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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Year End Commission File Number
December 31, 1997 0-24094
LESLIE BUILDING PRODUCTS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3764375
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 Mamaroneck Avenue, White Plains, NY 10601
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number including Area Code: (914) 421-2545
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Check mark indicates whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 the past 90 days. Yes X
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, if 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 ]
Aggregate market value of voting stock (Common Stock, $.01 par value) held by
non affiliates of Registrant (computed by reference to the closing price as of
March 9, 1998) was $7,391,008.
The number of shares outstanding of the Registrant's Common Stock, as of the
latest practicable date (March 9, 1998) was 4,862,624 shares of Common Stock.
Documents Incorporated by Reference
Proxy Statement with respect to Annual Meeting of Stockholders to be held on May
21, 1998 is incorporated by reference into Part III.
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<PAGE>
Item 1. BUSINESS
Introduction
Leslie Building Products, Inc. (the "Company"), through its wholly-owned
subsidiary Leslie-Locke, Inc. ("Leslie-Locke"), is a manufacturer and marketer
of a wide variety of specialty building products for the professional and
do-it-yourself remodeling and residential construction industry. Its products
consist of (i) ornamental iron security products (including doors, window
guards, fencing and railings), (ii) residential ventilation products, and (iii)
specialty building products consisting of metal and fiberglass air distribution
products for the HVAC industry, and a full line of door louvers and vision lite
products for the architectural door market.
The Company's principal executive and administrative offices are located
at 200 Mamaroneck Avenue, White Plains, New York, 10601; telephone number (914)
421 2545. The Common Stock of the Company is traded on the OTC-Bulletin Board
(symbol: LBPI).
Recent Event
On November 12, 1997, the Company announced that its Board of Directors
was considering strategic alternatives for the Company's long-range business
plans. In this connection, the Company retained Harris Williams & Co. to assist
in evaluating, and possibly disposing of, all or certain of the three major
operating divisions of the Company's wholly-owned operating subsidiary,
Leslie-Locke, Inc.
The Board's decision is motivated by the Company's desire to achieve
greater per share value for its stockholders. The home improvements products
business is in the midst of fundamental changes, including the rapid
consolidation of manufacturers and retailers, resulting in intense competitive
pressure. As a result, the Company's goal of increased per share return to its
stockholders is unlikely to be realized in the near future. Although operating
management is optimistic about the growth opportunities available to
Leslie-Locke, the Board of Directors believes that these opportunities could
best be realized by a significantly larger company which is in a better position
than the Company to compete in the changing industry. The specific restructuring
plans for the Company are dependent upon the ultimate outcome of these efforts.
BUSINESS OF THE COMPANY
Leslie-Locke's categories of products consist of (i) patented
do-it-yourself systems of ornamental iron railings, columns and accessories,
security doors and window and door guards; (ii) ventilation devices, including
exterior applied static ventilators, energy-free turbine ventilators, power
attic ventilators, chimney caps, and whole-house fans, and (iii) specialty
building products consisting of metal and fiberglass air distribution products
for the HVAC industry, door louvers, and glass frames and vision lite products
for architectural doors. Most of these categories of products include a wide
variety of styles, sizes and colors resulting in the availability of over 2,000
different products. During 1997, Leslie-Locke sold two of its smaller operations
engaged in the manufacture of skylights and industrial rakes.
Leslie Locke markets its products primarily to leading home center chains
and, to a lesser extent, to building material wholesalers, to commercial and
residential builders, and to remodelers and renovators. Approximately 70% of the
Company's consolidated net sales for 1997 were made by Leslie-Locke to The Home
Depot, Inc. Leslie-Locke has no long-term contracts for sales to The Home Depot.
While Leslie Locke competes with well over 100 national and regional
manufacturers, management believes that none of these suppliers offers the full
line of products offered
(2)
<PAGE>
by Leslie Locke. Leslie-Locke's broad range of products makes it an important
supplier to leading national retail outlets. Leslie-Locke's products are
marketed by a nationwide sales force consisting of six sales personnel working
exclusively for Leslie-Locke, and 64 manufacturers' representatives and
distributors.
Sales of Leslie Locke's products are somewhat seasonal in nature,
resulting in approximately 60% of its sales in the six-month period from March
through August. However, the wide variety of products offered by Leslie-Locke to
renovators and remodelers, and to a lesser extent to builders of new
construction, reduces the effects of cyclical changes experienced by businesses
solely dependent upon new construction.
Raw materials utilized by Leslie Locke, consisting of steel, aluminum,
electric motors, fan blades and other components and accessories, are readily
available from a number of sources. Manufacturing operations consist primarily
of stamping or roll forming component parts from purchased steel or aluminum
coil, followed by painting and various assembly operations to create finished
products.
Leslie-Locke's operations are subject to Federal, state and local
regulatory requirements relating to the use, storage, and disposal of certain
hazardous substances used in its manufacturing processes. Leslie-Locke believes
that it is currently operating in compliance with applicable regulations and
does not believe that costs of compliance with these laws and regulations will
have a material effect upon its capital expenditures, earnings or competitive
position.
In December 1986, Leslie-Locke acquired White Metal Rolling and Stamping
Corp. ("White Metal"), a manufacturer of aluminum consumer and industrial
ladders. After an initial period of profitable operations, the ladder operation
incurred substantial operating losses as a result of competitive market
conditions, volatile raw material costs, and product liability claims which
became uninsured as a result of the insolvency of several of its insurance
carriers in the late 1980's. Because of these losses, White Metal's ladder
manufacturing operations were discontinued as of November 1990 and its assets
were sold. On September 30, 1994, White Metal filed a voluntary petition seeking
liquidation under the provisions of chapter 7 of the United States Bankruptcy
Code. See "Item 3. Legal Proceedings" and Note 5 of Notes to Consolidated
Financial Statements.
On April 19, 1994, the Board of Directors of Drew Industries Incorporated
("Drew") approved a plan to transfer the stock of Leslie-Locke to the Company
and to distribute the common stock of the Company to Drew's stockholders on a
one-for-one basis (the "Spin-off"). The transfer of the stock of Leslie-Locke to
the Company was effective May 10, 1994, and the Spin-off was effective July 29,
1994. Since the Spin-off, the Company has been a stand-alone company, the common
stock of which is traded on the OTC-Bulletin Board (symbol: LBPI).
Pursuant to a Shared Services Agreement, the Company and Drew agreed to
share certain administrative functions and employee services, such as management
overview and planning, tax preparation, financial reporting, coordination of the
independent audit, stockholder relations, and regulatory matters. The Company
reimburses Drew for the fair market value of such services. The Agreement
expired on December 31, 1997 and was extended to December 31, 1998.
Employees
The Company has no full-time employees. Pursuant to the Shared Services
Agreement, certain employees of Drew perform administrative functions and
employee services such as management overview and planning, tax preparation,
financial reporting, coordination of the independent audit, stockholder
relations, and regulatory matters. The Company reimburses Drew for the fair
market value of such services.
(3)
<PAGE>
The approximate number of persons employed full-time by Leslie-Locke at
December 31, 1997 was 469. None of Leslie-Locke's employees are represented by a
union. The Company believes that relations with Leslie-Locke's employees are
good.
Item 2. PROPERTIES
Leslie Locke leases two and owns two manufacturing and warehouse
facilities consisting of an aggregate of approximately 557,000 square feet, in
Compton, California (two); and Burgaw, North Carolina (two), and leases its
corporate offices in Atlanta, Georgia consisting of approximately 17,000 square
feet of office space.
See Note 11 of Notes to Consolidated Financial Statements with respect to
the Company's lease obligations as of December 31, 1997.
Item 3. LEGAL PROCEEDINGS
The ladder manufacturing business formerly conducted by White Metal,
Leslie-Locke's subsidiary, ceased operations in 1990. On September 30, 1994, the
date White Metal filed a voluntary petition seeking liquidation under chapter 7,
there were approximately 45 pending personal injury claims against White Metal
in various stages of demand or litigation, alleging a variety of injuries. The
initial demands made by claimants range from nominal amounts to several million
dollars; however, the average settlement amount of a claim against White Metal
had been in the range of $30,000. White Metal anticipates that additional claims
may be asserted in the future. As of December 31, 1997, based on past actuarial
studies and past experience, White Metal's estimated future product liability
was approximately $3.9 million, representing existing and future claims and
associated administrative costs. Most of White Metal's product liability
insurance has either expired or was provided by insurers that are now insolvent.
As a result, White Metal became self-insured for a substantial portion of
pending, and virtually all new, product liability claims. As a result of the
chapter 7 petition, all litigation against White Metal was stayed. Under certain
circumstances, the Bankruptcy Court could lift the stay and permit litigation of
specific claims to proceed.
Prior to White Metal's chapter 7 petition, Leslie-Locke had been named as
a defendant in one personal injury case based on allegations of White Metal's
negligence in the manufacture of ladders, and an attempt was made to name
Leslie-Locke as a defendant in a second case. In the second case, the claim
against Leslie-Locke was dismissed by the court. The first case was settled by
White Metal upon payment made by the insurer. In September 1995, Leslie-Locke
was joined as a defendant in a personal injury action pending against White
Metal and other defendants on the theory that Leslie-Locke is the successor of
White Metal and assumed White Metal's liabilities. The case has been dormant
since January 1996 as a result of the commencement of bankruptcy proceedings by
another of the defendants. Because neither the Company nor Leslie-Locke are
engaged in the manufacture or marketing of ladders, and because the Company and
Leslie-Locke have maintained separate and distinct corporate entities,
businesses, manufacturing facilities and operations from White Metal and did not
assume White Metal's liabilities or succeed to its business, the Company and
Leslie-Locke disclaim any liability for the obligations of White Metal. In April
1996, the Company was named as a defendant in another White Metal related
personal injury case on the theory that the Company is the successor of White
Metal. The Company made a motion to dismiss the action, plaintiff failed to
respond, and the action against the Company was dismissed on default. There can
be no assurance that in the future any claim brought against White Metal, which
is asserted against the Company or Leslie-Locke, will be dismissed. Moreover,
while the Company and Leslie-Locke will vigorously oppose and defend any White
Metal
(4)
<PAGE>
claim asserted against them, because claims against White Metal are asserted in
various jurisdictions, it is impossible to predict the outcome of any future
litigation involving these matters.
On May 7, 1996, the Company and Leslie-Locke, and Drew, the former parent
of Leslie-Locke, and its subsidiary, Kinro, Inc., were served with a summons and
complaint in an adversary proceeding commenced by the chapter 7 trustee of White
Metal. The complaint, which appears to allege several duplicate claims, seeks
damages in the aggregate amount of $10.6 million plus attorneys fees, of which
approximately $7.5 million is sought, jointly and severally, from the Company,
Leslie-Locke, Drew and Kinro. The proceeding is based principally upon the
trustee's allegations that the Company and its affiliated companies obtained tax
benefits attributable to the use of White Metal's net operating losses. The
trustee seeks to recover the purported value of the tax savings achieved.
Management believes that the trustee's allegations are without merit and have no
basis in fact. In addition, the trustee alleges that White Metal made certain
payments to Leslie-Locke which were preferential and are recoverable by White
Metal, in the approximate amount of $2.2 million. Leslie-Locke denies liability
for any such amount and is vigorously defending against the allegations.
However, an estimate of potential loss, if any, cannot be made at this time. The
Company believes that the defense of this proceeding will not have a material
adverse impact on the Company's financial condition or results of operations.
Neither the Company nor Leslie-Locke is a party to any other legal
proceedings which, in the opinion of Management, could have a material adverse
effect on the Company or its consolidated financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
(5)
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following tables set forth certain information with respect to the
Directors and Executive Officers of the Company as of December 31, 1997.
Name Position
Leigh J. Abrams President, Chief Executive Officer and Director of the
(Age 55) Company since July 1994.
Edward W. Rose, III Chairman of the Board of Directors of the Company since
(Age 56) July 1994.
Ralph C. Pepper Director since July 1994.
(Age 55)
James F. Gero Director since July 1994.
(Age 52)
Marshall B. Payne Director since July 1994.
(Age 40)
Fredric M. Zinn Chief Financial Officer of the Company since July 1994.
(Age 46)
Harvey J. Kaplan Secretary and Treasurer of the Company since July 1994.
(Age 63)
LEIGH J. ABRAMS, for more than the past five years has also been
President, Chief Executive Officer and a Director of Drew.
EDWARD W. ROSE, III, for more than the past five years, has been President
and principal stockholder of Cardinal Investment Company, Inc., an investment
firm. Mr. Rose also serves as the Co-Managing General Partner of the Texas
Rangers Baseball Team, and as a director of the following public companies:
Osprey Holding, Inc., previously engaged in selling computer software for
hospitals; and ACE Cash Express, Inc. engaged in check cashing services. Mr.
Rose is also Chairman of the Board of Drew.
RALPH C. PEPPER, since April 1989, has been the President of Leslie-Locke,
Inc., a subsidiary of the Company. From August 1985, to April 1989, Mr. Pepper
held various executive offices with Leslie-Locke, Inc.
JAMES F. GERO, since March 1992, has been Chairman and Chief Executive
Officer of Sierra Technologies, Inc., a manufacturer of defense systems
technologies. From July 1987 to October 1989, Mr. Gero was Chairman and Chief
Executive Officer of Varo, Inc., a manufacturer of defense electronics, and from
1985 to 1987, Mr. Gero was President and Chief Executive Officer of Varo, Inc.
Mr. Gero also serves as a director of the following public companies:
Recognition Equipment, Inc., engaged in providing hardware, software and
services to automate work processing systems; American Medical Electronics,
Inc., engaged in manufacturing and distributing orthopedic and neurosurgical
medical devices; and Spar Aerospace Ltd., engaged in space robotics,
communications equipment and aerospace products and services. Mr. Gero is a
Director of Drew.
(6)
<PAGE>
MARSHALL B. PAYNE, for more than the past five years, has been Vice
President of Cardinal Investment Company, Inc., an investment firm. Mr. Payne
also serves as a director of the following public companies: Osprey Holding,
Inc., previously engaged in selling computer software for hospitals; and ACE
Cash Express, Inc., engaged in check cashing services.
FREDRIC M. ZINN, a certified public accountant, for more than the past
five years, has also been Chief Financial Officer of Drew.
HARVEY J. KAPLAN, a certified public accountant, for more than the past
five years, has also been Secretary and Treasurer of Drew.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than ten percent of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the NASD. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based on its review of the copies of such forms received by it, the
Company believes that during 1997 all such filing requirements applicable to its
officers and directors (the Company not being aware of any ten percent holder
other than Edward W. Rose, III a Director) were complied with.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Per Share Market Price Information
The Common Stock of the Company is traded on the OTC-Bulletin Board
(symbol: LBPI). On March 9, 1998, there were 2,376 holders of record of the
Common Stock. The Company estimates that 2,000 to 4,000 additional stockholders
own shares of its Common Stock held in the name of Cede & Co. and other broker
and nominee names.
(7)
<PAGE>
The table below sets forth, for the periods indicated, the range of high
and low prices per share for the Common Stock as reported by the National
Association of Securities Dealers. The prices set forth below represent
quotations between dealers, without adjustment for retail mark up, mark down or
commissions, and do not necessarily represent actual transactions.
High Low
---- ---
Calendar 1996
Quarter ended March 31...................... $ 2.25 $ 2.13
Quarter ended June 30....................... $ 2.38 $ 2.06
Quarter ended September 30.................. $ 4.25 $ 2.06
Quarter ended December 31................... $ 3.63 $ 3.13
Calendar 1997
Quarter ended March 31...................... $ 2.75 $ 1.38
Quarter ended June 30....................... $ 1.81 $ 1.13
Quarter ended September 30.................. $ 1.75 $ 1.25
Quarter ended December 31................... $ 2.50 $ 1.19
The closing price per share for the common stock on March 9, 1998 was
$2.63.
Dividend Information
The Company has not paid any cash dividends on its Common Stock. Future
dividend policy with respect to the Common Stock will be determined by the Board
of Directors of the Company in light of prevailing financial needs and earnings
of the Company and other relevant factors; however, it is not anticipated that
the Company will pay dividends on its Common Stock in the foreseeable future.
The Company's dividend policy is subject to restrictions contained in
financing agreements relating to its secured line of credit, which provide that
dividends upon the Common Stock may be payable only with the consent of the
lender. See Note 7 of Notes to Consolidated Financial Statements.
(8)
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the consolidated financial statements and related notes thereto included herein
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995 1994(a) 1993(a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 88,325 $ 82,154 $ 75,993 $ 71,105 $ 63,689
======== ======== ======== ======== ========
Operating profit (loss) $ 1,503 $ 2,299 $ (6,970) $ (3,272) $ 29
======== ======== ======== ======== ========
Income (loss) before income taxes $ 279 $ 627 $ (8,069) $ (4,202) $ (1,000)
Provision (benefit) for income taxes 264 (274)
-------- -------- -------- -------- --------
Net income (loss) $ 279 $ 627 $ (8,069) $ (4,466) $ (726)
======== ======== ======== ======== ========
Net income (loss) per share (basic)(b) $ .06 $ .13 $ (1.68) $ (.93) $ (.15)
======== ======== ======== ======== ========
Net income (loss) per share (diluted) $ .06 $ .13 $ (1.68) $ (.93) $ (.15)
======== ======== ======== ======== ========
Balance Sheet Data (at end of period):
Working capital $ 4,281 $ 11,241 $ 7,015 $ 7,929 $ 8,631
Total assets $ 34,129 $ 41,957 $ 38,749 $ 38,153 $ 35,242
Long-term debt $ 8,964 $ 17,598 $ 14,749 $ 5,225 $ 10,522
Stockholders' Equity $ 8,885 $ 8,563 $ 7,868 $ 15,921 $ 12,780
</TABLE>
- ----------
(a) Operating results for 1995, 1994 and 1993 include pretax charges of
$2,816,000, $4,433,000 and $1,035,000, respectively, in connection with
facilities restructuring. In addition, operating results for 1995 include a
pretax charge of $5,092,000 relating to a write-off of goodwill. See Notes 9
and 10 of Notes to Consolidated Financial Statements.
(b) Net loss per share for 1994 and prior is based upon 4,787,393 pro forma
shares, the number of shares distributed by Drew Industries Incorporated as
of July 29, 1994.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Leslie Building Products, Inc. ("Leslie Building Products"), including its
wholly-owned subsidiary Leslie-Locke, Inc. ("Leslie-Locke") (together, the
"Company"), is a diversified manufacturer and marketer of a wide variety of
specialty building products for the professional and do-it-yourself remodeling
and residential construction industry. Its products, which are manufactured and
marketed through three operating divisions, consist of (i) ornamental iron
security products (including doors, window guards, fencing and railings), (ii)
residential ventilation products, and (iii) speciality building products
consisting of metal and fiberglass air distribution products for the HVAC
industry, and a full line of door louvers and vision lite products for the
architectural door market. This broad range of products is marketed primarily to
leading home center chains and, to a lesser extent, to building material
distributors, hardware co-ops and mass merchandisers.
(9)
<PAGE>
RESULTS OF OPERATIONS
Operations
Net sales, gross margin and operating profit are (in thousands):
Year Ended December 31,
-------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
Net sales $ 88,325 $ 82,154 $ 75,993
======== ======== ========
Gross profit $ 15,013 $ 15,498 $ 13,483
Less:
Selling, general and administrative expenses 13,510 13,199 12,545
Facilities restructuring charge 2,816
Revaluation of goodwill 5,092
-------- -------- --------
Operating profit (loss) $ 1,503 $ 2,299 $ (6,970)
======== ======== ========
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Net sales increased 7.5% for 1997 compared to the prior year, as a result
of increased sales of all product lines except static vents, door louvers and
ornamental iron. This sales increase is primarily volume related. The increase
in ventilation sales, excluding static vents, is the result of new ventilation
product business awarded by two of the Company's major customers in December
1996. Approximately 70% of net sales are to The Home Depot.
Gross profit as a percentage of sales declined 1.9% from the prior year.
Gross profit declined as a result of additional trade discounts given in the
first four months of 1997 in connection with acquiring the new business
described above. In addition, selling prices were reduced on certain items as a
result of competitive pressures, and the Company experienced increases in
freight rates. Offsetting this negative impact on profits was an increase in
production efficiencies including substantial overhead cuts. The Company also
obtained price reductions on certain raw materials and components. In addition,
in an effort to focus on its primary products, the Company sold its aluminum
rake business and its skylight business. These two product lines, which had
revenues of $2.9 million in 1996, or 3% of total revenues, were sold at a
breakeven.
Selling, general and administrative expenses as a percentage of sales is
lower than last year. Reductions in fixed administrative costs were partially
offset by the increase in market development costs during the first four months
of 1997, incurred in connection with acquiring the new business described above,
as well as a provision of approximately $240,000 for accounts receivable
relating to the Chapter 11 filing of a major customer.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 8% over 1995 primarily as a result of continuing
volume increases in ventilation products, ductwork and security products offset
by a reduction in skylight sales and the discontinuance of postal product sales.
Sales to The Home Depot accounted for 58% of the Company's net sales in 1996 and
54% in 1995.
Operating profit was $2,299,000 for 1996 compared to $938,000 before
charges for facilities restructuring and the revaluation of goodwill in 1995.
Gross profit percentage increased to 18.9% in 1996 from 17.7% in 1995 as a
result of reduced material costs and improved efficiencies at the new plant in
Burgaw, North Carolina. Increases in freight rates during the latter part of
1996 have had a continuing impact on 1997 margins.
(10)
<PAGE>
Selling expenses as a percentage of sales increased from 10.1% in 1995 to
10.5% in 1996 as a result of increases in commission rates and volume rebates.
General and administrative expenses decreased $276,000 in 1996, due to (i) lower
compensation related costs, (ii) $114,000 of goodwill amortization incurred in
1995 compared to none in 1996, and (iii) lower charges pursuant to a Shared
Services Agreement with Drew.
Restructuring
In December 1994, the Board of Directors of the Company approved a plan to
restructure its manufacturing facilities in order to achieve more efficient and
less costly manufacturing and distribution of its products. The plan involved
(i) expanding the Company's facility in Burgaw, North Carolina by 157,000 square
feet, (ii) closing the Company's facilities in Chicago, Illinois and Atlanta,
Georgia and (iii) transferring operations of the closed facilities to the new
Burgaw factory and the Company's existing facility in Compton, California. The
Company recorded total pretax restructuring charges of $4,433,000 in 1994 and
$2,816,000 in 1995. The restructuring was substantially completed by December
31, 1995, and the restructuring reserve is -0- at December 31, 1997.
Expenditures and non-cash write-offs against this accrual were:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Idle plant expenses net of estimated sublease income $ 427 $1,214 $3,550
Expenses pursuant to the Company's existing post-employment
and pension plans 9 367 669
Other 290
------ ------ ------
Total $ 436 $1,581 $4,509
====== ====== ======
</TABLE>
Revaluation of Goodwill
In 1995, because operating results fell short of expectations and the
Company's stock price was below book value, the Company reevaluated its
accounting policy regarding goodwill impairment and adopted a new policy for
recognition and measurement of goodwill impairment based on a fair value
approach. The Company believes fair value is a preferable method to assess
goodwill as it believes that the value at which individual businesses could be
bought and sold in an arms-length transaction between a willing buyer and seller
is the most reasonable evidence and, therefore, the most relevant measure of
their value. The Company obtained an independent appraisal to determine the fair
value of its sole operating subsidiary, Leslie-Locke, to which the goodwill
relates. The determination of fair value was based on, among other things,
market comparables, discounted cash flow analyzes and a stock market valuation
of the Company. The stock market valuation of the Company was a reasonable
substitute for the value of Leslie-Locke since Leslie-Locke was the only
operating subsidiary of the Company. This change in the method of evaluating the
impairment and recoverability of goodwill resulted in a pretax charge to
operations of $5,092,000 in 1995 in order to write off the entire balance of the
goodwill. Goodwill amortization had been $170,000 per year.
Interest Expense, Net
The reduction in interest expense from $1,672,000 in 1996 to $1,224,000 in
1997 results primarily from lower average borrowings under the Company's
revolving credit line. The lower borrowings are attributable to lower inventory
and improved cash management including faster turnover of receivables. In
addition, interest expense was reduced by the refinancing of bank debt by a $7
million Industrial Revenue Bond which has a lower interest rate.
Interest costs on the Company's revolving debt increased from $406,000 in
1995 to $667,000 in 1996 primarily as a result of increased debt caused by the
costs of the restructuring in the latter part of 1995 and continuing into early
1996. Other interest increased $313,000 primarily as a result of the mortgage
loans and equipment loan
(11)
<PAGE>
relating to the construction of the plants in Burgaw, North Carolina, which were
outstanding for the entire year in 1996 and only part of 1995.
Income Taxes
The Company's income tax provision is recorded pursuant to the
requirements of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("Statement 109"). At December 31, 1997, the Company had a net operating
loss carryforward for Federal income tax purposes of approximately $4.1 million,
of which $3.7 million expires in the year 2010 and $.4 million expires in the
year 2011. The Company has net deferred tax assets at December 31, 1997 of $4.5
million, however, due to the uncertainty of future realization no income tax
benefit has been recorded. No income tax provision has been recorded in 1997
because the Company had losses for financial statement purposes in prior years,
primarily related to restructuring charges, on which no tax benefit was
recorded.
New Accounting Standards
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128
establishes standards for computing and presenting both basic and diluted
earnings per share ("EPS"). Basic EPS represents the earnings available to each
common share outstanding during the reporting period. Diluted EPS reflect the
earnings available to each common share after the effect of all potentially
dilutive common shares, such as stock options. All prior period income per share
data have been restated to conform with SFAS No. 128.
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," which permits companies
either to adopt a new method of accounting for employee stock options and
similar equity instruments or to continue following the historical accounting
method with supplemental pro forma disclosures. The Company is continuing its
historical practice, and provides the necessary additional information in
footnote disclosure.
In June 1997, the Financial Accounting Board issued SFAS 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," for fiscal years beginning after December
15, 1997. These statements address presentation and disclosure matters and will
have no impact on the company's financial position or results of operations.
Other
Pursuant to a Shared Services Agreement with Drew Industries Incorporated
("Drew"), the Company's former parent, Drew and Leslie Building Products have
shared certain administrative functions and employee services, such as
management overview and planning, tax preparation, financial reporting,
coordination of independent audit, stockholder relations, and regulatory
matters. Drew has been reimbursed by Leslie Building Products for the fair
market value of such services. This Agreement expires on December 31, 1998 but
may be extended. The Company was charged management fees by Drew of $526,000 in
1997, $509,000 in 1996 and $588,000 in 1995.
(12)
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $12 million revolving line of credit with Branch Banking
and Trust Company ("BBT"), consisting of cash advances of a maximum of $10.5
million, seasonally adjusted and depending upon collateral availability, and
letters of credit of $1.5 million, with interest payable at 0.625% over the
prime rate. The line of credit, of which $6 million is available at the close of
business on December 31, 1997, is adequate for the Company's anticipated needs.
The loan agreement expires in July 1999.
Pursuant to its bank agreements the Company is prohibited from declaring
or paying dividends without the prior written consent of the lender.
Leslie-Locke is also required to maintain certain financial covenants typical to
secured borrowing arrangements. The most significant financial covenants
compared to Leslie- Locke's results for the most recent reported period, are as
follows (in thousands, except ratios):
<TABLE>
<CAPTION>
As of December 31, 1997 or
For the Year Then Ended
-----------------------------------------
Bank
Covenant Actual Results
-------- --------------
<S> <C> <C>
Consolidated Tangible Net Worth, as defined..... At least $8,500 $8,775
Debt to Worth Ratio, as defined................. Not greater than 3.9 to 1 2.9
Working Capital, as defined..................... At least $3,000 $4,316
Debt Service Coverage Ratio, as defined......... At least 1.5 to 1 1.9
</TABLE>
The Statements of Cash Flows reflect the following (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net cash flows provided by (used for) operating activities $ 11,279 $ (2,439) $ (2,340)
Net cash flows provided by (used for) investing activities $ 463 $ (841) $ (7,827)
Net cash flows (used for) provided by financing activites $ (8,873) $ 3,299 $ 9,912
</TABLE>
Net cash provided by operating activities was $11.3 million in 1997
compared to $2.6 million used for operations in 1996. Receivables were reduced
by $1.9 million in 1997 compared to an increase of $.2 million in 1996 as a
result of shorter average terms given to customers. Inventories decreased $6.1
million in 1997 compared to an increase of $4.6 million in 1996. The inventory
reduction in 1997 is a result of management's effort to reduce debt by more
efficient asset management. The inventory buildup in 1996 resulted from
increased levels of production in anticipation of increased 1997 sales to two
major customers.
Cash flows provided by investing activities in 1997 primarily consists of
proceeds from the sale of the aluminum rake and skylight product lines reduced
by capital expenditures, which were only $.3 million. Capital expenditures
aggregated $.8 million for 1996 and $7.9 million for 1995. The capital
expenditures in 1995 relate primarily to the construction of a new plant in
Burgaw, North Carolina. Cash required for the 1995 capital expenditures was
provided primarily by the mortgage and equipment loans from BBT. The mortgage
was replaced by an Industrial Revenue Bond in 1997.
Cash flows generated from operations in 1997 were used to reduce debt by
$8.9 million with the balance invested in cash. There is no revolving debt at
December 31, 1997 and mortgage debt consists primarily of an Industrial Revenue
Bond of $7 million. Seasonal borrowings will be required in 1998.
(13)
<PAGE>
At December 31, 1997, the estimated future product liability of White
Metal, Leslie-Locke's discontinued ladder manufacturing subsidiary, which is no
longer covered by insurance, was approximately $3.9 million. Such liability is
reflected in discontinued operations, net, on the Consolidated Balance Sheet.
Although Leslie-Locke was named as a defendant in certain product liability
actions, Leslie-Locke has not been held responsible, and the Company and
Leslie-Locke disclaim any liability for the obligations of White Metal.
On September 30, 1994, White Metal filed a voluntary petition seeking
liquidation under the provisions of chapter 7 of the United States Bankruptcy
Code. In connection with the chapter 7 filing by White Metal, numerous proofs of
claim have been filed against White Metal. Included is a claim by Sears Roebuck
& Co., ("Sears") dated April 7, 1995, in the amount of $164 million, including
actual losses of $1.7 million and estimated future product liability losses for
the next 20 years, based upon indemnification obligations which Sears alleges
White Metal undertook in connection with White Metal's sale of ladders to Sears.
These proofs of claim have been evaluated in determining the Company's estimated
product liability accrual. The Company and Leslie-Locke have in the past
disclaimed, and continue to disclaim, any liability for the obligations of White
Metal.
On May 7, 1996, the Company and Leslie-Locke, and Drew, the former parent
of Leslie-Locke, and its subsidiary, Kinro, Inc., were served with a summons and
complaint in an adversary proceeding commenced by the chapter 7 trustee of White
Metal. The complaint, which appears to allege several duplicate claims, seeks
damages in the aggregate amount of approximately $10.6 million plus attorneys'
fees, of which approximately $7.5 million is sought, jointly, and severally,
from the Company, Leslie-Locke, Drew and Kinro. The proceeding is based
principally upon the trustee's allegations that the Company and its affiliated
companies obtained tax benefits attributable to the use of White Metal's net
operating losses. The trustee seeks to recover the reported value of the tax
savings achieved. Management believes that the trustee's allegations are without
merit and have no basis in fact. In addition, the trustee alleges that White
Metal made certain payments to Leslie-Locke which were preferential and are
recoverable by White Metal, in the approximate amount of $2.2 million.
Leslie-Locke denies liability for any such amount and is vigorously defending
against the allegations. However, an estimate of potential loss, if any, cannot
be made at this time. The Company believes the defense of this proceeding will
not have a material adverse impact on its financial condition or results of
operations.
INFLATION
The prices of raw materials, consisting primarily of steel, aluminum,
paint, electric motors and packaging materials are influenced by demand and
other factors specific to these commodities rather than being directly affected
by inflationary pressures.
STRATEGIC ALTERNATIVES
On November 12, 1997, the Company announced that its Board of Directors
was considering strategic alternatives for the Company's long-range business
plans. In this connection, the Company retained Harris Williams & Co. to assist
in evaluating, and possibly disposing of, all or certain of the three major
operating divisions of the Company's wholly-owned operating subsidiary,
Leslie-Locke, Inc.
The Board's decision is motivated by the Company's desire to achieve
greater per share value for its stockholders. The home improvements products
business is in the midst of fundamental changes, including the rapid
consolidation of manufacturers and retailers, resulting in intense competitive
pressure. As a result, the Company's goal of increased per share return to its
stockholders is unlikely to be realized in the near future. Although operating
management is optimistic about the growth opportunities available to
Leslie-Locke, the Board of Directors believes
(14)
<PAGE>
that these opportunities could best be realized by a significantly larger
company which is in a better position than the Company to compete in the
changing industry. The specific restructuring plans for the Company are
dependent upon the ultimate outcome of these efforts.
YEAR 2000
The company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the Year 2000 date
are a known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operational systems. The
Company has established processes for evaluating and managing the risks and
costs associated with this problem. The computing portfolio was identified and a
computer upgrade plan has been developed. The cost of achieving Year 2000
compliance is estimated to be approximately $.8 million to $1.5 million and will
be incurred through 1999.
FORWARD LOOKING STATEMENTS AND RISK FACTORS
This report contains certain statements, including the Company's plans
regarding its operating performance which could be construed to be forward
looking statements within the meaning of the Securities and Exchange Act of
1934. These statements reflect the Company's current views with respect to
future plans, events and financial performance. The Company has identified
certain risk factors which could cause actual plans and results to differ
substantially from those included in the forward looking statements. These
factors include pricing pressures due to competition, raw material costs,
housing starts, interest rates, and the Year 2000 problem discussed above. In
addition, general economic conditions may affect the retail sale of the
Company's products.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Schedule of the Company and its
subsidiaries pursuant to this Item and Item 14 of this Report are set forth in
the Index to Consolidated Financial Statements included herein.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Part III of Form 10-K is incorporated by reference to the Company's Proxy
Statement with respect to its Annual Meeting of Stockholders to be held on May
21, 1998.
(15)
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8 K
(a) Documents Filed
(1) Financial Statements. See " Index to Consolidated Financial
Statements."
(2) Schedule. See " Index to Consolidated Financial Statements."
(3) Exhibits. See "List of Exhibits" at the end of this report
incorporated herein by reference.
(b) Reports on Form 8 K
No Current Reports on Form 8-K were filed during the quarter ended
December 31, 1997.
(16)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LESLIE BUILDING PRODUCTS, INC.
Date: March 23, 1998 By: /s/ Leigh J. Abrams
-------------------
Leigh J. Abrams, President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and dates indicated.
Each person whose signature appears below hereby authorizes Leigh J.
Abrams and Harvey J. Kaplan, or either of them, to file one or more amendments
to the Annual Report on Form 10-K which amendments may make such changes in such
Report as either of them deems appropriate, and each such person hereby appoints
Leigh J. Abrams and Harvey J. Kaplan, or either of them, as attorneys-in-fact to
execute in the name and on behalf of each such person individually, and in each
capacity stated below, such amendments to such Report.
Date Signature Title
March 23, 1998 By:/s/Leigh J. Abrams Director, President and Chief
---------------------
(Leigh J. Abrams) Executive Officer
March 23, 1998 By:/s/Harvey J. Kaplan Secretary and Treasurer
---------------------
(Harvey J. Kaplan)
March 23, 1998 By:/s/Fredric M. Zinn Chief Financial Officer
---------------------
(Fredric M. Zinn)
March 23, 1998 By:/s/John F. Cupak Controller
---------------------
(John F. Cupak)
March 23, 1998 By:/s/Edward W. Rose, III Director
---------------------
(Edward W. Rose, III)
March 23, 1998 By:/s/ James F. Gero Director
---------------------
(James F. Gero)
March 23, 1998 By:/s/Ralph C. Pepper Director
---------------------
(Ralph C. Pepper)
March 23, 1998 By:/s/Marshall B. Payne Director
---------------------
(Marshall B. Payne)
(17)
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements
Independent Auditors' Report
Consolidated statements of operations for the years ended December 31,
1997, 1996 and 1995
Consolidated balance sheets at December 31, 1997 and 1996
Consolidated statements of cash flows for the years ended December 31,
1997, 1996 and 1995
Consolidated statements of stockholders' equity for the years ended December 31,
1997, 1996 and 1995
Notes to consolidated financial statements
Consolidated Financial Statement Schedules for the years ended December 31,
1997, 1996 and 1995
Schedule II - Valuation and Qualifying Accounts
Schedules other than that listed above are omitted as they are not
applicable or the information required is included in the consolidated financial
statements and notes thereto.
(18)
<PAGE>
Independent Auditors' Report
The Board of Directors
Leslie Building Products, Inc.:
We have audited the consolidated balance sheets of Leslie Building Products,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1997. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in Item 14. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule based on our audits.
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 made 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Leslie Building
Products, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
February 18, 1998
(19)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------
(In thousands, except per share amounts)
Net sales (Note 14) $ 88,325 $ 82,154 $ 75,993
Cost of sales 73,312 66,656 62,510
-------- -------- --------
Gross profit 15,013 15,498 13,483
Selling, general and administrative expenses 13,510 13,199 12,545
Restructuring expense (Note 9) 2,816
Revaluation of goodwill (Note 10) 5,092
-------- -------- --------
Operating profit (loss) 1,503 2,299 (6,970)
Interest expense, net 1,224 1,672 1,099
-------- -------- --------
Net income (loss) before income taxes 279 627 (8,069)
Provision for income taxes (Note 8)
-------- -------- --------
Net income (loss) $ 279 $ 627 $ (8,069)
======== ======== ========
Net income (loss) per share (basic) (Note 12) $ .06 $ .13 $ (1.68)
======== ======== ========
Net income (loss) per share (diluted) (Note 12) $ .06 $ .13 $ (1.68)
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
(20)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1996
- --------------------------------------------------------------------------------------------------
(In thousands, except shares and per share amounts)
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments $ 2,903 $ 34
Accounts receivable, trade, less allowances of $627 in 1997 and $404 in 1996 5,527 7,815
Inventories (Note 2) 10,181 16,891
Prepaid expenses and other current assets 1,294 1,455
------- -------
Total current assets 19,905 26,195
Fixed assets, net (Note 3) 13,698 15,320
Other assets 526 442
------- -------
Total assets (Note 7) $34,129 $41,957
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt (Note 7) $ 651 $ 933
Accounts payable, trade 5,957 6,442
Accrued expenses and other current liabilities (Notes 4 and 9) 5,163 3,882
Discontinued operations, net (Note 5) 3,853 3,697
------- -------
Total current liabilities 15,624 14,954
Long-term debt (Note 7) 8,964 17,598
Other long-term liabilities (Note 6) 656 842
------- -------
Total liabilities 25,244 33,394
------- -------
Commitments and Contingencies (Notes 5 and 11)
Stockholders' equity (Notes 7 and 12)
Common stock, par value $.01 per share: authorized 20,000,000 shares;
issued and outstanding 4,860,178 shares in 1997 and 4,833,075 shares in 1996 48 48
Paid-in capital 20,355 20,312
Accumulated deficit (11,518) (11,797)
------- -------
Total stockholders' equity 8,885 8,563
------- -------
Total liabilities and stockholders' equity $34,129 $41,957
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(21)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 279 $ 627 $ (8,069)
Adjustments to reconcile net income (loss) to cash flows
provided by (used for ) operating activities:
Revaluation of goodwill 5,092
Provision for restructuring 2,816
Depreciation and amortization 1,882 2,051 1,792
Deferred taxes 389
Provision for accounts receivable 359 84 36
Loss (gain) on disposal of fixed assets 28 19 (4)
Changes in assets and liabilities:
Accounts receivable, net 1,929 (192) (140)
Inventories 6,125 (4,649) 116
Prepaid expenses and other assets (89) 339 (316)
Accounts payable, accrued expenses and other
current liabilities 749 (877) (4,007)
Other noncurrent liabilities (139) 3 (45)
-------- -------- --------
Net cash flows provided by (used for) operating
activities from continuing operations 11,123 (2,595) (2,340)
Cash flows from discontinued operations 156 156 78
-------- -------- --------
Net cash flows provided by (used for) operating activities 11,279 (2,439) (2,262)
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (254) (845) (7,871)
Proceeds from sales of assets 717 4 44
-------- -------- --------
Net cash flows provided by (used for) investing activities 463 (841) (7,827)
-------- -------- --------
Cash flows from financing activities:
Industrial Revenue Bond 7,000
Mortgage loan 4,313
Equipment loan 925 2,075
Proceeds from secured line of credit and other borrowings 30,614 35,089 34,800
Repayments under secured line of credit and other borrowings (46,530) (32,783) (31,018)
Proceeds from employee purchases of common stock 43 68 16
Other (274)
-------- -------- --------
Net cash flows (used for) provided by financing activities (8,873) 3,299 9,912
-------- -------- --------
Net increase (decrease) in cash 2,869 19 (177)
Cash at beginning of year 34 15 192
-------- -------- --------
Cash and short-term investments at end of year $ 2,903 $ 34 $ 15
======== ======== ========
Supplemental disclosure of cash flows information:
Cash paid (received) during the year for:
Interest on debt $ 1,010 $ 1,567 $ 779
Income tax (refunds) net of payments $ (270) $ 29
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(22)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
- -----------------------------------------------------------------------------------------------
(In thousands, except shares)
<S> <C> <C> <C> <C>
Balance - December 31, 1994 $ 48 $ 20,228 $ (4,355) $ 5,921
Net loss (8,069) 8,069)
Employee purchases of 9,527 shares 16 16
---- -------- --------- -------
Balance - December 31, 1995 48 20,244 (12,424) 7,868
Net income 627 627
Employee purchases of 36,155 shares 68 68
---- -------- --------- -------
Balance - December 31, 1996 48 20,312 (11,797) 8,563
Net income 279 279
Employee purchases of 27,103 shares 43 43
---- -------- --------- -------
Balance - December 31, 1997 $ 48 $ 20,355 $ (11,518) $ 8,885
==== ======== ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(23)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Consolidated Financial Statements include the accounts of Leslie
Building Products and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated. The Company's only
active wholly-owned subsidiary, Leslie-Locke, Inc. ("Leslie-Locke") manufactures
and markets a wide variety of specialty building products for the professional
and do-it-yourself remodeling and residential construction industry. Its
products, which are manufactured and marketed through three operating divisions,
consist of (i) ornamental iron security products (including doors, window
guards, fencing and railings), (ii) residential ventilation products, and (iii)
speciality building products consisting of metal and fiberglass air distribution
products for the HVAC industry, and a full line of door louvers and vision lite
products for the architectural door market. Approximately 70% of Leslie-Locke's
sales are to The Home Depot.
Inventories
Inventories are stated at the lower of cost (using the last-in, first-out,
and first-in, first-out methods) or market. Cost includes material, labor and
overhead (for manufactured products); market is replacement cost or realizable
value after allowance for costs of distribution.
Fixed Assets
Fixed assets are depreciated principally on a straight-line basis over the
estimated useful lives of properties and equipment. Leasehold improvements and
leased equipment are amortized over the shorter of the lives of the leases or
the underlying assets. Maintenance and repairs are charged to operations as
incurred; significant betterments are capitalized.
Goodwill
During 1995, the Company reevaluated its accounting policy towards
measurement of goodwill and changed to a fair value method. See Note 10.
Previously, the primary indicators of recoverability were current or forecasted
profitability, measured by profit before interest, but after amortization of the
goodwill.
Income Taxes
The Company and its subsidiaries file separate Federal and state income
tax returns. The Company's subsidiaries generally file separate state income tax
returns on the same basis as the Federal income tax returns.
(24)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
New Accounting Standards
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128
establishes standards for computing and presenting both basic and diluted
earnings per share ("EPS"). Basic EPS represents the earnings available to each
common share outstanding during the reporting period. Diluted EPS reflect the
earnings available to each common share after the effect of all potentially
dilutive common shares, such as stock options.
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," which permits companies
either to adopt a new method of accounting for employee stock options and
similar equity instruments or to continue following the historical accounting
method with supplemental pro forma disclosures. The Company is continuing its
historical practice, and provides the necessary additional information in
footnote disclosure.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(2) INVENTORIES
Inventories consist of the following (in thousands):
1997 1996
- -----------------------------------------------------------------
Finished goods $ 5,886 $ 11,482
Work in process 1,143 1,769
Raw materials 3,651 4,143
-------- --------
10,680 17,394
Adjustment to LIFO cost basis (499) (503)
-------- --------
Total $ 10,181 $ 16,891
======== ========
Inventories stated at LIFO amounted to $6,352,000 at December 31, 1997 and
$9,916,000 at December 31, 1996.
(25)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) FIXED ASSETS
Fixed assets, at cost, consist of the following (in thousands):
<TABLE>
<CAPTION>
Estimated
Useful Life
1997 1996 In Years
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 595 $ 595
Buildings and improvements 9,676 9,648 40
Leasehold improvements 635 635 5 to 15
Machinery and equipment 9,105 9,586 5 to 10
Automotive equipment 27 27 2 to 4
Furniture and fixtures 1,982 1,843 3 to 10
------- -------
22,020 22,334
Less accumulated depreciation and amortization 8,322 7,014
------- -------
Fixed assets, net $13,698 $15,320
======= =======
</TABLE>
Depreciation and amortization of fixed assets consists of (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charges to cost of sales $1,500 $1,671 $1,389
Charges to selling, general and administrative expenses 216 214 177
------ ------ ------
Total $1,716 $1,885 $1,566
====== ====== ======
</TABLE>
(4) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of (in thousands):
1997 1996
- ------------------------------------------------------------------------------
Accrued advertising, sales allowances and related services $2,309 $1,326
Accrued expenses and other 2,854 2,556
------ ------
Total $5,163 $3,882
====== ======
(5) DISCONTINUED OPERATIONS
In fiscal 1990, the Company discontinued the operations of White Metal
Rolling and Stamping Corp. ("White Metal"), the Company's ladder manufacturing
subsidiary, and sold certain assets of White Metal, (machinery, equipment and
supplies and customer lists) to a private company. The buyer did not assume any
liabilities of White
(26)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Metal, nor acquire the White Metal name and will not produce White Metal
ladders. All manufacturing operations of White Metal ceased as of January 31,
1991 and substantially all of its remaining assets have since been liquidated.
At December 31, 1997, White Metal's estimated future product liability,
which is no longer covered by insurance, was approximately $3.9 million. Such
liability is reflected in discontinued operations, net, on the Consolidated
Balance Sheet. Although Leslie-Locke was named as a defendant in certain product
liability actions, Leslie-Locke has not been held responsible, and the Company
and Leslie-Locke disclaim any liability for the obligations of White Metal.
On September 30, 1994, White Metal filed a voluntary petition seeking
liquidation under the provisions of chapter 7 of the United States Bankruptcy
Code. In connection with the chapter 7 filing by White Metal, numerous proofs of
claim have been filed against White Metal. Included is a claim by Sears Roebuck
& Co., ("Sears") dated April 7, 1995, in the amount of $164 million, including
actual losses of $1.7 million and estimated future product liability losses for
the next 20 years, based upon indemnification obligations which Sears alleges
White Metal undertook in connection with White Metal's sale of ladders to Sears.
These proofs of claim have been evaluated in determining the Company's estimated
product liability accrual. The Company and Leslie-Locke have in the past
disclaimed, and continue to disclaim, any liability for the obligations of White
Metal.
On May 7, 1996, the Company and Leslie-Locke, and Drew Industries
Incorporated ("Drew"), the former parent of Leslie-Locke, and its subsidiary,
Kinro, Inc., were served with a summons and complaint in an adversary proceeding
commenced by the chapter 7 trustee of White Metal. The complaint, which appears
to allege several duplicate claims, seeks damages in the aggregate amount of
approximately $10.6 million plus attorneys' fees, of which approximately $7.5
million is sought, jointly, and severally, from the Company, Leslie-Locke, Drew
and Kinro. The proceeding is based principally upon the trustee's allegations
that the Company and its affiliated companies obtained tax benefits attributable
to the use of White Metal's net operating losses. The trustee seeks to recover
the reported value of the tax savings achieved. Management believes that the
trustee's allegations are without merit and have no basis in fact. In addition,
the trustee alleges that White Metal made certain payments to Leslie-Locke which
were preferential and are recoverable by White Metal, in the approximate amount
of $2.2 million. Leslie-Locke denies liability for any such amount and is
vigorously defending against the allegations. However, an estimate of potential
loss, if any, cannot be made at this time. The Company believes the defense of
this proceeding will not have a material adverse impact on its financial
condition or results of operations.
(6) RETIREMENT AND OTHER BENEFIT PLANS
Postretirement Plans
Leslie-Locke has a plan which provides for postretirement health care and
life insurance benefits for certain employees. New employees hired since 1994
are not eligible for such postretirement benefits. These benefits include major
medical insurance with deductible and coinsurance provisions and a lifetime
maximum benefit. Leslie-Locke pays all benefits on a current basis and the plan
is not funded. For 1997, 1996 and 1995 the postretirement benefit expense did
not have a material effect on operating results.
At December 31, 1997, $253,000 of the Company's $268,000 liability for
postretirement benefits has been included in other long-term liabilities in the
Consolidated Balance Sheet. At December 31, 1996, $267,000 of the
(27)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Company's $282,000 liability for postretirement benefits has been included in
other long-term liabilities in the Consolidated Balance Sheet.
Postemployment Plans
At December 31, 1997, $146,000 of the Company's $169,000 liability for
postemployment benefits has been included in other long-term liabilities in the
Consolidated Balance Sheet. At December 31, 1996, $105,000 of the Company's
$128,000 liability for postemployment benefits has been included in other
long-term liabilities in the Consolidated Balance Sheet.
Pension and Profit Sharing Plans
Leslie-Locke has an hourly and a salaried defined benefit pension plan
covering all eligible employees. Pension expense relating to these plans was
$201,000, $204,000 and $190,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Leslie-Locke's contributions were determined according to
the minimum funding requirements under law in 1995 and 1996 and according to the
maximum deductibility under income tax regulations in 1997.
The following assumptions and components were used to develop the net
pension expense (dollar amounts in thousands):
1997 1996 1995
- -----------------------------------------------------------------------------
Assumptions:
Discount rate 7.5% 7.5% 7.0%
Rates of increase in compensation levels 4.5% 4.5% 4.5%
Expected long-term rate of return on assets 9.0% 8.5% 8.5%
Components:
Service cost - benefits earned during the period $ 210 $ 211 $ 189
Interest cost on projected benefits obligation 294 285 296
Actual return on assets (624) (278) (269)
Amortization of deferred plan items, net 321 (14) (26)
----- ----- -----
Pension expense, net $ 201 $ 204 $ 190
===== ===== =====
(28)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the funded status of the plans and amounts
recognized in the Consolidated Balance Sheets (in thousands):
1997 1996
- --------------------------------------------------------------------------------
Actuarial Present Value of Benefit Obligations:
Vested benefit obligations $ 3,998 $ 3,129
Non-vested benefit obligations 246 141
------- -------
Accumulated benefit obligations 4,244 3,270
Benefits attributable to future salaries 592 423
------- -------
Projected benefit obligations 4,836 3,693
Plan assets at fair value 4,056 3,146
------- -------
Excess of projected benefit obligations over Plan assets (780) (547)
Unrecognized net transition asset (349) (384)
Unrecognized net loss 747 273
------- -------
Accrued pension liability recognized in the
Consolidated Balance Sheets $ (382) $ (658)
======= =======
The plans' assets include common stock, fixed income securities,
short-term investments and cash. Benefits are based upon years of credited
service and final average pay, including sales commissions and bonuses, for the
five highest consecutive years of earnings for the last ten calendar years
immediately preceding retirement. Participants are fully vested after five years
of continuous service as defined in the plan.
(7) LONG-TERM DEBT
The Company has a $12 million revolving line of credit, secured by
substantially all of the Company's assets, with Branch Banking and Trust Company
("BBT"), consisting of cash advances of a maximum of $10.5 million, seasonally
adjusted and depending upon collateral availability, and letters of credit of
$1.5 million, with interest payable at 0.625% over the prime rate. At December
31, 1997, the interest rate on this line of credit was 9.125%. At December 31,
1997, there were no borrowings under this line of credit.
Pursuant to its bank agreements, the Company is prohibited from declaring
or paying dividends without the prior written consent of the lender.
Leslie-Locke is also required to maintain certain financial covenants typical to
secured borrowing arrangements. For the year ended December 31, 1997 the Company
was in compliance with its debt covenants.
On June 1, 1997, the Company obtained financing in the form of a $7
million Industrial Revenue Bond. The proceeds were used to pay the existing
mortgage to BBT on the Company's second plant in Burgaw, North Carolina and
other debt. The loan is for thirteen years with annual amortization beginning
June 1999 and is secured by a letter of credit from BBT which expires after
three years. Interest is variable with the tax exempt short-term market (4.4%
per annum at December 31, 1997) and there is a letter of credit fee of 1.9% per
annum.
(29)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue Bond payable over thirteen years commencing June 1999 with
variable interest rates $ 7,000
Notes payable pursuant to $10.5 million revolving line of credit, expiring July 1998 $ 8,113
Mortgage note payable to bank, interest at 8% per annum, principal
and interest payable monthly based upon a 15-year amortization schedule
commencing January 1994 with a balloon payment in June 2000,
substantially prepaid in 1997 152 3,691
Mortgage note payable to bank, interest at 2.825% over the LIBO rate, principal
and interest payable monthly based upon a 15 year amortization schedule
commencing September 1995 with a balloon payment in February 2001,
prepaid in 1997 3,803
Equipment note payable to bank , interest at 4% on $690,000 and 2.825% over
the LIBO rate on the remainder, principal and interest payable monthly over
seven years commencing July 1, 1996 2,393 2,821
Other 70 103
------- -------
9,615 18,531
Less current portion 651 933
------- -------
Total long-term debt $ 8,964 $17,598
======= =======
</TABLE>
The approximate amount of maturities of long-term debt (in thousands) are:
1999 - $1,029; 2000 - $1,028; 2001 - $1,029; 2002 - $1,028; 2003 and thereafter
- - $4,850.
(8) INCOME TAXES
Income tax provision (benefit) in the Consolidated Statements of
Operations is as follows (in thousands):
Year Ended December 31,
----------------------
1997 1996 1995
- --------------------------------------------------------
Current:
Federal $ $ $(389)
State
Deferred:
Federal 389
State ---- ---- -----
$ -- $ -- $ --
==== ==== =====
(30)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The provision (benefit) for income taxes differs from the amount computed
by applying the Federal statutory rate (34%) to income before income taxes for
the following reasons (in thousands):
Year Ended December 31,
---------------------------
1997 1996 1995
- -------------------------------------------------------------------------------
Income tax (benefit) at Federal statutory rate $ 95 $ 213 $(2,743)
Change in valuation allowance (135) (305) 903
Write-off of goodwill 1,731
Amortization of purchase adjustments on acquired
companies and other non-deductible expenses 40 92 109
Other ------- ----- -------
Provision (benefit) for income taxes $ -- $ -- $ --
======= ===== =======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1996 are as follows (in thousands):
1997 1996
- ----------------------------------------------------------------------------
Deferred tax assets:
Accounts receivable $ 244 $ 157
Inventories 309 412
Accrual for plant restructuring 512
Employee benefits other than pensions 171 160
Other accruals 393 247
State tax credit carryforward 1,800 1,150
Net operating loss carryforwards 1,980 2,107
------ ------
Total gross deferred tax assets 4,897 4,745
Less deferred tax valuation allowance 4,511 4,095
------ ------
Deferred tax asset net of valuation allowance 386 650
Deferred tax liability:
Fixed assets 386 650
------ ------
Net deferred tax asset $ -- $-
====== ======
The valuation allowance applies to deferred tax assets that may expire
before the Company can utilize them. Based upon its prior operating results, the
Company cannot conclude that the deferred tax assets are likely to be realized
in the ordinary course of operations. Accordingly, a valuation allowance is
required to reduce the carrying value of the net deferred tax asset to zero at
December 31, 1997 and 1996. The valuation allowance is periodically re-evaluated
based upon expected operating results.
At December 31, 1997, the Company had a net operating loss carryforward
for Federal income tax purposes of approximately $4.1 million, of which $3.7
million expires in the year 2010 and $.4 million expires in the year 2011.
(31)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) RESTRUCTURING
In December 1994, the Board of Directors of the Company approved a plan to
restructure its manufacturing facilities in order to achieve more efficient and
less costly manufacturing and distribution of its products. The plan involved
(i) expanding the Company's facility in Burgaw, North Carolina by 157,000 square
feet, (ii) closing the Company's facilities in Chicago, Illinois and Atlanta,
Georgia and (iii) transferring operations of the closed facilities to the new
Burgaw factory and the Company's existing facility in Compton, California. The
restructuring was substantially completed by December 31, 1995. The Company has
recorded total pretax restructuring charges of $2,816,000 in 1995 and $4,433,000
in the fourth quarter of 1994.
The components of the facilities restructuring charge are as follows (in
thousands):
<TABLE>
<CAPTION>
Accrual Accrual
Balance Balance
Beginning of Year Provision Activity End of Year
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Idle plant expenses, net of estimated
sublease income $ 427 $ (427) $ --
Expenses pursuant to the Company's
existing postemployment and pension plans 9 (9) --
------ ---------- ------- -------
$ 436 $ -- $ (436) $ --
====== ========== ======= =======
1996
Idle plant expenses, net of estimated
sublease income $1,641 $(1,214) $ 427
Expenses pursuant to the Company's
existing postemployment and pension plans 376 (367) 9
------ ---------- ------- -------
$2,017 $ -- $(1,581) $ 436
====== ========== ======= =======
1995
Idle plant expenses net of estimated
sublease income $2,509 $ 2,682 $(3,550) $ 1,641
Expenses pursuant to the Company's
existing postemployment and pension plans 911 134 (669) 376
Other 290 (290)
------ ---------- ------- -------
$3,710 $ 2,816 $(4,509) $ 2,017
====== ========== ======= =======
</TABLE>
At December 31, 1996 the accrual of $436,000 is included in accrued
expenses and other current liabilities in the Consolidated Balance Sheet.
(32)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(10) REVALUATION OF GOODWILL
During 1995, because operating results fell short of expectations, and the
Company's stock price was below book value, the Company reevaluated its
accounting policy regarding goodwill impairment and adopted a new policy for
recognition and measurement of goodwill impairment based on a fair value
approach. The Company believes fair value is a preferable method to assess
goodwill as it believes that the value at which individual businesses could be
bought and sold in an arms-length transaction between a willing buyer and seller
is the most reasonable evidence and, therefore, the most relevant measure of
their value. The Company obtained an independent appraisal to determine the fair
value of its sole operating subsidiary, Leslie-Locke, to which the goodwill
relates. The determination of fair value was based on, among other things,
market comparables, discounted cash flow analysis and stock market valuation of
the Company. The stock market valuation of the Company was a reasonable
substitute for the value of Leslie-Locke since Leslie-Locke was the only
operating subsidiary of the Company. This change in the method of evaluating the
impairment and recoverability of goodwill resulted in a pretax charge to
operations of $5,092,000 in 1995 in order to write off the entire balance of the
goodwill. Goodwill amortization had been $170,000 per year.
(11) COMMITMENTS AND CONTINGENCIES
Leases
The Company's lease commitments are primarily for real estate and
vehicles. The significant real estate leases provide for renewal options and
periodic rental adjustments to reflect price index changes and require the
Company to pay for property taxes and all other costs associated with the leased
property. Most vehicle leases provide for contingent payments based upon miles
driven and other factors.
Future minimum lease payments under operating leases at December 31, 1997
are $927,000 in 1998, $842,000 in 1999, $802,000 in 2000, $593,000 in 2001,
$504,000 in 2002 and $2,464,000 in 2003 to 2007. Rent expense for the years
1997, 1996 and 1995 was $1,389,000, $1,158,000 and $1,520,000, respectively.
Other
As of December 31, 1997, letters of credit for $1,181,000 were outstanding
to secure certain obligations of the Company.
(12) STOCKHOLDERS' EQUITY
There are 20,000,000 shares of Par Value $.01 Per Share Common Stock
authorized and there are 1,000,000 shares of Par Value $5 Per Share Preferred
Stock authorized, of which 4,833,075 shares of Common Stock and no shares of
Preferred Stock are outstanding.
Employee Stock Option Plan
The Company has an Employee Stock Option Plan (the "Stock Option Plan")
pursuant to which the Company may grant officers, directors and key employees of
Leslie Building Products and Leslie-Locke options to purchase
(33)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Leslie Building Products Common Stock. The Stock Option Plan provides for the
grant of stock options that qualify as incentive stock options ("ISOs") under
Section 422 of the Code and non-qualified stock options ("NQSOs").
Under the Stock Option Plan, since 1994 Leslie Building Products' Stock
Option Plan Committee has been authorized to grant options to purchase up to an
aggregate of 300,000 shares of Leslie Building Products' Common Stock, of which
options for 96,617 shares have not yet been granted. The Committee will
determine the period for which each stock option may be exercisable, but in no
event may a stock option be exercisable more than 10 years from the date of
grant thereof. The number of shares available under the Stock Option Plan, and
the exercise price of options granted under the Stock Option Plan, are subject
to adjustments that may be made by the Committee to reflect stock splits, stock
dividends, recapitalization, mergers, or other major corporate action.
The exercise price for options granted under the Stock Option Plan is
determined by the Committee in its sole discretion; provided, however, in the
case of an ISO granted to an optionee, the exercise price shall be at least
equal to 100% of the fair market value of the shares subject to such option on
the date of grant. The exercise price may be paid in cash or in shares of Leslie
Building Products Common Stock. Options granted under the Stock Option Plan
become exercisable in annual installments determined by the Committee and
accelerated vesting is subject to performance criteria.
Transactions in stock options under this plan are summarized as follows:
<TABLE>
<CAPTION>
Number
Of Shares Option Price
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Granted in 1994 and outstanding at December 31, 1994 240,000 $ 1.66-$2.26
Granted 29,000 $ 1.55-$2.21
Canceled (76,000) $ 1.66
--------
Outstanding at December 31, 1995 193,000 $ 1.55-$2.26
Granted 7,883 $ 2.31-$3.21
Canceled (5,000) $ 1.66
--------
Outstanding at December 31, 1996 195,883 $ 1.55-$3.21
Granted 7,500 $ 2.05
--------
Outstanding at December 31, 1997 203,383 $ 1.55-$3.21
========
Exercisable at December 31, 1997 128,500 $ 1.55-$3.21
========
Options available for grant at December 31, 1997 96,617
========
</TABLE>
Stock options generally expire in five years from the date they are
granted; options vest over service periods that range from zero to five years.
The Company adopted the disclosure-only option under SFAS No.123,
Accounting for Stock-Based Compensation ("FAS 123"), as of December 31, 1996.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The weighted average assumptions used for
grants included no dividend yields, risk-free interest rates of 5.5%, 5.9% and
5.4%; assumed expected volatilities of 76.9%, 56.8% and 51.5%; and expected
lives of 5, 5, and 5 years; for 1997, 1996 and 1995, respectively. The
respective number of shares available for granting options were 96,617, 104,117
and 107,000 at December 31, 1997, 1996 and 1995, respectively.
If compensation cost for the Company's stock option plan had been
recognized in the income statement based upon the fair market method, net income
would have been reduced to $267,000 and $610,000 and earnings per share
(34)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
would have been $.06 (basic and diluted ) and $.13 basic ($.12 diluted) in 1997
and 1996, respectively. Net loss per share would have been increased to
$8,081,000 or $1.69 per share (basic and diluted) in 1995.
The following table summarizes information about stock options outstanding
at December 31, 1997:
Average
Option Remaining Option
Exercise Shares Life Shares
Price Outstanding (Years) Exercisable
----- ----------- ------- -----------
$ 1.55 21,500 4.0 8,600
$ 1.66 154,000 4.0 92,400
$ 2.05 7,500 5.0 7,500
$ 2.21 7,500 3.0 7,500
$ 2.26 5,000 3.0 5,000
$ 2.31 383 4.0
$ 3.21 7,500 4.0 7,500
------------- -----------
203,383 128,500
============= ===========
Stock Purchase Plan
Under the terms of the Company's 1995 Employee Stock Purchase Plan,
eligible employees may purchase shares of the Company's common stock through
payroll deductions.
During 1997, 27,103 shares were purchased under the Stock Purchase Plan at
a cost of $1.12 to $2.12 per share. During 1996, 36,155 shares were purchased at
a cost of $1.97 to $2.02 per share. At December 31, 1997, there were 302,215
shares available for future purchases under the Plan.
Common Stock and Shares Outstanding
Net income per common share (basic) is based on 4,850,905 shares,
4,817,138 shares and 4,789,592 shares for the years ended December 31, 1997,
1996 and 1995, respectively, the weighted average of common shares outstanding.
Net income per common share (diluted) is based on 4,864,493 shares and 4,888,230
shares for the years ended December 31, 1997 and 1996, respectively. Net income
(loss) per common share (basic) for 1995 is the same as net income (loss) per
common share (diluted) since the Company had a loss and therefore the exercise
of outstanding options would be antidilutive. The increase in diluted average
shares outstanding results from the assumed issuance of common stock pertaining
to stock options. The numerator, which is equal to net income, is constant for
both the basic and diluted income (loss) per share calculations.
(35)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(13) SHARED SERVICE AGREEMENT
Pursuant to a Shares Services Agreement with Drew Industries Incorporated,
the Parent of the Company until the Company was spun off in July 1994, the
Company has paid management fees for certain administrative services which are
included in selling, general and administrative expenses as follows (in
thousands):
Year ended December 31, 1997.................................. $ 526
Year ended December 31, 1996.................................. $ 509
Year ended December 31, 1995.................................. $ 588
(14) SIGNIFICANT CUSTOMERS
The Home Depot accounted for 70%, 58% and 54% of the Company's net sales
in the years ended December 31, 1997, 1996 and 1995, respectively. Management
believes its relationship with this customer is good.
(15) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Interim unaudited financial information follows (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1997
Net sales $ 20,399 $28,300 $23,675 $ 15,951 $88,325
Gross profit 2,657 5,217 4,040 3,099 15,013
Net income (loss) (1,267) 859 751 (64) 279
Net income (loss) per share (basic) (.26) .18 .15 (.01) .06
Net income (loss) per share (diluted) (.26) .18 .15 (.01) .06
Year Ended December 31, 1996
Net sales $18, 751 $25,969 $21,226 $ 16,208 $82,154
Gross profit 3,247 5,192 4,257 2,802 15,498
Net income (loss) (267) 1,039 479 (624) 627
Net income (loss) per share (basic) (.06) .22 .10 (.13) .13
Net income (loss) per share (diluted) (.06) .21 .10 (.13) .13
</TABLE>
(36)
<PAGE>
LESLIE BUILDING PRODUCTS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- ---------------------------- -------- --------
Additions
----------------------------
Balance At Charged To Charged To Balance At
Beginning Costs and Other End
Of Period Expenses Accounts Deductions Of Period
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Allowance for doubtful accounts
receivable, trade $ 404 $ 359 $ 136(a) $ 627
Reserve for liquidation losses -
disposal of businesses 2,587 156 2,743
YEAR ENDED DECEMBER 31, 1996:
Allowance for doubtful accounts
receivable, trade $ 355 $ 73 $ 24(a) $ 404
Reserve for liquidation losses -
disposal of businesses 2,431 156 2,587
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts
receivable, trade $ 390 $ 42 $ 77(a) $ 355
Reserve for liquidation losses -
disposal of businesses 2,353 156 78(b) 2,431
(a) Represents accounts written-off net of recoveries.
(b) Represents liquidation expenses incurred, net of recoveries, in connection
with disposal of discontinued operations.
</TABLE>
(37)
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- -----------------------------------------------------------------------------
3. Articles of Incorporation and By laws.
3.1 Leslie Building Products, Inc.
Certificate of Incorporation, as amended.
3.2 Leslie Building Products, Inc. By laws.
Exhibits 3.1 and 3.2 are incorporated by reference to the Exhibits bearing
the same numbers indicated on the Registration Statement of Leslie Building
Products, Inc. on Form 10 (Registration No. 0-24094).
10. Material Contracts.
10.1 Plan and Agreement of Distribution between the Registrant and Drew
Industries Incorporated, dated July 29, 1994.
10.3 Shared Services Agreement between the Registrant and Drew Industries
Incorporated, dated July 29, 1994.
10.4 Tax Matters Agreement between the Registrant and Drew Industries
Incorporated, dated July 29, 1994.
10.5 1994 Stock Option Plan of the Registrant and Subsidiaries, dated July
29, 1994.
10.6(a) Pension Plan for Salaried Employees of Leslie-Locke, Inc.
10.6(b) Pension Plan for Hourly Rated Employees of Leslie-Locke, Inc.
10.7 Non-competition Agreements between Leslie-Locke Acquisition Sub., Inc.
and Ralph C. Pepper and James S. Roach, respectively, dated August 28,
1985.
10.12 Asset Purchase Agreement by and between White Metal Rolling and Stamping
Corp. and R.D. Werner Co., Inc., dated as of November 23, 1990.
