<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended June 30, 1996.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from
____________________________ to ____________________________
Commission File Number: 0-27800
FREDERICK BREWING CO.
(Exact name of small business issuer as specified in its charter)
MARYLAND 52-1769647
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
103 SOUTH CARROLL STREET, FREDERICK, MARYLAND 21701
(Address of principal executive offices) (Zip Code)
(301) 694-7899
(Issuer's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the issuer (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. [ X ] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
COMMON STOCK, $0.00004 PAR VALUE 1,954,876
(Title of Each Class) (Number of Shares Outstanding
as of August 9, 1996)
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [ X ]
<PAGE>
FREDERICK BREWING CO.
INDEX TO FORM 10-QSB
Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEET (UNAUDITED)
June 30, 1996 1
STATEMENTS OF OPERATIONS (UNAUDITED)
Three and Six Months Ended June 30, 1996 and 1995 2
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three and Six Months Ended June 30, 1996 and 1995 3
NOTES TO UNAUDITED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. CHANGES IN SECURITIES 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES
SIGNATURE PAGE 21
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
FREDERICK BREWING CO.
Balance Sheet
June 30, 1996
(Unaudited)
ASSETS ------------
- - ----------------------------------------------------------
Current assets:
Cash and cash equivalents $1,267,320
Trade receivables 328,725
Inventories, net 362,009
Prepaids and other current assets 55,291
----------
Total current assets 2,013,345
----------
Property and equipment, net 1,045,078
Deposits 972,705
Intangibles, net of accumulated amortization of $25,914 102,141
Other assets 34,330
----------
Total assets $4,167,599
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ----------------------------------------------------------
Current liabilities:
Current maturities of long-term debt $ 73,401
Current maturities of capital leases 13,385
Accounts payable and accruals 117,593
----------
Total current liabilities 204,379
----------
Long-term debt 94,709
Obligations under capital leases 72,247
----------
Total liabilities 371,335
----------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $0.01 par value, 1,000,000 shares authorized,
none issued or outstanding -
Common stock - $0.0004 par value, 9,000,000 shares authorized,
1,954,876 shares issued and outstanding 72
Additional paid-in capital 4,901,424
Accumulated deficit (1,105,232)
----------
Total stockholders' equity 3,796,264
----------
Total liabilities and stockholders' equity $4,167,599
==========
The accompanying notes are an integral part of these financial statements
<PAGE>
FREDERICK BREWING CO.
Statements of Operations
For the Three and Six Month Periods Ended
June 30, 1996 and 1995
Three Month Period Six Month Period
1996 1995 1996 1995
(Unaudited) (Unaudited)
Gross sales $440,066 $477,284 $874,741 $862,697
Less: Returns and allowances 33,440 (3,652) 35,885 19,949
Excise taxes 23,125 24,226 41,486 40,949
-------- -------- -------- --------
Net sales 383,501 456,710 797,370 801,799
-------- -------- -------- --------
Cost of sales 357,181 295,356 763,845 586,990
-------- -------- -------- --------
Gross profit 26,320 161,354 33,525 214,809
Selling, general and administrative
expenses 362,413 129,231 687,975 288,339
-------- -------- -------- --------
(Loss) income from operations (336,093) 32,123 (654,450) (73,530)
Interest (income) expense, net (15,555) 21,297 (12,153) 28,571
Other expenses - - - 12,391
-------- -------- -------- --------
(Loss) income before income taxes (320,538) 10,826 (642,297) (114,492)
Provision for income taxes - - - -
-------- -------- -------- --------
Net (loss) income $(320,538) $ 10,826 $(642,297) $(114,492)
========= ======== ========= =========
Calculation of Earnings Per Share
For the Three and Six Months Periods Ended
June 30, 1996 and 1995
Net (loss) income
per common share $ (0.16) $ 0.01 $ (0.39) $ (0.10)
========= ========= ========= =========
Weighted average common shares
and common share
equivalents outstanding 1,954,876 1,204,719 1,652,477 1,204,719
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements
<PAGE>
FREDERICK BREWING CO.
Statements of Cash Flows
For the Three and Six Months Periods Ended
June 30, 1996 and 1995
Three Month Period Six Month Period
1996 1995 1996 1995
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net (loss) income $(320,538) $10,826 $(642,297) $(114,492)
Adjustments to reconcile net
(loss) income to net cash (used
for) provided by operating
activities:
Depreciation and amortization 48,920 26,442 97,288 53,845
Changes in operating assets and
liabilities:
Trade receivables (9,105) 135,913 (37,442) 7,256
Inventories (77,633) (4,787) (152,536) (52,706)
Prepaids and other current
assets 8,718 (28,604) 114,934 (63,537)
Other assets 1,685 - (34,330) -
Accounts payable and accruals (101,359) (17,286) (351,056) 56,536
---------- --------- ---------- ---------
Net cash (used for) provided by
operating activities (449,312) 122,504 (1,005,439) (113,098)
---------- --------- ---------- ---------
Cash flows from investing activities:
Deposits on equipment (405,517) - (971,663) -
Purchase of property and
equipment (160,617) (22,829) (172,191) (28,411)
Purchase of intangibles (35,346) (1,934) (83,089) (3,577)
---------- --------- ---------- ---------
Net cash used for investing
activities (601,480) (24,763) (1,226,943) (31,988)
---------- --------- ---------- ---------
Cash flows from financing activities:
Payments on short-term debt - - (100,000) -
Proceeds from long-term debt 80,316 - 80,316 232,164
Payments on long-term debt (10,839) (279,761) (332,049) (279,761)
Payments on capital leases (6,244) 2,470 (6,244) 1,446
Proceeds from common stock
issuance - 203,400 3,857,679 203,400
---------- --------- ---------- ---------
Net cash provided by (used for)
financing activities 63,233 (73,891) 3,499,702 157,249
---------- --------- ---------- ---------
Net (decrease) increase in cash and
cash equivalents (987,559) 23,850 1,267,320 12,163
Cash and cash equivalents,
beginning of period 2,254,879 61 - 11,748
---------- --------- ---------- ---------
Cash and cash equivalents,
ending of period $1,267,320 $ 23,911 $1,267,320 $ 23,911
========== ========= ========== =========
The accompanying notes are an integral part of these financial statements
<PAGE>
FREDERICK BREWING CO.
Notes to Financial Statements
June 30, 1996
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been
prepared in accordance with Generally Accepted Accounting
Principles for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. Accordingly,
they do not include all of the information and footnotes
required by Generally Accepted Accounting Principles for
complete financial statements. However, in the opinion of
management, all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the
interim financial position and the interim results of operations
of the Company, have been included.
Operating results for the six month period ended June 30, 1996
are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996, or for any
other period. For information relating to the financial position
and the results of operations of the Company as of and for the
year ended December 31, 1995, refer to the financial statements
included in the Company's 1995 Annual Report to shareholders
and to the Company's final Prospectus dated March 5, 1996.
The discussion of lease and financing agreements herein is
qualified in its entirety by reference to such agreements.
Note 2 - Cash and Cash Equivalents
The Company considers its investments with original
maturities, at date of purchase, of 90 days or less to be cash
equivalents. At June 30, 1996, the following cash and cash
equivalents are held by the Company:
Cash in bank and petty cash $ 112,585
Securities held under agreement to repurchase 1,154,735
-----------
$ 1,267,320
===========
The Company invests excess funds in reverse repurchase
agreements for U.S. government securities. Under these
agreements, the Company purchases securities with an
agreement to resell them. Generally, such agreements mature
on the next business day following the date of investment. Due
to the short-term nature of the agreements, the Company does
not take possession of the securities, which are instead held at
the bank from which the Company purchases the securities.
The carrying value of the agreements approximates fair market
value because of the short maturity of the investments and the
Company believes that it is not exposed to any significant risk
on its investments in reverse repurchase agreements.
<PAGE>
Notes to Financial Statements
June 30, 1996
(Unaudited)
Approximately $540,000 of the total amount held under
agreements to repurchase has been pledged as collateral for a
loan taken by Blue II, LLC ("Blue II'), a limited liability
company affiliated with two of the directors of the Company.
For a discussion of the affiliation, see the Company's final
Prospectus dated March 5, 1996. See also Note 4 -
Commitments, Contingencies and Subsequent Events.
Note 3 - Deposits
As of June 30, 1996, the Company had advanced approximately
$973,000 to vendors supplying major equipment components
for a new brewery being built for the Company. Such advances
are a normal requirement of the acquisition process for
customized brewing equipment and, as fabrication of such
equipment continues, additional deposits will be required by
some vendors. See Note 4 - Commitments, Contingencies and
Subsequent Events.
Note 4 - Commitments, Contingencies and Subsequent Events
The New Brewery
The Company has entered into agreements to have a third party,
Blue II, construct a new brewery to the Company's
specifications and to lease such improved property back to the
Company. Ground was broken for this new facility on April 9,
1996 and the Company anticipates substantial completion of
such facility on or about January 2, 1997. The Company
assisted Blue II in obtaining financing for the land purchase
and building construction from the Maryland Economic
Development Corporation ("MEDCO'), which on July 19, 1996
issued a taxable economic development revenue bond on Blue
II's behalf (the "Blue II Bond'). The Blue II Bond was
purchased, in its entirety, by Signet Bank, Maryland ("Signet').
See also "Financing' below.
Prior to the closing on and funding of the Blue II Bond, at the
Company's request, and for the purpose of keeping the new
brewery on its planned construction schedule, Blue II purchased
land for the brewery site. To facilitate such purchase, Blue II
received "bridge' financing from Signet. At the Blue II Bond
closing and funding such bridge financing was repaid with
proceeds from the Blue II Bond issue. As a condition of the
Signet bridge loan to Blue II, the Company had pledged certain
collateral (See Note 2, Cash and Cash Equivalents) to the
aforementioned loan. Subsequent to the Blue II Bond closing
and funding, that pledge was released.
Lease Transaction for the New Brewery
On July 19, 1996 the Company entered into a long-term lease
with Blue II for the new brewery. The lease will commence
with the substantial completion and delivery of the new brewery
to the Company
<PAGE>
Notes to Financial Statements
June 30, 1996
(Unaudited)
and is for a term of fifteen (15) years. Included within the
lease are options permitting the Company to purchase the
facility following the sixth and eleventh years of occupancy or
to terminate the lease following the tenth year of occupancy, all
such options and rights conditioned upon the Company's
compliance with all other lease terms and conditions.
The lease provides for a base rent of $36,000 per annum, pro-
rated and paid monthly, plus that amount necessary and
required to amortize the principal, interest and other associated
costs of the Blue II Bond (see "Financing' below), such
amounts also paid in monthly installments. All monthly lease
payments will be made directly to a Blue II account with Signet
from which Signet, as the holder of the Blue II Bond, will
automatically draw the amounts requisite to amortize the
principal, interest and other associate bond costs. However,
under the terms of the lease and the Blue II Bond, until August
1997, lease payments will be comprised only of the base rental
amount, plus an amount equivalent to the interest on, and other
costs related to, the Blue II Bond. In addition, under the terms
of the lease, the Company is responsible for all operating and
maintenance costs of the facility.
As a financing-type lease, this transaction will be reported in
the Company's financial statements as a capital lease. The
lesser of the fair value of the facility at inception of the lease
or the present value of the future minimum lease payments will
be reported as property and equipment and capital lease
obligations. The facility will be amortized on a straight-line
basis over a 15 year period, representing the lesser of the term
of the lease or the facility's useful life.
Under terms of the lease, the Company is directly responsible
for all building construction costs in excess of $3.0 million.
Such "excess' construction costs will be capitalized by the
Company as "leasehold improvements' and amortized over the
15 year term of the lease. The Company estimates that such
excess costs will be approximately $685,000. Financing for
such excess costs is discussed below. To assure Signet that the
excess costs will be paid, the Company has agreed to leave
approximately $600,000 on deposit, in identifiable accounts
with Signet, for the satisfaction of such costs.
Equipment for the New Brewery
To equip the new brewery, the Company has entered into
agreements with vendors for brewing and packaging machinery
and equipment. To date the Company has executed
commitments for substantially all of such equipment and has
made purchases of approximately $80,000 and deposits of
approximately $973,000 against these commitments. The
Company expects to incur additional expenditures of
approximately $2.3 million for equipment and furnishings prior
to the scheduled completion of the new brewery. Total
machinery, equipment and furnishings costs for the new
brewery are expected to be approximately $3.35 million.
Financing for such equipment costs is discussed below.
<PAGE>
Notes to Financial Statements
June 30, 1996
(Unaudited)
Financing
The New Brewery
On July 19, 1996, Blue II received $3.0 million in construction
financing from the issuance of a taxable economic development
revenue bond by MEDCO. Such bond was immediately
purchased by Signet with the proceeds of issuance thereafter
made available to Blue II for payment of brewery construction
costs. The Blue II Bond will be repaid over a nine year period
in 108 equal monthly principal installments of $17,857.14,
commencing on August 1, 1997, plus a final principal payment
of approximately $1,072,000 in August 2006. Interest
payments on all outstanding bond principal are due and payable
monthly commencing on the first day of the first month
immediately following the initial draw. Interest charges will be
based on the one month LIBOR (London Interbank Offered
Rate) plus 175 basis points adjusted monthly for the term of the
loan, collateralized by a first lien on the business assets of Blue
II and a limited personal guarantee of certain members of Blue
II. The initial rate of interest at the time of closing was
7.125%.
The Maryland Industrial Development Financing Authority
("MIDFA') has agreed to guarantee up to 55% of the principal
and interest on the Blue II Bond up to a maximum of $1.8
million.
As the sole intended user of the new brewery facility, the
Company, through its lease with Blue II and through the Blue II
Bond, is party to certain restrictive covenants and terms
contained in the Blue II Bond.
Equipment for the New Brewery
Financing for the brewery equipment has been arranged through
MEDCO and the Small Business Administration ("SBA'), with
additional, interim ("Bridge') funding provided by Signet.
On July 19, 1996, the Company received $1.5 million in
equipment financing from the issuance of a taxable economic
development revenue bond by MEDCO (the "Equipment
Bond'). Such bond was immediately issued to and purchased
by Signet with the proceeds of issuance thereafter made
available to the Company for the purchase of brewery
equipment. The Equipment Bond will be repaid over a nine
year period in 108 equal monthly principal installments of
$13,888.89, commencing on August 1, 1997. Interest payments
on all outstanding bond principle are due and payable monthly
commencing on the first day of the first month immediately
following the initial draw. Interest charges will be based on the
one-month LIBOR plus 150 basis points, adjusted monthly, and
will be collateralized by a first lien on all business assets of the
Company. The initial rate of interest on the bond, at the time
of closing, was 6.875%.
<PAGE>
Notes to Financial Statements
June 30, 1996
(Unaudited)
The terms of the Equipment Bond subject the Company to the
same restrictive covenants and terms as those contained in the
Blue II Bond.
In addition to the Equipment Bond, the Company has received
approval for a 20 year, $1.0 million SBA loan. It is anticipated
that the SBA loan will carry a fixed interest rate of 140 basis
points over the rate of the 10 year U.S. Treasury Note at the
time of closing and will have a pre-payment penalty if paid in
full in the first ten years. The SBA loan will be collateralized
by a second lien on all of the Company's business assets and by
the personal guarantees of the Company's Chairman and
President. As a condition of the SBA loan, the Company will
be required to purchase insurance policies, in the amount of
$500,000 each, on the lives of both of these officers.
The SBA will not fund the SBA loan until after the Company
has occupied the new brewery and has received final permitting
for its use and operation. Therefore, on July 19, 1996, Signet
granted the Company a short-term $1,000,000 bridge loan to
finance equipment deposits and purchases until the SBA loan is
consummated, which is expected to occur on or about January
2, 1997. Interest on this loan is payable monthly with principal
repaid from the proceeds of the SBA loan. Interest charges are
based upon the one-month LIBOR plus 150 basis points,
adjusted monthly, with the initial rate at time of closing being
6.875%.
The terms of the Signet loan subject the Company to the same
restrictive covenants and terms as those contained in the
Equipment and Blue II Bonds. All three loans contain default
clauses which will result in a default in all loans if there is a
default in any loan.
Purchase Commitment
Additional Brewing Capacity
The Company has an agreement with another brewer to utilize
such brewer's facilities for the production of the Company's
products. This agreement requires the Company to brew and
package not less than 4,000 cases of beer per month at such
other brewers facility through September 1996, or if such
capacity is not brewed and packaged, to pay a fixed capacity
charge.
Supply of Raw Materials
The Company has entered into a purchase agreement with its
supplier of glass bottles. Such purchase agreement assures the
Company of a low cost, stable price for its bottling stock for a
period of 12 months beginning with the first bottle shipment to
the new brewery. Following such period of time, the Company
is obligated to continue to purchase bottles from this vendor for
an additional 24 months. However, should any price increase
be proposed the Company can negotiate with other vendors and,
<PAGE>
Notes to Financial Statements
June 30, 1996
(Unaudited)
should the pricing of other vendors be more favorable, the
Company may, at its option, void the remaining term of the
supply contract. The Company is under no obligation to
purchase any minimum or maximum amount of materials under
this contract.
Letters of Credit
Outstanding letters of credit totaled approximately $40,000 as
of June 30, 1996. These letters guarantee certain purchase and
construction obligations of the Company, primarily in relation
to the acquisition / construction of the new brewery, to third
parties. All such obligations expire between March and July of
1997 and, as of June 30, 1996, were collateralized by cash
deposits with Signet Bank.
Other
In the normal course of business, the Company is involved in
various claims and litigation. Management is of the opinion
that any liability or loss resulting from such claims or litigation
will not have a material effect on the financial statements.
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations For the Three and Six Months Ended June 30,
1996 and 1995
Overview of Significant Activities and Expenses
A net loss of $320,538, or ($0.16) per share, was incurred
during the second quarter of 1996 compared to net income of
$10,826, or $0.01 per share, for the corresponding quarter of
1995. Year-to-date 1996 losses increased to $642,297, or
($0.39) per share, compared with losses of $114,492, or ($0.10)
per share, for the similar period in 1995.
Weighted average common shares outstanding were 1,954,876
during the second quarter of 1996, 1,652,477 year-to-date in
1996 and 1,204,719 for corresponding periods in 1995. The
substantial increase in shares outstanding from 1995 to the first
quarter of 1996, and from the first quarter of 1996 to the
second quarter of 1996 is the result of the Company's
completion of its initial public offering ("IPO') of 771,154
shares of common stock in March 1996.
The Company completed planning and estimating for its new
brewery during the first quarter of 1996 and commenced
construction work during the second quarter of 1996. Although
delays have been experienced due to unseasonably cold and wet
weather, the Company continues to anticipate it will be able to
operate portions of the facility before the end of 1996 and that
substantial completion will occur on or about January 2, 1997.
During the second quarter of 1996 the Company took actions to
reduce June, July and August 1996 production of its product at
an off-site, third party, facility due to cost concerns and
equipment malfunctions. Such reductions were made without
liability to the Company. Except for these reductions, the
Company continues to be bound to produce a minimum of 4,000
cases per month at the outside facility through September 1996,
at which time the existing contractual arrangement expires by
its terms. Upon expiration, the Company will decide whether to
extend the existing arrangement on the same or different terms.
In addition to evaluating and reducing production costs at the
third party facility, management took steps to better measure
and increase the efficiency of its direct labor costs. The
combination of these actions has had a positive impact on gross
margins during May and June of 1996.
During the second quarter of 1996 the Company continued to
expand its staffing and support services to improve its abilities
to sell and market its products following the completion of the
new brewery. Two new Brewery Representatives were added to
the staff, including the Company's first such representative
based outside of its Frederick, Maryland headquarters.
Training of these representatives is proceeding. These
additions doubled the size of the outside sales staff from two to
four.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
Review of Operations
The following table sets forth certain items derived from the
Company's unaudited Statements of Operations, expressed as a
percentage of net sales, for the three and six month periods
ended June 30, 1996 and 1995.
Percentage of Sales
for the Periods Ended June 30,
Three Months Ended Six Months Ended
1996 1995 1996 1995
------ ------ ------ ------
Gross sales . . . . . . . . . . . . 114.7% 104.5% 109.7% 107.6%
Less returns and allowances . . . . 8.7 (0.8) 4.5 2.5
Less excise taxes . . . . . . . . . 6.0 5.3 5.2 5.1
Net sales . . . . .. . . . . . . . 100.0 100.0 100.0 100.0
Cost of goods sold . . . . . . . . 93.1 64.7 95.8 73.2
Gross margin . . . . . . . . . . . 6.9 35.3 4.2 26.8
Selling, Gen'l & Admin Expenses . . 94.5 28.3 86.3 36.0
(Loss) income from operations . . . (87.6) 7.0 (82.1) (9.2)
Interest (income) expense . . . . (4.1) 4.7 (1.5) 3.6
Other expense . . . . . . . . . . 0.0 0.0 0.0 1.5
Net (loss) income . . . . . . . . (83.6) 2.4 (80.6) (14.3)
Sales
Gross sales for the 1996 and 1995 second quarters were
$440,066, and $477,284, respectively, a decrease of $37,218, or
7.8%, from 1995 to 1996. Year-to-date sales for 1996 and 1995
were $874,741 and $862,697, respectively, an increase of
$12,044, or 1.4%. Second quarter volumes were 2,521 and
2,713 barrels for 1996 and 1995, respectively, a decrease of
192 barrels, or 7.1%, from 1995. Year-to-date volumes in 1996
and 1995 were 4,977 and 4,951, respectively, an increase of 26
barrels, or 0.5%.
Revenues per barrel were essentially flat for all periods
reported. Revenues per barrel between the second quarters of
1996 and 1995 were $175 and $176, respectively, while they
were $176 and $174 for the year-to-date periods in 1996 and
1995, respectively.
Beer club sales made by the Company in the six month period
ended June 30, 1996 were negligible, approximately $15,000,
compared to 1995 year-to-date (six month) sales of
approximately $180,000. Due to savings in packaging costs
and bulk purchase pricing, such sales have a lower overall
selling price and gross margin.
While second quarter 1996 sales by the Company to its
wholesale distributors exhibited a decline, sales by distributors
to their retail accounts ("depletions") in the Company's "core'
market area of Maryland and the District of Columbia increased
by 12.7% over the comparable period in 1995. This disparity
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
results from the fact that, during the second quarter of 1996,
the Company and its distributor in this territory, The Kronheim
Company ("Kronheim'), reduced Kronheim's inventory quantity
from a 30-45 day supply to a 10-15 day supply in an effort to
reduce inventory rotation problems and to better ensure beer
freshness. The effect of this inventory reduction was to reduce
sales to the Kronheim company by between $35,000 and
$80,000 during the quarter.