10.13 Guaranty and Non-competition Agreement given by Drew Industries
Incorporated and Leslie-Locke, Inc., in favor of R.D. Werner Co., Inc.,
dated as of November 23, 1990.
10.14 Lease between Leslie-Locke, Inc. and Trust Company of the West, dated
December 6, 1991, as amended.
10.15 Loan Agreement between Branch Banking and Trust Company ("BBT") and
Leslie-Locke, Inc. dated June 21, 1993.
10.16 $4,200,000 Promissory Note of Leslie-Locke, Inc. to BBT dated June 21,
1993.
(38)
<PAGE>
10.17 North Carolina Deed of Trust between Leslie-Locke, Inc. and BBT dated
June 21, 1993.
10.18 Loan Agreement between BBT and Leslie-Locke dated July 29, 1994.
10.19 $6,000,000 Revolving Credit Note of Leslie-Locke, Inc. to BBT dated July
29, 1994.
10.20 Security Agreement between BBT and Leslie-Locke dated July 29, 1994.
10.21 Guaranty Agreement between BBT and the Registrant dated July 29, 1994.
10.22 Supplemental Executive Retirement Plan for Leslie-Locke, effective
January 1, 1994.
10.23 Loan Agreement between BBT and Leslie-Locke dated as of January 6, 1995.
10.24 Guaranty Agreement between BBT and Registrant dated as of January 6,
1995.
10.25 Amended and Restated Loan Agreement between BBT and Leslie-Locke, Inc.,
dated November 29, 1995.
10.26 Amended and Restated Revolving Credit Note of Leslie-Locke, Inc. to BBT,
restated November 29, 1995.
10.27 Amended and Restated Security Agreement between BBT and Leslie-Locke,
Inc., dated November 29, 1995.
10.28 Amended and Restated Guaranty Agreement between BBT and the Registrant,
dated November 29, 1995.
10.29 1995 Second Consolidated Amendment Agreement to Loan Agreement by and
among BBT, Leslie- Locke, Inc. and Registrant, dated November 29, 1995.
10.30 1995 Third Consolidated Amendment Agreement to Loan Agreement by and
among BBT, Leslie-Locke, Inc. and Registrant, dated November 29, 1995.
10.31 1996 First Consolidated Amendment Agreement to November 29, 1995 Loan
Agreement by and among BBT, Leslie-Locke, Inc. and Registrant, dated
February 20, 1996.
10.32 Bond Purchase Agreement by and among The Pender County Industrial
Facilities and Pollution Control Financing Authority, Blount Parrish &
Roton, Inc. and Leslie-Locke, Inc., dated June 13, 1997
10.33 Remarketing Agreement by and among Leslie-Locke, Inc., The Pender County
Industrial Facilities and Pollution Control Financing Authority and
Blount Parrish & Roton, Inc., dated as of June 1, 1997
10.34 Security Agreement by and between Leslie-Locke, Inc. and Branch Banking
and Trust Company dated as of June 1, 1997
10.35 Deed of Trust and Security Agreement by and among Leslie-Locke, Inc.,
Jerone C. Herring, as Trustee, and Branch Banking and Trust Company
dated June 1, 1997
10.36 Indenture of Trust by and between The Pender County Industrial
Facilities and Pollution Control Financing Authority and Norwest Bank
Minnesota, National Association, dated as of June 1, 1997
(39)
<PAGE>
10.37 Bond by and between The Pender County Industrial Facilities and
Pollution Control Financing Authority and Cede & Co. dated June 13, 1997
10.38 Loan Agreement by and between The Pender County Industrial Facilities
and Pollution Control Financing Authority and Leslie-Locke, Inc. dated
as of June 1, 1997
10.39 Promissory Note by and between Leslie-Locke, Inc. and The Pender County
Industrial Facilities and Pollution Control Financing Authority dated
June 13, 1997
10.40 Guaranty Agreement by and between Leslie-Locke, Inc. and Branch Banking
and Trust Company dated as of June 1, 1997
10.41 Letter of Credit and Reimbursement Agreement by and between
Leslie-Locke, Inc. and Branch Banking and Trust Company dated as of June
1, 1997
Exhibits 10.1-10.5 are incorporated by reference to the Exhibits bearing
the same numbers indicated on Post-Effective Amendment No. 1 on Form 10/A, dated
August 30, 1994, to the Registration Statement of Leslie Building Products, Inc.
on Form 10 (Registration No. 0-24094).
Exhibits 10.6(a) and 10.6(b) are incorporated by reference to the Exhibits
bearing the same numbers indicated on the Registration Statement of Leslie
Building Products, Inc. on Form 10 (Registration No. 0-24094).
Exhibit 10.7 is incorporated by reference to the Exhibit included in the
Current Report of Drew Industries Incorporated on Form 8-K dated September 6,
1985.
Exhibits 10.12 and 10.13 are incorporated by reference to the Exhibits
bearing numbers 10.121 and 10.122, respectively, included in the Current Report
of Drew Industries Incorporated on Form 8-K, dated November 28, 1990.
Exhibit 10.14 is incorporated by reference to the Exhibit bearing number
10.133 included in the Annual Report of Drew Industries Incorporated on Form
10-K for the fiscal year ended August 31, 1992.
Exhibits 10.15-10.17 are incorporated by reference to the Exhibits bearing
numbers 10.136, 10.137 and 10.138, respectively, included in the Annual Report
of Drew Industries Incorporated on Form 10-K for the year ended December 31,
1993.
Exhibits 10.18-10.24 are incorporated by reference to the Exhibits bearing
the same numbers included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
Exhibits 10.25-10.31 are incorporated by reference to the Exhibits bearing
the same numbers included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Exhibits 10.32 - 10.41 are filed herewith.
21. Subsidiaries
Exhibit 21 is filed herewith ____________ .
23. Consent of Independent Auditors.
(40)
<PAGE>
Exhibit 23 is filed herewith ____________ .
24. Powers of Attorney.
Powers of Attorney of persons signing this Report are included as part of
this Report.
(41)
Exhibit 10.36 Indenture of Trust
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING AUTHORITY
to
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
------------------------
INDENTURE OF TRUST
------------------------
Dated as of June 1, 1997
Relating to
$7,000,000 The Pender County Industrial Facilities
and Pollution Control Financing Authority
Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997
------------------------------------------------------------------------------
<PAGE>
INDENTURE OF TRUST
TABLE OF CONTENTS
(This Table of Contents is not a part of the Indenture of Trust and is only for
convenience of reference.)
Parties......................................................................1
Recitals.....................................................................1
Granting Clauses.............................................................2
ARTICLE I
DEFINITIONS
Section 101. Definitions.................................................. 4
Section 102. Use of Words................................................. 11
ARTICLE II
THE BONDS
Section 201. Authorized Amount of Bonds................................... 11
Section 202. Details of Bonds............................................. 11
Section 203. Form......................................................... 15
Section 204. Payment...................................................... 15
Section 205. Execution.................................................... 16
Section 206. Limited Obligation........................................... 16
Section 207. Authentication............................................... 17
Section 208. Delivery of the Bonds........................................ 17
Section 209. Mutilated, Destroyed or Lost Bonds........................... 17
Section 210. Registration and Transfer of Bonds........................... 18
Section 211. Cancellation................................................. 19
Section 212. Temporary Bonds.............................................. 19
Section 213. Additional Bonds............................................. 19
Section 214. Book Entry System. .......................................... 21
Section 215. CUSIP Numbers................................................ 22
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 301. Redemption and Purchase of Bonds............................. 23
Section 302. Notice....................................................... 26
Section 303. Redemption Payments.......................................... 26
Section 304. Cancellation................................................. 26
Section 305. Partial Redemption of Bonds.................................. 26
Section 306. Selection of Bonds for Redemption............................ 27
(i)
<PAGE>
Section 307. Mandatory Purchase of Bonds.................................. 27
ARTICLE IV
GENERAL COVENANTS
Section 401. Payment of Principal, Premium, if any, and Interest.......... 28
Section 402. Performance of Covenants..................................... 28
Section 403. Instruments of Further Assurance............................. 29
Section 404. Recordation and Other Instruments............................ 29
Section 405. Inspection of Project Books.................................. 29
Section 406. Rights Under Loan Agreement and Letter of Credit............. 29
Section 407. Prohibited Activities........................................ 29
Section 408. Transfer and Return of Letter of Credit...................... 30
Section 409. Substitute Letter of Credit.................................. 30
ARTICLE V
REVENUES AND FUNDS
Section 501. Creation of Bond Fund........................................ 31
Section 502. Payments Into Bond Fund...................................... 32
Section 503. Use of Moneys in Bond Fund................................... 32
Section 504. Withdrawals from Bond Fund................................... 33
Section 505. Non-Presentment of Bonds..................................... 33
Section 506. Fees, Expenses and Charges of Issuer, Trustee,
Remarketing Agent, and Paying Agent.......................... 33
Section 507. Moneys to be Held in Trust................................... 34
Section 508. Payment of Excess Amounts.................................... 34
Section 509. Letter of Credit............................................. 34
Section 510. Rebate Fund.................................................. 35
Section 511. Creation of Bond Purchase Fund............................... 36
ARTICLE VI
CUSTODY AND APPLICATION OF BOND PROCEEDS
Section 601. Creation of Construction Fund................................ 37
Section 602. Payments into Construction Fund.............................. 37
Section 603. Cost of the Project.......................................... 37
Section 604. Payments from Construction Fund.............................. 38
Section 605. Disposition of Balance in Construction Fund.................. 39
Section 606. Disposition of Balance in Construction Fund upon Default..... 39
ARTICLE VII
INVESTMENTS
Section 701. Investment of Moneys......................................... 39
(ii)
<PAGE>
ARTICLE VIII
RIGHTS OF THE COMPANY UNDER THE LOAN AGREEMENT
Section 801. Rights of Company Under Loan Agreement....................... 41
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 901. Events of Default............................................ 41
Section 902. Acceleration................................................. 42
Section 903. Other Remedies; Rights of Bondholders........................ 43
Section 904. Right of Bondholders to Direct Proceedings................... 43
Section 905. Appointment of Receiver...................................... 43
Section 906. Waiver....................................................... 44
Section 907. Application of Moneys........................................ 44
Section 908. Remedies Vested in Trustee................................... 45
Section 909. Rights and Remedies of Bondholders........................... 45
Section 910. Termination of Proceedings................................... 46
Section 911. Waivers of Events of Default................................. 46
Section 912. Disposition of Amounts Drawn on Letter of Credit;
Assignment of Rights to Contest.............................. 47
Section 913. Letter of Credit Bank Deemed Owner........................... 47
Section 914. Subrogation Rights of the Bank............................... 48
ARTICLE X
DISCHARGE OF LIEN
Section 1001. Discharge of Lien........................................... 48
Section 1002. Effect of Discharge on Bonds................................ 50
ARTICLE XI
TRUSTEE; PAYING AGENTS; REMARKETING AGENT
Section 1101. Acceptance of Trusts........................................ 50
Section 1102. Fees, Charges and Expenses of Trustee and Paying
Agents; Trustee's Prior Lien................................ 52
Section 1103. Notice to Bondholders of Default............................ 53
Section 1104. Intervention by Trustee..................................... 53
Section 1105. Merger or Consolidation of Trustee.......................... 53
Section 1106. Resignation by Trustee...................................... 54
Section 1107. Removal of Trustee.......................................... 54
Section 1108. Appointment of Successor Trustee............................ 54
Section 1109. Concerning Any Successor Trustee............................ 55
Section 1110. Reliance Upon Instruments................................... 55
Section 1111. Appointment of Co-Trustee................................... 55
Section 1112. Designation and Succession of Paying Agents................. 56
(iii)
<PAGE>
Section 1113. Remarketing Agent........................................... 56
Section 1114. Qualifications of Remarketing Agent......................... 57
ARTICLE XII
PURCHASE AND REMARKETING OF BONDS
Section 1201. Remarketing of Bonds........................................ 57
Section 1202. Purchase of Bonds........................................... 59
Section 1203. Delivery of Bonds........................................... 59
Section 1204. Drawings on Letter of Credit................................ 60
Section 1205. Delivery of Proceeds of Sale................................ 60
Section 1206. Issuer to Cooperate......................................... 60
Section 1207. No Remarketing After Default................................ 60
Section 1208. Duties of Trustee........................................... 60
Section 1209. No Remarketing Under Certain Conditions..................... 61
ARTICLE XIII
SUPPLEMENTAL INDENTURES
Section 1301. Supplemental Indentures Not Requiring Consent of Bondholders 61
Section 1302. Supplemental Indentures Requiring Consent of Bondholders.... 62
Section 1303. Consent of Company and Bank; Bond Counsel Opinion........... 63
ARTICLE XIV
AMENDMENT TO LOAN AGREEMENT, NOTE
AND LETTER OF CREDIT
Section 1401. Amendments Not Requiring Consent of Bondholders............. 63
Section 1402. Amendments Requiring Consent of Bondholders................. 64
ARTICLE XV
MISCELLANEOUS
Section 1501. Consents, etc............................................... 64
Section 1502. Notices..................................................... 64
Section 1503. Limitation of Rights........................................ 66
Section 1504. Severability................................................ 66
Section 1505. Applicable Provisions of Law................................ 67
Section 1506. Counterparts................................................ 67
Section 1507. Successors and Assigns...................................... 67
Section 1508. Captions.................................................... 67
Section 1509. Photocopies and Reproductions............................... 67
Section 1510. Bonds Owned by the Issuer or the Company.................... 67
Section 1511. Limitation of Liability of Directors, Officers of
Issuer and the Trustee...................................... 67
Section 1512. Bank as Third Party Beneficiary............................. 68
(iv)
<PAGE>
Section 1513. Expiration of Letter of Credit.............................. 68
Section 1514. Trustee Books Open for Inspection........................... 68
Signatures and Seals........................................................66
Exhibit A -- Form of Variable Rate Bond
Exhibit B -- Form of Fixed Rate Bond
Exhibit C -- Form of Requisition
(v)
<PAGE>
INDENTURE OF TRUST
This INDENTURE OF TRUST, dated as of June 1, 1997 (the "Indenture"), by
and between THE PENDER COUNTY INDUSTRIAL FACILITIES AND POLLUTION CONTROL
FINANCING AUTHORITY, a public body politic and corporate under the laws of the
State of North Carolina (the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking institution (the "Trustee");
W I T N E S S E T H :
WHEREAS, the Industrial and Pollution Control Facilities Financing Act,
Chapter 159C of the General Statutes of North Carolina, as amended (the "Act"),
authorizes the creation of industrial facilities and pollution control financing
authorities by the several counties in North Carolina and empowers such
authorities to acquire, construct, own, repair, maintain, extend, improve,
rehabilitate, renovate, furnish, equip and sell, lease, exchange, transfer or
otherwise dispose of industrial or manufacturing facilities to the end that such
authorities may be able to promote the right to gainful employment opportunity
and private industry, and thereby promote the general welfare of the inhabitants
of North Carolina, by exercising such powers to aid in financing industrial or
manufacturing facilities for the purpose of alleviating unemployment or raising
below average manufacturing wages and further authorizes such authority to loan
to others the proceeds of bonds issued for the purpose of paying for all or any
part of an industrial or manufacturing facility, to mortgage and pledge any or
all of such facilities, whether then owned or thereafter acquired, as security
for the payment of the principal of, premium, if any, and interest on any such
bonds and any agreements made in connection therewith and to pledge or assign
the revenues and receipts from such facilities or loan or from any other source
to the payment of such bonds; and
WHEREAS, the Issuer has been duly organized pursuant to the Act; and
WHEREAS, in order to further the purposes of the Act, the Issuer has
proposed to assist the Company (as defined below) by reimbursing the Company for
the costs of construction of a 156,000 square foot expansion to the Company's
existing facility, and acquisition and installation of equipment therein for the
manufacture of building products in Pender County, North Carolina (the
"Project"), whereby the proceeds to be received from the sale thereof will be
loaned to Leslie-Locke, Inc., a Delaware corporation (the "Company"), pursuant
to a Loan Agreement between the Issuer and the Company dated as of the date of
this Indenture of Trust (the "Loan Agreement"); and
WHEREAS, the Issuer intends to assign to the Trustee as security for the
Bonds certain of the Issuer's rights under the Loan Agreement and the Company's
promissory note in the principal amount of $7,000,000 (the "Note") issued by the
Company and delivered to the Issuer pursuant to the Loan Agreement; and
WHEREAS, the Company has caused an irrevocable Letter of Credit to be
issued by Branch Banking and Trust Company (the "Bank") as additional security
for the Bonds pursuant to a Letter
1
<PAGE>
of Credit and Reimbursement Agreement between the Bank and the Company dated as
of June 1, 1997 (the "Reimbursement Agreement"); and
WHEREAS, the execution and delivery of this Indenture and the issuance,
sale and delivery of the Issuer's bonds under the Act as herein provided have
been in all respects approved and duly and validly authorized by resolutions
duly adopted by the Issuer; and
WHEREAS, the Issuer has determined to issue its Industrial Development
Revenue Bonds in an aggregate principal amount of Seven Million Dollars
($7,000,000) (the "Bonds") to reimburse the Company for cost of acquiring,
constructing and equipping the Project, including necessary expenses incidental
thereto; and
WHEREAS, such Bonds and the Trustee's certificate of authentication to be
endorsed thereon are to be in substantially the form attached hereto as Exhibit
A, with appropriate variations, omissions and inserts as are permitted or
required by this Indenture; and
WHEREAS, the Bonds are limited obligations of the Issuer, payable solely
from the revenues and receipts derived from the Loan Agreement, and neither the
faith and credit nor the taxing powers of the Issuer or Pender County are
pledged to the payment of the Bonds; and
WHEREAS, all things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid, binding and legal
obligations of the Issuer according to the import thereof, and to constitute
this Indenture a valid assignment and pledge of revenues to the payment of the
principal of and premium, if any, and interest on the Bonds, in accordance with
the provisions hereof, have or will have been done and performed, and the
creation, execution and delivery of this Indenture of Trust and the creation,
execution and issuance of the Bonds, subject to the terms hereof, have in all
respects been duly authorized;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS INDENTURE
WITNESSETH:
GRANTING CLAUSES
That the Issuer, in consideration of the premises and the acceptance by
the Trustee of the trusts hereby created and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, (i)
as security for the payment of the principal of and premium, if any, and
interest on the Bonds, and the purchase price therefor, as hereinafter defined
and for the funds which may be advanced by the Trustee pursuant hereto and the
performance and observance by the Issuer of the covenants and obligations
expressed herein and in the Bonds, and (ii) to secure payment of all amounts
owed to the Bank pursuant to the Reimbursement Agreement as a result and to the
extent of funds drawn under the Letter of Credit by the Trustee, does hereby
irrevocably pledge, grant, bargain, sell, convey, transfer and assign unto and
grant a lien and security interest to, the Trustee, and its successor or
successors in trust, the following described property (collectively, the "Trust
Estate"):
2
<PAGE>
1. All rights, title and interest of the Issuer in and to the Loan
Agreement (except for the rights of the Issuer under Sections 4.1(c), 6.4, 6.6
and 8.5 thereof and any rights of the Issuer to receive notices, certificates,
or other communications or to give its consent thereunder), and the Note and all
revenues (and receipts) and the proceeds of all thereof;
2. All the rights and interest of the Issuer in and to the Bond Fund
(as hereinafter defined), Bond Purchase Fund (as hereinafter defined) and
Construction Fund (as hereinafter defined), and all moneys and investments
therein, but subject to the provisions of this Indenture pertaining thereto,
including those pertaining to the making of disbursements therefrom; and
3. All moneys, securities and obligations from time to time held by
the Trustee under the terms of this Indenture (except for moneys, securities or
obligations deposited with or paid to the Trustee for redemption or payment of
Bonds which are deemed to have been paid in accordance with Article IX hereof
and funds held pursuant to Sections 202(e), 505, 506, 510 and 1204 hereof, which
shall be held by the Trustee in accordance with the provisions of said Article
IX or Sections 204, 505, 506, 510 and 1204 as the case may be), and any and all
real and personal property of every name and nature from time to time hereafter
by delivery or by writing of any kind conveyed, mortgaged, pledged, assigned or
transferred, as and for additional security hereunder by the Issuer or by anyone
in its behalf or with its written consent to the Trustee which is hereby
authorized to receive any and all such property at any and all times and to hold
and apply the same subject to the terms hereof;
TO HAVE AND TO HOLD all the same with all privileges and appurtenances
hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and
its successors in said trusts and to them and their assigns forever;
IN TRUST, NEVERTHELESS, upon the terms and trust herein set forth for the
equal and proportionate benefit, security and protection of all owners of the
Bonds issued under and secured by this Indenture to the extent of any
obligations due thereunder, as their respective interests may appear, without
privilege, priority or distinction of any of the Bonds over any of the other of
the Bonds and for the Bank to secure payment and performance by the Company of
its obligations under the Reimbursement Agreement; provided, however, that if
the Issuer, its successors or assigns, shall well and truly pay, or cause to be
paid, the principal of the Bonds and the interest due thereon at the times and
in the manner provided in the Bonds according to the true intent and meaning
thereof, and shall make the payments into the Bond Fund as required hereunder or
shall provide, as permitted hereby, for the payment thereof by depositing or
causing to be deposited with the Trustee the amount specified herein, and shall
well and truly keep, perform and observe all the covenants and conditions
pursuant to the terms of this Indenture to be kept, performed and observed by
it, and shall pay to the Trustee all sums of money due or to become due to it in
accordance with the terms and provisions hereof, and the Company shall have paid
or performed all obligations owing to the Bank under the Reimbursement Agreement
to the extent of payments made by it under the Letter of Credit, then upon such
final payments this Indenture and the rights hereby granted shall cease,
determine and be void; otherwise, this Indenture to be and remain in full force
and effect; and
3
<PAGE>
THIS INDENTURE FURTHER WITNESSETH that, and it is expressly declared, all
Bonds issued and secured hereunder are to be issued, authenticated and delivered
and all said revenues and income hereby pledged are to be dealt with and
disposed of under, upon and subject to the terms, conditions, stipulations,
covenants, agreements, trusts, uses and purposes as hereinafter expressed, and
the Issuer has agreed and covenanted, and does hereby agree and covenant, with
the Trustee and with the respective owners, from time to time of the Bonds, as
follows:
ARTICLE I
DEFINITIONS
Section 101. Definitions. In addition to the words and terms elsewhere
defined in this Indenture or in the Loan Agreement, the following words and
terms as used in this Indenture shall have the following meanings unless the
context or use indicates another or different meaning:
"Act" shall mean Chapter 159C of the General Statutes of North Carolina
and any successor provisions thereto.
"Additional Bonds" shall mean any bonds issued pursuant to Section 213.
"Authorized Company Representative" shall mean the person or persons at
the time designated to act on behalf of the Company, such designation in each
case to be evidenced by a certificate furnished to the Issuer and the Trustee
containing the specimen signature of such person or persons and signed on behalf
of the Company by its President, any Vice President, Treasurer or Assistant
Treasurer, or Secretary or Assistant Secretary. Such certificate may designate
an alternate or alternates.
"Available Moneys" shall mean moneys which have been on deposit with the
Trustee for at least 366 days during which no Event of Bankruptcy with respect
to the Company or the Issuer shall have occurred, and the proceeds from the
investment thereof; provided that, if a petition giving rise to an Event of
Bankruptcy is filed during such one year period and such petition is dismissed
and the dismissal is final and not subject to appeal, the period shall continue
to run and no Event of Bankruptcy shall be deemed to have occurred during such
period.
"Bank" shall mean Branch Banking and Trust Company, in its capacity as
issuer of the Letter of Credit, its successors in such capacity and their
assigns, or any bank issuing a Substitute Letter of Credit.
"Beneficial Owner" means the Person in whose name a Bond is recorded as
beneficial owner of such Bond by the Securities Depository or a Participant or
an Indirect Participant on the records of such Securities Depository,
Participant or Indirect Participant, as the case may be, or such Person's
subrogee.
"Bond Counsel" shall mean initially Hunton & Williams, and any other firm
of nationally recognized municipal bond counsel selected by the Company and
acceptable to the Issuer and the Trustee.
4
<PAGE>
"Bond Registrar" shall mean the Trustee.
"Bond Fund" shall mean the fund by that name created and established in
Section 501 of this Indenture.
"Bond Purchase Fund" shall mean the fund by that name created and
established by Section 511 of this Indenture.
"Bonds" shall mean The Pender County Industrial Facilities and Pollution
Control Financing Authority Industrial Development Revenue Bonds (Leslie-Locke,
Inc. Project), Series 1997, in the aggregate principal amount of $7,000,000,
issued under and secured by this Indenture.
"Book Entry System" means a book entry system established and operated for
the recordation of Beneficial Owners of the Bonds pursuant to Section 214.
"Business Day" shall mean a day of the year, other than a Saturday or a
Sunday, on which banks located in the cities in which the principal corporate
trust office of the Trustee, the principal office of any Paying Agent and the
principal office of the Bank are located are not required or authorized to
remain closed and on which the New York Stock Exchange is not closed.
"Certificate of Authentication" shall mean the certificate described in
Section 207 of this Indenture.
"Chairman" shall mean the person holding the office and performing the
duties of the Chairman of the Issuer.
"Code" shall mean the Internal Revenue Code of 1986, as amended, the
regulations (whether proposed, temporary or final) under that Code or the
statutory predecessor of that Code, and any amendments of, or successor
provisions to, the foregoing and any official rulings, announcements, notices,
procedures and judicial determinations regarding any of the foregoing, all as
and to the extent applicable. Unless otherwise indicated, reference to a Section
of the Code means that Section of the Code, including such applicable
regulations, rulings, announcements, notices, procedures and determinations
pertinent to that Section of the Code.
"Commission" means the Local Government Commission of North Carolina, a
division of the North Carolina Department of State Treasurer, and any successor
or successors thereto.
"Company" shall mean Leslie-Locke, Inc., a corporation organized and
existing under the laws of the State of Delaware, and its permitted successors
and assigns under the Loan Agreement.
"Construction Fund" shall mean the fund created under Section 601 hereof.
"Conversion Date" shall mean the date specified by the Company pursuant to
Section 202(d) hereof, on which the variable rate feature borne by the Bonds
shall be terminated and the Bonds shall thereafter bear interest at a Fixed
Rate.
5
<PAGE>
"Cost of the Project" shall have the meaning set forth in Section 603
hereof.
"Credit Modification Date" shall mean a Substitution Date if either of the
following occurs:
(i) if the Bonds are then rated by a Rating Agency, the
Company provides notice that a Substitute Letter of Credit will be
provided in accordance with Section 409 hereof but fails to deliver to the
Trustee the letter from any Rating Agency then rating the Bonds as
required by Section 409(c) hereof, or (2) the Company delivers such notice
and the letter required by Section 409(c) but prior to the Substitution
Date, such Rating Agency revokes such letter, or (3) the Company delivers
such notice and letter but such Substitute Letter of Credit is not
delivered to, and accepted by, the Trustee on or prior to the Substitution
Date; or
(ii) the Bonds are not then rated and (1) the Company provides
notice that a Substitute Letter of Credit will be provided in accordance
with Section 409 hereof but fails to deliver to the Trustee the evidence
required by Section 409(d) hereof, or (2) the Company delivers such notice
and evidence but such Substitute Letter of Credit is not delivered to, and
accepted by, the Trustee on or prior to the Substitution Date.
"Event of Bankruptcy" shall mean (a) with the respect to the Company and
the Issuer, the filing of a petition in bankruptcy by or against the Company or
the Issuer under the United States Bankruptcy Code or the commencement of a
proceeding by or against the Company or the Issuer under any other law
concerning insolvency, reorganization or bankruptcy; and (b) with respect to the
Bank, the Bank shall become insolvent or bankrupt or fail to pay its debts
generally as such debts become due or shall admit in writing its inability to
pay any of its indebtedness or shall consent to or petition for or apply to any
authority for the appointment of a receiver, liquidator or trustee or similar
official for itself or for all or any substantial part of its properties or
assets or any such trustee, receiver, liquidator or similar official is
otherwise appointed or bankruptcy, insolvency, reorganization, arrangement or
liquidation proceedings or similar proceedings shall be instituted by or against
the Bank or entry of an order of relief by or against the Bank.
"Event of Default" shall mean any event of default specified in Section
1001 hereof.
"Fixed Rate" shall mean the fixed rate of interest on the Bonds determined
pursuant to Section 202(d) hereof.
"Government Securities" shall mean (i) direct obligations of the United
States of America, and (ii) obligations unconditionally guaranteed by the United
States of America, and the full and timely payment of which securities, receipts
or obligations is unconditionally guaranteed by the United States of America
(including any securities described in (i) or (ii) issued or held in book-entry
form on the books of the Department of the Treasury of the United States of
America), which obligations, in either case, are not subject to redemption prior
to maturity at less than par at the option of anyone other than the holder
thereof. "Government Securities" shall include short term money market funds
comprised either entirely of the foregoing or of a portfolio which is limited to
such obligations and
6
<PAGE>
repurchase agreements fully collateralized by such obligations. Such money
market funds may include funds advised by the Trustee.
"Holder" or "bondholder" or "Bondholder" or "owner of the Bonds" or
"registered owner" shall mean the registered owner of any Bond.
"Indenture" shall mean this Indenture of Trust and any amendments and
supplements hereto.
"Indirect Participant" means a broker-dealer, bank or other financial
institution for which the Securities Depository holds Bonds as a securities
depository through a Participant.
"Interest Payment Date" shall mean the first day of each March, June,
September and December, commencing September 1, 1997, prior to and including the
Conversion Date, and each June 1 and December 1 after the Conversion Date,
provided that, if such day shall not be a Business Day, payment shall be made on
the next succeeding Business Day with the same force and effect as if made on
the date such payment was due.
"Issuer" shall mean The Pender County Industrial Facilities and Pollution
Control Financing Authority, a political subdivision and a body corporate and
politic of the State of North Carolina, and its successors and assigns.
"Letter of Credit" shall mean the irrevocable letter of credit in an
amount not to exceed $7,466,666 dated the date of the issuance of the Bonds and
issued by the Bank to the Trustee at the request and for the account of the
Company pursuant to the Reimbursement Agreement, including any permitted
amendments thereto and any renewals or substitutes therefor, or any Substitute
Letter of Credit.
"Loan Agreement" shall mean the Loan Agreement dated as of June 1, 1997,
by and between the Issuer and the Company, and any amendments and supplements
thereto.
"Maximum Rate" shall mean 12% per annum, or such greater rate not
exceeding 15% as shall be fixed, at one time or from time to time, in a
certificate filed by the Issuer (at the direction of the Company), provided that
in order to increase the maximum rate to any rate greater than 12% during the
variable rate period, the Company shall have caused to be filed with the Trustee
a Substitute Letter of Credit in an amount sufficient to pay the principal of
the Outstanding Bonds, plus interest at such new rate fixed in the certificate
for a period of not less than 111 days plus a premium of 3% of the principal of
the Bonds Outstanding.
"Minimum Denominations" shall mean $100,000 and $5,000 multiples in excess
thereof (except that to the extent that less than $100,000 in principal amount
of Bonds is outstanding, "Minimum Denominations" shall mean such lesser amount);
provided that, following the Conversion Date, "Minimum Denominations" shall mean
$5,000 and integral multiples thereof if the conditions described in Section
202(f) hereof are satisfied.
7
<PAGE>
"Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successor
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 Company with the approval of the Remarketing Agent, by notice
to the Issuer and the Trustee.
"Net Proceeds", when used with respect to any insurance recovery or
condemnation award with respect to the Project, shall mean the gross proceeds
from such insurance recovery or condemnation award less payment of reasonable
attorneys' fees, fees and expenses of the Trustee and all other expenses
properly incurred in the collection of such gross proceeds.
"Outstanding" shall mean when used with reference to the Bonds, as of any
particular date, the aggregate of all Bonds authenticated and delivered under
this Indenture except:
(a) Bonds canceled at or prior to such date or delivered to or
acquired by the Trustee at or prior to such date for cancellation;
(b) Bonds deemed to be paid in accordance with Article X of
this Indenture; and
(c) Bonds in lieu of or in exchange or substitution for which
other Bonds shall have been authenticated and delivered pursuant to this
Indenture.
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 Bonds Outstanding are
then owned by the Company) or an Affiliate of the Company (as defined below)
shall be disregarded for the purpose of any such determination; provided that
the Trustee can assume that no Bonds are owned by an Affiliate of the Company
unless the Trustee has received written notice from the Company as to the
identity of such Affiliate. For the purpose of this paragraph, an "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. Any Bonds owned by the Company but pledged to the
Bank under the Reimbursement Agreement shall be deemed to be Outstanding, and
the Bank shall be entitled to give any consent, waiver, notice, request, demand,
authorization or direction as a Holder under the Indenture.
"Paying Agent" shall mean any bank or trust company named by the Issuer as
the place at which the principal of and premium, if any, and interest on the
Bonds are payable, and initially shall be the Trustee.
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"Participant" shall mean a broker-dealer, bank or other financial
institution for which the Securities Depository holds Bonds as a securities
depository.
"Person" shall mean natural persons, firms, associations, partnerships,
corporations, limited liability companies, and public bodies.
"Project" shall mean the facility for the manufacture of building products
constructed and equipped in Pender County, North Carolina, as described in
Exhibit A attached to the Loan Agreement, as the same may be revised in
accordance with Section 3.2 thereof, as the same may at any time exist.
"Purchase Date" shall have the meaning set forth in Section 202(e) hereof.
"Rate Computation Date" shall mean prior to the Conversion Date the
Wednesday of each calendar week, provided that if any Wednesday is not a
Business Day then the Rate Computation Date shall be the first Business Day
preceding such Wednesday.
"Rate Period" shall mean prior to the Conversion Date, a period from and
including the first Thursday following a Rate Computation Date to and including
the next succeeding Wednesday or the Conversion Date, if earlier.
"Rating Agency" shall mean Moody's, if such agency's ratings are in effect
with respect to the Bonds, or Standard & Poor's, if such agency's ratings are in
effect with respect to the Bonds, and their respective successors and assigns.
If either such corporation ceases to act as a securities rating agency, the
Company may, with the approval of the Remarketing Agent and the Bank, appoint
any nationally recognized securities rating agency as a replacement.
"Record Date" shall mean with respect to any Variable Rate Interest
Payment Date, the day that is the Business Day prior to such Interest Payment
Date, or, if such day shall not be a Business Day, the next preceding Business
Day; and with respect to any Fixed Rate Interest Payment Date, the fifteenth day
of the calendar month next preceding such Interest Payment Date, or, if such day
shall not be a Business Day, the next succeeding Business Day.
"Registrar" shall mean the bank or trust company acting in the capacity of
registrar under this Indenture.
"Reimbursement Agreement" shall mean the Letter of Credit and
Reimbursement Agreement dated as of June 1, 1997, by and between the Bank and
the Company, and any amendments and supplements thereto.
"Remarketing Agent" shall mean the remarketing agent appointed in
accordance with Section 1113 hereof, which initially shall be Blount Parrish &
Roton, Inc., Montgomery, Alabama.
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"Revenues" shall mean all amounts payable pursuant to Section 4.1 of the
Loan Agreement with respect to principal of, premium, if any, purchase price or
interest on the Bonds.
"Secretary" shall mean the person holding the office and performing the
duties of the Secretary of the Issuer.
"Securities Depository" shall mean The Depository Trust Company and any
substitute for or successor to such securities depository that shall maintain a
Book Entry System with respect to the Bonds.
"Securities Depository Nominee" shall mean the Securities Depository or
the nominee of such Securities Depository in whose name there shall be
registered on the Register the Bonds to be delivered to such Securities
Depository during the continuation with such Securities Depository of
participation in its Book Entry System.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, its successors and their assigns and, if
such corporation shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency, "Standard & Poor's" shall be deemed to
refer to any other nationally recognized securities rating agency designated by
the Company with the approval of the Remarketing Agent, by notice to the Issuer
and the Trustee.
"Substitute Letter of Credit" shall mean an irrevocable direct pay letter
of credit (which may include a letter of credit together with a confirming
letter of credit that satisfies the requirements of this definition), other than
the Letter of Credit issued by the Bank and delivered to the Trustee
concurrently with the original issuance of the Bonds (as such Letter of Credit
may be extended from time to time), issued by a commercial bank organized or
licensed under the laws of the United States or any state of the United States
or a branch or agency of a foreign commercial bank located in the United States
and subject to regulation by state or federal banking regulatory authorities, in
favor of the Trustee for the benefit of the owners of the Bonds, the terms of
which are in all material respects the same as the Letter of Credit (except for
any appropriate revisions in the forms of certificates attached thereto), with a
term of at least one year (or fifteen days following maturity of the Bonds if
sooner), which shall be delivered in accordance with the terms of Section 409
hereof. An amendment to the Letter of Credit for the sole purpose of extending
the term thereof shall not be deemed to be a Substitute Letter of Credit.
"Substitution Date" shall mean a Business Day not less than fifteen (15)
days prior to the expiration or termination date of the Letter of Credit then in
effect on which the Company notifies the Trustee pursuant to Section 409 hereof
will be the effective date of a Substitute Letter of Credit.
"Trustee" shall mean Norwest Bank Minnesota, National Association, in
Minneapolis, Minnesota, or its successors as such hereunder.
"Trust Estate" shall mean the property conveyed to the Trustee pursuant to
the Granting Clauses hereof.
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"Variable Rate" shall mean the variable rate of interest on the Bonds
determined pursuant to Section 202(c) hereof.
Section 102. Use of Words. Words of the masculine gender shall be deemed
and construed to include correlative words of the feminine and neuter genders.
Unless the context shall otherwise indicate, the words "Bond," "owner," "holder"
and "person" shall include the plural, as well as the singular, number.
ARTICLE II
THE BONDS
Section 201. Authorized Amount of Bonds. No Bonds may be issued under the
provisions of this Indenture except in accordance with this Article and except
as otherwise set forth with respect to Additional Bonds. The total principal
amount of Bonds that may be issued is hereby expressly limited to $7,000,000,
except as provided in Sections 209, 212 and 213 hereof.
Section 202. Details of Bonds. (a) The Bonds (i) shall be designated "The
Pender County Industrial Facilities and Pollution Control Financing Authority
Industrial Development Revenue Bonds (Leslie-Locke, Inc. Project), Series 1997,"
(ii) shall be in the aggregate principal amount of $7,000,000, (iii) shall be
dated and numbered as hereinafter provided, (iv) shall bear interest as
hereinafter provided, and (v) shall mature on June 1, 2010. The Bonds shall be
issued as registered bonds without coupons as is hereinafter provided.
(b) The Bonds shall bear interest from and including the date
thereof until payment of the principal or redemption price thereof shall have
been made or provided for in accordance with the provisions hereof, whether at
maturity, upon redemption or otherwise. Interest on the Bonds shall be paid on
each Interest Payment Date and shall be computed as follows: (i) for each Rate
Period ending prior to or on the Conversion Date, on the basis of a year of 365
or 366 days, as appropriate, for the actual number of days elapsed, and (ii)
commencing on the Conversion Date, on the basis of a year of 360 days consisting
of twelve 30-day months.
(c) For the first Rate Period, the Bonds shall bear interest at the
rate set prior to the issuance of the Bonds in the manner set forth in
subsection (c)(i). Thereafter, for each Rate Period ending prior to or on the
Conversion Date, the interest rate on the Bonds shall be the rate, determined as
follows:
(i) On the Rate Computation Date of each calendar week the
Remarketing Agent shall determine that interest rate which, if borne by
the Bonds, would, in its judgment having due regard to prevailing
financial market conditions and the yields at which comparable securities
are then being sold, be the lowest interest rate necessary, but which
would not exceed the interest rate necessary, to enable the Remarketing
Agent to sell the Bonds at par plus accrued interest, and the interest
rate so determined shall be the interest rate on the Bonds for the next
succeeding Rate Period; provided, however, such Variable Rate may be
adjusted by the Remarketing Agent on any date during such Rate Period if
such an adjustment is needed in order to enable the Remarketing Agent to
remarket a Bond which has
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been tendered for purchase in accordance with Section 202(e) hereof. Such
determination or adjustment shall be based on the knowledge of the
Remarketing Agent of actual sales or pricing during the prior 105 days for
securities which in the judgment of the Remarketing Agent are comparable
to the Bonds and prevailing market conditions, or the marketing efforts
with, or solicitation of proposals from, not less than three institutional
or money fund investors or other entities or individuals who customarily
purchase industrial development bonds or other tax-exempt securities in
denominations of $100,000 or more. Any such adjustment of the Variable
Rate occurring during a Rate Period shall apply to all of the Bonds
outstanding at the time that such adjustment is made, and shall be
effective beginning on the date immediately following the date on which
such rate is announced by the Remarketing Agent and thereafter to the
beginning of the next Rate Period. On the same Business Day the
Remarketing Agent shall give telegraphic or telephonic notice, promptly
confirmed in writing, to the Trustee and the Company specifying the
interest rate so determined.
(ii) In the event that no person is serving as the Remarketing
Agent on the applicable Rate Computation Date, or if at any time the
Remarketing Agent fails to establish the Variable Rate in accordance with
the procedure described in the preceding paragraph, then the Variable Rate
for the Rate Period affected shall be the same as for the preceding Rate
Period. If no Variable Rate has been set by the Remarketing Agent for the
two immediately preceding Rate Periods, then the Variable Rate shall be
determined by the Trustee and shall be a percentage per annum (not to
exceed the Maximum Rate) equal to eighty percent (80%) of the bond
equivalent yield (calculated in accordance with standard practice in the
banking industry) applicable to 91-day United States Treasury bills
determined on the basis of the average per annum discount rate at which
such 91-day Treasury bills shall have been sold at the most recent
Treasury auction of such 91-day Treasury bills as quoted or published by
the Federal Reserve Board or any department or agency of the United States
of America; provided further, that in the event that there shall not have
been a Treasury auction of such 91-day Treasury bills on any date during
the ten (10) Business Days immediately preceding such date of
determination of the Variable Rate, or in the event that discount rates
for any Treasury auction of such 91-day Treasury bills during such ten
(10) Business Day period shall not be quoted or published by the Federal
Reserve Board or any department or agency of the United States of America,
the Variable Rate for the immediately preceding Rate Period shall remain
in effect for such Rate Period.
(iii) Notwithstanding the foregoing the Variable Rate shall
never exceed a rate which would cause the net effective interest rate for
the Bonds as of any date, computed in accordance with applicable usury
law, to exceed the Maximum Rate. All calculations of the Variable Rate
shall be rounded to the nearest .01%.
The determination of the Variable Rate by the Remarketing Agent or the Trustee
shall be conclusive and binding upon the owners of the Bonds and, if determined
by the Remarketing Agent, on the Trustee.
(d) The Company shall have the option to convert the rate of
interest payable on the Bonds from the Variable Rate to the Fixed Rate on any
Interest Payment Date by giving written
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notice to the Issuer, the Bank, the Trustee, and the Remarketing Agent stating
(i) its election to convert to the Fixed Rate, (ii) the date as of which the
Fixed Rate shall be computed, which date shall be not less than seven (7)
Business Days prior to the Conversion Date, and (iii) the Conversion Date, which
date shall be an Interest Payment Date not less than forty-five (45) days after
the date the Company gives notice. Such Fixed Rate shall be effective from the
Conversion Date until final maturity (or earlier optional redemption) of the
Bonds. An election by the Company shall not be effective unless the Company
furnishes to the Trustee, concurrently with the notice of election: (A) an
opinion of Bond Counsel to the effect that the conversion to a Fixed Rate is
lawful under applicable law, is permitted by this Indenture, and will not
adversely affect the exclusion of the interest on the Bonds from gross income
for Federal income tax purposes, (B) payment to the Trustee of such amount as
the Trustee reasonably determines may be required in connection with the
conversion including but not limited to its own fees and expenses and the cost
of printing the Bonds in Fixed Rate form, if printed Bonds are required, and (C)
a commitment from a Bank to issue a Substitute Letter of Credit in an amount
sufficient to pay principal of the Outstanding Bonds, plus interest at the Fixed
Rate for a period of not less than 200 days, plus a premium equal to 3% of the
principal amount of Bonds Outstanding, with a term of at least one year from its
date of issuance (or fifteen days after the final maturity date of the Bonds, if
less than one year). Upon receipt of such notice the Trustee shall give written
notice thereof to all registered owners of the Bonds, which notice shall be
given not less than 30 days prior to the Conversion Date. Such notice shall be
given by mail in accordance with Section 302 hereof and shall state (U) that the
interest rate on the Bonds will be converted to the Fixed Rate on the Conversion
Date, (V) the Conversion Date, (W) the date the Fixed Rate shall be determined
and the procedure, which may include the furnishing of a telephone number which
registered owners can call, for informing the registered owners of the Bonds of
the Fixed Rate; (X) that interest on the Bonds will accrue at the Fixed Rate on
and after the Conversion Date until June 1, 2010, (Y) that following the
Conversion Date the Bonds will be secured by a Substitute Letter of Credit and
the name of the Bank issuing such Substitute Letter of Credit, together with the
information about such Substitute Letter of Credit required by Section 409
hereof, and (Z) that the Bonds shall be purchased by the Trustee on the
Conversion Date in accordance with Section 307 hereof. Commencing on the
Conversion Date, the interest rate on the Bonds shall be the Fixed Rate,
determined as follows:
(i) Upon the date set forth in the notice from the Company as
hereinabove provided, the Remarketing Agent shall determine that interest
rate which, if borne by the Bonds, would, in its judgment having due
regard to prevailing financial market conditions, be the interest rate
necessary, but which would not exceed the interest rate necessary, to
enable the Remarketing Agent to sell the Bonds at the principal amount
thereof on the Conversion Date, and the interest rate so determined shall
be the interest rate on the Bonds for the period from and including the
Conversion Date to and including June 1, 2010. The Remarketing Agent shall
give telegraphic or telephonic notice, promptly confirmed in writing, to
the Trustee and the Company specifying the interest rate so determined.
(ii) Notwithstanding the foregoing, the Fixed Rate shall not
exceed a rate which would cause the net effective rate for the Bonds as of
any date, computed in accordance with applicable usury law, to exceed the
Maximum Rate.
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The determination of the Fixed Rate by the Remarketing Agent shall be conclusive
and binding upon the Trustee and the owners of the Bonds.
(e) On or prior to the Conversion Date, any Bond shall be purchased,
on the demand of the registered owner thereof, in Minimum Denominations, on any
Business Day at a purchase price equal to the principal amount thereof plus
accrued interest, if any, to the Purchase Date (as defined below), upon: (i)
delivery to the Trustee at its principal corporate trust office by telephonic
notice, followed by written notice within two days (which may be delivered by
telecopy, and which shall be satisfactory to the Trustee), which (A) states the
principal amount of such Bond and (B) states the date on which such Bond shall
be purchased pursuant to this Section 202(e), which date shall be a Business Day
not prior to the seventh day next succeeding the date of the delivery of such
notice to the Trustee (the "Purchase Date"); and (ii) delivery of such Bond
(with an appropriate transfer of registration form executed in blank acceptable
to the Trustee) at the principal corporate trust office of the Trustee at or
prior to 10:00 a.m., Central time, on the Purchase Date; provided, however, that
such Bond shall be so purchased pursuant to this Section 202(e) only if the Bond
so delivered to the Trustee shall conform in all respects to the description
thereof in the aforesaid notice. Delivery of a notice to tender a Bond or Bonds
for purchase and delivery of the Bond or Bonds described therein to the Trustee
shall each constitute irrevocable acts on the part of the owner of such Bond or
Bonds. If less than all of the principal amount of a Bond is purchased pursuant
to this subsection, the bondholder must retain Bonds in Minimum Denominations
and a replacement Bond in the remaining principal amount shall be issued to the
holder tendering his Bond.
If a Bond is to be purchased in accordance with the preceding paragraph on
a Purchase Date that occurs after notice of a redemption or mandatory purchase
for such Bond is given but before such redemption or mandatory purchase occurs,
purchasers (other than the Company) of such Bond shall be given a copy of such
notice of redemption or mandatory purchase upon delivery of such Bond.
(f) The Bonds shall be originally issued and until the Conversion
Date in the denomination of $100,000 each, or any integral multiple of $5,000 in
excess thereof, numbered consecutively from VR-1 upwards in order of issuance
according to the records of the Trustee. On and after the Conversion Date, the
Bonds shall be issued in the denomination of $100,000, or any integral multiple
of $5,000 in excess thereof, numbered consecutively from FR-1 upwards in order
of issuance according to the records of the Trustee; provided that, if after the
Conversion Date the Bonds are rated A or better by a Rating Agency, the Bonds
may, at the direction of the Company, be issued in the denomination of $5,000,
or any integral multiple of $5,000 in excess thereof. Upon the original issuance
and delivery of the Bonds, the Bonds shall be dated the date of such issuance
and delivery, and any Bonds authenticated and delivered in exchange or
substitution for other Bonds shall be dated so that no gain or loss of interest
results from such exchange or substitution. The Bonds shall bear interest from
the date appearing thereon.
Section 203. Form. Bonds bearing interest at a variable rate shall be
substantially in the form attached hereto as Exhibit A with such appropriate
variations, omissions and insertions as are permitted or required by this
Indenture. Bonds bearing interest at a Fixed Rate shall be substantially
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in the form attached hereto as Exhibit B with such appropriate variations,
omissions and insertions as are permitted or required by this Indenture. The
Bonds may be in printed or typewritten form.
Section 204. Payment. The principal of and premium, if any, on the Bonds
shall be paid upon the presentation and surrender of said Bonds at the principal
corporate trust office of the Trustee. The interest on the Bonds shall be
payable by check or draft drawn upon the Trustee and mailed to the registered
owners as of the close of business on the Record Date next preceding the
Interest Payment Date at their respective addresses as such appear as of the
close of business on such Record Date on the bond registration books kept by the
Trustee, provided that, owners of Bonds in the aggregate principal amount of not
less than $500,000 may, by written instruction filed with the Trustee on or
before the Record Date next preceding such Interest Payment Date, direct that
interest payments be transmitted by wire transfer to an account in the
continental United States (which wire transfer shall be at the expense of the
holder). If and to the extent that there shall be a default in the payment of
the interest due on any Interest Payment Date, such defaulted interest shall be
paid to the owners in whose name any such Bonds (or any Bond or Bonds issued
upon transfer or exchange thereof) are registered at the close of business on
the fifth Business Day next preceding the date of payment of such defaulted
interest. Payment of the final installment of principal and interest on each
Bond shall be made only upon surrender thereof at the principal corporate trust
office of the Trustee. All payments shall be made in lawful money of the United
States of America.
Section 205. Execution. The Bonds shall be executed on behalf of the
Issuer by the manual or facsimile signatures of the Chairman or Vice Chairman
and the Secretary or Assistant Secretary and shall have impressed or imprinted
thereon the seal of the Issuer. A facsimile signature and seal shall have the
same force and effect as if personally signed. In case any officer whose
signature or facsimile of whose signature shall appear on the Bonds shall cease
to be such officer before the delivery of such Bonds, such signature or such
facsimile shall nevertheless be valid and sufficient for all purposes, the same
as if he had remained in office until delivery.
Section 206. Limited Obligation. The Bonds, together with interest
thereon, shall be payable from the Bond Fund, as hereinafter set forth, and
shall be a valid claim of the holders thereof only against the Bond Fund and the
Revenues, which Revenues are hereby pledged and mortgaged for the equal and
ratable payment of the Bonds (principal, purchase price, premium, if any, and
interest) and shall be used for no other purpose than to pay the principal of
and premium, if any, and interest on the Bonds, and the Paying Agent's and the
Trustee's fees, except as may be otherwise expressly authorized in this
Indenture. THE PRINCIPAL OF THE BONDS, THE PREMIUM, IF ANY, AND THE INTEREST
THEREON SHALL NOT BE DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND
CREDIT OF THE STATE OF NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE ISSUER. NEITHER THE STATE OF NORTH CAROLINA NOR ANY POLITICAL
SUBDIVISION THEREOF, INCLUDING THE ISSUER, SHALL BE OBLIGATED TO PAY THE
PRINCIPAL OF, PURCHASE PRICE, PREMIUM, IF ANY, OR INTEREST ON, OR PURCHASE PRICE
OF, THE BONDS OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE REVENUES AND
RECEIPTS PLEDGED THEREFOR, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER
OF THE STATE OF NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING
THE ISSUER, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF,
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PURCHASE PRICE, PREMIUM, IF ANY, OR INTEREST ON THE BONDS OR OTHER COSTS
INCIDENT THERETO.
Section 207. Authentication. Only such Bonds as shall have endorsed
thereon a certificate of authentication substantially in the form set forth in
Exhibits A and B attached hereto duly executed by the Trustee shall be entitled
to any right or benefit under this Indenture. No Bond shall be valid and
obligatory for any purpose unless and until such certificate of authentication
shall have been duly executed by the Trustee, and such certificate of the
Trustee upon any such Bond shall be conclusive evidence that such Bond has been
authenticated and delivered under this Indenture. The Trustee's Certificate of
Authentication on any Bond shall be deemed to have been executed if signed by an
authorized officer of the Trustee, but it shall not be necessary that the same
officer sign the Certificate of Authentication on all of the Bonds issued
hereunder.
Section 208. Delivery of the Bonds. The Issuer shall execute and deliver
to the Trustee and the Trustee shall authenticate the Bonds and deliver said
Bonds to the original purchaser or purchasers thereof. Prior to the delivery or
original issuance by the Trustee of any authenticated Bonds there shall be or
have been delivered to the Trustee:
(a) An original executed counterpart of this Indenture.
(b) An original executed counterpart of the Loan Agreement.
(c) The original executed Letter of Credit.
(d) An original executed Note, together with an executed
assignment from the Issuer to the Trustee.
(e) A written request to the Trustee by the Issuer to authenticate
and deliver the Bonds to the original purchaser or purchasers
thereof upon payment to the Trustee, of a sum specified in
such request plus accrued interest thereon, if any, as the
case may be, to the date of delivery.
(f) A copy, duly certified by the Secretary or Assistant
Secretary, of the proceedings of the governing body of the
Issuer authorizing the issuance of the Bonds.
(g) An opinion of Bond Counsel that the Bonds have been validly
issued and that the interest on the Bonds will be excluded
from gross income for Federal income tax purposes.
(h) Any other instrument or document the Trustee reasonably
requires.
Section 209. Mutilated, Destroyed or Lost Bonds. In case any Bond issued
hereunder shall become mutilated or be destroyed or lost, the Issuer, shall, if
not then prohibited by law, cause to be executed and the Trustee may
authenticate and deliver a new Bond of like date, number, maturity and
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tenor in exchange and substitution for and upon cancellation of such mutilated
Bond, or in lieu of and in substitution for such Bond destroyed or lost, upon
the holder's paying the reasonable expenses and charges of the Issuer and
Trustee in connection therewith, and, in the case of a Bond destroyed or lost,
his filing with the Trustee evidence satisfactory to it that such Bonds were
destroyed or lost, and of his ownership thereof, and furnishing the Issuer and
Trustee with indemnity satisfactory to them. The Trustee is hereby authorized to
authenticate any such new Bond. In the event any such Bonds shall have matured,
instead of issuing a new Bond, the Issuer may pay the same without the surrender
thereof.
Section 210. Registration and Transfer of Bonds. The Issuer hereby
constitutes and appoints the Trustee as Bond Registrar of the Issuer, and as
Bond Registrar the Trustee shall keep books for the registration and for the
transfer of the Bonds as provided in this Indenture at the principal corporate
trust office of the Trustee. The person in whose name any Bond shall be
registered shall be deemed and regarded as the absolute owner thereof for all
purposes and payment of or on account of the principal of and interest on any
such Bond shall be made only to or upon the order of the registered owner
thereof, or his legal representative, and neither the Issuer, the Trustee, nor
the Bond Registrar shall be affected by any notice to the contrary but such
registration may be changed as herein provided. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Bond to the
extent of the sum or sums so paid.
The transfer of the Bonds may be registered on the books of registration
kept by the Trustee by the registered owner in person or by his duly authorized
attorney, upon surrender thereof, together with a written instrument of transfer
duly executed by the registered owner or his duly authorized attorney. Upon
surrender for registration of any Bond at the principal corporate office of the
Trustee, the Issuer shall execute and the Trustee shall authenticate and deliver
in the name of the transferee or transferees a new Bond or Bonds in the same
aggregate principal amount and of any authorized denomination or denominations.
Bonds may be exchanged at the principal corporate trust office of the
Trustee for an equal aggregate principal amount of Bonds of any other authorized
denomination or denominations. The Issuer shall execute and the Trustee shall
authenticate and deliver Bonds which the bondholder making the exchange is
entitled to receive, bearing numbers not contemporaneously then outstanding. The
execution by the Issuer of any Bond of any denomination shall constitute full
and due authorization of such denomination and the Trustee shall thereby be
authorized to authenticate and deliver such Bond.
On and after the Conversion Date, the Trustee shall not be required to
register the transfer or exchange any Bond during the period from and including
a Record Date to the next succeeding Interest Payment Date of such Bond nor to
transfer or exchange any Bond after the mailing of notice calling such Bond for
redemption has been made and prior to such redemption.
Such registrations of transfer or exchanges of Bonds shall be without
charge to the holders of such Bonds, but any taxes or other governmental charges
required to be paid with respect to the same shall be paid by the holder of the
Bond requesting such transfer or exchange as a condition precedent to the
exercise of such privilege.
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Section 211. Cancellation. All Bonds surrendered for the purpose of
payment or retirement, or for exchange, or for replacement or payment as
provided above shall be canceled upon surrender thereof to the Trustee and, at
the option of the Trustee, either cremated, shredded or otherwise disposed of.
In the case of cremating, shredding or other disposition, the Trustee shall
execute and forward to the Issuer, upon request of the Issuer, an appropriate
certificate describing the Bonds involved and the manner of disposition.
Section 212. Temporary Bonds. Until Bonds in definitive form are ready for
delivery, the Issuer may execute, and upon the request of the Issuer the Trustee
shall authenticate and deliver, subject to the provisions, limitations and
conditions set forth herein, one or more Bonds in temporary form, whether
printed, typewritten, lithographed or otherwise produced, substantially in the
form of the definitive Bonds, with appropriate omissions, variations and
insertions, and in authorized denominations. Until exchanged for Bonds in
definitive form, such Bonds in temporary form shall be entitled to the lien and
benefit of this Indenture. Upon the presentation and surrender of any Bond or
Bonds in temporary form, the Issuer shall, without unreasonable delay, prepare,
execute and deliver to the Trustee and the Trustee shall authenticate and
deliver, in exchange therefor, a Bond or Bonds in definitive form. Such exchange
shall be made by the Trustee without making any charge therefor to the holder of
such Bond in temporary form.
Section 213. Additional Bonds. (a) At any time while the Issuer is not in
default under this Indenture, and to the extent permitted by law then in effect,
including, without limitation, the Act, and subject to receipt by the Trustee of
the documents listed below, the Issuer may, with the prior written consent of
the Bank, issue one or more series of Additional Bonds (1) to pay the cost of
completion of the Project, (2) to pay the cost of such additions, modifications
or improvements to the Project or other facilities of the Company within Pender
County, North Carolina which qualify under the Act, (3) to refund all or part of
a series of Bonds, or (4) for any combination of such purposes. Each such series
of Additional Bonds shall be issued pursuant to a supplement to this Indenture
and shall be equally and ratably secured under this Indenture with the Bonds
issued pursuant to Section 202 hereof and any other series of Additional Bonds,
without preference, priority or distinction of any Bonds over any other Bonds,
except, to the extent authorized by the Act, such Additional Bonds shall not be
secured by the Letter of Credit (but must be secured by a letter of credit or
other credit enhancement in accordance with the terms of this Indenture), and
notice that such Additional Bonds are not secured by the Letter of Credit and
the nature of the credit enhancement for such Additional Bonds shall be given to
each purchaser of any such Additional Bond prior to the purchase thereof. Unless
provided otherwise in a supplement to this Indenture, all such Additional Bonds
shall be in substantially the same form as the Bonds issued under Section 202
hereof, but shall be of such denomination or denominations, bear such date or
dates, bear interest at such rate or rates, have such maturity dates, redemption
dates and redemption premiums, contain an appropriate series designation, and be
issued at such prices as shall be set forth in a supplemental indenture all to
the extent not inconsistent with the Bonds. Nothing in this Indenture shall
create any obligation on the part of the Issuer to issue Additional Bonds.
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(b) The Trustee shall authenticate and deliver such Additional
Bonds, but only upon receipt of the following:
(1) A certificate of an Authorized Representative of the
Issuer stating that as of the date of such delivery no event or condition
has happened or existed, or is happening or existing, which constitutes,
or which, with notice or lapse of time or both, would constitute, an Event
of Default by the Issuer under this Indenture;
(2) A certificate of an Authorized Representative of the
Company stating the purpose of such Additional Bonds and requesting the
issuance and approving the terms of such Additional Bonds and stating that
(A) as of the date of such delivery no event or condition has happened or
existed, or is happening or existing, which constitutes, or which, with
notice or lapse of time or both, would constitute, an Event of Default or
the violation of any covenant or agreement under the Loan Agreement or (B)
if any such event or condition is happening or existing, specifying such
event or condition and stating in detail acceptable to the Trustee that
such event or condition will be corrected before the issuance of such
Additional Bonds;
(3) A certified copy of a resolution or resolutions of the
Issuer authorizing (A) the execution and delivery of any amendment to the
Loan Agreement, (B) the execution and delivery of the supplement to this
Indenture, and (C) the issuance, sale, execution and delivery of such
Additional Bonds;
(4) In the event such Additional Bonds are issued for the
purpose of constructing additional facilities, original executed
counterparts of amendments or supplements to the Loan Agreement;
(5) The executed supplement to the Note issued in an aggregate
principal amount at least equal to the principal of the Additional Bonds,
or an executed substitute for the Note issued in an aggregate principal
amount at least equal to the principal amount of the Bonds outstanding and
the Additional Bonds, in either case assigned to the Trustee;
(6) An original executed counterpart of the supplement to this
Indenture relating to the Additional Bonds;
(7) The original executed letter of credit or other credit
enhancement that will secure the Additional Bonds;
(8) A written request to the Trustee by the Issuer to
authenticate and deliver the Additional Bonds to the original purchaser or
purchasers thereof upon payment to the Trustee, but for the account of the
Issuer, of a sum specified in such order plus or less accrued interest
thereon, if any, as the case may be, to the date of delivery;
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(9) A copy, duly certified by the Secretary or Assistant
Secretary, of the proceedings of the governing body of the Issuer
authorizing the issuance of the Additional Bonds;
(10) A written opinion of Bond Counsel addressed to the
Trustee and the Issuer that the issuance of such Additional Bonds has been
duly authorized, that the Additional Bonds have been validly issued, that
the issuance of such Additional Bonds will have no adverse effect upon the
exemption from Federal income taxation of interest on any Bonds then
outstanding, and that the interest on the Additional Bonds will be
excluded from gross income for Federal income tax purposes;
(11) An opinion of counsel satisfactory to the Trustee that
any amendment or supplement to the Loan Agreement, the supplement to or
substitute for the Note and the supplement to this Indenture have been
properly authorized and executed;
(12) Written consent of the Bank authorizing the issuance of
the Additional Bonds; and
(13) Any other instrument or document the Trustee reasonably
requires.
(c) The proceeds of such Additional Bonds shall be deposited by the
Trustee in the Bond Fund and the Construction Fund as provided in the supplement
to this Indenture referred to above.
(d) If the Additional Bonds are refunding bonds for the Bonds issued
under Section 202 hereof, the supplement to this Indenture, if consented to in
writing by the Bank, may require the Trustee to draw on the Letter of Credit to
redeem such Bonds then called for redemption.
(e) No Additional Bonds shall be issued hereunder unless the LGC has
approved such issuance.
Section 214. Book Entry System. The Bonds shall be initially issued
pursuant to a Book Entry System administered by the Securities Depository with
no physical distribution of Bond certificates to be made except as provided in
this Section 214. Any provision of this Indenture or the Bonds requiring
physical delivery of the Bonds shall, with respect to any Bonds held under the
Book Entry System, be deemed to be satisfied by a notation on the Register
maintained by the Registrar that such Bonds are subject to the Book Entry
System.
So long as a Book Entry System is being used, one Bond in the aggregate
principal amount of the Bonds and registered in the name of the Securities
Depository Nominee will be issued and deposited with the Securities Depository
and held in its custody. The Book Entry System will be maintained by the
Securities Depository and the Participants and Indirect Participants and will
evidence beneficial ownership of the Bonds in Authorized Denominations, with
registration of transfers of ownership effected on the records of the Securities
Depository, the Participants and the Indirect Participants pursuant to rules and
procedures established by the Securities Depository, the
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Participants and the Indirect Participants. The principal of and premium, if
any, on each Bond shall be payable to the Securities Depository Nominee or any
other person appearing on the Register as the registered Holder of such Bond or
his/her registered assigns or legal representative at the principal office of
the Registrar. So long as the Book Entry System is in effect, the Securities
Depository will be recognized as the Holder of the Bonds for all purposes
(except as provided in Section 202(e) with respect to purchases at the demand of
the holder). Transfer of principal, interest and any premium payments or notices
to Participants and Indirect Participants will be the responsibility of the
Securities Depository, and transfer of principal, interest and any premium
payments or notices to Beneficial Owners will be the responsibility of the
Participants and the Indirect Participants. No other party will be responsible
or liable for such transfers of payments or notices or for maintaining,
supervising or reviewing such records maintained by the Securities Depository,
the Participants or the Indirect Participants. While the Securities Depository
Nominee or the Securities Depository, as the case may be, is the registered
owner of the Bonds, notwithstanding any other provisions set forth herein,
payments of principal of, redemption premium, if any, and interest on the Bonds
shall be made to the Securities Depository Nominee or the Securities Depository,
as the case may be, by wire transfer in immediately available funds to the
account of said Holder as may be specified in the Register maintained by the
Registrar or by such other method of payment as the Trustee may determine to be
necessary or advisable with the concurrence of the Securities Depository.
In the event that (i) the Securities Depository determines not to continue
to administer a Book Entry System for the Bonds, or (ii) the Remarketing Agent,
with the consent of the Trustee, determines that continuation of a Book Entry
System of evidence and transfer of ownership of the Bonds would adversely affect
the interests of the Beneficial Owners, then the Book Entry System will be
discontinued, in which case the Trustee will deliver replacement Bonds in the
form of fully registered certificates in Authorized Denominations in exchange
for the Outstanding Bonds as required by the Trustee and the Beneficial Owners.
The Securities Depository may be removed at any time at the election of
the Remarketing Agent, with the consent of the Trustee and the Company, and a
new Securities Depository may thereupon be appointed by the Remarketing Agent,
subject to the approval of the Trustee and the Company.
Section 215. CUSIP Numbers. The Issuer in issuing the Bonds may use
"CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Bonds or as contained in
any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Bonds, and any such redemption shall not
be affected by any defect in or omission of such numbers.
ARTICLE III
REDEMPTION OF BONDS BEFORE MATURITY
Section 301. Redemption and Purchase of Bonds. (a) The Bonds shall be
redeemed in the event the Company shall elect to exercise its option to prepay
installments payable under the Loan Agreement upon the occurrence of any of the
events set forth in Section 9.2 of the Loan Agreement,
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in whole but not in part, at any time, at a redemption price equal to 100% of
the principal amount thereof, plus interest accrued to the redemption date. Such
redemption shall be made only with the prior written consent of the Bank.
(b) The Bonds shall be redeemed in the event the Company shall
become obligated to prepay installments payable under Section 9.3 of the Loan
Agreement upon the occurrence of a "Determination of Taxability," as such term
is defined in Section 9.3 of the Loan Agreement, in whole at any time, at a
redemption price equal to 103% of the principal amount thereof, plus interest
accrued to the redemption date. Fewer than all of the Bonds may be redeemed if,
in the opinion of Bond Counsel, redemption of fewer than all of the Bonds would
result in the interest payable on the Bonds remaining Outstanding being excluded
from gross income for Federal income tax purposes. Notice of a redemption
pursuant to this Section shall be sent to the Holders pursuant to Section 302
hereof within thirty days after the occurrence of a Determination of Taxability.
(c) Prior to the Conversion Date, the Bonds shall be subject to
redemption prior to maturity at the option of the Issuer, to be exercised as
directed by the Company, with the prior written consent of the Bank, in whole at
any time or in part (in Minimum Denominations) on any Interest Payment Date at a
redemption price equal to 100% of the principal amount being redeemed plus
accrued interest to the redemption date.
(d) After the Conversion Date, the Bonds shall be subject to
redemption, at the direction of the Company, with the prior written consent of
the Bank, in whole at any time or in part (in Minimum Denominations) on any
Interest Payment Date occurring after the applicable period of Call Protection
(as defined below) set forth below at a price equal to the principal amount
thereof plus a redemption premium (expressed as a percentage of principal
amount) plus accrued interest thereon to the redemption date as follows:
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<TABLE>
<CAPTION>
Redemption Prices as a
Percentage of Principal Call Protection (Length of
Length of Period from the Amount (measured from and time (measured from the
Interest Payment Date including the Interest Interest Payment Date
immediately succeeding the Payment Date immediately immediately succeeding
Conversion Date to June succeeding the Conversion the Conversion Date) before
1, 2010 Date) Bonds may be called)
- ----------------------- ------------------------- ---------------------------
<S> <C> <C>
Greater than 10 years After 5 years (less one day) 5 years (less one day)
at 102%, declining 1/2% per 6
months
Less than or equal to 10 and After 3 years (less one day) 3 years (less one day)
greater than 7 years at 101-1/2%, declining 1/2%
per 6 months
Less than or equal to 7 and After 2 years (less one day) at 2 years (less one day)
greater than 4 years 101%, declining 1/2% per
6 months
Less than or equal to 4 and After 2 years (less one day) at 2 years (less one day)
greater than 3 years 100-1/2%, declining 1/2% per
6 months
Less than or equal to 3 and After 1 year (less one day) at 1 year (less one day)
greater than 2 years 100-1/2%, declining 1/2% per
6 months
Less than or equal to 2 and After 1 year (less one day) at 1 year (less one day)
greater than 1 year 100%
Less than or equal to 1 year On or after the first Interest The portion of such period
Payment Date during such prior to the first Interest
period at 100% Payment Date therein
</TABLE>
(e) The Bonds shall be redeemed in whole prior to their scheduled
maturity at a redemption price equal to the principal amount thereof, without
premium, plus accrued interest to the redemption date on the first Interest
Payment Date which is not less than 90 days after the Issuer has notified the
Trustee and the Bank in writing that the Company has, in the opinion of the
Issuer, ceased to operate the Project as an "industrial project for industry"
within the meaning of the Act. A cessation of operation shall not be deemed to
have occurred until 90 days shall have elapsed after written notice has been
given to the Company and the Bank by the Issuer that operations at the Project
shall have ceased and the Company shall not have demonstrated to the
satisfaction of the Issuer that the Company has resumed the operations of the
Project as an "industrial project for
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industry" within the meaning of the Act or that the Company is, in good faith,
seeking to arrange resumption of an economically reasonable operation of the
Project by the Company or, if permitted under the Loan Agreement, by an assignee
or purchaser of the Project as such an "industrial project for industry";
provided that a temporary shutdown due to a strike or other labor dispute, lack
of fuel or similar occurrence shall not be deemed a cessation of operation.
(f) The Bonds are subject to mandatory sinking fund redemption prior
to their scheduled maturity on June 1, 1999, and on each succeeding June 1
thereafter to and including June 1, 2009, in the principal amount of $600,000.
The remaining $400,000 in the principal amount of Bonds shall be redeemed on
June 1, 2010.
(g) The Bonds are subject to mandatory redemption at a redemption
price equal to the principal amount thereof plus accrued interest to, but not
including, the redemption date in whole or in part, without premium, at the
earliest date for which notice of redemption can be given upon receipt by the
Trustee of written notice from the Bank requesting such redemption, specifying
the principal amount of the Bonds to be redeemed (if less than all of the Bonds
Outstanding are to be redeemed) and stating that (i) an "Event of Default" under
and as defined in the Reimbursement Agreement has occurred and is continuing or
(ii) it holds as the registered or beneficial owner Bonds purchased by the Bank
in accordance with Section 307, 301(k) or 912(a) and not remarketed; provided,
however, only Bonds so held by the Bank shall be subject to mandatory redemption
pursuant to this subsection (ii).
(h) Each series of Additional Bonds shall be subject to redemption
by the Issuer on such dates and at such prices as may be provided in the
supplement to this Indenture authorizing their issuance.
(i) Bonds purchased on the Mandatory Purchase Date described in
Section 307(a)(iii) hereof shall not be remarketed but rather shall be deemed to
have been redeemed and shall be canceled.
(j) The Bonds are subject to mandatory redemption in part to the
extent of any proceeds remaining in the Construction Fund after the Completion
Date, which proceeds shall be transferred to the Bond Fund in accordance with
Section 605 hereof.
(k) When Bonds are subject to redemption pursuant to subsections
(a), (b) or (g) in this Section 301, Bonds paid by the Company or paid from a
draw or claim under the Letter of Credit or otherwise paid by or on behalf of
the Bank shall be purchased in lieu of redemption on the applicable redemption
date at a purchase price equal to the principal amount thereof, plus accrued
interest thereon to but not including the date of such purchase, if the Trustee
has received a written request on or before said purchase date from the Company
or the Bank, as the case may be, specifying that the moneys provided or to be
provided by such party shall be used to purchase Bonds in lieu of redemption. No
purchase of Bonds by the Company or the Bank pursuant to this Indenture or
advance or use of any moneys to effectuate any such purchase shall be deemed to
be a payment or redemption of the Bonds or any portion thereof, and such
purchase shall not operate to extinguish or discharge the indebtedness evidenced
by such Bonds. No Bonds purchased pursuant to this
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<PAGE>
subsection (k) shall be required to be remarketed by the Remarketing Agent
pursuant to Section 1201, unless the Remarketing Agent specifically agrees to
undertake such remarketing.
Section 302. Notice. Notice of the call for any redemption, identifying
the Bonds or portions thereof being called and the date on which they shall be
presented for payment, shall be given by the Trustee by first-class mail to the
registered owner of each such Bond addressed to such registered owner at his
registered address and placed in the mails not less than twenty (20) days prior
to the date fixed for redemption if such date is on or prior to the Conversion
Date, and not less than thirty (30) days prior to the date fixed for redemption
if such date is after the Conversion Date; provided, however, that failure to
give such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any Bond with respect to which no such failure
or defect has occurred. Any notice mailed as provided in this Section shall be
conclusively presumed to have been duly given, whether or not the registered
owner receives the notice.
Notice of redemption shall also be given by the Trustee, by first-class
mail, to all organizations registered with the Securities and Exchange
Commission as securities depositories, and to at least one information service
of national recognition which disseminates redemption information with respect
to tax-exempt securities. In preparing such notice, the Trustee shall take into
account, to the extent applicable, the prevailing tax-exempt securities industry
standards and any regulatory statement of any federal or state administrative
body having jurisdiction over the Issuer, the Company or the tax-exempt
securities industry, including without limitation Release No. 34-23856 of the
Securities and Exchange Commission, or any subsequent amending or superseding
release. Failure to give notice specified in this paragraph, or any defect
therein, shall not affect the validity of any proceedings for the redemption of
any Bonds with respect to which the notice specified in the foregoing paragraph
is correctly given.
Section 303. Redemption Payments. On or prior to the date fixed for
redemption, funds shall be deposited with the Trustee to pay, and Trustee is
hereby authorized and directed to apply such funds in accordance with Section
509 to the payment of, the Bonds or portions thereof called, together with
accrued interest thereon to the redemption date and any required premium. Upon
the giving of notice and the deposit of funds for redemption, interest on the
Bonds or portions thereof thus called shall no longer accrue after the date
fixed for redemption.
Section 304. Cancellation. All Bonds which have been redeemed shall not be
reissued but shall be canceled and disposed of by the Trustee in accordance with
Section 211 hereof.
Section 305. Partial Redemption of Bonds. In case a Bond is of a
denomination larger than $100,000, a portion of such Bond in Minimum
Denominations may be redeemed, so long as the holder retains Bonds in Minimum
Denominations following the partial redemption. Upon surrender of any Bond for
redemption in part only, the Issuer shall execute and the Trustee shall
authenticate and deliver to the holder thereof a new Bond or Bonds in the same
form and of authorized denominations in an aggregate principal amount equal to
the unredeemed portion of the Bond surrendered.
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<PAGE>
Section 306. Selection of Bonds for Redemption. In the event of a partial
redemption of Bonds pursuant to Section 301(a), (b), (c), (d), (f) or (g)
hereof, the Trustee shall select Bonds for redemption in accordance with the
following criteria: (a) the Trustee shall first select for redemption Bonds held
in the name of the Company or pledged to the Bank under Section 1203(c) hereof;
and (b) thereafter, the Trustee shall select Bonds for redemption by lot or in
such other manner as may be determined by the Trustee to be fair and equitable.
In no event shall the Trustee select a Bond or Bonds for redemption if such
redemption will result in any Bondholder owning Bonds with a principal amount
that is less than a Minimum Denomination; provided that, if a redemption cannot
be effected to result in Minimum Denominations for all holders, the Trustee
shall select Bonds for redemption such that one holder owns a Bond or Bonds with
a principal amount that is less than a Minimum Denomination, which Bond or Bonds
shall be deemed to be authorized under Section 202(f) hereof.
Section 307. Mandatory Purchase of Bonds. (a) The Bonds are subject to
mandatory purchase on the following dates (each of which is designated a
Mandatory Purchase Date):
(i) on the Conversion Date, at a purchase price equal to 100%
of the principal amount thereof plus accrued and unpaid interest thereon
to but not including the date of purchase, such purchase price to be paid
from the proceeds of the remarketing of the Bonds to the fixed rate
holders or from the proceeds of a draw under the Letter of Credit, in
accordance with Section 509 hereof; and
(ii) on any Credit Modification Date, at a purchase price
equal to 100% of the principal amount being purchased plus interest
accrued to the Mandatory Purchase Date and shall be paid with the process
of a draw under the Letter of Credit in accordance with Section 509
hereof; and
(iii) on the Business Day that is fifteen days prior to the
expiration or termination date of the Letter of Credit then in effect (or
if such date is not a Business Day, on the next preceding Business Day) in
the event the Company has not provided notice that a Substitute Letter of
Credit will be provided in accordance with Section 409.
(b) Notice of mandatory purchase shall be given to the holders at
least thirty (30) days prior to each Mandatory Purchase Date in accordance with
Section 302 hereof; provided that, in the event of a Credit Modification Date
resulting from a failure by the Company to deliver a Substitute Letter of Credit
on the Substitution Date, such mandatory purchase shall occur as soon as
practicable after such failure, but in all events no later than two Business
Days preceding the termination or expiration of the Letter of Credit then in
effect, and notice thereof shall be given as soon as practicable to the holders.
(c) In the event that the Trustee does not receive the opinion of
Bond Counsel required by Section 202(d)(A) and the Substitute Letter of Credit
required by Sections 202(d)(C) and 409 by 5:00 p.m. Central Time on the Business
Day preceding the Conversion Date, the interest rate on the Bonds shall not be
converted to the Fixed Rate, the Bonds shall be purchased on such date in
accordance with Section 1202 hereof, and shall continue to bear interest at the
Variable Rate.
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<PAGE>
ARTICLE IV
GENERAL COVENANTS
Section 401. Payment of Principal, Premium, if any, and Interest. The
Issuer shall promptly pay when due the principal of (whether at maturity, by
acceleration or call for redemption or otherwise), premium, if any, and interest
on, and the purchase price of, the Bonds at the places, on the dates and in the
manner provided herein and in the Bonds according to the true intent and meaning
thereof; provided, however, that such obligations are not general obligations of
the Issuer but are limited obligations payable solely from the Revenues, which
Revenues are hereby specifically pledged to such purposes in the manner and to
the extent provided herein. The Bonds, the premium, if any, and the interest
thereon shall not be deemed to constitute a debt or a pledge of the faith and
credit of the State of North Carolina or any political subdivision thereof,
including the Issuer. Neither the State of North Carolina nor any political
subdivision thereof, including the Issuer, shall be obligated to pay the
principal of, premium, if any, or interest on or purchase price of the Bonds or
other costs incident thereto except from the revenues and receipts pledged
therefor, and neither the faith and credit nor the taxing power of the State of
North Carolina or any political subdivision thereof, including the Issuer, is
pledged to the payment of the principal of, premium, if any, or interest on the
Bonds or other costs incident thereto.
Section 402. Performance of Covenants. The Issuer shall faithfully observe
and perform all covenants, conditions and agreements on its part contained in
this Indenture, in every Bond executed, authenticated and delivered hereunder
and in all proceedings of its Board of Commissioners pertaining thereto;
provided, however, that the liability of the Issuer under any such covenant,
condition or agreement for any breach or default by the Issuer thereof or
thereunder shall be limited solely to the Revenues and payments under the Letter
of Credit. The Issuer represents that it is duly authorized under the
Constitution and laws of the State of North Carolina, including particularly and
without limitation the Act, to issue, sell and deliver the Bonds authorized
hereby and to execute this Indenture, to execute and assign the Loan Agreement,
to assign the Note and to pledge the revenues and receipts thereunder and the
security therefor in the manner and to the extent herein set forth; that all
action on its part for the issuance, sale and delivery of the Bonds, the
execution and delivery of this Indenture, the execution and assignment of the
Loan Agreement and the assignment of the Note and the security therefor has been
duly and effectively taken (or if Additional Bonds are issued hereafter pursuant
to Section 213, will be duly taken as provided therein); and that the Bonds in
the hands of the holders thereof are and will be valid and enforceable
obligations of the Issuer according to the import thereof.
Section 403. Instruments of Further Assurance. The Issuer covenants that
it will do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, such indenture or indentures supplemental hereto and
such further acts, instruments and transfers as the Trustee may reasonably
require for the better assuring, transferring mortgaging, pledging, assigning
and confirming unto the Trustee the Trust Estate; provided that, the Issuer
shall not be required to do or take any action after the initial issuance of the
Bonds and the assignment of the Note and the Loan Agreement to the Issuer unless
and until the Company has satisfied any demand by the Issuer for advance payment
of any fees, or adequate assurance of future payment, for any expenses, or costs
that may
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<PAGE>
be incurred or anticipated by it in connection with the performance of any act
or thing that it may be called upon or required to do under the terms of the
Loan Agreement.
Section 404. Recordation and Other Instruments. The Issuer and the Trustee
covenant that they will cooperate with the Company in causing this Indenture,
the Loan Agreement, such security agreements, financing statements and all
supplements thereto, if any, and other instruments as may be required from time
to time to be kept, to be recorded and filed in such manner and in such places
as may be required by law in order to fully preserve and protect the security of
the holders and owners of the Bonds and the rights of Trustee hereunder, and to
perfect the security interest created by this Indenture. The Company shall be
responsible for making and recording such filings.
Section 405. Inspection of Project Books. The Issuer and the Trustee
covenant and agree that all books and documents in their possession relating to
the Project and the revenues derived from the Project shall at all reasonable
times be open to inspection by such accountants or other agencies as the other
party may from time to time designate in writing and by the Company.
Section 406. Rights Under Loan Agreement and Letter of Credit. The Loan
Agreement, duly executed counterparts of which have been filed with the Trustee,
sets forth the covenants and obligations of the Issuer and the Company,
including provisions that subsequent to the issuance of Bonds and prior to their
payment in full or provision for payment thereof in accordance with the
provisions hereof the Loan Agreement may not be effectively amended, changed,
modified, altered or terminated, or any provision waived without the written
consent of the Trustee, and reference is hereby made to the same for a detailed
statement of said covenants and obligations of the Company thereunder. The
Issuer agrees that the Trustee in its name or in the name of the Issuer may
enforce all rights of the Issuer and all obligations of the Company under and
pursuant to the Loan Agreement and the Letter of Credit for and on behalf of the
bondholders, whether or not the Issuer is in default hereunder.
Section 407. Prohibited Activities. The Issuer and the Trustee covenant
that neither of them shall knowingly take any action or suffer or permit any
action to be taken or condition to exist which causes or may cause the interest
payable on the Bonds to be subject to Federal income taxation. Without limiting
the generality of the foregoing, the Issuer and the Trustee covenant that they
will not knowingly permit the proceeds of the sale of the Bonds, the earnings
thereon, and any other moneys on deposit in any fund or account maintained in
respect of the Bonds (whether such moneys were derived from the proceeds of the
sale of the Bonds or from other sources), to be used directly or indirectly in
such manner as to cause the Bonds to be treated as "arbitrage bonds" within the
meaning of Section 148 of the 1986 Code.
Section 408. Transfer and Return of Letter of Credit. The Trustee shall
not sell, assign or transfer the Letter of Credit except to a successor trustee
under this Indenture in accordance with the requirements of the Letter of
Credit. The Trustee shall return the Letter of Credit to the Bank for
cancellation and together with such certificates or other documents as may be
required in accordance with its terms.
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Section 409. Substitute Letter of Credit. If the Company, in accordance
with Section 4.4 of the Loan Agreement, shall elect to provide a Substitute
Letter of Credit, the Company shall notify the Trustee not less than forty-five
(45) days prior to the Substitution Date and not less than sixty (60) days prior
to the expiration date of the Letter of Credit then in effect of its intention
to provide such Substitute Letter of Credit. The Company shall also provide to
the Trustee the following:
(a) an opinion of nationally recognized counsel satisfactory to the
Trustee that the Substitute Letter of Credit is the legal, valid and binding
obligation of the Bank issuing the Substitute Letter of Credit (or, in the case
of a branch or agency of a foreign commercial bank, the branch or agency issuing
the same) enforceable in accordance with its terms. In the case of a Substitute
Letter of Credit issued by a branch or agency of a foreign commercial bank,
there shall also be delivered an opinion of counsel, satisfactory to the Trustee
and licensed to practice law in the jurisdiction in which the head office of
such Bank is located, to the effect that the Substitute Letter of Credit is the
legal, valid and binding obligation of such Bank enforceable in such
jurisdiction in accordance with its terms; and
(b) an opinion of Bond Counsel stating that the delivery of such
Substitute Letter of Credit is authorized under this Indenture and complies with
the terms hereof and that the delivery of such Substitute Letter of Credit will
not have an adverse effect on the exclusion of interest on the Bonds from gross
income for Federal income tax purposes; and, if applicable
(c) if the Bonds are rated by Moody's and/or Standard & Poor's,
written evidence from Moody's, if the Bonds are rated by Moody's, and from
Standard & Poor's, if the Bonds are rated by Standard & Poor's, in each case to
the effect that such rating agency has reviewed the proposed Substitute Letter
of Credit and that the substitution of the proposed Substitute Letter of Credit
for the then current Letter of Credit will not, by itself, result in (A) a
permanent withdrawal of its rating of the Bonds or (B) a reduction of the then
current rating of the Bonds, or,
(d) if the Bonds are not rated, evidence that the issuer of such
Substitute Letter of Credit is a commercial bank or insurance company organized
and doing business in the United States of America or a branch or agency of a
foreign commercial bank located and doing business in the United States of
America and subject to regulation by state or federal banking regulatory
authorities and that has, as of the date sixty (60) days prior to such
expiration or termination date (i) senior debt or long-term bank deposits rated
by a Rating Agency with a rating at least equivalent to the senior debt or
long-term bank deposits of the Bank issuing the Letter of Credit then in effect
or (ii) outstanding letters of credit, insurance policies, surety bonds or other
similar instruments that, when supporting debt obligations, result in such debt
obligations being rated by a Rating Agency with a rating at least the equivalent
of the ratings assigned to debt obligations supported with letters of credit,
insurance policies, surety bonds or other similar instruments or devices issued
by such Bank on the date ninety (90) days prior to such expiration or
termination date.
In the event the Company does not provide to the Trustee the written
evidence specified in (c) or (d) above not later than two Business Days prior to
the Substitution Date, the Substitution Date shall be a Credit Modification
Date, and the Bonds shall be subject to mandatory tender for purchase on such
date in accordance with Section 307 hereof.
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The Trustee shall notify all persons who are then registered owners of the
Bonds that a Substitute Letter of Credit will be delivered to the Trustee, which
notice shall state (i) the Substitution Date, (ii) the expiration date of the
Letter of Credit for which the Substitute Letter of Credit is to be substituted,
(iii) the expiration date of the Substitute Letter of Credit, (iv) the Bank
which is issuing the Substitute Letter of Credit and a brief description of such
Bank, and (v) whether or not the Bonds are subject to mandatory tender for
purchase on the Substitution Date in accordance with Section 307 hereof. Such
notice shall be given not less than forty-five (45) days prior to the expiration
of the existing Letter of Credit, and, if such date is expected to be a Credit
Modification Date, not less than thirty (30) days prior to the Substitution
Date. Such notice shall be given by mail in accordance with Section 302 hereof.
The Company shall cause a description of the Bank issuing the Substitute Letter
of Credit to be furnished to the Trustee in time sufficient to permit the
Trustee to give the notice provided for in this Section 409. The Substitute
Letter of Credit must be delivered to the Trustee not later than 10:00 a.m.,
Eastern Time, on the Substitution Date.
ARTICLE V
REVENUES AND FUNDS
Section 501. Creation of Bond Fund. There is hereby created and ordered to
be established with the Trustee a trust fund of and in the name of the Issuer to
be designated "The Pender County Industrial Facilities and Pollution Control
Financing Authority Industrial Development Revenue Bond Fund (Leslie-Locke, Inc.
Project)." There is also hereby created and ordered to be established within the
Bond Fund two subaccounts, designated the "Letter of Credit Subaccount" and the
"Company Payments Account." Within the Company Payments Account there shall be
established, as and when required, a subaccount entitled "Available Moneys
Subaccount." Moneys deposited into the Letter of Credit Subaccount and the
Available Moneys Subaccount may not be commingled with moneys on deposit in the
other subaccounts of the Bond Fund or with other moneys held under this
Indenture. As provided in the granting clauses hereof, the Bond Fund is subject
to a lien and charge in favor of the Holders of the Bonds and the Bank. The
Letter of Credit Subaccount is established as a special trust fund for the
benefit of Bondholders and the Trustee shall have the sole right of withdrawal
therefrom. Neither the Company nor the Issuer shall have any legal, equitable or
beneficial right, title or interest in such subaccount. Any moneys deposited
with the Trustee in the Company Payments Account shall be transferred to the
Available Moneys Subaccount at such time as such funds meet the requirements of
the definition of Available Moneys herein, and moneys in the Available Moneys
Subaccount shall not be commingled with any other funds.
Section 502. Payments Into Bond Fund. There shall be deposited in the
Company Payments Account of the Bond Fund, as and when received, (a) all
Revenues, (b) all payments under the Note and (c) all other moneys received by
the Trustee under and pursuant to any of the provisions of the Loan Agreement or
this Indenture which are required to be paid into the Bond Fund or which are
accompanied by directions not inconsistent with the provisions of the Loan
Agreement, the Note and this Indenture that such moneys are to be paid into the
Bond Fund. Moneys representing a drawing on the Letter of Credit for regularly
scheduled principal and interest payments shall be deposited only into the
Letter of Credit Subaccount. So long as any of the Bonds are Outstanding the
Issuer shall promptly deposit, or cause to be deposited, in the Bond Fund for
its account sufficient sums from revenues and receipts derived by it from the
sale of the Bonds (whether or not under and pursuant
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to the Note or the Loan Agreement) or from payments pursuant to the Letter of
Credit or other security documents to pay the principal of, premium, if any, and
interest on the Bonds as the same become due and payable. Nothing herein shall
be construed as requiring the Issuer to operate the Project or to use any funds
or revenues from any source other than the payments derived from the loan of the
proceeds derived from the sale of the Bonds as provided in the Loan Agreement
and the Note.
Section 503. Use of Moneys in Bond Fund. Moneys in the Bond Fund shall be
used solely for the payment of the principal of and premium, if any, and
interest on the Bonds either at maturity or at redemption prior to maturity or
upon acceleration, or to repay the Bank for draws under the Letter of Credit to
pay such principal of, premium, if any, and interest on the Bonds. In addition,
moneys in the Bond Fund shall be used in the following priority:
(a) Moneys representing proceeds of a drawing under the Letter of
Credit;
(b) Revenues and moneys furnished by the Company to the Trustee
pursuant to the Loan Agreement, and proceeds from the investment thereof, which
constitute Available Moneys;
(c) Proceeds of the sale of refunding obligations, and proceeds from
the investment thereof which have been deposited in the Bond Fund; and
(d) Other revenues and moneys furnished by the Company to the
Trustee pursuant to the Loan Agreement which have been deposited in the Company
Payments Account pursuant to Section 502.
Section 504. Withdrawals from Bond Fund. The Bond Fund shall be in the
name of the Issuer, designated as set forth in Section 501, and the Issuer
hereby irrevocably authorizes and directs the Trustee to withdraw from the Bond
Fund sufficient funds to pay the principal of and premium, if any, and interest
on the Bonds at maturity and redemption prior to maturity, and to use such funds
for the purpose of paying principal, premium, if any, and interest in accordance
with the provisions hereof pertaining to payment, which authorization and
direction the Trustee hereby accepts; provided, however, that to the extent such
payments have been made with proceeds of a drawing under the Letter of Credit
and the Company does not reimburse the Bank, the Trustee shall promptly
reimburse the Bank from funds on deposit in the Bond Fund.
Section 505. Non-Presentment of Bonds. In the event any Bonds shall not be
presented for payment when the principal thereof becomes due, whether at
maturity, upon acceleration, upon call for redemption, upon demand for purchase,
or otherwise, if there shall have been deposited with the Trustee for that
purpose, or left in trust if previously so deposited, funds sufficient to pay
the principal thereof, and premium, if any, together with all interest unpaid
and due thereon, to the due date thereof, for the benefit of the holder thereof,
all liability of the Issuer to the holder thereof for the payment of the
principal thereof, premium, if any, and interest thereon, shall forthwith cease,
determine and be completely discharged, and thereupon it shall be the duty of
the Trustee to hold such fund or funds, without liability for interest thereon,
for benefit of the holder of such Bond, who
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shall thereafter be restricted exclusively to such fund or funds, for any claim
of whatever nature on his part under this Indenture or on, or with respect to,
the Bond.
Any moneys deposited with the Trustee or then held by the Trustee in trust
for the payment of the principal of and redemption premium, if any, or interest
on the Bonds and remaining unclaimed for five years after such principal and
premium, if any, or interest has become due shall be treated as abandoned
property pursuant to the provisions of Section 116B-18 of the North Carolina
General Statutes and the Trustee shall report and remit this property to the
Escheat Fund according to the requirements of Article 3 of Chapter 116B of the
North Carolina General Statutes, and thereafter the Holders shall look only to
the Escheat Fund, or to any successor fund, as the case may be, for payment and
then only to the extent of the amounts so received, without any interest
thereon, and the Issuer, the Remarketing Agent, the Trustee and the Company
shall have no responsibility with respect to such money.
Section 506. Fees, Expenses and Charges of Issuer, Trustee, Remarketing
Agent, and Paying Agent. It is understood and agreed that pursuant to the
provisions of Section 4.1(b) of the Loan Agreement, the Company agrees to pay
the fees, expenses (including fees and expenses of counsel) and charges of the
Trustee, the Remarketing Agent, and any Paying Agent as authorized and provided
by this Indenture and, pursuant to Section 4.1(c) of the Loan Agreement, the
fees, expenses and charges of the Issuer as authorized, required and provided by
this Indenture and by the Loan Agreement. All such payments under the Loan
Agreement which are received by the Trustee shall not be paid into the Bond
Fund, but shall be segregated by the Trustee and expended solely for the purpose
for which such payments are received. The Issuer may demand payment in advance,
or adequate assurance of future payment, for any and all acts or things that it
may be called upon, requested or required to do or perform in the future under
the terms hereof.
Section 507. Moneys to be Held in Trust. All moneys required to be
deposited with or paid to the Trustee under any provision of this Indenture
shall be held by the Trustee in trust for the benefit of the Holders of the
Bonds and the Bank as herein provided, and except for (a) moneys deposited with
or paid to the Trustee for the redemption of Bonds notice of which redemption
has been duly given, (b) moneys deposited with the Trustee under Section 1202 as
the purchase price for Bonds for which notice of tender has been irrevocably
given under Section 202(e), and (c) moneys deposited with or paid to the Trustee
pursuant to Article IX hereof, shall, while held by the Trustee, constitute part
of the Trust Estate and be subject to the lien hereof. Any moneys received by or
paid to the Trustee pursuant to any provisions of the Loan Agreement calling for
the Trustee to hold, administer and disburse the same in accordance with the
specific provisions of the Loan Agreement shall be held, administered and
disbursed pursuant to such provisions, and where required by the provisions of
the Loan Agreement the Trustee shall set the same aside in a separate account.
The Issuer agrees that if it shall receive any moneys pursuant to applicable
provisions of the Loan Agreement, it will forthwith upon receipt thereof pay the
same over to the Trustee to be held, administered and disbursed by the Trustee
in accordance with the provisions of the Loan Agreement pursuant to which the
Issuer may have received the same. Furthermore, if for any reason the Loan
Agreement ceases to be in force and effect while any Bonds are outstanding, the
Issuer agrees that if it shall receive any moneys derived from the Project, it
will forthwith upon receipt thereof pay the same over to the Trustee to be held,
administered and disbursed by the Trustee in accordance with provisions of the
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Loan Agreement that would be applicable if the Loan Agreement were then in force
and effect, and if there be no such provisions which would be so applicable,
then the Trustee shall hold, administer and disburse such moneys solely for the
discharge of the Issuer's obligations under this Indenture.
Section 508. Payment of Excess Amounts. Anything herein to the contrary
notwithstanding, and provided no Event of Default has occurred, the Trustee is
authorized and directed to remit to the Bank all excess amounts in the Bond
Fund, the Bond Purchase Fund, or in special accounts thereof to the extent
necessary to reimburse the Bank for amounts owing to the Bank under the
Reimbursement Agreement; provided that, in the event there are no amounts owing
to the Bank under the Reimbursement Agreement and the Letter of Credit is no
longer outstanding, such amounts shall be paid to the Company.
Section 509. Letter of Credit. Except with respect to any Bond held by the
Company or the Bank, the Trustee shall draw moneys under the Letter of Credit in
accordance with the terms thereof to the extent necessary:
(a) To make timely payments of principal of and interest on the
Bonds, or to redeem Bonds, whenever and to the extent moneys are not available
therefor from the sources set forth in clauses (a) and (b) of Section 503
hereof; and
(b) To purchase any Bonds tendered pursuant to Section 202(e) or 307
hereof whenever and to the extent moneys are not available therefor from the
sources set forth in clauses (i) and (ii) of Section 1202 (a) hereof.
(c) To purchase any Bonds tendered pursuant to Section 202(e) hereof
whenever and to the extent moneys are not available therefor from the sources
set forth in clause (i) of Section 1202(a) hereof.
So long as the Letter of Credit is in effect, the Trustee shall notify the
Company not later than one Business Day prior to its intended draw on the Letter
of Credit, with respect to a monthly interest payment, of its computation of the
amount of accrued interest on the Bonds. Such notice may be by telephone, but
shall be confirmed in writing, including confirmation by telecopy. The failure
of the Trustee to provide such notice to the Company shall not affect the
Trustee's obligation to draw on the Letter of Credit as provided herein. Moneys
drawn on the Letter of Credit pursuant to Section 509(a) shall be deposited in
the Letter of Credit Subaccount of the Bond Fund. Moneys drawn on the Letter of
Credit pursuant to Section 509(b) or (c) shall be deposited in the Letter of
Credit Subaccount of the Bond Purchase Fund.
Notwithstanding anything else contained herein, the Trustee shall not make
any payment of principal, purchase price or interest with respect to Pledged
Bonds with the proceeds of a draw on the Letter of Credit.
Section 510. Rebate Fund. (a) There is hereby created and ordered
established with the Trustee a trust fund to be designated "The Pender County
Industrial Facilities and Pollution Control Financing Authority Rebate Fund:
Leslie-Locke, Inc. Project." Any provisions in this Indenture to
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the contrary notwithstanding, amounts credited to the Rebate Fund shall be free
and clear of any lien hereunder.
The Trustee shall deposit in the Rebate Fund the amount forwarded to
the Trustee by the Company pursuant to Section 6.10 of the Loan Agreement.
Within 30 days after the end of each fifth anniversary of the date of issuance
of the Bonds, commencing on the fifth anniversary of the Issue Date, 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 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 amount certified by
the Company to be the required rebate to the United States as calculated under
Section 148(f)(2) of the Code (hereinafter called the "Rebate Amount"). Within
60 days after the payment in full of all outstanding Bonds, 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 Rebate Fund an amount equal to 100% of the Rebate
Amount and any moneys remaining in the Rebate Fund following such payment shall
be paid to the Company.
The Trustee shall be entitled to rely on the calculations made
pursuant to this Section and neither the Issuer nor the Trustee shall be
responsible for any loss or damage resulting from any good faith action taken or
omitted to be taken in reliance upon such calculations.
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.
Moneys in the Rebate Fund may be invested as provided in Article VII for the
investment of the Bond Fund and the Construction Fund.
(b) Notwithstanding anything to the contrary in this Indenture, the
Company shall not be required to deliver any calculation or payment under this
Section 510, and no payment shall be made by the Trustee to the United States of
America, if the Company shall furnish to the Trustee an opinion of Bond Counsel
to the effect that no payment of rebate is required under the Code in order to
prevent the Bonds from becoming "arbitrage bonds."
Section 511. Creation of Bond Purchase Fund. (a) There is hereby created
and ordered to be established with the Trustee a trust fund of and in the name
of the Issuer to be designated "The Pender County Industrial Facilities and
Pollution Control Financing Authority Industrial Development Revenue Bond
Purchase Fund (Leslie-Locke, Inc. Project)." There is also hereby created and
ordered to be established within the Bond Purchase Fund two subaccounts,
designated the "Remarketing Proceeds Subaccount" and the "Letter of Credit
Subaccount." As provided in the granting clauses hereof, the Bond Purchase Fund
is subject to a lien and charge in favor of the Holders of the Bonds and the
Bank. The Letter of Credit Subaccount of the Bond Purchase Fund is established
as a special trust fund for the benefit of Bondholders and the Trustee shall
have the sole right of withdrawal therefrom. Neither the Company nor the Issuer
shall have any legal, equitable or beneficial right, title or interest in such
subaccount. Moneys deposited into the Letter of Credit Subaccount and the
Remarketing Proceeds Subaccount may not be commingled with moneys on deposit in
the other subaccounts of the Bond Purchase Fund or with any other moneys held
under this Indenture.
(b) Moneys representing a drawing under the Letter of Credit to pay the
purchase price of tendered Bonds may only be deposited into the Letter of Credit
Subaccount of the Bond Purchase
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Fund. Moneys representing the proceeds of a remarketing of the Bonds pursuant to
Section 1202(a)(i) or 1202(b)(ii) shall be deposited into the Remarketing
Proceeds Subaccount of the Bond Purchase Fund.
(c) The Bond Purchase Fund shall be held in the name of the Issuer, and
the Issuer hereby irrevocably authorizes and directs the Trustee to withdraw
from the Bond Purchase Fund sufficient funds to purchase such Bonds, and to use
such funds for the purpose of paying the purchase price for the Bonds in
accordance with the provisions hereof pertaining to purchase, which
authorization and direction the Trustee hereby accepts; provided, however, that
to the extent such purchase price is paid with proceeds of a drawing under the
Letter of Credit and the Company does not reimburse the Bank, the Trustee shall
promptly reimburse the Bank from funds on deposit in the Bond Purchase Fund and
the Bond Fund for such payment.
ARTICLE VI
CUSTODY AND APPLICATION OF BOND PROCEEDS
Section 601. Creation of Construction Fund. There is hereby created and
ordered established with the Trustee a trust fund to be designated "The Pender
County Industrial Facilities and Pollution Control Financing Authority
Construction Fund: Leslie-Locke, Inc. Project." As provided in the granting
clauses hereof, the Construction Fund is subject to a lien and charge in favor
of the Holders of the Bonds and the Bank.
Section 602. Payments into Construction Fund. All proceeds received by or
on behalf of the Issuer from the sale of the Bonds shall be paid into the
Construction Fund to be used by the Trustee in the manner hereinafter provided
for payment of the Cost of the Project.
Section 603. Cost of the Project. The Cost of the Project shall include
the following:
(a) The cost of land or interests in land constituting part of the
Project;
(b) The actual cost of labor, materials, machinery and equipment as
payable to contractors, builders and materialmen in connection with the
acquisition, construction, installation and equipping of the Project;
(c) Governmental charges levied or assessed during installation upon
the Project, or on any property acquired therefor, and premiums on insurance in
connection with the Project during installation;
(d) Interest on the Bonds prior to, during and for not more than one
year after completion of the Project;
(e) Fees and expenses of architects and engineers for estimates,
surveys and other preliminary investigations, preparation of plans, drawings and
specifications and supervision of installation, as well as for the performance
of all other duties of architects and engineers in relation to the installation
of the Project or the issuance of the Bonds;
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(f) Expenses of administration, supervision and inspection properly
chargeable to the Project, legal expenses and fees, fees and expenses of the
Trustee, fees and expenses of financial advisors or brokers in arranging for the
sale or placement of the Bonds, financing charges (including all fees and
charges of the Bank relating to the issuance of the Letter of Credit during the
construction of the Project), cost of audits, cost of preparing, issuing and
selling the Bonds, abstracts and reports on titles to real estate, title
insurance premiums and all other items of expense, including those of the
Issuer, not elsewhere specified in this section incident to the acquisition,
construction and installation of the Project; and
(g) Reimbursement to the Company for any of such costs paid by it,
whether before or after the execution of this Indenture.
The Issuer hereby finds it advisable to include interest on the Bonds for
not more than one year after construction of the Project within the Cost of the
Project.
The Company agrees that it will not request any disbursement which, if
paid, would result in (i) less than substantially all (at least ninety-five
percent (95%)) of the proceeds of the Bonds being used to provide land or
property subject to the allowance for depreciation under Section 167 of the
Code, constituting the Project, (ii) less than all of the proceeds of the Bonds
being used to provide the Project under the Act, or (iii) the inclusion of the
interest on any of the Bonds in the gross income of any Holder for purposes of
federal income taxation (as long as such Holder is not a "related person" or a
"substantial user" of the Project as such terms are used in Section 144 of the
Code). To the extent permitted by law without affecting the tax exemption on
interest on the Bonds, if the Company determines that it has exceeded the
foregoing limitation, it shall immediately repay to the Construction Fund
sufficient monies to bring it into compliance with such limitation.
Section 604. Payments from Construction Fund. The Trustee shall use moneys
in the Construction Fund solely to pay the Cost of the Project. Before any
payment shall be made from the Construction Fund, there shall be filed with the
Trustee:
(a) A requisition, in the form attached as Exhibit C, signed by an
Authorized Representative of the Company (and consented to in writing by the
Bank), stating to whom the payment is to be made, the amount of the payment, the
purpose in reasonable detail for which the obligation to be paid was incurred,
and that the obligation stated on the requisition has been incurred by the
Company in or about the acquisition, construction or equipping of the Project,
each item is a proper charge against the Construction Fund and the obligation
has not been the basis for a prior requisition which has been paid, together
with a certificate attached to such requisition and signed by an Authorized
Representative of the Company stating that:
(1) there has been received no written notice of any lien
(other than any lien in favor of the Bank), right to lien or attachment
upon, or claim affecting the right of the payee to receive payment of, any
of the moneys payable under such requisition to any of the persons, firms
or corporations named therein;
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(2) such requisition contains no items representing payment on
account of any percentage entitled to be retained at the date of the
certificate;
(3) the payment of such requisition will not result in less
than 97% of the net proceeds of the Bonds, expended or to be expended
under such requisition and all prior requisitions being considered as
having been used for the acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance
for depreciation under Section 167 of the Code;
(4) the payment of such requisition will not violate the
prohibitions on use of proceeds set forth in Section 6.5 and Exhibit C of
the Loan Agreement; and
(5) no Event of Default or event which after notice or lapse
of time or both would constitute an Event of Default has occurred and not
been waived or cured.
(b) An invoice or other appropriate evidence of the obligation
described in the requisition required by subsection (a) above.
Upon receipt of each such requisition (together with the written consent
of the Bank, as evidenced by its execution thereof) and accompanying
certificate, the Trustee shall make payment from the Construction Fund in
accordance with such requisition.
Section 605. Disposition of Balance in Construction Fund. The Company has
certified in the Loan Agreement that the Project is complete, and that all
amounts in the Construction Fund will be used to pay Costs of the Project or
issuance expenses within thirty (30) days following the Closing Date.
Section 606. Disposition of Balance in Construction Fund upon Default. If
the principal on the Bonds shall have become due and payable pursuant to Article
IX hereof, any balance remaining in the Construction Fund shall immediately and
without further authorization be transferred to the Bond Fund. The Trustee shall
notify the Issuer, the Company, and, if applicable, the Bank of such action.
ARTICLE VII
INVESTMENTS
Section 701. Investment of Moneys. Except as otherwise provided below, any
moneys held in the Construction Fund or the Bond Fund may be separately invested
and reinvested by the Trustee, at the request of and as directed in writing by
the Company, to the extent such investments are permitted by law, in:
(a) Government Securities, securities of the Federal National
Mortgage Association, Government National Mortgage Association, Federal
Intermediate Credit Banks, Federal Banks for Cooperatives, Federal Land Banks
and Federal Home Loan Banks, including short term money market funds comprised
either entirely of the foregoing or of a portfolio which is limited to
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the foregoing and repurchase agreements fully collateralized by the foregoing.
Such money market funds may include those funds advised by the Trustee.
(b) Commercial paper rated by Moody's Investors Service, Inc. within
its NCO/Moody's ratings of Prime 1, or by Standard & Poor's Inc. within its
ratings of A-1, or by Fitch Investors Service within its ratings of F-1.
(c) Savings accounts, time deposits or certificates of deposit in
any bank or trust company organized under the laws of the United States of
America or any state thereof, Canada or any province thereof, or a member nation
of the European Economic Community which has, at the time of the acquisition by
the Trustee of such investments, a combined capital, surplus and undivided
profits of not less than $100,000,000 (which bank may include the Trustee),
provided that no deposits made under this subsection shall be made for any
period extending beyond the date established as the date of final payment from
the Construction Fund.
(d) Savings accounts and certificates of (1) savings and loan
associations that are under supervision of the State of North Carolina and (2)
Federal associations organized under the laws of the United States of America
and under Federal supervision, but only to the extent that such accounts and
certificates are fully insured by the Federal Deposit Insurance Corporation or
any successor Federal agency, provided that no deposits made under this
subsection shall be made for any period extending beyond the date established as
the date of final payment from the Construction Fund.
(e) Tax-exempt securities that are rated, or that are supported by a
letter of credit or similar credit enhancement that is rated not lower than the
second highest rating category of a Rating Agency.
(f) Participating interests in tax-exempt mutual funds.
Any bonds, notes or other evidences of indebtedness listed in subsections (a)
and (b) above may be purchased by the Trustee pursuant to a repurchase agreement
with any bank within or without the State of Minnesota acceptable to the Trustee
and having a combined capital, surplus and undivided profits of not less than
$25,000,000 and a rating by Moody's Investor Service Inc. within its NCO/Moody's
ratings of Baa-3 or Prime 3, provided the obligation of the bank to repurchase
the underlying securities is within 30 days of the date of purchase. A
repurchase agreement for securities described in subsections (a) and (b) above
shall be considered a purchase of such securities even if title and/or
possession of such securities is not transferred to the Trustee so long as (1)
the repurchase obligation of the bank is collateralized by the securities
themselves, (2) the securities have on the date of the repurchase agreement a
fair market value equal to at least 100% of the amount of the repurchase
obligation of the bank and (3) the securities are held by a third party as agent
for the Trustee and segregated from securities owned generally by the bank.
All such investments shall be held by or under the control of the Trustee
and while so held shall be deemed a part of the particular Fund in which held.
The interest accruing thereon and any profit realized from such investments
shall be credited to such Fund, and any loss resulting from such
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investments shall be charged to such Fund. The Company shall file with the
Trustee and amend as appropriate a statement of when amounts in the Construction
Fund are expected to be requisitioned. The Trustee shall sell and reduce to cash
a sufficient amount of such investments whenever the cash balance in the
Construction Fund or Bond Fund is insufficient for its purposes, regardless of
the loss on liquidation.
Any moneys held in the Letter of Credit Subaccount and the Bond Purchase
Subaccount shall be held uninvested.
Since the investments permitted by this section have been included at the
request of the Company and the making of such investments from time to time will
be subject to the Company's written direction, the Issuer, without thereby
affecting the limitation of its liability set forth in the Loan Agreement and
this Indenture, specifically disclaims any obligation to the Trustee or the
Company for any loss arising from, or tax consequences of, investments pursuant
to the provisions of this section. The Trustee shall not be responsible for any
losses on investments made in accordance with this section or the tax
consequences thereof.
ARTICLE VIII
RIGHTS OF THE COMPANY UNDER THE LOAN AGREEMENT
Section 801. Rights of Company Under Loan Agreement. Nothing herein
contained shall be deemed to impair the rights and privileges of the Company set
forth in the Loan Agreement and an Event of Default hereunder shall not
constitute an "Event of Default" under the Loan Agreement unless by the terms of
the Loan Agreement it constitutes an Event of Default thereunder.
ARTICLE IX
DEFAULT PROVISIONS AND REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 901. Events of Default. Each of the following events shall
constitute and is referred to in this Indenture as an "Event of Default":
(a) Default in the due and punctual payment of any interest on any
Bond hereby secured and outstanding;
(b) Default in the due and punctual payment of the principal of and
premium, if any, on any Bond hereby secured and outstanding, whether at the
stated maturity thereof, or upon proceedings for redemption thereof, or upon the
maturity thereof by declaration;
(c) Default in the payment of any amount due pursuant to Section
202(e) hereof;
(d) Default in the payment of any other amount required to be paid
under this Indenture or the performance or observance of any other of the
covenants, agreements or conditions contained in this Indenture, or in the Bonds
issued under this Indenture, and continuance thereof for a period of 30 days
after written notice specifying such failure and requesting that it be remedied,
shall have been given to the Issuer and the Company by the Trustee, which may
give such notice in
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its discretion and shall give such notice at the written request of bondholders
of not less than 10% in aggregate principal amount of the Bonds then
outstanding, unless the Trustee, or the Trustee and bondholders of an aggregate
principal amount of Bonds not less than the aggregate principal amount of Bonds
the bondholders of which requested such notice, as the case may be, shall agree
in writing to an extension of such period prior to its expiration; provided,
however, if the failure stated in the notice cannot be corrected within the
applicable period, the Issuer and the Trustee will not unreasonably withhold
their consent to an extension of such time if corrective action is instituted by
the Issuer, or the Company on behalf of the Issuer, within such period and is
being diligently pursued;
(e) The occurrence of an "Event of Default" under the Loan
Agreement;
(f) Receipt by the Trustee of written notice from the Bank that an
"Event of Default" has occurred under the Reimbursement Agreement, accompanied
by a demand by the Bank that the Trustee declare the Bonds to be immediately due
and payable;
(g) Receipt by the Trustee of notice from the Bank as provided in
the Letter of Credit with respect to interest to the effect that the amount
available to be drawn under the Letter of Credit will not be reinstated;
(h) The occurrence of an Event of Bankruptcy of the Company; and
(i) The occurrence of an Event of Bankruptcy of the Bank.
The term "default" as used in clauses (a), (b), (c) and (d) above shall
mean default by the Issuer in the performance or observance of any of the
covenants, agreements or conditions on its part contained in this Indenture, or
in the Bonds outstanding hereunder, exclusive of any period of grace required to
constitute a default an "Event of Default" as hereinabove provided.
Section 902. Acceleration. (a) Upon the occurrence and during the
continuation of an Event of Default, the Trustee may, and in certain events
shall, declare the principal of all Outstanding Bonds secured by the Indenture
and interest accrued thereon immediately due and payable, and such principal and
interest shall thereupon become and be immediately due and payable. Such
declarations shall be made as follows: Upon the occurrence and continuation of
an Event of Default described in clause (a), (b), (c), (f), (g), or (i) of
Section 901 hereof, the Trustee shall declare the Bonds immediately due and
payable as set forth above. Upon the occurrence and continuation of an Event of
Default described in clause (d), (e) or (h) of Section 901 hereof, the Trustee
may, and upon the written request of the holders of a majority in aggregate
principal amount of Bonds outstanding hereunder, shall, but only with the prior
written consent of the Bank so long as the Bank has not wrongfully dishonored a
draw under the Letter of Credit, declare the Bonds immediately due and payable
as set forth above. In each case, the Trustee shall declare such an Event of
Default and acceleration of the Bonds by notice in writing delivered to the
Issuer, the North Carolina Local Government Commission, the Company, and the
Bank. Upon any such declaration the Issuer shall forthwith pay to the holders of
the Bonds the entire unpaid principal of, premium, if any, and accrued interest
on the Bonds, but only from the revenues and receipts herein specifically
pledged for such purpose.
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(b) Upon the acceleration of the maturity of the Bonds, by
declaration or otherwise, the Trustee shall immediately, without requirement of
the indemnification described in Section 904 hereof, draw upon the Letter of
Credit for the aggregate unpaid principal amount of the Bonds and all interest
accrued thereon which shall be applied as set forth in Section 907. Upon such
acceleration, interest on the Bonds shall cease to accrue as of the date of
declaration of such acceleration.
Section 903. Other Remedies; Rights of Bondholders. Upon the occurrence
and during the continuation of an Event of Default, the Trustee may, as an
alternative, pursue any available remedy by suit at law or in equity to enforce
the payment of the principal of and premium, if any, and interest on the Bonds
then Outstanding hereunder.
If an Event of Default shall have occurred, and if it shall have been
requested so to do by the holders of a majority in aggregate principal amount of
Bonds outstanding hereunder and shall have been indemnified as provided in
Section 1101 hereof, the Trustee shall be obligated to exercise such one or more
of the rights and powers conferred upon it by this Section and by Section 902 as
the Trustee, being advised by counsel, shall deem most expedient in the
interests of the bondholders.
No remedy by the terms of this Indenture conferred upon or reserved to the
Trustee (or to the bondholders) is intended to be exclusive of any other remedy,
but each and every such remedy shall be cumulative and shall be in addition to
any other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.
No delay or omission to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default or acquiescence
therein; and every such right and power may be exercised from time to time and
as often as may be deemed expedient.
No waiver of any default or Event of Default hereunder, whether by the
Trustee or by the bondholders, shall extend to or shall affect any subsequent
default or Event of Default or shall impair any rights or remedies consequent
thereon.
Section 904. Right of Bondholders to Direct Proceedings. The holders of
two-thirds in aggregate principal amount of Bonds outstanding hereunder shall
have the right, at any time, by an instrument or instruments in writing executed
and delivered to the Trustee, to direct the method and place of conducting all
proceedings to be taken in connection with the enforcement of the terms and
conditions of this Indenture, or for the appointment of a receiver or any other
proceeding hereunder; provided that such direction shall not be otherwise than
in accordance with the provisions of law and of this Indenture. The Trustee is
entitled to the indemnity provided in Section 1101 hereof before taking any
action under this Section.
Section 905. Appointment of Receiver. Upon the occurrence of an Event of
Default, and upon the filing of a suit or other commencement of judicial
proceedings to enforce the rights of the Trustee and of the bondholders under
this Indenture, the Trustee shall be entitled, as a matter of right, to the
extent permitted by law, to the appointment of a receiver or receivers of the
Trust Estate and
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of the tolls, rents, revenues, issues, earnings, income, products and profits
thereof, pending such proceedings with such powers as the court making such
appointment shall confer.
Section 906. Waiver. In case of an Event of Default on its part, as
aforesaid, to the extent that such rights may then lawfully be waived, neither
the Issuer nor anyone claiming through it or under it shall or will set up,
claim, or seek to take advantage of any appraisement, valuation, stay, extension
or redemption laws now or hereafter in force, in order to prevent or hinder the
enforcement of this Indenture, but the Issuer, for itself and all who may claim
through or under it, hereby waives, to the extent that it lawfully may do so,
the benefit of all such laws and all right of appraisement and redemption to
which it may be entitled under the laws of the State of North Carolina.
Section 907. Application of Moneys. Following an Event of Default and
subject to Section 1102, moneys shall be applied by the Trustee as follows:
(a) Unless the principal of all the Bonds shall have become or shall
have been declared due and payable, all such moneys shall be applied:
First: To the payment to the persons entitled thereto of all
installments of interest then due, in the order of the maturity of the
installments of such interest, and, if the amount available shall not be
sufficient to pay in full any particular installment, then to the payment
ratably, according to the amounts due on such installment, to the persons
entitled thereto, without any discrimination or privilege; provided that,
payment of interest with respect to Pledged Bonds or Bonds held by the
Company shall be paid only after payment of interest with respect to all
other Bonds Outstanding.
Second: To the payment to the persons entitled thereto of the unpaid
principal of any of the Bonds which shall have become due (other than
Bonds called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), in the order of their due
dates, with interest on such Bonds from the respective dates upon which
they become due, and, if the amount available shall not be sufficient to
pay in full Bonds due on any particular date, together with such interest,
then to the payment ratably, according to the amount of principal due on
such date, to the persons entitled thereto without any discrimination or
privilege of any Bond over any other Bond and without preference or
priority of principal over interest or of interest over principal;
provided that, payments of principal and interest with respect to Bonds
held by the Company or Pledged Bonds shall be paid only after payments of
principal and interest with respect to all other Bonds Outstanding have
been paid.
Third: To the payment of the interest on and the principal of the
Bonds, and to the redemption of Bonds, all in accordance with the
provisions of Article V of this Indenture; and
Fourth: To the payment of obligations due to the Bank under the
Reimbursement Agreement.
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(b) If the principal of all the Bonds shall have become due or shall
have been declared due and payable, all such moneys shall be applied to the
payment of the principal and interest then due and unpaid upon the Bonds,
without preference or priority of principal over interest or of interest over
principal, or of any Bond over any other Bond, ratably, according to the amounts
due respectively for principal and interest, to the person entitled thereto
without discrimination or privilege provided that, payments of principal and
interest with respect to Bonds held by the Company or Pledged Bonds shall be
paid only after payments of principal and interest with respect to all other
Bonds Outstanding have been paid.
(c) If the principal of all the Bonds shall have been declared due
and payable, and if such declaration shall thereafter have been rescinded and
annulled under the provisions of this Article then, subject to the provisions of
paragraph (b) of this Section in the event that the principal of all the Bonds
shall later become due or be declared due and payable, the moneys shall be
applied in accordance with the provisions of paragraph (a) of this Section.
Whenever moneys are to be applied by the Trustee pursuant to the
provisions of this Section, such moneys shall be applied by it at such times,
and from time to time, as it shall determine, having due regard to the amount of
such moneys available for application and the likelihood of additional moneys
becoming available for such application in the future. Whenever the Trustee
shall apply such funds, it shall fix the date (which shall be an Interest
Payment Date unless it shall deem another date more suitable) upon which such
application is to be made and upon such date interest on the amounts of
principal to be paid on such dates shall cease to accrue. The Trustee shall give
such notice as it may deem appropriate of the deposit with it of any such moneys
and of the fixing of any such date and shall not be required to make payment to
the holder of any unpaid Bond until such Bond shall be presented to the Trustee
for appropriate endorsement or for cancellation if fully paid.
Section 908. Remedies Vested in Trustee. All rights of action (including
the right to file proof of claim) under this Indenture or under any of the Bonds
may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceeding relating thereto and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee, without the necessity of joining as plaintiffs or defendants any
holders of the Bonds hereby secured, and any recovery of judgment shall be for
the equal benefit of the holders of the Outstanding Bonds.
Section 909. Rights and Remedies of Bondholders. No holder of any Bond
shall have any right to institute any suit, action or proceeding in equity or at
law for the enforcement of this Indenture or for the execution of any trust
hereof or for the appointment of a receiver or any other remedy hereunder,
unless a default has occurred of which the Trustee has been notified as provided
in subsection (g) of Section 1101 hereof, or of which by said subsection it is
deemed to have notice, nor unless such default shall have become an Event of
Default and the holders of a majority in aggregate principal amount of Bonds
Outstanding hereunder shall have made written request to the Trustee and shall
have offered it reasonable opportunity either to proceed to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name, nor unless also they have offered to the Trustee indemnity as provided in
Section 1101 hereof nor unless the Trustee shall thereafter fail or refuse to
exercise the powers hereinbefore granted, or to institute such action,
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suit or proceeding in its own name; and such notification, request and offer of
indemnity are hereby declared in every such case at the option of the Trustee to
be conditions precedent to the execution of the powers and trusts of this
Indenture, and to any action or cause of action for the enforcement of this
Indenture or for the appointment of a receiver or for any other remedy
hereunder; it being understood and intended that no one or more holders of the
Bonds shall have any right in any manner whatsoever to affect, disturb or
prejudice the lien of this Indenture by his or their action or to enforce any
right hereunder except in the manner herein provided, and that all proceedings
at law or in equity shall be instituted, held and maintained in the manner
herein provided for the equal benefit of the holders of all Bonds outstanding
hereunder. Nothing in this Indenture contained shall, however, affect or impair
the right of any bondholders to enforce the payment of the principal of and
interest on any Bonds at and after the maturity thereof, or the obligation of
the Issuer to pay the principal of and interest on each of the Bonds issued
hereunder to the respective holders thereof at the time and place set forth in
the Bonds.
Section 910. Termination of Proceedings. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a
receiver or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason, or shall have been determined adversely to the
Trustee, then and in every such case the Issuer and the Trustee shall be
restored to their former positions and rights hereunder with respect to the
property herein conveyed, and all rights, remedies and powers of the Trustee
shall continue as if no such proceedings had been taken, except to the extent
the Trustee is legally bound by such adverse determination.
Section 911. Waivers of Events of Default. The Trustee, with the written
consent of the Bank, may in its discretion waive any Event of Default hereunder
and its consequences and rescind any declaration of maturity of principal and
shall do so, with the written consent of the Bank, upon the written request of
the holders of a majority in principal amount of all Bonds outstanding
hereunder; provided, however, that there shall not be waived any Event of
Default described in clause (a), (b) or (c) of Section 901 hereof, unless prior
to such waiver or rescission all arrears of principal (due otherwise than by
declaration) and interest and all expenses of the Trustee and Paying Agent,
shall have been paid or provided for, and in case of any such waiver or
rescission the Issuer, Trustee and the bondholders shall be restored to their
former positions and rights hereunder respectively; but no such waiver or
rescission shall extend to any subsequent or other default, or impair any right
subsequent thereon.
Section 912. Disposition of Amounts Drawn on Letter of Credit; Assignment
of Rights to Contest.
(a) All amounts drawn on the Letter of Credit by the Trustee in accordance
with Section 902 shall be held in the Bond Fund, shall be applied immediately to
the payment of principal of and premium, if any, and interest accrued on the
Bonds unless, prior to or with the proceeds of the draw on the Letter of Credit,
the Trustee receives written instructions from the Bank to use such proceeds to
purchase all (but not less than all) Bonds. If such instructions are received by
the Trustee, such draw proceeds shall be immediately applied to the purchase of
the Bonds, the acceleration of the Bonds shall be canceled, the Bonds shall
become Pledged Bonds and the Bonds shall be registered in the name of the
Company and pledged under the Reimbursement Agreement as additional security
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for repayment of the Company's obligations under the Reimbursement Agreement.
Thereafter, such Bonds shall not be remarketed by the Remarketing Agent unless
the Letter of Credit is reinstated or a Substitute Letter of Credit is delivered
pursuant to Section 409.
(b) The Trustee hereby assigns to the Bank all its rights to contest or
otherwise dispute in the Trustee's name, place and stead and at the Bank's sole
election and cost any claim of preferential transfer made by a bankruptcy
trustee, debtor-in-possession or other similar official with respect to any
amount paid to the Trustee by or on behalf of the Company or the Issuer to be
applied to principal of and premium, if any, or interest on or purchase price of
the Bonds, to the extent of payments made to the Trustee pursuant to a drawing
under the Letter of Credit. The Trustee shall cooperate with and assist the Bank
in any such contest or dispute as the Bank may reasonably request; provided,
however, that the Bank shall reimburse the Trustee for its reasonable costs
incurred in connection with providing such cooperation and assistance. The
Trustee shall give the Bank prompt notice of any claim of preferential transfer
of which the Trustee has knowledge. The foregoing assignment shall not be deemed
to confer upon the Bank any right to contest or otherwise dispute any claim of
preferential transfer with respect to any amount as to which there has been no
drawing under the Letter of Credit. The assignment set forth above shall in no
event be effective until the Bank shall have first furnished to the Trustee an
agreement to indemnify the Trustee and the holders of the Bonds against any
claim, liability or damage which they might suffer by reason of any such contest
or dispute.
Section 913. Letter of Credit Bank Deemed Owner. For all purposes of this
Article IX (other than receipt of payments), the Bank shall, so long as the
Letter of Credit shall be in effect and the Bank shall not have wrongfully
dishonored any draw under the Letter of Credit (any dishonor for a reason
permitted by the Letter of Credit or pursuant to any administrative or judicial
order, ruling, finding or decision shall not be deemed "wrongful" for purposes
hereof), be deemed the holder and registered owner of all Bonds. As such, the
Bank may take all actions permitted by this Article IX to be taken by the
holders or registered owners of the Bonds, to the exclusion of the actual
holders and registered owners of the Bonds; the purpose of this Section 913
being to permit the Bank to direct the taking of actions and enforcement of
remedies permitted by this Article IX so long as the Letter of Credit shall be
in effect and the Bank shall not have wrongfully dishonored any draw under the
Letter of Credit.
Section 914. Subrogation Rights of the Bank.
(a) Notwithstanding anything else contained herein, whenever the Trustee
shall make any payment to any Bondholder with funds drawn under the Letter of
Credit pursuant hereto, the Trustee shall make such payments as agent for the
Bank and not as agent for the Issuer, and the Bank and its assigns shall
thereafter, to the extent of the amount so paid, be subrogated to the rights
thereon of the Bondholders to whom such payment was made, and the Trustee shall,
in the event of the payment of principal, keep a written record of such
payments. When a Bondholder has been paid the entire principal of and interest
on his Bond with funds drawn under the Letter of Credit, such Bond shall be
surrendered to the Trustee as agent for the Bank, in lieu of cancellation
thereof, and such Bond shall be either cancelled or transferred and delivered to
the Bank as the Bank shall direct.
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(b) In the event the Bank makes any payment with respect to the payment of
the principal or purchase price of or interest on any Bond to the Trustee under
the Letter of Credit, the Bank shall be subrogated to the rights possessed under
this Indenture and in and to the Trust Estate by the Trustee, the Issuer and the
owners of such Bonds so paid, and the Bank shall be subrogated to the rights of
the Issuer and the Trustee under any other document, instrument or agreement
securing repayment of the principal or purchase price of and interest on the
Bonds. For purposes of the Bank's subrogation rights hereunder, (i) any
reference in this Indenture to the Bondholders shall include the Bank, which
shall be entitled to be treated as if the Bank were a registered owner of Bonds
in the principal amount of any principal payment made by the Bank under the
Letter of Credit, (ii) any portion of any Bond as to which the principal or
purchase price is paid with money collected pursuant to the Letter of Credit
shall be deemed to be outstanding under this Indenture and the principal amount
of such Bond, together with interest due and unpaid thereon, which shall have
been paid by the Bank pursuant to the Letter of Credit shall be deemed to be
held by and owing to the Bank, and (iii) the Bank may exercise any and all
rights and benefits it would have under this Indenture as a Holder of Bonds to
the extent of the principal amount of Bonds owned or deemed to be owned by the
Bank and any and all interest so due and unpaid thereon; provided that such
Bonds (A) shall not be taken into account in determining any deficiency for
which a claim or draw is to be made under the Letter of Credit, and (B) shall be
subordinated in right of payment as of any Interest Payment Date or upon the
redemption or acceleration of the Bonds. Subrogation rights granted to the Bank
hereunder are not intended to be exclusive of any other rights or remedies
available to the Bank, and such subrogation rights shall be cumulative and shall
be in addition to every right or remedy given hereunder or under any other
instrument or agreement with respect to reimbursement of money paid by the Bank
pursuant to the Letter of Credit, and every other right or remedy now or
hereafter existing at law or in equity or by statute.
ARTICLE X
DISCHARGE OF LIEN
Section 1001. Discharge of Lien. If the Issuer shall pay or cause to be
paid to the holders and owners of the Bonds the principal, premium, if any, and
interest to become due thereon at the times and in the manner stipulated
therein, and if all fees and expenses of the Trustee have been paid, and if the
Issuer shall keep, perform and observe all and singular the covenants and
promises in the Bonds and in this Indenture expressed as to be kept, performed
and observed by it on its part, then 366 days thereafter these presents and the
estate and rights hereby granted shall cease, determine and be void; provided,
however, that if the Trustee has drawn on the Letter of Credit pursuant to
Section 902 hereof this Indenture, then the rights and obligations created
hereby shall remain in full force and effect until the proceeds of such draw
have been distributed in accordance with the provisions hereof and all amounts
owing or payable hereunder, under the Reimbursement Agreement, and under the
Bonds have been paid. In the event such payments are made from (i) Available
Moneys or (ii) the proceeds of a draw under the Letter of Credit, the lien of
this Indenture shall close, determine and be terminated immediately upon such
payment, subject to the proviso set forth in the preceding sentence. Thereupon
the Trustee shall cancel and discharge the lien of this Indenture, and execute
and deliver to the Issuer such instruments in writing as shall be requisite to
satisfy the lien hereof, and reconvey to the Issuer the estate hereby conveyed,
and assign and deliver to the Issuer or the Company, as their respective
interests may appear, any property at the time subject to the lien of this
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Indenture which may then be in its possession, except moneys or Government
Securities held by it for the payment of the principal of and premium, if any,
and interest on the Bonds.
After the Conversion Date, any Bond shall be deemed to be paid within the
meaning of this Article when payment of the principal of and premium, if any,
and interest on such Bond (whether at maturity or upon redemption as provided in
this Indenture, or otherwise), either (i) shall have been made or caused to be
made in accordance with the terms thereof, or (ii) shall have been provided for
by irrevocably depositing with the Trustee, in trust and irrevocably set aside
exclusively for such payment, (1) moneys sufficient to make such payment or (2)
Government Securities (provided that such deposit will not affect the tax exempt
status of the interest on any of the Bonds or cause any of the Bonds to be
classified as arbitrage bonds within the meaning of Section 148 of the 1986
Code), maturing as to principal and interest in such amount and at such times as
will provide sufficient moneys to make such payment and to redeem such Bonds,
and all reasonable fees, compensation and expenses of the Trustee and any Paying
Agent pertaining to the Bonds with respect to which such deposit is made and all
other liabilities of the Company under the Loan Agreement shall have been paid
or the payment thereof provided for to the satisfaction of the Trustee. Any
moneys or Government Securities so held shall be held for the benefit of the
Bondholders. The Trustee shall deliver notice to the bondholders in accordance
with Section 302 that it has received moneys or Government Securities in
accordance with this Section, and that the Bonds have been defeased in
accordance with this Section.
The Issuer or the Company may at any time surrender to the Trustee for
cancellation by it any Bonds previously authenticated and delivered hereunder,
which the Issuer or the Company may have acquired in any manner whatsoever, and
such Bonds, upon such surrender and cancellation, shall be deemed to be paid and
retired.
If the Bonds are to be rated by a Rating Agency at or prior to the time
provision for payment shall be made there shall be delivered to the Rating
Agency the opinion of nationally recognized certified public accountants that
the amounts deposited in accordance with this section are sufficient to pay
principal and accrued interest on the Bonds when due, without reliance on any
reinvestment income, and a written opinion of counsel experienced in bankruptcy
law matters and in form satisfactory to the Rating Agency that the deposit and
use of such monies will not constitute an avoidable preferential payment
pursuant to Section 547 of the Bankruptcy Code, or an avoidable post-petition
transfer pursuant to Section 549 of the Bankruptcy Code, recoverable from
Holders of the Bonds pursuant to Section 550 of the Bankruptcy Code in the event
of an Event of Bankruptcy.
Section 1002. Effect of Discharge on Bonds. The provisions of this
Indenture relating to the determination of the rate of interest to be borne by
the Bonds, the options of the owners of the Bonds to deliver Bonds to the
Trustee for purchase prior to or on the Conversion Date, and the related
obligations of the Company, the Trustee and the Remarketing Agent shall remain
in effect with respect to all Bonds until the principal of and interest on the
Bonds shall have been paid in full, notwithstanding that the lien of this
Indenture has been discharged pursuant to Section 1001 hereof.
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ARTICLE XI
TRUSTEE; PAYING AGENTS; REMARKETING AGENT
Section 1101. Acceptance of Trusts. The Trustee hereby accepts the trust
imposed upon it by this Indenture, and agrees to perform said trust as an
ordinarily prudent trustee under a corporate mortgage, but only upon and subject
to the following expressed terms and conditions:
(a) The Trustee may execute any of the trusts or powers hereof and
perform any duties required of it by or through attorneys, agents, receivers or
employees, and shall be entitled to advice of counsel concerning all matters of
trusts hereof and its duties hereunder, and may in all cases pay reasonable
compensation to all such attorneys, agents, receivers and employees as may
reasonably be employed in connection with the trusts hereof. The Trustee may act
upon the opinion or advice of any attorney, surveyor, engineer or accountant
selected by it in the exercise of reasonable care, or, if selected or retained
by the Issuer prior to the occurrence of a default of which the Trustee has been
notified as provided in subsection (g) of this Section 1101, or of which by said
subsection the Trustee is deemed to have notice, approved by the Trustee in the
exercise of such care. The Trustee shall not be responsible for any loss or
damage resulting from an action or non-action in accordance with any such
opinion or advice.