In addition, second quarter 1995 sales included approximately
$110,000 of first-time sales to 10 distributors in remote
markets where, to date, the Company has not yet provided sales
or marketing support. Lacking such support, these same
markets accounted for only approximately $10,000 in sales
during the second quarter of 1996. Similar "pipeline filling'
sales have not been repeated in any new markets during the
second quarter of 1996, reflecting the Company's decision to
have sales and market support for its products in place prior to
selling into new markets. Historically, such support has only
been available in the Company's core market area.
Although not specifically quantifiable, management also
believes that unusually cold and wet weather during the
traditionally strong sales period of late spring, particularly the
Memorial Day holiday weekend, had a negative effect on sales
for the second quarter of 1996.
The Company has historically been dependent upon wholesale
distributors to sell the Company's beers and to assist the
Company in creating demand for, and promoting market
acceptance of, the Company's products, and for providing
adequate service to its retail customers. In particular, the
Company's largest distributor, Kronheim, accounted for (net of
beer club sales) approximately 55% and 64% of sales in the
three month periods ended June 30, 1996 and 1995,
respectively and 52% and 66% of sales in the six month periods
ended June 30, 1996 and 1995, respectively.
The Company competes in a segment of the domestic beer
market which is facing intense and increasing competition. A
significant number of new brands have entered the market and
are competing against the Company's products. The
Company's various distributors, including Kronheim, have
expanded their offerings of such other products reducing the
time and effort afforded the Company's offerings. Management
believes that the reduction of efforts on the part of its
distributors has had an impact on its sales growth and on the
level of services such distributors have provided to the
Company's retailers. However, in anticipation of decreasing
support by its distributors, the Company began to expand its
sales staff in the first quarter of 1996 and anticipates further
expansion of such staff throughout 1996, continuing into 1997.
The Company anticipates that the use of a dedicated sales force
will be a competitive advantage for it, reducing the Company's
dependence on wholesale distributors and strengthening direct
ties to its retailing customers. Many of the Company's direct
competitors do not have resources to support similar sales
staffs.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
Returns and Allowances
Returns for the second quarter of 1996 were $33,440 in
comparison to a negligible amount for the same period in 1995.
For the year-to-date period ended June 30, 1996 and 1995
returns were $35,885 and $19,949, respectively, an increase of
$15,936, or 79.9%.
Although the Company does not guarantee its distributors that
it will repurchase unsold inventories of the Company's product,
from time to time such a purchase will be made to facilitate the
maintenance of solid business relationships. During the second
quarter of 1996 management made the decision to repurchase
approximately $15,000 of "Mug Box' inventory from
Kronheim. This inventory was originally sold to Kronheim in
the fourth quarter of 1995. In addition, and also during the
second quarter of 1996, approximately $6,000 of inventory was
returned, at the Company's request, as part of a distributor re-
alignment initiated by the Company. No other individually
significant returns have been made in 1996.
Excise Taxes
Federal and state excise taxes were $23,125 and $24,226, or
6.0% and 5.3% of net sales, during the second quarters of 1996
and 1995, respectively. For the year-to-date periods of 1996
and 1995 such taxes were $41,486 and $40,949, or 5.2% and
5.1%, respectively. The increase in excise taxes in 1996, as a
percentage of net sales, is due to changes in the mix of beer
distribution between states. Each state in which the Company
distributes its product has different liquor excise tax rates and
regulations, including some states which require the distributor
to pay such taxes instead of the brewer.
Cost of Goods Sold
Second quarter cost of goods sold for 1996 and 1995 was
$357,181 and $295,356, or 93.1% and 64.7% of net sales,
respectively, an increase of $61,825 over 1995. Year-to-date
cost of goods for 1996 and 1995 was $763,845 and $586,990,
or 95.8% and 73.2% of net sales, respectively, an increase of
$176,855 over 1995.
Had second quarter and year-to-date 1996 costs, as a percentage
of net sales, been consistent with those of 1995, cost of goods
sold would have been approximately $109,000 and $180,000
lower in the second quarter and year-to-date periods in 1996,
respectively. A recap of the most substantial changes in cost of
goods sold is presented in the table below.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
Cost of Goods Sold,
1996 Increase Over 1995
Description of Item Second Quarter Year-to-Date
-------------------------------------------- ----------- ---------
Third party brewing facility increased costs $35,000 $ 65,000
Depreciation expense 19,000 35,000
Wage & benefit increase 10,000 20,000
Inventory losses 14,000 14,000
Labor efficiencies 5,000 20,000
Freight costs 4,000 15,000
Other fixed costs and expenses 6,000 17,000
Other 13,000 (6,000)
-------- --------
Total change from 1995 $106,000 $180,000
======== ========
The most substantial portions of cost of goods sold increases
over levels experienced in 1995 continues to be costs
associated with the third party facility and depreciation and
other fixed cost increases. The most substantial portion of the
depreciation expense increase is due to a reduction in the
estimated useful life of the Company's leasehold improvements
to its existing facility resulting in the depreciation of such
leasehold improvements over a shorter period of time
(approximately $10,000 in the second quarter and
approximately $20,000 year-to-date in 1996.) Increases in
other fixed costs, for both periods, primarily represent
increases in rental payments over those in 1995 and various
tooling costs which the Company chose to expense vs.
capitalize given the pending move to the new brewery.
Wages and labor costs increased with 1996 employee merit
increases. Efficiencies lagged during the first quarter of 1996
due to management's focus on other issues, including
completion of the IPO and planning for the new brewery.
Freight costs increased as a result of shipments of finished and
raw goods between the Company's facility and the third party
facility and due to an expanded use of outside carriers.
Inventory losses reflect a write off of out of date inventory.
Selling, General and Administrative Expenses
Selling, general and administrative ("S,G&A") expenses were
$362,413 and $129,231 in the second quarters of 1996 and
1995, respectively, an increase of $233,182, or 206%. S,G&A
expenses were $687,975 and $288,339 in the year-to-date
periods of 1996 and 1995, respectively, an increase of
$399,636, or 139%.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
S,G& A increases between 1995 and 1996 are a result of the
Company's expansion of its manufacturing, sales and marketing
capabilities and the requisite related support functions. The
more significant increases in 1996 costs over related periods in
1995 are presented in the table below. In general, such
increases can be attributed to three areas: Those costs
associated with the Company's efforts to expand the business
(building of the new brewery, additions to sales, marketing and
support staffs, costs associated with staff increases and greater
market coverage, etc.), the increased costs of being a publicly
held and traded company (legal and professional fees, exchange
registration fees, etc.), and general business operations costs.
1996 Increase Over 1995
Description of Item Second Quarter Year-to-Date
Increased Costs Associated With Expansion of the Business:
Salaries and wages $ 106,882 $ 124,757
Office & data processing supplies 11,793 17,519
Promotion 28,042 35,748
Travel related 26,142 38,578
Increased Costs Predominately Related to Being a Public Company:
Professional fees 4,870 70,028
Licenses, fees and permits 13,667 15,155
Insurance 19,278 16,983
Increased General Operations Costs:
Bad debt expense 0 50,000
Other Expense
No 'other expense' has been recorded by the Company in 1996
compared to approximately $12,000 in 1995 when the Company
incurred such expenses in the defense of its trademark.
Interest (Income) Expense, Net
Interest (income) expense, net, during the second quarter, and
year-to-date periods in 1996 was ($15,555) and ($12,153),
respectively in comparison to $21,297 and $28,571 during
comparable periods in 1995. Interest expense decreased due to
the payoff of $412,000 in debt following the IPO coupled with
only minimal amounts of borrowing since the IPO. Interest
income is primarily the result of the investment of IPO
proceeds until required for operating and investment purposes.
Income Tax Provision
The Company has incurred net operating losses during both
1996 and 1995 and, accordingly, no provisions for income taxes
have been provided on the Statements of Operations.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
Liquidity and Capital Resources
Due to losses experienced during the start-up and expansion of
the Company, operations to date have been funded from private
and public placements of common stock, most recently the IPO
of 771,154 shares of common stock, and loans from
stockholders and financial institutions. As of June 30, 1996,
the Company had working capital of approximately $1.8
million. This balance is principally the result of the IPO which
raised approximately $3.8 million (net of selling commissions
and offering expenses) for the Company.
Net cash used in investing activities during the three and six
months ended June 30, 1996 was $601,480 and $1,226,943,
respectively, which amounts primarily represent deposits placed
with vendors for the fabrication of new brewery equipment
(approximately $405,000 and $971,000) and purchases of
capital assets ($160,617 and $172,191). In addition, various
expenses incurred in arranging for SBA, MEDCO and Signet
financing, brewery construction, and other matters related to
the public offering and trademarks were capitalized as
intangible assets.
Net cash provided by financing activities during the three and
six months ended June 30, 1996 was $63,233 and $3,499,702,
respectively, consisting primarily of the first quarter 1996 IPO
proceeds of $3,848,000, partially offset by repayments on
short-term and long-term debt of $421,000. Second quarter
1996 activities related primarily to routine monthly payments
on existing debt and additional financing on new vehicles
purchased by the Company for use by its Brewery
Representatives.
The Company does not currently have a working capital line of
credit or any other revolving credit facility but is negotiating to
obtain a line of credit from Signet. Management does not
anticipate obtaining this or any other revolving credit facility
until after the new brewery is operational. This line of credit
would be separate from bridge financing provided by Signet for
new brewery equipment and furnishings. There can be no
assurance that such a facility can be obtained on terms
acceptable to the Company.
After June 30, 1996, and during the balance of calendar year
1996, the Company expects to complete additional financing
and investing activities as shown in the table below.
Investment activities not funded through completed and
prospective debt financing will be funded from proceeds of the
Company's IPO.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
Investing Activities to be Completed in 1996:
Funding required for new brewery leasehold improvements $ 685,000
Purchase additional machinery and equipment for the new brewery 2,300,000
Purchase additional vehicles for Brewery Representatives 75,000
----------
$3,060,000
==========
Financing Activities to be Completed in 1996:
Complete 10 year equipment financing through MEDCO * $1,500,000
Complete bridge financing through Signet * 1,000,000
Financing for new vehicles 75,000
----------
$2,575,000
==========
____________
* completed on July 19, 1996
The Company had cash of approximately $112,000 at June 30,
1996. In addition, approximately $1,155,000 of cash
equivalents (short-term securities with maturities of less than
90 days, approximately $540,000 of which is currently pledged
as collateral for loans made to Blue II, see Note 4 -
Commitments, Contingencies and Subsequent Events, to
the accompanying financial statements) are available for the
Company's operating needs. Management believes that this
level of liquidity is sufficient to fund its operations until such
time as the Company can generate positive cash flows from
operations, which is expected to occur within twelve months
after the new brewery begins full scale production.
Impact of Inflation
Although the Company has not attempted to calculate the effect
of inflation, management does not believe inflation has had a
material effect on its results of operations. Material increases
in costs and expenses, particularly packaging, raw material and
labor costs, in the future, could have a significant impact on
the Company's operating results to the extent that the effect of
such increases cannot be transferred to its customers.
Forward Looking Information
The Company believes that it can benefit from the perceived
trend toward the consumption of fresh, all-natural, full-bodied
beer by consumers who seek beers with more flavor and
character. However, since its inception, lack of capacity,
operating inefficiencies and undercapitalized efforts to gain
sales and market share have led the Company to incur net losses
and negative cash flows.
<PAGE>
Management's Discussion and Analysis
For the Three and Six Months Ended June 30, 1996 and 1995
The Company also believes that its future is, to a great degree,
dependent upon the completion of the new brewery, which will
substantially increase its production efficiency and cost, and its
ability to gain sales and market share in the specialty beer
market. Both efforts require significant time and capital
commitments.
Management believes that the IPO, and its other financing
agreements relating to the new facility and new brewing
equipment, have provided it with the opportunity and the
necessary funding to implement its long-term business plans
and to improve upon its earnings and cash flow history.
This capital has also allowed the Company to expand its efforts
to gain sales and market share, predominantly, to date, through
the addition of a Marketing Director and Sales Manager and
additional staffing of its sales force. It is the Company's intent
to continue to expand such staffing and to support this staff
with adequate funding for their travel and promotional efforts.
The Company also intends to substantially increase its direct-
to-consumer advertising and promotional activities when the
new brewery becomes operational. All of these efforts will
require the Company to increase expenditures. Because sales
increases, if any, will lag these increased expenditures,
management anticipates negative effects on net income and
cash flows in the short term.
The Company anticipates that its operating losses will continue
throughout the remainder of 1996 and through the first half of
1997 while it supports the efforts to build and open the new
brewery and to develop a broader and deeper market for its
products. The Company believes these efforts will result in the
attainment of profitable operations and positive cash flow.
However, there can be no assurance that the Company will be
successful in such endeavors.
<PAGE>
PART II. - OTHER INFORMATION
For the Three and Six Months Ended June 30, 1996
FREDERICK BREWING CO.
Item 1. Legal Proceedings
See Note 4 - Commitments, Contingencies and Subsequent
Events, "Other', to the Condensed Financial Statements
attached hereto.
Item 2. Changes in Securities
In connection with financing for the new brewery and related
equipment, all of the principal lenders and issuers of such
financings (SBA, MEDCO, and Signet) have placed, or will
place, restrictions upon the Company's ability to pay dividends,
enter into new debt financing agreements, guarantee debts of
another person or party, make loans to other persons or parties,
or make substantial investments in non-current assets other
than the new brewery. In addition, debt covenants exist which
stipulate various financial ratios which must be maintained by
the Company to avoid technical default on the Equipment and
Blue II Bonds and the Bridge loan. See also Exhibits 10(iii),
10(viii), and 10(x) attached hereto.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
On May 10, 1996 the annual meeting of stockholders of the
Company was held. Two matters were put to a vote of the
stockholders at this meeting: the election of three directors and
the ratification of Coopers & Lybrand LLP as the Company's
independent auditors for the fiscal year ending December 31,
1996. Information regarding the matters voted upon was
disclosed and discussed in the Company's Proxy Statement
which, along with forms of Proxy, were distributed to all
shareholders of record of the Company on or about April 19,
1996. Readers should refer to such Proxy Statement for
additional information on the matters voted upon.
At the meeting, 1,123, 923 shares (approximately 57 1/2%) of
the Company's 1,954,876 shares of common stock were
represented either in person or by proxy.
Results of the voting for directors was as follows:
Nominee for One-Year Term Expiring in 1997:
Peter C. Spellar 1,122,973 for, 0 against, 950 withheld, 0 not voted.
Nominees for Three-Year Terms Expiring in 1999:
Nicholas P. Foris, M.D. 1,122,973 for, 0 against, 950 withheld, 0 not voted.
Maribeth Visco 1,122,973 for, 0 against, 950 withheld, 0 not voted.
Such nominees were declared duly elected. The directors of the
Company whose term of office continued after the meeting were
Carl R. Hildebrand and Jerome M. Pool whose terms expire in
1997 and Kevin E. Brannon and Marjorie A. McGinnis whose
terms expire in 1998.
<PAGE>
Other Information
For the Three and Six Months Ended June 30, 1996
Results of the voting for the ratification of auditors was as
follows:
1,123,823 for, 0 against, 100 withheld, 0 not voted.
The auditors were declared duly ratified.
Item 5. Other Information
On July 19, 1996 the Company completed its financing and
leasing agreements with and between MEDCO, Signet and Blue
II. For further information regarding these matters, see Note 6
- - - Commitments, Contingencies and Subsequent Events, to the
financial statements.
Item 6. Exhibits and Reports on 8-K
(a) Exhibits Filed:
Index to Exhibits
- - -----------------------------------------------------------------------------
Exhibit
No. Description
------- -----------------------------------------------------------------
10 Material Contracts
CONTRACTS RELATING TO THE CONSTRUCTION AND OPERATION OF THE NEW
BREWERY:
(i) Loan and financing agreement between Blue II, MEDCO, Signet and
the Company
(ii) Promissory note
(iii) $3,000,000 Economic Development Revenue Bond
(iv) Construction contract between Blue II, Morgan Keller, Inc., and
the Company
(v) Lease agreement between Blue II and the Company
CONTRACTS RELATING TO THE EQUIPMENT FINANCING:
(vi) Loan and financing agreement between MEDCO, Signet and the
Company
(vii) Promissory note
(viii) $1,500,000 Economic Development Revenue Bond
CONTRACTS RELATING TO THE BRIDGE LOAN WITH SIGNET:
(ix) Loan and security agreement - $969,000 bridge loan
(x) Promissory note - bridge loan
CONTRACTS WITH MAJOR EQUIPMENT VENDORS:
(xi) Filler / capper equipment
(xii) Bottling line
(xiii) Mechanical and electrical work
(xiv) Phase I industrial wastewater treatment
(xv) Bottle supply
(xvi) Interior fit out of new brewery office space
(b) Reports Filed on 8K
None Filed
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and
Exchange Act of 1934, the registrant has caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
Frederick Brewing Co.
Date August 13, 1996 /s/ Kevin E. Brannon
-------------------------
Kevin E. Brannon
Chairman of the Board and
Chief Executive Officer
Date August 13, 1996 /s/ Dennis A. Olson
------------------------
Dennis A. Olson
Chief Financial Officer
EXHIBIT 10 (i)
<PAGE>
MARYLAND ECONOMIC DEVELOPMENT CORPORATION,
as Issuer,
BLUE II, LLC,
as Borrower,
FREDERICK BREWING CO.,
as Facility User,
and
SIGNET BANK,
as Lender
______________________________
LOAN AND FINANCING AGREEMENT
______________________________
$3,000,000
Maryland Economic Development Corporation
Taxable Economic Development Revenue Bond
(Blue II, LLC Facility)
1996 Issue
__________________________
July 19, 1996
__________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND RULES
OF CONSTRUCTION
SECTION PAGE
1.1. Definitions - General . . . . . . . . . . . . . .2
1.2. ERISA Terms . . . . . . . . . . . . . . . . . . .15
1.3. Accounting Terms . . . . . . . . . . . . . . . .16
1.4. Rules of Construction . . . . . . . . . . . . . .16
1.5. References to Bond Ineffective After
Termination Date . . . . . . . . . . . . . . . .16
ARTICLE II
THE BOND; REDEMPTION;
SECURITY FOR THE BOND
2.1. The Bond . . . . . . . . . . . . . . . . . . . . 16
2.2. Redemption of the Bond . . . . . . . . . . . . . 16
2.3. Partial Redemptions . . . . . . . . . . . . . . . 18
2.4. Effect of Redemption of Bond . . . . . . . . . . 19
2.5. Negotiability, Registration and Transfer of
Bond; Mutilated, Lost or Destroyed Bond . . . . . 19
2.6. Limited Liability of the Issuer . . . . . . . . . 20
2.7. Security for Bond; Assignment by the Issuer
to the Lender . . . . . . . . . . . . . . . . . . 21
2.8. Insurance Provided by the Authority . . . . . . . 22
ARTICLE III
THE LOAN; THE NOTE; SECURITY FOR THE LOAN
3.1. The Loan; The Note . . . . . . . . . . . . . . . 24
3.2. Payments by Borrower Upon Redemption of
the Bond . . . . . . . . . . . . . . . . . . . . 24
3.3. Guarantee of Loan. . . . . . . . . . . . . . . . . 24
3.4. Security for the Loan . . . . . . . . . . . . . . 24
3.5. Location of Security; Other Covenants
Pertaining to Security . . . . . . . . . . . . . 25
3.6. Loss of Security . . . . . . . . . . . . . . . . 25
3.7. Filings . . . . . . . . . . . . . . . . . . . . . 25
3.8. Consent of the Authority . . . . . . . . . . . . 26
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
FINDINGS BY THE ISSUER
4.1. Representations and Warranties of the Issuer . . 26
4.2. Findings by the Issuer . . . . . . . . . . . . . 26
4.3. General Representations and Warranties of the
Borrower . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
COVENANTS
5.1. Covenants of the Issuer . . . . . . . . . . . . . 29
5.2. Affirmative Covenants of the Borrower . . . . . . 29
5.3. Negative Covenants of the Borrower . . . . . . . 33
5.4 Affirmative Covenants of the Facility User . . . 35
5.5 Negative Covenants of the Facility User . . . . . 40
ARTICLE VI
APPLICATION OF LOAN PROCEEDS
6.1. Application of Loan Proceeds; Advances . . . . . 42
6.2. Advances of Bond Proceeds . . . . . . . . . . . . 42
6.3. Procedure for Making Advances of Bond Proceeds. . 44
6.4. Conditions Precedent to Advances of
Bond Proceeds . . . . . . . . . . . . . . . . . . 46
6.5. Completion of the Facility . . . . . . . . . . . 49
6.6. Establishment of Completion Date . . . . . . . . 51
6.7. Financing Sign on Property; Publicity . . . . . . 51
6.8. Action by Holder Through and Reliance
Upon Others . . . . . . . . . . . . . . . . . . . 52
6.9. Holder May Rely Upon Instruments. . . . . . . . . 52
ARTICLE VII
COVENANTS, AGREEMENTS, REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO THE
PROPERTY AND THE FACILITY
7.1. Possession, Ownership and Use of the
Facility . . . . . . . . . . . . . . . . . . . . 52
7.2. Representations, Warranties and Covenants
Pertaining to the Facility and the Property . . . 52
7.3. No Warranty of Suitability by Issuer or Holder . 55
7.4. Alterations, Additions and Improvements . . . . . 55
<PAGE>
7.5. Transfer of Property; Other Liens; Assignment
and Leasing . . . . . . . . . . . . . . . . . . . 56
ARTICLE VIII
PROPERTY TAXES; INSURANCE
8.l. Property Taxes; Tax and Insurance Escrow. . . . . 58
8.2. Insurance Required. . . . . . . . . . . . . . . . 59
8.3. Specific Requirements With Respect to
Insurance . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX
DAMAGE TO THE PROPERTY;
APPLICATION OF NET PROCEEDS
9.l. Damage to the Property . . . . . . . . . . . . . 63
9.2. Application of Net Proceeds . . . . . . . . . . . 63
9.3. General Provisions . . . . . . . . . . . . . . . 66
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
10.1. Events of Default Defined. . . . . . . . . . . . . 67
10.2. Remedies on Default . . . . . . . . . . . . . . . 70
10.3. No Remedy Exclusive; Delays or Omissions;
Waiver of Breach . . . . . . . . . . . . . . . . . 73
10.4. Termination of Proceedings . . . . . . . . . . . . 73
10.5. Application of Moneys . . . . . . . . . . . . . . 74
ARTICLE XI
DURATION OF AGREEMENT; DEFEASANCE
11.1. Duration of this Agreement . . . . . . . . . . . 74
11.2. Defeasance and Discharge of Lien of
the Holder . . . . . . . . . . . . . . . . . . . 74
ARTICLE XII
ADDITIONAL PAYMENTS
12.1. Costs to be Paid by the Borrower; Issuer's Fee 75
<PAGE>
12.2. Reimbursement of Advances Made or Other Costs
Incurred . . . . . . . . . . . . . . . . . . . . 75
12.3. Interest on Additional Payments and
Reimbursements . . . . . . . . . . . . . . . . . 75
12.4. Indemnification. . . . . . . . . . . . . . . . . 76
12.5. Surviving Rights . . . . . . . . . . . . . . . . 78
12.6. Payments Due on Non-Business Days . . . . . . . 78
ARTICLE XIII
MISCELLANEOUS
13.1. Unconditional Obligations of Borrower. . . . . . 78
13.2. Authorized Representatives . . . . . . . . . . . 79
13.3. Consent to Jurisdiction; Service of Process. . . 80
13.4. Further Assurances and Corrective Instruments. . 80
13.5. Estoppel Certificate . . . . . . . . . . . . . . 80
13.6. Prior Agreements Canceled . . . . . . . . . . . 80
13.7. Binding Effect . . . . . . . . . . . . . . . . . 81
13.8. Dissolution of Issuer . . . . . . . . . . . . . 81
13.9. Illegality . . . . . . . . . . . . . . . . . . . 81
13.10. Amendments, Changes and Modifications. . . . . . 81
13.11. Execution of Counterparts. . . . . . . . . . . . 81
13.12. Law Governing Construction of Agreement. . . . . 81
13.13. Assignment . . . . . . . . . . . . . . . . . . . 82
______________________
EXHIBIT A - Form of Requisition
EXHIBIT B - Form of Completion Certificate
EXHIBIT C - Sources and Uses of Funds
EXHIBIT D - Schedule of Additional Equipment
<PAGE>
LOAN AND FINANCING AGREEMENT
THIS LOAN AND FINANCING AGREEMENT is entered into July
19, 1996, by and among MARYLAND ECONOMIC DEVELOPMENT
CORPORATION, a body politic and corporate and a public
instrumentality of the State of Maryland (the "Issuer"), BLUE II, LLC, a
Maryland limited liability company (the "Borrower"), FREDERICK
BREWING CO., a Maryland corporation (the "Facility User"), and
SIGNET BANK, a Virginia banking corporation (the "Lender").
RECITALS
Pursuant to and in accordance with the Act (as hereinafter defined),
the Issuer has determined to issue and sell to the Lender its Taxable
Economic Development Revenue Bond (Blue II, LLC Facility), 1996
Issue, in the principal amount of $3,000,000 (the "Bond"), and loan the
proceeds from the sale thereof to the Borrower, to assist the Borrower in
financing the costs of the acquisition and improvement by the Borrower
of a certain facility (the "Facility"), located within the geographical
boundaries and jurisdiction of Frederick County, Maryland, and to be
leased by the Borrower to the Facility User, all upon the terms and
conditions of this Financing Agreement.
Pursuant to and in accordance with the MIDFA Act (as hereinafter
defined), the Authority, in its capacity as insurer under the MIDFA Act,
is providing financial assistance (within the meaning of the MIDFA Act)
by insuring, through its Bond Insurance Fund (hereinafter defined), a
portion of the principal of and interest on the Bond.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the
respective representations, covenants and agreements hereinafter
contained, and of the purchase and acceptance of the Bond by those who
shall hold the same from time to time, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows (provided, that
in performance of the agreements of the Issuer herein contained, any
obligation the Issuer, the Authority or the Department may thereby incur
for the payment of money shall not constitute an indebtedness or a charge
against the general credit or taxing powers of the Issuer or of any other
public body, shall not create any pecuniary liability of the Issuer, the
Authority (except in regard to the Authority Insurance Agreement), or of
any other public body, and shall be payable solely from the sources
herein provided):
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions - General. Certain terms used in this
Agreement and in certain of the other documents executed and delivered
in connection herewith are defined in this Section 1.1. Such terms shall
have the meanings given to them in this Section l.l, unless specifically
provided otherwise or unless the context clearly indicates otherwise:
"Accountant" means an Independent Person engaged in the
accounting profession as a certified public accountant under the laws of
the State, and qualified to pass upon those matters required by this
Agreement and the other Documents to be passed upon by an Accountant.
"Acquisition" or "acquisition" means, when used in regard to the
Facility, and shall include, where applicable, and without limitation, the
acquisition, construction, rehabilitation, remodeling, extension,
equipping and permanent improvement of the Facility, and paying the
necessary costs of preparing, printing and selling the Bonds, and such
other costs as may be permitted by the Act and approved by the Lender
and the Authority.
"Acquisition Costs" means all costs of the acquisition of the
Facility approved by the Lender and the Authority.
"Act" means Article 83A, Title 5, Subtitle 2 of the Annotated Code
of Maryland (1995 Replacement Volume), as amended, and all future laws
supplemental thereto or amendatory thereof.
"Act of Bankruptcy" means the filing of a petition in bankruptcy
under the Bankruptcy Code or the commencement of a proceeding under
any other applicable law concerning insolvency, reorganization or
bankruptcy by or against the Borrower or the Issuer as debtor.
"Additions" means any and all alterations, additions, accessions
and improvements to property, substitutions therefor, and renewals and
replacements thereof.
"Agent" means any official, officer, employee or agent.
"Applicable Rate" means the applicable rate of interest payable by
the Issuer under the Bond and by the Borrower under the Note from time
to time.
"Assignment of Leases" means the Assignment of Leases and Rents
of even date herewith between the Issuer and the Lender, together with
all Supplements thereto.
"Assignment of Note" means the Assignment of Note of even date
herewith from the Issuer to the Lender, pursuant to which the Issuer has
assigned to the Lender, without recourse, the payments to be made by the
Borrower under the Note (except for the Reserved Rights of the Issuer).
<PAGE>
"Associate Director" means the Associate Director of the Authority
or such other person or office to which the principal functions of the
Associate Director may be transferred.
"Authority" means the Maryland Industrial Development Financing
Authority, a body corporate and politic and a public instrumentality of
the State created pursuant to the MIDFA Act, its successors and assigns.
"Authority Insurance Agreement" means the Insurance Agreement of
even date herewith by and between the Authority and the Lender,
pursuant to which the Authority, through the Bond Insurance Fund, has
provided financial assistance in connection with the acquisition of the
Facility by insuring the payment of a portion of the principal of, and
interest on the Bond.
"Authority's Insurance Premium" shall mean the Authority's
Insurance Premium as described in Section 5.2(m) hereof.
"Authority's Subrogation Rights" means all of the Authority's rights
of subrogation, as set forth in this Agreement and any of the other
Documents and as may be otherwise available under law.
"Authorized Authority Representative" means the Chairman, the
Vice Chairman, the Executive Director or the Associate Director, or such
other person or persons as may be designated to act on behalf of the
Authority in accordance with the provisions of Section 13.2 of this
Agreement.
"Authorized Borrower Representative" means the Managing Member
of the Borrower, or such other person or persons as may be designated to
act on behalf of the Borrower in accordance with the provisions of
Section 13.2 of this Agreement.
"Authorized Issuer Representative" means the Executive Director of
the Issuer, or such other person or persons as may be designated to act on
behalf of the Issuer in accordance with the provisions of Section 13.2 of
this Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq., and all future acts supplemental thereto or
amendatory thereof.
"Bond" means the Issuer's Taxable Economic Development Revenue
Bond (Blue II, LLC Facility), 1996 Issue, of even date herewith, issued
and delivered on the Closing Date in the principal amount of $3,000,000,
together with all Supplements thereto, which is a "bond" within the
meaning of the Act.
"Bond Counsel" means Miles & Stockbridge, a Professional
Corporation, Baltimore, Maryland, or any other Independent Counsel
approved by the Holder and the Issuer and whose opinions are generally
accepted in the field of municipal finance.
<PAGE>
"Bond Insurance Fund" means the continuing, nonlapsing, revolving
fund of the Authority created pursuant to the MIDFA Act. The faith and
credit of the State are not pledged to the Bond Insurance Fund.
"Bond Registrar" means the Lender or such other person as may be
approved by the Issuer to maintain registration books for the registration
and transfer of the Bond.
"Borrower" means Blue II, LLC, a Maryland limited liability
company, its successors and assigns.
"Borrower's Account" has the meaning given to that term in Section
5.2(q) hereof.
"Borrower's Architect" means DNC Architects, Inc., a Maryland
corporation, its successors and assigns, or such other person as may be
engaged by the Borrower and approved by the Lender to prepare the Plans
and Specifications.
"Borrower's Engineer" means Harris, Smariga & Associates, Inc., a
Maryland corporation, its successors and assigns, or such other person as
may be engaged by the Borrower and approved by the Lender.
"Borrower's Obligations" means the obligations of the Borrower
under this Agreement, the Note and the other Documents to (a) pay the
principal of and interest on the Note, when and as the same shall become
due and payable (whether at the stated maturity thereof, on any
installment payment date, by acceleration of maturity, after notice of
redemption or otherwise), (b) pay all other payments required by this
Agreement, the Note, and the other Documents to be paid by the
Borrower to the Issuer, to the Authority, to the Lender, or to others,
when and as the same shall become due and payable, and (c) timely
perform, observe and comply with all of the terms, covenants, conditions,
stipulations, and agreements, express or implied, which the Borrower is
required by this Agreement, the Note, and any of the other Documents, to
perform or observe.
"Bridge Loan" means the short-term loan made by the Lender to the
Facility User on the date hereof, in the principal amount of Nine Hundred
Sixty-Nine Thousand Dollars ($969,000), to provide short-term financing
for certain equipment to be purchased by the Facility User for use in the
Facility, after disbursement of the proceeds of the Facility User's Bond.
"Building" means the 50,000 square foot (approximate),
warehouse/manufacturing building to be constructed on the Land by the
Borrower in accordance with the Plans and Specifications.
<PAGE>
"Business Day" or "business day" means a day other than a
Saturday, Sunday or legal holiday in the State, and observed as such by
the Holder.
"Carroll Street Facility" means the building currently occupied by
the Facility User located at 103 S. Carroll Street in Frederick County,
Maryland.
"Chairman" means the Chairman of the Authority or such other
person or office to which the principal functions of the Chairman may be
transferred.
"Claim" means any liability, suit, action, claim, demand, loss,
expense or cost of any kind or nature whatsoever.
"Closing Date" means the date of this Agreement, which is the date
of issue and delivery of the Bond.
"Collateral Assignment" means the Collateral Assignment of
Project Documents of even date herewith, executed and delivered by the
Borrower to the Issuer and its assigns, including the Lender, together
with all Supplements thereto.
"Completion Certificate" means the certificate to be delivered by
the Borrower to the Authority and the Lender pursuant to Section 6.6
hereof, in substantially the form attached hereto as Exhibit B and made a
part hereof, and signed by the Authorized Borrower Representative, by
the General Contractor, the Borrower's Architect, the Borrower's
Engineer and by the Lender's Inspector.
"Completion Date" means the date of completion of the acquisition
of the Facility, as that date is certified as provided in Section 6.6 of this
Agreement.
"Condemnation" means any taking of title, of use, or of any other
property interest under the exercise of the power of eminent domain, by
any governmental body or by any person acting under governmental
authority.
"Connection Fee Agreement" means the Connection Fee Agreement
and Mortgage executed or to be executed by the Borrower in favor of the
Board of County Commissioners of Frederick County, Maryland and
consented to by the Lender.
"Construction Contract" means the Construction Contract dated July
10, 1996, between the Borrower and the General Contractor.
"Construction Documents" means the Construction Contract and all
exhibits thereto and drawings and documents referred therein.
"Construction Period" means the period from the Closing Date to
January 2, 1997.
"County" means Frederick County, Maryland, the county within
which the Facility is to be located.
<PAGE>
"Damage" means (a) any damage, destruction or other injury (in
whole or in part) by fire or other casualty, and (b) any Condemnation.
"Damaged" means (a) damaged, destroyed or injured (in whole or in part)
by fire or other casualty, or (b) taken by Condemnation.
"Deed of Trust" means the Deed of Trust of even date herewith
between the Borrower and the Individual Trustees, covering the Property,
or that portion of the Property described therein, together with all
Supplements thereto.
"Department" means the Department of Business and Economic
Development of the State, a principal department of the government of
the State.
"Direct Costs of Construction" means the direct costs of the
construction of the Building, as set forth in the Construction Contract.
"Documents" means and includes (without limitation) the Bond, this
Agreement, the Note, the Assignment of Note, the Deed of Trust, the
Authority Insurance Agreement, the Assignment of Leases, the Collateral
Assignment, the Guaranty, the Facility Lease, the Guaranty Letter of
Credit, and any and all other documents which the Issuer, the Authority,
the Facility User or any other party or parties or their representatives,
have executed and delivered, or may hereafter execute and deliver, to
evidence or secure the Issuer's Obligations, the Borrower's Obligations or
any part thereof, or in connection therewith, together with all
Supplements thereto.
"Encumbrance" means any mortgage, pledge, lien, security interest,
charge or other encumbrance.
"Environmental Laws" shall have the meaning given to that term in
the Deed of Trust.
"Equipment Collateral" means all building materials, fixtures,
machinery, equipment and tangible personal property of every kind and
nature whatsoever, now or hereafter located or contained in or upon or
attached to, the Land or the Improvements or any part thereof, and used
or usable in connection with any present or future use or operations of
the Land or the Improvements or any part thereof, whether now owned or
hereafter acquired by the Borrower, together with all Additions thereto
and all Proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
<PAGE>
"Event of Default" means (a) with respect to this Agreement, those
events of default specified in Section 10.1 hereof; (b) when used with
respect to the Deed of Trust, those events of default specified in Section
5.1 thereof; and (c) when used with respect to any of the other
Documents, any "event of default" specified therein, or if none is
specified, any failure of any party thereto to comply with any of the
terms thereof, after the expiration of any applicable cure or grace periods
set forth therein.
"Executive Director" means the Executive Director of the Authority
or such person or office to which the principal functions of the Executive
Director may be transferred.
"Executive Order" means the Executive Order of even date herewith
executed by the Chairman, approving the form of the Bond and other
details in connection with the Bond and the Loan, as authorized by the
Revenue Bond Act.
"Facility" means the Land and the Building, a "project" within the
meaning of the Act.
"Facility Lease" means the Lease Agreement and Option to
Purchase of even date herewith, by and between the Borrower, as
landlord and the Facility User, as lessee, covering the Project, together
with all Supplements thereto.
"Facility User" means Frederick Brewing Co., a Maryland
corporation, the lessee under the Lease, its successors and permitted
assigns.
"Facility User's Bond" means the Maryland Economic Development
Corporation Taxable Economic Development Revenue Bond (Frederick
Brewing Co. Facility), 1996 Issue, in the principal amount of $1,500,000,
issued or to be issued on or before the date hereof by the Issuer for the
benefit of the Facility User.
"Financial Assistance" or "financial assistance" means financial
assistance within the meaning of the MIDFA Act.
"Financing Agreement" or "Agreement" means this Loan and
Financing Agreement by and among the Issuer, the Borrower, the Facility
User and the Lender, together with all Supplements hereto.
"Force Majeure" means and includes, without limitation, the
following: acts of God; strikes; lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of the
United States or of the State or any of their departments, agencies or
officials, or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; fire; hurricanes; storms;
floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions; breakage or accident to machinery,
transmission pipes or canals; partial or entire failure of utilities; or any
other cause or event not reasonably within the control of the Borrower, it
being agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the Borrower and
the Borrower 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
Borrower, unfavorable to it.
<PAGE>
"Full Insurable Value" means such value as shall be determined
from time to time at the request of the Borrower or the Holder or the
Authority (but not more frequently than once every 24 months) by one of
the insurers selected by the Borrower and approved by the Holder and the
Authority.
"General Contractor" means Morgan-Keller, Inc., a Maryland
corporation, and its successors.
"Grantor" means the Borrower, as grantor under the Deed of Trust.
"Gross Negligence" means gross negligence or willful misconduct.
"Guarantor Letter of Credit" means the Guarantor Letter of Credit
of even date issued in the stated amount of $600,000 by Frederick County
National Bank in favor of the Lender, as security for the Guaranty,
together with all Supplements thereto.
"Guarantors" means Edward D. Scott, Robert Schuerholz, Nicholas
P. Foris, and Vishnampet S. Jayanthimath, and their respective heirs and
personal and legal representatives.
"Guaranty" means the Guaranty of even date herewith, executed and
delivered by the Guarantors in favor of the Issuer and its assigns
(including the Lender), and together with all Supplements thereto.
"Holder" means the Lender and any other registered owner from
time to time of the Bond, their successors and registered assigns.
"Improvements" shall have the meaning given to that term in the
Deed of Trust.
"Independent Architect" means an Independent Person registered
and qualified to practice the profession of architecture under the laws of
the State.
"Independent Counsel" means an Independent Person duly admitted
to practice law before the highest court of the State.
"Independent Engineer" means an Independent Person registered
and qualified to practice the profession of engineering under the laws of
the State.
"Independent Person" means a person designated by the Borrower,
approved by the Holder and the Authority, and not an employee of the
Issuer or the Borrower.
"Individual Trustees" means the individual trustees acting as
trustees under the Deed of Trust, or their successors in trust who may be
acting under and pursuant to the Deed of Trust from time to time.
<PAGE>
"Issuer" means Maryland Economic Development Corporation, a
body politic and corporate and a public instrumentality of the State of
Maryland.
"Issuer's Fee" means the annual fee payable in advance by the
Borrower to the Issuer equal to 1/8 of 1% of the outstanding principal
balance of the Bond.
"Issuer's Obligations" means the obligations of the Issuer under the
Bond, this Agreement and the other Documents, to (a) pay the principal
of, premium (if any) and interest (at the Applicable Rate) on the Bond,
when and as the same shall become due and payable (whether at the
stated maturity thereof, on any installment payment date, by acceleration
of maturity, after notice of redemption or otherwise), (b) pay all other
payments (if any) required by the Bond, this Agreement and the other
Documents to be paid by the Issuer to the Holder, or to others, when and
as the same shall become due and payable, and (c) timely perform,
observe and comply with all of the terms, covenants, conditions,
stipulations and agreements, express or implied, which the Issuer is
required by the Bond, this Agreement or any of the other Documents, to
perform and observe; provided, however, that the Issuer's Obligations do
not include any obligation to incur any pecuniary liability or any
obligation to make any payment from the Bond Insurance Fund or any
other funds other than from moneys paid to it by the Borrower or as
proceeds of any Security.
"Land" means that parcel of land identified as "Lot 13",
Wedgewood Business Park, on Wedgewood Boulevard, Buckeystown,
Election District #1, Frederick County, Maryland, consisting of
approximately 5.6 acres, together with the Building and any and all
improvements thereon.
"Laws" or "laws" means federal, state and local laws, rules, and
regulations, and orders of any court or other governmental authority
having jurisdiction.
"Leases" means any and all leases and subleases which may have
been heretofore executed or which may be hereafter executed in
connection with, or for, the use and occupancy of the Property (or any
part thereof), together with all Supplements thereto including, without
limitation, the Facility Lease.
"Lender" means Signet Bank, a Virginia banking corporation, and
its successors.
"Lender's Inspector" means Whitney, Bailey, Cox & Magnani or
such other person as may be approved by the Lender for the purpose of
inspecting the progress of construction of the Building.
"Loan" means the loan in the principal amount of $3,000,000, made
by the Issuer to the Borrower on the Closing Date from the proceeds of
the Bond, as evidenced by the Note and described in this Agreement and
secured, inter alia, by this Agreement, the Deed of Trust, and the other
Documents.
<PAGE>
"Loan Term" means the period beginning on the Closing Date and
continuing until the Termination Date.
"MIDFA Act" means the Maryland Industrial Development
Financing Authority Act, and all future acts supplemental thereto or
amendatory thereof.
"MIDFA Resolution" means the resolution adopted by the Authority
November 30, 1995, as amended on December 21, 1995 and further
amended on February 22, 1996.
"Net Proceeds", when used with respect to any condemnation
awards or insurance proceeds allocable to the Property, means the gross
proceeds from Condemnation or insurance received by reason of any
Damage remaining after payment of all expenses (including attorneys'
fees) incurred in the collection of such gross proceeds.
"Note" means the Promissory Note of even date herewith made by
the Borrower payable to the Issuer in the amount of the Loan, together
with all Supplements thereto.
"Notice" means a written communication given by delivery or by
certified mail, postage prepaid, return receipt requested, addressed to the
person to whom such communication is to be given, at the following
addresses:
Authority: Maryland Industrial Development Financing Authority
217 East Redwood Street
Baltimore, Maryland 21202
Attention: Executive Director
Borrower: Blue II, LLC
117 West Patrick Street
Frederick, Maryland 21701
Attention: Managing Member
Facility User: Frederick Brewing Co.
103 S. Carroll Street
Frederick, Maryland 21701
Attention: Chief Executive Officer
after the Completion Date:
Frederick Brewing Co.
4607 Wedgewood Boulevard
Buckeystown, Maryland 21703
Attention: Chief Executive Officer
Issuer: Maryland Economic Development
Corporation
36 South Charles Street
Suite 1911
Baltimore, Maryland 21201
Attention: Executive Director
<PAGE>
Lender: Signet Bank
Seven Saint Paul Street
Baltimore, Maryland 21202
Attention: Mark A. Cunningham
Individual Trustees: H. Victor Rieger, Jr. and
Jeannette G. Miller, Trustees
c/o Signet Bank
Seven Saint Paul Street
Baltimore, Maryland 21202
Holder: THE LENDER AT ITS ADDRESS SET FORTH
ABOVE OR TO SUCH OTHER HOLDER WHOSE
NAME APPEARS ON THE REGISTRATION BOOKS
OF THE BOND REGISTRAR AT THE ADDRESS
DESIGNATED THEREIN.
A duplicate copy of each communication given hereunder by any
person listed above to another shall also be given to the Holder and to
the Authority; provided, however, that any failure to give a duplicate
copy of any such communication shall not invalidate any Notice given
hereunder. Any of the persons listed above may, by notice given
hereunder, designate any further or different addresses to which
subsequent Notices, certificates or other communications shall be sent.
"Outstanding" or "outstanding" means with respect to the Bond, the
period beginning on the Closing Date and continuing until all principal
of, premium (if any) and interest on the Bond have been paid in full.