(b) The Trustee shall not be responsible for any recital herein, or
in the Bonds (except in respect to the certificate of the Trustee endorsed on
such Bonds), or for insuring the property herein conveyed or collecting any
insurance moneys, or for the validity of the execution by the Issuer of this
Indenture or of any supplemental indentures or instrument of further assurance,
or for the sufficiency of the security for the Bonds issued hereunder or
intended to be secured hereby, or for the value of the title of the property
herein conveyed or otherwise as to the maintenance of the security hereof;
except that in the event the Trustee enters into possession of a part or all of
the property herein conveyed pursuant to any provision of this Indenture, it
shall use due diligence in preserving such property; and the Trustee shall not
be bound to ascertain or inquire as to the performance or observance of any
covenants, conditions and agreements aforesaid as to the condition of the
property herein conveyed.
(c) The Trustee may become the owner of Bonds secured hereby with
the same rights which it would have if not Trustee.
(d) The Trustee shall be protected in acting upon any notice,
request, consent, certificate, order, affidavit, letter, telegram or other paper
or document believed by it, in the exercise of reasonable care, to be genuine
and correct and to have been signed or sent by the proper person or persons. Any
action taken by the Trustee pursuant to this Indenture upon the request or
authority or consent of the owner of any Bond secured hereby, shall be
conclusive and binding upon all future owners of the same Bond and upon Bonds
issued in exchange therefor or in place thereof.
(e) As to the existence or non-existence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, the Trustee
shall be entitled to rely upon a certificate of the Issuer signed by its
Chairman or Vice Chairman and attested by its Secretary or Assistant Secretary
as sufficient evidence of the facts therein contained and prior to the
occurrence of a default
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of which it has been notified as provided in subsection (g) of this Section
1101, or of which by that subsection it is deemed to have notice, and shall also
be at liberty to accept a similar certificate to the effect that any particular
dealing, transaction or action is necessary or expedient, but may at its
discretion, at the reasonable expense of the Issuer, in every case secure such
further evidence as it may think necessary or advisable but shall in no case be
bound to secure the same. The Trustee may accept a certificate of the Secretary
of the Issuer under its seal to the effect that a resolution or ordinance in the
form therein set forth has been adopted by the Issuer as conclusive evidence
that such resolution or ordinance has been duly adopted, and is in full force
and effect.
(f) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty of the Trustee, and the Trustee
shall be answerable only for its own negligence or willful default.
(g) The Trustee shall not be required to take notice or be deemed to
have notice of any default hereunder (except a default under Section 901(a),
(b), (c), (f), (g) or (i) concerning which the Trustee shall be deemed to have
notice) unless the Trustee shall be specifically notified in writing of such
default by the Issuer, the Company or the Bank or by the holders of at least a
majority in aggregate principal amount of Bonds outstanding hereunder and all
notices or other instruments required by this Indenture to be delivered to the
Trustee must, in order to be effective, be delivered to the office of the
Trustee, and in the absence of such notice so delivered, the Trustee may
conclusively assume there is no such default except as aforesaid.
(h) The Trustee shall not be personally liable for any claims by or
on behalf of any person, firm, corporation or other legal entity arising from
the conduct or management of, or from any work or thing done on, the Project,
and shall have no affirmative duty with respect to compliance of the Project
under state or Federal laws pertaining to the transport, storage, treatment or
disposal of pollutants, contaminants, waste or hazardous materials, or
regulations, permits or licenses issued under such laws.
(i) At any and all reasonable times the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives, shall have the right fully to inspect any and all of the
property herein conveyed, including all books, papers and records of the Issuer
pertaining to the Project and the Bonds, and to take such memoranda from and in
regard thereto as may be desired; provided, however, that nothing contained in
this subsection or in any other provision of this Indenture shall be construed
to entitle the above named persons to any information or inspection involving
the confidential know-how of the Company.
(j) The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in respect
of the premises.
(k) Notwithstanding anything elsewhere in this Indenture contained,
the Trustee shall have the right, but shall not be required, to demand, in
respect of the authentication of any Bonds, the withdrawal of any cash, the
release of any property, or any action whatsoever within the purview of this
Indenture, any showings, certificates, opinions, appraisals, or other
information, or corporate action or evidence thereof, in addition to that by the
terms hereof required as a condition
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of such action by the Trustee, deemed desirable for the purpose of establishing
the right of the Issuer to the authentication of any Bonds, the withdrawal of
any cash, the release of any property, or the taking of any other action by the
Trustee.
(l) Before taking such action hereunder, the Trustee may require
that it be furnished an indemnity bond satisfactory to it for the reimbursement
to it of all expenses to which it may be put and to protect it against all
liability, except liability which is adjudicated to have resulted from the
negligence or willful default of the Trustee, by reason of any action so taken
by the Trustee. 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. Notwithstanding the foregoing, the Trustee shall
not require indemnity hereunder prior to (i) making a draw on the Letter of
Credit in accordance with the terms hereof and thereof, (ii) making payments of
principal and interest on the Bonds when due, or (iii) declaring an acceleration
of the Bonds in accordance with the terms of Section 902.
Section 1102. Fees, Charges and Expenses of Trustee and Paying Agents;
Trustee's Prior Lien. The Trustee shall be entitled to payment and/or
reimbursement for its reasonable fees for services rendered hereunder and all
advances, Reasonable Attorneys' Fees and other expenses reasonably and
necessarily made or incurred by the Trustee in and about the execution of the
trusts created by this Indenture and in and about the exercise and performance
by the Trustee of the powers and duties of the Trustee hereunder, and for all
reasonable and necessary costs and expenses incurred in defending any liability
in the premises of any character whatsoever (unless such liability is
adjudicated to have resulted from the negligence or willful default of the
Trustee). Any Paying Agent shall be paid the standard and customary fees and
charges of the Paying Agent for handling the payment of the principal of and
premium, if any, and interest on the Bonds, and funds sufficient to pay the same
shall be deposited with each Paying Agent prior to the dates on which payments
are required to be made on the Bonds. The Issuer has made provisions in the Loan
Agreement for the payment of such reasonable and necessary advances, fees, costs
and expenses and reference is hereby made to the Loan Agreement for the
provisions so made. In this regard, it is understood that the Issuer pledges no
funds or revenues other than those derived from and the avails of the Trust
Estate to the payment of any obligation of the Issuer set forth in this
Indenture, including the obligations set forth in this Section 1102, but nothing
herein shall be construed as prohibiting the Issuer from using any other funds
and revenues for the payment of any of its obligations under this Indenture.
Following the occurrence of an Event of Default, the Trustee shall have a first
lien with right of payment prior to payment on account of principal or interest
of any Bond issued hereunder upon the Trust Estate for such reasonable and
necessary advances, fees, costs and expenses incurred by the Trustee, provided
that the Trustee shall not in any event have a lien on the proceeds of a drawing
under the Letter of Credit.
Section 1103. Notice to Bondholders of Default. If an Event of Default
occurs of which the Trustee is deemed to have notice, so long as the Trustee has
not declared an acceleration of the Bonds pursuant to Section 902, the Trustee
shall, not less than fifteen (15), nor more than thirty (30),
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days after receiving notice of the occurrence of such Event of Default, give
notice to the Company, the Bank and the Holders of all Bonds Outstanding by
first-class mail.
Section 1104. Intervention by Trustee. In any judicial proceeding to which
the Issuer is a party and which in the opinion of the Trustee and its counsel
has a substantial bearing on the interests of holders of Bonds issued hereunder,
the Trustee may intervene on behalf of bondholders and shall do so if requested
in writing by the holders of at least a majority in aggregate principal amount
of Bonds outstanding hereunder. The rights and obligations of the Trustee under
this Section 1104 are subject to the approval of the court having jurisdiction
in the premises.
Section 1105. Merger or Consolidation of Trustee. Any bank or trust
company to which the Trustee may be merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any bank or trust company resulting
from any such sale, merger, consolidation or transfer to which it is a party,
ipso facto, shall be and become successor trustee hereunder and vested with all
of the title to the whole property or Trust Estate and all the trusts, powers,
discretions, immunities, privileges, and all other matters as was its
predecessor, without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that such successor
trustee shall have capital and surplus of at least $100,000,000.
Section 1106. Resignation by Trustee. The Trustee and any successor
trustee may at any time resign from the trusts hereby created by giving 30 days
written notice to the Issuer and the Company, and such resignation shall take
effect at the end of such 30 days (provided a successor trustee has been duly
appointed) or upon the earlier appointment of a successor trustee by the
bondholders or by the Issuer. Such notice may be served personally or sent by
certified mail.
Section 1107. Removal of Trustee. The Trustee may be removed at any time
by an instrument or concurrent instruments in writing delivered to the Trustee
and to the Issuer, and signed by the holders of a majority in aggregate
principal amount of Bonds outstanding hereunder; provided, however, that such
removal shall not be effective until the appointment of a successor trustee as
set forth in Section 1108 hereof.
Section 1108. Appointment of Successor Trustee. So long as no Event of
Default has occurred or is continuing, in case the Trustee hereunder shall
resign or be removed, or be dissolved, or shall be in course of dissolution or
liquidation, or otherwise become incapable of acting hereunder, or in case it
shall be taken under the control of any public officer or officers, or of a
receiver appointed by the court, a successor may be appointed by the Issuer,
with the consent of the Company, by an instrument executed and signed by its
Chairman or Vice Chairman and attested by its Secretary or Assistant Secretary
under its seal. If an Event of Default has occurred and is continuing, such
successor trustee may be appointed by the holders of a majority in aggregate
principal amount of Bonds outstanding hereunder, by an instrument or concurrent
instruments in writing signed by such holders, or by their attorneys in fact,
duly authorized; provided, nevertheless, that in case of such vacancy the
Issuer, with the consent of the Company, by an instrument executed and signed by
its Chairman or Vice Chairman and attested by its Secretary or Assistant
Secretary under its seal, shall
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appoint a temporary trustee to fill such vacancy until a successor trustee shall
be appointed by the bondholders in the manner above provided; and any such
temporary trustee so appointed by the Issuer shall immediately and without
further act be superseded by the trustee. Every such successor trustee shall be
a trust company or bank in good standing, having capital and surplus of not less
than $100,000,000, and, if the Bonds are rated by a Rating Agency, it shall also
have a rating by Moody's (if the Bonds are then rated by Moody's) of at least
Baa3/P-3, or by Standard & Poor's (if the Bonds are then rated by Standard &
Poor's) of at least BBB/A3 or higher or shall otherwise be approved in writing
by Moody's or Standard & Poor's, as the case may be. Such successor Trustee
shall be satisfactory to the Company so long as no event has occurred with
respect to the Company which constitutes an Event of Default or which by notice
or lapse of time or both would constitute an Event of Default under this
Indenture or the Loan Agreement. If no successor is appointed within thirty (30)
days following the resignation or removal of the Trustee, the Trustee may
petition a court of competent jurisdiction for the appointment of a successor
Trustee.
Section 1109. Concerning Any Successor Trustee. Every successor or
temporary trustee appointed hereunder shall execute, acknowledge and deliver to
its predecessor and also to the Issuer an instrument in writing accepting such
appointment hereunder, and thereupon such successor or temporary trustee,
without any further act or conveyance, shall become fully vested with all the
estates, properties, rights, powers, trusts, duties and obligations of its
predecessor; but such predecessor shall, nevertheless, on the written request of
the Issuer or of its successor trustee, execute and deliver an instrument
transferring to such successor all the estate, properties, rights, powers and
trusts of such predecessor hereunder; and every predecessor trustee shall, upon
payment of all amounts owed to it hereunder, deliver all securities, moneys and
any other property held by it as trustee hereunder to its successor. Should any
instrument in writing from the Issuer be required by any successor trustee for
more fully and certainly vesting in such successor the estates, rights, powers
and duties hereby vested or intended to be vested in the predecessor trustee,
any and all such instruments in writing shall, on request, be executed,
acknowledged and delivered by the Issuer. The resignation of any trustee and the
instrument or instruments removing any trustee and appointing a successor
hereunder, together with all other instruments provided for in this Article
shall, at the expense of the Issuer, be forthwith filed and/or recorded by the
successor trustee in each recording office where the Indenture shall have been
filed and/or recorded.
Section 1110. Reliance Upon Instruments. The resolutions, opinions,
certificates and other instruments provided for in this Indenture may be
accepted and relied upon by the Trustee as conclusive evidence of the facts and
conclusions stated therein and shall be full warrant, protection and authority
to the Trustee for its actions taken hereunder.
Section 1111. Appointment of Co-Trustee. The Issuer and the Trustee shall
have power to appoint and upon the request of the Trustee the Issuer shall for
such purpose join with the Trustee in the execution of all instruments necessary
or proper to appoint another corporation or one or more persons approved by the
Trustee, and satisfactory to the Company so long as there is no termination of
the interest of the Company by virtue of an Event of Default or otherwise,
either to act as co-trustee or co-trustees jointly with the Trustee of all or
any of the property subject to the lien hereof, or to act as separate trustee or
trustee of all or any such property, with such powers as may be provided in the
instrument of appointment and to vest in such corporation or person or persons
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as such separate trustee or co-trustee any property, title, right or power
deemed necessary or desirable. In the event that the Issuer shall not have
joined in such appointment within 15 days after the receipt by it of a request
so to do, the Trustee alone shall have the power to make such appointment.
Should any deed, conveyance or instrument in writing from the Issuer be required
by the separate trustee or co-trustee so appointed for more fully and certainly
vesting in and confirming to him or to it such properties, rights, powers,
trusts, duties and obligations, any and all such deeds, conveyances and
instruments in writing shall, on request, be executed, acknowledged and
delivered by the Issuer. Every such co-trustee and separate trustee shall, to
the extent permitted by law, be appointed subject to the following provisions
and conditions, namely:
(1) The Bonds shall be authenticated and delivered, and all
powers, duties, obligations and rights conferred upon the Trustee in
respect of the custody of all money and securities pledged or deposited
hereunder, shall be exercised solely by the Trustee; and
(2) The Trustee, at any time by an instrument in writing, may
remove any such separate Trustee or co-trustee.
Every instrument, other than this Indenture, appointing any such
co-trustee or separate trustee, shall refer to this Indenture and the conditions
of this Article XI expressed, and upon the acceptance in writing by such
separate trustee or co-trustee, he, they or it shall be vested with the estate
or property specified in such instrument, jointly with the Trustee (except
insofar as local law makes it necessary for any separate trustee to act alone),
subject to all the trusts, conditions and provisions of this Indenture. Any such
separate trustee or co-trustee may at any time, by an instrument in writing,
constitute the Trustee as his, their or its agent or attorney-in-fact with full
power and authority, to the extent authorized by law, to do all acts and things
and exercise all discretion authorized or permitted by him, them or it, for and
on behalf of him, them or it and in his, their or its name. In case any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all the estate, properties, rights, powers, trusts, duties and
obligations of said separate trustee or co-trustee shall vest in and be
exercised by the Trustee until the appointment of a new trustee or a successor
to such separate trustee or co-trustee. Any such co-trustee shall meet the
requirements set forth in Section 1108 for a substitute trustee.
Section 1112. Designation and Succession of Paying Agents. The Trustee and
any other banks or trust companies, if any, designated as Paying Agent or Paying
Agents in any supplemental indenture or in an instrument appointing a successor
Trustee, shall be the Paying Agent or Paying Agents for the Bonds. Any Paying
Agent appointed hereunder shall meet the requirements set forth in Section 1108
for a substitute trustee.
Any bank or trust company with which or into which any Paying Agent may be
merged or consolidated, or to which the assets and business of such Paying Agent
may be sold, shall be deemed the successor of such Paying Agent for the purposes
of this Indenture. If the position of Paying Agent shall become vacant for any
reason, the Issuer shall, within 30 days thereafter, appoint such bank or trust
company as shall be specified by the Company as such Paying Agent to fill such
vacancy; provided, however, that, if the Issuer shall fail to appoint such
Paying Agent within said period, the Trustee shall make such appointment.
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The Paying Agents shall enjoy the same protective provisions in the
performance of their duties hereunder as are specified in Section 1101 hereof
with respect to the Trustee insofar as such provisions may be applicable.
Section 1113. Remarketing Agent. The Issuer shall, with the approval of
the Company, appoint the Remarketing Agent for the Bonds, subject to the
conditions set forth in Section 1114 hereof. The Remarketing Agent shall
designate to the Trustee 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 Issuer and the Trustee under which the Remarketing
Agent will agree, particularly:
(a) at the direction of the Company and subject to the provisions of
Article XII hereof, to offer for sale, and use its best efforts to sell, Bonds
delivered to the Trustee for purchase pursuant to Section 202(e) hereof at a
price equal to the principal amount thereof plus accrued interest to the
Purchase Date specified in the applicable tender notice, any such sale to be
made on the Purchase Date; and
(b) 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, the Trustee and the Company at all reasonable times.
Section 1114. Qualifications of Remarketing Agent. The Remarketing Agent
shall be a member of the National Association of Securities Dealers, Inc., or a
commercial bank having a capitalization of at least $50,000,000 and authorized
by law to perform all the duties imposed upon it by this Indenture. If the Bonds
are rated by a Rating Agency, any successor Remarketing Agent shall be a bank or
trust company whose outstanding bank deposit obligations are rated at least Baa-
3/P-3 or otherwise be acceptable to such Rating Agency. The Remarketing 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 Issuer, the Company,
the Paying Agent and the Trustee; provided that such resignation shall not be
effective until a successor is appointed. The Remarketing Agent may be removed
at any time, at the direction of the Company (with the prior written consent of
the Bank), by an instrument filed with the Remarketing Agent and the Trustee.
Upon resignation or removal of the Remarketing Agent, the Company shall, with
the consent of the Bank, appoint a substitute Remarketing Agent.
In the event of the resignation or removal of the Remarketing Agent, the
Remarketing Agent shall pay over, assign and deliver any moneys and Bonds held
by it in such capacity to its successor or, if there be no successor, to the
Trustee.
ARTICLE XII
PURCHASE AND REMARKETING OF BONDS
Section 1201. Remarketing of Bonds. (a) By the end of the Business Day on
which the Trustee receives any notice in accordance with Section 202(e) hereof,
the Trustee shall give telephonic or telegraphic notice, promptly confirmed by
written notice, to the Remarketing Agent
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specifying the principal amount of Bonds stated in such notice to be delivered
to it for purchase pursuant to Section 202(e) and the Purchase Date selected in
such notice.
(b) In the event the Bonds are subject to mandatory purchase under
Section 307 hereof, the Trustee shall send notice to the Company and the
Remarketing Agent of such mandatory purchase, including the Mandatory Purchase
Date, at the time it delivers notice thereof to the holders. The Remarketing
Agent shall use its best efforts to remarket the Bonds to be purchased on the
Mandatory Purchase Date at a price of par plus accrued interest.
(c) No later than 3:00 p.m., Central Time, on the Business Day next
preceding any Purchase Date or Mandatory Purchase Date, the Remarketing Agent
shall give telegraphic or telephonic notice, promptly confirmed by written
notice, to the Trustee specifying the principal amount of Bonds, if any, sold by
it. Such notice shall include notice of the amount of Bonds it has not sold
hereunder. Bonds to be purchased on the Purchase Date or the Mandatory Purchase
Date must be delivered to the Trustee not later than 10:00 a.m., Central Time,
on the Purchase Date. Any Bond subject to purchase on the Purchase Date or the
Mandatory Purchase Date that is not tendered by 10:00 a.m., Central Time, on the
Purchase Date will be deemed tendered, and the holder of such Bond shall not be
entitled to interest thereon other than the interest accrued to the Purchase
Date.
(d) On any Purchase Dates or Mandatory Purchase Date, the Trustee
shall give telegraphic or telephonic notice, promptly confirmed by written
notice, to the Company and the Remarketing Agent specifying any Bond which have
not been delivered to the Trustee pursuant to Section 202(e) or 307.
(e) The Remarketing Agent shall use its best efforts to arrange for
the sale, at par plus accrued interest, if any, of any Bonds for which a tender
notice has been received under Section 202(e) or which are subject to mandatory
purchase pursuant to Section 307 for settlement on the Purchase Date. Not later
than 10:00 a.m., Central Time, on the Purchase Date, the Remarketing Agent shall
transfer to the Trustee the proceeds of the remarketing of the Bonds remarketed
on such Purchase Date, and the Trustee shall deposit such amounts in the
Remarketing Proceeds Subaccount of the Bond Purchase Fund. In the event (i) the
Remarketing Agent notifies the Trustee that it has failed to remarket any Bonds
for which it has received notice of tender under Section 202(e) or any Bonds
subject to mandatory purchase, or (ii) the Trustee does not receive the proceeds
of the remarketing from the Remarketing Agent by 10:00 a.m., Central Time, the
Trustee shall take all action necessary to draw on the Letter of Credit for an
amount sufficient, when added to any remarketing proceeds delivered by the
Remarketing Agent, to pay the purchase price of the Bonds to be purchased. Any
Bonds purchased with the proceeds of a draw on the Letter of Credit shall be
held by the Trustee as agent and bailee of the Bank subject to the lien of the
Bank provided under the Reimbursement Agreement.
(f) Any Bond purchased by the Trustee pursuant to the terms of this
Indenture after notice of redemption or mandatory purchase has been given as
provided in Section 302 or 307(b) hereof shall not be remarketed unless the
notice of redemption or mandatory purchase, as the case may be, is
simultaneously delivered to the Purchaser of the remarketed Bond.
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(g) The Remarketing Agent shall not sell or remarket any Bonds to
the Company, the Issuer, or any affiliate or the Company or the Issuer.
Section 1202. Purchase of Bonds. (a) On any Purchase Date the Trustee
shall purchase on behalf of the Company, but only from the funds listed below,
such Bonds from the registered owners thereof at a purchase price equal to the
principal amount thereof plus accrued interest, if any, to the date of purchase.
Funds for the payment of such purchase price shall be derived from the following
sources in the order of priority indicated:
(i) proceeds of the remarketing of such Bonds pursuant to Section
1201(e) hereof;
(ii) moneys representing proceeds of a drawing under the Letter of
Credit;
(iii) revenues and moneys furnished by the Company to the Trustee,
and proceeds from the investment thereof, which constitute Available
Moneys; and
(iv) revenues and moneys furnished by the Company pursuant to the
Loan Agreement.
(b) On any Mandatory Purchase Date the Trustee shall purchase on behalf of
the Company, but only from the funds listed below, such Bonds from the
registered owners thereof at a purchase price equal to the principal amount
thereof plus accrued interest, if any, to the date of purchase. Funds for the
payment of such purchase price shall be derived from the following sources in
the order of priority indicated:
(i) moneys representing proceeds of a drawing under the Letter of
Credit;
(ii) proceeds of the remarketing of such Bonds pursuant to Section
1201(b) and (e) hereof;
(iii) revenues and moneys furnished by the Company to the Trustee,
and proceeds from the investment thereof, which constitute Available
Moneys; and
(iv) revenues and moneys furnished by the Company pursuant to the
Loan Agreement.
Section 1203. Delivery of Bonds. Bonds purchased by the Trustee pursuant
to Section 1202 shall be delivered by the Trustee as follows:
(a) Bonds sold by the Remarketing Agent pursuant to Section 1201
hereof shall be delivered to the purchasers thereof upon payment therefor.
(b) Bonds purchased by the Trustee with moneys described in clause
(iii) of Section 1202(a) or clause (iii) of 1202(b) hereof shall be canceled.
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(c) Bonds purchased by the Trustee with moneys described in clause
(ii) of Section 1202(a) or clause (i) or 1202(b) hereof shall be Pledged Bonds
and shall be registered in the name of the Company and held by the Bank or its
designee (including the Trustee) as agent and bailee for the Bank pending
remarketing in accordance with the Pledge and Security Agreement dated as of
November 1, 1995, between the Bank and the Company. The Trustee shall not
release Pledged Bonds until it has received written notice from the Bank that
the Letter of Credit has been fully reinstated with respect to such Pledged
Bonds.
(d) Bonds purchased by the Trustee with moneys described in clause
(iv) of Section 1202(a) hereof shall, at the direction of the Company, be (i)
delivered to the Trustee for the account of the Company, (ii) canceled, or (iii)
delivered to the Company; provided, however, that any Bonds so purchased after
the selection thereof by the Trustee for redemption shall be canceled.
(e) The due-bill checks, if any, delivered to the Trustee in
accordance with Section 202(e) hereof shall be delivered to the person to whom
the Trustee is to deliver the related Bonds.
Bonds delivered as provided in this Section 1203 shall be registered
in the manner directed by the recipient thereof.
Section 1204. Drawings on Letter of Credit. The Trustee shall draw moneys
under the Letter of Credit to the extent necessary to make timely payments
required to be made pursuant to, and in accordance with, Section 1202 hereof.
Section 1205. Delivery of Proceeds of Sale. The proceeds of the sale by
the Remarketing Agent of any Bond shall be delivered to the Bondholder selling
such Bond (or to the Company if the Bonds remarketed are held by or for the
benefit of the Company, or to the Bank if the proceeds are from the sale of
Pledged Bonds).
Section 1206. Issuer to Cooperate. The Issuer shall cooperate with the
Trustee and the Company to cause the necessary arrangements to be made and to be
thereafter continued whereby funds from the sources specified herein and in the
Loan Agreement will be made available for the purchase of Bonds delivered to the
Trustee and whereby Bonds, executed by the Issuer and authenticated by the
Trustee, shall be made available to the extent necessary for delivery pursuant
to Section 1203 hereof.
Section 1207. No Remarketing After Default. Anything in this Indenture to
the contrary notwithstanding there shall be no remarketing of Bonds pursuant to
this Article XII if there shall have occurred and be continuing an Event of
Default described in clause (a), (b) or (c) of the first paragraph of Section
901 hereof or if any event shall have occurred and be continuing which with the
lapse of time would constitute such an Event of Default.
Section 1208. Duties of Trustee. The Trustee hereby agrees that in
performing its duties referred to in this Article XII that the Trustee is acting
as the agent and representative of the Company, the Bank and the holders of the
Bonds and not the agent or representative of the Issuer.
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Section 1209. No Remarketing Under Certain Conditions. Notwithstanding
anything to the contrary herein provided, the Bonds shall not be remarketed
unless a Letter of Credit providing for the payment of the principal of, premium
in the amount of 3%, and interest on, and purchase price of, the Bonds will be
in effect following the remarketing of such Bonds.
ARTICLE XIII
SUPPLEMENTAL INDENTURES
Section 1301. Supplemental Indentures Not Requiring Consent of
Bondholders. The Issuer and the Trustee may, from time to time and at any time,
but without the consent of or notice to the bondholders, enter into supplemental
indentures as follows:
(a) to cure any formal defect, omission, inconsistency or ambiguity
in this Indenture;
(b) to grant to or confer or impose upon the Trustee for the benefit
of the bondholders any additional rights, remedies, powers, authority, security,
liabilities or duties which may lawfully be granted, conferred or imposed and
which are not contrary to or inconsistent with this Indenture as theretofore in
effect, provided that no such additional liabilities or duties shall be imposed
upon the Trustee without its consent;
(c) to add to the covenants and agreements of, and limitations and
restrictions upon, the Issuer in this Indenture other covenants, agreements,
limitations and restrictions to be observed by the Issuer which are not contrary
to or inconsistent with this Indenture as theretofore in effect;
(d) to confirm, as further assurance, any pledge under, and the
subjection to any claim, lien or pledge created or to be created by, this
Indenture, of the Revenues of the Issuer from the Loan Agreement or of any other
moneys, securities or funds;
(e) to comply with the requirements of the Trust Indenture Act of
1939, as from time to time amended;
(f) to obtain an investment rating on the Bonds from a nationally
recognized rating agency equal to or comparable to the rating assigned to long
term or short term paper issued by the Bank;
(g) to provide for the issuance, sale and delivery of Additional
Bonds as provided in and upon compliance with Section 213 to provide for (1) the
deposit and disbursement of the proceeds of such Additional Bonds to pay the
expenses of the issuance of such Additional Bonds and the cost of all or any
part of the facilities to be financed by means of such Additional Bonds or to
refund another series of Bonds, as the case may be, (2) the payment of the
principal of, premium, if any, and interest on such Additional Bonds, and (3)
such other changes necessary in connection with
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the issuance of such Additional Bonds as shall not, in the opinion of the
Trustee, prejudice in any material respect the rights of the holders of the
Bonds then outstanding; or
(h) to modify, alter, amend or supplement this Indenture in any
other respect which is not materially adverse to the bondholders and which does
not involve a change described in clause (a), (b), (c), (d), (e) or (f) of
Section 1302 hereof and which, in the judgment of the Trustee, is not to the
prejudice of the Trustee.
Section 1302. Supplemental Indentures Requiring Consent of Bondholders.
Subject to the terms and provisions contained in this Section, and not
otherwise, the holders of not less than two-thirds in aggregate principal amount
of the Bonds then outstanding shall have the right, from time to time, anything
contained in this Indenture to the contrary notwithstanding, to consent to and
approve the execution by the Issuer and the Trustee of such indenture or
indentures supplemental hereto as shall be deemed necessary and desirable by the
Issuer for the purpose of modifying, altering, amending, adding to or
rescinding, in any particular, any of the terms or provisions contained in this
Indenture or in any supplemental indenture; provided, however, that nothing
herein contained shall permit, or be construed as permitting (a) an extension of
the maturity (or mandatory sinking fund or other mandatory redemption date) of
the principal of or the interest on or purchase price of any Bond issued
hereunder, or (b) a reduction in the principal amount of or redemption premium
or rate of interest on or purchase price on any Bond issued hereunder, or (c)
the creation of any lien ranking prior to or on a parity with the lien of this
Indenture on the Trust Estate or any part thereof, except as hereinbefore
expressly permitted, or (d) a privilege or priority of any Bond or Bonds over
any other Bond or Bonds, or (e) a reduction in the aggregate principal amount of
the Bonds required for consent to such supplemental indenture, or (f) deprive
the holder of any Bond then outstanding of the lien hereby created on the Trust
Estate. Nothing herein contained, however, shall be construed as making
necessary the approval of bondholders of the execution of any supplemental
indenture as provided in Section 1301 of this Article.
If at any time the Issuer or the Company shall request the Trustee to
enter into any supplemental indenture for any of the purposes of this Section,
the Trustee shall, at the expense of the Company, cause notice of the proposed
execution of such supplemental indenture to be mailed by first class mail to
each registered owner of the Bonds. Such notice shall briefly set forth the
nature of the proposed supplemental indenture and shall state that copies
thereof are on file at the principal office of the Trustee for inspection by
bondholders. The Trustee shall not, however, be subject to any liability to any
bondholder by reason of its failure to mail such notice, and any such failure
shall not affect the validity of such supplemental indenture when consented to
and approved as provided in this Section. If the holders of not less than
two-thirds in aggregate principal amount of the Bonds outstanding at the time of
the execution of any such supplemental indenture have consented thereto, as
herein provided, no holder of any Bond shall have any right to object to any of
the terms and provisions contained therein, or the operation thereof, or in any
manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the Issuer from executing the same or from taking any
action pursuant to the provisions thereof. Upon the execution of any such
supplemental indenture, this Indenture shall be deemed to be modified and
amended in accordance therewith.
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Section 1303. Consent of Company and Bank; Bond Counsel Opinion. Anything
herein to the contrary notwithstanding, a supplemental indenture under this
Article XIII shall not become effective unless and until the Company and the
Bank shall have consented to the execution and delivery of such supplemental
indenture. In this regard, the Trustee shall cause notice of the proposed
execution and delivery of any such supplemental indenture together with a copy
of the proposed supplemental indenture to be mailed by certified or registered
mail to the Company and the Bank at least 15 days prior to the proposed date of
execution and delivery of any such supplemental indenture. The Company and the
Bank shall be deemed to have consented to the execution and delivery of any such
supplemental indenture if the Trustee receives a letter or other instrument
signed by an authorized officer of the Company and the Bank expressing consent.
In addition, the Trustee shall not execute and deliver any supplemental
indenture hereunder unless and until the Trustee has received an opinion of Bond
Counsel stating that the execution and delivery of such supplemental indenture
is authorized under this Indenture and complies with the terms hereof and that
the execution and delivery thereof will not have an adverse effect on the
exclusion of interest on the Bonds from gross income for Federal income tax
purposes.
ARTICLE XIV
AMENDMENT TO LOAN AGREEMENT, NOTE
AND LETTER OF CREDIT
Section 1401. Amendments Not Requiring Consent of Bondholders. The Trustee
may from time to time (with the prior written consent of the Bank), and at any
time, consent to any amendment, change or modification of the Loan Agreement,
Note and Letter of Credit (a) for the purpose of curing any ambiguity or formal
defect or omission, (b) in connection with the Project described in the Loan
Agreement so as to identify the same more precisely or substitute or add
additional property acquired with the proceeds of the Bonds; (c) in connection
with any reinstatement or reduction of the Letter of Credit as permitted by its
original terms; (d) in connection with obtaining a short term or long term
investment rating on the Bonds from a nationally recognized rating agency equal
to or comparable with the short term or long term rating then associated with
the Bank's letters of credit; (e) in connection with the issuance, sale and
delivery of Additional Bonds as provided in and in compliance with Section 213
to provide for payments of additional amounts sufficient to pay the principal
of, premium, if any, and interest on such Additional Bonds and such other
charges necessary in connection with the issuance of such Additional Bonds as
shall not, in the opinion of the Trustee, prejudice in any material respect the
rights of the holders of the Bonds then outstanding; or (f) to make any other
change therein, which in the reasonable judgment of the Trustee is not to the
prejudice of the Trustee or the holders of the Bonds. The Trustee shall not
consent to any other amendment, change or modification of the Loan Agreement,
Note and Letter of Credit without the approval or consent of the holders of not
less than two-thirds in aggregate principal amount of the Bonds at the time
outstanding, evidenced in the manner provided in Section 1501 hereof. No
amendment, change or modification may decrease the obligation of the Company
under the Note to pay amounts sufficient to pay the principal of, premium, if
any, and interest on the Bonds as the same become due or the obligation of the
Bank under the Letter of Credit.
Section 1402. Amendments Requiring Consent of Bondholders. If at any time
the Issuer or the Company shall request the Trustee's consent to a proposed
amendment, change or modification
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requiring bondholder approval under Section 1401 hereof, the Trustee, shall, at
the expense of the requesting party, cause notice of such proposed amendment,
change or modification to be mailed in the same manner as provided by Section
1302 hereof with respect to supplemental indentures. Such notice shall briefly
set forth the nature of such proposed amendment, change or modification and
shall state that copies of the instrument embodying the same are on file in the
principal office of the Trustee for inspection by any interested bondholder. The
Trustee shall not, however, be subject to any liability to any bondholder by
reason of its failure to publish or mail such notice, and any such failure shall
not affect the validity of such amendment, change or modification when consented
to by the Trustee in the manner hereinabove provided. Anything contained in this
Indenture to the contrary notwithstanding, the Issuer and the Trustee may
consent to any amendment, change or modification of the Loan Agreement, the Note
or the Letter of Credit upon receipt of the consent of the holders of all Bonds
then outstanding and the Bank.
ARTICLE XV
MISCELLANEOUS
Section 1501. Consents, etc. of Bondholders. Any request, direction,
objection or other instrument required by this Indenture to be signed and
executed by the bondholders may be in any number of concurrent writings of
similar tenor and may be signed or executed by such bondholders in person or by
agent appointed in writing. Proof of the execution of any such request,
direction, objection or other instrument or of the writing appointing any such
agent and of the ownership of Bonds, if made in the following manner, shall be
sufficient for any of the purposes of this Indenture, and shall be conclusive in
favor of the Trustee with regard to any action taken by it under such request or
other instrument, namely:
(a) The fact and date of the execution by any person of any such
writing may be proved by the certificate of any officer in any jurisdiction who
by law has power to take acknowledgments within such jurisdiction that the
person signing such writing acknowledged before him the execution thereof, or by
an affidavit of any witness to such execution.
(b) The fact of ownership of Bonds and the amount or amounts,
numbers and other identification of such Bonds, and the date of holding the same
shall be proved by the registration books of the Issuer maintained by the
Trustee as Bond Registrar.
Section 1502. Notices. Except as otherwise provided in this Indenture, all
notices, certificates or other communications shall be sufficiently given and
shall be deemed given three Business Days after they have been mailed by
registered or certified mail, postage prepaid, to the Issuer, the Company, the
Trustee, the Remarketing Agent, or any Paying Agent other than the Trustee.
Facsimiles of each notice, certificate or other communication given hereunder to
the Company shall, in addition to mailing, be telecopied to the Company, and
copies of each notice, certificate or other communication given hereunder by or
to the Company shall be mailed by registered or certified mail, postage prepaid,
to the Trustee; provided, however, that the effectiveness of any such notice
shall not be affected by the failure to telecopy any such facsimiles or to send
any such copies. Notices, certificates or other communications shall be sent to
the following addresses:
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Company: Leslie-Locke, Inc.
4501 Circle 75 Parkway
Suite F-6300
Atlanta, Georgia 30339
Attention: President
Telephone: (770) 953-6366 x206
Telecopy: (770) 988-8158
Issuer: The Pender County Industrial Facilities
and Pollution Control Financing Authority
c/o Clerk, Pender County Board
of Commissioners
The York House
Burgaw, North Carolina 28425
Attention: Chairman
Telephone: (910) 259-1200
Telecopy: (910) 259-1402
With copy to: Pender County Attorney
Courthouse
Post Office Box 5
Burgaw, North Carolina 28425
Attention: C. David Morison
Telephone: (910) 259-1200
Telecopy: (910) 259-1402
Trustee and Paying Agent: Norwest Bank Minnesota, National Association
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Telephone: (612) 667-8058
Telecopy: (612) 667-9825
Remarketing Agent: Blount Parrish & Roton, Inc.
10 Court Square
Montgomery, Alabama 36104
Attention: James D. Reynolds, Jr.
Telephone: (205) 264-8410
Telecopy: (205) 264-7608
Bank: Branch Banking and Trust Company
202 North Third Street
Wilmington, North Carolina 28402
Attention: Brett A. Barnes
Telephone: (910) 815-2770
Telecopy: (910) 815-2799
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with a copy to: Smith Helms Mulliss & Moore, L.L.P.
227 N. Tryon Street
Charlotte, North Carolina 28202
Attention: J. Richard Hazlett, Esq.
Telephone: (704) 343-2008
Telecopy: (704) 334-8467
Any of the foregoing may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 1503. Limitation of Rights. With the exception of rights herein
expressly conferred, nothing expressed or mentioned in or to be implied from
this Indenture, or the Bonds issued hereunder, is intended or shall be construed
to give to any person or company other than the parties hereto, and the holders
of the Bonds secured by this Indenture any legal or equitable rights, remedy or
claim under or in respect to this Indenture or any covenants, conditions and
provisions hereof being intended to be and being for the sole exclusive benefit
of the parties hereto and the holders of the Bonds hereby secured as herein
provided.
Section 1504. Severability. If any provisions of this Indenture shall be
held or deemed to be or shall, in fact, be inoperative or unenforceable as
applied in any particular case in any jurisdiction or jurisdictions or in all
jurisdictions or in all cases because it conflicts with any provisions or any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions herein contained invalid, inoperative or
unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or
paragraphs in this Indenture contained shall not affect the remaining portions
of this Indenture or any part thereof.
Section 1505. Applicable Provisions of Law. This Indenture shall be
considered to have been executed in the State of North Carolina and it is the
intention of the parties that the substantive law of the State of North Carolina
shall govern as to all questions of interpretation, validity and effect.
Section 1506. Counterparts. This Indenture 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 1507. Successors and Assigns. All the covenants, stipulations,
provisions, agreements, rights, remedies and claims of the parties hereto in
this Indenture contained shall bind and inure to the benefit of their successors
and assigns.
Section 1508. Captions. The captions or headings in this Indenture are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions or sections of this Indenture.
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Section 1509. Photocopies and Reproductions. If permitted by applicable
law, a photocopy or other reproduction of this Indenture may be filed as a
financing statement pursuant to the Uniform Commercial Code as adopted in the
State of North Carolina, although the signatures of the Issuer and the Trustee
on such reproduction are not original manual signatures.
Section 1510. Bonds Owned by the Issuer or the Company. In determining
whether bondholders of the requisite aggregate principal amount of the Bonds
have concurred in any direction, consent or waiver under this Indenture, Bonds
which are owned by the Issuer or the Company or by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company shall be disregarded and deemed not to be outstanding
for the purpose of any such determination, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, consent or waiver, only Bonds which the Trustee knows are so owned
shall be so disregarded. Bonds so owned which have been pledged in good faith
may be regarded as outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Bonds and that
the pledgee is not the Issuer or the Company or any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.
Section 1511. Limitation of Liability of Directors, Officers of Issuer and
the Trustee. No covenant, agreement or obligation contained herein shall be
deemed to be a covenant, agreement or obligation of any present or future
commissioner, director, officer, employee, attorney or agent of the Issuer or
the Pender County Board of Commissioners in his individual capacity, and neither
the directors of the Issuer nor any officer thereof executing the Bonds shall be
liable personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof. No commissioner, director,
officer, employee, attorney or agent of the Issuer shall incur any personal
liability with respect to any other action taken by him pursuant to this
Indenture or the Act. Notwithstanding anything herein to the contrary, no
provision, covenant or agreement contained in this Indenture or in the Bonds or
any obligations herein or therein imposed upon the Issuer or the breach thereof,
shall constitute or give rise to or impose upon the Issuer or the Pender County
Board of Commissioners a pecuniary liability or a charge upon its general credit
or taxing powers. In making the agreements, provisions and covenants set forth
in this Indenture, the Issuer has not obligated itself except with respect to
its rights and interest in the Loan Agreement and the Note, as hereinabove
provided. The issuance of the Bonds under this Indenture shall not be considered
a misfeasance in office.
Section 1512. Bank as Third Party Beneficiary. The Issuer and the Trustee
acknowledge that this Indenture is also for the benefit of the Bank, so long as
the Letter of Credit is outstanding, by virtue of the Bank's obligations under
the Letter of Credit and the Company's obligations under the Reimbursement
Agreement; provided, however, that the Bank's rights hereunder, including its
right to give its consents hereunder, shall be suspended as long as there is
continuing a wrongful dishonor by the Bank of a draw under the Letter of Credit.
Section 1513. Expiration of Letter of Credit. Upon the expiration or
earlier termination of the Letter of Credit and the full payment and performance
by the Company of its obligations under
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the Reimbursement Agreement, then references in this Indenture to the Bank's
right of consent and to receive notices shall be ineffective except to the
extent that the context requires otherwise.
Section 1514. Trustee Books Open for Inspection. The Issuer and the
Company may, following a written request therefor, inspect the books of the
Trustee relating to the Bonds during the regular business hours of the Trustee.
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IN WITNESS WHEREOF, the Issuer has caused these presents to be signed in
its name and behalf by its Chairman or Vice Chairman, to evidence its acceptance
of the trust hereby created, the Trustee has caused these presents to be signed
in its behalf by its duly authorized officer.
THE PENDER COUNTY INDUSTRIAL FACILITIES AND
POLLUTION CONTROL FINANCING AUTHORITY
By: ________________________________________
(SEAL) Chairman
ATTEST:
By:_____________________________
Secretary
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:_____________________________
Corporate Trust Officer
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EXHIBIT A
Form of Variable Rate Bond
No. VR- $___________
UNITED STATES OF AMERICA
STATE OF NORTH CAROLINA
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING AUTHORITY
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(LESLIE-LOCKE, INC. PROJECT), SERIES 1997
Date of Bond: June 13, 1997 Maturity Date: June 1, 2010
Interest Rate: Variable (subject to conversion to a Fixed Rate as
set forth herein)
CUSIP: ________________
Registered Owner:
Principal Amount:
KNOW ALL MEN BY THESE PRESENTS:
That The Pender County Industrial Facilities and Pollution Control
Financing Authority, a political subdivision of the State of North Carolina (the
"Issuer"), for value received, promises to pay to the registered owner shown
above, or registered assigns, but solely from the source and in the manner
hereinafter set forth, on the maturity date shown above, the principal amount
shown above and in like manner to pay interest on said amount from the date
hereof shown above until payment of such principal amount has been made or duly
provided for, at the rates and on the dates set forth herein, except as the
provisions hereinafter set forth with respect to redemption of this Bond prior
to maturity may become applicable hereto. This Bond shall be purchased on the
demand of the registered owner as hereinafter described. The principal of this
Bond is payable in lawful money of the United States of America upon the
presentation and surrender hereof at the principal corporate trust office of
Norwest Bank Minnesota, National Association, or its successor or successors, as
Trustee (the "Trustee"), and interest on this Bond is payable on each Interest
Payment Date in like money to the registered owner hereof by check or draft
drawn upon the Trustee and mailed to the person in whose name this Bond is
registered at the close of business one Business Day (as hereinafter defined)
prior to such Interest Payment Date (the "Record Date"), provided that, owners
of Bonds in the aggregate principal amount of not less than $500,000 may, by
written instruction filed with the Trustee on or before the Record Date next
preceding such Interest Payment Date, direct that
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interest payments be transmitted by wire transfer to an account in the
continental United States (which wire transfer shall be at the expense of the
holder).
This Bond, designated "The Pender County Industrial Facilities and
Pollution Control Financing Authority Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997" is one of a series of Bonds in the
aggregate principal amount of Seven Million Dollars ($7,000,000) (the "Bonds"),
issued for the purpose of financing the cost of the construction of an expansion
to an existing facility and to acquire and install equipment therein for the
manufacture of building products (the "Project") for Leslie-Locke, Inc., a
Delaware corporation (the "Company"), and paying expenses of issuing such Bonds.
The Bonds are all issued under and are all equally and ratably secured and
entitled to the protection given by an Indenture of Trust dated as of June 1,
1997 (the "Indenture"), duly executed and delivered by the Issuer to the
Trustee. Reference is hereby made to the Indenture and all indentures
supplemental thereto for the provisions, among others, with respect to the
nature and extent of the security, the rights, duties and obligations of the
Issuer, the Trustee and the registered owners of the Bonds, and the terms upon
which the Bonds are issued and secured. The terms and conditions of the
financing of the Project, the use of the proceeds of the Bonds by the Company
for such purpose, and the payment of certain amounts thereunder, are contained
in a Loan Agreement dated as of June 1, 1997 (the "Loan Agreement"), by and
between the Issuer and the Company. Pursuant to the Loan Agreement, the Company
has caused Branch Banking and Trust Company (the "Bank") to issue an irrevocable
Letter of Credit (the "Letter of Credit"), issued in favor of the Trustee dated
the date of the issuance of the Bonds, in an amount sufficient to pay the
outstanding principal amount of, premium, if any, and unpaid interest on the
Bonds, but not to exceed $7,466,666, which Letter of Credit expires on June 15,
2000. Substitute letters of credit may be delivered in accordance with Section
409 of the Indenture. Reference is hereby made to the Indenture, the Loan
Agreement, the Note and the Letter of Credit and to all amendments and
supplements thereto for a description of the provisions, among others, with
respect to the nature and extent of the security, the default provisions, the
rights, duties and obligations of the Issuer and the Trustee or the rights of
the holders of the Bonds and the terms upon which the Bonds are issued and
secured. All capitalized terms not defined herein shall have the meanings given
them in the Indenture.
The Bonds are issued pursuant to and in full compliance with the laws of
the State of North Carolina, particularly the Industrial Facilities and
Pollution Control Financing Act, Chapter 159C of the North Carolina General
Statutes, as amended (hereinafter called the "Act"), and pursuant to a
resolution of the Issuer, which authorized the execution and delivery of the
Indenture. This Bond is a limited obligation of the Issuer payable solely from
the Revenues, as defined in the Indenture, which Revenues have been pledged and
assigned to the Trustee for the benefit of the Bondholders to secure payment of
this Bond, and from the Letter of Credit. THIS BOND AND THE ISSUE OF WHICH IT IS
A PART AND THE PREMIUM, IF ANY, AND INTEREST THEREON AND PURCHASE PRICE THEREFOR
ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE REVENUES AND
RECEIPTS DERIVED FROM THE LOAN AGREEMENT, INCLUDING PAYMENTS RECEIVED UNDER THE
NOTE AND THE LETTER OF CREDIT, WHICH REVENUES AND RECEIPTS HAVE BEEN PLEDGED AND
ASSIGNED TO THE TRUSTEE TO SECURE PAYMENT OF THE BONDS. THE BONDS, THE PREMIUM,
IF ANY, AND THE INTEREST THEREON, AND PURCHASE PRICE THEREFOR, SHALL NOT BE
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DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF
NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE ISSUER.
NEITHER THE STATE OF NORTH CAROLINA NOR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE ISSUER, SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST ON OR PURCHASE PRICE OF THE BONDS OR OTHER COSTS INCIDENT
THERETO EXCEPT FROM THE REVENUES AND RECEIPTS PLEDGED THEREFOR, AND NEITHER THE
FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA OR ANY
POLITICAL SUBDIVISION THEREOF, INCLUDING THE ISSUER, IS PLEDGED TO THE PAYMENT
OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON OR PURCHASE PRICE OF THE
BONDS OR OTHER COSTS INCIDENT THERETO.
The Bonds are not general obligations of the Issuer but are special obligations
payable solely from revenues derived from the Loan Agreement.
The Loan Agreement provides for payments by the Company in amounts
sufficient to provide for the payment of the principal of and interest on the
Bonds as due and payable. Provision has been made in the Loan Agreement for such
payments to be paid directly to the Trustee and deposited in a special account
of the Issuer and held by the Trustee designated "Industrial Development Revenue
Bond Fund (Leslie-Locke, Inc. Project)," and such payments have been duly
assigned to the Trustee for that purpose.
The Company shall have the option to convert the rate of interest payable
on the Bonds from the variable rate set forth herein to a fixed rate determined
as set forth in the Indenture on any Interest Payment Date (the date of such
conversion being herein referred to as the "Conversion Date"), by giving written
notice to the Issuer, the Trustee and the Remarketing Agent and upon the terms
and conditions set forth in the Indenture. The Trustee is required to give
written notice of the exercise of such option by mail to the registered owner of
this Bond not less than 30 days prior to the Conversion Date. Subject to the
obligation of the Remarketing Agent (hereinafter identified) to remarket the
Bonds, as set forth in the Indenture, all Bonds shall be purchased by the
Trustee on behalf of the Company on the Conversion Date at a purchase price
equal to the principal amount thereof plus accrued interest, if any, to the date
of purchase. If the owner of this Bond does not tender the same for purchase
prior to the Conversion Date in accordance with the Indenture and the provisions
hereinafter set forth, this Bond shall be deemed to have been so tendered for
purchase on the Conversion Date and no further interest hereon at the variable
rate set forth herein shall thereafter accrue. After the Conversion Date, the
Bonds shall no longer be subject to certain provisions of the Indenture,
including the provisions relating to the right of the owner to demand purchase
of the Bonds. Reference is hereby made to the Indenture and all indentures
supplemental thereto for all of the provisions with respect to the conversion of
the rate payable on the Bonds to the Fixed Rate.
On or prior to the Conversion Date, any Bond shall be purchased, on the
demand of the owner thereof, on any Business Day (as hereinafter defined) at a
purchase price equal to the principal amount thereof plus accrued interest, if
any, to the date of purchase, upon:
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(a) delivery to the Trustee at its principal corporate trust office
of telephonic notice followed within two days by written notice (which may be
delivered by telecopy) which (i) states the name of the registered holder and
the principal amount of such Bond to be tendered and (ii) states the date on
which such Bond shall be so purchased, which date shall be a Business Day not
prior to the seventh day next succeeding the date of the delivery of such notice
to the Trustee; and
(b) delivery of such Bond (with an appropriate transfer of
registration form executed in blank acceptable to the Trustee) and, in the case
of a Bond to be purchased prior to the Interest Payment Date for any Rate Period
and after the Record Date in respect thereof, a due-bill check, in form
satisfactory to the Trustee, for interest due on such Interest Payment Date, at
the principal corporate trust office of the Trustee at or prior to 10:00 a.m.,
Central time, on the date specified in the aforesaid notice; provided, however,
that such Bond shall be so purchased only if the Bond so delivered to the
Trustee shall conform in all respects to the description thereof in the
aforesaid notice.
The term "Business Day" shall mean a day of the year, other than a
Saturday or a Sunday, on which banks located in the cities in which the
principal corporate trust office of the Trustee, the principal office of any
Paying Agent and the principal office of the Bank are located are not required
or authorized to remain closed and on which the New York Stock Exchange is not
closed.
Interest on the Bonds shall be paid on September 1, 1997, and on the first
day (or, if such day shall not be a Business Day, the next succeeding Business
Day with the same force and effect as if paid on such day) of each March, June,
September and December thereafter prior to and including the Conversion Date (an
"Interest Payment Date"), and shall be computed on the basis of a year of 365 or
366 days, as appropriate, for the actual number of days elapsed. Interest on the
Bonds shall first accrue from and including the date of the first authentication
and delivery of Bonds to and including September 1, 1997, and commencing
September 1, 1997, and until the Conversion Date, interest on the Bonds shall
accrue from and including each Interest Payment Date to and including the day
next preceding the following Interest Payment Date.
For the period from and including the day of the first authentication and
delivery of Bonds to and including the Wednesday of the next succeeding calendar
week, the Bonds shall bear interest at a rate equal to the rate set on the date
prior to the issuance of the Bonds in the manner set forth in subparagraphs (a),
(b) and (c) of this paragraph. Thereafter and prior to the Conversion Date, for
each period from and including the first Thursday following a Rate Computation
Date to and including the next succeeding Wednesday (each such period, including
the first period described in the immediately preceding sentence, being
hereinafter called a "Rate Period"), the interest rate on the Bonds shall be
determined as follows:
(a) On the Rate Computation Date of each calendar week the
Remarketing Agent shall determine that interest rate which, if borne by the
Bonds, would, in its judgment having due regard to prevailing financial market
conditions and the yields at which comparable securities are then being sold, be
the interest rate necessary, but which would not exceed the interest rate
necessary, to enable the Remarketing Agent to sell the Bonds at the principal
amount thereof, and the interest rate so determined shall be the interest rate
on the Bonds for the next succeeding Rate Period; provided,
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however, such rate may be adjusted by the Remarketing Agent on any date during
such Rate Period if such an adjustment is needed in order to enable the
Remarketing Agent to remarket a Bond which has been tendered for purchase in
accordance with the Indenture and the provisions hereinabove set forth. Such
determination or adjustment shall be based on the knowledge of the Remarketing
Agent of actual sales or pricing during the prior 105 days of securities which
in the judgment of the Remarketing Agent are comparable to the Bonds and
prevailing market conditions, or the marketing efforts with, or solicitation of
proposals from, not less than three institutional or money fund investors or
other entities or individuals who customarily purchase industrial development
bonds or other tax-exempt securities in denominations of $100,000 or more. Any
such adjustment of the rate occurring during a Rate Period shall apply to all of
the Bonds outstanding at the time that such adjustment is made, and shall be
effective beginning on the date immediately following the date on which such
rate is announced by the Remarketing Agent and thereafter to the beginning of
the next Rate Period. On the same Business Day the Remarketing agent shall give
telegraphic or telephonic notice, promptly confirmed in writing, to the Trustee
and the Company specifying the interest rate so determined.
(b) In the event that no person is serving as the Remarketing Agent
on the applicable Rate Computation Date, or if at any time the Remarketing Agent
fails to establish the Variable Rate in accordance with the procedure described
in the preceding paragraph, then the Variable Rate for the Rate Period affected
shall be the same as for the preceding Rate Period. If no Variable Rate has been
established for the two immediately preceding Rate Periods, then the Variable
Rate for such Rate Period shall be determined by the Trustee and shall be a
percentage per annum (not to exceed the Maximum Rate) equal to eighty percent
(80%) of the bond equivalent yield (calculated in accordance with standard
practice in the banking industry) applicable to 91-day United States Treasury
bills determined on the basis of the average per annum discount rate at which
such 91-day Treasury bills shall have been sold at the most recent Treasury
auction of such 91-day Treasury bills as quoted or published by the Federal
Reserve Board of any department or agency of the United States of America;
provided further, that in the event that there shall not have been a Treasury
auction of such 91-day Treasury bills on any date during the ten (10) Business
Days immediately preceding such date of determination of the Variable Rate, or
in the event that such discount rates for any Treasury auction of such 91-day
Treasury bills during such ten (10) Business Day period shall not be quoted or
published by the Federal Reserve Board or any department or agency of the United
States of America, the Variable Rate for the immediately preceding Rate Period
shall remain in effect for such Rate Period.
(c) Notwithstanding the foregoing the interest rate on the Bonds
shall never exceed a rate which would cause the net effective interest rate for
the Bonds as of any date, computed in accordance with applicable usury law, to
exceed 12%. All calculations of the Variable Rate shall be rounded to the
nearest one-hundredth of one percent (.01%).
The determination of the Variable Rate by the Remarketing Agent of the
Trustee shall be conclusive and binding upon the owners of the Bonds.
The term "Rate Computation Date" shall mean (i) the Business Day next
preceding the date of the first authentication and delivery of the Bonds, and
(ii) the Wednesday of each calendar week
A-5
<PAGE>
thereafter, provided that if any Wednesday is not a Business Day then the Rate
Computation Date shall be the first Business Day preceding such Wednesday.
The Issuer has appointed Blount Parrish & Roton, Inc., Montgomery,
Alabama, as Remarketing Agent under the Indenture. The Issuer may from time to
time, at the direction of the Company, remove or replace the Remarketing Agent.
The owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any event of default under the Indenture, or to
institute, appear in and defend any suit or other proceeding with respect
thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of this Bond may be declared and may become due and payable before the
stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture
supplemental thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
Prior to the Conversion Date, the Bonds are subject to redemption prior to
maturity as follows:
(a) The Bonds shall be redeemed in the event the Company shall elect
to exercise its option set forth in Section 9.2 of the Loan Agreement to prepay
installments payable under the Loan Agreement upon the occurrence of any of the
events specified in such section, in whole but not in part, at any time, at a
redemption price equal to the principal amount being redeemed plus accrued
interest to the redemption date. Such redemption shall be made only with the
prior written consent of the Bank.
(b) The Bonds shall be redeemed in the event the Company shall
become obligated to prepay installments payable under the Loan Agreement upon
the occurrence of a "Determination of Taxability," as such term is defined in
Section 9.3 of the Loan Agreement, in whole at any time, at a redemption price
equal to 103% of the principal amount thereof plus accrued interest to the
redemption date. Fewer than all of the Bonds may be redeemed if, in the opinion
of Bond Counsel, redemption of fewer than all the Bonds would result in the
interest payable on the Bonds remaining Outstanding being excluded from gross
income for Federal income tax purposes. Notice of a redemption pursuant to this
Section shall be sent to the Holders within thirty days after the occurrence of
a Determination of Taxability.
(c) The Bonds may be redeemed at the option of the Issuer, to be
exercised as directed by the Company, with the prior written consent of the
Bank, in whole at any time or in part (in denominations of $100,000 or any
integral multiple thereof) on any Interest Payment Date (and if in part, by lot
or in such other manner as may be determined by the Trustee to be fair and
equitable), at a redemption price equal to the principal amount being redeemed
plus accrued interest to the redemption date in the event the Company exercises
its right to prepay installments on the Note in order to redeem Bonds as set
forth in Section 9.1 of the Loan Agreement.
A-6
<PAGE>
(d) The Bonds are subject to mandatory sinking fund redemption prior
to their scheduled maturity on June 1, 1999, and on each succeeding June 1 to
and including June 1, 2009, in the principal amount of $600,000. The remaining
$400,000 in principal amount of Bonds shall be redeemed on June 1, 2010.
(e) The Bonds shall be redeemed, in whole or in part, and without
premium, at the direction of the Bank following the occurrence of an "Event of
Default" under the Letter of Credit and Reimbursement Agreement under which the
Letter of Credit was issued at a redemption price equal to the principal amount
thereof to be redeemed plus accrued interest to, but not including, the
redemption date.
(f) Bonds purchased on the Mandatory Purchase Date described in
subsection (c) below of the provisions relating to mandatory purchase of Bonds
shall not be remarketed but rather shall be deemed to have been redeemed and
shall be canceled.
(g) The Bonds are subject to mandatory redemption after the
Completion Date with respect to the Project, to the extent of any excess
proceeds remaining in the Construction Fund and transferred to the Bond Fund
under Section 605 of the Indenture.
(h) The Bonds shall be redeemed in whole prior to their scheduled
maturity at a redemption price equal to the principal amount thereof, without
premium, plus accrued interest to the redemption date on the first Interest
Payment Date which is not less than 90 days after the Issuer has notified the
Trustee and the Bank in writing that the Company has, in the opinion of the
Issuer, ceased to operate the Project as an "industrial project for industry"
within the meaning of the Act. A cessation of operation shall not be deemed to
have occurred until 90 days shall have elapsed after written notice has been
given to the Company and the Bank by the Issuer that operations at the Project
shall have ceased and the Company shall not have demonstrated to the
satisfaction of the Issuer that the Company has resumed the operations of the
Project as an "industrial project for industry" within the meaning of the Act or
that the Company is, in good faith, seeking to arrange resumption of an
economically reasonable operation of the Project by the Company or, if permitted
under the Loan Agreement, by an assignee or purchaser of the Project as such an
"industrial project for industry"; provided that a temporary shutdown due to a
strike or other labor dispute, lack of fuel or similar occurrence shall not be
deemed a cessation of operation.
In the event any of the Bonds or portions thereof (which shall be $100,000
or any integral multiple of $5,000 in excess thereof) are called for redemption,
notice thereof shall be given by the Trustee by first class mail to the
registered owner of each such Bond addressed to such registered owner at his
registered address and placed in the mails not less than twenty (20) days prior
to the date fixed for redemption; provided, however, that failure to give such
notice by mailing, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any Bond with respect to which no such failure
or defect has occurred. Each notice shall identify the Bonds or portions thereof
being called, and the date on which they shall be presented for payment. After
the date specified in such call, the Bond or Bonds so called will cease to bear
interest provided funds sufficient for their redemption have been deposited with
the Trustee, and, except for the purpose of payment, shall no longer be
protected by the Indenture and shall not be deemed to be outstanding under the
A-7
<PAGE>
provisions of the Indenture. If Bonds are redeemed in part, a portion of a Bond
may be redeemed only if the holder of such Bond will hold, following such
partial redemption, Bonds in a denomination of at least $100,000; provided that,
if a redemption cannot be effected to result in denominations of $100,000 for
all holders, the Trustee shall select Bonds for redemption so that one holder
owns Bonds with a principal amount that is less $100,000.
The Bonds are subject to mandatory purchase on the following dates (each
of which is designated a Mandatory Purchase Date):
(a) on the Conversion Date, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to but not
including the date of purchase, and shall be paid from the proceeds of a draw
under the Letter of Credit in accordance with Section 509 hereof;
(b) on any Credit Modification Date, at a purchase price equal to 100% of
the principal amount thereof, plus interest accrued to the Mandatory Purchase
Date, and shall be paid from the proceeds of a draw under the Letter of Credit
in accordance with Section 509 hereof; and
(c) on the Business Day that is fifteen days prior to the expiration or
termination date of the Letter of Credit then in effect (or if such date is not
a Business Day, on the next preceding Business Day) in the event the Company has
not provided notice that a Substitute Letter of Credit will be provided in
accordance with Section 409.
A Credit Modification Date shall mean a Substitution Date if either of the
following occurs:
(i) if the Bonds are then rated by a Rating Agency, the Company
provides notice that a Substitute Letter of Credit will be provided in
accordance with Section 409 of the Indenture but fails to deliver to the
Trustee the letter from any Rating Agency then rating the Bonds as
required by Section 409(c), or (2) the Company delivers such notice and
the letter required by Section 409(c) but prior to the Substitution Date
such Rating Agency revokes such letter, or (3) the Company delivers such
notice and letter but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date; or
(ii) the Bonds are not then rated and (1) the Company provides
notice that a Substitute Letter of Credit will be provided in accordance
with Section 409 of the Indenture but fails to deliver to the Trustee the
evidence required by Section 409(d), or (2) the Company delivers such
notice and evidence but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date.
Notice of mandatory purchase shall be given as set forth above in
connection with a redemption of Bonds at least 30 days prior to the Mandatory
Purchase Date; provided that in the event of a Credit Modification Date
resulting from a failure by the Company to deliver a Substitute Letter of Credit
on the Substitution Date, such mandatory purchase shall occur as soon as
practicable after such failure, but in all events no later than two Business
Days preceding the termination or expiration of the Letter of Credit then in
effect, and notice thereof shall be given as soon as practicable to the holders.
A-8
<PAGE>
In the event the Trustee does not receive the Substitute Letter of Credit
required for a mandatory purchase under section (c) above by 5:00 p.m., Central
Time, on the Business Day preceding the Mandatory Purchase Date designated
thereunder, the Bonds shall be purchased on the Mandatory Purchase Date, and the
Trustee shall draw on the Letter of Credit to pay the Purchase Price of such
Bonds.
This Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon
surrender hereof, together with a written instrument of transfer duly executed
by the registered owner or his duly authorized attorney.
Prior to the Conversion Date, the Bonds are issuable as registered Bonds
without coupons in denominations of $100,000 or any integral multiple of $5,000
in excess thereof, except as otherwise provided in the Indenture. Subject to the
limitations and upon payment of the charges provided in the Indenture, Bonds may
be exchanged for a like aggregate principal amount of Bonds of other authorized
denominations.
This Bond is issued with the intent that the laws of the State of North
Carolina will govern its construction.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
issuance of the Bonds do exist, have happened and have been performed in due
time, form and manner as required by law; that the indebtedness represented by
the Bonds, together with all obligations of the Issuer, does not exceed any
constitutional or statutory limitation.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been signed by the Trustee.
A-9
<PAGE>
IN WITNESS WHEREOF, The Pender County Industrial Facilities and Pollution
Control Financing Authority has caused this Bond to be signed by the manual or
facsimile signature of its Chairman or Vice Chairman, its seal to be affixed
hereto or a facsimile of its seal to be printed hereon or affixed hereto and
attested by its Secretary or Assistant Secretary, and this Bond to be dated June
__, 1997.
THE PENDER COUNTY INDUSTRIAL FACILITIES AND
POLLUTION CONTROL FINANCING AUTHORITY
By:____________________________________
(SEAL) Chairman
ATTEST:
By:_________________________________
Secretary
A-10
<PAGE>
(Form of Trustee's Certificate of Authentication)
Date of Authentication: __________________________
This Bond is one of the Bonds described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:____________________________________
Authorized Officer
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________________ ("Transferor"),
hereby sells, assigns and transfers unto
________________________________________, the within Bond and all rights
thereunder, and hereby irrevocably constitutes and appoints
_____________________________ ("Transferee") as attorney to transfer the within
Bond on the books kept for registration thereof with full power of substitution
in the premises.
DATE: ___________, _____
_____________________________
Transferor
GUARANTEED BY:
_________________________________________________
NOTICE: Signature(s) must be guaranteed
by a member firm of the New York Stock
Exchange or a commercial bank or a trust
company.
A-11
<PAGE>
EXHIBIT B
Form of Fixed Rate Bond
No. _____ $______________
UNITED STATES OF AMERICA
STATE OF NORTH CAROLINA
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING AUTHORITY
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(LESLIE-LOCKE, INC. PROJECT), SERIES 1997
Date of Bond: Maturity Date: June 1, 2010
Interest Rate: ____% per annum
CUSIP: ____________
Registered Owner:
Principal Amount:
KNOWN ALL MEN BY THESE PRESENTS:
That The Pender County Industrial Facilities and Pollution Control
Financing Authority, a political subdivision of the State of North Carolina (the
"Issuer"), for value received, promises to pay to the registered owner shown
above, or registered assigns, but solely from the source and in the manner
hereinafter set forth, on the maturity date shown above, the principal amount
shown above and in like manner to pay interest on said amount from the date
hereof shown above until payment of such principal amount has been made or duly
provided for, at the rate per annum shown above, semiannually on June 1 and
December 1 of each year commencing on the June 1 or December 1 next succeeding
the date of this Bond (an "Interest Payment Date"), except as the provisions
hereinafter set forth with respect to the redemption of which Bond prior to
maturity may become applicable hereto. The principal of and premium, if any, on
this Bond are payable in lawful money of the United States of America upon the
presentation and surrender hereof at the principal corporate trust office of
Norwest Bank Minnesota, National Association, or its successor or successors, as
Trustee (the "Trustee"), and interest on this Bond is payable in like money to
the registered owner hereof by check or draft drawn upon the Trustee and mailed
to the person in whose name this Bond is registered at the close of business on
the fifteenth day of the calendar month preceding each Interest Payment Date
(the "Record Date"), irrespective of any transfer or exchange of this Bond
subsequent to such Record Date and prior to such Interest Payment Date.
B-1
<PAGE>
This Bond, designated "The Pender County Industrial Facilities and
Pollution Control Financing Authority Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997," is one of a series of Bonds in the
aggregate principal amount of Seven Million Dollars ($7,000,000) (the "Bonds"),
issued for the purpose of financing the cost of construction of an expansion to
an existing facility and of acquisition and installation of equipment therein
for the manufacture of building products (the "Project") for Leslie-Locke, Inc.,
a North Carolina corporation (the "Company"), and paying expenses of issuing
such bonds. The Bonds are all issued under and are all equally and ratably
secured and entitled to the protection given by an Indenture of Trust dated as
of June 1, 1997 (the "Indenture"), duly executed and delivered by the Issuer to
the Trustee. Reference is hereby made to the Indenture and all indentures
supplemental thereto for the provisions, among others, with respect to the
nature and extent of the security, the rights, duties and obligations of the
Issuer, the Trustee and the registered owners of the Bonds, and the terms upon
which the Bonds are issued and secured. The terms and conditions of the
financing of the Project, the use of the proceeds of the Bonds by the Company
for such purpose, and the payment of certain amounts thereunder, are contained
in a Loan Agreement dated as of June 1, 1997 (the "Loan Agreement"), by and
between the Issuer and the Company. Pursuant to the Loan Agreement, the Company
has caused Branch Banking and Trust Company (the "Bank") to issue an irrevocable
Letter of Credit (the "Letter of Credit"), issued in favor of the Trustee dated
_______________, _____, in an amount sufficient to pay the outstanding principal
amount of, premium, if any, and unpaid interest on the Bonds, but not to exceed
$_________________, which Letter of Credit expires on _______________, _____.
Substitute letters of credit may be delivered in accordance with Section 409 of
the Indenture. Reference is hereby made to the Indenture, the Loan Agreement,
the Note and the Letter of Credit and to all amendments and supplements thereto
for a description of the provisions, among others, with respect to the nature
and extent of the security, the default provisions, the rights, duties and
obligations of the Issuer and the Trustee or the rights of the holders of the
Bonds and the terms upon which the Bonds are issued and secured. All capitalized
terms not defined herein shall have the meanings given them in the Indenture.
The Bonds are issued pursuant to and in full compliance with the laws of
the State of North Carolina, particularly the Industrial Facilities and
Pollution Control Financing Act, Chapter 159C of the North Carolina General
Statutes, as amended (the "Act"), and pursuant to a resolution of the Issuer,
which authorized the execution and delivery of the Indenture. This Bond is a
limited obligation of the Issuer payable solely from the Revenues, as defined in
the Indenture, which Revenues have been pledged and assigned to the Trustee for
the benefit of the Bondholders to secure payment of this Bond. THIS BOND AND THE
ISSUE OF WHICH IT IS A PART AND THE PREMIUM, IF ANY, AND INTEREST THEREON AND
PURCHASE PRICE THEREFOR ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY
FROM THE REVENUES AND RECEIPTS DERIVED FROM THE LOAN AGREEMENT, INCLUDING
PAYMENTS RECEIVED UNDER THE NOTE AND THE LETTER OF CREDIT, WHICH REVENUES AND
RECEIPTS HAVE BEEN PLEDGED AND ASSIGNED TO THE TRUSTEE TO SECURE PAYMENT OF THE
BONDS. THE BONDS, THE PREMIUM, IF ANY, AND THE INTEREST THEREON SHALL NOT BE
DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF
NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE ISSUER.
NEITHER THE STATE OF NORTH CAROLINA NOR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE ISSUER,
B-2
<PAGE>
SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE
BONDS OR OTHER COSTS INCIDENT THERETO EXCEPT FROM THE REVENUES AND RECEIPTS
PLEDGED THEREFOR, AND NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE
STATE OF NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE
ISSUER, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR
INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO.
The Bonds are not general obligations of the Issuer but are special obligations
payable solely from revenues derived from the Loan Agreement.
The Loan Agreement provides for payments by the Company in amounts
sufficient to provide for the payment of the principal of and interest on the
Bonds as due and payable. Provision has been made in the Loan Agreement for such
payments to be paid directly to the Trustee and deposited in a special account
of the Issuer designated "Industrial Development Revenue Bond Fund
(Leslie-Locke, Inc. Project)," and such payments have been duly assigned to the
Trustee for that purpose.
The owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any event of default under the Indenture, or to
institute, appear in and defend any suit or other proceeding with respect
thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of this Bond may be declared and may become due and payable before the
stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture
supplemental thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
The Bonds are subject to redemption prior to maturity as follows:
(a) The Bonds shall be redeemed in the event the Company shall elect
to exercise its option set forth in Section 9.2 of the Loan Agreement to prepay
installments payable under the Loan Agreement upon the occurrence of any of the
events set forth in such section, in whole but not in part, at any time, at a
redemption price equal to the principal amount being redeemed plus accrued
interest to the redemption date. Such redemption shall be made only with the
prior written consent of the Bank.
(b) The Bonds shall be redeemed in the event the Company shall
become obligated to prepay installments payable under the Loan Agreement upon
the occurrence of a "Determination of Taxability," as such term is defined in
Section 9.3 of the Loan Agreement, in whole but not in part, at any time, at a
redemption price equal to 103% of the principal amount thereof plus accrued
interest to the redemption date. Fewer than all of the Bonds may be redeemed if
redemption of fewer than all the Bonds would result in the interest payable on
the Bonds remaining outstanding being excluded from gross income for Federal
income tax purposes. Such redemption shall occur within thirty days after the
occurrence of a determination of taxability.
B-3
<PAGE>
(c) The Bonds shall be subject to redemption, at the direction of
the Company, with the prior written consent of the Bank, in whole or in part (in
denominations of $100,000 or any integral multiple thereof) on any Interest
Payment Date occurring after the applicable period of Call Protection set forth
below at a price equal to the principal amount thereof plus a redemption premium
(expressed as a percentage of principal amount) plus accrued interest thereon to
the redemption date as follows:
<TABLE>
<CAPTION>
Redemption Prices as a
Percentage of Principal Call Protection (Length of
Length of Period from the Amount (measured from and time (measured from the
Interest Payment Date including the Interest Interest Payment Date
immediately succeeding the Payment Date immediately immediately succeeding
Conversion Date to June succeeding the Conversion the Conversion Date) before
1, 2010 Date) Bonds may be called)
- ----------------------- ------------------------- ---------------------------
<S> <C> <C>
Greater than 10 years After 5 years (less one day) 5 years (less one day)
at 102%, declining 1/2% per 6
months
Less than or equal to 10 and After 3 years (less one day) 3 years (less one day)
greater than 7 years at 101-1/2%, declining 1/2%
per 6 months
Less than or equal to 7 and After 2 years (less one day) at 2 years (less one day)
greater than 4 years 101%, declining 1/2% per
6 months
Less than or equal to 4 and After 2 years (less one day) at 2 years (less one day)
greater than 3 years 100-1/2%, declining 1/2% per
6 months
Less than or equal to 3 and After 1 year (less one day) at 1 year (less one day)
greater than 2 years 100-1/2%, declining 1/2% per
6 months
Less than or equal to 2 and After 1 year (less one day) at 1 year (less one day)
greater than 1 year 100%
Less than or equal to 1 year On or after the first Interest The portion of such period
Payment Date during such prior to the first Interest
period at 100% Payment Date therein
</TABLE>
B-4
<PAGE>
If Bonds are redeemed in part, a portion of a Bond may be redeemed only if the
holder of such Bond will hold, following such partial redemption, Bonds in a
denomination of at least $100,000.
(d) The Bonds are subject to mandatory sinking fund redemption prior
to their scheduled maturity on June 1, 1999, and on each succeeding June 1 to
and including June 1, 2009, in the principal amount of $600,000. The remaining
$400,000 in principal amount of Bonds shall be redeemed on June 1, 2010.
(e) The Bonds shall be redeemed, in whole or in part, and without
premium, at the direction of the Bank following the occurrence of an "Event of
Default" under the Letter of Credit and Reimbursement Agreement under which the
Letter of Credit was issued at a redemption price equal to the principal amount
thereof to be redeemed plus accrued interest to, but not including, the
redemption date.
(f) Bonds purchased on the Mandatory Purchase Date described the
provisions hereof relating to mandatory purchase of Bonds shall not be
remarketed but rather shall be deemed to have been redeemed and shall be
canceled.
(g) The Bonds are subject to mandatory redemption after the
Completion Date with respect to the Project, to the extent of any excess
proceeds remaining in the Construction Fund and transferred to the Bond Fund
under Section 605 of the Indenture. If Bonds are redeemed in part, a portion of
a Bond may be redeemed only if the holder of such Bond will hold, following such
partial redemption, Bonds in a denomination of at least $100,000; provided that,
if a redemption cannot be effected to result in denominations of $100,000 for
all holders, the Trustee shall select Bonds for redemption so that one holder
owns Bonds with a principal amount that is less $100,000.
In the event the Bonds are called for redemption, notice thereof shall be
given by the Trustee by first-class mail to the registered owner of each such
Bond addressed to such registered owner at his registered address and placed in
the mails not less than 30 days prior to the date fixed for redemption;
provided, however, that failure to give such notice by mailing, or any defect
therein, shall not affect the validity of the proceedings for the redemption of
any Bond with respect to which no such failure or defect has occurred. Each
notice shall identify the Bonds being called, and the date on which they shall
be presented for payment. After the date specified in such call, the Bond or
Bonds so called will cease to bear interest provided funds sufficient for their
redemption have been deposited with the Trustee, and, except for the purpose of
payment, shall no longer be protected by the Indenture and shall not be deemed
to be outstanding under the provisions of the Indenture.
B-5
<PAGE>
The Bonds are subject to mandatory purchase on the following dates (each
of which is designated a Mandatory Purchase Date):
(a) on any Credit Modification Date, at a purchase price equal to 100% of
the principal amount thereof, plus interest accrued to the Mandatory Purchase
Date, and shall be paid from the proceeds of a draw under the Letter of Credit
in accordance with Section 509 of the Indenture; and
(b) on the Business Day that is fifteen days prior to the expiration or
termination date of the Letter of Credit then in effect (or if such date is not
a Business Day, on the next preceding Business Day) in the event the Company has
not provided notice that a Substitute Letter of Credit will be provided in
accordance with Section 409.
A Credit Modification Date shall mean a Substitution Date if either of the
following occurs:
(i) if the Bonds are then rated by a Rating Agency, the Company
provides notice that a Substitute Letter of Credit will be provided in
accordance with Section 409 of the Indenture but fails to deliver to the
Trustee the letter from any Rating Agency then rating the Bonds as
required by Section 409(c), or (2) the Company delivers such notice and
the letter required by Section 4009(c) but prior to the Substitution Date
the Rating Agency revokes such letter, or (3) the Company delivers such
notice and letter but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date; or
(ii) the Bonds are not then rated and (1) the Company provides
notice that a Substitute Letter of Credit will be provided in accordance
with Section 409 of the Indenture but fails to deliver to the Trustee the
evidence required by Section 409(d), or (2) the Company delivers such
notice and evidence but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date.
Notice of mandatory purchase shall be given as set forth above in
connection with a redemption of Bonds at least thirty (30) days prior to the
Mandatory Purchase Date; provided that in the event of a Credit Modification
Date resulting from a failure by the Company to deliver a Substitute Letter of
Credit on the Substitution Date, such mandatory purchase shall occur as soon as
practicable after such failure, but in all events no later than two Business
Days preceding the termination or expiration of the Letter of Credit then in
effect, and notice thereof shall be given as soon as practicable to the holders.
In the event that the Trustee does not receive the opinion of Bond Counsel
and the Substitute Letter of Credit required for a mandatory purchase on a
Conversion Date under the Indenture by 5:00 p.m. Central time on the Business
Day preceding the Conversion Date, the interest rate on the Bonds shall not be
converted, the Bonds shall be purchased on such date and shall thereafter bear
interest at the Variable Rate.
This Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon
surrender hereof, together with a written instrument of transfer duly executed
by the registered owner or his duly authorized attorney.
B-6
<PAGE>
The Bonds are issuable as registered Bonds without coupons in
denominations of $100,000 and any integral multiple of $5,000 in excess thereof;
provided that, if the Bonds are rated A or better by a nationally recognized
rating agency, the Bonds may, at the direction of the Company, be issued in the
denomination of $5,000, or any integral multiple of $5,000 in excess thereof.
Subject to the limitations and upon payment of the charges provided in the
Indenture, Bonds may be exchanged for a like aggregate principal amount of Bonds
of other authorized denominations.
This Bond is issued with the intent that the laws of the State of North
Carolina will govern its construction.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
issuance of the Bonds do exist, have happened and have been performed in due
time, form and manner as required by law; that the indebtedness represented by
the Bonds, together with all obligations of the Issuer, does not exceed any
constitutional or statutory limitation.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been signed by the Trustee.
IN WITNESS WHEREOF, The Pender County Industrial Facilities and Pollution
Control Financing Authority has caused this Bond to be signed by the manual or
facsimile signature of its Chairman or Vice Chairman, its seal to be affixed
hereto or a facsimile of its seal to be printed hereon or affixed hereto and
attested by its Secretary or Assistant Secretary and this Bond to be dated
____________ ___, ____.
THE PENDER COUNTY INDUSTRIAL FACILITIES AND
POLLUTION CONTROL FINANCING AUTHORITY
By:______________________________________
(SEAL) Chairman
ATTEST:
_____________________________
Secretary
B-7
<PAGE>
(Form of Trustee's Certificate of Authentication)
Date of Authentication: _______________________
This Bond is one of the Bonds described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:______________________________________
Authorized Officer
B-8
<PAGE>
EXHIBIT C
REQUISITION
Requisition No. ______________________ __________, 199_
Norwest Bank Minnesota, National
Association, as Trustee
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: ___________________________
Sirs:
On behalf of The Pender County Industrial Facilities and Pollution Control
Financing Authority (the Issuer), I hereby requisition pursuant to Section 604
of an Indenture of Trust dated as of June 1, 1997 (the Indenture), between the
Issuer and you as Trustee the sum of $_________ to be paid by check or wire
transfer at the following address or in accordance with the following wire
instructions:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
I hereby certify that (a) such obligation has been incurred by
Leslie-Locke, Inc. (the Company) in or about the acquisition, construction and
installing of the Project, as defined in the Indenture, (b) each item is a
proper charge against the Construction Fund, as defined in the Indenture, (c)
such obligation has not been the basis for a prior requisition which has been
paid, and (d) attached hereto is the certificate required by Section 604 of the
Indenture. Evidence of the obligation referred to hereinabove is attached
hereto.
_____________________________________________________
Authorized Representative of Leslie-Locke, Inc.
Consented to and approved by:
BRANCH BANKING AND TRUST COMPANY
By:_______________________________
Its:___________________________
C-1
<PAGE>
CERTIFICATE
I hereby certify that (a) no written notice of any lien (other than any
lien in favor of the Bank), right to lien or attachment upon, or claim affecting
the right to receive payment of, any of the moneys payable under the requisition
above has been received, (b) such requisition contains no items representing
payment on account of any retained percentages entitled to be retained at this
date, (c) the payment of such requisitions will not result in less than 97% of
the net proceeds of the Bonds, as defined in the Indenture, expended or to be
expended under such requisition and all prior requisitions, being considered as
having been used 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) of the Internal Revenue Code
of 1986, as amended, (d) the payment of such requisition will not violate the
prohibitions or requirements relating to the use of proceeds set forth in
Exhibit C and Section 6.5 of the Loan Agreement, as defined in the Indenture,
and (e) no Event of Default, as defined in the Indenture, or event which after
notice or lapse of time or both would constitute an Event of Default has
occurred and not been waived or cured.
______________________________________________
Authorized Representative of
Leslie-Locke, Inc.
C-2
Exhibit 10.37 - Bond
No. VR-1 $7,000,000
UNITED STATES OF AMERICA
STATE OF NORTH CAROLINA
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING AUTHORITY
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(LESLIE-LOCKE, INC. PROJECT), SERIES 1997
Date of Bond: June 13, 1997 Maturity Date: June 1, 2010
Interest Rate: Variable (subject to conversion to a Fixed Rate as set forth
herein)
Registered Owner: CEDE & CO. CUSIP: 706715 AA7
Principal Amount: SEVEN MILLION AND NO/100 DOLLARS ($7,000,000)
KNOW ALL MEN BY THESE PRESENTS:
That The Pender County Industrial Facilities and Pollution Control
Financing Authority, a political subdivision of the State of North Carolina (the
"Issuer"), for value received, promises to pay to the registered owner shown
above, or registered assigns, but solely from the source and in the manner
hereinafter set forth, on the maturity date shown above, the principal amount
shown above and in like manner to pay interest on said amount from the date
hereof shown above until payment of such principal amount has been made or duly
provided for, at the rates and on the dates set forth herein, except as the
provisions hereinafter set forth with respect to redemption of this Bond prior
to maturity may become applicable hereto. This Bond shall be purchased on the
demand of the registered owner as hereinafter described. The principal of this
Bond is payable in lawful money of the United States of America upon the
presentation and surrender hereof at the principal corporate trust office of
Norwest Bank Minnesota, National Association, or its successor or successors, as
Trustee (the "Trustee"), and interest on this Bond is payable on each Interest
Payment Date in like money to the registered owner hereof by check or draft
drawn upon the Trustee and mailed to the person in whose name this Bond is
registered at the close of business one Business Day (as hereinafter defined)
prior to such Interest Payment Date (the "Record Date"), provided that, owners
of Bonds in the aggregate principal amount of not less than $500,000 may, by
written instruction filed with the Trustee on or before the Record Date next
preceding such Interest Payment Date, direct that interest payments be
transmitted by wire transfer to an account in the continental United States
(which wire transfer shall be at the expense of the holder).
This Bond, designated "The Pender County Industrial Facilities and
Pollution Control Financing Authority Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997" is one of a series of Bonds in the
aggregate principal amount of Seven Million Dollars ($7,000,000) (the "Bonds"),
issued for the purpose of financing the cost of the construction of an expansion
to an existing facility and to acquire and install equipment therein for the
manufacture of building products (the "Project") for Leslie-Locke, Inc., a
Delaware corporation (the "Company"), and paying expenses of issuing such Bonds.
The Bonds are all issued under and are all equally and ratably secured and
entitled to the protection given by an Indenture of Trust dated as of June 1,
1997 (the "Indenture"), duly executed and delivered by the Issuer to the
Trustee. Reference is hereby made
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to the Indenture and all indentures supplemental thereto for the provisions,
among others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Issuer, the Trustee and the registered owners of
the Bonds, and the terms upon which the Bonds are issued and secured. The terms
and conditions of the financing of the Project, the use of the proceeds of the
Bonds by the Company for such purpose, and the payment of certain amounts
thereunder, are contained in a Loan Agreement dated as of June 1, 1997 (the
"Loan Agreement"), by and between the Issuer and the Company. Pursuant to the
Loan Agreement, the Company has caused Branch Banking and Trust Company (the
"Bank") to issue an irrevocable Letter of Credit (the "Letter of Credit"),
issued in favor of the Trustee dated the date of the issuance of the Bonds, in
an amount sufficient to pay the outstanding principal amount of, premium, if
any, and unpaid interest on the Bonds, but not to exceed $7,466,666, which
Letter of Credit expires on June 15, 2000. Substitute letters of credit may be
delivered in accordance with Section 409 of the Indenture. Reference is hereby
made to the Indenture, the Loan Agreement, the Note and the Letter of Credit and
to all amendments and supplements thereto for a description of the provisions,
among others, with respect to the nature and extent of the security, the default
provisions, the rights, duties and obligations of the Issuer and the Trustee or
the rights of the holders of the Bonds and the terms upon which the Bonds are
issued and secured. All capitalized terms not defined herein shall have the
meanings given them in the Indenture.
The Bonds are issued pursuant to and in full compliance with the laws of
the State of North Carolina, particularly the Industrial Facilities and
Pollution Control Financing Act, Chapter 159C of the North Carolina General
Statutes, as amended (hereinafter called the "Act"), and pursuant to a
resolution of the Issuer, which authorized the execution and delivery of the
Indenture. This Bond is a limited obligation of the Issuer payable solely from
the Revenues, as defined in the Indenture, which Revenues have been pledged and
assigned to the Trustee for the benefit of the Bondholders to secure payment of
this Bond, and from the Letter of Credit. THIS BOND AND THE ISSUE OF WHICH IT IS
A PART AND THE PREMIUM, IF ANY, AND INTEREST THEREON AND PURCHASE PRICE THEREFOR
ARE LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY FROM THE REVENUES AND
RECEIPTS DERIVED FROM THE LOAN AGREEMENT, INCLUDING PAYMENTS RECEIVED UNDER THE
NOTE AND THE LETTER OF CREDIT, WHICH REVENUES AND RECEIPTS HAVE BEEN PLEDGED AND
ASSIGNED TO THE TRUSTEE TO SECURE PAYMENT OF THE BONDS. THE BONDS, THE PREMIUM,
IF ANY, AND THE INTEREST THEREON, AND PURCHASE PRICE THEREFOR, SHALL NOT BE
DEEMED TO CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF
NORTH CAROLINA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE ISSUER.
NEITHER THE STATE OF NORTH CAROLINA NOR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE ISSUER, SHALL BE OBLIGATED TO PAY THE PRINCIPAL OF, PREMIUM, IF
ANY, OR INTEREST ON OR PURCHASE PRICE OF THE BONDS OR OTHER COSTS INCIDENT
THERETO EXCEPT FROM THE REVENUES AND RECEIPTS PLEDGED THEREFOR, AND NEITHER THE
FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA OR ANY
POLITICAL SUBDIVISION THEREOF, INCLUDING THE ISSUER, IS PLEDGED TO THE PAYMENT
OF
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THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON OR PURCHASE PRICE OF THE BONDS
OR OTHER COSTS INCIDENT THERETO.
The Bonds are not general obligations of the Issuer but are special obligations
payable solely from revenues derived from the Loan Agreement.
The Loan Agreement provides for payments by the Company in amounts
sufficient to provide for the payment of the principal of and interest on the
Bonds as due and payable. Provision has been made in the Loan Agreement for such
payments to be paid directly to the Trustee and deposited in a special account
of the Issuer and held by the Trustee designated "Industrial Development Revenue
Bond Fund (Leslie-Locke, Inc. Project)," and such payments have been duly
assigned to the Trustee for that purpose.
The Company shall have the option to convert the rate of interest payable
on the Bonds from the variable rate set forth herein to a fixed rate determined
as set forth in the Indenture on any Interest Payment Date (the date of such
conversion being herein referred to as the "Conversion Date"), by giving written
notice to the Issuer, the Trustee and the Remarketing Agent and upon the terms
and conditions set forth in the Indenture. The Trustee is required to give
written notice of the exercise of such option by mail to the registered owner of
this Bond not less than 30 days prior to the Conversion Date. Subject to the
obligation of the Remarketing Agent (hereinafter identified) to remarket the
Bonds, as set forth in the Indenture, all Bonds shall be purchased by the
Trustee on behalf of the Company on the Conversion Date at a purchase price
equal to the principal amount thereof plus accrued interest, if any, to the date
of purchase. If the owner of this Bond does not tender the same for purchase
prior to the Conversion Date in accordance with the Indenture and the provisions
hereinafter set forth, this Bond shall be deemed to have been so tendered for
purchase on the Conversion Date and no further interest hereon at the variable
rate set forth herein shall thereafter accrue. After the Conversion Date, the
Bonds shall no longer be subject to certain provisions of the Indenture,
including the provisions relating to the right of the owner to demand purchase
of the Bonds. Reference is hereby made to the Indenture and all indentures
supplemental thereto for all of the provisions with respect to the conversion of
the rate payable on the Bonds to the Fixed Rate.
On or prior to the Conversion Date, any Bond shall be purchased, on the
demand of the owner thereof, on any Business Day (as hereinafter defined) at a
purchase price equal to the principal amount thereof plus accrued interest, if
any, to the date of purchase, upon:
(a) delivery to the Trustee at its principal corporate trust office of
telephonic notice followed within two days by written notice (which may be
delivered by telecopy) which (i) states the name of the registered holder and
the principal amount of such Bond to be tendered and (ii) states the date on
which such Bond shall be so purchased, which date shall be a Business Day not
prior to the seventh day next succeeding the date of the delivery of such notice
to the Trustee; and
(b) delivery of such Bond (with an appropriate transfer of registration
form executed in blank acceptable to the Trustee) and, in the case of a Bond to
be purchased prior to the Interest Payment Date for any Rate Period and after
the Record Date in respect thereof, a due-bill check, in
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<PAGE>
form satisfactory to the Trustee, for interest due on such Interest Payment
Date, at the principal corporate trust office of the Trustee at or prior to
10:00 a.m., Central time, on the date specified in the aforesaid notice;
provided, however, that such Bond shall be so purchased only if the Bond so
delivered to the Trustee shall conform in all respects to the description
thereof in the aforesaid notice.
The term "Business Day" shall mean a day of the year, other than a
Saturday or a Sunday, on which banks located in the cities in which the
principal corporate trust office of the Trustee, the principal office of any
Paying Agent and the principal office of the Bank are located are not required
or authorized to remain closed and on which the New York Stock Exchange is not
closed.
Interest on the Bonds shall be paid on September 1, 1997, and on the first
day (or, if such day shall not be a Business Day, the next succeeding Business
Day with the same force and effect as if paid on such day) of each March, June,
September and December thereafter prior to and including the Conversion Date (an
"Interest Payment Date"), and shall be computed on the basis of a year of 365 or
366 days, as appropriate, for the actual number of days elapsed. Interest on the
Bonds shall first accrue from and including the date of the first authentication
and delivery of Bonds to and including September 1, 1997, and commencing
September 1, 1997, and until the Conversion Date, interest on the Bonds shall
accrue from and including each Interest Payment Date to and including the day
next preceding the following Interest Payment Date.
For the period from and including the day of the first authentication and
delivery of Bonds to and including the Wednesday of the next succeeding calendar
week, the Bonds shall bear interest at a rate equal to the rate set on the date
prior to the issuance of the Bonds in the manner set forth in subparagraphs (a),
(b) and (c) of this paragraph. Thereafter and prior to the Conversion Date, for
each period from and including the first Thursday following a Rate Computation
Date to and including the next succeeding Wednesday (each such period, including
the first period described in the immediately preceding sentence, being
hereinafter called a "Rate Period"), the interest rate on the Bonds shall be
determined as follows:
(a) On the Rate Computation Date of each calendar week the Remarketing
Agent shall determine that interest rate which, if borne by the Bonds, would, in
its judgment having due regard to prevailing financial market conditions and the
yields at which comparable securities are then being sold, be the interest rate
necessary, but which would not exceed the interest rate necessary, to enable the
Remarketing Agent to sell the Bonds at the principal amount thereof, and the
interest rate so determined shall be the interest rate on the Bonds for the next
succeeding Rate Period; provided, however, such rate may be adjusted by the
Remarketing Agent on any date during such Rate Period if such an adjustment is
needed in order to enable the Remarketing Agent to remarket a Bond which has
been tendered for purchase in accordance with the Indenture and the provisions
hereinabove set forth. Such determination or adjustment shall be based on the
knowledge of the Remarketing Agent of actual sales or pricing during the prior
105 days of securities which in the judgment of the Remarketing Agent are
comparable to the Bonds and prevailing market conditions, or the marketing
efforts with, or solicitation of proposals from, not less than three
institutional or money fund investors or other entities or individuals who
customarily purchase industrial development bonds or other
4
<PAGE>
tax-exempt securities in denominations of $100,000 or more. Any such adjustment
of the rate occurring during a Rate Period shall apply to all of the Bonds
outstanding at the time that such adjustment is made, and shall be effective
beginning on the date immediately following the date on which such rate is
announced by the Remarketing Agent and thereafter to the beginning of the next
Rate Period. On the same Business Day the Remarketing agent shall give
telegraphic or telephonic notice, promptly confirmed in writing, to the Trustee
and the Company specifying the interest rate so determined.
(b) In the event that no person is serving as the Remarketing Agent on the
applicable Rate Computation Date, or if at any time the Remarketing Agent fails
to establish the Variable Rate in accordance with the procedure described in the
preceding paragraph, then the Variable Rate for the Rate Period affected shall
be the same as for the preceding Rate Period. If no Variable Rate has been
established for the two immediately preceding Rate Periods, then the Variable
Rate for such Rate Period shall be determined by the Trustee and shall be a
percentage per annum (not to exceed the Maximum Rate) equal to eighty percent
(80%) of the bond equivalent yield (calculated in accordance with standard
practice in the banking industry) applicable to 91-day United States Treasury
bills determined on the basis of the average per annum discount rate at which
such 91-day Treasury bills shall have been sold at the most recent Treasury
auction of such 91-day Treasury bills as quoted or published by the Federal
Reserve Board of any department or agency of the United States of America;
provided further, that in the event that there shall not have been a Treasury
auction of such 91-day Treasury bills on any date during the ten (10) Business
Days immediately preceding such date of determination of the Variable Rate, or
in the event that such discount rates for any Treasury auction of such 91-day
Treasury bills during such ten (10) Business Day period shall not be quoted or
published by the Federal Reserve Board or any department or agency of the United
States of America, the Variable Rate for the immediately preceding Rate Period
shall remain in effect for such Rate Period.
(c) Notwithstanding the foregoing the interest rate on the Bonds shall
never exceed a rate which would cause the net effective interest rate for the
Bonds as of any date, computed in accordance with applicable usury law, to
exceed 12%. All calculations of the Variable Rate shall be rounded to the
nearest one-hundredth of one percent (.01%).
The determination of the Variable Rate by the Remarketing Agent of the
Trustee shall be conclusive and binding upon the owners of the Bonds.
The term "Rate Computation Date" shall mean (i) the Business Day next
preceding the date of the first authentication and delivery of the Bonds, and
(ii) the Wednesday of each calendar week thereafter, provided that if any
Wednesday is not a Business Day then the Rate Computation Date shall be the
first Business Day preceding such Wednesday.
The Issuer has appointed Blount Parrish & Roton, Inc., Montgomery,
Alabama, as Remarketing Agent under the Indenture. The Issuer may from time to
time, at the direction of the Company, remove or replace the Remarketing Agent.
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The owner of this Bond shall have no right to enforce the provisions of
the Indenture or to institute action to enforce the covenants therein, or to
take any action with respect to any event of default under the Indenture, or to
institute, appear in and defend any suit or other proceeding with respect
thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of this Bond may be declared and may become due and payable before the
stated maturity thereof, together with accrued interest thereon.
Modifications or alterations of the Indenture, or of any indenture
supplemental thereto, may be made only to the extent and in the circumstances
permitted by the Indenture.
Prior to the Conversion Date, the Bonds are subject to redemption prior to
maturity as follows:
(a) The Bonds shall be redeemed in the event the Company shall elect to
exercise its option set forth in Section 9.2 of the Loan Agreement to prepay
installments payable under the Loan Agreement upon the occurrence of any of the
events specified in such section, in whole but not in part, at any time, at a
redemption price equal to the principal amount being redeemed plus accrued
interest to the redemption date. Such redemption shall be made only with the
prior written consent of the Bank.
(b) The Bonds shall be redeemed in the event the Company shall become
obligated to prepay installments payable under the Loan Agreement upon the
occurrence of a "Determination of Taxability," as such term is defined in
Section 9.3 of the Loan Agreement, in whole at any time, at a redemption price
equal to 103% of the principal amount thereof plus accrued interest to the
redemption date. Fewer than all of the Bonds may be redeemed if, in the opinion
of Bond Counsel, redemption of fewer than all the Bonds would result in the
interest payable on the Bonds remaining Outstanding being excluded from gross
income for Federal income tax purposes. Notice of a redemption pursuant to this
Section shall be sent to the Holders within thirty days after the occurrence of
a Determination of Taxability.
(c) The Bonds may be redeemed at the option of the Issuer, to be exercised
as directed by the Company, with the prior written consent of the Bank, in whole
at any time or in part (in denominations of $100,000 or any integral multiple
thereof) on any Interest Payment Date (and if in part, by lot or in such other
manner as may be determined by the Trustee to be fair and equitable), at a
redemption price equal to the principal amount being redeemed plus accrued
interest to the redemption date in the event the Company exercises its right to
prepay installments on the Note in order to redeem Bonds as set forth in Section
9.1 of the Loan Agreement.
(d) The Bonds are subject to mandatory sinking fund redemption prior to
their scheduled maturity on June 1, 1999, and on each succeeding June 1 to and
including June 1, 2009, in the principal amount of $600,000. The remaining
$400,000 in principal amount of Bonds shall be redeemed on June 1, 2010.
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(e) The Bonds shall be redeemed, in whole or in part, and without premium,
at the direction of the Bank following the occurrence of an "Event of Default"
under the Letter of Credit and Reimbursement Agreement under which the Letter of
Credit was issued at a redemption price equal to the principal amount thereof to
be redeemed plus accrued interest to, but not including, the redemption date.
(f) Bonds purchased on the Mandatory Purchase Date described in subsection
(c) below of the provisions relating to mandatory purchase of Bonds shall not be
remarketed but rather shall be deemed to have been redeemed and shall be
canceled.
(g) The Bonds are subject to mandatory redemption after the Completion
Date with respect to the Project, to the extent of any excess proceeds remaining
in the Construction Fund and transferred to the Bond Fund under Section 605 of
the Indenture.
(h) The Bonds shall be redeemed in whole prior to their scheduled maturity
at a redemption price equal to the principal amount thereof, without premium,
plus accrued interest to the redemption date on the first Interest Payment Date
which is not less than 90 days after the Issuer has notified the Trustee and the
Bank in writing that the Company has, in the opinion of the Issuer, ceased to
operate the Project as an "industrial project for industry" within the meaning
of the Act. A cessation of operation shall not be deemed to have occurred until
90 days shall have elapsed after written notice has been given to the Company
and the Bank by the Issuer that operations at the Project shall have ceased and
the Company shall not have demonstrated to the satisfaction of the Issuer that
the Company has resumed the operations of the Project as an "industrial project
for industry" within the meaning of the Act or that the Company is, in good
faith, seeking to arrange resumption of an economically reasonable operation of
the Project by the Company or, if permitted under the Loan Agreement, by an
assignee or purchaser of the Project as such an "industrial project for
industry"; provided that a temporary shutdown due to a strike or other labor
dispute, lack of fuel or similar occurrence shall not be deemed a cessation of
operation.
In the event any of the Bonds or portions thereof (which shall be $100,000
or any integral multiple of $5,000 in excess thereof) are called for redemption,
notice thereof shall be given by the Trustee by first class mail to the
registered owner of each such Bond addressed to such registered owner at his
registered address and placed in the mails not less than twenty (20) days prior
to the date fixed for redemption; provided, however, that failure to give such
notice by mailing, or any defect therein, shall not affect the validity of the
proceedings for the redemption of any Bond with respect to which no such failure
or defect has occurred. Each notice shall identify the Bonds or portions thereof
being called, and the date on which they shall be presented for payment. After
the date specified in such call, the Bond or Bonds so called will cease to bear
interest provided funds sufficient for their redemption have been deposited with
the Trustee, and, except for the purpose of payment, shall no longer be
protected by the Indenture and shall not be deemed to be outstanding under the
provisions of the Indenture. If Bonds are redeemed in part, a portion of a Bond
may be redeemed only if the holder of such Bond will hold, following such
partial redemption, Bonds in a denomination of at least $100,000; provided that,
if a redemption cannot be effected to result in denominations of
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$100,000 for all holders, the Trustee shall select Bonds for redemption so that
one holder owns Bonds with a principal amount that is less $100,000.
The Bonds are subject to mandatory purchase on the following dates (each
of which is designated a Mandatory Purchase Date):
(a) on the Conversion Date, at a purchase price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to but not
including the date of purchase, and shall be paid from the proceeds of a draw
under the Letter of Credit in accordance with Section 509 hereof;
(b) on any Credit Modification Date, at a purchase price equal to 100% of
the principal amount thereof, plus interest accrued to the Mandatory Purchase
Date, and shall be paid from the proceeds of a draw under the Letter of Credit
in accordance with Section 509 hereof; and
(c) on the Business Day that is fifteen days prior to the expiration or
termination date of the Letter of Credit then in effect (or if such date is not
a Business Day, on the next preceding Business Day) in the event the Company has
not provided notice that a Substitute Letter of Credit will be provided in
accordance with Section 409.
A Credit Modification Date shall mean a Substitution Date if either of the
following occurs:
(i) if the Bonds are then rated by a Rating Agency, the Company
provides notice that a Substitute Letter of Credit will be provided in
accordance with Section 409 of the Indenture but fails to deliver to the
Trustee the letter from any Rating Agency then rating the Bonds as
required by Section 409(c), or (2) the Company delivers such notice and
the letter required by Section 409(c) but prior to the Substitution Date
such Rating Agency revokes such letter, or (3) the Company delivers such
notice and letter but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date; or
(ii) the Bonds are not then rated and (1) the Company provides
notice that a Substitute Letter of Credit will be provided in accordance
with Section 409 of the Indenture but fails to deliver to the Trustee the
evidence required by Section 409(d), or (2) the Company delivers such
notice and evidence but such Substitute Letter of Credit is not delivered
to, and accepted by, the Trustee on or prior to the Substitution Date.
Notice of mandatory purchase shall be given as set forth above in
connection with a redemption of Bonds at least 30 days prior to the Mandatory
Purchase Date; provided that in the event of a Credit Modification Date
resulting from a failure by the Company to deliver a Substitute Letter of Credit
on the Substitution Date, such mandatory purchase shall occur as soon as
practicable after such failure, but in all events no later than two Business
Days preceding the termination or expiration of the Letter of Credit then in
effect, and notice thereof shall be given as soon as practicable to the holders.
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In the event the Trustee does not receive the Substitute Letter of Credit
required for a mandatory purchase under section (c) above by 5:00 p.m., Central
Time, on the Business Day preceding the Mandatory Purchase Date designated
thereunder, the Bonds shall be purchased on the Mandatory Purchase Date, and the
Trustee shall draw on the Letter of Credit to pay the Purchase Price of such
Bonds.
This Bond may be transferred on the books of registration kept by the
Trustee by the registered owner or by his duly authorized attorney upon
surrender hereof, together with a written instrument of transfer duly executed
by the registered owner or his duly authorized attorney.
Prior to the Conversion Date, the Bonds are issuable as registered Bonds
without coupons in denominations of $100,000 or any integral multiple of $5,000
in excess thereof, except as otherwise provided in the Indenture. Subject to the
limitations and upon payment of the charges provided in the Indenture, Bonds may
be exchanged for a like aggregate principal amount of Bonds of other authorized
denominations.
This Bond is issued with the intent that the laws of the State of North
Carolina will govern its construction.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required to exist, happen and be performed precedent to and in the
issuance of the Bonds do exist, have happened and have been performed in due
time, form and manner as required by law; that the indebtedness represented by
the Bonds, together with all obligations of the Issuer, does not exceed any
constitutional or statutory limitation.
This Bond shall not be valid or become obligatory for any purpose or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been signed by the Trustee.
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IN WITNESS WHEREOF, The Pender County Industrial Facilities and Pollution
Control Financing Authority has caused this Bond to be signed by the manual or
facsimile signature of its Chairman or Vice Chairman, its seal to be affixed
hereto or a facsimile of its seal to be printed hereon or affixed hereto and
attested by its Secretary or Assistant Secretary, and this Bond to be dated June
__, 1997.
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING
AUTHORITY
By:
----------------------------------
(SEAL) Chairman
ATTEST:
By:
----------------------------------
Secretary
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(Form of Trustee's Certificate of Authentication)
Date of Authentication: __________________________
This Bond is one of the Bonds described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
---------------------------------
Authorized Officer
(Form of Assignment)
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________________ ("Transferor"),
hereby sells, assigns and transfers unto ______________________________________,
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints_________________________________ ("Transferee") as attorney to
transfer the within Bond on the books kept for registration thereof with full
power of substitution in the premises.
DATE: ___________, _____
---------------------------------
Transferor
GUARANTEED BY:
- --------------------------------------------
NOTICE: Signature(s) must be guaranteed
by a member firm of the New York Stock
Exchange or a commercial bank or a trust
company.
11
================================================================================
Exhibit 10.38 Loan Agreement
THE PENDER COUNTY INDUSTRIAL FACILITIES
AND POLLUTION CONTROL FINANCING AUTHORITY
and
LESLIE-LOCKE, INC.
==========================================
LOAN AGREEMENT
==========================================
Dated as of June 1, 1997
Relating to
$7,000,000
Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project)
Series 1997
================================================================================
All right, title and interest of The Pender County Industrial Facilities and
Pollution Control Financing Authority (the "Issuer") in this Loan Agreement have
been pledged and assigned to Norwest Bank Minnesota, National Association, as
Trustee under an Indenture of Trust dated as of June 1, 1997, between the Issuer
and the Trustee.
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not a part of the Loan Agreement and is only for
convenience of reference.)
Parties......................................................................1
Recitals.....................................................................1
ARTICLE I
DEFINITIONS
Section 1.1. Definitions.................................................. 2
Section 1.2. Use of Words and Phrases..................................... 4
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations and Warranties of the Issuer................. 4
Section 2.2. Representations by Company................................... 6
ARTICLE III
THE PROJECT
Section 3.1. Loan of Proceeds............................................. 7
Section 3.2. Agreement to Acquire, Construct and Equip Project............ 7
Section 3.3. Agreement to Issue Bonds..................................... 8
Section 3.4. Establishment of Completion Date............................. 8
Section 3.5. Reserved..................................................... 8
Section 3.6. Limitation of Issuer's Liability............................. 8
Section 3.7. Disclaimer of Warranties..................................... 8
Section 3.8. Taxes, Other Governmental Charges, Utility Charges........... 9
Section 3.9. Insurance.................................................... 9
Section 3.10. Maintenance of the Project................................... 9
ARTICLE IV
PAYMENT PROVISIONS
Section 4.1. Repayment of Bonds and Payment of Other Amounts Payable...... 9
Section 4.2. No Defense or Set-off -- Unconditional Obligation............ 11
Section 4.3. Assignment of Issuer's Rights................................ 11
Section 4.4. Letter of Credit............................................. 11
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ARTICLE V
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 5.1. Parties to Give Notice....................................... 12
Section 5.2. Damage and Destruction....................................... 12
Section 5.3. Condemnation and Loss of Title............................... 12
ARTICLE VI
SPECIAL COVENANTS AND AGREEMENTS
Section 6.1. Maintenance of Corporate Existence........................... 13
Section 6.2. Financial Reports............................................ 13
Section 6.3. Project List................................................. 13
Section 6.4. Inspection of Project........................................ 13
Section 6.5. Use of Proceeds; Other Matters with Respect to Project,
Bonds and Tax Exemption...................................... 14
Section 6.6. Indemnification by Company................................... 15
Section 6.7. Qualification of Company in North Carolina................... 17
Section 6.8. Permits or Licenses.......................................... 17
Section 6.9. Issuer's and Trustee's Access to Project..................... 17
Section 6.10. Arbitrage Covenant........................................... 17
Section 6.11. Reference to Bonds Ineffective after Bonds Paid.............. 17
Section 6.12. Notification of a Bankruptcy Filing or Event of Default...... 18
Section 6.13. Obligations Under Indenture.................................. 18
Section 6.14. Undertaking to Provide Continuing Disclosure................. 18
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
Section 7.1. Conditions................................................... 18
Section 7.2. Instrument Furnished to Trustee.............................. 18
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default............................................ 19
Section 8.2. Force Majeure................................................ 19
Section 8.3. Remedies on Default.......................................... 20
Section 8.4. No Remedy Exclusive.......................................... 20
Section 8.5. Agreement to Pay Attorneys' Fees and Expenses................ 21
Section 8.6. Waiver of Breach............................................. 21
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ARTICLE IX
REDEMPTION OF BONDS
Section 9.1. Optional Redemption of Bonds................................. 21
Section 9.2. Extraordinary Optional Redemption of Bonds................... 21
Section 9.3. Mandatory Prepayment of Bonds Upon a Determination of
Taxability................................................... 22
Section 9.4. Mandatory Prepayment of Bonds Upon Cessation of Operation.... 23
Section 9.5. Amounts Payable by Company................................... 23
Section 9.6. Procedure for Exercise of Options............................ 24
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices...................................................... 24
Section 10.2. Severability................................................. 26
Section 10.3. Execution of Counterparts.................................... 26
Section 10.4. Amounts Remaining in Bond Fund............................... 26
Section 10.5. Amendments, Changes and Modifications........................ 26
Section 10.6. Governing Law................................................ 26
Section 10.7. Authorized Company Representative............................ 26
Section 10.8. Term of the Agreement........................................ 26
Section 10.9. No Personal Liability........................................ 27
Section 10.10.Parties in Interest.......................................... 27
Signatures and Seals........................................................28
Receipt.....................................................................29
Exhibit A -- Description of Project.........................................30
Exhibit B -- Form of Promissory Note........................................31
iii
<PAGE>
LOAN AGREEMENT
This Loan Agreement, dated as of June 1, 1997, by and between THE PENDER
COUNTY INDUSTRIAL FACILITIES AND POLLUTION CONTROL FINANCING AUTHORITY, a
political subdivision and body corporate and politic of the State of North
Carolina (the "Issuer"), and LESLIE-LOCKE, INC., a Delaware corporation
organized and existing under the laws of the State of Delaware (the "Company");
W I T N E S S E T H :
WHEREAS, the Industrial and Pollution Control Facilities Financing Act,
Chapter 159C of the General Statutes of North Carolina, as amended (the "Act"),
authorizes the creation of industrial facilities and pollution control financing
authorities by the several counties in North Carolina and empowers such
authorities to acquire, construct, own, repair, maintain, extend, improve,
rehabilitate, renovate, furnish, equip and sell, lease, exchange, transfer or
otherwise dispose of industrial or manufacturing facilities to the end that such
authorities may be able to promote the right to gainful employment opportunity
and private industry and thereby promote the general welfare of the inhabitants
of North Carolina by exercising such powers to aid in financing industrial or
manufacturing facilities for the purpose of alleviating unemployment or raising
below average manufacturing wages and further authorizes such authorities to
loan to others the proceeds of bonds issued for the purpose of paying for all or
any part of an industrial or manufacturing facility, to mortgage and pledge any
or all of such facilities, whether then owned or thereafter acquired, as
security for the payment of the principal of, premium, if any, and interest on
any such bonds and any agreements made in connection therewith and to pledge or
assign the revenues and receipts from such facilities or loan or from any other
source to the payment of such bonds; and
WHEREAS, the Issuer has been duly organized pursuant to the Act; and
WHEREAS, in order to further the purposes of the Act, the Issuer proposes
to reimburse the Company for the cost of construction of a 156,000 square foot
expansion to the Company's existing facility, and the acquisition and
installation therein of equipment for the manufacture of building products (the
"Project") in Pender County, North Carolina, which constitutes an industrial
project under the Act, and to obtain the funds therefor by the issuance of its
Bonds (as hereinafter defined) under an Indenture of Trust securing such Bonds,
between the Issuer and Norwest Bank Minnesota, National Association,
Minneapolis, Minnesota, as Trustee, dated as of the date hereof (the
"Indenture"); and
WHEREAS, the Issuer proposes to loan the proceeds from the sale of the
Bonds, as hereinafter defined, to the Company to acquire, construct and equip
the Project upon the terms and conditions hereinafter set forth; and
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WHEREAS, the Company and Branch Banking and Trust Company will enter into
a Reimbursement Agreement (the "Reimbursement Agreement") dated as of the date
hereof pursuant to which the Bank will issue an irrevocable letter of credit in
an amount not to exceed $7,466,666 to the Trustee at the request and for the
account of the Company upon the terms set forth in the Reimbursement Agreement;
and
WHEREAS, it has been determined that the financing of the acquisition,
construction and installing of the Project will require the issuance, sale and
delivery by the Issuer of a series of bonds in the aggregate principal amount of
Seven Million and no/100 Dollars ($7,000,000) (the "Bonds"); and
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein made, and subject to the conditions herein set forth, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. In addition to the words and terms elsewhere
defined in this Agreement or in the Indenture, the following words and terms as
used in this Agreement shall have the following meanings unless the context or
use indicates another or different meaning:
"Agreement" shall mean this Loan Agreement and any amendments and
supplements hereto.
"Authorized Company Representative" shall mean the person or persons at
the time designated to act on behalf of the Company, such designation in each
case to be evidenced by a certificate furnished to the Issuer and the Trustee
containing the specimen signature of such person or persons and signed on behalf
of the Company by its President, any Vice President, Treasurer or Assistant
Treasurer, or Secretary or Assistant Secretary. Such certificate may designate
an alternate or alternates.
"Bond Counsel" shall mean initially Hunton & Williams, and any other firm
of nationally recognized municipal bond counsel selected by the Company and
acceptable to the Issuer and the Trustee.
"Bond Fund" shall mean the fund by that name created and established in
Section 501 of the Indenture.
"Bonds" shall mean The Pender County Industrial Facilities and Pollution
Control Financing Authority Industrial Development Revenue Bonds (Leslie-Locke,
Inc. Project), Series 1997, in the aggregate principal amount of $7,000,000,
issued under and secured by the Indenture, and any Additional Bonds issued under
Section 213 of the Indenture.
"Closing Date" shall mean the date on which the Bonds are issued and
delivered.
"Company" shall mean Leslie-Locke, Inc., a corporation organized and
operating under the laws of the State of North Carolina, and its permitted
successors and assigns under this Agreement.
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"Conversion Date" shall mean the date specified by the Company pursuant to
Section 202(d) of the Indenture, on which the variable rate feature borne by the
Bonds shall be terminated and the Bonds shall thereafter bear interest at a
fixed rate.
"Event of Default" shall mean any event of default specified in Section
8.1 hereof.
"Indenture" shall mean the Indenture of Trust dated as of June 1, 1997, by
and between Issuer and Trustee, securing the Bonds, and any amendments and
supplements thereto.
"Issuer" shall mean The Pender County Industrial Facilities and Pollution
Control Financing Authority, a political subdivision and a body corporate and
politic of the State of North Carolina and its successors and assigns.
"Letter of Credit" shall mean the irrevocable letter of credit in an
amount not to exceed $7,466,666 dated the date of the issuance of the Bonds and
issued by the Bank to the Trustee at the request and for the account of the
Company pursuant to the Reimbursement Agreement, including any permitted
amendments thereto and any renewals or substitutes therefor, or any Substitute
Letter of Credit.
"LGC" shall mean the North Carolina Local Government Commission within the
North Carolina Department of State Treasurer.
"Net Proceeds", when used with respect to any insurance recovery or
condemnation award with respect to the Project, shall mean the gross proceeds
from such insurance recovery or condemnation award less payment of attorneys'
fees, fees and expenses of the Trustee and all other expenses properly incurred
in the collection of such gross proceeds.
"Note" shall mean the promissory note of the Company in the principal
amount of $7,000,000, dated June ___, 1997, in the form attached hereto as
Exhibit B, issued pursuant hereto and delivered to the Issuer as consideration
for the loan of the proceeds of the Bonds for the undertaking of the Project,
and any amendment or supplement thereto or substitution therefor.
"Payment of the Bonds" shall mean payment in full of principal of and
interest and premium, if any, on the Bonds, or provision for such payment
sufficient to discharge the Indenture.
"Project" shall mean the industrial manufacturing facility to be
constructed by the Company with the proceeds of the Bonds in Pender County,
North Carolina, all as more particularly described in Exhibit A attached to this
Loan Agreement.
"Reimbursement Agreement" shall mean the Reimbursement Agreement dated as
of the date of this Loan Agreement between the Company and the Bank, including
any supplements or amendments thereto, and any similar agreement between the
Company and the issuer of a Substitute Letter of Credit.
"Related Person" shall mean a "related person" within the meaning of
Section 147(a)(3) of the Code.
3
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"Substantial User" shall mean, with respect to any "facilities" (as the
term "facilities" is used in Section 144(a) of the Code), a "substantial user"
of such "facilities" within the meaning of Section 147(a) of the Code.
"Tax Regulations" shall mean the applicable treasury regulations
promulgated under the Code or under Section 103 of the Internal Revenue Code of
1954, as amended, whether at the time proposed, temporary, final or otherwise.
"Trustee" shall mean Norwest Bank Minnesota, National Association,
Minneapolis, Minnesota, a national banking corporation or association, and its
successor or successors.
Section 1.2. Use of Words and Phrases. "Herein," "hereby," "hereunder,"
"hereof," "hereinabove," "hereinafter," and other equivalent words and phrases
refer to this Agreement and not solely to the particular portion thereof in
which any such word is used. The definitions set forth in Section 1.1 hereof
include both singular and plural. Whenever used herein, any pronoun shall be
deemed to include both singular and plural and to cover all genders. All
capitalized terms used but not defined herein shall have the meaning given to
them in the Indenture.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations and Warranties of the Issuer. The Issuer
makes the following representations as the basis for the undertakings herein
contained:
(a) The Issuer is duly organized, existing and in good standing
under the Act.
(b) The Issuer has the power to issue bonds for the purpose of
paying the costs of the acquisition, construction and installation of the
Project from the proceeds of the sale of the Bonds and to loan the Company the
proceeds from the sale of the Bonds pursuant to the provisions of this Loan
Agreement, such loan being in furtherance of the purposes for which the Issuer
was organized.
(c) The Issuer proposes to issue its Bonds in the aggregate
principal amount of $7,000,000 to provide amounts necessary to reimburse the
Company for the Cost of the Project under the Indenture pursuant to which the
Issuer's interest in this Loan Agreement and the revenues and receipts
therefrom, including the Note and the payments thereon by the Company, will be
assigned and pledged by the Issuer to the Trustee as security for payment of the
principal of, premium, if any, and interest on the Bonds.
(d) The Issuer has the power to enter into this Loan Agreement and
the Indenture and to carry out its obligations hereunder and thereunder and to
issue the Bonds to finance the Cost of the Project; by proper action has duly
authorized the execution and delivery of this Loan Agreement and the Indenture,
the performance of its obligations hereunder and thereunder and the issuance of
the Bonds; and, simultaneously with the execution and delivery of this Loan
Agreement, has duly executed and delivered the Indenture and issued the Bonds.
4
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(e) The Issuer hereby finds that the financing of the Project serves
the purposes of the Act.
(f) The Issuer is not in default in the payment of the principal of
or interest on any of its indebtedness for borrowed money and is not in default
under any instrument under or subject to which any indebtedness for borrowed
money has been incurred, and no event has occurred and is continuing under the
provisions of any such instrument that with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.
(g) The Issuer is not, to the knowledge of its officers, (1) in
violation of the resolution creating it or any existing law, rule or regulation
applicable to it or (2) in default under any indenture, mortgage, deed of trust,
lien, lease, contract, note, order, judgment, decree or other agreement,
instrument or restriction of any kind by which it or any of its assets are or
may be bound or affected. To the best of Issuer's knowledge, the execution and
delivery by the Issuer of this Loan Agreement, the Indenture and the Bonds and
compliance with the terms and conditions hereof and thereof will not conflict
with or result in the breach of or constitute a default under any of the above
described instruments or other restrictions.
(h) To the best of Issuer's knowledge, no further approval, consent
or withholding of objection on the part of any Federal, state or local
regulatory body, is required in connection with (1) the execution, issuance,
sale and delivery of the Bonds by the Issuer or (2) the execution or delivery of
or compliance by the Issuer with the terms and conditions of this Loan Agreement
and the Indenture, or (3) the assignment by the Issuer of its rights under the
Loan Agreement and the Note. To the best of Issuer's knowledge, the consummation
by the Issuer of the transactions set forth in the manner and under the terms
and conditions as provided herein will comply with all applicable state, local
or Federal laws and any rules and regulations promulgated thereunder by any
regulatory authority or agency.
(i) To the best of Issuer's knowledge, no litigation, inquiry or
investigation of any kind in or by any judicial or administrative court or
agency is pending or threatened against the Issuer with respect to (1) the
organization and existence of the Issuer, (2) its authority to execute or
deliver this Loan Agreement, the Indenture or the Bonds, (3) the validity or
enforceability of this Loan Agreement, the Indenture or the Bonds, or the
transactions contemplated hereby or thereby, (4) the title of any officer of the
Issuer who executed this Loan Agreement, the Indenture or the Bonds, or (5) any
authority or proceedings related to the execution and delivery of this Loan
Agreement, the Indenture or the Bonds, on behalf of the Issuer, and no such
authority or proceedings have been repealed, revoked, rescinded or amended but
are in full force and effect.
(j) The Issuer acknowledges that the Company has acquired,
constructed and equipped the Project in the manner determined by the Company,
without any responsibility or liability of the Issuer therefore.
(k) Neither this Loan Agreement, the Note and the payments thereon
by the Company nor any of the revenues to be received hereunder or thereunder
have been pledged or hypothecated by the Issuer in any manner or for any purpose
other than as provided in the Indenture as security for the payment of the
Bonds.
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Section 2.2. Representations by Company. The Company makes the following
representations as the basis for its undertakings hereunder:
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, is qualified to do
business in North Carolina, has the power to enter into this Agreement and the
transactions contemplated hereby and to perform its obligations hereunder and
has duly authorized the execution and delivery of this Agreement and the
performance of its obligations hereunder.
(b) The execution and delivery of this Agreement and the Note and
the performance by the Company of its obligations hereunder do not and will not
(1) conflict with, or constitute a breach or result in a violation of, its
articles of incorporation or bylaws, (2) constitute a default under any material
agreement or other material instrument to which the Company is a party or by
which it is bound, or (3) result in a violation of any material agreement or
other material instrument to which the Company is a party or by which it is
bound or to the knowledge of the Company, any constitutional or statutory
provision or material order, rule, regulation, decree or ordinance of any court,
government or governmental authority having jurisdiction over the Company or its
property.
(c) The Company will operate the Project, or cause it to be operated
as an industrial project within the meaning of the Act and as a manufacturing
facility within the meaning of Section 144(a)(12) of the Code, until Payment of
the Bonds.
(d) The Company is not in default in the payment of the principal of
or interest on any of its material indebtedness for borrowed money and is not in
default in any material respect under any instrument under and subject to which
any indebtedness has been incurred, and no event has occurred and is continuing
under the provisions of any such agreement that, with the lapse of time or the
giving of notice, or both, would constitute an event of default thereunder.
(e) Except as described in the reports and registration statements
which the Company has filed with the Securities and Exchange Commission prior to
the date of this Agreement, there is no action, suit, proceeding or
investigation at law or in equity, or before or by any court, public board or
body, known to be pending or, to the best knowledge and information of the
Company, threatened, in which any liability of the Company is not adequately
covered by insurance or in which any judgment or order would have a material
adverse effect upon the business or assets of the Company or which would affect
its existence or authority to do business, operation of the Project, the
validity of this Agreement or the Note or the performance of the Company's
obligations hereunder or thereunder.
(f) The Company has obtained all consents, approvals, authorizations
and orders of any governmental or regulatory authority that are required to be
obtained by the Company as a condition precedent to the issuance of the Bonds or
the execution and delivery of this Agreement or the performance by the Company
of its obligations hereunder.
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(g) The Project is of the type authorized and permitted by the Act,
and the Project is substantially the same in all material respects to that
described in the notice of public hearing published on December 2, 1996.
(h) The Project has been acquired and installed and will be operated
by the Company in such manner as to conform with all applicable zoning,
planning, building, environmental and other regulations of the governmental
authorities having jurisdiction over the Project.
(i) The Company will cause all of the proceeds of the Bonds to be
applied solely to the payment of Costs of the Project (including the costs of
issuance enumerated therein).
(j) The Company has not, to its knowledge, taken action, and has not
omitted to take any action, which action or omission to take action would in any
way affect or impair the excludability of interest on the Bonds from gross
income of the Holders thereof for federal income tax purposes.
(k) The Project is located wholly within Pender County.
(l) The representations and warranties contained in Exhibit C and
made a part hereof are true and complete.
ARTICLE III
THE PROJECT
Section 3.1. Loan of Proceeds. The Issuer hereby loans the proceeds from
the sale of the Bonds pursuant to this Loan Agreement to the Company, and the
Company hereby borrows the same from the Issuer as evidenced by this Loan
Agreement and the issuance and delivery of the Note to the Issuer. The Company
covenants to use such proceeds to pay the Cost of the Project.
Section 3.2. Agreement to Acquire, Construct and Equip Project. The
Company has caused the acquisition, construction and equipping of the Project as
described in Exhibit A attached hereto, as such Exhibit A may be amended from
time to time by the Company, provided that in the case of any material change in
such Exhibit A there shall be filed with the Issuer and the Trustee the written
approving opinion of Bond Counsel acceptable to the Trustee to the effect that
such change shall not impair the Federal income tax exemption of interest on any
of the Bonds under Section 103 of the Code (other than interest on Bonds held by
a Substantial User of the Project or a Related Person to a Substantial User).
The Company agrees to obtain all licenses, permits and consents required for the
acquisition, construction, equipping and operation of the Project, and the
Issuer shall have no responsibility therefor.
The Company will not take any action or fail to take any action which
would adversely affect the qualification of the Project under the Act or the
exclusion of interest on the Bonds from Federal income taxation under Section
103 of the Code.
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Section 3.3. Agreement to Issue Bonds. In order to provide funds for
payment of the Cost of the Project the Issuer shall simultaneously with the
execution and delivery hereof proceed with the issuance and sale of the Bonds
bearing interest, maturing and having the other terms and provisions set forth
in the Indenture. The obligation of the Issuer to pay for the Cost of the
Project shall be limited to the proceeds in the Construction Fund derived from
the sale of the Bonds in accordance with the Indenture.
Section 3.4. Establishment of Completion Date. The Company hereby
certifies that the Project is complete, and was placed in service for federal
income tax purposes on January 1, 1996, that the Cost of the Project was
$6,860,000, that the acquisition, construction and equipping of the Project has
been completed substantially in accordance with Section 3.2 hereof, and that the
full Cost of the Project has been paid. Such certification is given without
prejudice to any rights against third parties which exist at the date hereof or
which may subsequently come into being.
Section 3.5. Reserved.
Section 3.6. Limitation of Issuer's Liability. Anything contained in this
Loan Agreement to the contrary notwithstanding, any obligation the Issuer may
incur in connection with the undertaking of the Project for the payment of money
shall not be deemed to constitute a debt or general obligation of the Issuer or
the Pender County Board of Commissioners but shall be payable solely from the
revenues and receipts derived by it from the loan of the proceeds of the sale of
the Bonds pursuant to this Loan Agreement, including payments received under the
Note and from payments pursuant to the Letter of Credit. No provision in this
Loan Agreement or any obligation herein imposed upon the Issuer, or the breach
thereof, shall constitute or give rise to or impose upon the Issuer a pecuniary
liability or a charge upon its general credit or taxing powers. No officer or
member of the Issuer shall be personally liable on this Loan Agreement.
Section 3.7. Disclaimer of Warranties. The Company recognizes that since
the Project has been acquired, constructed and equipped by the Company and by
contractors and suppliers selected by the Company in accordance with plans and
specifications prepared by architects or engineers selected by the Company, THE
ISSUER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO
THE MERCHANTABILITY, CONDITION OR WORKMANSHIP OF ANY PART OF THE PROJECT OR ITS
SUITABILITY FOR THE COMPANY'S PURPOSES OR THE EXTENT TO WHICH PROCEEDS DERIVED
FROM THE SALE OF THE BONDS WILL PAY THE COST TO BE INCURRED IN CONNECTION
THEREWITH.
Section 3.8. Taxes, Other Governmental Charges, Utility Charges. The
Company shall pay, as the same become due, all taxes, assessments, impositions
and governmental charges of any kind whatsoever, general and specific, foreseen
and unforeseen, and all water and sewer charges that may be lawfully assessed,
levied or imposed on the payments under the Note and this Loan Agreement or with
respect to the Project. The Company shall pay as the same become due all utility
and other charges incurred in the operation, maintenance, use and occupancy of
the Project and all assessments and charges lawfully made by any governmental
body for public improvements to the Project. The Company may allow to exist any
indebtedness for any such tax, assessment, charge, levy or claim, provided any
such tax, assessment, charge, levy or claim is being contested in good faith by
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<PAGE>
appropriate proceedings and the Company shall have established and maintained
adequate reserves for the payment of the same. Upon the request of the Issuer,
the Company shall provide the Issuer with proof of payment of all taxes and
charges as required under this Section 3.8.
Section 3.9. Insurance. The Company shall keep the Project insured against
fire and other risks to the extent usually insured against by companies owning
and operating similar property, by reputable insurance companies or, at the
Company's election, with respect to all or any element or unit of the Project,
by means of an adequate insurance fund set aside and maintained by it out of its
own earnings or in conjunction with other companies through an insurance fund,
trust or other agreement. Upon the request of the Issuer, the Company shall
provide a certificate to the Issuer indicating its insurance coverage.
Section 3.10. Maintenance of the Project. The Company shall use, maintain
and operate the Project, or cause it to be used, maintained and operated, in
good repair, in accordance with all applicable laws, rules and regulations,
subject to ordinary wear and tear and obsolescence. The Company may make
modifications, replacements and renewals of and to the Project as the Company
shall deem necessary or desirable and that do not adversely affect the value of
the Project provided that all such additions, modifications or improvements
comply with all applicable Federal, state and local codes.
ARTICLE IV
PAYMENT PROVISIONS
Section 4.1. Repayment of Bonds and Payment of Other Amounts Payable. (a)
On or before any date that interest on the Bonds is due as set forth in the
Indenture, or any date fixed for the redemption of any or all of the Bonds
pursuant to the Indenture, until the principal of and premium, if any, and
interest on the Bonds shall have been fully paid or provision for the payment
thereof shall have been made in accordance with the Indenture, the Company
covenants and agrees to pay or to cause to be paid in lawful money of the United
States of America to the Trustee for deposit in the Bond Fund, a sum equal to
the amount payable on such payment date as principal (whether at maturity, upon
redemption or otherwise) of and premium, if any, and interest on the Bonds as
provided in the Indenture and in the Note. All payments made pursuant to this
Section shall be made in immediately available funds at the principal corporate
trust office of the Trustee during normal banking hours. The Company covenants
to make all payments on the Note, as and when the same become due.
In the event that the payment of the principal of and accrued interest on
the Bonds is accelerated under Section 902 of the Indenture, the Company
covenants and agrees to pay, or cause to be paid, to the Trustee as provided
above a sum equal to all the principal of and premium, if any, and interest on
the Bonds then outstanding.
Each payment pursuant to this Section shall at all times be sufficient to
pay the total amount of principal (whether at maturity, upon redemption or
otherwise) of and premium, if any, and interest payable on the Bonds on the date
that such payment is due; provided that excess Bond Fund moneys
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held by the Trustee in the Bond Fund on such date and available to pay principal
and interest on the Bonds shall be credited against the payment due on such
date. Subject to the provisions of the next succeeding sentence, if at any time
the amount held by the Trustee in the Bond Fund should be sufficient (and remain
sufficient) to pay at the times required the principal of and premium, if any,
and interest on the Bonds then remaining unpaid, the Company shall not be
obligated to make any further payments under the provisions of this Section.
Notwithstanding the provisions of the preceding sentence, if on any date excess
Bond Fund moneys held by the Trustee in the Bond Fund are insufficient to make
the then required payments of principal (whether at maturity, upon redemption or
otherwise) of and premium, if any, and interest on the Bonds on such date, the
Company shall forthwith pay such deficiency as a payment hereunder.
(b) The Company agrees to pay the reasonable fees, charges and
expenses, including reasonable attorneys' fees, of the Trustee and any Paying
Agent relating to the Bonds, including but not limited to enforcing the
Indenture and the Loan Agreement.
(c) The Company agrees to pay the Issuer's reasonable costs
(including reasonable attorneys' fees) in connection with (i) the authorization,
issuance and sale of the Bonds; (ii) prepayment or redemption of the Bonds; and
(iii) administrative costs and expenses of the Issuer, including the fees of
attorneys, accountants, engineers, appraisers or consultants, paid or incurred
by the Issuer by reason of the Bonds being outstanding or pursuant to
requirements of this Agreement. The Company also agrees to pay the LGC's fee in
connection with its approval of the issuance of the Bonds.
(d) The Company agrees to pay to the Trustee amounts equal to the
amounts to be paid by the Trustee pursuant to Section 1201 of the Indenture,
such amounts to be paid by the Company to the Trustee on the dates such payments
pursuant to Section 1201 of the Indenture are to be made; provided, however,
that the amount of any such payment hereunder shall be reduced by the amount of
moneys available for such payment under Section 1201(a) of the Indenture.
(e) In the event the Company should fail to make, or cause to be
made, any of the payments required in this Section, the item or installment so
in default shall continue as an obligation of the Company until the amount in
default shall have been fully paid.
Section 4.2. No Defense or Set-off -- Unconditional Obligation. The
obligations of the Company to make the payments required in Section 4.1 hereof
and to perform and observe the other agreements on its part contained herein
shall be absolute and unconditional, irrespective of any defense or any right of
set-off, recoupment or counterclaim it might otherwise have against the Issuer
or the Trustee, and the Company shall pay net during the term of this Agreement
the payments to be made as prescribed in Section 4.1 and all other payments
required hereunder free of any deductions and without abatement, diminution or
set-off; and until such time as the principal of and premium, if any, and
interest on the Bonds shall have been fully paid, or provision for the payment
thereof shall have been made in accordance with the Indenture, the Company: (i)
will not suspend or discontinue any payments provided for in Section 4.1 hereof;
(ii) will perform and observe all of its other agreements contained in this
Agreement; and (iii) except as provided in Article VIII hereof, will not
terminate this Agreement for any cause, including, without limiting the
generality of the foregoing, failure to complete the Project, the occurrence of
any act or circumstances that may constitute failure
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of consideration, destruction of or damage to the Project, commercial
frustration of purpose, any change in the tax laws of the United States of
America or the State of North Carolina or any political subdivision of either of
them, or any failure of the Issuer or the Trustee to perform or observe any
agreement, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement or the Indenture.