"Permitted Encumbrances" means as of any particular time, (a) the
Encumbrances set forth in the Commitment for Title Insurance Case No.
73907.001, dated June 4, 1996, as updated to the Closing Date, issued by
Lawyers Title Insurance Corporation with respect to the Land and the
Building, (b) the Deed of Trust, (c) any Leases, so long as the same are
subject and subordinate to the Deed of Trust and all of the other
Documents and are permitted under Section 7.5 hereof, (d) utility, access
and other restrictions and exceptions which, in the opinion of the Holder
and the Authority, will not interfere with or impair the operations being
conducted, or contemplated to be conducted, in the Building (or, if no
operations are being conducted therein, the operations for which the
Building was designed or last modified), (e) such minor defects,
irregularities, encumbrances, easements, rights of way, and clouds on
title as normally exist with respect to properties similar in character to
the Property and as do not, in the opinion of the Holder and the
Authority, materially impair the value of the Property or the ability to
utilize the Property for the purposes for which it was acquired or is held
by the Borrower, (f) liens for Property Taxes not delinquent or being
contested in
<PAGE>
good faith and by appropriate proceedings, and (g) the
Connection Fee Agreement.
"Permitted Use" means use of the Facility by the Borrower as a
warehouse and manufacturing facility to be leased to the Facility User
and used by the Facility User in its business as a brewing company, or
such other use or uses as may be approved by the Holder and the Issuer
and permitted by the Act.
"Person" or "person" means any natural person, firm, association,
partnership, corporation, limited liability company, trust, public body or
other entity.
"Plans and Specifications" means the final plans and specifications
in accordance with which the Building is to be constructed, and which
have been prepared by the Borrower's Architect and approved in writing
by the General Contractor and the Borrower and delivered to the Lender
on or before the Closing Date.
"Pledged Receipts" means: (a) scheduled payments of principal of
and interest on the Note, (b) Net Proceeds, (c) Receipts Requiring
Mandatory Redemption, and (d) any other payments required or provided
for by the Documents and paid to the Issuer and its assigns from any
source, including both timely and delinquent payments with late charges.
"Proceeds" or "proceeds" means, when used with respect to any of
the Security, all proceeds within the meaning of the Maryland Uniform
Commercial Code and shall include the proceeds of any and all insurance
policies.
"Projected Completion Date" means January 2, 1997, or such later
date as may be approved in writing by the Holder and the Authority or as
may be extended by reason of Force Majeure pursuant to Section 6.5(a)
of this Financing Agreement.
"Property" means the Land, the Building, the Equipment Collateral,
all other items and property described in the granting clauses of the Deed
of Trust, and all Additions to all of the foregoing.
"Property Taxes" means all taxes, payments in lieu of taxes, water
rents, sewer rents, ground rents, assessments and other
governmental or municipal or public or private dues, charges and levies
and any liens (including federal tax liens) which are or may be levied,
imposed or assessed upon the Property or any part thereof or any of the
other Security, or upon any Leases, or upon the rents, issues, income or
profits thereof, whether any or all of the aforementioned be levied
directly or indirectly or as excise taxes, as income taxes, or otherwise.
"Receipts Requiring Mandatory Redemption" means amounts
received by the Borrower, by the Holder or by any other person from any
of the following sources:
<PAGE>
(a) all amounts received by the Borrower from the proceeds
of any sale of the Facility (or any portion thereof) or the Property (or
any portion thereof), (including any profit realized by the Borrower) and
required by any of the Documents to be applied to the redemption of the
Bond,
(b) any unadvanced portion of the Bond proceeds remaining
after the Completion Date and final advance of Bond proceeds are
required to be applied to the redemption of the Bond pursuant to Section
6.2(b),
(c) any amounts received by the Borrower from any
recoveries from any contractors, as provided in Section 6.5(e) hereof,
(d) any Net Proceeds received as a result of any Damage to
the Property and required by the Holder to be applied to the redemption
of the Bond, as provided in the Deed of Trust,
(e) any other amount or amounts received from any source
and required by the Documents or by the Holder to be applied to the
redemption of the Bond.
"Reimbursement Rate" means the fluctuating rate of interest which
is at all times equal to the Applicable Rate plus 2% per annum.
"Reimbursement Rights" means (a) the rights of the Holder and the
Issuer to receive reimbursement and indemnification pursuant to the
Documents, (b) the Authority's Subrogation Rights, and (c) all
enforcement remedies with respect to the foregoing.
"Rents" means all of the rents, royalties, issues, profits, revenues,
earnings, income and other benefits of the Property, or arising from the
use or enjoyment of all or any portion thereof, or from any lease or other
agreement pertaining thereto.
"Requisition" means the form attached hereto as Exhibit A,
submitted by the Borrower under this Agreement for advance of Bond
proceeds.
"Reserved Rights of the Issuer" means (a) Reimbursement Rights of
the Issuer; (b) the right to receive Notices and to make any determination
and to grant any approval or consent to anything in the Documents
requiring the determination, consent or approval of the Issuer; (c) all
rights of the Issuer set forth in the Documents regarding the use of Bond
proceeds and the Facility; (d) any and all rights, remedies and limitations
of liability of the Issuer set forth in the Documents regarding (l) the
negotiability, registration and transfer of the Bond, (2) the loss or
destruction of the Bond, (3) the limited liability of the Issuer as provided
in the Act and in the Documents, (4) the maintenance of insurance by the
Borrower, (5) no liability of the Issuer to third parties, and (6) no
warranties of suitability or merchantability by the Issuer;
<PAGE>
and (e) all
rights of the Issuer in connection with any amendment to or modification
of the Documents.
"Resolution" means the resolution adopted by the Board of
Directors of the Issuer on March 18, 1996.
"Security" means all of the security for the Borrower's Obligations
described in Section 3.4 hereof, in the Deed of Trust, and in all of the
other Documents, together with all Proceeds thereof and Additions
thereto.
"State" means the State of Maryland.
"Subsidiary" means any present or future corporation at least a
majority of whose outstanding Voting Stock shall at the time be owned
by the Borrower or the Facility User; or by one or more Subsidiaries of
the Borrower or the Facility User; or by the Borrower or the Facility
User and one or more of its respective Subsidiaries.
"Supplements" means any and all extensions, renewals,
modifications, amendments, supplements and substitutions.
"Surviving Rights" means the Reimbursement Rights, which shall
survive any transfer or payment of the Bond, in full or in part, and, if so
indicated in this Agreement, which shall also survive the termination of
this Agreement.
"Taxes" means all taxes, assessments and governmental charges or
levies imposed upon the applicable person or on its income or its
properties, including, without limitation, all Property Taxes.
"Termination Date" means the date when the principal of, premium
(if any) and interest on the Bond and the Note are paid in full and all of
the Borrower's Obligations and the Issuer's Obligations are fully and
irrevocably satisfied.
"Title Company" means Lawyers Title Insurance Corporation, and
its successors, or any other title insurance company issuing the Title
Policy and approved by the Lender and the Authority.
"Title Policy" means the title policy covering the Land and the
Improvements issued by the Title Company pursuant to Title Commitment
No. 73907.001 dated June 4, 1996, as updated to the Closing Date, and
any other title policy issued with the consent of the Lender, in its sole
discretion, with the approval of the Authority.
"Transaction" or "transaction" means the financing of the
acquisition of the Facility, as described in this Agreement and the other
Documents, a transaction within the meaning of the MIDFA Act. "Parties
to this transaction" or "parties to this transaction" means the Issuer, the
Borrower, the Facility User, the Authority and the Holder.
<PAGE>
"Vice Chairman" means the Vice Chairman of the Authority or such
other person or office to which the principal functions of the Vice
Chairman may be transferred.
"Voting Stock" means the shares of any class of capital stock of a
corporation or any membership interests of a limited liability company
having ordinary voting power to elect the directors, managers or trustees
thereof (irrespective of whether or not at the time stock of any class or
classes of such corporation or such membership interests in the case of a
limited liability company shall have or might have voting power by
reason of the happening of any contingencies).
SECTION 1.2. ERISA Terms. Certain terms used in this Agree-
ment and in the other Documents are defined in ERISA. When and if
used in this Agreement and in the other Documents, such terms shall have
the meanings given them in ERISA. Specifically, the following terms
shall have the following meanings:
"Accumulated Funding Deficiency" means an "accumulated funding
deficiency" as defined in Section 302 of ERISA or Section 412(a) of the
Code.
"Commonly Controlled Entity" means any Subsidiary or any other
trade or business (whether or not incorporated) which is under "common
control" (as defined in the Code) and of which the Borrower, or any of its
Subsidiaries, is a part.
"Multiemployer Plan" means a multiemployer plan (as defined in
ERISA) to which the Borrower or any Commonly Controlled Entity, as
appropriate, has or had an obligation to contribute.
"Plan" means any pension, profit sharing, savings, stock bonus or
other deferred compensation plan which is subject to the requirements of
ERISA, together with any related trusts.
"Prohibited Transaction" means a "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" means a "reportable event" as defined by Title
IV of ERISA.
SECTION 1.3. Accounting Terms. Unless specifically provided
otherwise, all accounting terms shall have the definitions given them in
accordance with generally accepted accounting principles ("GAAP") as
applied to the applicable person and its Subsidiaries, if any, on a
consistent basis by its accountants in the preparation of its annual
financial statements, and unless otherwise indicated, all accounting terms
and covenants shall be applied on a consolidated basis. The parties
hereto understand and acknowledge that the financial covenants
contained in Section 5.4 hereof (the "Financial Covenants") were
structured using GAAP as in effect on the Closing Date. If GAAP
changes to such an extent that the Financial Covenants no longer measure
what was intended to be measured using GAAP as in effect on the
Closing Date as determined
<PAGE>
by the Lender and the Authority in their sole
and absolute discretion, the parties hereto agree to enter into an
amendment to this Financing Agreement to restructure the Financial
Covenants in form and substance satisfactory to the Lender and the
Authority.
SECTION 1.4. Rules of Construction. Unless otherwise indicated,
all terms used in each of the other Documents shall have the meanings
given them in this Financing Agreement.
As used in each of the Documents, the words "hereof", "herein",
"hereunder", "hereto", "Agreement", and other words of similar import
refer to each Document in its entirety.
The terms "agree" and "agreements" are intended to include and
mean "covenant" and "covenants".
The headings of each Document are for convenience only and shall
not define or limit the provisions thereof.
All references made (a) in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, and (b) in the
singular or plural number shall be deemed to have been made,
respectively, in the plural or singular number as well.
Any reference to particular sections or subsections of the Code and
applicable Income Tax Regulations shall include any successor
provisions of law or regulations, to the extent the same shall apply to the
Bond.
SECTION 1.5. References to Bond and Note Ineffective After
Termination Date. On the Termination Date, all references in this
Agreement to the Bond and the Note shall be ineffective, and neither the
Issuer nor the Holder nor the Lender shall thereafter have any rights
hereunder, except with respect to any Surviving Rights, as applicable.
ARTICLE II
THE BOND; REDEMPTION; SECURITY FOR THE BOND
SECTION 2.1. The Bond. Simultaneously with the execution and
delivery of this Agreement, the Issuer has issued, and the Lender has
purchased, the Bond. The Bond bears interest and is payable as provided
therein.
SECTION 2.2. Redemption of the Bond. The Bond is subject to
redemption prior to maturity as follows:
(a) Optional Redemption of Bond Prior to Maturity From
Prepayments By the Borrower. At any time after, but not before, the
Completion Date, the Bond is subject to redemption at the option of the
Issuer, in whole at any time or in part on any interest payment date, but
only upon direction of the Borrower, from moneys made available by the
Borrower for such purpose, at a
<PAGE>
redemption price equal to the principal
amount of the Bond to be redeemed, together with unpaid interest on the
principal of the Bond to be redeemed accrued to the date fixed for
redemption, without payment of premium or penalty therefor.
Any partial optional redemption pursuant to this Section shall be
made in multiples of $25,000 and shall be applied to the principal
installments to be redeemed in the inverse order of the installment
payment dates under the Bond.
In the event the Bond is called for redemption, in whole or in part,
pursuant to the provisions of this subsection (a), the Borrower shall give
Notice thereof to the Holder, in the name of the Issuer, at least 30 days
prior to the date fixed for redemption, which Notice shall specify the
anticipated redemption date and the principal amount of the Bond to be
redeemed. On a date no later than the date fixed for redemption in such
Notice, the Borrower shall pay to the Holder moneys in an amount
sufficient, together with other moneys (if any) held by the Holder and
available for the redemption of the Bond, to redeem the Bond at the
redemption price set forth above.
(b) Special Mandatory Redemption from Certain Receipts.
The Bond is subject to special mandatory redemption, in whole or in part,
from any and all Receipts Requiring Mandatory Redemption, at a
redemption price equal to the principal amount to be redeemed, together
with all unpaid interest on the principal of the Bond to be redeemed
accrued to the date fixed for redemption. The Holder shall apply such
moneys to the redemption of the Bond promptly upon the receipt thereof,
without premium or penalty, and regardless of amount. Prior to any such
redemption, the Holder shall give Notice thereof to the Borrower,
specifying the date fixed for such redemption and the principal amount to
be redeemed. On a date no later than the date fixed for redemption in
such Notice, the Borrower shall pay to the Holder moneys in an amount
sufficient, together with other moneys (if any) held by the Holder and
available for the redemption of the Bond, to redeem the Bond at the
redemption price set forth above.
(c) Mandatory Redemption at Option of the Holder. The
Bond is subject to mandatory redemption, in the sole and absolute
discretion of the Holder, in whole but not in part, at a redemption price
equal to the unpaid principal amount thereof, together with all unpaid
interest on the Bond accrued to the date fixed for redemption, without
payment of premium or penalty on the fifth anniversary of the Closing
Date.
In the event that the Holder determines that the Bond is to be
redeemed during the period pursuant to the provisions of this subsection
(c), the Holder shall give Notice of such determination to the Borrower,
the Issuer and the Authority at least 120 days prior to the date fixed for
redemption, which Notice shall specify the unpaid principal amount of
the Bond, the redemption date, the redemption price (computed as of the
date fixed for redemption), the place or places where amounts due upon
such redemption will be
<PAGE>
payable, and the amount of any other of the
Borrower's Obligations then payable to the Holder.
On the date fixed for redemption in such Notice, the Borrower shall
pay to the Holder moneys in an amount sufficient, together with other
moneys (if any) held by the Holder and available for the redemption of
the Bond, to redeem the Bond at the redemption price set forth above.
Notwithstanding the foregoing provisions of this subsection (c), in
the event that:
(i) the Borrower obtains another purchaser for
the Bond and obtains the approval of the Authority for the
purchase of the bond by such purchaser,
(ii) the Borrower gives Notice to the Holder and
the Authority, at least 30 days prior to the date fixed for
mandatory redemption, of its intention to have the Bond
transferred by the Holder to such other purchaser,
(iii) such purchaser purchases the Bond from the
Holder, at least two days prior to the date fixed for mandatory
redemption, at a purchase price at least equal to the
redemption price set forth above,
(iv) all of the Borrower's Obligations due and
payable as of such date of purchase have been satisfied,
(v) the Borrower has paid any and all expenses
of the Issuer and the previous Holder arising out of such
transfer,
(vi) the transfer is without recourse to the
previous Holder, and
(vii) either the purchaser of the Bond or the
Borrower provides the previous Holder with an opinion of
counsel satisfactory to the previous Holder that such sale will
not require registration of the Bond under the securities laws
of the United States of America or any relevant state,
the Holder shall sell the Bond to such purchaser, and the Bond shall not
be redeemed as provided in this subsection (c).
SECTION 2.3. Partial Redemptions. Any partial redemption made
pursuant to Section 2.2(a) or 2.2(b) above shall be applied to the
principal to be redeemed in the inverse order of the installment payment
dates under the Bond, except for any partial redemption pursuant to
Section 2.2(b) from unadvanced proceeds of the Bond that are not needed
to pay Acquisition Costs and are applied to the redemption of the Bond in
accordance with Section 2.2(b), which unadvanced proceeds shall be
deemed to be a
<PAGE>
redemption of the Bond and the remaining principal
installments on the Bond shall be reduced pro rata in the ratio that the
amount of unadvanced proceeds bears to the outstanding and unpaid
principal of the Bond. The amount of any partial redemption, and the
date on which the same is actually made, shall be noted by the Holder on
Schedule B attached to the Bond and made a part thereof; but the failure
to so note any partial redemption shall not affect the validity of any
payment actually received by the Holder.
SECTION 2.4. Effect of Redemption of Bond. In the event the
Bond (or any portion thereof) is called for redemption pursuant to
Section 2.2 above, the Bond (or portion thereof) so called for
redemption, and which is actually redeemed, shall cease to bear interest
on the specified redemption date, shall no longer be protected by this
Agreement, and shall not be deemed to be outstanding under the
provisions of this Agreement, and all rights of the Holder with respect
thereto (except Surviving Rights) shall cease.
SECTION 2.5. Negotiability, Registration and Transfer of
Bond; Mutilated, Lost or Destroyed Bond. The Bond shall be negotiable,
subject to the provisions for registration and transfer contained in this
Agreement and in the Bond, and shall be registered as to both principal
and interest. So long as the Bond remains outstanding, the Issuer shall
cause to be maintained, at the office of the Bond Registrar, registration
books for the registration (including the name and address of the
registered Holder) and transfer of the Bond. The Bond shall be
transferable only upon the registration books maintained by the Bond
Registrar, which transfer shall be similarly noted on the registration
table attached to the Bond as Schedule C. At the written request of the
Holder or its attorney or officer duly authorized in writing, and upon
presentation of the Bond for transfer, together with a written instrument
of transfer satisfactory to the Bond Registrar duly executed by such
Holder or attorney or officer and duly authorized in writing, the Bond
Registrar shall cause the Bond to be transferred on the registration
books, and the Bond Registrar shall note such transfer on the registration
table attached to the Bond. Any Surviving Rights of the Holder shall
survive any transfer of the Bond.
If the Bond is transferred, the person acting as Bond Registrar prior
to such transfer will continue to serve and act as Bond Registrar until a
successor Bond Registrar has been appointed by the Issuer and has
accepted the duties and responsibilities of Bond Registrar.
The Issuer, the Borrower, and the other parties to this transaction
may deem and treat the person in whose name the Bond is registered upon
the registration books as the absolute owner of the Bond, whether the
Bond is overdue or not, for the purpose of receiving payment of, or on
account of, the principal of and premium, if any, and interest on the
Bond and for all other purposes, and all such payments so made to any
such registered Holder or upon its order shall be valid and effectual to
satisfy and discharge the liability upon the Bond to the extent of the sum
or sums so paid, and neither the Issuer nor the Borrower nor any other
party to this transaction or any other person shall be affected by any
notice to the contrary.
<PAGE>
In the event the Bond is mutilated, lost, stolen or destroyed, the
Issuer may execute a new Bond of like date, maturity, interest rate and
denomination as that of the Bond mutilated, lost, stolen or destroyed;
provided that, in case the Bond is mutilated, such mutilated Bond shall
first be surrendered to the Issuer and canceled, and in the case the Bond
is lost, stolen or destroyed, there shall be first furnished to the Issuer
evidence of such loss, theft or destruction satisfactory to the Issuer,
together with indemnity satisfactory to the Issuer. The Issuer may
charge the Holder the fees and expenses of the Issuer, if any, in
connection with the foregoing.
SECTION 2.6. Limited Liability of the Issuer.
The provisions of this Section, the Bond and the interest on it are
limited obligations of the Issuer, the principal of, premium, if any, and
interest on which are payable solely from the Pledged Receipts and any
other moneys made available to the Issuer for such purpose. Neither the
Bond nor the interest thereon shall ever constitute an indebtedness or a
charge against the general credit or taxing powers of the State, the
Department, the Authority, the Issuer, or any public body or other public
instrumentality within the meaning of any constitutional or charter
provision or statutory limitation, and neither shall ever constitute or give
rise to any pecuniary liability of the State, the Department, the Issuer,
the Authority (except in regard to the Authority Insurance Agreement), or
any public body or other public instrumentality. The Bond does not
constitute an indebtedness to which the faith and credit of the State, the
Department, the Authority, the Issuer or any public body or other public
instrumentality is pledged.
No covenant or agreement contained in the Bond or in any of the
other Documents shall be deemed to be the covenant or agreement of any
Agent of the Issuer in his or her individual capacity.
It is recognized that no Holder shall have a Claim against the Issuer
for damages suffered by such Holder as a result of the failure of the
Issuer, while acting in good faith, to perform any covenant, undertaking
or obligation under this Financing Agreement, the Bond or any of the
other Documents, nor as a result of the incorrectness of any
representation made in good faith by the Issuer in the Documents.
Although this Financing Agreement recognizes that the Documents shall
not give rise to any pecuniary liability of the Issuer, nothing contained in
this Financing Agreement shall be construed to preclude in any way any
action or proceeding (other than that element of any action or proceeding
involving a Claim for monetary damages against the Issuer) in any court
or before any governmental body, agency or instrumentality or otherwise
against the Issuer or any of its Agents to enforce the provisions of any of
the Documents.
<PAGE>
No covenant or agreement contained in the Bond or in any of the
other Documents shall be deemed to be the covenant or agreement of any
Agent of the Issuer in his or her individual capacity, and, as provided in
the MIDFA Act, neither the members of the Authority nor any Agent of
the Authority executing the Bond or any of the other Documents entered
into by the Authority, nor any Agent of the Department or the State, shall
be liable personally on the Bond or subject to any personal liability or
accountability by reason of the issuance, execution, or delivery thereof.
Notwithstanding any provision of any of the Documents, neither the
Borrower nor the Holder nor any other person shall have any Claim
against the Issuer or any of its Agents for damages suffered as a result of
the Issuer's failure to perform in any respect any covenant, undertaking
or obligation under the Bond or any of the other Documents nor as a
result of the incorrectness of any representation in or any omission from
any of the Documents.
SECTION 2.7. Security for the Bond; Assignment by the Issuer to
the Lender. In order to secure the payment of the principal of, premium
(if any) and interest on the Bond according to its tenor and effect, the
performance and observance by the Issuer of all of the covenants
expressed or implied herein and in the Bond, and the payment and
performance of all other of the Issuer's Obligations, the Issuer has
executed and delivered the Assignment of Note, and does hereby grant,
bargain, sell, convey, pledge and assign, without recourse, to the Lender,
and grants to the Lender and its assigns a continuing security interest in,
the following:
(a) All of the Issuer's right, title and interest in and to and
remedies under all of the Documents, including, without limitation, this
Agreement, the Note, the Deed of Trust, the Assignment of Leases, the
Collateral Assignments, the Guaranty, the Guaranty Letter of Credit and
any and all Security referred to in all of the foregoing Documents.