Section 4.3. Assignment of Issuer's Rights. As security for the payment of
the Bonds, the Issuer will assign to the Trustee the Issuer's rights under this
Agreement (except for the Issuer's rights under Sections 4.1(c), 6.4, 6.6 and
8.5 hereof and any rights of the Issuer to receive notices, certificates, or
other communications hereunder or to give its consent hereunder) and the Note,
including the right to receive payments hereunder and the proceeds thereof, and
hereby directs the Company to make said payments, or to cause said payments to
be made, directly to the Trustee. The Company herewith assents to such
assignment and will make payments, or cause payments to be made, directly to the
Trustee.
Section 4.4. Letter of Credit. The Company shall provide for the payment
of amounts due under Section 4.1(a) by delivery to the Trustee on the date of
initial authentication and delivery of the Bonds of a Letter of Credit in favor
of the Trustee and for the benefit of the holders of the Bonds (other than
Company Bonds and Bank Bonds). The Company shall be entitled to provide a
Substitute Letter of Credit under certain circumstances as provided in the
Indenture. Any extension of the Letter of Credit shall be for at least one year
or, if less, the fifteenth day after the maturity date of the Bonds. The Company
agrees to cause a letter of credit to be in effect at all times with respect to
the Bonds.
EXCEPT AS RESERVED IN SECTION 4.3, THIS LOAN AGREEMENT HAS BEEN ASSIGNED
TO, AND IS SUBJECT TO A SECURITY INTEREST IN FAVOR OF NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, AS TRUSTEE UNDER AN INDENTURE OF TRUST DATED AS OF JUNE 1,
1997, BETWEEN THE PENDER COUNTY INDUSTRIAL FACILITIES AND POLLUTION CONTROL
FINANCING AUTHORITY AND SUCH TRUSTEE, AS AMENDED OR SUPPLEMENTED FROM TIME TO
TIME. INFORMATION CONCERNING SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE
TRUSTEE AT ITS PRINCIPAL OFFICE IN MINNEAPOLIS, MINNESOTA.
ARTICLE V
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 5.1. Parties to Give Notice. In case of any material damage
to or destruction of any part of the Project, the Company shall give prompt
notice thereof to the Issuer and the Trustee. In case of a taking of all or any
part of the Project or any right therein under the exercise of the power of
eminent domain or any loss thereof because of failure of title thereto or the
commencement of any proceedings or negotiations which might result in such a
taking or loss, the party upon which notice of such taking is served shall give
prompt notice to the other and to the Trustee. Each such notice shall describe
generally the nature and extent of such damage, destruction, taking, loss,
proceeding or negotiations.
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Section 5.2. Damage and Destruction. Unless the Company terminates this
Loan Agreement and prepays the Note pursuant to Article IX, and subject to the
terms and conditions of the Reimbursement Agreement, if all or any part of the
Project is destroyed or damaged by fire or other casualty, the Company shall be
obligated to continue to make payments required under the Note and shall
promptly replace, repair, rebuild or restore the property damaged or destroyed
to substantially its same condition as prior to such damage or destruction, with
such alterations and additions as the Company may determine and as will not
impair the capacity or character of the Project for the purpose for which it is
then being used or is intended to be used.
Section 5.3. Condemnation and Loss of Title. Unless the Company terminates
this Loan Agreement and prepays the Note pursuant to Article IX, and subject to
the terms and conditions of the Reimbursement Agreement, if before the
Completion Date title to or the temporary use of all or any part of the Project
shall be taken under the exercise of the power of eminent domain, the Company
shall be obligated to continue to make the payments required under the Note. The
Company shall cause the Net Proceeds from any such condemnation award to be
applied to the restoration of the Project affected by the taking to
substantially its same condition as prior to the exercise of such power of
eminent domain with such repairs and replacements as the Company may determine
and as will not impair the capacity or character of the Project for the purpose
for which it is then being used or is intended to be used.
ARTICLE VI
SPECIAL COVENANTS AND AGREEMENTS
Section 6.1. Maintenance of Corporate Existence. The Company agrees that
it will maintain its corporate existence and will not dissolve or otherwise
dispose of all or substantially all of its assets and will not consolidate with
or merge into another Person or permit one or more other Persons to consolidate
with or merge into it, except the Company may, without violating the foregoing,
consolidate with or merge into another corporation, or permit one or more other
corporations to consolidate with or merge into it, or transfer all or
substantially all of its assets to another corporation (and thereafter dissolve
or not dissolve as it may elect) if the corporation surviving such merger or
resulting from such consolidation, or the corporation to which all or
substantially all of the assets of the Company are transferred, as the case may
be: (i) shall be a domestic corporation organized under the laws of the United
States of America, the District of Columbia or one of the states of the United
States, and (ii) shall assume in writing all of the obligations of the Company
hereunder. Notwithstanding the foregoing, the Company may at any time permit any
wholly owned subsidiary to merge into it without violating this Section. In the
event the Company consolidates or merges with another company in accordance with
this Section it shall provide written notice of such merger or consolidation to
the Trustee and the Issuer. No transfer of all or substantially all of the
Company's assets to another Person shall relieve the Company of its obligations
hereunder unless the Company has received prior written consent of the Issuer,
the Bank and the Trustee to such transfer. The Company shall not sell or lease
the Project or any part thereof except in accordance with Article VII hereof.
Section 6.2. Financial Reports. The Company shall, within thirty (30) days
following June 30 of each year, provide a written report to the LGC, the Pender
County Finance Officer (at the
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Issuer's address) and the Issuer, indicating the principal amount of Bonds
outstanding as of June 30 of such year.
Section 6.3. Project List. The Company shall maintain at the Project site
a list setting forth in reasonable detail all items constituting the Project.
Section 6.4. Inspection of Project. The Issuer, the Trustee and their duly
authorized agents shall have the right at all reasonable times, after reasonable
notice, during normal business hours to enter upon any part of the Project and
to examine and inspect the same as may be reasonably necessary for the purpose
of determining whether the Company is in compliance with its obligations under
Section 3.10 hereof or in the event of failure of the Company to perform its
obligations under Section 3.10 hereof, and the Issuer, the Trustee and their
duly authorized agents shall also have the right at all reasonable times to
examine the books and records of the Company insofar as such books and records
relate to the installation and maintenance of the Project.
Section 6.5. Use of Proceeds; Other Matters with Respect to Project, Bonds
and Tax Exemption.
(a) Use of Proceeds; Prohibited Uses of Project, etc. Neither the
Issuer nor the Company shall cause any proceeds of the Bonds to be expended
except pursuant to the Indenture and the Reimbursement Agreement. The Company
shall not (1) requisition or otherwise allow any payment out of proceeds of the
Bonds (A) if such payment is to be used for the acquisition of any property (or
an interest therein) unless the first use of such property is pursuant to such
acquisition, provided that this clause (A) shall not apply to any building (and
the equipment purchased as a part thereof, if any,) if the "rehabilitation
expenditures", as defined in Section 147(d) of the Code, with respect to the
building equal or exceed 15% of the portion of the cost of acquiring the
building (including such equipment) financed with the proceeds of the Bonds, (B)
if as a result of such payment, 25% or more of the proceeds of the Bonds would
be considered as having been used directly or indirectly for the acquisition of
land (or an interest therein), (C) if, as a result of such payment, less than
95% of the net proceeds of the Bonds, expended at the time of such requisition
would be considered as having been used for costs of the acquisition,
construction, or 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 ("Qualifying Costs") or (D) if such payment is
used to pay issuance costs (including counsel fees and placement fees) of the
Bonds in excess of an amount equal to 2% of the principal amount of the Bonds;
(2) take or omit, or permit to be taken or omitted, any other action with
respect to the use of such proceeds the taking or omission of which would result
in the loss of exemption of interest on the Bonds from Federal income taxation
under Section 144 of the Code; or (3) take or omit, or permit to be taken or
omitted, any other action the taking or omission of which would cause the loss
of such exemption.
(b) Commencement of Construction; First Users. The Company hereby
represents that neither "construction" nor "acquisition" of the Project
"commenced" more than 60 days prior to "official action" of the Issuer within
the meaning of Section 142 of the Code, which took place on November 16, 1994.
No person, firm or corporation who was a Substantial User of the Project (within
the meaning described in such term under Section 144(a) of the Code) before the
date of issuance of the Bonds and who was or will be a Substantial User of the
Project following its being
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placed in service, has received or will receive, directly or indirectly, any
proceeds from the issuance and sale of the Bonds.
(c) Economic Life of Project. The Company hereby represents that the
"average reasonably expected economic life" of the components comprising the
Project, determined pursuant to Section 147(b) of the Code, is not less than the
amount set forth in the certificates or letters of representation of the Company
delivered on the Closing Date. The weighted average maturity of the Bonds does
not exceed 120% of the remaining "average reasonably expected economic life" of
the components comprising the Project, determined pursuant to Section 147(b) of
the Code. The Company agrees that it will not make any changes in the Project
which would, at the time made, cause the "average reasonably expected economic
life" of the components of the Project, determined pursuant to Section 147(b) of
the Code, to be less than the "average reasonably expected estimated economic
life" of the components set forth in the certificates or letters of
representation of the Company delivered on the Closing Date, unless the Company
shall file with the Issuer and the Trustee an opinion of Bond Counsel that such
change to the Project will not impair the exemption of interest on the Bonds
from Federal income taxation pursuant to Section 144 of the Code.
(d) Certificate of Information; 8038 Form. The Company hereby
represents that the information contained in the certificates or letters of
representation of the Company with respect to the compliance with the
requirements of Section 103 of the Code, including the information in Form 8038
(excluding the issue number and the employer identification number of the
Issuer), filed by the Issuer with respect to the Bonds and the Project, is true
and correct in all material respects. The Company shall bear all expenses of
filling out and filing such form.
(e) 144(a)(4) Election. The Issuer hereby elects to have the
provisions of Section 144(a)(4) of the Code apply to the Bonds.
Section 6.6. Indemnification by Company. The Company shall at all times
indemnify and save harmless the Issuer, the County of Pender, the LGC, and the
Trustee from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without limitation,
reasonable counsel fees and expenses) imposed upon or incurred by or asserted
against the Issuer, the County of Pender, the LGC, or the Trustee on account of
(a) any failure of the Company to comply with any of the terms of this Agreement
or (b) any loss or damage to property or any injury to or death of any Person
pertaining to the Project or the use thereof, and shall further indemnify and
save harmless the Issuer, the LGC and the Trustee and their respective past,
present and future officers, commissioners, directors, employees and agents (the
"Indemnitees") from and against all liabilities, obligations, claims, damages,
penalties, fines, losses, reasonable costs and expenses (the "Damages")
including, without limitation:
(a) all amounts paid in settlement of any litigation commenced or
threatened against the Indemnitees, or any of them, if such settlement is
effected with the written consent of the Company;
(b) all expenses reasonably incurred in the investigation of,
preparation for or defense of any litigation, proceeding or investigation of any
nature whatsoever, commenced or threatened against the Company, the Project, or
any Indemnitees;
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(c) any judgments, penalties, fines, damages, assessments,
indemnities or contributions; and
(d) the reasonable fees of attorneys, auditors and consultants;
provided that the Damages arise out of:
(1) any failure by the Company or its officers, partners, employees
or agents, to comply with the terms of the Loan Agreement, the Note, the
Indenture (to the extent the Indenture makes requirements of the Company
which it expressly assumes herein) or any other document to which the
Company is a party delivered in connection with the sale of the Bonds (the
"Financing Documents") and any agreements, covenants, obligations, or
prohibitions set forth herein or therein;
(2) any action, suit, claim or demand contesting or affecting the
title of the Project;
(3) any breach of any representation or warranty of the Company set
forth in the Financing Documents or any certificate or any letter of
representation delivered by the Company pursuant thereto, and any claim
that any statement, representation or warranty of the Company contains or
contained any untrue or misleading statement of material fact or omits or
omitted to state any material facts necessary to make the statements made
therein not misleading in light of the circumstances under which they were
made;
(4) any action, suit, claim, proceeding or investigation of a
judicial, legislative, administrative or regulatory nature arising from or
in connection with the financing, acquisition, installation, ownership,
operation, occupation or use of the Project; or
(5) any suit, action, administrative proceeding, enforcement action,
or governmental or private action of any kind whatsoever commenced against
the Company, the Project, or any Indemnitee which might adversely affect
the validity or enforceability of the Bonds, the Financing Documents, or
the performance by the Company or the Indemnitees of any of their
respective obligations thereunder;
provided that such indemnity shall be effective only to the extent of any loss
that may be sustained by the Indemnitees in excess of the net proceeds received
by it or them from insurance, if any, required hereunder or under any of the
Financing Documents with respect to such loss, and provided further that the
benefits of this Section shall not inure to any person other than the
Indemnitees and their successors and assigns. Nothing contained herein shall
require the Company to indemnify the Issuer for any claim or liability resulting
from the Issuer's or the LGC's willful, wrongful acts or the Trustee for any
claim or liability resulting from its negligence or its willful, wrongful acts.
The Issuer may require advance payment or assurance of payment for any fees,
expenses, or costs incurred or expected to be incurred by it in connection with
the performance of any act or thing it may be called upon to do under the term
of this Agreement. The foregoing sentence does not apply to the Issuer's
obligations set forth in Sections 3.3 or 4.3 hereof.
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If any action, suit or proceeding is brought against any Indemnitee for
any loss or damage for which the Company is required to provide indemnification
under this Section, such Indemnitee shall promptly notify the Company and the
Company shall have the sole right and duty to assume, and shall assume, the
defense thereof, with full power to litigate, compromise or settle the same in
its sole discretion. Notwithstanding the foregoing, in the event the Indemnitee
is the Issuer or the LGC, in the event the Issuer or the LGC reasonably believes
there are defenses available to it that are not being pursued, the Issuer or the
LGC, as the case may be, may, in its sole discretion, hire independent counsel
to pursue its own defense, and the Company shall be liable for the cost of such
counsel. The obligations of the Company under this Section shall survive any
termination of this Agreement.
Section 6.7. Qualification of Company in North Carolina. The Company
agrees that throughout the term of this Agreement it will be qualified to do
business in the State of North Carolina.
Section 6.8. Permits or Licenses. In the event that it may be necessary
for the proper performance of this Agreement on the part of the Company or the
Issuer that any application or applications for any permit or license to do or
to perform certain things be made to any governmental or other agency by the
Company or the Issuer, the Company and the Issuer each shall, upon the request
of either, execute such application or applications.
Section 6.9. Issuer's and Trustee's Access to Project. The Issuer and the
Trustee shall have the right, upon appropriate prior notice to the Company, to
have reasonable access to the Project and the books and records of the Company
with respect to the Project during normal business hours for the purpose of
making examinations and inspections of the same.
Section 6.10. Arbitrage Covenant. The Issuer and the Company covenant that
no use of the proceeds of the Bonds or the earnings thereon will be made or
directed, and no other action will be taken, which would cause the Bonds to be
"arbitrage bonds" within the meaning of Section 148 of the Code. The Company
further covenants that (a) all actions with respect to the Bonds required by
Section 148(f) of the Code shall be taken, (b) it shall make the determinations
required by Section 510 of the Indenture at its own expense and promptly notify
the Trustee and the Issuer of the same, together with supporting calculations,
and (c) it shall within forty-five (45) days after the final payment, whether
upon redemption in whole or at maturity, of the Bonds, file with the Trustee,
and, at the request of the Issuer, with the Issuer, a statement signed by the
Company to the effect that the Company is then in compliance with its covenants
contained in clauses (a) and (b) of this sentence, together with supporting
calculations; provided, however, that if the Company shall furnish an opinion of
Bond Counsel to the Trustee to the effect that no further action by the Company
is required for such compliance with respect to the Bonds, the Company shall not
thereafter be required to deliver any such statements or calculations.
Notwithstanding the foregoing, the Company shall take such steps and provide
such information to the Issuer as may be required by the Issuer for it to meet
any requirements (relating to rebate or otherwise) required by the Code, the
Internal Revenue Service, or any other Federal or state government agency.
Section 6.11. Reference to Bonds Ineffective after Bonds Paid. Upon
payment of the Bonds and upon payment of all obligations under this Loan
Agreement, all references in this Loan Agreement to the Bonds and the Trustee
shall be ineffective, and neither the Trustee, the Issuer nor
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the holders of any of the Bonds shall thereafter have any rights hereunder
except as provided in Section 6.6 hereof and except with regard to payments of
costs and expenses of the Trustee and the Issuer by the Company.
Section 6.12. Notification of a Bankruptcy Filing or Event of Default. The
Issuer and the Company shall each notify the other, the Bank, the LGC and the
Trustee within two Business Days after either of them receives notice that an
Event of Bankruptcy has occurred with respect to the Company or the Issuer, or
after either of them becomes aware that an Event of Default (as defined in
Article VIII) has occurred.
Section 6.13. Obligations Under Indenture. The Company covenants and
agrees to perform all of the obligations imposed on the Company under the
Indenture.
Section 6.14. Undertaking to Provide Continuing Disclosure.
Notwithstanding any provisions in the Indenture to the contrary, no conversion
to a Fixed Rate shall be permitted unless the Trustee, the Issuer and the
Remarketing Agent shall have received, at least two (2) Business Days prior to
the proposed Conversion Date, a copy of a continuing disclosure agreement
imposing obligations upon the Company, the Trustee or any other responsible
party to comply with the regulations of Rule 15c2-12 promulgated under the
Securities and Exchange Act of 1934, as amended ("Rule 15c2-12"), as it may be
amended or supplemented from time to time, with respect to the Bonds, together
with such disclosure documents as the Remarketing Agent shall require in order
to comply with such Rule.
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
Section 7.1. Conditions. (a) The Company's interest in this Agreement may
be assigned in whole or in part, and the Project may be leased or sold as a
whole or in part (whether a specific element or unit or an undivided interest),
by the Company, subject, however, to the condition that no assignment, lease or
sale (other than as described in Section 6.1 hereof) shall relieve the Company
from primary liability for its obligations hereunder, and from its obligation to
utilize the Project as a manufacturing facility.
(b) Notwithstanding the provisions of Section 7.1(a) above, the
Company may sell or lease the Project and assign its interest in this Agreement
in full, and may be released from all liability under this Agreement, so long as
the Trustee receives (1) consent of the Bank, the Issuer and 66-2/3% of the
Holders of the Bonds to such transfer or assignment, (2) the purchaser or
assignee agrees in writing to assume the Company's obligations hereunder and (3)
an opinion of Bond Counsel to the effect that such assignment will not have an
adverse effect on the tax-exempt status of interest on the Bonds.
Section 7.2. Instrument Furnished to Trustee. The Company shall, within
fifteen (15) days after the delivery thereof, furnish to the Issuer and the
Trustee a true and complete copy of the agreements or other documents
effectuating any such assignment, lease or sale.
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Section 7.3. Limitation. This Agreement shall not be assigned nor shall
the Project be leased or sold, in whole or in part, except as provided in this
Article VII or in Section 6.1 hereof.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default. Each of the following events shall
constitute and is referred to in this Agreement as an "Event of Default":
(a) Failure by the Company to pay when due any payment required to
be made under Section 4.1(a) or (d) hereof, which failure shall have resulted in
an "Event of Default" under clause (a), (b) or (c) of the first paragraph of
Section 901 of the Indenture.
(b) Failure by the Company to observe and perform any covenant,
condition or agreement on its part to be observed or performed in the Loan
Agreement, other than as referred to in Section 8.1(a) above, which failure
shall continue for a period of thirty (30) days after written notice, specifying
such failure and requesting that it be remedied, is given to the Company by the
Issuer or the Trustee, unless the Issuer and the Trustee shall agree in writing
to an extension of such time prior to its expiration; provided, however, if the
failure stated in the notice cannot be corrected within the applicable period,
the Issuer and the Trustee will not unreasonably withhold their consent to an
extension of such time if corrective action is instituted by the Company within
the applicable period and is being diligently pursued.
(c) The dissolution or liquidation of the Company or the filing by
the Company of a voluntary petition in bankruptcy, or failure by the Company
promptly to lift any execution, garnishment or attachment of such consequence as
will impair its ability to carry out its obligations under this Agreement, or
the entry of an order of relief in any involuntary bankruptcy proceedings
against the Company, or an assignment by the Company for the benefit of its
creditors, or the entry by the Company into an agreement of composition with its
creditors, or the approval by a court of competent jurisdiction of a petition
applicable to the Company in any proceeding for its reorganization instituted
under the provisions of any bankruptcy act, or under any similar act which may
hereafter be enacted. The term "dissolution or liquidation of the Company," as
used in this subsection, shall not be construed to include the cessation of the
corporate existence of the Company resulting either from a merger or
consolidation of the Company into or with another corporation or a dissolution
or liquidation of the Company following a transfer of all or substantially all
of its assets as an entirety, under the conditions permitting such actions
contained in Section 6.1 hereof.
Section 8.2. Force Majeure. The provisions of Section 8.1(b) hereof are
subject to the following limitation: if by reason of acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders or
other acts of any kind of the Government of the United States or of the State of
North Carolina, or any other sovereign entity or body politic, or any
department, agency, political subdivision, court or official of any of them, or
any civil or military authority; insurrections; riots; epidemics; landslides;
lightning; earthquakes, volcanoes; fires; hurricanes; tornadoes; storms; floods;
washouts; droughts; arrests; restraint of government and people; civil
disturbances; explosions, breakage or accident to machinery; partial or entire
failure of utilities; or any cause or event not reasonably within the control of
the Company, the Company is unable in whole
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or in part to carry out any one or more of its agreements or obligations
contained herein, other than its obligations under Sections 4.1(a) and (d), 6.1,
6.2, 6.5, 9.3, 9.4 and 10.1 hereof, the Company shall not be deemed in default
by reason of not carrying out said agreement or agreements or performing said
obligation or obligations during the continuance of such inability. The Company
agrees, however, to use its best efforts to remedy with all reasonable dispatch
the cause or causes preventing it from carrying out its agreements; provided,
that the settlement of strikes, lockouts and other industrial disturbances shall
be entirely within the discretion of the Company, and the Company shall not be
required to make settlement of strikes, lockouts and other industrial
disturbances by acceding to the demands of the opposing party or parties when
such course is in the judgment of the Company unfavorable to the Company.
Section 8.3. Remedies on Default. Whenever any Event of Default hereunder
shall have happened and be continuing, any one or more of the following remedial
steps may be taken:
(a) The Issuer with the prior consent of the Trustee, or the
Trustee, may at its option, and shall, if acceleration occurs or is declared
pursuant to Section 902 of the Indenture, declare all unpaid amounts payable
under this Agreement, together with interest then due thereon, to be immediately
due and payable, whereupon the same shall become due and payable.
(b) The Issuer with the prior consent of the Trustee, or the
Trustee, may take any action at law or in equity to collect the payments then
due and thereafter to come due hereunder, or to enforce performance and
observance of any obligation, agreement or covenant of the Company under this
Agreement.
Any amounts collected pursuant to action taken under this Section shall be
applied in accordance with the Indenture.
In case any proceeding taken by the Issuer or the Trustee on account of
any Event of Default shall have been discontinued or abandoned for any reason,
or shall have been determined adversely to the Issuer or the Trustee, then and
in every case the Issuer and the Trustee shall be restored to their former
positions and rights hereunder, respectively, and all rights, remedies and
powers of the Issuer and the Trustee shall continue as though no such proceeding
has been taken.
Section 8.4. No Remedy Exclusive. No remedy conferred upon or reserved to
the Issuer or the Trustee by this Agreement is intended to be exclusive of any
other available 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. No
delay or omission to exercise any right or power accruing upon 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. In order to entitle the Issuer or the
Trustee to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice other than such notice as may be required in this
Article.
Section 8.5. Agreement to Pay Attorneys' Fees and Expenses. In the event
the Company should default under any of the provisions of this Agreement and the
Issuer or the Trustee should employ attorneys or incur other expenses for the
collection of payments due hereunder or for the
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enforcement of performance or observance of any obligation or agreement on the
part of the Company contained herein, the Company agrees that it will on demand
therefor pay to the Issuer or the Trustee, as the case may be, the reasonable
fees of such attorneys and such other reasonable expenses so incurred. In the
event the Company fails to pay such amount, the Trustee may, to the extent of
funds available under the Indenture, pay such fees and expenses.
Section 8.6. Waiver of Breach. In the event that any agreement contained
herein shall be breached by either the Company or the Issuer and such breach
shall thereafter 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. In view of the assignment of the Issuer's rights in and under
this Agreement to the Trustee under the Indenture, the Issuer shall have no
power to waive any default hereunder by the Company without the consent of the
Trustee, and the Trustee may exercise any of the rights of the Issuer hereunder.
ARTICLE IX
REDEMPTION OF BONDS
Section 9.1. Optional Redemption of Bonds. Prior to the Conversion Date,
the Company shall have and is hereby granted the option to prepay installments
payable hereunder for the purpose of redeeming prior to maturity the Bonds, in
whole or in part, pursuant to Section 301(c) of the Indenture, but only after
receipt of prior written consent of the Bank to such prepayment. After the
Conversion Date, the Company shall have and is hereby granted the option to
prepay installments payable hereunder for the purpose of redeeming the Bonds
prior to maturity, in whole or in part, pursuant to Section 301(e) of the
Indenture.
Section 9.2. Extraordinary Optional Redemption of Bonds. The Company shall
have and is hereby granted the option to prepay installments payable hereunder
in whole for the purpose of redeeming the Bonds prior to maturity, pursuant to
Section 301(a) of the Indenture, upon the occurrence of any of the following,
but only after receipt of prior written consent from the Bank:
(a) The Project shall have been damaged or destroyed (i) to such
extent that it cannot be reasonably restored within a period of six months to
the condition thereof immediately preceding such damage or destruction, or (ii)
to such extent that the Company is thereby prevented, in the Company's judgment,
from carrying on its normal operation of the Project for a period of six months,
or (iii) to such extent that it would not be economically feasible, in the
Company's judgment, for the Company to repair the Project.
(b) Title to, or the temporary use for a period of six months or
more of, all or substantially all of the Project, or such part thereof as shall
materially interfere, in the Company's judgment, with the operation of the
Project for the purpose for which the Project is designed, shall have been taken
under the exercise of the power of eminent domain by any governmental body or by
any person, firm or corporation acting under governmental authority (including
such a taking or takings as results in the Company being thereby prevented from
carrying on its normal operation of the Project for a period of six months).
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(c) Changes which the Company cannot reasonably control or overcome,
in the economic availability of materials, supplies, labor, equipment and other
properties and things necessary for the efficient operation of the Project shall
have occurred, or technological or other changes shall have occurred which in
the judgment of the Company, render the continued operation of the Project
uneconomic for such purposes.
(d) As a result of any changes in the Constitution of North Carolina
or the Constitution of the United States of America or of legislative or
administrative action (whether state or Federal) or by final decree, judgment or
order of any court or administrative body (whether state or Federal) entered
after the contest thereof by the Company in good faith, this Agreement shall
have become void or unenforceable or impossible of performance in accordance
with the intent and purposes of the parties as expressed in this Agreement, or
unreasonable burdens or excessive liabilities shall have been imposed on the
Company in respect to the Project, including, without limitation, Federal, state
or other ad valorem, property, income or other taxes not being imposed on the
date of this Agreement.
Section 9.3. Mandatory Prepayment of Bonds Upon a Determination of
Taxability. In the event that there shall occur a Determination of Taxability,
as hereinafter defined, the Company agrees to prepay in whole, or in part to the
extent prepayment of fewer than all of the Bonds would result in the interest
payable on the Bonds remaining Outstanding being excluded from gross income for
Federal income tax purposes, within thirty days after the occurrence of the
Determination of Taxability, the installments payable hereunder for the purpose
of redeeming the Bonds prior to maturity (including for such purpose Bonds
deemed to be paid in accordance with Article IX of the Indenture), plus accrued
interest to the redemption date, plus a premium equal to 3% of the principal
amount of Bonds to be redeemed, plus any reasonable expenses of redemption and
Trustee's and Paying Agent's reasonable fees and charges, but after the
deduction of the amounts, if any, then in the Bond Fund.
The term "Determination of Taxability" shall mean any determination,
decision or decree made in regard to Section 103 of the Code, by the
Commissioner or any District Director of the Internal Revenue Service, or, if
there is an appeal from any such determination by a Commissioner or District
Director, when a final administrative or judicial determination has been made,
or by a final decision of any court of competent jurisdiction, or the receipt by
the Trustee of an opinion of Bond Counsel, that the interest paid or payable on
any Bond is or was includable in the gross income of a holder thereof for
Federal income tax purposes (other than a Holder who is a Substantial User of
the Project or Related Person as such terms are defined in the Code and
regulations thereunder and other than a Holder who includes such interest in
gross income for purposes of any alternative minimum income tax computations).
However, no such determination, decision or decree will be considered final for
this purpose unless the Company has been given written notice and, if it is so
desired and is legally allowed, has been afforded the opportunity to contest the
same, either directly or in the name of any Holder of a Bond. Furthermore, no
opinion of Bond Counsel shall be considered final for this purpose unless the
Company has been given written notice thereof and the opportunity (but not
longer than 30 days) to provide a second opinion of Bond Counsel. In the event
the opinions provided to the Trustee conflict, the Trustee shall, at the cost of
the Company, obtain a third opinion of Bond Counsel. If the opinion of such Bond
Counsel concurs with the original opinion delivered to the Trustee, the Trustee
shall proceed with the redemption of Bonds as described above.
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Notwithstanding the foregoing provisions, if a final determination, decision,
decree or opinion has not occurred within three (3) years after the Company
first receives written notice as described above, the Company shall prepay the
amounts payable under this Agreement on such date as is three (3) years from the
date that it first received written notice and the Trustee shall proceed with
the redemption of the Bonds as described above.
The obligation of the Company under this Section 9.3 shall survive any
termination of this Agreement.
Section 9.4. Mandatory Prepayment of Bonds Upon Cessation of Operation. In
the event of a "cessation of operation" of the Project as an "industrial project
for industry," as defined in the Act, the Company agrees to prepay the Bonds in
whole, together with accrued interest to the redemption date on the first
Interest Payment Date that is not less than 90 days after the Issuer has
notified the Company and the Bank in writing that the Company has, in the
opinion of the Issuer, ceased to operate the project as an "industrial project
for industry." A cessation of operation shall not be deemed to have occurred
until 90 days shall have elapsed after written notice has been given to the
Company and the Bank by the Issuer that operations at the Project shall have
ceased and the Company shall not have demonstrated to the satisfaction of the
Issuer that the Company has resumed the operations of the Project as an
"industrial project for industry" within the meaning of the Act or that the
Company is, in good faith, seeking to arrange resumption of an economically
reasonable operation of the Project by the Company or, if permitted under this
Loan Agreement, by an assignee or purchaser of the Project as such an
"industrial project for industry"; provided that a temporary shutdown due to a
strike or other labor dispute, lack of fuel or similar occurrence shall not be
deemed a cessation of operation.
Section 9.5. Amounts Payable by Company. (a) In the case of a prepayment
for the redemption of the Bonds in whole pursuant to Section 9.1, 9.2, 9.3 or
9.4 hereof, the amount to be prepaid by the Company hereunder (which shall fully
discharge the obligation of the Company to make payments hereunder) will be a
sum sufficient, together with other funds deposited with the Trustee and
available for such purpose, to pay (1) the principal of all Bonds then
outstanding, plus interest accrued and to accrue to the date upon which the
Bonds will be redeemed, plus premium, if any, pursuant to the Indenture, (2) all
reasonable and necessary fees and expenses of the Trustee and any Paying Agent
accrued and to accrue through final payment of the Bonds, and (3) all other
liabilities of the Company accrued and to accrue under this Agreement.
(b) In case of a prepayment for the redemption of the Bonds in part
pursuant to Section 9.1 hereof, the amount to be prepaid by the Company
hereunder will be a sum sufficient, together with other funds deposited with the
Trustee and available for such purpose, to pay (1) the principal of all Bonds
then being redeemed, plus interest accrued and to accrue to the date upon which
the Bonds will be redeemed, plus premium, if any, pursuant to the Indenture, (2)
all reasonable and necessary fees and expenses of the Trustee and any Paying
Agent accrued and to accrue in connection with said redemption, and (3) all
other liabilities of the Company accrued or to accrue under this Agreement in
connection with said redemption.
(c) The Company agrees to and shall pay to the Trustee any amount
required to be paid by it under this Section 9.5, and the Trustee shall be
directed to use the moneys so paid to it to
22
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redeem the Bonds pursuant to the provisions of the Indenture. Any amount
required to be paid under this Section 9.5, shall not be deemed to be paid until
it is received by the Trustee.
Section 9.6. Procedure for Exercise of Options. To exercise an option
granted in Section 9.1 or 9.2 hereof, the Company shall give written notice to
the Issuer and the Trustee, which shall specify therein the date upon which
redemption of the Bonds will be made and the applicable redemption provisions of
the Indenture. Such date shall be not less than 45 nor more than 90 days from
the date the notice is given. Upon receipt of such notice, the Issuer shall
forthwith take all steps (other than the payment of the money required for such
redemption) necessary under the applicable provisions of the Indenture to effect
redemption of all or part, as the case may be, of the Bonds on the earliest
practicable date thereafter on which such redemption may be made under the
applicable provisions of the Indenture.
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. Except as otherwise provided in this Agreement, all
notices, certificates or other communications shall be sufficiently given and
shall be deemed given when mailed by registered or certified mail, postage
prepaid, to the Issuer, the Company, the Trustee, the Bank, or the Remarketing
Agent. Facsimiles of each notice, certificate or other communication given
hereunder to the Company shall, in addition to mailing, be telecopied to the
Company, and copies of each notice, certificate or other communication given
hereunder by or to the Company shall be mailed by registered or certified mail,
postage prepaid, to the Trustee and the Bank; provided, however, that the
effectiveness of any such notice shall not be affected by the failure to
telecopy any such facsimiles or to send any such copies. Notices, certificates
or other communications shall be sent to the following addresses:
Company: Leslie-Locke, Inc.
4501 Circle 75 Parkway, Suite F-6300
Atlanta, Georgia 30339
Attention: President
Bank: Branch Banking and Trust Company
Post Office Box 1727
202 North Third Street
Wilmington, North Carolina 28402
Attention: Brett A. Barnes
with a copy to: Smith Helms Mulliss & Moore, L.L.P.
Post Office Box 31247 (28231)
227 North Tryon Street
Charlotte, North Carolina 28202
Attention: J. Richard Hazlett, Esquire
Issuer: The Pender County Industrial Facilities and Pollution
Control Financing Authority
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c/o Clerk, Pender County Board of Commissioners
The York House
Burgaw, North Carolina 28425
Attention: Chairman
with a copy to: Pender County Attorney
Courthouse
Post Office Box 5
Burgaw, North Carolina 28425
Attention: C. David Morrison
Trustee and Norwest Bank Minnesota, National Association
Paying Agent: Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Remarketing Agent: Blount Parrish & Roton, Inc.
10 Court Square (36104)
Post Office Drawer 5212
Montgomery, Alabama 36103
Attention: James D. Reynolds, Jr.
Any of the foregoing may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 10.2. Severability. If any provision of this Agreement shall be
held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
Section 10.3. Execution of Counterparts. This 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;
except that, to the extent that this Agreement shall constitute personal
property under the Uniform Commercial Code of North Carolina, no security
interest in this Agreement may be created or perfected through the transfer or
possession of any counterpart of this Agreement other than the original
counterpart, which shall be the counterpart containing the receipt therefor
executed by the Trustee following the signatures to this Agreement.
Section 10.4. Amounts Remaining in Bond Fund. It is agreed by the parties
hereto that after payment in full of (i) the Bonds (or the provision for payment
thereof having been made in accordance with the provisions of the Indenture),
(ii) the fees, charges and expenses of the Trustee and Paying Agents in
accordance with the Indenture, (iii) all amounts owing to the Bank under the
Reimbursement Agreement, and (iv) all other amounts required to be paid under
this Agreement and the Indenture, any amounts remaining in the Bond Fund shall
belong to and be paid by the Trustee to the Company.
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Section 10.5. Amendments, Changes and Modifications. Except as otherwise
provided in this Agreement or the Indenture, subsequent to the initial issuance
of Bonds and prior to payment in full of the Bonds (or the provision for payment
thereof having been made in accordance with the provisions of the Indenture),
this Agreement may not be effectively amended, changed, modified, altered or
terminated nor any provision waived, without the written consent of the Trustee.
Section 10.6. Governing Law. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State of North
Carolina.
Section 10.7. Authorized Company Representative. An Authorized Company
Representative shall act on behalf of the Company whenever the approval of the
Company is required or the Company requests the Issuer to take some action, and
the Issuer and the Trustee shall be authorized to act on any such approval or
request and neither the Issuer nor the Company shall have any complaint against
the other or against the Trustee as a result of any such action taken at the
direction of the Authorized Company Representative.
Section 10.8. Term of the Agreement. This Agreement shall be in full force
and effect from the date hereof and shall continue in effect so long as any
Bonds are outstanding or the Trustee shall hold any moneys under Article IX of
the Indenture, whichever is later. All representations and certifications by the
Company as to all matters affecting the tax-exempt status of the Bonds shall
survive the termination of this Agreement.
Section 10.9. No Personal Liability. No covenant or agreement contained in
this Agreement shall be deemed to be the covenant or agreement of any official,
officer, agent, attorney, or employee of the Issuer or the Company in his
individual capacity, and no such person shall be subject to any personal
liability or accountability by reason of the issuance thereof.
Section 10.10. Parties in Interest. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Company and their
respective successors and assigns, and no other person, firm or corporation
shall have any right, remedy or claim under or by reason of this Agreement;
provided, however, that any obligation of the Issuer created by or arising out
of this Agreement shall be payable solely out of the revenues derived from this
Agreement or the sale of the Bonds or income earned on invested funds as
provided in the Indenture and shall not constitute, and no breach of this
Agreement by the Issuer shall impose, a pecuniary liability upon the Issuer or a
charge upon the Issuer's general credit or against its taxing powers.
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IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be executed in their respective corporate names by their respective duly
authorized officers, all as of the date first above written.
(Corporate Seal) THE PENDER COUNTY INDUSTRIAL
FACILITIES AND POLLUTION CONTROL
FINANCING AUTHORITY
Attest:
By:
- ------------------------- ----------------------------
Secretary Chairman
(Corporate Seal) LESLIE-LOCKE, INC.
Attest:
By:
- ------------------------- ----------------------------
Secretary Its:
----------------------------
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RECEIPT
Receipt of the foregoing original counterpart of the Loan Agreement dated
as of June 1, 1997, between The Pender County Industrial Facilities and
Pollution Control Financing Authority and Leslie-Locke, Inc. is hereby
acknowledged.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
-----------------------------
Corporate Trust Officer
3
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EXHIBIT A
DESCRIPTION OF PROJECT
The Project consists of the construction of a 156,000 square foot
expansion to the Company's existing facility, and the acquisition and
installation of equipment therein for the manufacture of building products,
constituting an industrial facility, to be located at 295 McKay Road, Burgaw,
North Carolina 28525.
A-1
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EXHIBIT B
Promissory Note
Leslie-Locke, Inc.
$7,000,000 June 13, 1997
Leslie-Locke, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to The Pender County Industrial Facilities and
Pollution Control Financing the Authority (the "Issuer"), or assigns, on June 1,
the principal sum of SEVEN MILLION DOLLARS ($7,000,000) subject to prior
payment, with interest on the unpaid principal sum, from June 13, 1997, until
said principal sum shall be paid, and to the extent permitted by law, interest
on overdue installments of such interest, at the then interest rate provided in
the Bonds, as hereinafter defined. Interest hereunder shall be payable at the
time interest is payable on the Bonds.
Payments shall be made in lawful money of the United States of America in
immediately available funds on the date payment is due, at the principal
corporate trust office of Norwest Bank Minnesota, National Association (the
"Trustee"), in Minneapolis, Minnesota, or at such other place as the Trustee may
direct in writing.
Anything herein to the contrary notwithstanding, any amount held by the
Trustee in the Bond Fund referred to in the Indenture, hereinafter defined,
shall be credited against the next succeeding payment hereunder and shall reduce
the payment to be made by the Company. If the amount held by the Trustee in the
Bond Fund should be sufficient to pay at the times required the principal of,
premium, if any, and interest on the Bonds then remaining unpaid and to pay all
fees and expenses of the Trustee and the Paying Agents accrued and to accrue
through final payment of the Bonds, then the Company shall not be obligated to
make any further payments hereunder, except to the extent losses may be incurred
in connection with investment of moneys in the Bond Fund.
The Issuer, by the execution of the Indenture, as hereinafter defined, and
the assignment form at the foot of this Note, is assigning this Note and the
payments thereon to the Trustee acting pursuant to an Indenture of Trust dated
as of June 1, 1997 (the "Indenture"), between the Issuer and the Trustee as
security for the Issuer's $7,000,000 Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997 (the "Bonds"), as defined in the
Indenture, all as issued pursuant to the Indenture. Payments of principal of and
interest on this Note shall be made directly to the Trustee for the account of
the Issuer pursuant to such assignment and applied only to the principal of and
interest on the Bonds. All obligations of the Company hereunder shall terminate
when all sums due and to become due pursuant to the Indenture, this Note, the
Loan Agreement, hereinafter defined, and the Bonds have been paid.
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In addition to the payments of principal and interest specified in the
first paragraph hereof, the Company shall also pay such additional amounts, if
any, which, together with other moneys available therefor pursuant to the
Indenture, may be necessary to provide for payment when due of principal of
(whether at maturity, by acceleration, upon purchase, upon call for mandatory,
extraordinary or optional redemption, or otherwise), premium, if any, and
interest on the Bonds.
The Company shall have the option or may be required to prepay this Note
in whole or in part upon the terms and conditions and in the manner specified in
the Loan Agreement dated as of June 1, 1997 (the "Loan Agreement"), between the
Issuer and the Company.
This Note is issued pursuant to the Loan Agreement in satisfaction of the
Company's payment obligation in Section 4.1 thereof and is entitled to the
benefits and subject to the conditions thereof, including the provisions of
Section 4.2 thereof that the Company's obligations thereunder and hereunder
shall be unconditional as provided in such Section 4.2. All the terms,
conditions and provisions of the Loan Agreement and the applicable provisions of
the Bonds and the Indenture are, by this reference thereto, incorporated herein
as a part of this Note.
In case an Event of Default, as defined in the Loan Agreement, shall
occur, the principal of and interest on this Note may be declared immediately
due and payable as provided in the Loan Agreement. This Note shall be governed
by, and construed in accordance with, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in its
corporate name and its seal to be hereunto affixed and attested by its duly
authorized officers, all as of the date first above written.
LESLIE-LOCKE, INC.
Attest:
By: By:
----------------------- -----------------------
Secretary President
B-2
<PAGE>
ASSIGNMENT
The Pender County Industrial Facilities and Pollution Control Financing
Authority (the Issuer), hereby irrevocably assigns, without recourse, the
foregoing Note to Norwest Bank Minnesota, National Association, Trustee under an
Indenture of Trust dated as of June 1, 1997 (the Indenture), between the Issuer
and the Trustee, and hereby directs Leslie-Locke, Inc. (the Company) as the
maker of the Note to make all payments of principal of and interest thereon
directly to the Trustee at its principal corporate trust office in Minneapolis,
Minnesota, or at such other place as the Trustee may direct in writing. Such
assignment is made as security for the payment of the Issuer's $7,000,000
Industrial Development Revenue Bonds (Leslie-Locke, Inc. Project), Series 1997,
issued pursuant to the Indenture.
THE PENDER COUNTY INDUSTRIAL
FACILITIES AND POLLUTION
CONTROL FINANCING AUTHORITY
By:
----------------------------------
Chairman, Board of Commissioners
June 13, 1997
B-2
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES RELATING TO TAX MATTERS
WITH RESPECT TO THE BONDS AND THE PROJECT
1. Not less than 95% of the net proceeds of the Bonds (consisting of the
face amount of the Bonds less any original issue discount plus any original
issue premium, but including issuance costs) shall be used to provide facilities
to be used in the manufacturing or production of tangible personal property,
including facilities that are directly related and ancillary to such
manufacturing facilities and located on the same site as the manufacturing
facilities; provided, however, that not more than twenty-five percent (25%) of
the net proceeds shall be used to provide such ancillary facilities.
2. The aggregate amount of capital expenditures (as defined by Section
1.103- 10(b)(2) of the Tax Regulations to include any expenditure which was or
could have been treated as a capital expenditure under any rule or election
under the Code) with respect to facilities located in the same incorporated
municipality as the Project, or which are contiguous or integrated facilities,
the principal user of which was or is the Company or any Related Person, paid or
incurred during the period beginning three years before the date of issuance of
the Bonds, and financed otherwise than out of the Bond proceeds (not including
investment earnings thereon) and otherwise than out of the proceeds of other
outstanding issues to which Section 144(a)(2) of the Code applies, is
$_________________.
3. The aggregate face amount of all prior issues outstanding as of the
date of issuance of the Bonds (whether or not the issuer of each issue is the
same) to which Section 144(a) of the Code or Section 103(b)(6) of the Internal
Revenue Code of 1954, as amended applies, the proceeds of which were or will be
used to any extent with respect to facilities located in the same incorporated
municipality as the incorporated municipality in which the Project is located
and the principal user of which is the Company or a Related Person, is $-0-. The
Issuer hereby elects to have the provisions of Section 144(a) of the Code apply
to the Bonds. The Company and, at the direction of the Company, the Issuer,
shall file any reports or statements and take any other action as may be
required from time to time with respect to the qualification of the Bonds as an
exempt small issue within the meaning of Section 144(a) of the Code.
4. (a) During the period commencing 15 days before the date of issuance of
the Bonds, neither the Company nor any Related Person (or group of Related
Persons which includes the Company) has guaranteed, arranged, participated in,
assisted with, borrowed the proceeds of, or leased facilities financed by,
obligations issued under Section 144(a) of the Code by any state or local
governmental unit or any constituted authority empowered to issue obligations by
or on behalf of any state or local governmental unit other than the Issuer.
Except for the Company or any "Related Person" (or group of "Related Persons"),
no Person has (1) guaranteed, arranged, participated in, assisted with or paid
any portion of the cost of the issuance of the Bonds, or
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(2) provided any property or any franchise, trademark or trade name (within the
meaning of Section 1253 of the Code) which is to be used in connection with the
Project.
(b) During the period commencing on the date of issuance of the Bonds and
ending 15 days thereafter, there will be no obligations issued under Section
144(a) of the Code which are guaranteed by the Company or any Related Person (or
group of Related Persons which includes the Company) or which are issued with
the assistance or participation of, or by arrangement with, the Company or any
Related Person (or group of Related Persons which includes the Company) without
the written opinion of Hunton & Williams to the effect that the issuance of such
obligations will not adversely affect their opinion as to the exemption from
present federal income tax of interest on the Bonds. Other than the Company or
any Related Person (or group of Related Persons including the Company), no
Person has (i) guaranteed, arranged, participated in, assisted with the issuance
of, or paid any portion of the cost of the issuance of, any of the Bonds, and
(ii) provided any property or any franchise, trademark or trade name (within the
meaning of Section 1253 of the Code) which is to be used in connection with the
Project.
(c) The Bonds are not being issued as part of an issue the interest of
which is exempt from federal income taxation under any other provision of law
other than Section 144(a) of the Code.
5. No portion of the Bond proceeds is being used to provide a facility, a
purpose of which is retail food and beverage services, automobile sales or
service, or the provision of recreation or entertainment. No portion of the Bond
proceeds is being used to provide any private or commercial golf course, country
club, health 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,
racetrack, skybox or other luxury box, airplane, store the principal business of
which is the sale of alcoholic beverages for consumption off premises, or
facility used primarily for gambling. No portion of the Bond proceeds is being
used directly or indirectly to provide residential real property for family
units.
6. (a) As of the date of issuance of the Bonds, the sum of (i) the
aggregate authorized face amount of the Bonds allocated in accordance with
Section 144(a)(10)(C) of the Code to the Company or any Related Person to the
Company plus (ii) the aggregate authorized face amount of any outstanding
tax-exempt facility-related bonds (as defined in Section 144(a)(10)(B) of the
Code) of the Company, or any Related Person to the Company, does not exceed $40
million.
(b) As of the date of issuance of the Bonds, the sum of (i) the aggregate
authorized face amount of the Bonds allocated in accordance with Section
144(a)(10)(C) of the Code to any known test-period beneficiary, as defined in
Section 144(a)(10)(D) of the Code, or any Related Person to such test-period
beneficiary (other than the Company or any Related Person to the Company) plus
(ii) the aggregate authorized face amount of any outstanding tax-exempt
facility-related bonds (as defined in Section 144(a)(10)(B) of the Code) of such
known test-period
C-2
<PAGE>
beneficiary, or any Related Person thereto (other than the Company or any
Related Person to the Company), does not exceed $40 million.
7. There are no other bonds to which Section 144(a) of the Code applies
which, together with the Bonds, are to be used with respect to (a) a single
building, (b) an enclosed shopping mall, or (c) a strip of offices, stores or
warehouses, using substantial common facilities with the Project or a portion
thereof.
8. Bond proceeds were used only with respect to either real or personal
property the first use of which was pursuant to such acquisition with the Bond
proceeds.
9. (a) No portion of the Bond proceeds has been used directly or
indirectly for the acquisition of land or any interest therein to be used for
the purpose of farming.
(b) Less than 25% of the Bond proceeds will be used directly or indirectly
to reimburse the Company for the cost of the acquisition of land to be used for
purposes other than farming.
10. The Bonds will not be federally guaranteed within the meaning of
Section 149(b) of the Code. For purposes of this representation, no principal
user of the financed property has entered into any leases of the financed
property to, or sales or service contracts with, any federal government agency.
11. The costs of the issuance of the Bonds including, but not limited to,
underwriter's spread, counsel fees, financial advisor fees, rating agency fees,
trustee fees incurred in connection with the borrowing, paying agent and
certifying and authenticating agent fees related to the issuance of the Bonds,
accountant fees, printing costs and costs incurred in obtaining public approval
of the Bonds, paid from the proceeds of the Bonds or investment earnings
thereon, will not exceed 2% of the aggregate face amount of the Bonds.
12. The Company hereby represents that the information contained in the
certificates or letters of representation of the Company with respect to the
compliance with the requirements of Section 103 of the Code, including the
information in Form 8038 (excluding the issue number and the employer
identification number of the Issuer), filed by the Company on behalf of the
Issuer with respect to the Bonds, and the Tax Code Compliance Questionnaire
completed by the Company and dated April 18, 1997.
C-3
Exhibit 10.39 - Promissory Note
Promissory Note
Leslie-Locke, Inc.
$7,000,000 June 13, 1997
Leslie-Locke, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to The Pender County Industrial Facilities and
Pollution Control Financing the Authority (the "Issuer"), or assigns, on June 1,
the principal sum of SEVEN MILLION DOLLARS ($7,000,000) subject to prior
payment, with interest on the unpaid principal sum, from June 13, 1997, until
said principal sum shall be paid, and to the extent permitted by law, interest
on overdue installments of such interest, at the then interest rate provided in
the Bonds, as hereinafter defined. Interest hereunder shall be payable at the
time interest is payable on the Bonds.
Payments shall be made in lawful money of the United States of America in
immediately available funds on the date payment is due, at the principal
corporate trust office of Norwest Bank Minnesota, National Association (the
"Trustee"), in Minneapolis, Minnesota, or at such other place as the Trustee may
direct in writing.
Anything herein to the contrary notwithstanding, any amount held by the
Trustee in the Bond Fund referred to in the Indenture, hereinafter defined,
shall be credited against the next succeeding payment hereunder and shall reduce
the payment to be made by the Company. If the amount held by the Trustee in the
Bond Fund should be sufficient to pay at the times required the principal of,
premium, if any, and interest on the Bonds then remaining unpaid and to pay all
fees and expenses of the Trustee and the Paying Agents accrued and to accrue
through final payment of the Bonds, then the Company shall not be obligated to
make any further payments hereunder, except to the extent losses may be incurred
in connection with investment of moneys in the Bond Fund.
The Issuer, by the execution of the Indenture, as hereinafter defined, and
the assignment form at the foot of this Note, is assigning this Note and the
payments thereon to the Trustee acting pursuant to an Indenture of Trust dated
as of June 1, 1997 (the "Indenture"), between the Issuer and the Trustee as
security for the Issuer's $7,000,000 Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997 (the "Bonds"), as defined in the
Indenture, all as issued pursuant to the Indenture. Payments of principal of and
interest on this Note shall be made directly to the Trustee for the account of
the Issuer pursuant to such assignment and applied only to the principal of and
interest on the Bonds. All obligations of the Company hereunder shall terminate
when all sums due and to become due pursuant to the Indenture, this Note, the
Loan Agreement, hereinafter defined, and the Bonds have been paid.
<PAGE>
In addition to the payments of principal and interest specified in the
first paragraph hereof, the Company shall also pay such additional amounts, if
any, which, together with other moneys available therefor pursuant to the
Indenture, may be necessary to provide for payment when due of principal of
(whether at maturity, by acceleration, upon purchase, upon call for mandatory,
extraordinary or optional redemption, or otherwise), premium, if any, and
interest on the Bonds.
The Company shall have the option or may be required to prepay this Note
in whole or in part upon the terms and conditions and in the manner specified in
the Loan Agreement dated as of June 1, 1997 (the "Loan Agreement"), between the
Issuer and the Company.
This Note is issued pursuant to the Loan Agreement in satisfaction of the
Company's payment obligation in Section 4.1 thereof and is entitled to the
benefits and subject to the conditions thereof, including the provisions of
Section 4.2 thereof that the Company's obligations thereunder and hereunder
shall be unconditional as provided in such Section 4.2. All the terms,
conditions and provisions of the Loan Agreement and the applicable provisions of
the Bonds and the Indenture are, by this reference thereto, incorporated herein
as a part of this Note.
In case an Event of Default, as defined in the Loan Agreement, shall
occur, the principal of and interest on this Note may be declared immediately
due and payable as provided in the Loan Agreement. This Note shall be governed
by, and construed in accordance with, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in its
corporate name and its seal to be hereunto affixed and attested by its duly
authorized officers, all as of the date first above written.
LESLIE-LOCKE, INC.
Attest:
By: By:
------------------------ -------------------------
Secretary President
<PAGE>
ASSIGNMENT
The Pender County Industrial Facilities and Pollution Control Financing
Authority (the Issuer), hereby irrevocably assigns, without recourse, the
foregoing Note to Norwest Bank Minnesota, National Association, Trustee under an
Indenture of Trust dated as of June 1, 1997 (the Indenture), between the Issuer
and the Trustee, and hereby directs Leslie-Locke, Inc. (the Company) as the
maker of the Note to make all payments of principal of and interest thereon
directly to the Trustee at its principal corporate trust office in Minneapolis,
Minnesota, or at such other place as the Trustee may direct in writing. Such
assignment is made as security for the payment of the Issuer's $7,000,000
Industrial Development Revenue Bonds (Leslie-Locke, Inc. Project), Series 1997,
issued pursuant to the Indenture.
THE PENDER COUNTY INDUSTRIAL
FACILITIES AND POLLUTION CONTROL
FINANCING AUTHORITY
By:
---------------------------------
Chairman, Board of Commissioners
, 1997
- --------------
Exhibit 10.40 - Guaranty Agreement
==============================================================================
GUARANTY AGREEMENT
Dated as of June 1, 1997
between
LESLIE BUILDING PRODUCTS, INC.
and
BRANCH BANKING AND TRUST COMPANY
relating to
Letter of Credit and Reimbursement Agreement of
Leslie-Locke, Inc.
in connection with
The Pender County Industrial Facilities
and Pollution Control Financing Authority $7,000,000
Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project) Series 1997
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
Parties.................................................................... 1
Preliminary Statements..................................................... 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.........................................2
SECTION 1.02. Computation of Time Periods...................................3
SECTION 1.03. Accounting Terms..............................................3
SECTION 1.04. Other Capitalized Terms.......................................3
ARTICLE II
THE GUARANTY
SECTION 2.01. The Guaranty..................................................3
SECTION 2.02. Guaranty Unconditional........................................3
SECTION 2.03. Operation of Guaranty.........................................3
SECTION 2.04. Obligation of Guarantor Absolute..............................4
SECTION 2.05. Waiver of Notice..............................................4
SECTION 2.06. Subordination.................................................5
SECTION 2.07. White Metals Bankruptcy and Related Litigation................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Guarantor...............5
ARTICLE IV
COVENANTS OF THE GUARANTOR
SECTION 4.01. Affirmative Covenants.........................................8
SECTION 4.02. Negative Covenants...........................................12
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. Events of Default............................................12
SECTION 5.02. Rights Upon an Event of Default..............................14
SECTION 5.03. No Remedy Exclusive..........................................14
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<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendments, Etc..............................................14
SECTION 6.02. Notices, Etc.................................................14
SECTION 6.03. No Waiver....................................................14
SECTION 6.04. Right of Set-off.............................................14
SECTION 6.05. Costs, Expenses and Taxes....................................15
SECTION 6.06. Binding Effect...............................................15
SECTION 6.07. Severability.................................................15
SECTION 6.08. Governing Law................................................15
SECTION 6.09. Headings.....................................................15
SECTION 6.10. Prior Agreements Superseded..................................15
SECTION 6.11. Counterparts.................................................16
SECTION 6.12. Consent to Jurisdiction......................................16
ii
<PAGE>
THIS GUARANTY AGREEMENT, dated as of June 1, 1997, by and between LESLIE
BUILDING PRODUCTS, INC., a Delaware corporation (the "Guarantor"), and BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation (the "Bank").
PRELIMINARY STATEMENTS:
(1) LESLIE-LOCKE, INC. (the "Company") has requested THE PENDER COUNTY
INDUSTRIAL FACILITIES AND POLLUTION CONTROL FINANCING AUTHORITY (the "Issuer")
to issue, pursuant to an Indenture of Trust of even date herewith (said
Indenture of Trust and any amendments or supplements thereto being herein
referred to as the "Trust Indenture"), between Norwest Bank Minnesota, National
Association (the "Bond Trustee") and the Issuer, $7,000,000 aggregate principal
amount of the Issuer's Industrial Development Revenue Bonds (Leslie-Locke, Inc.
Project) (the "Bonds") to various purchasers.
(2) The Company and the Issuer have entered into a Loan Agreement of even
date herewith, under the terms of which the Issuer will loan the proceeds of the
sale of the Bonds to the Company for the purpose of financing the construction
of a 156,000 square-foot expansion to the Company's existing facility and the
acquisition and installation of equipment therein in Pender County, North
Carolina for the manufacture of building products (the "Project").
(3) In order to provide security for the payment when due of the principal
or premium, if any, and interest on the Bonds, the Company has requested the
Bank to issue in favor of the Bond Trustee an irrevocable direct-pay letter of
credit (such letter of credit and any successor letter of credit as provided for
or contemplated in such letter of credit or this Agreement being collectively
referred to herein as the "Letter of Credit") initially in the amount of
$7,466,666.
(4) It is a condition precedent to the issuance of the Letter of Credit by
the Bank under the Reimbursement Agreement (as defined in Section 1.01 hereof)
that the Guarantor shall have executed and delivered this Guaranty.
(5) The Guarantor owns 100% of the issued and outstanding stock of the
Company.
(6) The Guarantor will materially and directly benefit from the issuance
and sale by the Issuer of the Bonds and the loan of the proceeds thereof as
hereinabove described and, therefore, to provide an inducement to the Bank to
issue the Letter of Credit in the amount of $7,466,666 in connection with the
issuance of the Bonds, the Guarantor is willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing and in order to induce the Bank to issue the Letter of
Credit, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Guaranty Agreement and any amendments or
supplements hereto.
"Bond Trustee" has the meaning assigned to that term in paragraph
(1) of the Preliminary Statements hereof.
"Bonds" has the meaning assigned to that term in paragraph (1) of
the Preliminary Statements hereof.
"Company Documents" means, collectively, the Reimbursement
Agreement, the Deed of Trust (as defined in the Reimbursement Agreement)
and the Security Agreement (as defined in the Reimbursement Agreement).
"Default" means the occurrence of any event or condition which
constitutes, or with the giving of notice or lapse of time or both would
constitute, an Event of Default hereunder.
"Default Rate" means a fluctuating interest rate equal to two
percent (2%) per annum above the Base Rate (as defined in the
Reimbursement Agreement) in effect from time to time.
"Guarantor" means Leslie Building Products, Inc., a Delaware
corporation.
"Guaranty" means this Guaranty Agreement and any amendments or
supplements hereto.
"Reimbursement Agreement" shall mean that Letter of Credit and
Reimbursement Agreement dated the date hereof by and between the Company
and the Bank, and any amendments or supplements thereto.
"Related Documents" has the meaning assigned to that term in Section
2.11 of the Reimbursement Agreement.
"Subsidiaries" means with respect to any Person, any corporation,
association, or other business entity more than 50% of the shares of
voting stock of which are at the time owned directly or indirectly by such
Person and/or any Subsidiary of such Person. When such term is used
without specifying the Person of which a Person is a Subsidiary, such
2
<PAGE>
reference is intended to be a Subsidiary of the Borrower. For purposes
hereof White Metal shall not be considered a Subsidiary.
"White Metal" means White Metal Rolling and Stamping Corp., a New
York corporation.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistently applied, except as otherwise stated herein.
SECTION 1.04. Other Capitalized Terms. All capitalized terms used herein
and not defined elsewhere in this Agreement shall have the meaning assigned to
that term in the Reimbursement Agreement.
ARTICLE II
THE GUARANTY
SECTION 2.01. The Guaranty. The Guarantor hereby (i) unconditionally
guarantees to the Bank the full and prompt payment and performance by the
Company of all its obligations under the Reimbursement Agreement and the other
Company Documents, including without limitation its obligations to pay interest,
principal, fees, expenses and indemnification amounts when and as the same shall
become due whether at the stated maturity thereof, by acceleration or otherwise,
and (ii) agrees to pay any and all expenses (including reasonable attorneys'
fees) incurred by the Bank in enforcing its rights under this Agreement.
SECTION 2.02. Guaranty Unconditional. This Agreement shall be a
continuing, absolute and unconditional guaranty and shall remain in full force
and effect until all of the obligations of the Company under the Reimbursement
Agreement and the other Company Documents shall have been paid and satisfied in
full and the Letter of Credit shall have expired or been terminated, provided
that the guarantee hereunder of indemnification obligations of the Company shall
survive. The obligations of the Guarantor hereunder shall arise absolutely and
unconditionally when the Letter of Credit shall have been issued by the Bank.
SECTION 2.03. Operation of Guaranty. This is a guaranty of payment and not
of collection, and the Guarantor expressly waives any right to require that any
action be brought against the Company or to require that resort be had to any
security, whether held by or available to the Bank or to any other Person.
Without limiting the generality of the foregoing, the Guarantor hereby
specifically waives the benefits of N.C. General Statutes Section 26-7 through
26-9 inclusive. If the Company shall default in payment of principal, interest,
fees or any other amount payable under the Reimbursement Agreement or the other
Company Documents when and
3
<PAGE>
as the same shall become due, whether at stated maturity, by acceleration, upon
demand, or otherwise, or upon the occurrence of any other Event of Default
hereunder, the Guarantor, upon demand by the Bank or its successors or assigns,
shall promptly and fully make such payments. All payments by the Guarantor shall
be made in immediately available freely transferable coin or currency of the
United States of America which on the respective dates of payment thereof is
legal tender for the payment of public and private debts. Each default in
payment of any amount payable under the Reimbursement Agreement or any of the
other Company Documents, or the occurrence of any other Event of Default
hereunder, shall give rise to a separate cause of action hereunder, and separate
suits may be brought hereunder as each cause of action arises. The Bank or its
successors or assigns, in its sole discretion, shall have the right to proceed
first and directly against Guarantor and its successors and assigns. In the
event that any amount payable hereunder is not paid when due, then (without
limiting the rights of the Bank under Article V hereof), such amount shall bear
interest until paid in full at the lesser of the Default Rate or the maximum
rate permitted by applicable law.
SECTION 2.04. Obligation of Guarantor Absolute. The obligations of the
Guarantor hereunder shall not be impaired, modified, released or limited by any
occurrence or condition whatsoever, including without limitation (a) the release
of any co-guarantor or any compromise, settlement, release, waiver, renewal,
extension, indulgence or modification of or change in any of the obligations and
liabilities of the Company contained in the Reimbursement Agreement or the other
Company Documents, (b) any impairment, modification, release or limitation of
the liability of the Company or its estate in bankruptcy, or any other security
for the Reimbursement Agreement, or any remedy for the enforcement thereof,
resulting from the operation of any present or future provision of the
Bankruptcy Code, or other statute or from the decision of any court, (c) the
assertion or exercise by the Issuer or its successors or assigns, or the Bond
Trustee or its successors or assigns, of any rights or remedies under any of the
Related Documents or its delay in or failure to assert or exercise any such
rights or remedies, (d) any lack of validity or enforceability of the
Reimbursement Agreement, any of the other Company Documents or any other
agreement or instrument relating thereto; (e) any change in the time, manner or
place of payment of, or in any other term of, all or any of the obligations, or
any other amendment or waiver of or any consent to departure from the
Reimbursement Agreement or any of the other Company Documents; (f) any exchange,
release or non-perfection of any collateral, or any release or amendment or
waiver of or consent to departure from any other guaranty; or (g) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or a guarantor except, subject to the following
sentence of this paragraph, final and irrevocable payment in full of the
Company's obligations to the Bank under the Reimbursement Agreement and the
other Company Documents. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
obligations of Company is rescinded or is otherwise returned by the Bank upon
the insolvency, bankruptcy or reorganization of the Company, or otherwise, all
as though such payment had not been made.
SECTION 2.05. Waiver of Notice. The Guarantor unconditionally waives (a)
notice of any of the matters referred to in Section 2.04 hereof and (b) any
demand (except as specified in Section 2.03 hereof), proof or notice of
nonpayment under the Reimbursement Agreement or the
4
<PAGE>
other Company Documents, or of default by the Company, in performing and keeping
any other covenant, condition or agreement required of it under the
Reimbursement Agreement or any of the Company Documents.
SECTION 2.06. Subordination. Upon payment by the Guarantor of any of the
Company's obligations under the Reimbursement Agreement or the other Company
Documents, all rights of the Guarantor against the Company arising as a result
therefrom by way of right of subrogation or contribution or otherwise (the
"Subordinate Claims") shall in all respects be subordinated and junior in right
of the Bank for payment to the prior indefeasible right of the Bank to payment
in full of all obligations under the Reimbursement Agreement and the other
Company Documents as follows:
(a) All of the Company's obligations under the Reimbursement Agreement and
the other Company Documents shall finally and irrevocably be paid in full
(including interest thereon) before any direct or indirect payment or
distribution (whether in cash, property or securities, or by setoff,
counterclaim or otherwise) shall be made on Subordinate Claims;
(b) In the event that any payment or distribution of assets of the Company
of any kind or character (whether in cash, property or securities, or by set
off, counterclaim or otherwise) shall be received by the Guarantor or on its
behalf at any time when the making of such payment or distribution shall have
been in violation of this Section 2.06, then such payment, distribution or
amount shall be held in trust for the benefit of, and shall be paid or delivered
to, the Bank for application to the payment of all obligations under the
Reimbursement Agreement, and the other Company Documents; and
(c) The holders of Subordinate Claims shall have no right to initiate any
legal proceedings against the Company with respect to any of the Subordinate
Claims while any obligations under the Reimbursement Agreement or the other
Company Documents shall remain outstanding.
SECTION 2.07. White Metals Bankruptcy and Related Litigation. The Bank
acknowledges that the Guarantor has informed it of the filing by White Metal of
a voluntary petition in bankruptcy under Chapter 7 of the federal bankruptcy
laws and other litigation relating thereto, and the Bank acknowledges that such
filing shall not constitute an Event of Default hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Guarantor. The
Guarantor represents and warrants as follows (which representations and
warranties shall survive the issuance of the Letter of Credit):
5
<PAGE>
(a) The Guarantor is a corporation duly formed, validly existing and in
good standing under the laws of the state of its incorporation and has all
requisite power and authority to conduct its business, to own its properties,
and to execute and deliver and perform all of its obligations under this
Agreement. The Guarantor is duly qualified as a foreign corporation to do
business in every jurisdiction in which the nature of its business makes such
qualification necessary and is in good standing in such jurisdictions, except
where the failure to qualify would not have an materially adverse effect on its
business. The Guarantor owns all of the outstanding capital stock of the
Company.
(b) The execution, delivery and performance by the Guarantor of this
Agreement are within the Guarantor's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene (i) any provision of
the Certificate of Incorporation or Bylaws of the Guarantor, (ii) any law, rule
or regulation applicable to the Guarantor or its properties or (iii) any
agreement or contractual restriction binding on or affecting the Guarantor or
any of its properties, and do not result in or require of cause the creation of
any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties.
(c) No authorization or approval or other action by, and no notice to, or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Guarantor of this Agreement,
except as have been duly obtained or made and are in full force and effect.
(d) This Agreement is the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as enforceability may be affected by bankruptcy, insolvency or other similar
matter involving the Guarantor or the application of equitable principles.
(e) Except as set forth on Exhibit 3.01(e) hereof, there is no pending or,
to the Guarantor's knowledge, threatened action, investigation or proceeding
before any court, governmental agency or arbitrator against or affecting the
Guarantor which may materially adversely affect the financial condition of the
Guarantor or operations of the Guarantor or the ability of the Guarantor to
perform its obligations hereunder or which purports to affect the legality,
validity or enforceability of this Agreement.
(f) The consolidated balance sheet of the Guarantor and its Subsidiaries
as at December 31, 1996 audited by KPMG Peat Marwick, certified public
accountants, and the related consolidated statements of income, retained
earnings and cash flow of the Guarantor and its Subsidiaries for the fiscal
period then ended, copies of which have been furnished to the Bank, present
fairly the financial condition of the Guarantor and its Subsidiaries as of the
date thereof and the results of its operations for the period covered therein.
The consolidated balance sheet of the Guarantor and its Subsidiaries as at March
31, 1997, and the related consolidated statements of income, retained earnings
and cash flow for the three-month period then ended on such date, as delivered
to the Bank, present fairly, subject to normal recurring year-end adjustments,
the financial condition of the Guarantor and its Subsidiaries as at such date
and the results of their
6
<PAGE>
operation for such period. Neither the Guarantor nor any Subsidiary has any
material liability, contingent or otherwise, as of the date of this Agreement,
including material liabilities for taxes, not disclosed by, or reserved against
in the financial statements referred to above or in the notes thereto, and at
the present time, there are no material unrealized or anticipated losses from
any commitments of the Guarantor or its Subsidiaries except as have been
disclosed to the Bank in writing. Such financial statements have been prepared
in accordance with Generally Accepted Accounting Principles, as defined in the
Reimbursement Agreement. Since December 31, 1996, there has been no material
adverse change in the financial condition, properties or operations of the
Guarantor or any Subsidiary.
(g) The Guarantor has filed all tax returns which are required to be filed
by it and has paid all taxes due pursuant to such returns or pursuant to any
assessments received by the Guarantor the failure to pay would have a material
adverse effect on the financial condition, business or operations of the
Guarantor. The charges, accruals and reserves on the books of the Guarantor in
resect of taxes or other governmental charges are adequate. No controversy in
respect of additional taxes, state, Federal or foreign, of the Guarantor is
pending, or, to the knowledge of the Guarantor, threatened, except such
controversies which are being contested by the Guarantor in good faith and by
proper proceedings which, if determined adversely to the Guarantor, would not
have a material adverse effect on the business, financial condition or
operations of the Company.
(h) The Guarantor has no Indebtedness, except as shown in the financial
statements referred to in Section 3.01(f) hereof and except for Indebtedness not
exceeding, in the aggregate, $50,000.
(i) The Guarantor has good and marketable title to, or a valid leasehold
interest in, its respective properties and assets, including the properties and
assets reflected in the financial statements and notes thereto described in
Section 3.01(f) hereof, except for such assets as have been disposed of since
the date of said financial statements in the ordinary course of business or as
are no longer useful in the conduct of business, and all such properties and
assets are free and clear of all liens, mortgages, pledges, encumbrances or
charges of any kind except as described in such financial statements.
(j) The Guarantor has not guaranteed any obligations of others and is not,
to the best of the Guarantor's knowledge, contingently liable in any manner,
direct or indirect, except as disclosed in the financial statements and notes
thereto described in Section 3.01(f) hereof, on Exhibit 3.01(j) hereof and in
the other Company Documents and except for the existing guaranty agreement in
favor of the Bank.
(k) The Guarantor is not a party to nor is it bound by any contract,
agreement or other restrictions which materially and adversely affect the
ability of the Guarantor to perform its obligations hereunder, except as
disclosed in writing to the Bank.
7
<PAGE>
(l) The Guarantor owns, possesses, or has the right to use all necessary
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, copyrights, trade secrets, know how and confidential commercial and
proprietary information to conduct its business as now conducted, without known
conflict with any patent, license, franchise, trademark, trade name, copyright
or other proprietary right of any other Person.
(m) The Guarantor is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party or by which it may be bound
material to its business, the effect of which default would allow any Person to
cause such obligation under the agreement or instrument to become due prior to
its stated maturity.
(n) The Guarantor has received the written approval of all Federal, state,
local and foreign governmental authorities, if any, necessary to carry out the
terms of this Agreement and known to the Guarantor to be necessary and, to the
best of the Guarantor's knowledge, no further governmental consents or approvals
are required for the making or performance of this Agreement.
(o) Neither this Agreement nor any of the Company Documents nor any
reports, schedules, certificates, agreements or instruments heretofore or
simultaneously with the execution of this Agreement delivered to the Bank by or
on behalf of the Guarantor or the Company in connection with the issuance of the
Letter of Credit, contains any misrepresentation or untrue statement of fact or,
to the best of the Guarantor's knowledge, omits to state any material fact
necessary to make this Agreement or any such other document, agreement, report,
schedule, certificate or instrument not misleading.
(p) The Guarantor has not incurred any material accumulated funding
deficiency within the meaning of ERISA, as defined in the Reimbursement
Agreement, or incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") established under ERISA (or any successor thereto under
ERISA) in connection with any employee benefit plan established or maintained by
the Guarantor and no Reportable Event (as defined in ERISA) has occurred or is
occurring.
(q) The Guarantor does not own or lease any real property.
(r) The Guarantor is now, and after giving effect to this Agreement, will
be, solvent.
ARTICLE IV
COVENANTS OF THE GUARANTOR
SECTION 4.01. Affirmative Covenants. So long as a drawing is available
under the Letter of Credit, the Company shall have any obligation to pay any
amount to the Bank under the Reimbursement Agreement or the other Company
Documents, or the Guarantor shall have any
8
<PAGE>
obligation to the Bank hereunder, the Guarantor shall, unless the Bank shall
otherwise consent in writing:
(a) Preservation of Corporate Existence, Etc. (i) Preserve and maintain
its existence as a corporation and all rights, privileges and franchises
necessary and desirable in the normal conduct of its business, in the operation
and ownership of its properties and assets, and in the performance of its
obligations hereunder and not dissolve or otherwise discontinue its existence or
operations, except where any such action would not have a mutually adverse
affect on its business, properties or condition, financial or otherwise and (ii)
take no action or suffer any actions to be taken by others which will alter,
change or destroy its status as a corporation.
(b) Compliance with Laws, Etc. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental or regulatory
authority, non-compliance with which would materially adversely affect its
business, properties or condition, financial or otherwise.
(c) Payment of Taxes, Etc. Pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property the failure to pay and discharge might have
a material adverse affect on the financial condition, business or operations of
the Guarantor, and (ii) all lawful claims which, if unpaid, might by law become
a lien upon the property of the Guarantor and result in a material adverse
affect on financial condition, business or operations of the Guarantor;
provided, however, that the Guarantor shall not be required to pay or discharge
any such tax, assessment, charge or claim that is being contested in good faith
and by proper proceedings, and, if requested by Bank, reserves with respect
thereto acceptable to the Bank shall be maintained; provided further that any
such tax, assessment, charge, levy or claim shall be paid forthwith upon the
commencement of proceedings to foreclose any lien securing the same.
(d) Inspection Rights. At any reasonable time and from time to time
following at least three days' notice from the Bank, permit the Bank or any
agents or representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of, the
Guarantor and discuss the affairs, finances and accounts of the Guarantor with
any of its officers and accountants.
(e) Keeping of Books. Keep proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets, liabilities and business of the Guarantor, and set up on its books such
reserves as may be required by Generally Accepted Accounting Principles, and
include such reserves in interim as well as year end financial statements.
(f) Maintenance of Properties, Etc. Maintain and preserve all of its
properties which are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear expected.
9
<PAGE>
(g) Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which it operates, and
upon request of the Bank deliver to the Bank certificates of insurance or copies
of policies of insurance required to be carried by or on behalf of the Guarantor
pursuant hereto.
(h) Reporting Requirements. Furnish to the Bank the following:
(1) as soon as practicable and in any event within 15 days after the
occurrence of each Default or Event of Default, a statement of an
executive officer of the Guarantor setting forth details of such Default
or Event of Default and the action which the Guarantor proposes to take
with respect thereto;
(2) as soon as practicable and in any event within 45 days after the
end of the Guarantor's first three quarterly accounting periods of each
fiscal year a consolidated balance sheet of the Guarantor and its
Subsidiaries as at the last day of the last monthly accounting period of
such quarter and related consolidated statement of income and cash flow
for the period from the beginning of the current fiscal year to such day,
setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year, all in reasonable
detail and certified by the chief financial officer or the treasurer of
Guarantor to have been prepared on a basis consistent with prior interim
financial statements;
(3) as soon as practicable and in any event within 90 days after the
end of each fiscal year, consolidated balance sheets of the Guarantor and
its Subsidiaries as at the end of such fiscal year, and related
consolidated statements of income, and consolidated statements or retained
earnings and cash flow for such fiscal year, setting forth in each case in
comparative form figures from the annual audit for the preceding year, all
in reasonable detail and satisfactory in scope to the Bank and audited by
and containing an unqualified opinion satisfactory to the Bank of
independent certified public accountants of recognized national standing
selected by the Guarantor;
(4) simultaneously with filing with the Securities and Exchange
Commission, copies of Form 10-K, Form 10-Q, Proxy Statements and other
filings made with such agency.
(5) together with each delivery of those items required by clause
(2) and (3) above, the Guarantor shall deliver to the Bank a certificate
of the chief financial officer or the treasurer of the Guarantor setting
forth (i) that to the best of its knowledge, the Guarantor has kept,
observed, performed and fulfilled each and every agreement binding on it
contained in this Agreement, and is not at the time in default of the
keeping, observance, performance or fulfillment or any of the terms,
provisions and conditions hereof, and (ii) that no Default or Event of
Default has occurred, or specifying all such Defaults and
10
<PAGE>
Events of Default of which they may have knowledge and the action which
the Guarantor proposes to take with respect thereto;
(6) immediately upon any change of the Guarantor's independent
public accountants, notification thereof and such further information as
the Bank may reasonably request concerning the resignation, refusal to
stand for reappointment after completion of the current audit or dismissal
of such accountants;
(7) promptly upon becoming aware thereof, written notice of any
material adverse change in the business or operations of the Guarantor or
any Subsidiary;
(8) promptly upon becoming aware thereof, written notice of the
commencement or existence of any proceeding against the Guarantor or any
Subsidiary by or before any court or governmental agency that might, in
the reasonable judgment of the Guarantor or any Subsidiary, result in a
material adverse effect on the business, operations or financial condition
of the Guarantor or any Subsidiary or the ability of the Guarantor or the
Company to perform its obligations under this Agreement or any of the
Company Documents and, if requested by the Bank, establish and maintain
reserves with respect thereto acceptable to the Bank; and
(9) such other information respecting the business, properties,
condition or operations, financial or otherwise, of the Guarantor as the
Bank may from time to time reasonably request.
(i) ERISA. Comply with all requirements of ERISA applicable to it and
furnish to the Bank as soon as possible and in any event within 30 days after
the Guarantor or duly appointed administrator of a plan knows or has reason to
know that any Reportable Event (as defined in ERISA) with respect to any Plan
has occurred, a statement of the chief financial officer of the Guarantor
describing in reasonable detail such Reportable Event and any action which the
Guarantor proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event given to the PBGC or a statement that said
notice will be filed with the annual report to the Untied States Department of
Labor with respect to such Plan if such filing has been authorized.
(j) Payment of Obligations. Pay when due all of its obligations and
liabilities, except where the same (other than Indebtedness and judgments) are
being contested in good faith by appropriate proceedings diligently prosecuted
and appropriate reserves for the accrual of same satisfactory to the Bank are
maintained or the failure of which to pay would not have a material adverse
effect on the financial condition, business or operation of the Guarantor.
(k) Further Assurances. Upon request of the Bank, duly execute and deliver
or cause to be duly executed and delivered to the Bank such further instruments
and do and cause to be
11
<PAGE>
done such further acts that may be reasonably necessary or proper in the opinion
of the Bank to carry out more effectively the provisions and purposes of this
Agreement.
SECTION 4.02. Negative Covenants. So long as a drawing is available under
the Letter of Credit, the Company shall have any obligation to pay any amount to
the Bank under the Reimbursement Agreement or the other Company Documents, or
the Guarantor shall have any obligation to the Bank hereunder, the Guarantor
shall not, unless the Bank shall otherwise consent in writing:
(A) Consolidation, Merger, Dissolution, Liquidation or Sale. Enter into
any transaction of merger or consolidation, any transaction of dissolution or
liquidation or sale of all or substantially all of its properties or assets,
except that (i) any Person may consolidate with or merge into the Guarantor,
provided that the guarantor shall be the surviving entity and after giving
effect to such consolidation or merger no Event of Default shall exist hereunder
or (ii) the Guarantor may consolidate with or merge into another Person (the
"Survivor"), provided, after giving effect to such merger or consolidation (x)
the Survivor has a consolidated tangible net worth not less than the
consolidated tangible net worth of the Guarantor immediately prior to the
transaction, (y) no Event of Default shall exist hereunder and (z)
simultaneously with such transaction the Survivor shall enter into an agreement
with Bank acceptable to the Bank assuming this Agreement.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) The Guarantor shall fail to pay any amount payable under this
Agreement on the date when due; or
(b) Any representation, warranty, certification or statement made by the
Guarantor herein or in connection with this Agreement or in any writing
furnished by or on behalf of the Guarantor shall be false, misleading or
incomplete in any material respect on the date as of which made the effect of
which may, in the reasonable opinion of the Bank, have a material adverse affect
on the financial condition, business or operations of the Guarantor; or
(c) The Guarantor shall fail to perform or observe any of the provisions
of Section 4.01(d), (h)(6) through (h)(9) or (k) or Section 4.02 of this
Agreement; or
(d) The Guarantor shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure shall remain unremedied for a period of 30 days
after the date upon which written notice of such failure, requiring the same to
be remedied, shall have been given to the Guarantor by the Bank; provided that
if such default cannot reasonably be cured within such 30 day period, the
12
<PAGE>
period for such cure shall be extended for an additional period of up to 60 days
as long as the Guarantor has commenced action to cure such default within the
initial 30 day period and diligently pursues such action; or
(e) The Guarantor shall fail to pay any Indebtedness of, in the aggregate,
$150,000 or more (excluding Indebtedness under this Agreement) or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or any other default under any
agreement or instrument relating to any such Indebtedness, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration, of the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(f) Liquidation or dissolution of the Guarantor or any Subsidiary or
filing by the Guarantor of a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization, arrangement, readjustment of its
debts or for any other relief under the Bankruptcy Code, as amended, or under
any other insolvency act or law, state or Federal, now or hereafter existing, or
any other action of the Guarantor or any Subsidiary indicating its consent to,
approval of, or acquiescence in any such petition or proceeding; the application
by the Guarantor for, or the appointment by or with the consent or acquiescence
of the Guarantor or any Subsidiary of, a receiver, a trustee or a custodian
therefor; the application by the Guarantor or any Subsidiary for, or the consent
to or acquiescence of the Guarantor or any Subsidiary in, an assignment for the
benefit of creditors; or the inability of the Guarantor or any Subsidiary or the
admission by the Guarantor or any Subsidiary in writing of its inability to pay
its debts as they mature; or
(g) Filing of an involuntary petition against the Guarantor or any
Subsidiary in bankruptcy or seeking reorganization, arrangement, readjustment of
its debts or for any other relief under the Bankruptcy Code, as amended, or
under any other insolvency act or law, state or Federal, now or hereafter
existing; or the involuntary appointment of a receiver, a trustee or a custodian
of the Guarantor or any Subsidiary or for all or a substantial part of her
property; the issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of the Guarantor or any Subsidiary
and the continuance of any of such events for 60 days undismissed, undischarged
or unstayed; or
(h) One or more judgments, decrees or orders for the payment of money in
excess of $150,000 in the aggregate shall be rendered against the Guarantor or
any Subsidiary and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment, decree or order, or (ii) there shall be
any period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
13
<PAGE>
(i) Any provision of this Agreement shall at any time for any reason cease
to be valid and binding on the Guarantor in any material respect, or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the Guarantor, or a proceeding shall be commenced by any
governmental agency or authority having jurisdiction over the Guarantor seeking
to establish the invalidity or unenforceability thereof, or the Guarantor shall
deny that it has any liability or obligation under this Agreement; or
(j) Any "Event of Default" under or as defined in the Reimbursement
Agreement or any of the other Company Documents shall have occurred and not been
waived; or
(k) The Guarantor ceases to own all of the outstanding capital stock of
the Company.
SECTION 5.02. Rights Upon an Event of Default. If any Event of Default
shall have occurred and not been waived, the Bank may proceed hereunder and
shall have the right to proceed first directly against the Guarantor, and the
Bank shall have no obligation to proceed against or exhaust any other remedy or
remedies which it may have without resorting to any other security or guaranty,
whether held by or available to the Bank.
SECTION 5.03. No Remedy Exclusive. 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 hereunder or now or hereafter existing at
law or in equity or by statute.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Guarantor in any event shall
be effective unless the same shall be in writing and signed by the Bank and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 6.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including required copies) and sent by
receipted hand delivery (including Federal Express or other receipted courier
service), telefacsimile or regular mail, if to the Guarantor, at the Guarantor's
address at: 200 Mamaroneck Avenue, White Plains, New York 10601, Attention:
President; and if to the Bank, at its address at: P. O. Box 1727, Wilmington,
North Carolina 28402-1727, or, as to each party, at such other address as shall
be designated by such party in a written notice to other party. All such notices
and communications shall, when hand-delivered or telecopied, be effective when
deposited with the courier or transmitted, respectively, addressed as aforesaid.
SECTION 6.03. No Waiver. No failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial
14
<PAGE>
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
SECTION 6.04. Right of Set-off. (a) Upon the occurrence of any Event of
Default, the Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand) at any time held and other Indebtedness at
any time owing by the Bank to or for the credit or the account of the Guarantor
against any and all of the obligations of the Guarantor now and hereafter
existing under this Agreement, irrespective of whether or not the Bank shall
have made any demand hereunder and although such obligations may be contingent
or unmatured.
(b) The Bank agrees promptly to notify the Guarantor after any such
set-off and application referred to in subsection (a) above, 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 Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.
SECTION 6.05. Costs, Expenses and Taxes. If any Event of Default shall
have occurred, the Guarantor agrees to pay immediately when due all costs and
expenses in connection with the preparation, negotiation, delivery and
enforcement of this Agreement and the preservation of any rights under this
Agreement, including, without limitation, the reasonable fees and out-of-pocket
expenses of the Bank and of counsel for the Bank (not in excess of those
permitted by law).
SECTION 6.06. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Guarantor and the Bank and their respective
successors and assigns, except that the Guarantor shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank. The Bank may assign or sell a participation in all or any
part of, or any interest (undivided or divided) in, the Bank's rights and
benefits under this Agreement to any financial institution. To the extent of any
assignment by the Bank, the assignee shall have the same rights and benefits
against the Guarantor hereunder as it would have had if such assignee were the
Bank issuing or paying under the Letter of Credit.
SECTION 6.07. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 6.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal substantive laws of the State of
North Carolina.
15
<PAGE>
SECTION 6.09. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 6.10. Prior Agreements Superseded. This Agreement shall completely
and fully supersede all prior undertakings or agreements, both written and oral,
between the Guarantor and the Bank relating to the issuance of the Letter of
Credit, including those contained in any commitment letter between the Bank and
the Guarantor executed in anticipation of the issuance of the Letter of Credit.
SECTION 6.11. Counterparts. This 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 6.12. Consent to Jurisdiction. The Guarantor hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement may be instituted in the Superior Court in Wake County, North
Carolina, or the United States District Court for the Eastern District of North
Carolina or in such other appropriate court and venue as the Bank may choose at
its sole discretion. The Guarantor consents to the jurisdiction of such courts
and waives any objection relating to the basis for personal or in rem
jurisdiction or to venue which the Guarantor may now or hereafter have in any
such legal action or proceedings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
LESLIE BUILDING PRODUCTS, INC.
ATTEST:
By: By:
----------------------- --------------------------
Title: Title:
--------------------- ------------------------
[CORPORATE SEAL]
BRANCH BANKING AND TRUST COMPANY
By:
---------------------------
Title:
--------------------------
16
<PAGE>
EXHIBIT 3.01(e)
17
<PAGE>
EXHIBIT 3.01(j)
18
Exhibit 10.41 Letter of Credit and Reimbursement Agreement
==============================================================================
LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
Dated as of June 1, 1997
between
LESLIE-LOCKE, INC.
and
BRANCH BANKING AND TRUST COMPANY
relating to
The Pender County Industrial Facilities and
Pollution Control Financing Authority
$7,000,000
Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997
==============================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms.........................................2
SECTION 1.02. Computation of Time Periods...................................8
SECTION 1.03. Accounting Terms..............................................8
ARTICLE II
AMOUNT AND TERMS OF THE LETTER OF CREDIT; PLEDGE OF BONDS
SECTION 2.01. The Letter of Credit..........................................8
SECTION 2.02. Issuing the Letter of Credit..................................8
SECTION 2.03. Fees and Expenses.............................................8
SECTION 2.04. Reimbursement; Amounts Paid in Advance of Date When Due.......9
SECTION 2.05. Tender Advances..............................................10
SECTION 2.06. Interest on Tender Advances..................................11
SECTION 2.07. Prepayments; Reinstatement of Letter of Credit Amounts.......11
SECTION 2.08. Increased Costs..............................................12
SECTION 2.09. Payments and Computations....................................13
SECTION 2.10. Evidence of Debt.............................................13
SECTION 2.11. Obligations Absolute.........................................13
SECTION 2.12. Delivery of Bonds Upon Purchase or Conversion................14
SECTION 2.13. Extension of the Stated Termination Date.....................14
SECTION 2.14. Pledge of Bonds..............................................14
ARTICLE III
CONDITIONS OF ISSUANCE
SECTION 3.01. Condition Precedent to Issuance of the Letter of Credit......17
SECTION 3.02. Additional Conditions Precedent to Issuance of the
Letter of Credit ............................................20
SECTION 3.03. Conditions Precedent to Each Tender Advance..................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company................21
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants........................................25
SECTION 5.02. Negative Covenants...........................................31
i
<PAGE>
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default............................................35
SECTION 6.02. Rights Upon an Event of Default..............................36
SECTION 6.03. No Remedy Exclusive..........................................37
SECTION 6.04. Anti-Marshalling Provisions..................................37
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc..............................................38
SECTION 7.02. Notices, Etc.................................................38
SECTION 7.03. No Waiver....................................................38
SECTION 7.04. Right of Set-off.............................................38
SECTION 7.05. Indemnification..............................................38
SECTION 7.06. Liability of the Bank........................................39
SECTION 7.07. Costs, Expenses and Taxes....................................40
SECTION 7.08. Binding Effect...............................................40
SECTION 7.09. Severability.................................................40
SECTION 7.10. Governing Law................................................40
SECTION 7.11. Headings.....................................................40
SECTION 7.12. Prior Agreements Superseded..................................40
SECTION 7.13. Counterparts.................................................41
SECTION 7.14. Removal of Remarketing Agent.................................41
SECTION 7.15. Modification to Promissory Note dated June 21, 1993
of the Company ..............................................41
EXHIBIT A - Form of Letter of Credit......................................A-1
EXHIBIT B - Form of Company Counsel Opinion...............................B-1
EXHIBIT C - Form of Opinion Letter for Bond Counsel.......................C-1
EXHIBIT D - Form of Deed of Trust.........................................D-1
EXHIBIT E - Form of Security Agreement....................................E-1
EXHIBIT F - Form of Guaranty Agreement....................................F-1
EXHIBIT G - Payment of Taxes..............................................G-1
EXHIBIT H - Agreements of Company and Subsidiaries........................H-1
EXHIBIT I - Environmental Matters.........................................I-1
EXHIBIT J - Locations of Personal Property................................J-1
EXHIBIT K - Insider Transactions..........................................K-1
EXHIBIT L - Guarantees....................................................L-1
Schedule 4.01(d) Litigation
ii
<PAGE>
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of June 1, 1997,
between LESLIE-LOCKE, INC., a Delaware corporation (the "Company), and BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation (the "Bank").
PRELIMINARY STATEMENTS:
(1) The Company has requested THE PENDER COUNTY INDUSTRIAL FACILITIES AND
POLLUTION CONTROL FINANCING AUTHORITY (the "Issuer") to issue, pursuant to an
Indenture of Trust of even date herewith (said Indenture of Trust and any
amendments or supplements thereto being herein referred to as the "Trust
Agreement" or "Indenture"), between Norwest Bank Minnesota, National
Association, as trustee (the "Bond Trustee"), and the Issuer, $7,000,000
aggregate principal amount of the Issuer's Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project), Series 1997 (the "Bonds") to various purchasers.
(2) The Company and the Issuer have entered into a Loan Agreement of even
date herewith (said Loan Agreement and any amendments or supplements thereto
being herein referred to as the "Loan Agreement"), under the terms of which the
Issuer will loan the proceeds of the sale of the Bonds to the Company for the
purpose of financing the cost of the construction of a 156,000 square-foot
expansion to the Company's existing facility and the acquisition and
installation of equipment therein for the manufacture of building products (the
"Project") in Pender County, North Carolina.
(3) In order to provide security for the payment when due of the principal
of, and interest and premium on, the Bonds, the Company has requested the Bank
to issue its irrevocable letter of credit naming the Bond Trustee as
beneficiary, in substantially the form of Exhibit A hereto (such letter of
credit and any successor letter of credit as provided for or contemplated in
such letter of credit or this Agreement being the "Letter of Credit"), in the
amount of $7,466,666 (the "Commitment"), of which (a) $7,000,000 shall support
the payment of principal or portion of the purchase price corresponding to
principal of the Bonds and (b) $256,666 shall support the payment of up to 110
days of interest or portion of the purchase price corresponding to interest on
the Bonds, at an assumed interest rate of 12% per annum and (c) $210,000 shall
support the payment of premium of up to 3% of the principal amount of the Bonds
to be redeemed upon a redemption due to the occurrence of a Determination of
Taxability pursuant to Section 301(b) of the Trust Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing and in order to induce the Bank to issue the Letter of
Credit, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"A Drawing," or "B Drawing," "C Drawing," or "D Drawing" shall have
the meaning ascribed to such terms in the Letter of Credit.
"Advance" means any Tender Advance and "Advances" means Tender
Advances collectively.
"Affiliate" of a specified Person shall mean any Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with (by virtue of ownership of
voting securities, contract or otherwise) such specified Person. For
purposes hereof, White Metal shall not be deemed an Affiliate.
"Agreement" means this Letter of Credit and Reimbursement Agreement
and any amendments or supplements thereto.
"Base Rate" means a fluctuating rate of interest per annum equal to
the Prime Rate plus two percent (2%), each change in the Base Rate shall
take effect simultaneously with the corresponding change or changes in the
Prime Rate.
"Bond Trustee" has the meaning assigned to that term in paragraph
(1) of the Preliminary Statements hereof.
"Bonds" has the meaning assigned to that term in paragraph (1) of
the Preliminary Statements hereof.
"Business Day" means a day of the year on which state-chartered
banks are not required or authorized to close in Charlotte, North
Carolina.
"Capital Lease Obligations" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under a lease of
(or other agreement conveying the right to use) real and/or personal
property which obligation is, or in accordance with Generally Accepted
Accounting Principles is required to be, classified and accounted for as a
capital lease on a balance sheet of such Person, and for purposes of this
Agreement the amount of such obligation shall be the capitalized amount
thereof determined in accordance with such principles.
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"Collateral" means the property covered by the Security Agreement
and the Deed of Trust.
"Commitment" has the meaning assigned to that term in paragraph (3)
of the Preliminary Statements hereof.
"Commitment Termination Date" has the meaning assigned to that term
in Section 2.01 of this Agreement.
"Completion Date" means June 30, 1997.
"Consolidated Debt Service Coverage Ratio" means, with respect to
the Company and its Subsidiaries as at the end of each of the fiscal
quarters of a fiscal year, the ratio of (i) the sum of Consolidated Net
Income plus taxes, depreciation, depletion and amortization of properties
(including intangible properties) of the Company and its Subsidiaries for
the four most recent consecutive fiscal quarters plus Consolidated
Interest Expense for the four most recent consecutive fiscal quarters, to
(ii) the sum of Consolidated Interest Expense for the four most recent
consecutive fiscal quarters plus the current portion of long-term debt as
of the end of such fiscal quarter.
"Consolidated Interest Expense" means, for any period, the gross
interest expense without offset for interest income, excluding any
interest in connection with any intercompany debt (including, without
limitation, debt to or from any past, present or future Affiliate) and
excluding imputed interest expense with respect to the White Metal
Reserve, of the Company and its Subsidiaries on a consolidated basis
during such period determined in accordance with Generally Accepted
Accounting Principles, and shall in any event include, without limitation,
(i) the amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Indebtedness to the extent
included in interest expense and (iii) the imputed interest portion of any
Capital Lease Obligation.
"Consolidated Net Income" means, with respect to any period, the net
income of the Company and its Subsidiaries on a consolidated basis for
such period computed in accordance with Generally Accepted Accounting
Principles.
"Consolidated Net Intangible Assets" means, at any date of
determination thereof, all amounts that would, in accordance with
Generally Accepted Accounting Principles, be classified as intangible
assets on a consolidated balance sheet of the Company and its Subsidiaries
as at such date, including goodwill, patents, trademarks, copyrights,
franchises, licenses and customer lists.
"Consolidated Net Tangible Assets" means, at any date of
determination thereof, all amounts that would, in accordance with
Generally Accepted Accounting Principles, be included as assets on a
consolidated balance sheet of the Company and its Subsidiaries as at such
date, excluding Consolidated Net Intangible Assets.
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"Consolidated Tangible Net Worth" means, at any date of
determination thereof, the excess of (i) Consolidated Net Tangible Assets
over (ii) Consolidated Total Liabilities less Subordinated Indebtedness.
"Consolidated Total Liabilities" means, at any date of determination
thereof, all amounts that would, in accordance with Generally Accepted
Accounting Principles, be included as current liabilities, long-term debt,
deferred income taxes, Capital Lease Obligations or any other liability on
a consolidated balance sheet of the Company and its Subsidiaries as at
such date.
"Credit Termination Date" means the date on which the Letter of
Credit shall terminate in accordance with its terms.
"Date of Issuance" has the meaning assigned to that term in Section
2.02 of this Agreement.
"Deed of Trust" means that certain Deed of Trust of even date
herewith, made by the Company to a deed of trust trustee for the benefit
of the Bank, in substantially the form of Exhibit D hereto, and any
amendments and supplements thereto.
"Default Rate" means a fluctuating interest rate equal to 2% per
annum above the Base Rate in effect from time to time.
"Environmental Laws" means any Federal, state or local statute, law,
ordinance, code, rule, regulation, order, decree, permit or license
regulating, relating to, or imposing liability or standards of conduct
concerning, any environmental matters or conditions, environmental
protection or conservation, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended; the Superfund Amendments and Reauthorization Act of
1986, as amended; the Resource Conservation and Recovery Act, as amended;
the Toxic Substances Control Act, as amended; the Clean Air Act, as
amended; the Clean Water Act, as amended; together with all regulations
promulgated thereunder, and any other "Superfund" or "Superlien" law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulations
promulgated thereunder.
"Event of Default" has the meaning assigned to that term in Section
6.01 of this Agreement.
"Generally Accepted Accounting Principles" means those principles of
accounting set forth in statements of the Financial Accounting Standards
Board or which have other substantial authoritative support and are
applicable in the circumstances as of the date of a report, as such
principles are from time to time supplemented and amended.
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"Guarantor" means Leslie-Building Products, Inc., a Delaware
corporation, its successors and assigns.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such Person, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or to purchase (or to advance or supply funds for
the purchase of) any security for the payment of such Indebtedness, (b) to
purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness or (c) to
maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness; provided, however, that the term
Guaranty shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"Guaranty Agreement" means that certain Guaranty Agreement of even
date herewith of the Guarantor in favor of the Bank in substantially the
form of Exhibit F attached hereto, and any amendments or supplements
thereto.
"Hazardous Material" means and includes any pollutant, contaminant,
or hazardous, toxic or dangerous waste, substance or material (including
without limitation petroleum products, asbestos-containing materials and
lead), the generation, handling, storage, transportation, disposal,
treatment, release, discharge or emission of which is subject to any
Environmental Law.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c)
all obligations of such Person upon which interest charges are customarily
paid, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by
such Person, (e) all obligations of such Person incurred or assumed as the
deferred purchase price of property or services, (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guaranties by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(i) all obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or
exchange rate hedging arrangements and (j) all obligations of such Person
as an account party in respect of letters of credit and bankers'
acceptances. The Indebtedness of any Person shall include the Indebtedness
of any partnership in which such Person is a general partner. Indebtedness
does not include trade debt incurred by the Company in the ordinary course
of business.
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"Interest Payment Date" means each date on which interest is payable
on the Bonds pursuant to the Bonds and the Trust Agreement.
"Issuer" has the meaning assigned to that term in paragraph (1) of
the Preliminary Statements hereof.
"Letter of Credit" has the meaning assigned to that term in
paragraph (3) of the Preliminary Statements hereof.
"Letter of Credit Fee Calculation Amount" in effect at any time
means the maximum amount available to be drawn at such time under the
Letter of Credit, the determination of such maximum amount to assume
compliance with all conditions for drawing and no reduction for (i) any
amount drawn by any B Drawing referred to in the Letter of Credit (unless
such amount is not reinstated under the Letter of Credit), or (ii) any
amount drawn by any C Drawing or D Drawing, or (iii) any amount not
available to be drawn because Bonds are held by or for the account of the
Company.
"Lien" means any interest in property securing any obligation owed
to, or a claim by, a person other than the owner of the property,
including but not limited to the lien or security interest arising from a
mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt or consignment or bailment for security purposes.
"Loan Agreement" has the meaning assigned to that term in paragraph
(2) of the Preliminary Statements hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Official Statement" means the Offering Memorandum, relating to the
Bonds, together with any documents incorporated therein by reference.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" means and includes (i) liens of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business for sums not overdue or being contested in good faith; (ii) liens
incurred in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of tenders, statutory
obligations, leases and contracts (other than for Indebtedness) entered
into in the ordinary course of business or to secure obligations on surety
or appeal bonds; (iii) rights of lessees under leases made in the ordinary
course of business under which the Company or any Subsidiary is lessor;
(iv) liens in respect of final judgments or awards or attachments
remaining undischarged or unstayed for not longer than 60 days from the
making thereof; and (v) existing liens in favor of the Bank.
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"Person" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of
entity.
"Plan" means an employee benefit plan (other than a Multiemployer
Plan) maintained for employees of the Company, or any Affiliate and
covered by Title IV of ERISA.
"Plan Termination Event" means (i) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the
PBGC under such regulations), or (ii) the withdrawal of the Company or any
of its Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii)
the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, or (iv) the
institution of proceedings to terminate a Plan by the PBGC, or (v) any
other event or condition which would constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan.
"Prime Rate" means the rate of interest per annum announced by the
Bank from time to time to be its prime rate. The Prime Rate is one of
several rate indexes used by the Bank in calculating interest on loans to
its customers and is not necessarily the best or lowest rate of interest
offered by the Bank.
"Project" has the meaning assigned to that term in paragraph (2) of
the Preliminary Statements hereof.
"Related Documents" has the meaning assigned to that term in Section
2.11.
"Security Agreement" means that certain Security Agreement of even
date herewith between the Company and the Bank in substantially the form
of Exhibit E, and any amendments and supplements thereto.
"Stated Termination Date" means June 30, 2000.
"Subordinated Indebtedness" of a Person shall mean any indebtedness
of such Person and/or any of its Subsidiaries subordinated in a manner
approved by the Bank in writing.
"Subsidiary" means with respect to any Person, any corporation,
association, or other business entity more than fifty percent (50%) of the
shares of voting stock or other interests (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon
or other contingencies) of which are at the time owned directly or
indirectly by such Person and/or any Subsidiary of such Person. When such
term is used without specifying the Person of which a Person is a
Subsidiary, such reference is intended to be to a Subsidiary
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of the Company. Unless otherwise indicated, White Metal shall not be
considered a Subsidiary.
"Tender Advance" has the meaning assigned to that term in Section
2.05 of this Agreement.
"Tender Agent" means Norwest Bank Minnesota, National Association,
or any successor thereto as tender agent under the Trust Agreement.
"Trust Agreement" has the meaning assigned to that term in paragraph
(1) of the Preliminary Statements hereof.
"White Metal" means White Metal Rolling and Stamping Corp., a New
York corporation.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistently applied, except as otherwise stated herein.
ARTICLE II
AMOUNT AND TERMS OF THE LETTER OF CREDIT; PLEDGE OF BONDS
SECTION 2.01. The Letter of Credit. The Bank agrees, on the terms and
conditions hereinafter set forth, to issue and deliver the Letter of Credit in
favor of the Bond Trustee at any time during the period from the date hereof to
June 30, 1997 (the "Commitment Termination Date") in the amount of the
Commitment and expiring on or before the Stated Termination Date.
SECTION 2.02. Issuing the Letter of Credit. The Letter of Credit shall be
issued on at least five Business Days' notice from the Company to the Bank
specifying the proposed date of issuance. On the date specified by the Company
in such notice and upon fulfillment of the applicable conditions set forth in
Article III hereof, the Bank will issue and deliver the Letter of Credit to the
Bond Trustee (the date of such issuance and delivery being called the "Date of
Issuance"). The Letter of Credit shall be issued in substantially the form of
Exhibit A hereto. The Bank agrees that any and all payments made under the
Letter of Credit will be made with the Bank's own funds.
SECTION 2.03. Fees and Expenses. (a) The Company agrees to pay the Bank on
the Date of Issuance an initial Letter of Credit fee of $141,866.65. Thereafter,
the Company agrees to pay to the Bank on each one year anniversary of the Date
of Issuance a Letter of Credit fee equal to the percentage shown below of the
Letter of Credit Fee Calculation Amount, based upon the ratio of
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Indebtedness to Consolidated Tangible Net Worth as of the last day of the
immediately preceding fiscal year of the Company:
Ratio of Percentage of
Indebtedness to Consolidated Letter of Credit Fee
Tangible Net Worth Calculation Amount
---------------------------- --------------------
3.50 or more 2.25%
3.00 through 3.499 2.00
2.50 through 2.999 1.75
2.00 through 2.499 1.50
1.50 through 1.999 1.25
1.499 or less 1.00
The amount of such fee shall be calculated based on the Letter of Credit
Fee Calculation Amount as of the date such payment is due, and the fee shall be
deemed earned when paid and the Company shall be entitled to no refund or rebate
of such fee in the event the Letter of Credit terminates after such payment.
(b) The Company agrees to pay to the Bank, upon each drawing under the
Letter of Credit, a fee of $50 per drawing.
(c) The Company agrees to pay to the Bank, upon each transfer of the
Letter of Credit, a transfer commission equal to $2,500 together with all costs
and expenses of the Bank (including reasonable attorneys' fees) incurred related
thereto.
(d) The Company agrees to pay to the Bank, upon each amendment of the
Letter of Credit, a fee of $1,000 together with all costs and expenses of the
Bank (including reasonable attorneys' fees) incurred related thereto.
(e) The Company agrees to pay the Bank's normal transaction charges,
including wire charges, and service charges on any account established with the
Bank in order to perform this Agreement.
(f) Any amount of fees or expenses payable by the Company to the Bank
which is not paid within 10 days when due shall bear interest, from the date
such amount of fees was due until the date of payment in full, at the Default
Rate, payable on the first to occur of the date of payment in full of such
amount or demand by the Bank.
SECTION 2.04. Reimbursement; Amounts Paid in Advance of Date When Due. The
Company agrees to pay the Bank (i) any amount drawn under the Letter of Credit
pursuant to any
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A Drawing, B Drawing or D Drawing and, if the conditions contained in Section
3.03 hereof are not fulfilled by the Company, that portion of the purchase price
corresponding to principal and that portion of the purchase price corresponding
to interest drawn under the Letter of Credit pursuant to a C Drawing,
immediately after (and before 2:00 p.m. (Eastern Standard time) on the same
Business Day as) such drawing, plus (ii) interest at the Default Rate, payable
on demand, on any amount remaining unpaid by the Company to the Bank under
clause (i) above, from the date such amount becomes due and payable until
payment in full.
As set forth in Section 3.01 (f) of the Indenture, a principal amount of
the Bonds is scheduled to be paid to the holder thereof on an annual basis
commencing June 1, 1999 in the amounts set forth in Section 3.01(f) of the
Indenture with the final principal payment due and payable on June 1, 2010.
Interest on the Bonds shall be payable quarterly on the first day of each March,
June, September and December of each year at the rate established pursuant to
the Indenture (the "Interest Payment Dates").
As such principal and interest payments become due on the Bonds, drawings
will be made on the Letter of Credit for such amounts by the Bond Trustee. The
Company desires to set up a sinking fund account into which it will deposit
quarterly in advance with the Bank the principal amount which it will need to
reimburse the Bank hereunder for drawings under the Letter of Credit respecting
principal. Therefore, the Company agrees to deposit in cash with the Bank on
each Interest Payment Date commencing September 1, 1998, an amount in cash equal
to one-fourth of the principal payment due on the Bonds on the next following
principal payment date (being $150,000 on each Interest Payment Date from
September 1, 1997 through June 1, 2009 and $100,000 on each Interest Payment
Date from September 1, 2009 through June 1, 2010). All such funds shall be held
in an interest bearing account of the Bank (the "Sinking Fund Account") and
shall not be withdrawable by the Company except as provided herein. Provided no
Default or Event of Default has occurred hereunder, any interest which accrues
on such funds held by the Bank may be withdrawn by the Company on each interest
payment date for the Bonds or left in such account and credited against the
reimbursement obligations due hereunder. The Company hereby assigns to and
grants the Bank a security interest in such sinking fund account to secure the
Company's obligations hereunder. To the extent that the Company fails to pay
when due any amount owing hereunder, including the reimbursement payments due
under this Section 2.04, the Bank may, and is hereby authorized by the Company
to, withdraw from such account and pay to itself such amounts as are needed to
satisfy such obligations of the Company to the Bank.
THE SINKING FUND ACCOUNT SHALL BE DEPLETED AT LEAST ONCE EACH YEAR. ANY
MONEY DEPOSITED IN THE SINKING FUND ACCOUNT SHALL BE SPENT WITHIN A
THIRTEEN-MONTH PERIOD BEGINNING ON THE DATE OF DEPOSIT, AND ANY AMOUNT RECEIVED
FROM INVESTMENT OF MONEY HELD IN THE SINKING FUND ACCOUNT SHALL BE SPENT WITHIN
A ONE-YEAR PERIOD BEGINNING ON THE DATE OF RECEIPT. IN ADDITION TO THE
FOREGOING, THE COMPANY AGREES THAT THE SINKING FUND ACCOUNT SHALL BE USED AND
MAINTAINED AT ALL TIMES IN SUCH A MANNER THAT SHALL NOT CAUSE THE BONDS TO BE
TREATED AS "ARBITRAGE BONDS" WITHIN THE MEANING OF SECTION 148 OF THE CODE (AS
DEFINED IN THE INDENTURE).
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SECTION 2.05. Tender Advances. If the Bank shall make any payment of that
portion of the purchase price corresponding to principal of and interest on the
Bonds from amounts drawn under the Letter of Credit pursuant to a C Drawing and
the conditions set forth in Section 3.03 shall have been fulfilled, such payment
shall constitute a tender advance made by the Bank to the Company on the date
and in the amount of such payment, each such tender advance being a "Tender
Advance". Notwithstanding any other provision hereof, the Company shall repay
the unpaid amount of each Tender Advance, together with all unpaid interest
thereon, on the earlier to occur of (i) such date as provided in Section 2.07(b)
hereof, (ii) the date thirty (30) days following such Tender Advance or (iii)
the Credit Termination Date. The Company may prepay any such amounts on an
earlier date as provided in Section 2.07(a) hereof.
SECTION 2.06. Interest on Tender Advances. The Company shall pay interest
on the unpaid amount of each Tender Advance from the date of such Advance until
such amount is paid in full, payable monthly, in arrears, on the first day of
each month during the term of each Tender Advance and on the date such amount is
paid in full, at a fluctuating interest rate per annum in effect from time to
time equal to the Base Rate, provided that the unpaid amount of any Tender
Advance which is not paid when due pursuant to Section 2.05 hereof shall bear
interest at the Default Rate, payable on demand and on the date such amount is
paid in full.
SECTION 2.07. Prepayments; Reinstatement of Letter of Credit Amounts. (a)
The Company may prepay the outstanding amount of any Tender Advance in whole or
in part, together with accrued interest to the date of such prepayment on the
amount prepaid. The Company shall notify the Bank on the date of such prepayment
of the amount to be prepaid, which notice may be given by telephone (promptly
confirmed in writing) but which shall not be effective unless received by the
Bank prior to 11:00 A.M. Charlotte, North Carolina time on the day of the
proposed prepayment referred to above.
(b) Subject to Section 2.05, prior to or simultaneously with the resale of
Bonds acquired by the Tender Agent with the proceeds of one or more draws under
the Letter of Credit by one or more C Drawings, the Company shall repay the then
outstanding Tender Advances (in the order in which they were made) by paying to
the Bank an amount equal to the sum of (i) the portion of the purchase price
corresponding to the aggregate principal amount of the Bonds being resold or to
be resold, plus (ii) the portion of the purchase price corresponding to the
aggregate amount of accrued and unpaid interest on such Bonds, plus (iii) the
aggregate amount of accrued and unpaid interest on such Tender Advances, less
the amount paid pursuant to the immediately preceding clause (ii). Such payment
shall be applied by the Bank in reimbursement of such drawings (and as repayment
of Advances resulting from such drawings in the manner described above), and,
the Company irrevocably authorizes the Bank to reinstate the Letter of Credit in
accordance therewith.
(c) The Company agrees that, pursuant to the provisions of the Trust
Agreement, Bonds purchased with proceeds of a drawing under the Letter of Credit
shall be (i) held by the Bond Trustee as agent and bailee for the account of the
Bank or (ii) delivered by the Tender Agent to the Bank or its designee, in
either case, to be held by the Bank or its agent, bailee or designee in pledge
as collateral securing the Company's payment obligations to the Bank hereunder.
Bonds so delivered
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to the Bank or its designee shall be registered in the name of the Bank, or its
agent, bailee or designee, as pledgee of the Company, as provided for in Section
2.14 hereof.
(d) The Company shall, forthwith, prepay or cause to be prepaid pursuant
to subsection (a) of this Section 2.07 any amount owing to the Bank as a result
of any Tender Advance for the purpose of paying the purchase price of any Bond
delivered to the Tender Agent, if the Tender Agent failed, for any reason, to
pay or tender payment of the purchase price of such Bond when due to or for the
account of the person entitled thereto and such failure is continuing or any
other person shall assert that such person has a lien on or security interest in
such Bond.
(e) Upon payment to the Bank of the amount of any Tender Advance to be
prepaid together with accrued interest on such Advance to the date of such
prepayment on the amount to be prepaid, the principal amount outstanding of
Tender Advances shall be reduced by the amount of such prepayment, interest
shall cease to accrue on the amount prepaid and, if applicable, the Bank shall
release or cause to be released to the Tender Agent, in accordance with the
terms of the Trust Agreement, a principal amount of Bonds, if any, then held
under pledge equal to the principal amount of such prepayment.
SECTION 2.08. Increased Costs. If any law, regulation or change in any law
or regulation or in the interpretation thereof, or any ruling, decree, judgment,
guideline, directive or recommendation (whether or not having the force of law)
by any regulatory body, court, central bank or any administrative or
governmental authority charged or claiming to be charged with the administration
thereof (including, without limitation, a request or requirement which affects
the manner in which the Bank allocates capital resources to its commitments
including its obligations hereunder) shall either (i) impose upon, modify,
require, make or deem applicable to the Bank or any of its affiliates,
Subsidiaries or participants any reserve requirement, special deposit
requirement, insurance assessment or similar requirement against or affecting
the Letter of Credit issued hereunder, or (ii) subject the Bank or any of its
affiliates, Subsidiaries or participants to any tax, charge, fee, deduction or
withholding of any kind whatsoever in connection with the Letter of Credit or
change the basis of taxation of the Bank or any of its affiliates, Subsidiaries
or participants (other than a change in the rate of tax based on the overall net
income of the Bank or such participant), or (iii) impose any condition upon or
cause in any manner the addition of any supplement to or increase of any kind to
the Bank's or an affiliate's, Subsidiary's or participant's capital or cost base
for issuing or owning a participation in the Letter of Credit which results in
an increase in the capital requirement supporting the Letter of Credit, or (iv)
impose upon, modify, require, make or deem applicable to the Bank or any of its
affiliates, Subsidiaries or participants any capital requirement, increased
capital requirement or similar requirement, such as the deeming of the Letter of
Credit to be an asset held by the Bank or any of its affiliates, Subsidiaries or
participants for capital adequacy calculation or other purposes (including,
without limitation, a request or requirement which affects the manner in which
the Bank or any participant allocates capital resources to its commitments
including its obligations hereunder or under the Letter of Credit), and the
result of any events referred to in (i), (ii), (iii) or (iv) above shall be to
increase the costs in any way to the Bank or any affiliate, Subsidiary or
participant of issuing, maintaining or participating in the Letter of Credit or
reduce the amounts payable by the Company hereunder or reduce the rate of return
on capital, as a consequence of the issuing, maintaining or participating in the
Letter of Credit, to a level below that
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which the Bank, its affiliates, Subsidiaries or participants could have achieved
but for such events; then and in such event the Company shall, promptly upon
receipt of written notice to the Company by the Bank of such increased costs
and/or decreased benefits, pay within 30 days of demand therefor to the Bank all
such additional amounts which, in the Bank's or participant's sole good faith
calculation as allocated to the Letter of Credit, shall be sufficient to
compensate it for all such increased costs and/or decreased benefits, all as
certified by the Bank or such participants in said written notice to the
Company. Such certification shall be accompanied by information concerning the
calculation of such increased costs and/or decreased benefits and shall be
conclusive and binding on the parties hereto, absent manifest error. In
determining such amount, the Bank or any participant may use any reasonable
averaging or attribution methods.
SECTION 2.09. Payments and Computations. The Company shall make each
payment hereunder (a) representing reimbursement pursuant to Section 2.04 hereof
to the Bank of drawings made under the Letter of Credit not later than 2:00 p.m.
(Charlotte, North Carolina time), and (b) not later than 2:00 p.m. (Charlotte,
North Carolina time) for all other payments, on the day when due in lawful money
of the United States of America to the Bank at its address referred to in
Section 7.02 hereof in same day funds. The Company hereby authorizes the Bank,
if and to the extent payment is not made when due hereunder, to charge from time
to time against any of the Company's accounts with the Bank, including the
Sinking Fund Account established under Section 2.04 hereunder, any amount so
due. Computations of the Prime Rate, the Default Rate and of any fees or
commissions hereunder shall be made by the Bank on the basis of a year of 360
days for the actual number of days (including the first day but excluding the
last day) elapsed. Whenever any payment to be made hereunder shall be stated to
be due on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall in such case be
included in the computation of payment of interest, fee or commission, as the
case may be.
SECTION 2.10. Evidence of Debt. The Bank shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Company resulting from each drawing under the Letter of Credit and each Tender
Advance made from time to time hereunder and the amounts of principal, interest
and fees payable and paid from time to time hereunder. In any legal action or
proceeding in respect of this Agreement, the entries made in such account or
accounts shall be conclusive evidence of the existence and amounts of the
obligations of the Company therein recorded, absent manifest error.
SECTION 2.11. Obligations Absolute. The payment obligations of the Company
under this Agreement shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of the Letter of Credit,
the Bonds, the Trust Agreement, the Loan Agreement, the Deed of Trust, the
Security Agreement, the Guaranty Agreement, or any other agreement or
instrument relating thereto (collectively, the "Related Documents");
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(ii) any amendment or waiver of or any consent to departure from all or
any of the Related Documents (unless consented to in writing by the Bank);
(iii) the existence of any claim, set-off, defense (other than the
defense of payment) or other right which the Company may have at any time
against the Bond Trustee or any other beneficiary, or any transferee, of
the Letter of Credit (or any persons or entities for whom the Bond
Trustee, any such beneficiary or any such transferee may be acting), the
Bank, or any other person or entity, whether in connection with this
Agreement, the transactions contemplated herein or in the Related
Documents, or any unrelated transaction;
(iv) 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; provided that the Bank's reliance upon any such statement or
document shall not have constituted gross negligence or willful misconduct
of the Bank;
(v) payment by the Bank under the Letter of Credit against
presentation of a draft or certificate which does not comply with the
terms of the Letter of Credit; provided that such payment shall not have
constituted gross negligence or willful misconduct of the Bank.
SECTION 2.12. Delivery of Bonds Upon Purchase or Conversion. The Company
hereby agrees to cause the Tender Agent, in accordance with the terms of the
Trust Agreement, to deliver Bonds purchased with the proceeds of any drawing
under the Letter of Credit to the Bank or its designee (including the Bond
Trustee as agent and bailee for the Bank) to be held by the Bank in pledge as
collateral securing the Company's payment obligations hereunder. Bonds so
delivered to the Bank or its designee shall be registered by the Bond Trustee in
the name of the Bank, or its agent, bailee or designee, as pledgee of the
Company, as provided in the Trust Agreement. Upon payment to the Bank of the
amount of such drawings, together with accrued interest, if any, on such amount,
calculated at the Default Rate, to the date of payment, or upon written notice
to the Bond Trustee that the Bank has reinstated the Letter of Credit with
respect to Bonds purchased with proceeds of such drawings, the Bank shall
release to the Tender Agent, in accordance with the terms of the Trust
Agreement, a principal amount of Bonds, if any, then held under the pledge equal
to the amount of such payment corresponding to the principal portion of such
Bonds.
SECTION 2.13. Extension of the Stated Termination Date. At least one
hundred and eighty days before the Stated Termination Date, the Company may
request the Bank in writing to extend the Stated Termination Date for one year
for purposes of this Agreement and the Letter of Credit. If the Company shall
make such a request, the Bank shall, on or before the date one hundred forty
days preceding the Stated Termination Date, notify the Company in writing
whether or not the Bank will extend the Stated Termination Date and, if the Bank
does so elect, the conditions of such extension (including conditions relating
to legal documentation and pricing, such as fees for renewal and drawings). If
the Bank shall not so notify the Company, the Bank shall be deemed to have not
consented to such request. All requests and notices made pursuant to this
Section 2.13 shall also be delivered to the Bond Trustee.
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SECTION 2.14. Pledge of Bonds. The Company hereby pledges, assigns,
hypothecates, transfers and delivers to the Bank all its right, title and
interest to, and hereby grants to the Bank a first lien on, and security
interest in, all right, title and interest of the Company in and to the
following (the "Collateral"):
(a) all Bonds which may from time to time have been purchased with
proceeds of C Drawings under the Letter of Credit (the "Pledged Bonds");
(b) all income, earnings, profits, interest, premium or other
payments in whatever form in respect of the Pledged Bonds;
(c) all proceeds (cash and non-cash) arising out of the sale,
exchange, collection, enforcement or other disposition of all or any
portion of the Pledged Bonds;
as collateral security for the prompt and complete payment when due of all
amounts due in respect of the reimbursement obligations of the Company set forth
herein with respect to such Pledged Bonds (the "Obligations").
Pledged Bonds shall be held by the Bond Trustee pursuant to the provisions
of Section 1203 of the Trust Agreement or as otherwise directed by the Bank.
In the event that the Company shall fail to pay any amount when due
hereunder with respect to the Pledged Bonds, the Bank, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of 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 said Collateral, or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange, broker's board
or at any of the Bank's offices or elsewhere upon such terms and conditions as
it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk, with the
right of the Bank upon any such sale or sales, public or private, to purchase
the whole or any part of said Collateral so sold, 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 collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral or in any
way relating to the rights of the Bank hereunder, including reasonable
attorney's fees and legal expenses, to the payment in whole or in part of the
Obligations in such order as the Bank may elect, the Company remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Bank of any other amount
required by any provision of law, including, without limitation, Section
9-504(1) of the Uniform Commercial Code, need the Bank account for the surplus,
if any, to the Company. The Company agrees that the Bank need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale or other intended disposition is to take place and that
such notice is reasonable notification of such matters.
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No notification need be given to the Company if it has signed after default a
statement renouncing or modifying any right to notification of sale or other
intended disposition. 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
North Carolina, except to the extent the remedial provisions of some other state
laws are applicable.
The Company covenants that the pledge, assignment and delivery of the
Collateral hereunder will create a valid, perfected, first priority security
interest in all right, title or interest of the Company in or to such
Collateral, 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 Collateral. The
Company covenants and agrees that it will defend the Bank's right, title and
security interest in and to the Collateral and the proceeds thereof against the
claims and demands of all persons whomsoever.
Pledged Bonds shall be released from the security interest created
hereunder upon satisfaction of the Obligations with respect to such Pledged
Bonds, and restoration of the Letter of Credit in the amount of any drawing
thereunder to satisfy the Obligations.
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ARTICLE III
CONDITIONS OF ISSUANCE
SECTION 3.01. Condition Precedent to Issuance of the Letter of Credit. The
obligation of the Bank to issue the Letter of Credit is subject to the condition
precedent that the Bank shall have received on or before the Date of Issuance,
except as otherwise indicated below, the following, each dated such date, in
form and substance satisfactory to the Bank:
(a) Corporate Documents: (i) A copy of the Certificate of
Incorporation of the Company and the Guarantor, each certified as of a
date no earlier than 10 days prior to the Date of Issuance by the
Secretary of State of the State of Delaware; (ii) certificates dated no
earlier than 10 days prior to the Date of Issuance of the Secretary of
State of the State of Delaware as to the good standing of the Company and
of the Guarantor, (iii) a certificate dated no earlier than 10 days prior
to the Date of Issuance of the Secretary of State of the State of North
Carolina as to the qualification to do business of the Company; (iv) a
copy of the bylaws of the Company and of the Guarantor, each certified as
of the Date of Issuance by the Secretary or an Assistant Secretary of the
Company as being complete, correct and in full force and effect; and (v)
copies of the resolutions of the Board of Directors of the Company and of
the Guarantor evidencing authorization and approval of this Agreement, the
Deed of Trust, the Security Agreement, and any Related Document to which
the Company or the Guarantor is a party, as applicable, and the
transactions contemplated thereby, certified by the Secretary or an
Assistant Secretary of the Company and of the Guarantor (which certificate
shall state that such resolutions are in full force and effect on the Date
of Issuance).
(b) Governmental Approvals: Originals (or copies certified to be
true copies by the Secretary or Assistant Secretary of the Company or, in
the case of the Issuer, by an authorized officer of the Issuer) of all
governmental and regulatory approvals (including, without limitation,
approvals or orders of the Issuer, the North Carolina Local Government
Commission or the Governor of the State of North Carolina) necessary for
the Company with respect to this Agreement, the issuance of the Bonds and
the transactions contemplated hereby and thereby.
(c) Incumbency Certificates: Certificates of the Secretary or an
Assistant Secretary of the Company and of the Guarantor certifying the
names and true signatures of the officers of the Company and the
Guarantor, respectively, authorized to sign this Agreement, the Related
Documents and the other documents contemplated hereby and thereby to which
the Company or the Guarantor is a party, respectively.
(d) Company Counsel Opinions: An opinion of Berlack, Israels &
Liberman LLP, as Counsel to the Company and the Guarantor, and/or any
counsel licensed to practice in North Carolina and in Georgia that may be
engaged by the Company, in substantially the form of Exhibit B-1 hereto in
form and substance satisfactory to the Bank and its counsel, and as to
such other matters as the Bank may reasonably request.
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(e) Bond Counsel Opinion: An opinion of Hunton & Williams, Bond
Counsel, in substantially the form of Exhibit C hereto in form and
substance satisfactory to the Bank and its counsel and as to such other
matters as the Bank may reasonably request.
(f) Operative Documents: An executed copy of the Loan Agreement,
Deed of Trust, Security Agreement, Guaranty Agreement, Trust Agreement,
Official Statement, the Bond Purchase Agreement and the Remarketing
Agreement, each as defined in the Trust Agreement.
(g) Bond Transcript: As soon as practicable after the issuance of
the Letter of Credit, a copy of the Bond transcript and each closing
document relating to the issuance of the Bonds.
(h) Authentication Order: A certificate from the Issuer stating that
the Issuer has duly executed and delivered the Bonds to the Trustee for
authentication.
(i) Title Insurance: From a title insurance company acceptable to
the Bank, in respect of the Deed of Trust, a mortgagee's title insurance
policy or marked-up unconditional binder for such insurance, dated the
Date of Issuance. Such policy shall (i) be in an amount equal to
$7,000,000; (ii) insure that the Deed of Trust insured thereby creates a
valid first lien on the property covered by such Deed of Trust free and
clear of all defects and encumbrances (except those acceptable to the
Bank); (iii) name the Bank as the insured party thereunder; (iv) be in the
form of ALTA Loan Policy-1992 or other form approved by the Bank; and (v)
contain a Revolving Credit/Letter of Credit Endorsement and such other
endorsements and effective coverage as the Bank may reasonably request.
The Bank shall also have received (i) evidence that all premiums in
respect of such policy have been paid and (ii) copies of all items
appearing as exceptions on such policy or binder.
(j) Certified Survey and Flood Plain Certification: A physical
survey containing maps or plats of the perimeter or boundaries of the site
of the real property and improvements covered by the Deed of Trust
certified to the Bank and the title insurance company, in a manner
acceptable to each of them, dated a date satisfactory to the Bank and the
relevant title insurance company, by an independent professional licensed
land surveyor satisfactory to the Bank and the relevant title insurance
company, which survey shall indicate the following: (i) the locations on
such site of all the buildings, structures and other improvements and the
established building setback lines insofar as the foregoing affect the
perimeter or boundary of such property; (ii) the lines of streets abutting
the site and width thereof; (iii) all access and other easements
appurtenant to the site or necessary or desirable to use the site; (iv)
all roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the site, whether recorded,
apparent from a physical inspection of the site or otherwise known to the
surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the site; and (vi) if the site is described
as being on a filed map, a legend relating the survey to said map, all in
form satisfactory to the Bank. The Company shall also provide a
certification from an independent professional licensed land surveyor
satisfactory to the Bank as to the location of the Project
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or any property covered by the Deed of Trust in any "special flood hazard"
area within the meaning of the Federal Flood Disaster Protection Act of
1973.
(k) Evidence of Recordation, Filings and Payments of Fees: Evidence
satisfactory to the Bank that any documents (including, without
limitation, financing statements) required to be recorded or filed in
order to create, in favor of the Bank, a perfected lien on and security
interest in all real and personal property covered by the Deed of Trust or
the Security Agreement have been properly recorded and/or filed in each
office in each jurisdiction required in order to create, in favor of the
Bank, a perfected lien on and security interest in the respective
collateral described therein. The Bank shall have received evidence of all
such recordation and acknowledgment copies of all such filings (or, in
lieu thereof, the Bank shall have received other evidence satisfactory to
the Bank that all such filings have been made or will be made), and the
Bank shall have received evidence that all necessary recordation and
filing fees and all documentary taxes or other expenses related to such
filings or recordations have been paid in full.
(l) Insurance: Copies of Certificates of Insurance and/or if
requested by Bank the insurance policies covered by such Certificates of
Insurance required under Section 2.16 of the Deed of Trust or under the
Security Agreement, from insurance companies or associations acceptable to
the Bank, listing the Bank as insured party and/or loss payee together
with evidence satisfactory to the Bank that all premiums necessary to be
paid for the effectiveness of such insurance have been paid by the
Company. If any part of the Project or property covered by the Deed of
Trust is located in a "special flood hazard" area within the meaning of
the Federal Flood Disaster Protection Act of 1973, a flood insurance
policy satisfactory to the Bank and naming the Bank as insured party
and/or loss payee shall be delivered to the Bank.
(m) Fees Payable: Payment by the Company to (i) the Bank of the fees
set forth in Section 2.03(a) hereof and such other costs and expenses
pursuant to Section 7.07 hereof, and (ii) counsel to the Bank, of their
fees incurred in connection with this transaction, plus such counsel's
out-of-pocket expenses.
(n) Current Financial Statements: Financial statements of the
Company in the form required under Section 5.01(a) hereof.
(o) Invoices. Copies of the original invoices relating to the
building addition constructed and the machinery and equipment financed
with Bond proceeds.
(p) Environmental Audit: A satisfactory phase I environmental audit
covering the "Phase II" of the Property from an engineering firm
acceptable to the Bank indicating no environmental hazards not acceptable
to the Bank, which audit shall be delivered not more than 60 days after
the Date of Issuance.
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(q) Other Documents: Such other documents, instruments, approvals
(and, if requested by the Bank, certified duplicates of executed copies
thereof) or opinions as the Bank may reasonably request.
SECTION 3.02. Additional Conditions Precedent to Issuance of the Letter of
Credit. (a) The obligation of the Bank to issue the Letter of Credit shall be
subject to the further conditions precedent that on the Date of Issuance the
following statements shall be true and the Bank shall have received a
certificate signed by an authorized officer of the Company, dated the Date of
Issuance, stating that:
(i) The representations and warranties contained in Section 4.01 of
this Agreement, Section 2.02 of the Loan Agreement, in the Deed of Trust
and in the Security Agreement are correct on and as of the Date of
Issuance of the Letter of Credit as though made on and as of such date;
and
(ii) No event has occurred or would result from the issuance of the
Letter of Credit, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be
given or lapse of time or both;
and (b) there shall have been no introduction of or change in or in the
interpretation of any law or regulation that would make it unlawful or unduly
burdensome for the Bank to issue the Letter of Credit, no outbreak or escalation
of hostilities or other calamity or crisis, no suspension of or material
limitation on trading on the New York Stock Exchange or any other national
securities exchange, no declaration of a general banking moratorium by United
States or North Carolina banking authorities, and no establishment of any new
restrictions on transactions in securities or on banks materially affecting the
free market for securities or the extension of credit by banks.
SECTION 3.03. Conditions Precedent to Each Tender Advance. Each payment
made by the Bank under the Letter of Credit pursuant to a Tender Draft shall
constitute an Advance hereunder only if on the date of such payment the
following statements shall be true:
(i) The representations and warranties contained in Section 4.01 of
this Agreement, in Section 2.02 of the Loan Agreement, in the Deed of
Trust and in the Security Agreement, are correct on and as of the date of
such Advance as though made on and as of such date; and
(ii) No event has occurred or would result from such Advance, which
constitutes an Event of Default or would constitute an Event of Default
but for the requirement that notice be given or lapse of time or both.
Unless the Company shall have previously advised the Bank otherwise in writing,
the Company shall be deemed to have represented and warranted, on the date of
payment by the Bank under the Letter of Credit pursuant to a Tender Draft, that
on the date of such payment the above statements are true and correct.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The Company
represents and warrants for itself and the Guarantor, as applicable, as follows
(which representations and warranties shall survive the issuance of the Letter
of Credit):
(a) The Company, the Guarantor and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the corporate power to own its
properties and to carry on its business as now being conducted, and is duly
qualified as a foreign corporation to do business in every jurisdiction in the
United States of America in which the nature of its business makes such
qualification necessary and the failure to be so qualified would result in a
material adverse effect on the business, properties or condition (financial or
other) of the Company, and is in good standing in such jurisdictions. The
Company does not have any Subsidiaries (as defined).
(b) Each of the Company and the Guarantor is duly authorized under all
applicable provisions of law to execute, deliver and perform this Agreement, the
Security Agreement, the Deed of Trust and the other Related Documents to which
it is a party, and all corporate action on its part (and any shareholder action)
required for the lawful execution, delivery and performance thereof has been
duly taken; and this Agreement, the Security Agreement, the Deed of Trust and
other Related Documents, upon the due execution and delivery thereof, will be
the valid and enforceable instruments and obligations of the Company, and the
Guarantor as applicable, in accordance with their terms. Neither the execution
of this Agreement, the Deed of Trust or the Security Agreement or the other
Related Documents, nor the fulfillment of or compliance with their provisions
and terms, will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a violation of or default under any law,
regulation, order, writ or decree applicable to or binding upon the Company, the
Guarantor or any Subsidiary, or any of their properties, or the Articles of
Incorporation or Bylaws of the Company, the Guarantor or any Subsidiary, or any
agreement or instrument to which the Company, the Guarantor or any Subsidiary is
now a party or by which any of them or their properties may be bound.
(c) The Company has good and marketable title to its properties and
assets, and all such properties and assets are free and clear of all Liens of
any kind except (i) as disclosed in the financial statements and notes thereto
delivered by the Guarantor under the Guaranty Agreement prior to the date hereof
and (ii) Permitted Encumbrances.
(d) Except as set forth on Schedule 4.01(d) hereof, there are no pending
or, to the Company's knowledge, threatened orders, claims, actions,
investigations or proceedings before or by any court, arbitrator or governmental
or administrative body, agency or official which may materially adversely affect
the properties, business or condition, financial or otherwise, of the Company,
the Guarantor or any Subsidiary or in any way adversely affect or call into
question the power and authority of the Company or the Guarantor to enter into
or perform this Agreement, the Security Agreement, the Deed of Trust or any
other Related Documents to which it is a party.