(b) The Pledged Receipts.
(c) All right, title and interest in and to and remedies with
respect to any and all other property of every description and nature from
time to time hereafter by delivery or by writing of any kind conveyed,
pledged, assigned or transferred, as and for additional security for the
Issuer's Obligations, by the Issuer or by anyone on its behalf or with its
written consent, to the Lender, 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.
PROVIDED, HOWEVER, that there shall be excluded from the
assignment set forth above all Reserved Rights of the Issuer.
<PAGE>
With respect to such Security and the security interest granted
therein, the Lender and any other Holder shall have all of the rights and
remedies of a secured party under the Maryland Uniform Commercial
Code.
SECTION 2.8. Insurance Provided By the Authority. In addition to
the security for the Bond described in Section 2.7 above, the Authority is
providing financial assistance by insuring, through the Bond Insurance
Fund, the repayment of a portion of the principal of and interest on the
Bond, pursuant to the Authority Insurance Agreement. In recognition of
the interests of the Authority as an insurer, the parties to this Agreement
hereby agree that, in addition to the rights and remedies of the Authority
set forth in the Insurance Agreement and in the other Documents, the
Authority has certain rights and remedies in connection with this
transaction, as follows:
(a) Notices to the Authority; Consents. Each of the
Borrower, the Facility User and the Lender (on behalf of itself and each
other Holder of the Bond) agrees:
(i) to provide the Authority with copies of all
financial statements, certifications, evidence of insurance
coverage, and any other information or documentation
required by the Documents to be given to the Holder or the
Authority by such Person, and to give the Authority Notice of
any occurrences or circumstances requiring Notice to be given
to the Holder or to the Authority by such Person, as provided
in this Agreement and in the other Documents,
(ii) to obtain the consent, approval,
determination, permission, opinion or similar agreement of
the Authority under such circumstances and at such times as
is required by such Person by this Agreement and the other
Documents,
(iii) that none of the Documents may be modified
or amended without the prior written consent of the
Authority, and
(iv) that, as provided in Section 10.2 hereof, the
Holder shall not exercise any remedies after the occurrence of
an Event of Default hereunder without obtaining the prior
approval of the Authority.
(b) Borrower's Insurance; Inspections. In addition, the
Borrower agrees:
<PAGE>
(i) that, as provided in the Deed of Trust, the
Authority and the Holder shall be named as mortgagees on any
builder's risk and hazard insurance policy and as additional
insureds on any general public liability policy, and
(ii) to permit the Authority and its Agents to
visit and inspect the Property and the Building, to examine
the Borrower's records and books of account and to discuss
the affairs, finances and accounts pertaining thereto with
Agents of the Borrower at its offices during normal business
hours and at such other reasonable times as may be requested
by the Authority or the Lender.
(c) No Warranties by the Authority or the Lender. Neither
the Authority nor the Lender makes any warranty, express or implied, or
makes any assurances that the Facility will be suitable for the needs of
the Borrower or that the proceeds of the Loan will be sufficient to pay
for the costs of the acquisition of the Facility.
(d) Payments by the Authority. Notwithstanding any of the
provisions of this Agreement or any of the other Documents, the
Authority, on behalf of the Borrower, may, in its discretion, but subject
to the provisions of the Authority Insurance Agreement, elect to make
any payments required to be made by the Borrower under the Documents
and not paid by the Borrower within the time provided for therein, and
may elect to cure any defaults under any of the Documents if it so
chooses. The Authority shall be entitled to reimbursement pursuant to
the provisions of Section 12.2 hereof for any payments made by it
pursuant to this paragraph.
(e) Subrogation and Reimbursement of the Authority to
the Extent of Payments Made. The Authority, to the extent of any
payments made by it pursuant to any Authority Insurance Agreement or
pursuant to paragraph (d) above, shall be subrogated to (a) all rights of
the Holder to receive payment of such amounts from the Borrower or
others under any of the Documents, and (b) all rights of the Borrower to
receive payment or reimbursement of such amounts from other sources,
subject to the provisions of the Authority Insurance Agreement. In
addition, the Borrower agrees to reimburse the Authority for any
payments made by the Authority under the Authority Insurance
Agreement, and such obligation to reimburse the Authority, as well as the
obligation to reimburse the Authority pursuant to the provisions of
Section 12.2 hereof, shall be deemed to be Borrower's Obligations
secured by this Agreement and the other Documents.
(f) Authority a Third-Party Beneficiary. The Authority is a
third-party beneficiary of this Agreement and the other Documents to
which the Authority is not a party.
ARTICLE III
THE LOAN; THE NOTE; SECURITY FOR THE LOAN
SECTION 3.1. The Loan; The Note. The Issuer agrees, upon the
terms and subject to the conditions set forth in this Agreement, to make
the Loan to the Borrower. The Loan shall be made on the Closing Date
from the proceeds of the Bond, as provided in Article VI hereof. The
Loan is evidenced by the Note and is payable as provided therein and in
this Agreement. All payments under this Agreement, the Note, and all of
the other Documents shall be payable by the Borrower directly to the
Holder (except for any payments made pursuant to any Reimbursement
Rights, which, if so requested by the person entitled thereto, may be
made directly to such person). The receipt by the Holder of any amounts
payable under the Bond or any of the other Documents and delivered to it
pursuant to this Section shall discharge the respective obligations of the
Borrower to the Issuer and of the Issuer to the Holder, to the extent of
payment.
<PAGE>
SECTION 3.2. Payments by Borrower Upon Redemption of the
Bond. Upon any redemption of the Bond pursuant to Section 2.2 hereof,
the Borrower, on a date no later than the date fixed for redemption, shall
pay:
(a) to the Holder moneys in an amount sufficient, together
with other moneys (if any) held by the Holder and available for
redemption of the Bond, to redeem the Bond on such
date at the applicable redemption price set forth in Section 2.2 hereof,
(b) to the Holder moneys in an amount sufficient to pay any
other of the Borrower's Obligations owing to the Holder through the date
fixed for redemption,
(c) to the Issuer moneys in an amount sufficient to pay any
other of the Borrower's Obligations owing to the Issuer through the date
fixed for redemption, and
(d) to the other parties to this transaction, moneys in an
amount sufficient to pay any other of the Borrower's Obligations owing
to any of such persons through the date of redemption.
SECTION 3.3. Guarantee of Loan. Payment and performance of
the Borrower's Obligations have been unconditionally and irrevocably,
and jointly and severally guaranteed by each of the Guarantors, under and
pursuant to the terms of the Guaranty, to the extent provided therein.
Performance by the Guarantors of their obligations under the Guaranty
have been secured by the Guarantor Letter of Credit.
SECTION 3.4. Security for the Loan. The Borrower's Obligations
are evidenced by the Note and by this Agreement, and are secured by (a)
this Agreement, (b) the Deed of Trust, (c) the Assignment of Leases, (d)
the Collateral Assignment, and by the other Documents executed and
delivered for the purpose of securing the Loan.
The Borrower agrees that with respect to the Security, the Issuer
and its assigns (including the Lender and its assigns) shall have all of the
rights and remedies of a secured party under all applicable laws,
including, without limitation, the Maryland Uniform Commercial Code.
<PAGE>
SECTION 3.5. Location of Security; Other Covenants Pertaining to
Security. The Borrower agrees (a) to keep the Holder informed as to the
location of the Security, give the Holder prior Notice of any
contemplated changes of location, and not change the location of any of
the Security without the prior written consent of the Holder, and (b) to
comply with all of the covenants and agreements set forth herein with
respect to the Property, to the extent that the same are applicable to the
Security.
SECTION 3.6. Loss of Security. The Holder shall not be liable for
any loss of any Security in its possession, nor shall such loss diminish
the debt due.
SECTION 3.7. Filings. The Deed of Trust shall be recorded among
the Land Records of the County and the security interests created hereby
and by the Deed of Trust shall be perfected by the filing of financing
statements which fully comply with the Maryland Uniform Commercial
Code - Secured Transactions, in such offices as may be required by the
Lender. The parties agree that:
(a) all necessary continuation statements shall be filed by
the secured party or its assigns named therein within the time prescribed
by the Maryland Uniform Commercial Code in order to continue the
security interests created by the Documents;
(b) if, at any time any of the information contained in any
financing statement filed in connection with the security interests created
by the Documents, including without limitation, the description of the
Security, shall change in such manner as to cause such financing
statement to become misleading in any material respect or as may impair
the perfection of the security interests intended to be created by the
Documents, then the Borrower shall promptly prepare an amendment to
such financing statement as may be necessary to continue the perfection
of the security interest intended to be created by the Documents, obtain
the signatures of the debtor and secured party upon such amendment, and
file the same in any office where such amendment is required to be filed
to continue the perfection of the security interest intended to be created
thereby;
(c) upon the request of the Holder, the Borrower shall
prepare, have executed and file any amendments to the financing
statements filed with respect to the security interests created by the
Documents in such form as the Holder may require; and
(d) as provided in Article XII hereof, the Borrower shall
bear all costs of any and all of the filings described in this Section 3.7.
SECTION 3.8. Consent of the Authority. The Borrower and the
Holder shall obtain the prior written consent of the Authority with regard
to any transaction described in this Article III with respect to which the
consent or approval of the Holder is required, and will satisfy such other
terms and conditions pertaining to the Security as the Authority may
reasonably require.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; FINDINGS BY THE ISSUER
SECTION 4.1. Representations and Warranties of the Issuer.
The Issuer makes the following representations and warranties:
(a) Authorized Issuer. The Issuer is a body corporate and
politic and a public instrumentality of the State. Under the provisions of
the Act, the Issuer has the power to enter into this Agreement and the
other Documents entered into by it and the transactions contemplated
hereunder and thereunder and to carry out its obligations hereunder and
thereunder.
(b) Necessary Actions. As required by the MIDFA Act, the
Issuer has approved the Loan and the issuance and sale of the Bond. By
proper action, the Issuer has duly adopted the Resolution, and the Issuer
has duly authorized the execution and delivery of the Bond, this
Agreement and each of the other Documents executed and delivered by it.
(c) Compliance With Laws. The Issuer is not in violation
of any laws of the State which would affect its existence or its ability to
issue and sell the Bond, to enter into any of the Documents, or to
perform any of the Issuer's Obligations.
SECTION 4.2. Findings by the Issuer. The Issuer hereby confirms
its findings contained in the Resolution.
SECTION 4.3. General Representations and Warranties of
the Borrower. The Borrower makes the following representations and
warranties:
(a) Subsidiaries. The Borrower has no Subsidiaries.
(b) Good Standing. The Borrower (i) is a limited liability
company duly organized and existing, in good standing, under the laws of
the jurisdiction of the State, and (ii) has the power to own its property
and to carry on its business as now being conducted, and (iii) is duly
qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary, including,
but not limited to, the State.
(c) Authority. The Borrower has full power and authority
to acquire the Facility and to enter into and execute and deliver this
Agreement and each of the other Documents executed and delivered by
the Borrower, and to incur and perform the obligations provided for
herein and therein (including the borrowing of the Loan), all of which
have been duly authorized by all proper and necessary action and all
material governmental licenses, authorizations, consents and approvals
required. No consent or approval of any other Person or public authority
or regulatory body (other than the Issuer and the Authority) is required
as a condition to the validity or enforceability of this Agreement or any
of such other Documents, or if required the same has been duly obtained.
<PAGE>
(d) Binding Obligations. This Agreement and each of the
other Documents executed and delivered by the Borrower have been
properly executed by the Borrower, constitute valid and legally binding
obligations of the Borrower, and are fully enforceable against the
Borrower, in accordance with their respective terms.
(e) Litigation. There is no litigation or proceeding pending
or, so far as the Borrower knows, threatened before any court or
administrative agency which, in the opinion of the Borrower, will
materially adversely affect the financial condition or operations of the
Borrower or the authority of the Borrower to enter into, or the validity or
enforceability of, this Agreement or any of the other Documents executed
and delivered by the Borrower.
(f) No Conflicting Agreements. There is (i) no provision of
the Borrower's operating agreement or articles of organization, or pro-
vision of any existing Encumbrance, contract or agreement binding on the
Borrower or affecting its property, and (ii) to the knowledge of the
Borrower, no law binding upon the Borrower or affecting any of its
property, which would conflict with or in any way prevent the execution,
delivery or performance of the terms of this Agreement or of any of the
other Documents executed and delivered by the Borrower, or which would
be in default or violated as a result of such execution, delivery or
performance.
(g) Financial Information. All financial information
heretofore furnished to the Lender, the Issuer, the Authority and to the
other parties to this transaction concerning the Borrower is complete and
correct and fairly presents the financial condition of the Borrower.
There are no liabilities, direct or indirect, fixed or contingent, of the
Borrower except as reflected therein. There has been no material adverse
change in the financial condition or operations of the Borrower as
reflected on the balance sheet of the Borrower as of June 30, 1996 (and
to the Borrower's knowledge no such material adverse change is pending
or threatened), and the Borrower has not guaranteed the obligations of, or
made any investment in or advances to, any person except as disclosed in
such financial statements. The Borrower has good and marketable title to
all of its properties and assets, and all of such properties and assets are
free and clear of Encumbrances (other than Permitted Encumbrances),
except as reflected in such information.
(h) Tax Returns. The Borrower has filed or caused to be
filed all required foreign, federal, state and local tax returns and has paid
all Taxes as shown on such returns to the extent that such Taxes have
become due. No claims have been assessed and are unpaid with respect
to such Taxes except as shown in the financial statements referred to in
(g) above, and the Borrower has established reserves which it believes to
be adequate for the payment of additional Taxes for years which have not
been audited by the respective tax authorities.
<PAGE>
(i) Liens on Property and Security. There exist no
Encumbrances (except Permitted Encumbrances) on or with respect to the
Property or any of the Security.
(j) ERISA. (i) Any Plan established and maintained by the
Borrower or any Commonly Controlled Entity is a qualifying plan under
the applicable requirements of ERISA, and there is no current matter
which would materially adversely affect the qualified tax-exempt status
of any Plan; (ii) neither the Borrower nor any Commonly Controlled
Entity has engaged in or is engaging in any Prohibited Transaction or has
incurred any Accumulated Funding Deficiency in connection with any
such Plan, whether or not waived, and no Reportable Event has occurred
with respect to any Plan subject to the minimum funding requirements of
Section 412 of the Code; (iii) no Multiemployer Plan has "terminated", as
that term is defined in ERISA; (iv) neither the Borrower nor any
Commonly Controlled Entity has "withdrawn" or "partially withdrawn"
from any Multiemployer Plan; and (v) no Multiemployer Plan is in
"reorganization" nor has notice been received from the administrator of
any Multiemployer Plan that any such Plan will be placed in
"reorganization".
(k) Names of Borrower. The Borrower has never done
business under any name other than the name of the Borrower set forth in
this Agreement.
(l) Prohibition on Discrimination. The Borrower prohibits
discrimination on the basis of (i) political or religious opinion or
affiliation, marital status, race, color, creed or national origin, or (ii) sex
or age, except when age or sex constitutes a bona fide occupational
qualification, or (iii) the physical or mental disability of a qualified
individual with a disability.
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Issuer. The Issuer hereby
covenants and agrees as follows:
(a) Maintenance of Existence; Compliance with Laws. The
Issuer will not voluntarily take any action towards dissolution unless it
has assured the assumption of its obligations under this Agreement and
the other Documents by any other person succeeding to its powers; and it
will comply with all laws applicable to this Agreement or any of the
other Documents.
(b) Further Instruments and Actions. The Issuer will from
time to time execute and deliver such further instruments and take such
further actions as may be reasonable and as may be required to carry out
the purpose of this Agreement; provided, however, that no such
instruments or actions shall pledge the credit or taxing power of the
State, the Issuer, the Authority or any other public body or require the
State, the Department, the Issuer, the Authority (except in regard to the
Authority Insurance Agreement), or any public body to incur any
pecuniary obligations.
<PAGE>
(c) Priority of Pledge. Except for the assignment to the
Lender under this Agreement, the Assignment of Note, the Issuer will not
sell, lease or otherwise dispose of or encumber its interest in any part of
the security for the Bond, and will cooperate in causing to be discharged
any Encumbrances created by it with respect to any of the security for
the Bond.
(d) Books and Documents Open to Inspection. The Issuer
shall, to the extent required and permitted by law, within a reasonable
time after request, open any and all of its books and documents in its
possession relating to the financing of the Facility, if any, during the
normal business hours of the Issuer, to such Accountants or other persons
as the Holder, the Borrower or the Authority may from time to time
designate.
SECTION 5.2. Affirmative Covenants of the Borrower. Until the
Termination Date, the Borrower will, unless the prior written consent to
do otherwise has been obtained from the Holder and the Authority:
(a) Financial Statements. Furnish to the Holder and the
Authority:
(i) as soon as available but in no event more
than thirty (30) days after the end of each quarter, financial
statements of the Borrower (including a balance sheet and
statements of income, cash flows and members' capital) for
such quarter, in reasonable detail satisfactory to the Holder
and prepared in accordance with generally accepted
accounting principles consistently applied, and certified by
the principal financial officer of the Borrower as true and
correct, and accompanied by a certificate of that officer
stating whether any event has occurred which constitutes an
Event of Default under any of the Documents, or which would
constitute such an Event of Default with the giving of notice
or the lapse of time or both, and, if so, stating the facts with
respect thereto; and
(ii) as soon as available but in no event more
than 90 days after the close of each of the Borrower's fiscal
years, a copy of the annual financial statements of the
Borrower in reasonable detail satisfactory to the Holder and
the Authority relating to the Borrower, prepared in
accordance with generally accepted accounting principles and
examined and audited by an Accountant, which financial
statement shall include a balance sheet and statements of
income, cash flows and members' capital of the Borrower as
of the end of such fiscal year and a statement of earnings and
surplus of the Borrower for such fiscal year; and
<PAGE>
(iii) such additional information, reports or
statements as the Holder or the Authority may from time to
time reasonably request.
(b) Taxes and Claims. Pay and discharge all Taxes prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become an Encumbrance upon any of its properties, subject
to the right of the Borrower to contest the same in accordance with the
provisions of Section 8.1(c) hereof. If the Borrower fails to pay any of
such Taxes at the time or in the manner provided in this Section, the
Holder or the Authority, may, at its option, pay such Taxes and the
Borrower shall pay to the Holder or the Authority the amount of any sum
so paid, with interest thereon as provided in Article XII hereof.
The fact that the Issuer or the Authority is assisting in the
financing of the acquisition of the Facility shall not imply that the
Borrower is or shall be eligible for any decrease in or immunity from any
applicable Taxes ordinarily imposed by the State, the County or any
other public body.
(c) Insurance. In addition to the insurance required by
Article VIII hereof, maintain insurance with responsible insurance
companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses operating in the
same vicinity. The Borrower shall file with the Authority and the
Holder, upon request, a detailed list of the insurance then in effect
covering the Borrower's properties, stating the names of the insurance
companies, the amounts and rates of insurance, dates of the expiration
thereof and the properties and risks covered thereby; and, within 30 days
after Notice from the Authority or the Holder, obtain such additional
insurance as the Authority or the Holder may reasonably request.
(d) Maintenance of Existence. Maintain in good standing
its existence as a Maryland limited liability company and qualified to do
business in the State.
(e) Compliance With Laws. Comply with all applicable
federal, state and local laws, rules and regulations.
(f) Books and Records; Inspections. Keep and until the
Completion Date, use its best efforts to cause the General Contractor to
keep, adequate records and books of account with respect to the Property,
the Building, and its business in accordance with generally accepted
accounting principles; and permit the Holder and the Authority, by their
respective Agents, accountants and attorneys, to visit and inspect the
Property and the Building, to examine such records and books of account
and to discuss the affairs, finances and accounts pertaining thereto with
Agents of the Borrower at its offices during normal business hours and at
such other reasonable times as may be requested by the Holder or the
Authority.
<PAGE>
(g) Facility Lease. The Borrower shall (i) comply with all
the terms of the Facility Lease required of it in its role as landlord,
(ii) provide the Lender and the Authority with Notices of Events of
Default under the Facility Lease, and (iii) notify the Lender and the
Authority promptly upon receipt of a Notice from the Facility User of the
Facility User's intent to exercise its option to renew the Facility Lease or
purchase the Facility.
(h) Equal Employment. Prohibit discrimination on the basis
of (i) political or religious opinion or affiliation, marital status, race,
color, creed or national origin, (ii) sex or age, except when sex or age
constitutes a bona fide occupational qualification, or (iii) the physical or
mental disability of a qualified individual with a disability. Upon the
request of the Authority or the Department, the Borrower will submit to
the Authority or the Department, as appropriate, information relating to
its employment practices and operations, with regard to this subsection
(h) on a form to be prescribed by the Department.
(i) Drug and Alcohol Free Workplace. Make a good faith
effort to eliminate illegal drug use and alcohol and drug abuse from its
workplace and the Facility during the term of this Loan Agreement by:
(i) prohibiting the unlawful manufacture,
distribution, dispensation, possession, or use of drugs in its
workplace and the Facility;
(ii) prohibiting its employees from working
while under the influence of alcohol or illegal drugs or
abusing alcohol or drugs;
(iii) not hiring or assigning to work on an
activity funded in whole or part with State funds, anyone
whom it knows, or in the exercise of due diligence should
know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
(iv) promptly informing the appropriate law
enforcement agency of every drug-related crime that occurs in
its workplace and the Facility if it or its employee has
observed the violations or otherwise has reliable information
that a violation has occurred; and
(v) notifying employees that illegal drug use and
alcohol and drug abuse are banned in the workplace and the
Facility, imposing sanctions on employees who abuse drugs
and alcohol in the workplace or in the Facility, and instituting
steps to maintain a workplace and the Facility free from
illegal drug use and drug and alcohol abuse.
<PAGE>
(j) Employment Count. Upon request, but not more
frequently than twice annually, supply the employment count at the
Facility to the Authority.
(k) Appraisals. Permit the Lender and/or the Authority from
time to time, at the Borrower's expense, to order an appraisal of the
Property to be performed by an appraiser or appraiser selected by the
Lender and/or the Authority, in their sole discretion. The Borrower
further agrees (i) to fully cooperate with such appraisers, (ii) to provide
such appraisers with access to the Property and with any information
regarding the Property as is reasonably requested, and (iii) to permit the
Lender and the Authority, their agents and representatives, to disclose to
such appraisers any and all information it may have with regard to the
Property, the Borrower and the Loan as the Lender and the Authority, in
their reasonable discretion, determine is necessary to provide for an
accurate appraisal of the Property. In the event the Lender should at any
time or from time to time determine that the value of the Facility as
determined by any such appraisal is less than One Million Dollars
($1,000,000), the Borrower shall, upon the written demand of the Lender
or the Authority, (x) prepay the Loan (without duplication for any
amounts previously prepaid in connection with any other appraisal) in an
amount equal to such difference, or (y) provide to the Lender and the
Authority, pursuant to written agreements in form and substance
acceptable to the Lender, cash or such other additional collateral to
secure the Borrower's Obligations as may be satisfactory to the Lender.
(l) Environmental Inspections. Permit the Lender and its
Agents, to enter upon and inspect the Facility and to conduct thereon, at
the expense of the Borrower, such audit tests and examinations, including
subsurface exploration and testing as the Lender may deem necessary to
determine whether the ownership, occupation, operation and/or use of the
Facility, as the case may be, and the conduct of the activities engaged in
thereon, are in compliance with all applicable Environmental Laws.
(m) Authority's Insurance Premium. Pay directly to the
Lender, for remittance to the Authority, the Authority's insurance
premium payable in advance on the Closing Date and on the first day of
each anniversary of the Closing Date in the amount of the greater of (i)
one-half of one percent (1/2%) of the outstanding insured portion of the
principal balance of the Bond or (ii) Five Hundred Dollars ($500.00).
(n) Notice of Event of Default. Immediately notify the
Lender and the Authority of the occurrence of any Event of Default or
any event which, with the giving of notice or lapse of time (or both)
would be an Event of Default, and the facts with respect thereto.
(o) Litigation. Promptly notify the Lender and the
Authority in writing of any action, suit or proceeding at law or in equity
by or before any court, governmental agency or instrumentality which
could result in any material adverse change in the business, operations,
prospects, properties or assets or in the condition, financial or otherwise,
of the Borrower or any Subsidiary.
<PAGE>
(p) Extraordinary Loss; Change in Condition. Promptly
notify the Lender and the Authority in writing of (i) any event causing
extraordinary loss or depreciation of the value of the Borrower's or any
Subsidiary's assets (whether or not insured) and the facts with respect
thereto, and (ii) the occurrence of any material adverse change in the
Borrower's or any Subsidiary's business, assets, operations, business
prospects or financial condition.
(q) Borrower to Maintain Account with Lender. Throughout
the term of this Agreement, the Borrower shall maintain with the Lender
an account (the "Borrower's Account") into which the Facility User shall
directly deposit all payments made by the Facility User pursuant to the
Facility Lease. The Lender is hereby authorized by the Borrower to debit
the Borrower's Account to make payments owing to the Lender under the
Bond and the other Documents. The Lender shall not debit the
Borrower's Account until such payments owing to the Lender are due and
payable under the Bond and the other Documents.
In connection with the Borrower's Account, the Lender hereby
waives any and all rights of set off it may have as a result or arising out
of, or in connection with any indebtedness of any party to the Lender
other than the indebtedness evidenced by the Bond and the other
Documents.
SECTION 5.3. Negative Covenants of the Borrower. Until the
Termination Date, the Borrower will not, without the prior written
consent of the Holder and the Authority, directly or indirectly:
(a) ERISA Compliance. (i) Restate or amend any Plan
established and maintained by the Borrower or any Commonly Controlled
Entity, in a manner designed to disqualify such Plan under the applicable
requirements of the Code; (ii) permit any officers of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified
tax-exempt status of any Plan of the Borrower or any Commonly
Controlled Entity; (iii) engage in or permit any Commonly Controlled
Entity to engage in any Prohibited Transaction; (iv) incur or permit any
Commonly Controlled Entity to incur any Accumulated Funding
Deficiency, whether or not waived, in connection with any Plan; (v) take
or permit any Commonly Controlled Entity to take any action or fail to
take any action which causes a termination of any Plan in a manner which
could result in the imposition of a lien on the property of the Borrower
or any Commonly Controlled Entity pursuant to Section 4068 of ERISA;
(vi) fail to notify the Holder that notice has been received of a
termination of any Multiemployer Plan to which the Borrower or any
Commonly Controlled Entity has an obligation to contribute; (vii) incur
or permit any Commonly Controlled Entity to incur a complete or partial
withdrawal from any Multiemployer Plan to which the Borrower or any
Commonly Controlled Entity has an obligation to contribute; or (viii) fail
to notify the Holder that notice has been received from the administrator
of any Multiemployer Plan to which the Borrower or any Commonly
Controlled Entity has an obligation to contribute that any such plan will
be placed in "reorganization".
<PAGE>
(b) Borrowings. Create, incur, assume or suffer to exist any
liability for borrowed money, except:
(i) indebtedness in existence on the Closing
Date and of which the Borrower has informed the other parties
to this transaction in writing prior to the Closing Date and
which such other parties have agreed in writing may remain
outstanding after the Closing Date,
(ii) short-term indebtedness incurred in the
ordinary course of the Borrower's business operations; and
(iii) indebtedness which may be consented to by the
Lender and the Authority in writing in advance, and, if required by
the Lender or the Authority, subordinated to the other obligations
of the Borrower to the Lender by written agreement satisfactory to
the Lender in form and substance.
(c) Mortgages and Pledges. Create, incur, assume or suffer
to exist any Encumbrance of any kind upon any of its property or assets,
whether now owned or hereafter acquired, except:
(i) Permitted Encumbrances,
(ii) liens for Taxes not delinquent or being
contested in good faith and by appropriate proceedings,
(iii) liens in connection with worker's
compensation, unemployment insurance or other social
security obligations,
(iv) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and
other obligations of like nature arising in the ordinary course
of business, and
(v) mechanics', worker's, materialmen's,
landlords', carriers', or other like liens arising in the ordinary
course of business with respect to obligations which are not
due or which are being contested in good faith.
(d) Merger, Acquisition; Dissolution or Sale of Assets. Enter
into any merger or consolidation, dissolution or acquire all or
substantially all of the assets of any Person, or sell, lease, or otherwise
dispose of any substantial portion of its assets (except assets disposed of
in the ordinary course of business if such assets are replaced by assets of
similar value and are otherwise subject to the lien of the Lender under
the Deed of Trust); provided, however, the Lender shall not unreasonably
withhold its consent to the exercise by the Facility User under the
Facility Lease to purchase the Facility, provided the terms of such option
are acceptable to the Lender and to the Authority.
<PAGE>
(e) Subsidiaries. Create any Subsidiaries.
(f) Loans. Make loans or advances to any Person, except
advances to employees in the ordinary course of business.
(g) Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business.
(h) Investments. Make any investment in non-current
assets.
(i) Sale and Leaseback. Directly or indirectly enter into
any arrangement whereby the Borrower shall sell or transfer all or any
substantial part of its fixed assets then owned by it and shall thereupon
or within one year thereafter rent or lease the assets so sold or
transferred.
(j) Dividends or Redemptions. Pay dividends on or make
distributions with respect to member interests, or make redemptions of
any member interests.
(k) Redemption of Debt. Redeem or prepay any long-term
indebtedness of the Borrower.
SECTION 5.4 Affirmative Covenants of Facility User. Until the
Termination Date, the Facility User will, unless the prior written consent
to do otherwise has been obtained from the Holder and the Authority:
(a) Financial Statements. Furnish to the Holder and the
Authority:
(i) as soon as available but in no event more
than thirty (30) days after the end of each monthly accounting
period of the Borrower, monthly financial statements of the
Borrower (including an income statement and balance sheet),
prepared in accordance with generally accepted accounting
principles, consistently applied, and certified by the chief
financial officer of the Borrower as true and correct;
<PAGE>
(ii) as soon as available but in no event more
than 45 days after the end of each of the first three quarterly
accounting periods of the Facility User, a consolidated and
consolidating statement of income and retained earnings of
the Facility User and any Subsidiaries for such period and for
the period from the beginning of the current fiscal year of the
Facility User to the end of each period, and a consolidated
and consolidating statement of cash flows of the Facility User
and any Subsidiaries for such period and for the period from
the beginning of the current fiscal year of the Facility User to
the end of each period, and a consolidated and consolidating
balance sheet of the Facility User and any Subsidiaries as at
the end of such period, setting forth in each case in
comparative form figures for the corresponding periods in the
preceding fiscal year of the Facility User (commencing April,
1997), all in detail and scope satisfactory to the Holder and
the Authority, prepared in accordance with generally accepted
accounting principles consistently applied, certified by the
chief financial officer of the Facility User and accompanied
by a certificate of that officer stating whether any Event of
Default or any event which, with the giving of notice or lapse
of time (or both) would be an Event of Default, has occurred
and, if so, stating the facts with respect thereto;
(iii) as soon as available but in no event more
than 90 days after the end of each fiscal year of the Facility
User, a consolidated and consolidating statement of income
and retained earnings of the Facility User and any
Subsidiaries for such year, and a consolidated and
consolidating statement of cash flows of the Facility User and
any Subsidiaries for such year, and a consolidated and
consolidating balance sheet of the Facility User and any
Subsidiaries as at the end of such year, setting forth in each
case in comparative form corresponding figures for the
preceding fiscal year of the Facility User, all in detail and
scope satisfactory to the Holder and the Authority, prepared
in accordance with generally accepted accounting principles
consistently applied and examined and audited by Coopers &
Lybrand, LLP or other Accountants reasonably satisfactory to
the Holder and the Authority, accompanied by a report of such
Accountants with respect to such financial statements which
is prepared in accordance with generally accepted accounting
principles, and accompanied by a certificate of the chief
financial officer of the Facility User stating whether any
Event of Default or any event which, with the giving of notice
or lapse of time (or both) would be an Event of Default, has
occurred and, if so, stating the facts with respect thereto; and
(c) promptly upon transmission thereof, copies of any
financial statements, proxy statements, reports and the like
which the Facility User or any Subsidiary sends to its
shareholders, members or partners and copies of all
registration statements (with exhibits) and all regular, special
or periodic reports which the Facility User or any Subsidiary
<PAGE>
files with the United States Securities and Exchange
Commission (or any governmental body or agency succeeding
to the functions of the United States Securities and Exchange
Commission) or with any national stock exchange on which
the Facility User's or any Subsidiary's securities are listed
and copies of all press releases and other statements made
available by the Facility User or any Subsidiary to the public
concerning material developments in the business of the
Facility User and/or any Subsidiary; and
(iv) such additional information, reports or
statements as the Holder or the Authority may from time to
time reasonably request.
(b) Current Ratio. Maintain a ratio of current assets to
current liabilities of not less than: (i) 1.25 to 1 as of September 30,
1996 and as of the end of each calendar quarter thereafter to and
including the calendar quarter ending September 30, 1997; and (ii) 1.5 to
1 as of December 31, 1997 and as of the end of each calendar quarter
thereafter.
(c) Debt to Worth Ratio. Maintain a ratio of debt to
tangible net worth of not greater than: (i) 3.25 to 1 as of September 30,
1996 and as of the end of each calendar quarter thereafter to and
including the calendar quarter ending September 30, 1997; (ii) 3.0 to 1 as
of December 31, 1997 and as of March 31, 1998; and (iii) 2.5 to 1 as of
June 30, 1998 and as of the end of each calendar quarter thereafter.
(d) Tangible Net Worth. Maintain a tangible net worth of at
least (i) Two Million Dollars ($2,000,000) as of September 30, 1996 and
as of the end of each calendar quarter thereafter to and including the
calendar quarter ending September 30, 1997 and (ii) Two Million Five
Hundred Thousand Dollars ($2,500,000) as of December 31, 1997 and as
of the end of each calendar quarter thereafter.
(e) Cash Flow to Debt Service Ratio. Maintain a ratio of
cash flow to debt service of not less than (a) 1.5 to 1.0 as of December
31, 1997 and as of the end of each calendar quarter thereafter to and
including December 31, 1998, and (b) 2.0 to 1.0 as of March 31, 1999
and as of the end of each calendar quarter thereafter. For purposes
hereof, "cash flow" shall mean net profits plus depreciation and
amortization expense of the Facility User, and shall be measured (x) as
of December 31, 1997, for the calendar quarter then ending, and (y) as of
the end of each calendar quarter thereafter, on a cumulative year-to-date
basis. For purposes hereof, "debt service" shall mean, for each period
during which cash flow is measured, the current portion of long term debt
of the Facility User (including, without limitation, the current portion of
capital lease obligations) due and/or paid during such period.
<PAGE>
(f) Appraisals. Permit the Lender and/or the Authority to
order appraisals of the Facility, as provided in Section 5.2(k) above and
permit the Lender and/or the Authority from time to time, at the expense
of the Facility User, to order an appraisal of the equipment of the
Facility User to be performed by an appraiser or appraisers selected by
the Lender and the Authority, in their discretion; provided, however, that
the Facility User shall not be required to pay for more than one appraisal
during any twelve month period unless (i) a default or an Event of
Default has occurred under any of the Documents, (ii) such appraisal is
being conducted due to regulatory requirements of the Lender, or (iii) the
Lender determines, in good faith, that the value of the Security has been
materially impaired. The Facility User agrees to (i) cooperate with such
appraiser or appraisers, (ii) provide such appraiser or appraisers with
access to the Facility and such equipment and with any information
regarding the Facility or such equipment as is reasonably requested, and
(iii) permit the Lender and the Authority and their respective Agents to
disclose to such appraiser or appraisers any and all information they may
have with regard to the Facility, the Facility User, the equipment of the
Facility User, the Borrower and the transactions contemplated by the
Documents as the Lender and the Authority, in their reasonable
discretion, determines is necessary to provide for an accurate appraisal
of the equipment of the Facility User.
(g) Licenses and Permits. Maintain any licenses and
permits necessary for the operation of a brewery.
(h) Taxes and Claims. Pay and discharge all Taxes prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become an Encumbrance upon any of its properties, subject
to the right of the Facility User to contest the same, provided that the
Facility User shall (i) give the Holder and the Authority written Notice
of its intention to contest, (ii) diligently prosecute such contest, (iii) at
all times effectively stay or prevent any official or judicial sale of its
properties or any part thereof by reason of nonpayment of such Taxes,
and (iv) establish reasonable reserves for such liabilities being contested
if the Holder or the Authority reasonably determines such reserves to be
necessary, and, provided further that the security for the Bond and the
Borrower's Obligations is not, in the opinion of the Holder and the
Authority, materially impaired during the period of contest. If the
Facility User fails to pay any of such Taxes at the time or in the manner
provided in this Section, the Holder or the Authority, may, at its option,
pay such Taxes and the Facility User shall pay to the Holder or the
Authority the amount of any sum so paid, with interest thereon at the
Reimbursement Rate.
The fact that the Issuer or the Authority is assisting in the
financing of the acquisition of the Facility shall not imply that the
Facility User is or shall be eligible for any decrease in or immunity from
any applicable Taxes ordinarily imposed by the State, the County or any
other public body.
<PAGE>
(i) Insurance. In addition to the insurance required by the
Facility Lease, maintain insurance with responsible insurance companies
on such of its properties, in such amounts and against such risks as is
customarily maintained by similar businesses operating in the same
vicinity. The Facility User shall file with the Authority and the Holder,
upon request, a detailed list of the insurance then in effect covering the
Facility User's properties, stating the names of the insurance companies,
the amounts and rates of insurance, dates of the expiration thereof and
the properties and risks covered thereby; and, within 30 days after Notice
from the Authority or the Holder, obtain such additional insurance as the
Authority or the Holder may reasonably request.
(j) Maintenance of Existence. Maintain in good standing
its existence as a Maryland corporation.
(k) Compliance With Laws. Comply with all applicable
federal, state and local laws, rules and regulations.
(l) Books and Records; Inspections. Keep adequate records
and books of account with respect to the Property, the Building, and its
business in accordance with generally accepted accounting principles;
and permit the Holder and the Authority, by their respective Agents,
accountants and attorneys, upon prior notice to the Borrower unless a
default has occurred under any of the Documents, to visit and inspect the
Property and the Building, to examine such records and books of account
and to discuss the affairs, finances and accounts pertaining thereto with
Agents of the Facility User at its offices during normal business hours
and at such other reasonable times as may be requested by the Holder or
the Authority.
(m) Facility Lease. (i) Comply with all the terms of the
Facility Lease required of it in its role as tenant, (ii) provide the Lender
and the Authority with notices of events of default under the Facility
Lease, and (iii) notify the Lender and the Authority promptly of the
Facility User's intent to exercise its option to renew the Facility Lease or
purchase the Facility.
(n) Equal Employment. Comply with all applicable laws
prohibiting discrimination on the basis of (i) political or religious
opinion or affiliation, marital status, race, color, creed or national
origin, (ii) sex or age, except when sex or age constitutes a bona fide
occupational qualification, or (iii) the physical or mental disability of a
qualified individual with a disability. Upon the request of the Authority
or the Department, the Facility User will submit to the Authority or the
Department, as appropriate, information relating to its employment
practices and operations, with regard to this subsection (h) on a form to
be prescribed by the Department.
(o) Drug and Alcohol Free Workplace. Make a good faith
effort to eliminate illegal drug use and alcohol and drug abuse from its
workplace and the Facility during the term of this Loan Agreement by:
<PAGE>
(i) prohibiting the unlawful manufacture,
distribution, dispensation, possession, or use of drugs in its
workplace and the Facility;
(ii) prohibiting its employees from working
while under the influence of alcohol or illegal drugs or
abusing alcohol or drugs;
(iii) not hiring or assigning to work on an
activity funded in whole or part with State funds, anyone
whom it knows, or in the exercise of due diligence should
know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
(iv) promptly informing the appropriate law
enforcement agency of every drug-related crime that occurs in
its workplace and the Facility if it or its employee has
observed the violations or otherwise has reliable information
that a violation has occurred; and
(v) notifying employees that illegal drug use and
alcohol and drug abuse are banned in the workplace and the
Facility, imposing sanctions on employees who abuse drugs
and alcohol in the workplace or in the Facility, and instituting
steps to maintain a workplace and the Facility free from
illegal drug use and drug and alcohol abuse.
(p) Employment Count. Upon request, but not more
frequently than twice annually, supply the employment count at the
Facility to the Authority.
(q) Environmental Inspections. Permit the Lender and its
Agents, to enter upon and inspect the Facility and to conduct thereon,
such audit tests and examinations, including subsurface exploration and
testing as the Lender may deem necessary to determine whether the
ownership, occupation, operation and/or use of the Facility, as the case
may be, and the conduct of the activities engaged in thereon, are in
compliance with all applicable Environmental Laws.
(r) Deposit of Payments Under Facility Lease. Deposit
directly into the Borrower's Account all payments required to be made by
the Facility User under the Facility Lease.
(s) Escrow of Moneys in Connection with the Connection
Fee Agreement and Mortgage. Deposit with the Lender on the Closing
Date an amount equal to $24,000 to be held in escrow by the Lender to
cure any default under the Connection Fee Agreement.
SECTION 5.5. Negative Covenants of the Facility User. Until the
Termination Date, the Facility User will not, without the prior written
consent of the Holder and the Authority, directly or indirectly:
<PAGE>
(a) Borrowings. Create, incur, assume or suffer to exist any
liability for borrowed money, except:
(i) indebtedness in existence on the Closing
Date and of which the Facility User has informed the other
parties to this transaction in writing prior to the Closing Date
and which such other parties have agreed may remain
outstanding after the Closing Date including the Bridge Loan,
the Facility User Bond and the SBA Loan;
(ii) short-term indebtedness incurred in the
ordinary course of the Facility User's business operations;
(iii) existing indebtedness to the Lender; and
(iv) indebtedness which may be consented to by the
Lender and the Authority in writing in advance, in the sole
discretion of the Lender and the Authority and, if required by the
Lender and the Authority, subordinated to the other obligations of
the Facility User to the Lender and the Authority by written
agreement satisfactory to the Lender and the Authority in form and
substance.
(b) Mortgages and Pledges. Create, incur, assume or suffer
to exist any Encumbrance of any kind upon any of its property or assets,
whether now owned or hereafter acquired, except for liens and
encumbrances expressly consented to in writing by the Lender and the
Authority, which include the liens created by the Bridge Loan, the
Facility User's Bond and the SBA Loan.
(c) Merger, Acquisition; Dissolution or Sale of Assets. Enter
into any merger or consolidation, dissolution or acquire all or
substantially all of the assets of any Person, or sell, lease, or otherwise
dispose of any substantial portion of its assets, except assets disposed of
in the ordinary course of business. Notwithstanding anything herein to
the contrary, the Facility User shall be permitted, during the first
eighteen (18) months after the Closing Date but after Completion, to sell
in arm's-length transactions, any part of the Facility User's existing
brewing and packaging equipment located at the Carroll Street Facility
(excluding any equipment purchased by the Facility User with the
proceeds of the Facility User's Bond or for the Bridge Loan).
(d) Loans. Make loans or advances to any Person, except
advances to employees in the ordinary course of business.
(e) Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business.
<PAGE>
(f) Investments. (i) Make any investment in non-current
assets (which shall include fixed assets and capitalized value of leased
equipment and leased real property) during any twelve-month period
which exceeds $50,000 or (ii) make any capital contribution to any other
person or purchase or acquire a beneficial interest in any stock,
securities or evidences of indebtedness of, or make any investment or
acquire any interest in, any other person, except (a) investments in
federally insured certificates of deposit, (b) direct obligations of the
United States of America maturing within one year from the date of
acquisition, and (c) repurchase agreements with Lender.
(g) Sale and Leaseback. Directly or indirectly enter into
any arrangement whereby the Facility User shall sell or transfer all or
any substantial part of its fixed assets then owned by it and shall
thereupon or within one year thereafter rent or lease the assets so sold or
transferred.
(h) Dividends or Redemptions. Pay dividends on or make
distributions with respect to any stockholders of the Facility User, or
make redemptions of any stockholder interests.
(i) Redemption of Debt. Redeem or prepay any long-term
indebtedness of the Facility User except for debt redeemed or prepaid
with the proceeds of the sale of equipment permitted to be sold under
subsection 5.5(c) above provided such debt was secured by such
equipment.
(j) Subsidiaries. Create or acquire any Subsidiaries.
(k) Management. Fail to notify the Lender and the
Authority in writing of any change in the executive management of the
Facility User, including, without limitation, the offices of President and
Chief Executive Officer.
(l) Leases. Enter into any leases of real property and/or
equipment as lessee which involve the lease of any property with a value
in excess of $25,000 in any one instance, or $100,000 in the aggregate
over any twelve-month period, not including (i) rental payments under
current leases of the Facility User for facilities currently occupied by the
Facility User; (ii) the Facility Lease; (iii) leases of equipment described
on Exhibit D attached hereto and made a part hereof (provided, however,
that the value of such equipment shall not exceed $427,500 in the aggre-
gate), and (iv) any other leases in place as of the date hereof, of which
the Facility User has disclosed to the Lender and the Authority, and
consented to by the Lender and the Authority, in writing.