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(e) The Company and its Subsidiaries have filed all income tax returns
required to be filed by them and all taxes shown thereon have been paid (except
where the failure to pay will not have a material adverse effect on the
financial condition, business or operation of the Company), and no controversy
in respect of additional income taxes, foreign, state or Federal, of the Company
or any Subsidiary is pending, or to the knowledge of the Company threatened
except such controversies which are being contested by the Company in good faith
and by proper proceedings which, if determined adversely to the Company, would
not have a material adverse affect on the business, financial condition or
operations of the Company. The Federal and state income taxes of the Company and
its Subsidiaries (excluding any state franchise taxes) have been examined and
reported on or closed by applicable statutes for all fiscal years as indicated
on Exhibit G, and adequate reserves have been established for the payment of all
such taxes for periods ended subsequent to such fiscal years.
(f) Neither the Company nor any Subsidiary is a party to or bound by any
contract or agreement or subject to any charter or other corporate restrictions
which adversely affects the business, properties, or condition, financial or
otherwise, of the Company or any Subsidiary. The Bank acknowledges that the
agreements described on Exhibit H may, under certain circumstances, have an
adverse affect on the business of the Company and its Subsidiaries.
(g) The Company owns, possesses, or has the right to use all necessary
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights and copyrights to conduct its business as now conducted, without
known conflict with any patent, license, franchise, trademark, trade name, or
copyright of any other Person.
(h) No written approval known by the Company to be required of any
foreign, Federal, state or local governmental authorities is necessary to enter
into and carry out the terms of this Agreement or the other Related Documents,
and no consents or approvals are required in connection with the making or
performance of this Agreement or the other Related Documents. The Company has
received the written approval or permits from all foreign, Federal, state and
local governmental authorities necessary to conduct its operations as presently
conducted.
(i) Neither this Agreement, the other Related Documents nor any other
agreements, reports, schedules, certificates or instruments heretofore or
simultaneously with the execution of this Agreement delivered to the Bank by or
on behalf of the Company or its Subsidiaries in connection with the issuance of
the Letter of Credit contains any misrepresentation or untrue statement of
material fact or omits to state any material fact necessary to make any of such
agreements, reports, schedules, certificates or instruments not misleading.
(j) The Company is now, and after giving effect to (i) the loan made by
the Issuer pursuant to the Loan Agreement and (ii) the credit to be extended by
the Bank pursuant to the Letter of Credit, will be, solvent.
(k) Except as set forth on Exhibit I, neither the Company nor to the
Company's best knowledge any previous owner or operator of any real property
currently owned or operated by the Company (collectively, the "Current
Property"), has generated, stored, or disposed of any Hazardous
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Material on any portion of the Current Property, or transferred any Hazardous
Material from the Current Property to any other location in violation of any
applicable Environmental Laws which has not been fully remedied. Neither the
Company nor any Subsidiary has been notified of any action, suit, proceeding or
investigation which calls into question compliance by the Company or any of its
Subsidiaries with any Environmental Laws or which seeks to suspend, revoke or
terminate any license, permit or approval necessary for the generation,
handling, storage, treatment or disposal of any Hazardous Material.
(l) No part of the proceeds of the loan made by the Issuer pursuant to the
Loan Agreement will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System) or for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry margin stock or for any other purpose which might cause the loan made
by the Issuer pursuant to the Loan Agreement to constitute a "purpose credit"
within the meaning of said Regulation U or Regulation X (12 C.F.R. Parts 221 and
224) of the Federal Reserve Board.
(m) None of the ERISA Plans maintained at any time by the Company or any
Subsidiary or the trusts created thereunder has engaged in a prohibited
transaction (as defined in ERISA) which could subject any such ERISA Plan or
trust to a material tax or penalty on prohibited transactions imposed under the
Code or ERISA; neither the Company nor any Subsidiary has incurred any
accumulated funding deficiency within the meaning of ERISA, whether or not
waived; nor has there been any Reportable Event (as defined in ERISA), or other
event or condition, which presents a material risk of termination of any such
ERISA Plan by the Pension Benefit Guaranty Corporation.
(n) Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party
relating to any Indebtedness, the effect of which default (i) may impair the
ability of the Company to repay the Advances or any other amounts due hereunder;
or (ii) would cause such obligation under the agreement or instrument to become
due prior to its stated maturity and would have a material adverse affect on the
financial condition, business or operations of the Company.
(o) Neither the Company nor any Subsidiary is in default with respect to
any of its existing Indebtedness where such default would have a material
adverse affect on the financial condition, business or operations of the Company
or such Subsidiary.
(p) The address of the Company's chief executive offices and principal
place of business is 4501 Circle 75 Parkway, Suite F-6300, Atlanta, Georgia
30339. All records and other information with respect to the Collateral
(including computer programs and printouts) are maintained by the Company at
such address. Any other personal property covered by the Security Agreement will
be located at the manufacturing facilities and locations described on Exhibit J
attached hereto.
(q) The Company covenants, warrants and represents to the Bank that all
representations and warranties of the Company contained in this Agreement and
the other Related Documents shall be true at the time of the Company's execution
of this Agreement and the other Related Documents,
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and shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.
(r) The information provided by the Company about itself and the Project
in the Official Statement (the "Company Information") is accurate in all
material respects for the purposes for which its use is authorized; and the
Company Information in the Official Statement does not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made therein, in the light of the circumstances under which
they are or were made, not misleading.
(s) The Company has received the written approval of all Federal, state,
local and foreign governmental authorities, if any, necessary to acquire and
construct the Project and to carry out the terms of this Agreement, the Deed of
Trust, the Security Agreement and the other Related Documents to which it is a
party and no further governmental consents or approvals are required for the
acquisition and construction of the Project or the making or performance of this
Agreement, the Deed of Trust, the Security Agreement and such Related Documents.
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ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. So long as a drawing is available
under the Letter of Credit, or the Bank shall have any Commitment hereunder, or
the Company shall have any obliga tion to pay any amount to the Bank hereunder,
the Company will, unless the Bank shall otherwise consent in writing:
(a) Financial Reports and Other Data.
(i) As soon as practicable and in any event within twenty five (25)
days after the end of each month, deliver, or cause to be delivered, to
the Bank (i) an unaudited and unconsolidated balance sheet of the Company
and its Subsidiaries, and related statements of income and retained
earnings and cash flow for such month and for the period from the
beginning of the then current fiscal year to the end of such month, all in
reasonable detail and certified by the chief financial officer of the
Company to have been prepared in accordance with Generally Accepted
Accounting Principles, subject only to changes resulting from normal
year-end adjustments; and (ii) computations demonstrating compliance with
the provisions of subsections (a), (b), (c) and (d) of Section 5.02
hereof;
(ii) As soon as practicable and in any event within ninety (90) days
after the end of each fiscal year, deliver to the Bank (A) consolidated
and consolidating balance sheets of the Guarantor and its Subsidiaries as
at the end of such Fiscal Year, and related consolidated and consolidating
statements of income, retained earnings and cash flow for such Fiscal Year
(including comparable unaudited financial statements of the Company and
its Subsidiaries), setting forth in each case in comparative form figures
from the preceding Fiscal Year, all in reasonable detail and satisfactory
in scope to the Bank and, in the case of the consolidated financial
statements, audited by and containing (as to the consolidated statements
only) an unqualified opinion, without exception not satisfactory to the
Bank, of independent certified public accountants acceptable to the Bank,
(B) a copy of any letter or report provided by such accountants to the
Guarantor, the Company or members of the Guarantor's or the Company's
management in connection with or as a result of such audit relating to the
Guarantor's or the Company's operations or management of its financial
affairs, and (iii) a certificate of the duly authorized financial officer
of the Company containing computations in reasonable detail evidencing
compliance with subsections (a), (b), (c) and (d) of Section 5.02 hereof;
(iii) Together with each delivery of those items required by clause (i)
and (ii) above, the Company shall deliver to the Bank a certificate
setting forth (A) that to the best of its knowledge, the Company and its
Subsidiaries have kept, observed, performed and fulfilled each and every
agreement binding on them contained in this Agreement and the other
Related Documents, and is not at the time in default of the keeping,
observance, performance or fulfillment of any of the terms, provisions and
conditions hereof or thereof, and (B) that no Default or Event of Default
has occurred, or specifying all such defaults and events of which they may
have knowledge;
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(iv) With reasonable promptness, deliver such additional financial or
other data as the Bank may reasonably request from time to time.
The Bank is hereby authorized to deliver a copy of any financial statements or
any other information relating to the business, operations or financial
condition of the Company and its Subsidiaries which may be furnished to it or
come to its attention pursuant to this Agreement or otherwise, to any regulatory
body or agency having jurisdiction over the Bank or to any person which shall,
or shall have the right or obligation to, succeed to all or any part of the
Bank's interest in this Agreement and the Related Documents.
(b) Taxes and Liens. Promptly pay, or cause to be paid, in all cases in
which the failure to pay might have a material adverse effect on the financial
condition, business or operations of the Company, (i) all taxes, assessments and
other governmental charges which may lawfully be levied or assessed upon the
income or profits of the Company, or upon any property, real, personal or mixed,
belonging to the Company, or upon any part thereof, (ii) any lawful claims for
labor, material and supplies which, if unpaid, might become a Lien or charge
against any such property and (iii) any and all amounts required to be paid to
all Federal, state, local and other taxing authorities in respect of employee
withholdings; provided, however, that the Company shall not be required to pay
or discharge any such items described on (i) and (ii) above that are being
contested in good faith and by proper proceedings, and, if requested by the
Bank, reserves with respect thereto acceptable to the Bank shall be maintained;
provided further that any such item shall be paid forthwith upon the
commencement of proceedings to foreclose any lien securing the same.
(c) Business and Existence. Do or cause to be done all things necessary to
preserve and to keep in full force and effect its corporate existence and rights
and its franchises, trade names, service marks, patents, trademarks, permits,
know-how, trade secrets and other proprietary rights which are reasonably
necessary for the continuance of its business, except where such failure would
not have a material adverse affect on its business, properties or condition,
financial or otherwise.
(d) Insurance; Payment of Premiums. Keep its businesses and properties
insured at all times by responsible insurance companies against the risks and to
the extent that provision for such insurance is usually made by other
corporations engaged in similar businesses similarly situated and consistent
with its past practices, and carry such other types and amounts of insurance as
are usually carried by corporations engaged in the same or a similar business
similarly situated and consistent with its past practices, including without
limitation:
(i) casualty insurance in an amount not less than the full replacement
cost at time of loss, on all real and personal property serving as
Collateral for Indebtedness of the Company to the Bank (except as may be
otherwise agreed to by the Bank) against loss or damage by fire and
lightning and other hazards and risks ordinarily included under uniform
standard extended coverage policies, limited only as may be provided in
the standard form of extended coverage endorsement at the time in use in
the state of location of such collateral;
(ii) general public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about the real
property owned or leased by the Company in an
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amount not less than $1,000,000 with respect to bodily injury, death or
property damage on a combined single limit basis in any one accident and
with an aggregate coverage amount of not less than $2,000,000 during any
one policy year; and
(iii) liability insurance (or self insurance arrangements meeting the
requirements of the applicable jurisdiction) under the workers'
compensation laws of the state of location of its facilities; provided,
however, that the insurance so required may be provided by blanket
policies now or hereafter maintained by the Company.
Each insurance policy obtained in satisfaction of the requirements of
subsections (i) through (iii) above shall be by such insurer (or insurers) as
shall be financially responsible, qualified to do business in the applicable
jurisdiction such insurance coverage is obtained for, and of recognized
standing, shall prohibit cancellation, non-renewal or lapse in coverage by the
insurer without at least 30 days' prior written notice to the Bank, shall
provide (with respect to insurance under (i) only) that, except as otherwise
provided in the Security Agreement or upon the occurrence of an Event of Default
hereunder, losses thereunder shall be adjusted with the insurer by the Company
at its expense, and if requested by the Bank, the Bank, on behalf of the insured
parties and the decision of such Persons as to any adjustment shall be final and
conclusive. Each such policy shall name the Bank as lienholder and loss payee
(with respect to insurance under (i) only) and additional insured thereunder, as
its interests may appear. Not later than 30 days prior to the termination or
expiration of any such policy then in effect and upon any further request, the
Company shall deliver or cause to be delivered to the Bank an Officer's
Certificate setting forth the nature of the risks covered by such insurance, the
amount carried with respect to each risk, and the name of the insurer.
(e) Maintain Property. Maintain its properties in good order and repair
and, from time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management.
(f) Books of Record and Account. Keep, and cause each Subsidiary to keep,
proper books of record and accounts in which full, true and correct entries
shall be made of its transactions in accordance with Generally Accepted
Accounting Principles.
(g) Payment of Indebtedness. Pay when due (or within applicable grace
periods) all Indebtedness due third persons, except when the amount thereof is
being contested in good faith by appropriate proceedings and with adequate
reserves therefor being set aside on the books of the Company.
(h) Right of Inspection. After at least three days' prior notice from the
Bank, permit any person designated by the Bank to visit and inspect any of the
properties, corporate books and financial reports of the Company, and to discuss
its affairs, finances and accounts with its principal officers and independent
certified public accountants, all at such reasonable times and as often as the
Bank may reasonably request, including an annual (or more frequent if the Bank
in its sole discretion deems necessary) collateral audit of the Company by the
Bank at the expense of the Company.
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(i) Observe All Laws. Conform to and duly observe all laws with respect to
the conduct of its business the failure of which to comply might have a material
adverse effect on the financial condition, business or operations of the
Company.
(j) Covenants Extending to Subsidiaries. Cause each of its Subsidiaries to
do with respect to itself, its business and its assets, each of the things
required of the Company in subsections (b) through (i) above, inclusive.
(k) Officer's Knowledge of Default. Upon an officer of the Company
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of the Company or any Subsidiary, cause such officer to
promptly deliver to the Bank a certificate specifying the nature thereof, the
period of existence thereof, and what action the Company proposes to take with
respect thereto.
(l) Suits or Other Proceedings. Upon an officer of the Company obtaining
knowledge of any material litigation, dispute or proceedings being instituted or
threatened against the Company, or any attachment, levy, execution or other
process being instituted against any material portion of the assets of the
Company, promptly deliver to the Bank a certificate stating the nature and
status of such litigation, dispute, proceeding, levy, execution or other
process.
(m) Notice Regarding Hazardous Material or Environmental Complaint. Give
to the Bank immediate written notice of any complaint, order, directive, claim,
citation or notice by any governmental authority or any person with respect to
the use, generation, storage, transportation or disposal of Hazardous Material
by the Company. The Company shall promptly comply with its obligations under law
with regard to such matters and may contest any such obligations to the extent
permitted by law.
(n) Environmental Indemnification. Defend, indemnify and hold the Bank
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, cleanup costs and reasonable attorneys'
fees including those arising by reason of any of the aforesaid or an action
against the Company under this indemnity) arising directly or indirectly from,
out of or by reason of the handling, storage, treatment, emission or disposal of
any Hazardous Material by or in respect of the Company or any Subsidiary.
(o) Further Assurances. At its cost and expense, upon request of the Bank,
duly execute and deliver or cause to be duly executed and delivered, to the Bank
such further instruments, documents, certificates, financing and continuation
statements, and do and cause to be done such further acts that may be reasonably
necessary or advisable in the opinion of the Bank to carry out more effectively
the provisions and purposes of this Agreement and the other Related Documents.
(p) ERISA Requirement. Comply with all requirements of ERISA applicable to
it and furnish to the Bank as soon as possible (i) a certificate describing in
reasonable detail any Reportable Event (as defined in ERISA) with respect to any
ERISA Plan that has occurred and any action which the Company proposes to take
with respect thereto, (ii) a copy of any notice that the Company or any
Subsidiary may receive from the Pension Benefit Guaranty Corporation relating to
the intention of
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the Pension Benefit Guaranty Corporation to terminate any ERISA Plan or ERISA
Plans or to appoint a trustee to administer any such ERISA Plan, and (iii) a
certificate setting forth details as to any failure to make a required
installment or other payment with respect to an ERISA Plan and the action that
the Company or any Subsidiary proposes to take with respect thereto.
(q) Continued Operations. Continue at all times to conduct its business
and engage principally in the same line or lines of business substantially as
heretofore conducted.
(r) Principal Accounts. Maintain its principal banking depository accounts
with the Bank.
(s) Application of Net Proceeds of Insurance and Eminent Domain.
(i) The Net Proceeds of the liability insurance carried pursuant to
the provisions of subsections (d)(ii) and (iii) above and of the other
Related Documents shall be applied by the Company toward extinguishment of
the defect or claim or satisfaction of the liability with respect to which
such insurance proceeds may be paid.
(ii) The Net Proceeds of the insurance carried with respect to the
real and personal property serving as collateral pursuant to the
provisions of subsection (d)(i) or the other Related Documents and the Net
Proceeds resulting from Eminent Domain shall be paid to the Bank and
applied as follows:
(A) If the amount of the Net Proceeds does not exceed $25,000,
the Net Proceeds shall be paid to the Company and shall be applied
to the repair, replacement, renewal or improvement of the affected
Collateral as necessary.
(B) If the amount of the Net Proceeds exceeds $25,000, the Net
Proceeds shall be paid to and held by the Bank pending receipt of
written instructions from the Company. At the option of the Company,
to be exercised within the period of ninety (90) days from the date
of notice to the Company of receipt by the Bank of such Net
Proceeds, the Company shall advise the Bank that (I) the Company
will use the Net Proceeds for the repair, replacement, renewal or
improvement of the affected Collateral (such funds to remain with
the Bank and to be drawn down by the Company upon delivery of
evidence satisfactory to Bank that such amounts are due for such
repair, replacement, renewal or improvement), or (II) the Net
Proceeds shall be applied to the prepayment of the Bonds. If the
Company does not advise the Bank within said period of ninety (90)
days that it elects to proceed under clause (I) to use such Net
Proceeds for the repair, replacement, renewal or improvement of the
affected Collateral, such Net Proceeds shall be applied to the
prepayment of the Bonds, such prepayments to be applied by the Bank
to the Bonds, as determined by the Bank in its sole discretion.
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The Company agrees that if Company elects to use the moneys
paid to the Bank pursuant to this Section for the repair,
replacement, renewal or improvement of the affected Collateral, it
will restore the affected Collateral, or cause the same to be done,
to a condition substantially equivalent to its condition prior to
the occurrence of the event to which the Net Proceeds were
attributable. At the request of the Bank the Company shall present
evidence satisfactory to the Bank that sufficient funds (whether
through Net Proceeds or additional funds supplied by the Company)
exist so that the affected Collateral can be so restored. To the
extent that the Net Proceeds are not sufficient to restore or
replace the affected Collateral, the Company shall use its own funds
to restore or replace the affected Collateral. Prior to the
commencement of such work, the Bank may require the Company to
furnish a completion bond, escrow deposit or other satisfactory
evidence of the Company's ability to pay or provide for the payment
of any estimated costs in excess of the amount of the Net Proceeds.
Any balance remaining after any such application of such Net
Proceeds shall be paid to the Company. The Company shall be entitled
to the Net Proceeds of any insurance or resulting from Eminent
Domain relating to property of the Company not included in the
affected Collateral and not providing security for the Letter of
Credit.
(iii) For purposes hereof, Net Proceeds, when used with respect to
any insurance proceeds or award resulting from, or other amount received
in connection with, Eminent Domain, shall mean the gross proceeds from
such proceeds, award or other amount, less all expenses (including
attorneys' fees) incurred in the realization thereof.
(iv) The proceeds of any such insurance shall be held by the Bank
subject to a lien in favor of the Bank to secure the Letter of Credit.
(t) Registration of Bonds. Cause all Bonds which it acquires, or which it
has had acquired for its account, to be registered forthwith in accordance with
the Trust Agreement in the name of the Company or, if acquired with funds drawn
under the Letter of Credit, in the name of the Bank, or its designee, as pledgee
of the Company.
(u) Project Reporting Requirements. Furnish to the Bank the following:
(i) Prior to submission for payment to the Trustee, copies of
each requisition for disbursement from the Construction Fund (as
defined in the Trust Agreement), including copies of all original
invoices on machinery and equipment, and all certifications and
attachments thereto, submitted for payment to the Trustee pursuant
to Section 602 of the Trust Agreement for approval by the Bank;
(ii) Copies of the Certificate submitted by the Company pursuant
to Section 3.4 of the Loan Agreement; and
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(iii) Notice of the filing of any mechanic's, laborer's or
materialman's lien against the Project which has not been discharged
within 30 days after notice of the filing thereof.
(v) Post-Closing Items. To the extent the Bank has not received all items
required by Section 3.01 hereof at the date of issuance of the Letter of Credit,
to deliver all such items to the Bank within twenty (20) days of issuance of the
Letter of Credit.
SECTION 5.02. Negative Covenants. So long as a drawing is available under
the Letter of Credit, or the Bank shall have any Commitment hereunder, or the
Company shall have any obligation to pay any amount to the Bank hereunder, the
Company will not, nor will it permit any Subsidiary to, without the prior
written consent of the Bank:
(a) Consolidated Working Capital. Cause, suffer or permit the excess of
Consolidated Current Assets over Consolidated Current Liabilities to be less
than the following on the dates set forth below: (i) $8,750,000 at June 30,
1997, September 30, 1997 and December 31, 1997; (ii) $10,000,000 at March 31,
1998; and (iii) $8,750,000 at June 30, 1998 and each fiscal quarter end
thereafter.
(b) Consolidated Tangible Net Worth. Cause, suffer or permit Consolidated
Tangible Net Worth of the Company and its Subsidiaries to be less than (i)
$7,000,000 at March 31, 1997; (ii) $7,900,000 at June 30, 1997; (iii) $8,400,000
at September 30, 1997; and (iv) $8,500,000 at December 31, 1997 and at each
fiscal quarter end thereafter.
(c) Consolidated Debt to Worth Ratio. Cause, suffer or permit the ratio of
(x) Consolidated Liabilities excluding Subordinated Indebtedness of the Company
and of its Subsidiaries to (y) Consolidated Tangible Net Worth of the Company
and its Subsidiaries, to exceed (i) 5.20 to 1.00 at March 31, 1997; (ii) 4.50 to
1.00 at June 30, 1997; (iii) 3.60 to 1.00 at September 30, 1997; and (iv) 3.90
to 1.00 at December 31, 1997 and each fiscal quarter end thereafter.
(d) Consolidated Debt Service Coverage Ratio. Cause, suffer or permit the
Consolidated Debt Service Coverage Ratio to be less than the following at the
following fiscal quarter ends:
Quarter End Ratio
----------- -----
March 31, 1997 1.20 to 1.00
June 30, 1997 and September 30, 1997 1.10 to 1.00
December 31, 1997 and each fiscal
quarter end thereafter 1.4 to 1.00
In determining compliance with the provisions of (a) and (d) above, indebtedness
under the Line of Credit Loan of the Company outstanding under the $12,000,000
Amended and Restated Loan Agreement dated as of November 29, 1995 between the
Company and the Lender shall be considered long term debt.
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(e) Mortgages, Liens, Etc. Incur, create, assume or permit to exist any
Lien on any of its properties or assets now owned or hereafter acquired of any
character, including without limitation interests under conditional sales or
other title retention agreements, except (i) Permitted Liens and the lien
described on Exhibit C to the Security Agreement; (ii) Liens existing as of the
date hereof and disclosed in the financial statements and notes thereto of the
Guarantor delivered under the Guaranty Agreement prior to the date hereof; and
(iii) Liens securing indebtedness permitted under subsection (f)(ii) below.
(f) Indebtedness. Create, assume, incur, or in any manner be or become
liable in any manner to any person or persons directly or indirectly for any
Indebtedness, other than:
(i) The indebtedness provided for herein and existing Indebtedness
of the Company held by the Bank;
(ii) Purchase Money Mortgage Indebtedness (including Capital Lease
Obligations), not in excess of $500,000 in the aggregate for the Company
and its Subsidiaries in any fiscal year, provided that no such
indebtedness shall exceed the cost of the asset securing such
indebtedness;
(iii) liabilities under operating leases of equipment not in excess
of $500,000 in the aggregate for the Company and its Subsidiaries in any
fiscal year; and
(iv) trade payables and accruals incurred in the ordinary course of
business.
(g) Name Change, Merger, Dissolution, Etc. Change its name, enter into any
transaction of merger or consolidation, or change the nature of its business, or
wind up, liquidate or dissolve, or agree to any of the foregoing, or permit any
Subsidiary to do so, except that any Subsidiary may dissolve or transfer all or
a substantial part of its properties and assets to, or may merge into, the
Company or any other Subsidiary.
(h) Compliance with ERISA; Funding of ERISA Plans. Engage in any
transaction in connection with which the Company or any related person would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code; terminate any ERISA Plan in a
manner, or take any other action with respect to any such ERISA Plan, which
would result in any liability of the Company or any Subsidiary to the Pension
Benefit Guaranty Corporation; as of any ERISA Plan year, permit to exist any
accumulated funding deficiency (as defined in Section 412 of the Code); or
contribute or be obligated to contribute to any multi-employer ERISA Plan.
(i) Investments. Make any investments in any Person or purchase or
otherwise acquire any capital stock, properties, substantially all the assets or
obligations of, or any other equity interest in, any Person, except for:
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(A) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America and which mature within one year from the date of acquisition
thereof;
(B) investments in commercial paper of any corporation with a
maturity not in excess of thirty days from the date of acquisition thereof
and rated P-1 or better by Moody's Investors Services, Inc., or A-1 or
better by Standard & Poor's Corporation;
(C) investments in certificates of deposit with a maturity not in
excess of ninety days from the date of acquisition thereof, issued by (a)
the Bank or (b) any commercial bank organized and existing under the laws
of the United States of America or under any state of the United States of
America and having a combined capital and undivided surplus of not less
than $50,000,000, provided, however, that certificates of deposit at any
one bank shall at no time exceed ten percent (10%) of the undivided
capital and surplus of such bank;
(D) investments not in excess of, in the aggregate, $250,000 in any
Person; and
(E) investments representing loans to officers or directors to
finance the purchase of common stock of the Guarantor provided the
aggregate principal amount of such loans outstanding does not exceed, at
any time, $250,000.
(j) Sale of Assets, Dissolution, etc. (a) Sell, assign, lease, transfer or
otherwise dispose of assets or properties in any fiscal year having a book value
in excess of $250,000 or any stock or Indebtedness of any Subsidiary, except for
(i) the sale of inventory in the ordinary course of business, and (ii) the sale
of the Company's "rake and lute" division, or (b) agree to do any of the
foregoing.
(k) Dividends, Redemptions and Other Payments. (a) Declare or pay any
dividends (excluding dividends payable solely in common stock of the Company) on
any shares of stock of any class of the Company now or hereafter outstanding, or
(b) purchase, redeem or otherwise retire any such shares, or apply or set apart
any of its assets therefor or make any other distribution (by reduction of
capital or otherwise) in respect of any such shares, or (c) agree to do any of
the foregoing.
(l) Insider Transactions. Except for those transactions described on
Exhibit K, directly or indirectly purchase, acquire or lease any property or
asset from, or purchase, sell, dispose of, exchange or lease any property or
assets to, or render service to, or otherwise deal with, in the ordinary course
of business or otherwise, any Affiliate (including for purposes of this Section
White Metal), except pursuant to reasonable requirements and upon fair and
reasonable terms and conditions not less favorable to the Company than if it
were a comparable arm's length transaction and no such relationship existed.
(m) Guarantee. Guarantee, assume, endorse or otherwise become or remain
liable in connection with the obligations of any other Person (including
obligations of such Persons arising from working capital maintenance agreements)
other than:
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(i) the endorsement of negotiable instruments in the ordinary course
of business for deposit or collection;
(ii) such guaranties and other contingent liabilities currently
existing as disclosed in the financial statements and notes thereto of the
Guarantor delivered under the Guaranty Agreement prior to the date hereof;
and
(iii) those guaranties described on Exhibit L.
(n) Sale of Accounts. Sell, pledge, encumber or discount, with or without
recourse, any of its notes or accounts.
(o) Different Business. Enter into or carry on any business not related to
the business currently conducted by the Company.
(p) Amendment of Any Related Document. Enter into or consent to any
amendment or modification of the Trust Agreement, the Loan Agreement, the Deed
of Trust, the Security Agreement or any other Related Document, as in effect on
the Date of Issuance.
(q) Change in Business or Use of Project. Enter into any business which is
materially different from and/or not connected with the business in which the
Company is engaged on the Date of Issuance or operate the Project in a manner
other than as permitted under the Loan Agreement.
(r) Tax Status. Take any action or suffer any action to be taken by others
that will impair the tax-exempt status of the Bonds.
(s) Optional Redemption of Bonds. Take any action, or permit the Trustee's
taking of any action, which would result in the optional redemption or
prepayment of all or any portion of the Bonds with funds drawn under the Letter
of Credit.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) The Company shall fail to pay any amount payable hereunder or
under any of the Related Documents on the date when due (after giving
effect to applicable grace periods); or
(b) If any representation, warranty, statement, report or
certification made by the Company herein or in any other Related Document
shall be false or misleading in any material respect on the date as of
which made and which could have a material adverse affect on the business
or financial condition of the Company or any Subsidiary or, in the
reasonable opinion of the Bank, could impair the value of the Collateral
in any material respect or the liens of the Bank thereon; or
(c) The Company shall fail to perform or observe the provisions of
Sections 5.01(k), 5.01(l), 5.01(m) or Section 5.02 of this Agreement; or
(d) The Company shall default in the performance or observance of
any other agreement, covenant, term or condition binding on it contained
herein other than as set forth in (c) above or in any other of the other
Related Documents and such default shall not have been remedied within
thirty (30) days, or lesser period set forth in such agreement or
documents, after the earlier to occur of the Company becoming aware of
such default or written notice thereof specifying the default shall have
been received by the Company from the Bank; provided that if such default
cannot reasonably be cured within such 30 day period, the period for such
cure shall be extended for an additional period of up to 60 days as long
as the Company has commenced action to cure such default within the
initial 30 day period and diligently pursues such action; or
(e) The Company (i) shall default in payment of principal of or
interest on any other Indebtedness of, in the aggregate, $50,000 or more,
beyond any period of grace provided with respect thereto, or (ii) shall
default in the performance of any other agreement, covenant, term or
condition contained in any agreement under which any such Indebtedness is
created if the effect of such performance default described in this clause
(ii) is to cause, or permit the holder or holders of such obligation (or a
trustee in behalf of such holder or holders) to cause, such obligation to
become due prior to its stated maturity; or
(f) Liquidation or dissolution of the Company, or suspension of the
business of the Company or filing by the Company of a voluntary petition
in bankruptcy or a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
Bankruptcy Code, as amended, or under any other insolvency act or law,
state or Federal, now or hereafter existing, or any other action of the
Company indicating its consent to, approval of, or acquiescence in any
such petition or proceeding; the
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application by the Company for, or the appointment by or with the consent
or acquiescence of the Company of, a receiver, a trustee or a custodian
for the Company; the application by the Company for, or the consent to or
acquiescence of the Company in, an assignment for the benefit of
creditors; or the inability of the Company or the admission by the Company
in writing of its inability to pay its debts as they mature; or
(g) Filing of an involuntary petition against the Company or any
Subsidiary in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the Bankruptcy
Code, as amended, or under any other insolvency act or law, state or
Federal, now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of the Company or any Subsidiary or for
all or a substantial part of its respective property; the issuance of a
warrant of attachment, execution or similar process against any
substantial part of the property of the Company or any Subsidiary and the
continuance of any of such events for sixty (60) days undismissed or
undischarged; or
(h) If (i) any order is entered in any proceedings against the
Company decreeing the dissolution or split-up of the Company, and such
order remains in effect for more than sixty (60) days; or (ii) any charges
(whether by indictment, information or other criminal process) are
instituted against the Company under any criminal statute, state or
federal, for which seizure or forfeiture of assets is a potential penalty
or remedial measure; or
(i) If a final judgment, which with other outstanding final
judgments against the Company or any Subsidiary exceeds applicable
insurance coverage by an aggregate of $50,000 shall be rendered against
the Company or any Subsidiary, and if within thirty (30) days after entry
thereof such judgment shall not have been discharged or execution thereof
stayed pending appeal, or if within thirty (30) days after the expiration
of any such stay such judgment shall not have been discharged;
(j) Any provision of this Agreement shall at any time for any reason
cease to be valid and binding on the Company, or shall be declared to be
null and void, or the validity or enforceability thereof shall be
contested by the Company, or a proceeding shall be commenced by any
governmental agency or authority having jurisdiction over the Company
seeking to establish the invalidity or unenforceability thereof, or the
Company shall deny that it has any or further liability or obligation
under this Agreement; or
(k) Any "Event of Default" under and as defined in the Loan
Agreement, the Trust Agreement, the Deed of Trust, the Guaranty Agreement,
the Security Agreement or any other Related Document shall have occurred
and not been waived; or
(l) The Bonds for any reason shall be determined to be invalid or
any Related Document shall for any reason cease to be in full force and
effect.
SECTION 6.02. Rights Upon an Event of Default. If any Event of Default
shall have occurred and not been waived, the Bank may give notice of the
occurrence and continuance of an Event of Default to the Bond Trustee pursuant
to Section 901 of the Trust Agreement, and direct the
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Bond Trustee to declare the principal of the Bonds then outstanding and the
interest accrued thereon immediately due and payable under Section 901 of the
Trust Agreement resulting in the Trustee drawing under the Letter of Credit
pursuant to Section 902 of the Trust Agreement whereupon all amounts drawn under
the Letter of Credit, all Advances, all interest thereon and all other amounts
payable hereunder or in respect hereof shall automatically be forthwith due and
payable by the Company, without presentment, demand, protest, or further notice
of any kind, all of which are hereby expressly waived by the Company. The Bank
may also elect to cause the Bonds to be purchased with the proceeds of the
Letter of Credit pursuant to the terms of the Trust Agreement. If the Bonds are
purchased rather than redeemed with the proceeds of such a drawing under the
Letter of Credit, such Bonds shall be held as Pledged Bonds for the benefit of
the Bank in accordance with the terms hereof and of the terms of the Trust
Agreement.
Notwithstanding the foregoing, if an Event of Default specified in (f) or
(g) above shall occur, then all commitments, if any, shall automatically
terminate and all obligations owing to the Bank hereunder and all accrued
interest in respect thereof shall immediately become due and payable without the
giving of any notice or other action by the Bank.
SECTION 6.03. No Remedy Exclusive. 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 hereunder, under the Loan Agreement, the
Deed of Trust, the Security Agreement, the Trust Agreement or the other Related
Documents, or now or hereafter existing at law or in equity or by statute.
SECTION 6.04. Anti-Marshalling Provisions. The right is hereby given by
the Company to the Bank to make releases (whether in whole or in part) of all or
any part of the security under the Deed of Trust, the Security Agreement or the
Trust Agreement agreeable to the Bank without notice to, or the consent,
approval or agreement of other parties and interests, including junior lienors,
which releases shall not impair in any manner the validity of or priority of the
liens and security interest in the remaining collateral conferred under such
documents, nor release the Company from liability for the obligations hereby
secured. Notwithstanding the existence of any other security interest in the
collateral held by the Bank, the Bank shall have the right to determine the
order in which any or all of the collateral shall be subjected to the remedies
provided herein, or in the Deed of Trust, the Security Agreement or the Trust
Agreement. The Company hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or therein.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Company therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Bank and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other communications provided
for hereunder shall be in writing (including required copies) and sent by
receipted hand delivery (including Federal Express or other receipted courier
service), telex or regular mail, if to the Company, at its address at 4501
Circle 75 Parkway, Suite F-6300, Atlanta, Georgia 30339, Attention: President;
if to the Bank, at its address at Post Office Box 1727, Wilmington, North
Carolina 28402-1727, Attention: City Executive; if to the Bond Trustee, at its
address at Sixth and Marquette, Minneapolis, Minnesota 55479-0069, Attention:
Corporate Trust Department; or, as to each party, at such other address as shall
be designated by such party in a written notice to other party. All such notices
and communications shall, when delivered or telexed, be effective when deposited
with the courier or telexed, respectively, addressed as aforesaid, except that
notices to the Bank pursuant to the provisions of Article II shall not be
effective until received by the Bank.
SECTION 7.03. No Waiver. No failure on the part of 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.
SECTION 7.04. Right of Set-off. (a) Upon the occurrence and continuation
of any Event of Default after any applicable notice, the Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by the Bank to or for the credit or the account of the Company
against any and all of the obligations of the Company now and hereafter existing
under this Agreement, irrespective of whether or not the Bank shall have made
any demand hereunder and although such obligations may be contingent or
unmatured.
(b) The Bank agrees promptly to notify the Company after any such set-off
and application referred to in subsection (a) above, 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 Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which the Bank may have.
SECTION 7.05. Indemnification. The Company hereby indemnifies and holds
the Bank harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses which the Bank may incur or which may be claimed
against the Bank by any person or entity:
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(a) by reason of any inaccuracy or alleged inaccuracy in any
material respect, or any untrue statement or alleged untrue statement of
any material fact, contained in the Official Statement (other than the
statements contained under the caption "The Bank" and "Tax Exemption") or
any amendment or supplement thereto, or by reason of the omission or
alleged omission to state therein a material fact necessary to make such
statements, in light of the circumstances under which they were made, not
misleading; or
(b) by reason of or in connection with the execution, delivery or
performance of this Agreement, the Bonds, the Trust Agreement, the Loan
Agreement, or any Related Document, or any transaction contemplated
thereby; or
(c) by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to make payment under, the Letter of
Credit; provided, however, that the Company shall not be required to
indemnify the Bank pursuant to this Section 7.05(c) for any claims,
damages, losses, liabilities, costs or expenses to the extent caused by
the Bank's gross negligence or willful misconduct in failing to make
lawful payment under the Letter of Credit after the presentation to it by
the Bond Trustee of a draft and certificate strictly complying with the
terms and conditions of the Letter of Credit.
Nothing in this Section 7.05 is intended to limit the Company's
obligations contained in Article II. Without prejudice to the survival of any
other obligation of the Company hereunder, the indemnities and obligations of
the Company contained in this Section 7.05 shall survive the payment in full of
amounts payable pursuant to Article II and the termination of the Letter of
Credit.
SECTION 7.06. Liability of the Bank. The Company assumes all risks of the
acts or omissions of the Bond Trustee and any other beneficiary or transferee of
the Letter of Credit with respect to its use of the Letter of Credit. 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 any acts or
omissions of the Bond Trustee and any other beneficiary or transferee in
connection therewith; (b) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such document should prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by the
Bank against presentation of documents which do not comply with the terms of the
Letter of Credit, including 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 that the Company shall have a claim against the Bank, and the Bank shall
be liable to the Company, to the extent of any direct, as opposed to
consequential, damages, suffered by the Company which the Company proves were
caused by the Bank's (i) gross negligence or willful misconduct in determining
whether documents presented under the Letter of Credit complied with the terms
of the Letter of Credit or (ii) wrongful failure to make lawful payment under
the Letter of Credit after the presentation to it by the Bond Trustee of a 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 reasonably appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
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SECTION 7.07. Costs, Expenses and Taxes. The Company agrees to pay
immediately when due all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration and enforcement of or
monitoring of compliance with this Agreement and the Related Documents and any
other documents which may be delivered in connection with this Agreement or the
transactions contemplated hereby, including, without limitation, the reasonable
fees and out-of-pocket expenses of the Bank and of counsel and any agents or
consultants for the Bank, with respect thereto and with respect to advising the
Bank as to its rights and responsibilities under this Agreement, and all
reasonable costs and expenses (including counsel fees and expenses) in
connection with (i) the preparation and enforcement of this Agreement, the
Related Documents and such other documents which may be delivered in connection
herewith or therewith or (ii) any action or proceeding relating to a court
order, injunction, or other process or decree restraining or seeking to restrain
the Bank from paying any amount under the Letter of Credit. In addition, the
Company shall pay any and all stamps and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Agreement, the Related Documents and such other documents, and
agrees to save the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 7.08. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Company and the Bank and thereafter shall be
binding upon and inure to the benefit of the Company and the Bank and their
respective successors and assigns, except that the Company shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Bank. The Bank may, without cost or expense to the
Company, assign or sell a participation in all or any part of, or any interest
(undivided or divided) in, the Bank's rights and benefits under this Agreement
to any financial institution. To the extent of any assignment by the Bank, the
assignee shall have the same rights and benefits against the Company hereunder
as it would have had if such assignee were the Bank issuing or paying under the
Letter of Credit hereunder.
SECTION 7.09. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
SECTION 7.11. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 7.12. Prior Agreements Superseded. This Agreement shall completely
and fully supersede all prior undertakings or agreements, both written and oral,
between the Company and the Bank relating to the issuance of the Letter of
Credit, including those contained in any commitment letter between the Bank and
the Company executed in anticipation of the issuance of
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the Letter of Credit, except for any provisions in such commitment letter which
by their express terms survive issuance of the Letter of Credit.
SECTION 7.13. Counterparts. This 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 7.14. Removal of Remarketing Agent. Upon the written direction of
the Bank to remove the Remarketing Agent stating the reason therefor, and
whether due to the Bank's request or otherwise, upon the resignation of the
Remarketing Agent, the Company hereby agrees to remove the Remarketing Agent and
to appoint such successor Remarketing Agent as shall be acceptable to the Bank.
SECTION 7.15. Modification to Promissory Note dated June 21, 1993 of the
Company. The Company agrees that, effective upon the Date of Issuance, the
Promissory Note of the Company dated June 21, 1993 in favor of the Bank in the
original principal amount of $4,200,000 (the "Note") is hereby amended as
follows:
(i) Commencing with the scheduled payment due June 21, 1997, and for
each scheduled payment date thereafter, principal and interest on
the Note shall be payable as follows: on each payment date a
principal installment shall be payable in the amount of $41,857.88
and all accrued unpaid interest to such payment date shall be
payable.
(ii) On April 21, 1998, all unpaid principal and interest on the Note
shall be due and payable in full.
If requested by the Bank, the Company will execute the Bank's standard
Note Modification Agreement to reflect the foregoing modification.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ATTEST: LESLIE-LOCKE, INC.
By:______________________ By:_________________________________________
Title:___________________ Title:______________________________________
(Seal)
BRANCH BANKING AND TRUST COMPANY
By:_________________________________________
Title:______________________________________
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EXHIBIT A
[Form of Letter of Credit]
IRREVOCABLE LETTER OF CREDIT
CUSTOMER ACCOUNT NO. ________ AND LETTER OF CREDIT NO. ______
June __, 1997
Norwest Bank Minnesota, National Association
Corporate Trust Department
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Dear Ladies and Gentlemen:
At the request of and pursuant to the instructions of Leslie-Locke, Inc.
(the "Company"), we hereby establish this Irrevocable Letter of Credit in your
favor as Trustee under an Indenture of Trust dated as of June 1, 1997, between
The Pender County Industrial Facilities and Pollution Control Financing
Authority (the "Issuer") and Norwest Bank Minnesota, National Association, as
trustee (the "Indenture") pursuant to which $7,000,000 principal amount of the
Issuer's industrial development revenue bonds (the "Bonds") have been issued. We
hereby authorize you to draw on us an amount not exceeding $7,466,666 (the
"Initial Stated Amount" and, as the same may from time to time be reduced and
thereafter reinstated as hereinafter provided, the "Stated Amount") of which (i)
subject to the provisions below reducing amounts available hereunder, an
aggregate amount not exceeding $7,000,000 may be drawn on in respect of
principal or the portion of the purchase price corresponding to principal of the
Bonds (the "Principal Component"); (ii) subject to the provisions below reducing
amounts available hereunder, an aggregate amount not exceeding $256,666 may be
drawn on in respect of the payment of up to 110 days' interest or the portion of
the purchase price corresponding to interest on the Bonds at an assumed per
annum interest rate of 12% (the "Interest Component"); and (iii) subject to the
provisions below reducing amounts available hereunder, an aggregate amount not
exceeding $210,000 may be drawn upon in respect of the payment of premium on the
Bonds upon a mandatory redemption of any Bonds pursuant to Section 301(b) of the
Indenture due to an occurrence of a Determination of Taxability (the "Premium
Component") effective immediately and expiring at 3:00 P.M. (Charlotte, North
Carolina time) at our Presentation Office (as hereinafter defined) on June 30,
2000 (the "Expiration Date") or earlier as hereinafter provided.
Multiple and partial drawings may be made under this Letter of Credit, but
no single drawing under this Letter of Credit shall be honored in an amount
exceeding the Stated Amount.
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Funds under this Letter of Credit are available to you against a sight
draft drawn on us, stating on its face "Drawn under Branch Banking and Trust
Company Irrevocable Letter of Credit Customer Account No. _________ and Letter
of Credit No. ______", presented for payment on a day of the year on which state
chartered banks are not required or authorized to close in Charlotte, North
Carolina (a "Business Day"), and accompanied by a written certificate:
(a) in the form of Annex A attached hereto (an "A Drawing") if the
drawing is made with respect to payment of principal of the Bonds upon the
acceleration, redemption or stated maturity thereof;
(b) in the form of Annex B attached hereto (a "B Drawing") if the
drawing is made with respect to payment of interest on the Bonds on or
prior to their stated maturity date;
(c) in the form of Annex C attached hereto (a "C Drawing") if the
drawing is made with respect to payment of the portion of the purchase
price of, and accrued and unpaid interest on, Bonds tendered for purchase
pursuant to Section 202(e) of the Indenture ("Pledged Bonds"); and
(d) in the form of Annex D attached hereto (a "D Drawing") if the
drawing is made with respect to payment of the premium due upon a
mandatory redemption of any Bonds pursuant to Section 301(b) of the
Indenture upon a Determination of Taxability.
The demand for payment hereunder shall not exceed the Stated Amount. The
Stated Amount shall be reduced by delivery to us of your certificate in the form
of Annex E in the amount specified in such certificate.
The Principal Component of the Stated Amount shall be further
automatically and permanently reduced by the amount of each A Drawing. The
Premium Component of the Stated Amount shall be automatically and permanently
reduced by the amount of each D Drawing. The Stated Amount shall also be reduced
by the amount of any drawing hereunder, except that (i) the amount of each B
Drawing in respect of interest shall forthwith be restored (except as provided
in the next following sentence) unless we shall notify you no later than 10 days
after such B Drawing that the same shall not be restored by reason of the
failure of the Company to have reimbursed such drawing; and (ii) the amount of
each C Drawing shall be restored upon receipt by you of notice from us
confirming that the Company has reimbursed us for such drawing. In the case of a
B Drawing delivered in connection with a redemption (but not purchase) of Bonds
as indicated on Annex B, there shall be a pro rata permanent reduction of the
Interest Component as provided in such Annex B.
This Letter of Credit shall expire at our close of business at the
Presentation Office on the earlier to occur of (i) the Expiration Date (or if
the same is not a Business Day, the first such Business Day following the
Expiration Date), or (ii) fifteen days following the Conversion Date (as defined
in the Indenture) or (iii) the date on which we receive from you a certificate
in the form of Annex F hereto. This Letter of Credit shall be promptly
surrendered to us by you upon such
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expiration. The Expiration Date may be extended by us at our discretion at any
time or from time to time, by our giving written notice of such extension to you
specifying a new Expiration Date.
The aforesaid certificates, which form an integral part of this Letter of
Credit, shall have all blanks appropriately filled in and shall be signed by
your authorized officer, and any sight draft and the aforesaid certificates
shall be in the form of a letter on your letterhead either delivered to us at
our office located at 202 North Third Street, Wilmington, North Carolina,
Attention: City Executive (the "Presentation Office") on a Business Day or
delivered to us by telefacsimile (at telecopier number 910/815-2799) on a
Business Day (or at such other address or telecopier number as we may designate
in a written notice delivered to you). The originals of all documents telecopied
to us pursuant to which a drawing is made hereunder shall be delivered to us
immediately following such telefacsimile. If demand for payment is made
hereunder not later than 11:00 A.M. (Charlotte, North Carolina time) on any
Business Day, and provided that such demand for payment and the documents
presented in connection therewith conform to the terms and conditions hereof,
payment of the amount demanded shall be made in immediately available funds not
later than 3:00 P.M. (Charlotte, North Carolina time) on the same Business Day.
If demand for payment is made hereunder after 11:00 A.M. (Charlotte, North
Carolina time) on any Business Day, and provided that such demand for payment
and the documents presented in connection therewith conform to the terms and
conditions hereof, payment of the amount demanded shall be made in immediately
available funds, not later than 10:00 A.M. (Charlotte, North Carolina time) on
the next succeeding Business Day.
This Letter of Credit is transferable in its entirety (but not in part) to
any transferee whom you certify to us has succeeded you as Trustee under the
Indenture. Transfer of the available balance of this Letter of Credit to a
successor transferee shall be effected by the presentation to us of this Letter
of Credit accompanied by a written certificate in the form of Annex G attached
hereto and payment of the transfer commission referred to in Annex G.
Only you (or a transferee as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit. Upon payment to you or
your account of the amount demanded hereunder, we shall be fully discharged of
our obligation under this Letter of Credit with respect to the respective demand
for payment and we shall not thereafter be obligated to make any further
payments under this Letter of Credit in respect of such demand for payment. By
paying to you an amount demanded in accordance herewith we make no
representation as to the correctness of the amount demanded.
This Letter of Credit sets forth in full the terms of our undertaking and
shall not in any way be 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 is related, except for
the certificates referred to herein; and any such reference shall not be deemed
to incorporate herein by reference any document, instrument or agreement except
for such certificates.
This Letter of Credit, except as otherwise expressly stated herein, is
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision) International Chamber of Commerce Publication No. 500, and to the
extent not inconsistent therewith, the laws of the State of North Carolina.
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BRANCH BANKING AND TRUST COMPANY
By:___________________________________
Title: Vice President
A-4
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Annex A
DRAWING CERTIFICATE
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Re: Drawing Certificate
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. _______ (the "Letter of Credit"; the terms
"Bonds", "Stated Amount", "Principal Component" and "Indenture" as used herein
having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the trustee under the Indenture for the holders of the
Bond.
2. The Trustee is making a demand for payment under the Letter of Credit
with respect to $________ to be used for the payment of principal of the Bonds.
3. The amount of principal of the Bonds which is due and payable is
$________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying
this Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with Section 301 of the Indenture
and does not exceed the portion of the Stated Amount available to be drawn under
the Letter of Credit with respect to the payment of principal of the Bonds.
5. Upon receipt by the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the
appropriate amount owing on account of the Bonds pursuant to the Indenture, (b)
no portion of said amount shall be applied by the undersigned for any other
purpose, and (c) no portion of said amount shall be commingled with any other
funds held by the Trustee.
The undersigned acknowledges that upon the Bank's honoring the Draft
accompanying this Certificate, the Principal Component of the Stated Amount
under the Letter of Credit shall be permanently reduced by the aggregate amount
of such Draft.
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IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_____________________________
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Annex B
DRAWING CERTIFICATE
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Re: Drawing Certificate
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. _________ (the "Letter of Credit"; the terms
"Bonds", "Stated Amount" and "Indenture" as used herein having their respective
meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee is making a demand for payment under the Letter of Credit
with respect to $________ to be used for the payment of interest on the Bonds on
or prior to their stated maturity date.
3. The amount of interest on the Bonds which is due and payable is
$________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying
this Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with Section 202(b) of the
Indenture, and does not exceed the portion of the Stated Amount available to be
drawn under the Letter of Credit with respect to interest on the Bonds.
[5. The amount drawn hereby is to be used to pay interest on Bonds
redeemed and not purchased. The undersigned acknowledges that upon the Bank's
honoring the Draft accompanying this Certificate, the Interest Component of the
stated amount under the Letter of Credit shall be permanently reduced by an
amount equal to 110 days interest on the principal amount of the Bonds being
redeemed computed at the rate of 12% per annum.]
5.[6] Upon receipt by the undersigned of the amount demanded hereby (a)
the undersigned will apply the same directly to the payment when due of the
appropriate amount owing on account of the Bonds pursuant to the Indenture, (b)
no portion of said amount shall be applied by the
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undersigned for any other purpose, and (c) no portion of said amount shall be
commingled with any other funds held by the Trustee.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:__________________________
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Annex C
DRAWING CERTIFICATE
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Re: Drawing Certificate
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee"") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. _______ (the "Letter of Credit"; the terms
"Bonds", "Indenture", "Stated Amount" and "Pledged Bonds" as used herein having
their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee is making a demand for payment under the Letter of Credit
to be applied to the payment of the portion of the purchase price of Bonds
tendered for purchase pursuant to Section 202(e) of the Indenture, equal to the
principal amount thereof. The amount of such portion of the purchase price equal
to the principal amount of such Bonds is $__________.
3. The Trustee is making a demand for payment under the Letter of Credit
to be applied to the payment of the portion of the purchase price of Bonds
tendered for purchase pursuant to Section 202(e) of the Indenture, equal to the
amount of accrued and unpaid interest on such Bonds to the date of purchase
thereof. The amount of such portion of the purchase price equal to accrued and
unpaid interest on such Bonds to the date of purchase thereof is $____________.
4. The amount of this demand for payment is $__________ (the sum of the
amounts in Paragraphs 2 and 3 above) and the sight draft accompanying this
Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with Section 202(e) of the
Indenture, and does not exceed the portion of the Stated Amount available to be
drawn under the Letter of Credit with respect to principal and interest of the
Bonds.
5. Upon receipt of the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the
appropriate amount owing on account of the purchase price of Pledged Bonds
pursuant to the Indenture, (b) no portion of said amount shall be applied for
any other purpose and (c) no portion of said amount shall be commingled with any
other funds held by the Trustee.
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6. The Trustee agrees to hold, as the designee and agent for the Bank, the
Bonds tendered for purchase and, upon request, will deliver the Bonds with
respect to which this drawing relates and the purchase price of which demand is
made hereunder to the Bank as Pledged Bonds entitled to a security interest in
favor of the Bank.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_____________________________
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Annex D
DRAWING CERTIFICATE
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Re: Drawing Certificate
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit"; the terms
"Bonds", "Indenture", and "Stated Amount" as used herein having their respective
meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee has given the notice of redemption required by Article III
of the Indenture upon a Determination of Taxability.
3. The Trustee is making a demand for payment under the Letter of Credit
to be applied to the payment of premium on Bonds redeemed pursuant to Section
301(b) of the Indenture, equal to 3% of the outstanding principal balance of the
Bonds so redeemed.
4. The amount of premium payable on such Bonds is $__________ and is the
amount of the sight draft accompanying this Certificate.
5. The amount of this demand for payment and the sight draft accompanying
this Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with Section 301(b) of the
Indenture and does not exceed the portion of the Stated Amount available to be
drawn under the Letter of Credit with respect to premium on the Bonds.
6. Upon receipt of the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the
appropriate amount owing on account of premium on the Bonds pursuant to the
Indenture, (b) no portion of said amount shall be applied by the undersigned for
any other purpose and (c) no portion of said amount shall be commingled with any
other funds held by the Trustee.
A-11
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_____________________________
A-12
<PAGE>
Annex E
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. _________ (the "Letter of Credit"; the terms
"Bonds", the "Indenture" and "Stated Amount" as used herein having their
respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee hereby notifies you that on or prior to the date hereof
$_________ amount of the Bonds have been paid, redeemed or defeased pursuant to
the Indenture other than with funds drawn under the Letter of Credit.
3. Following the payment, redemption or the defeasance referred to in
paragraph (2) above, the aggregate principal amount of all the Bonds outstanding
is $___________.
4. The amount of interest (computed at a rate of [________ percent (___%)]
per annum), accruing on the Bonds referred to in paragraph (3) above in any
period of ___ days is $_______.
5. The amount of premium payable on the Bonds on the principal balance
referred to in paragraph 3 above in the event of a Determination of Taxability
is $___________.
6. The amount available to be drawn under the Letter of Credit has been
reduced to $_____ (such amount being equal to the amounts specified in
paragraphs 3, 4 and 5 above).
7. The Stated Amount of the Letter of Credit is reduced to $______ (such
amount being equal to the amount specified in paragraph 6 above upon receipt by
the Bank of this certificate.
A-13
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this _____ day of _______________. 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By:_____________________________
A-14
<PAGE>
Annex F
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Ladies and Gentlemen:
Norwest Bank Minnesota, National Association (the "Trustee") hereby
certifies to Branch Banking and Trust Company (the "Bank") with reference to
Irrevocable Letter of Credit No. ______ (the "Letter of Credit"; the terms
"Bonds" and "Indenture" as used herein having their respective meanings set
forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture for the holders of the
Bonds.
2. The Trustee hereby notifies you that all the Bonds have been paid,
redeemed or defeased pursuant to the Indenture or the Letter of Credit is no
longer required to be maintained pursuant to the Indenture.
3. The Letter of Credit is attached hereto and is being surrendered to you
herewith.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this ___ day of _____, 19__.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, as Trustee
By: ___________________________
A-15
<PAGE>
Annex G
[Date]
Branch Banking and Trust Company
202 North Third Street
Post Office Box 1727
Wilmington, North Carolina 28402-1727
Attention: Business Services Manager
Ladies and Gentlemen:
We refer to Irrevocable Letter of Credit No. _______ (the "Letter of
Credit"), issued in favor of Norwest Bank Minnesota, National Association, as
Trustee under the Indenture (as defined in the Letter of Credit).
For value received we hereby irrevocably transfer to ____________________,
hereinafter referred to as the transferee, all rights of the undersigned to draw
under the above Letter of Credit in its entirety.
By this transfer, all rights of the undersigned in such Letter of Credit
are transferred to the transferee and the transferee shall have the sole rights
relating to any amendments, whether increases or extensions or other amendments
and whether now existing or hereafter made. All amendments are to be advised
direct to the transferee without necessity of any consent of or notice to the
undersigned.
The Letter of Credit is returned herewith.
Please notify the transferee of this transfer and the conditions of the
Letter of Credit.
In connection with the above transactions, we herewith hand you our check
to the order of Branch Banking and Trust Company for $2,500 representing its
transfer fee, which is to be considered earned whether or not any drafts are
drawn and whether or not payments are made under
A-16
<PAGE>
the above Letter of Credit. We also agree to pay to you on demand any expenses
which may be incurred by you in connection with this transfer.
Very truly yours,
-----------------------------------
(Signature of Transferor)
Signature Authenticated
_______________________
(Bank)
_______________________
(Authorized Signature)
A-17
<PAGE>
EXHIBIT B
[FORM OF COMPANY COUNSEL OPINION]
_______ __, 1997
Branch Banking and Trust Company
Post Office Box 1727
Wilmington, North Carolina 28402-1727
$7,000,000
The Pender County Industrial Facilities and
Pollution Control Financing Authority
Industrial Development Revenue Bonds
(Leslie-Locke, Inc. Project)
--------------------------------------------
Ladies and Gentlemen:
We are counsel to Leslie-Locke, Inc., a Delaware corporation (the
"Company") and Leslie-Building Products, Inc. (the "Guarantor"). In that
capacity we are familiar with the matters relating to the preparation, execution
and delivery of a Letter of Credit and Reimbursement Agreement, dated as of June
1, 1997 (the "Reimbursement Agreement) between the Company and Branch Banking
and Trust Company (the "Bank") and a Guaranty Agreement dated as of June 1, 1997
from the Guarantor in favor of the Bank (the "Guaranty Agreement"). Terms
defined in the Reimbursement Agreement are used herein as therein defined. Among
other things, we have examined:
(1) a fully executed counterpart of the Reimbursement Agreement and
Guaranty Agreement;
(2) a fully executed counterpart of the Deed of Trust;
(3) a fully executed counterpart of the Security Agreement;
(4) the other Related Documents referred to in the Reimbursement
Agreement;
(5) financing statements naming the Company as debtor and the Bank
as the secured party, covering the security interests granted in the Deed
of Trust;
(6) financing statements naming the Company as debtor and the Bank
as secured party relating to the Security Agreement (such financing
statements in (5) and (6) herein called the "Financing Statements");
B-1
<PAGE>
(7) the Certificate of Incorporation of each of the Company and the
Guarantor and all amendments thereto (collectively, the "Charters");
(8) the Bylaws of each of the Company and the Guarantor as now in
effect (collectively, the "Bylaws"); and
(9) the documents delivered by or on behalf of the Company pursuant
to Section 3.01 of the Reimbursement Agreement.
We have also examined the originals, or copies certified to our
satisfaction, of (i) such other corporate records of the Company and the
Guarantor, certificates of public officials and of officers of the Company and
the Guarantor, (ii) the agreements, instruments and documents identified to us
by the Company or the Guarantor which affect or purport to affect the
obligations of the Company under the Reimbursement Agreement or the Related
Documents or the Guarantor under the Guaranty Agreement, and (iii) such other
agreements, instruments and documents as we have deemed necessary as a basis for
the opinions hereinafter expressed. As to questions of fact material to such
opinions, we have, when relevant facts were not independently established by us,
relied upon certificates of the Company and the Guarantor or their respective
officers or of public officials. We have assumed the due execution and delivery
by the Bank of the Reimbursement Agreement and the Related Documents to which it
is a party.
In rendering the opinions set forth herein, all statements made herein
which are specifically subject to the qualifications "to the best of our
knowledge", "known to us", or words of like meaning, are made on the basis of
our existing knowledge, without independent investigation or inquiry. Other than
as expressly stated herein, we have conduced no independent investigation or
inquiry of any documents, agreements, instruments, information or facts. We
express no opinion with respect to any financial statements or other financial
information supplied by, or relating to, the Company or the Guarantor in the
Reimbursement Agreement, the Related Documents or otherwise.
We are members of the bar of the State of New York and not purport to be
expert in, or to render opinions or advice with respect to, the laws of any
jurisdiction other than New York and Federal laws of the United States. We have,
however, reviewed the Delaware General Corporation law to the extent required to
express the opinions set forth herein. The opinions expressed herein are limited
to matters governed by the laws of the State of New York, the Federal laws of
the United States and the Delaware General Corporation Law.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and, based
solely our review of certificates issued by the Secretary of State of
North Carolina, is duly qualified to do business in, and is in good
standing under the laws of the State of North Carolina.
B-2
<PAGE>
2. The Guarantor is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
3. The execution, delivery and performance by the Company of the
Reimbursement Agreement, the Deed of Trust, the Security Agreement and the
Related Documents to which it is a party are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action, do not contravene (i) the Charter or the Bylaws of the Company,
(ii) to the best of our knowledge, any judgment, writ, order or decree
issued in proceedings to which the Company is a party and which is
applicable to the Company or its properties or (iii) to the best of our
knowledge, any agreement or contractual restriction contained in any
material contract to which the Company is a party and which is binding on
or affects the Company or any of its properties other than the loan
documents executed in connection with the loans made by the Bank to the
Company on June 21, 1993, July 29, 1994, January 6, 1995, and November 29,
1995, respectively; and, to the best of our knowledge, such execution,
delivery and performance do not result in or require the creation of any
lien, security interest or other charge or encumbrance (except as provided
in or contemplated by the Reimbursement Agreement, the Deed of Trust or
the Security Agreement) upon or with respect to any of the Company's
properties.
4. The execution, delivery and performance by Guarantor of the
Guaranty Agreement and any other instruments and certificates executed in
connection therewith are within the Guarantor's corporate powers, have
duly authorized by all necessary corporate action, do not contravene, (i)
the Charter or the Bylaws of the Guarantor, (ii) to the best of our
knowledge, any judgment, writ, order or decree issued in proceedings to
which the Guarantor is a party and which is applicable to the Guarantor or
its properties or (iii) to the best of our knowledge, any agreement or
contractual restriction contained in any material contract to which the
Company is a party and which is binding on or affects the Company or any
of its properties other than the guaranty agreements dated July 29, 1994,
January 6, 1995, and November 29, 1995, by and between the Guarantor and
the Bank; and, to the best of our knowledge, such execution, delivery and
performance do not result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.
5. No authorization or approval or other action by, and no notice to
or filing or registration with, any New York or United States governmental
authority or regulatory body is required for (i) the due execution,
delivery and performance by the Company of the Reimbursement Agreement,
the Deed of Trust, the Security Agreement or any Related Document to which
it is a party, (ii) the grant by the Company of the mortgage lien and
security interests created by the Deed of Trust or the Security Agreement,
(iii) the perfection of, or the exercise by the Bank of its rights and
remedies under the Deed of Trust or the Security Agreement, except for the
filings and recordings referred to in paragraphs 7 and 8 below or (iv) the
due execution, delivery and performance by the Guarantor of the Guaranty
Agreement.
B-3
<PAGE>
6. The Reimbursement Agreement, the Deed of Trust, the Security
Agreement and the Related Documents to which the Company is a party have
been duly executed and delivered by the Company. Assuming the laws of the
State of North Carolina are the same as the laws of the State of New York
in all respects, each of such documents are the legal, valid and binding
obligations of the Company enforceable against the Company in accordance
with their respective terms, except as the enforceability thereof may be
limited by insolvency, moratorium, or similar laws relating to or limiting
creditors' rights generally or by equitable principles of general
application.
7. The Guaranty Agreement has been duly executed and delivered by
the Guarantor. Assuming the laws of the State of North Carolina are the
same as the laws of the State of New York in all respects, the Guaranty
Agreement constitutes a legal, valid and binding obligation of Guarantor
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by insolvency, moratorium, or similar laws relating
to or limiting creditors' rights generally or by equitable principles of
general application.
8. There is no pending or threatened action, investigation or
proceeding before any court, governmental agency or arbitrator against or
affecting the Company or any of its subsidiaries or the Guarantor which
may materially adversely affect the properties, business, financial
condition or operations of the Company or Guarantor or the ability of the
Company or Guarantor to perform its obligations under the Reimbursement
Agreement or any Related Document which purports to affect the legality,
validity or enforceability of the Reimbursement Agreement or any Related
Document.
9. Assuming the laws of the states having jurisdiction over the
Collateral (as defined in the Reimbursement Agreement and used throughout
this letter with such definition) are the same as the laws of the State of
New York in all respects, the Security Agreement creates in favor of the
Bank a legal lien on and security interest in all the Collateral securing
the payment of the obligations covered thereby, assuming that financing
statements describing the Collateral are filed by the Bank in proper form
in the offices in which such filings are required by the laws of the
states having jurisdiction over the Collateral, and assuming that the laws
of the states having jurisdiction over the Collateral are the same as the
laws of the State of New York in all respects, such liens and security
interest will be perfected as to the Collateral with respect to which such
perfection can be effected by filing of financing statements in accordance
with the Uniform Commercial Code as in force and effect in such
jurisdictions; except as the enforceability of any of the foregoing may be
limited by insolvency moratorium or similar laws relating to or limited
creditors' rights generally or by equitable principles of general
applications. We express no opinion with respect to the relative priority
of any liens and security interests purported to be created under the
Security Agreement or any other Related Documents or perfected as to the
Collateral.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
B-4
<PAGE>
EXHIBIT C
Form of Opinion Letter for Bond Counsel
[See Tab Number 21 of Closing Documents]
C-1
<PAGE>
EXHIBIT D
Form of Deed of Trust
[See Tab Number 2 of Closing Documents]
D-1
<PAGE>
EXHIBIT E
Form of Security Agreement
[See Tab Number 3 of Closing Documents]
E-1
<PAGE>
EXHIBIT F
Form of Guaranty Agreement
[See Tab Number 5 of Closing Documents]
F-1
<PAGE>
EXHIBIT G
Payment of Taxes
G-1
<PAGE>
EXHIBIT H
Agreements of Company and Subsidiaries
H-1
<PAGE>
EXHIBIT I
Environmental Matters
I-1
<PAGE>
EXHIBIT J
Locations of Personal Property
J-1
<PAGE>
EXHIBIT K
Insider Transactions
K-1
<PAGE>
EXHIBIT L
Guarantees
L-1
<PAGE>
Schedule 4.01(d)
Consent of Independent Auditors
The Board of Directors
Leslie Building Products, Inc.
We consent to incorporation by reference in the registration statements (No.
33-97702, No. 33-97704) on Form S-8 of Leslie Building Products, Inc. of our
report dated February 18, 1998, relating to the consolidated balance sheets of
Leslie Building Products, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1997, and related financial statement schedule, appearing in the
December 31, 1997, annual report on Form 10-K of Leslie Building Products, Inc.
/s/ KPMG Peat Marwick LLP
Stamford, Connecticut
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,903
<SECURITIES> 0
<RECEIVABLES> 6,154
<ALLOWANCES> 627
<INVENTORY> 10,181
<CURRENT-ASSETS> 19,905
<PP&E> 22,020
<DEPRECIATION> 8,322
<TOTAL-ASSETS> 34,129
<CURRENT-LIABILITIES> 15,624
<BONDS> 0
0
0
<COMMON> 48
<OTHER-SE> 8,837
<TOTAL-LIABILITY-AND-EQUITY> 34,129
<SALES> 88,325
<TOTAL-REVENUES> 88,325
<CGS> 73,312
<TOTAL-COSTS> 86,822
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,224
<INCOME-PRETAX> 279
<INCOME-TAX> 0
<INCOME-CONTINUING> 279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 279
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