(m) Payments to Stockholders. Pay or lend any money to the
Facility User's stockholders for any purpose whatsoever, except for
salaries and advances for customary and reasonable business expenses
and dividends authorized by the Facility User's board of directors, except
scheduled payments in an aggregate amount not to exceed $70,993 made
pursuant to existing promissory notes of the Facility User to
stockholders; provided, however, that optional prepayments with respect
to such indebtedness shall not be permitted.
<PAGE>
(n) Amendment of Contract. Amend, modify, extend or
otherwise supplement its current contract with The Johnson Beer
Company for the processing of beer.
ARTICLE VI
APPLICATION OF LOAN PROCEEDS
SECTION 6.1. Application of Loan Proceeds; Advances. As
provided in Section 3.1 hereof, the Loan has been made to the Borrower,
to be used by the Borrower to pay a portion of the Acquisition Costs.
The proceeds of the Bond will be advanced by the Lender from time to
time in accordance with the procedures set forth in this Article VI
directly to the Borrower, or for the account of the Borrower, as the
acquisition of the Facility progresses. The Bond and the Note will bear
interest based upon the aggregate amount of Bond proceeds advanced to
the Borrower by the Lender pursuant to this Article VI.
SECTION 6.2. Advances of Bond Proceeds. The Lender shall
advance the proceeds of the Bonds in accordance with the provisions of
Sections 6.2, 6.3 and 6.4 hereof.
(a) Payment of Acquisition Costs; Sources and Uses of
Funds. The Borrower and the Facility User certify to the Issuer, the
Lender and MIDFA that the projected sources and uses of funds
constituting total Acquisition Costs are as set forth on the Sources and
Uses of Funds Schedule attached hereto as Exhibit C and incorporated
herein. The Lender may approve changes in the amounts of each category
of Acquisition Costs set forth on Exhibit C, as long as the total amount
of Acquisition Costs as set forth on Exhibit C does not increase as the
acquisition of the Facility progresses.
The Facility User agrees to pay all Acquisition Costs in
excess of $3,000,000. To secure this obligation of the Facility User, the
Facility User hereby grants to the Issuer and the Lender a security
interest in Account No. 89000189 held by the Lender.
(b) Remaining Amounts. Any unadvanced Bond proceeds
remaining after the Completion Date and the final advance of Bond
proceeds shall be deemed a redemption of the Bond as provided in the
Bond and in Section 2.2(b) of this Agreement.
(c) Deficiency. If at any time, either on the Closing Date
or thereafter, in the opinion of the Lender or the Authority, the Bond
proceeds are insufficient to pay for all Acquisition Costs, the Borrower
shall (i) complete, or cause to be completed, the Facility and pay or
finance, or cause to be paid or financed, that portion of the Acquisition
Costs as may be in excess of the Bond proceeds, and (ii) immediately,
<PAGE>
upon receipt of Notice from the Lender or the Authority, pay to the
Lender, from funds other than the proceeds of the Bond, for deposit in
escrow, a sum of money in cash or cash equivalent or letter of credit
(provided that such cash equivalent or letter of credit is in all respects
satisfactory to the Holder and the Authority) which, when added to the
Bond proceeds, will be sufficient to pay for all Acquisition Costs.
Neither the Authority, the Issuer nor the Lender makes any warranty,
either express or implied, that the Loan will be sufficient to pay all of
the Acquisition Costs. If the Borrower finances any portion of the
Acquisition Costs pursuant to the provisions of this Section from sources
other than the proceeds of the Loan, it shall not be entitled to any
reimbursement therefor from the Issuer, from the Lender, from the
Authority or from any other Holder, nor shall it be entitled to any
abatement or diminution of any payments required by the Note or this
Agreement. Any moneys deposited in escrow with the Lender pursuant to
this subsection (c) and remaining after the Completion Date shall be
returned to the Borrower.
(d) Waiver of Conditions to Advances. Anything herein to
the contrary notwithstanding, the Lender, with the prior written consent
of the Authority, may waive any requirement or condition precedent to
the advance of Bond proceeds.
(e) Lender's Obligations Following Final Advance. Upon
the final advance of Bond proceeds to the Borrower, including the
retainage as provided in Section 6.3(c), the Lender shall be under no
further obligation to make any advance of Bond proceeds to the
Borrower.
SECTION 6.3. Procedure for Making Advances of Bond Proceeds.
Each advance of Bond proceeds to pay the Acquisition Costs set forth in
Section 6.2(a) hereof shall be made only upon the receipt by the Holder
of a Requisition, substantially in the form attached hereto as Exhibit A
and made a part hereof, executed by the Authorized Borrower
Representative and approved by the Lender and/or the Lender's Inspector,
and only upon satisfaction of the conditions precedent set forth in
Section 6.4 hereof, in accordance with the following procedures:
(a) Requisitions for Acquisition Costs Other than
Direct Costs of Construction. Requisitions for Acquisition Costs other
than Direct Costs of Construction must (i) include an itemization of the
costs for which payment is requested, (ii) indicate that the delivery and
installation of any equipment for which payment is requested has been
completed except for the payment of progress payments to vendors of the
equipment in such amounts as shall be agreed to by the Lender, (iii) have
attached thereto invoices for costs to be paid, (iv) be approved by the
Lender and the Lender's Inspector prior to any disbursement, and (v)
have attached thereto any additional documents or information (including
any financing statements or amendments to financing statements, and all
filing fees necessary for the filing thereof) reasonably required by the
Lender in order to create and/or perfect the security interests of Issuer
and the Lender in such equipment.
<PAGE>
(b) Requisitions for Direct Costs of Construction.
Requisition for Direct Costs of Construction (other than for the last
advance) shall (i) include the AIA forms G702 and G703, which shall be
signed by the General Contractor and the Borrower's Architect, and be
approved by the Lender's Inspector, and (ii) other than the last advance,
be for not more than 90% of the value of the work performed and
material in place.
(c) Ten Percent Holdback. The final 10% holdback of the
Direct Costs of Construction will be retained until the Facility is
complete and the Holder and the Authority have been furnished with a
copy of the Completion Certificate, together with the other documents
required by Section 6.6 of this Agreement.
(d) Timing. The Holder shall have a period of 10 business
days within which to fund each Requisition and shall not be required to
advance Bond proceeds more than once each month.
(e) Payment of Advances; Joint Checks. Unless the Lender
requires that Bond proceeds be disbursed by joint check as further
provided in this paragraph, advances of Bond proceeds shall be disbursed
into a construction account of the Borrower with the Lender and
disbursed to pay Acquisition Costs, as set forth herein. The Holder
reserves the right to require that all advances of Bond proceeds be made
jointly to the Borrower and to the General Contractor or any other
contractor or supplier for which payment is requested by a Requisition;
provided, however, that upon the occurrence of an Event of Default under
this Agreement, the Holder may, in its sole discretion, make all advances
or any advance directly to the Borrower, or to the General Contractor, or
to subcontractors, laborers, materialmen, or persons furnishing labor,
services, materials or equipment used or to be used in connection with
the acquisition of the Facility or to any combination thereof, and pay all
loan fees, Taxes, appraisals, inspection fees, recording charges, legal
fees and any other outstanding amounts due relating to the Facility and
the full cost of its completion. Any such advance or payment shall be
deemed to have been made to the Borrower or for its account. The
Authority also reserves the right to require at any time that payments be
made directly to the Borrower or to any contractor or supplier, and the
Holder shall, upon direction from the Authority, make disbursements in
such manner as the Authority may request.
Upon receipt of any funds requested by a Requisition, the Borrower
shall immediately apply such funds to payment of the Acquisition Costs
for which such funds are requested by the Requisition.
(f) Payment of Interest. Notwithstanding the foregoing
provisions of this Section 6.3, the Borrower hereby irrevocably
authorizes the Holder to make advances of Bond proceeds to pay all
interest bills rendered by the Holder in connection with the Loan,
regardless of whether or not a Requisition therefor has been submitted by
the Borrower, although it is anticipated that, in the normal course of
events, such interest bills shall be delivered to and paid by the Borrower
after submission of a Requisition therefor in accordance with the
provisions of this Article.
<PAGE>
(g) Stored Materials. No advances will be made for
materials that are not physically incorporated into the Building, other
than for materials (i) actually delivered to the site and stored in a place
secured and insured against theft, vandalism and other Damage, all in a
manner satisfactory to the Holder and the Lender and the Authority, in
their discretion, (ii) owned by the Borrower subject to no Encumbrances,
other than those permitted hereby, and (iii) subject to the lien created by
the Loan Documents.
(h) Holder's Reliance on Requisitions. In making any
advance of Bond proceeds, the Holder may rely on any Requisitions and
certifications delivered to it pursuant to this Section 6.3, and the Holder
shall be relieved of all liability with respect to making such payments in
accordance with such Requisitions and certifications, except only for its
Gross Negligence. Each Requisition submitted pursuant to this
Agreement, or the receipt of the advance of Bond proceeds requested
thereby, shall constitute an affirmation that the representations and
warranties of the Borrower set forth in this Agreement are true and
correct in all material respects as of the date of such Requisition.
(i) No Liability to Third Parties. Neither the issuance of
the Bond nor the making of the Loan shall in any way be construed as
obligating the Issuer or the Holder to any Person for the payment of any
expense incurred with respect to the Facility, and no Person contracting
with the Borrower in connection with the Facility shall be reimbursed by
the Issuer or the Holder under any circumstances whatsoever. Neither
the Lender, any other Holder, the Department, nor the Authority, shall in
any event be responsible or liable to any person other than the Borrower
for the advance of or failure to advance Bond proceeds, or any part
thereof, and neither the General Contractor nor any subcontractor nor
material or equipment supplier shall have any right or claim against the
Lender, any other Holder, the Authority, the Department or the Issuer
under this Agreement or in connection with the administration hereof.
SECTION 6.4. Conditions Precedent to Advances of Bond
Proceeds. The Lender shall not be obligated to advance any Bond
Proceeds until all of the following conditions precedent shall have been
fully met and complied with in all respects:
(a) No Event of Default. No Event of Default shall have
occurred hereunder, other than any Event of Default waived by, or cured
to the satisfaction of, the Holder and the Authority.
(b) Sufficient Time to Complete Facility. There shall be
sufficient time in the opinion of the Lender and the Lender's Inspector to
complete the Facility no later than the Projected Completion Date.
<PAGE>
(c) Waivers of Liens; Receipts. At the request of the
Holder, the Borrower shall furnish waivers of liens and receipts of
payment as to the General Contractor and each subcontractor for all work
performed to the date of each Requisition at the time such Requisition is
submitted and waivers of liens as to each supplier for materials included
in the last previous Requisition within 30 days from the date of funding
of the last previous Requisition, or prior to the next Requisition,
whichever shall first occur.
(d) Title Continuation Report. At the option of the Holder,
the Title Company shall have issued, at the expense of the Borrower, a
title continuation or endorsement showing that the fee simple title to the
Land is clear of liens and other encumbrances (other than Permitted
Encumbrances) to the date of such advance and that no financing
statements affecting the Property, or any part thereof, other than in favor
of the Holder or in connection with Permitted Encumbrances, have been
filed.
(e) Compliance with Plans and Specifications. The
Borrower's Architect and the Lender's Inspector shall have certified to
the Holder that all construction work which has been completed on the
Building is in full conformity with the Plans and Specifications.
(f) Proper Application of Prior Advances. The Holder shall
have received evidence satisfactory to it that all prior advances have
been properly applied to the Acquisition Costs.
(g) Location Surveys. If the Holder has so requested, it
shall have received a current location survey showing that (i) all new
construction is within the property lines and in compliance with all
applicable setback, location and area requirements, and (ii) there is no
change in conditions that could adversely affect the security for the
Loan, which survey shall be obtained at the expense of the Borrower.
(h) Sufficient Funds to Complete Facility. The sum of the
funds being requisitioned, plus the aggregate of all retentions and
unadvanced funds, plus any amounts remaining on deposit in escrow with
the Lender in accordance with Section 6.2(c) of this Agreement, shall be
sufficient, in the sole opinion of the Holder, to complete the Facility and
to pay all unpaid Acquisition Costs. In the event the Borrower is
required to deposit moneys in escrow in order to pay all costs of
completing the Facility pursuant to Section 6.2(c), whether on or after
the Closing Date, the Borrower shall have made such deposit.
(i) Quality and Quantity of Construction. The Holder shall
have received evidence that all construction work performed and
materials in place to the date of the Requisition are satisfactory as to
both quantity and quality and that the subsoil is suitable for the
continued Permitted Use of the Building.
<PAGE>
(j) Documents Required Prior to First Advance of Bond
Proceeds. Notwithstanding any other provision of any of the Documents,
and in addition to any other requirements set forth herein, prior to the
first advance of Bond proceeds the Lender and the Authority must have
received and approved in all respects all requirements set forth in the
Lender's commitment letter to the Borrower dated May 13, 1996, and in
the Authority's commitment letter to the Borrower dated April 11, 1996,
as amended May 29, 1996 (the terms of which are hereby incorporated
herein by reference unless specifically otherwise superseded), including,
without limitation, the following:
(i) Two Public Works Agreements with respect
to storm drain and water and sewer;
(ii) Deed of Easement (sanitary sewer line);
(iii) Maintenance Agreement (water and sewer);
(iv) Connection Fee Agreement and related
promissory note;
(v) A letter from an Independent Engineer
stating that the actions taken by the General Contractor are
acceptable remediation actions with regard to matters
described in the Letter dated July 16, 1996 from Hillis-Carnes
Engineering Associates, Inc. regarding site conditions;
(vi) Opinion of Counsel to the Facility User
dated the Closing Date;
(vii) Opinion of Counsel to the Facility User as
the borrower in connection with the Facility User's Bond
dated the Closing Date;
(viii) Guarantor Letter of Credit;
(ix) the final building permit for the construction
of the Building; and
(x) Good Standing Certificates from all states in
which the Facility User is required to be qualified to conduct
business.
Copies of major subcontracts shall be promptly furnished to the
Lender and resolution of the Lender's Inspector's review of the Plans and
Specifications in a manner satisfactory to the Lender shall be made, but
neither shall not constitute a condition to the first advance of the
proceeds of the Bonds.
(k) Completion of Foundation of Building. Upon substantial
completion of the foundation for the Building, the Borrower shall provide
to the Lender a revision to the initial survey provided to the Lender in
accordance with subparagraph (j)(vi) above, together with an affidavit
and certification from such surveyor to the Lender, the Title Company,
the Authority and any other party as reasonably requested by the Lender,
in form and substance acceptable to the Lender and the Title Company,
that the Improvements lie entirely within the boundaries of the Land and
that the location of the Building does not violate any setback or other
restrictions applicable to the Land.
<PAGE>
(l) Documents Required Prior to Final Advance of Bond
Proceeds. Notwithstanding any other provision of any of the Documents,
prior to the final advance of Bond proceeds, the Lender and the Authority
must have received, and the Lender must have approved in all respects
(i) the fully executed Certificate of Completion, substantially in the form
attached hereto as Exhibit B and made a part hereof, together with all
completed exhibits attached thereto, (ii) an affidavit of the Borrower
and/or the General Contractor listing the names of all subcontractors and
materialmen who supplied labor or materials to the Facility, together
with final lien waivers, (iii) a final "as-built" survey of the Facility, in
form and substance to the Lender, the Authority and the title company
which issued the Title Policy, and (iv) an endorsement to the Title Policy
ensuring the lien of the Deed of Trust as confirmed by the confirmatory
deed of trust. All requirements, including, without limitation, the "as-
built" survey, under this subsection, shall be at the sole expense of the
Borrower.
(m) Requirements of Authority. Any requirements of the
Authority as a condition precedent to such advances have been satisfied
to the satisfaction of the Authority.
SECTION 6.5. Completion of the Facility. The Borrower hereby
covenants and agrees with the Lender and the Authority that:
(a) Commencement of Construction; Time of Completion.
It will cause the acquisition of the Facility to be commenced within 30
days after the Closing Date and prosecuted with diligence and continuity
in accordance with the Plans and Specifications and the Construction
Documents and will complete, on or before the Projected Completion
Date, the construction of the Building in accordance with the Plans and
Specifications, free and clear of Encumbrances and free and clear of
Claims in connection with materials supplied or labor or services
performed in connection with the acquisition of the Facility.
The Projected Completion Date shall not be extended without
the prior written consent of the Holder and the Authority. In the event of
the occurrence of Force Majeure, the Holder and the Authority shall
consent to an extension of the Projected Completion Date upon written
request of the Borrower setting forth the reasons for such extension in
form and substance satisfactory to the Holder and the Authority.
(b) Building Permits. All necessary building and other
governmental permits have been obtained with respect to the Facility or
will be obtained prior to commencing the particular work for which they
are required.
<PAGE>
(c) Plans and Specifications; Changes in Construction
Contracts. The Plans and Specifications are satisfactory to the Borrower,
have been approved, to the extent required by applicable law or any
effective restrictive covenant, respectively, by all local authorities and
the beneficiary of any such covenant; the Plans and Specifications so
approved have been also approved by the Borrower, the General
Contractor, the Lender, and the Lender's Inspector; all construction, if
any, heretofore performed on the Building has been performed within the
perimeter of the Land in accordance with the Plans and Specifications
and in accordance with any restrictive covenants applicable thereto; there
are no structural defects in the Building; and no violation of any law
exists with respect to the Property. The Borrower shall not, without the
prior written consent of the Holder and any governmental authorities
having jurisdiction if such consent is required, permit any changes in the
Plans and Specifications or any change orders in the Construction
Contract or any subcontracts which would (i) increase the amount thereof
by more than $10,000 per change order or by more than $25,000 in the
aggregate, or (ii) result in any structural change in the Facility.
(d) Delivery of Certain Documents. It will deliver to the
Holder, on demand, any contracts, bills of sale, statements, receipted
vouchers or agreements, under which the Borrower claims title to any
materials, fixtures or articles incorporated in the Facility or subject to
the lien of this Agreement or the Deed of Trust.
(e) Correction of Defects. It will, upon demand by the
Holder, commence and proceed promptly and diligently to correct (or
take such action and institute such proceedings as may be necessary to
cause the General Contractor or others to correct) any structural defect in
the Building or any departure from the Plans and Specifications not
approved as herein provided; the Holder shall determine in its discretion
whether the Borrower is acting promptly and diligently; and no advance
of Bond proceeds by the Holder will constitute a waiver of the Holder's
right to require compliance with this covenant with respect to any such
defects or departures from the Plans and Specifications. Any amounts
recovered by way of damages, refunds, adjustments or otherwise in
connection with any Claims initiated by the Borrower (to the extent such
amounts represent recovery of Bond proceeds previously advanced), less
any expenses incurred by the Borrower in order to collect the same, shall
be used to correct any defective work in the Building, and if not used for
such purpose, shall be paid over to the Holder and applied to the
redemption of the Bond in accordance with the provisions of Section
2.2(b) hereof.
(f) Identification of Contractors and Suppliers; Approval of
Contracts. It will deliver to the Holder the names of all persons with
whom it intends to contract for the construction of the Building or for
the furnishing of labor or materials therefor and will obtain the approval
of the Holder prior to executing any such contract. The Holder agrees to
approve or disapprove of any such contractor within five Business Days
<PAGE>
of delivery of the name of the prospective contractor by the Borrower;
provided, however, that the Holder shall be deemed to have approved
such contractor if the Holder has not acted within such five Business
Days. The Borrower shall submit to the Lender and the Authority copies
of all contracts with the General Contractor, all major subcontractors, the
Borrower's Architect and the Borrower's Engineer. Such contracts shall
be in such form as is acceptable to the Lender and the Authority and
shall be in such form as to be assignable to the Lender or Authority for
the prices specified therein. The Borrower's Architect, Engineer, General
Contractor and major subcontractors shall, if requested so to do by the
Lender or the Authority, execute an agreement authorizing an assignment
to the Lender, or the Authority, as the case may be, on Notice by the
Lender, or the Authority, as the case may be, at the prices and on the
terms specified therein, of their contracts in the event of a default by the
Borrower without any requirement that the Lender or the Authority
assume liability for any default which the Borrower may have made in
payment to them with regard to Bond proceeds already disbursed. The
agreement with the Borrower's Architect and Borrower's Engineer shall
assign the right to use the architectural and engineering plans with
respect to the Facility.
(g) Fees of Lender's Inspector. It will pay the fees of the
Lender's Inspector.
(h) Compliance With Restrictions, etc. It will comply with
all applicable building restrictions, zoning ordinances, building codes,
environmental protection requirements and other governmental
regulations applicable to the Property.
(i) Payment of Contractors. It will promptly pay the General
Contractor and all other contractors and materialmen the amounts justly
due to them, and receive the advances of Bond proceeds in trust to be
applied for the purpose of paying the Acquisition Costs.
No Person contracting with the Borrower with respect to the
Facility shall have the right to be reimbursed by the Holder, or the Issuer
under any circumstances whatsoever. The participation of the Holder,
the Authority and the Issuer in the transactions contemplated hereby
shall not in any way be construed as obligating the Holder, the Authority
or the Issuer to any person or entity for the payment of any expense
incurred with respect to the Facility.
(j) Location Surveys. Upon request of the Holder or the
Authority, it shall deliver to the Holder or the Authority, as the case may
be, a location survey prepared by an Independent Engineer showing the
location of the Building on the Land in relation to the boundary lines
thereof and setback restrictions applicable thereto and stating that such
location is in compliance with all setback and other applicable
restrictions. As construction progresses, and upon its completion, the
Borrower will supply such further location surveys as the Holder or the
Authority may require from time to time to assure itself that the Building
does not extend beyond such boundary lines and setback and other
restrictions.
<PAGE>
(k) Requirements of Authority. It shall deliver to the
Authority copies of all documents and information delivered to the
Holder pursuant to Section 6.4 or this Section 6.5, shall provide the
Authority with such other information as the Authority may reasonably
request, and shall satisfy such other conditions as the Authority may
reasonably require.
SECTION 6.6. Establishment of Completion Date. The Completion
Date shall be evidenced to the Holder, the Authority and to the Issuer by
delivery of the following items:
(a) the fully executed and completed Completion Certificate,
together with all completed exhibits attached thereto; and
(b) evidence of permanent hazard insurance as required by
Article VIII hereof.
It shall be the duty of the Borrower to cause such items to be
furnished as soon as the acquisition of the Facility shall have been
completed.
SECTION 6.7. Financing Sign on Property; Publicity. The
Borrower authorizes the Lender, the Authority and the Issuer to place
signs at the Facility at any locations selected by the Lender, the
Authority and the Issuer and to prepare and furnish news releases to the
news media or any other publications selected by the Lender or the
Authority advertising the fact that financial assistance for the Facility
has been obtained from the Lender, the Authority and the Issuer, and the
details of such financial assistance and the Facility. Any sign placed on
the Facility by the Borrower which identifies the Facility shall identify
the Lender, the Authority and the Issuer as the parties providing
financing for the Facility.
SECTION 6.8. Action by Holder Through and Reliance Upon
Others. The Holder may execute and perform any of the duties or powers
required of it hereunder by or through attorneys, receivers or Agents,
shall be entitled to advice of counsel concerning all matters with respect
to its duties hereunder, and shall not be answerable for the default or
misconduct of any such attorney, receiver or Agent selected by it with
reasonable care, or for the exercise of any discretion or power under this
Agreement except only for its own Gross Negligence.
SECTION 6.9. Holder May Rely Upon Instruments. The Holder
shall be protected and shall incur no liability in acting or proceeding in
good faith upon any resolution, notice, telegram, request, consent,
waiver, certificate, statement, affidavit, voucher, bond, requisition or
other paper or document which it shall in good faith believe to be
genuine and to have been passed or signed by the proper person or to
have been prepared and furnished pursuant to any of the provisions of
this Agreement, and the Holder shall be under no duty to make any
investigation or inquiry as to any statements contained or matters
referred to in any such instrument, but may accept and rely upon the
same as conclusive evidence of the truth and accuracy of such statements.
<PAGE>
ARTICLE VII
COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES WITH
RESPECT TO THE PROPERTY AND THE FACILITY
SECTION 7.1. Possession, Ownership and Use of the Facility. The
Facility shall be the property of the Borrower, and the Borrower shall
enjoy the ownership and possession thereof only for the Permitted Use,
subject to rights of the Holder, the Authority and the Issuer and the other
parties to this transaction to enter the Property for inspection and other
purposes pursuant to this Agreement and the other Documents. The
Issuer and the Holder covenant and agree that they will not take any
action, other than pursuant to this Agreement, the Deed of Trust, and the
other Documents, to prevent the Borrower from having quiet and
peaceable enjoyment of the Facility.
SECTION 7.2. Representations, Warranties and Covenants
Pertaining to the Facility and the Property. The Borrower hereby
represents, warrants and agrees that:
(a) Use of Loan Proceeds. The Borrower intends that the
proceeds of the Loan will be used solely for the Acquisition Costs.
(b) Utilities. All utility services necessary for the
construction and operation of the Building for its intended purposes are
available at the boundaries of the Land, including water supply of
sufficient quantity and pressure, storm and sanitary sewer facilities of
adequate capacities, gas, electric and telephone facilities. The Borrower
has procured, or hereby agrees to use its best efforts to procure, from the
appropriate State, county, municipal, and other authorities and
corporations, connection and discharge arrangements for the supply of
water, gas, electricity and other utilities and sewage and industrial waste
disposal for the operation of the Facility.
(c) Roads. All roads necessary for the full utilization of
the Facility for its intended purposes have either been completed or the
necessary rights of way therefor have either been acquired by the
Borrower or the appropriate governmental authority or have been
dedicated to public use and accepted by such governmental authority or
will be so acquired or dedicated within a period of time satisfactory to
the Holder, and all necessary steps have been taken by the Borrower and
such governmental authority to assure the complete construction and
installation thereof in accordance with law and all applicable
governmental or quasi-governmental requirements.
(d) Zoning, Restrictive Covenants, etc. The Building, and
the use of the Facility for its intended use, will not violate any zoning or
other ordinance, regulation or law, restrictive covenant or agreement of
the Borrower (either now in existence or known by the Borrower to be
proposed) applicable to the Property or its use, and all requirements for
such use have been satisfied. The Borrower shall not, without the prior
written consent of the Holder and the Authority, initiate, join in, or
consent to any change in, any restrictive covenant, easement, zoning
ordinance, or other public or private restriction limiting or defining the
uses which may be made of the Property or any part thereof. The
Borrower will promptly perform and observe, or cause to be performed
and observed, all of the terms, covenants and conditions of all
instruments of record affecting the Property, non-compliance with which
may affect the Security or the Deed of Trust, or which may impose any
duty or obligation upon the Borrower or any lessee or other occupant of
the Property, or any part thereof, and the Borrower shall do or cause to
be done all things necessary to preserve intact and unimpaired any and
all easements, appurtenances and other interests and rights in favor of, or
constituting any portion of, the Property.
<PAGE>
(e) Inspection. The Borrower will permit the Lender, the
Authority and their respective Agents, the Lender's Inspector and the
other parties to this transaction to enter upon the Property at all
reasonable times and as often as may be reasonably requested, to inspect
the Building and all materials to be used in connection with the
construction thereof, and to examine all detailed plans and drawings
which are or may be kept at the construction site.
(f) Maintenance and Repair of the Property; Com-
pliance with Laws; etc. The Borrower will, at its sole cost and expense:
(i) Maintenance and Repair. Keep and maintain
the Property and each part thereof in good condition, working
order and repair, and make all necessary or appropriate
repairs, replacements and renewals thereto so that each part
thereof shall at all times be in good condition, fit and proper
for the respective purposes for which it was originally
intended, erected, or installed and to insure that the security
for the Bond and the Security for the Loan shall not be
impaired.
(ii) Obstructions. Keep and maintain all portions of
the Property and the sidewalks, curbs and passageways
adjoining the same in a clean and orderly condition, free of
dirt, rubbish, snow, ice and unlawful obstructions.
(iii) Permits, Licenses, Etc. Procure or cause to be
procured, any and all necessary permits, certificates, licenses
or other authorizations required for the Permitted Use, and
observe and comply with all conditions and requirements
necessary to preserve and extend any and all rights, licenses,
permits, privileges, franchises and concessions which are now
applicable to the Property or which may be applicable in the
future.
<PAGE>
(iv) Structural Injury, Nuisance, Waste and
Other Prohibited Uses. Not use or occupy the Property or
permit the same to be used or occupied in any manner which
would cause structural injury to the Building or which would
cause the value or the usefulness of the Property or any part
thereof to diminish (ordinary wear and tear for its business
excepted), or which would constitute a public or private
nuisance, or waste.
(v) Compliance with Laws. Not use or occupy the
Property or permit the same to be used or occupied contrary
to any uniformly applicable laws affecting the Property and
the occupancy, operation or use thereof, whether or not any
such laws which may be hereafter enacted involve a change of
policy on the part of the governmental body enacting the
same; provided, however, that if such laws prohibit the use of
the Property for the Permitted Use, the Borrower may use the
Property for any lawful purpose that is approved by the
Holder, the Authority and the Issuer; provided further that the
Borrower may, at its sole cost and expense, in good faith and
by appropriate and diligent proceedings, contest the validity
or applicability of any such law.
(g) Wetlands. The Property contains no wetlands.
(h) Appraisal. The appraised value of the Facility is not less
than $1,000,000, as evidenced by an appraisal delivered to the Holder
and the Authority prior to the Closing Date.
SECTION 7.3. No Warranty of Suitability by Issuer or Holder.
The Borrower recognizes that since the Plans and Specifications for
constructing the Building are furnished by it, neither the Issuer nor the
Holder makes any warranty, either express or implied, and offers no
assurances that the Facility will be suitable for the Borrower's purposes
or needs. Without limiting the generality of the foregoing provisions of
this Section, the Borrower hereby acknowledges that THERE ARE NO
IMPLIED WARRANTIES OR WARRANTIES OF FITNESS MADE BY
THE ISSUER OR THE HOLDER.
SECTION 7.4. Alterations, Additions and Improvements. Except (i)
for the Facility, or (ii) by application of Net Proceeds (to the extent
permitted by Article IX hereof), the Borrower will not construct any
additional improvements on the Land without the prior written consent of
the Holder and the Authority, and no portion of the Building or the
Equipment Collateral, or any other improvements or equipment now or
hereafter covered by the lien and security interest of this Agreement or
the Deed of Trust, shall be removed, demolished or materially altered,
without the prior written consent of the Holder and the Authority;
provided, however, that the Borrower may, at its sole cost and expense:
(a) Improvements to Real Estate. Make structural changes,
additions, improvements, alterations or replacements to the Property,
including the Building, that it may deem desirable for its business
purposes, so long as (1) the Borrower complies with the provisions set
forth below and in the Deed of Trust with respect to permitted
improvements, and (2) no Event of Default has occurred and is
continuing; and
<PAGE>
(b) Disposition of Equipment Collateral. Remove and
dispose of, free from the lien and security interest of this Agreement and
the Deed of Trust, such of the Equipment Collateral as from time to time
may become worn out or obsolete, or as the Borrower shall deem to be
necessary to upgraded, provided that no Event of Default has occurred
and is continuing, and either: (1) simultaneously with or prior to such
removals any such Equipment Collateral is replaced with other equipment
of value at least equal to that of the replaced Equipment Collateral and
free from the lien or security interest of any title retention or security
agreement or other encumbrance, other than the liens contemplated by
this Agreement and hereunder and by such removal and replacement the
Borrower shall be deemed to have subjected such equipment to the lien
and security interest of this Agreement and the Deed of Trust, or (2) such
Equipment Collateral is sold at fair market value for cash and the net
cash proceeds received from such disposition are paid over promptly to
the Holder to be applied to the redemption of the Bond in accordance
with the provisions of Section 2.2(b) hereof.
The Borrower will complete and pay for, within a reasonable time,
any permitted structure at any time in the process of construction on the
Land, and will:
(1) Certification. File a certificate executed by the
Borrower, the Independent Architect and the Independent
Engineer with the Holder and the Authority stating that any
such structure will not adversely affect the utility of the
Property or materially reduce its value;
(2) Compliance With Restrictions. Construct, erect
and complete any permitted improvements on any part of the
Land (a) in a good and workmanlike manner and strictly in
accordance with all applicable laws and in accordance with
the orders, rules and regulations of the National Board of Fire
Underwriters, or any other body hereafter constituted
exercising similar functions, (b) entirely on lots or parcels of
the Land, (c) so as not to encroach upon any easement or right
of way or upon the land of others, (d) wholly within the
building restriction lines however established, and (e) so as
not to violate use and other restrictions contained in prior
conveyances, zoning ordinances or restrictions;
(3) Insurance. Furnish, in connection with any such
work, general public liability insurance for the benefit of the
Holder and the Authority in the limits set forth under Article
VIII hereof;
<PAGE>
(4) Payment. Promptly pay for all such
improvements; and
(5) Liens; Surety Bond. Discharge any and all liens
filed against the Property (unless the Borrower in good faith
contests any such liens by appropriate and diligent pro-
ceedings), and upon the request of the Holder or the
Authority, deposit with the Holder a surety bond or other
security satisfactory to the Holder and to the Authority to
assure the payment for and completion of any such changes,
additions, alterations, substitutions, replacements, removals
or improvements.
All such changes, additions, alterations, substitutions,
replacements, removals and improvements shall become a part of the
Property and subject to the lien and security interest of this Agreement
and the Deed of Trust.
SECTION 7.5. Transfer of Property; Other Liens; Assignment
and Leasing. Except as provided in Section 7.4 above, without the prior
written consent of the Holder and the Authority, the Borrower will not
encumber, transfer, sell, assign, lease, dispose of, or contract to transfer
all or any part of the Property or suffer to exist any Encumbrance on the
Property (except for Permitted Encumbrances), whether superior to or
junior to the Deed of Trust and this Agreement. The Borrower will give
the Holder and the Authority Notice of any default in any permitted
senior, junior or subordinated Encumbrance on the Property and Notice of
any foreclosure or threat of foreclosure of such permitted senior, junior
or subordinated Encumbrance. In the event of any permitted removal,
replacement, or sale of the Property, the Borrower shall promptly notify
the Holder and the Authority of such removal, replacement or sale, and if
so requested, shall provide the Holder with such financing statements or
other documents necessary to perfect or continue the lien and security
interest of the Holder in such Property.
It is understood and agreed that in the event that any request
by the Borrower that the Facility be leased or subleased to another
Person is approved in accordance with the foregoing provisions of this
Section 7.5, the following conditions shall apply:
(i) No such leasing shall relieve the Borrower
from primary liability for any of the Borrower's Obligations,
and in the event of any such leasing, the Borrower shall
continue to remain primarily liable for all of the Borrower's
Obligations.
(ii) Any such leasing shall be made expressly
subject to the legal operation and effect of all of the
Documents, including, without limitation, the Deed of Trust.
<PAGE>
(iii) The Facility User (or any other tenant
approved by the Holder and the Authority) shall use the
Facility only for the purposes permitted by the Act and this
Agreement.
(iv) The Borrower shall, within 30 days after the
delivery thereof, furnish or cause to be furnished to the Issuer
and the Holder and the Authority a true and complete copy of
each such lease.
(v) No lease, sale or disposition of the Facility
shall relieve the Borrower of any liability with respect to its
obligations pertaining to reimbursement and indemnity set
forth in this Agreement.
Any and all Leases shall (A) be subordinate to the lien of the Deed
of Trust, (B) contain attornment language requiring each tenant to attorn
to any subsequent purchaser of the Facility, (C) not contain non-
disturbance language entitling the tenant to remain at the Facility after
any sale of the Facility, (D) be approved by the Holder in all respects,
and (E) be assigned as Security for the Loan and the security for the
Bond.
No approved Lease may be modified, amended, terminated or
extended without the prior written consent of the Holder, the Authority
and the Issuer.
ARTICLE VIII
PROPERTY TAXES; INSURANCE
SECTION 8.l. Property Taxes; Tax and Insurance Escrow. Subject
to its right to contest as set forth in subsection (c) below, the Borrower
will promptly pay in full and discharge all Property Taxes before
delinquency and before any penalty for nonpayment attaches thereto. The
Borrower, upon payment of any of the Property Taxes, will exhibit to the
Holder and the Issuer, upon demand, the receipted bills therefor, prior to
the day upon which the same shall become delinquent. If the Borrower
fails to pay or cause to be paid the Property Taxes (or any deficiency as
hereinafter set forth) at the time or in the manner provided in this
Section, the Holder may, at its option, pay such Property Taxes, and the
Borrower shall pay to the Holder the amount of any Property Taxes so
paid, with interest thereon, as provided in Section 12.2 hereof. As
provided in Section 2.8 hereof, the Authority may also pay such Property
Taxes not paid by the Borrower, and the Borrower shall be required to
reimburse the Authority in accordance with the provisions of Section
12.2 hereof.
(a) Tax and Insurance Escrow. In addition to, together
with, and at the same time and place as any installments of principal of
or interest on the Note are to be paid, the Borrower shall pay to the
Holder, upon request, an amount which shall be estimated by the Holder
in its sole discretion from time to time, to be sufficient to enable the
Holder to pay (out of the moneys so paid by the Borrower) at least 30
<PAGE>
days before due, all Property Taxes and premiums on the insurance
required by this Article VIII, which sums shall be held by the Holder in a
non-interest bearing account to pay the Property Taxes and such
premiums. Upon foreclosure or release of the Deed of Trust or as
provided in this subsection (a) or, to the extent permitted by law, upon
the occurrence of an Event of Default under any of the Documents, the
Holder may apply any sums so deposited to the Borrower's Obligations in
such order and in such manner as the Holder may determine. If funds
accumulated under the terms of this subsection (a) are not sufficient to
pay the Property Taxes and insurance premiums when and as the same are
due and payable, the Borrower shall pay on demand the amount of any
such deficiency. If from time to time there are funds accumulated under
the terms of this subsection in excess of the amount needed to pay
Property Taxes and such insurance premiums, at least annually the
Borrower shall be given the option of (i) receiving a refund of such
excess funds, (ii) applying such excess funds to the payment of principal
of and interest on the Loan, or (iii) permitting such excess funds to
remain in the escrow account established pursuant to this subsection (a).
Within 60 days after receipt of a request for a refund from the Borrower,
the Holder shall refund such excess funds to the Borrower. If the
Borrower fails to notify the Holder of its intent with respect to the
application of such excess funds as provided in this subsection within 60
days from the date the Holder mailed notice of the accumulation of such
excess funds, the Holder shall return such excess funds to the Borrower
promptly.
(b) New Taxes. In the event of the passage of any law
subsequent to the date hereof, in any manner changing or modifying the
laws now in force governing the taxation of deeds of trust or debts
secured by deeds of trust or the manner of collecting any such taxes so as
to adversely affect the Holder (including, without limitation, a
requirement that internal revenue stamps be affixed to this Agreement or
the Deed of Trust or any of the other Documents), the Borrower will
promptly pay any such tax upon request. If the Borrower fails to make
such prompt payment, or if any such law prohibits the Borrower from
making such payment or would penalize the Holder if the Borrower makes
such payment, then the entire outstanding and unpaid balance of the Loan
and all unpaid interest accrued thereon shall, without notice, immediately
become due and payable at the option of the Holder. In no event,
however, shall any income taxes of the Holder or franchise taxes of the
Holder, measured by income, or taxes in lieu of such income taxes or
franchise taxes, be required to be paid by the Borrower.
(c) Right of Borrower to Contest. Notwithstanding any of
the foregoing provisions, the Borrower shall have the right, without
creating an Event of Default hereunder, to contest the validity or amount
of any Property Taxes by timely and appropriate proceedings, provided
that the Borrower shall (i) give the Holder and the Authority written
Notice of its intention to contest, (ii) diligently prosecute such contest,
(iii) at all times effectively stay or prevent any official or judicial sale
of the Property or any part thereof by reason of nonpayment of any such
Property Taxes, and (iv) establish reasonable reserves for such liabilities
being contested if the Holder or the Authority reasonably determines
such reserves to be necessary, and, provided further, that the security for
the Bond and the Borrower's Obligations is not, in the opinion of the
Holder and the Authority, materially impaired during the period of
contest.
<PAGE>
SECTION 8.2. Insurance Required. The Borrower shall, at all times
during the Loan Term beginning with the Closing Date and at the
Borrower's sole cost and expense, maintain or cause to be maintained
insurance coverage in accordance with the customary insurance practices
of businesses similar to the business which will be carried on in the
Facility, but in all events at least to the following extent:
(a) Insurance of Property. The Borrower will keep the
Property insured against loss or damage from:
(i) the perils of fire and hazards ordinarily
included under standard extended coverage endorsements, in
amounts necessary to prevent the application of any co-
insurance provisions of the applicable policies up to the Full
Insurable Value thereof within the terms of applicable
policies, but in no event in an amount which is less than the
aggregate principal amount of the Loan outstanding from time
to time, and
(ii) war risks when a state of war or national
public emergency exists and such insurance is obtainable from
a department or agency of the United States Government,
upon reasonable terms, in the full amount necessary to
prevent the application of any co-insurance provisions of the
applicable policies up to the then Full Insurable Value, or, if
such amounts are not obtainable, then in the highest amount
which can be so obtained, and
(iii) boiler or pressure vessel explosion (if there
are boilers or pressure vessels located on the Property) in an
amount customarily carried in the case of similar industrial or
commercial operations.
(b) General Public Liability, Worker's Compensation,
and Property Damage Insurance. The Borrower shall maintain or cause to
be maintained:
(i) general public liability insurance and
worker's compensation insurance in amounts usually carried
by similar operations against claims for bodily injury or death
occurring upon, in or about the Property, with such insurance
(other than worker's compensation insurance) to afford
protection to the limit of not less than $1,000,000 in respect
of bodily injury or death for any one occurrence, and to the
limit of not less than $3,000,000 for the aggregate of all
occurrences during any such given annual policy period, each
such policy naming the Holder as additional insured;
<PAGE>
(ii) property damage insurance against claims for
damage to property (including loss of use) occurring upon, in
or about the Property with such insurance to afford protection
to the limit of not less than $250,000 in respect of damage to
property of any one occurrence, and not less than $500,000 in
the aggregate for all occurrences; and
(iii) on or before the Completion Date, rent
interruption insurance, covering all rents and revenues under
any Leases, for a twelve month period.
(c) Builder's All Risk Insurance. During any period of
construction upon the Property, the Borrower shall maintain, or cause the
General Contractor or others to maintain, builder's all risk insurance,
including vandalism and malicious mischief, of the type customarily
carried in the case of similar construction for the Full Insurable Value of
the Facility. Any such policy shall (i) name the Holder, the Authority
and the Issuer (as their interests may appear) as mortgagees under the
mortgagee clause therein, (ii) be in form and content satisfactory to the
Holder, the Authority and the Issuer, and (iii) be issued by a company
approved by the Holder and the Issuer.
(d) Flood Insurance. If at any time the Property is in an
area that has been identified by the Federal Insurance Administration as
having special flood and mudslide hazards, and in which the sale of flood
insurance has been made available under the National Flood Insurance
Act of 1968, as amended, the Borrower shall purchase and maintain a
flood insurance policy satisfactory to the Holder and the Authority. In
the event that the Property is not in an area having special flood and
mudslide hazards, the Borrower shall deliver to the Holder and the
Authority on or prior to the Closing Date and thereafter upon request, a
certificate or letter issued by its insurance company stating that the
Property is not in such a flood or mudslide hazard area.
(e) Additional Insurance. The Borrower will cause the
General Contractor to obtain and keep in force general liability insurance
and worker's compensation insurance, in amounts satisfactory to the
Lender and the Authority. The Borrower will obtain and keep in force,
and cause the General Contractor to obtain and keep in force, such other
and further insurance as may be required from time to time by the Holder
and the Authority in similar transactions.
SECTION 8.3. Specific Requirements With Respect to Insurance.
The following provisions shall apply with respect to the insurance
coverage required by Section 8.2 hereof:
(a) Insurance Companies. All insurance required by Section
8.2 hereof shall be carried with responsible insurance companies selected
by the Borrower and approved by the Holder and the Authority, and may
be effected by endorsement of blanket insurance policies; provided,
however, that all policies of insurance shall be written by companies of
recognized standing which are authorized to do business in the State and
are well rated by national rating organizations.
<PAGE>
(b) Evidence of Insurance. The Borrower shall deliver to
the Holder and the Authority, promptly upon the execution and delivery
of this Agreement, original policies or duplicates thereof, or binders
evidencing such insurance, and the Borrower shall deliver to the Holder
and the Authority, at least 30 days prior to the expiration of any such
insurance, additional policies or duplicates thereof, or binders
evidencing the renewal of such insurance and the payment of the
premiums therefor.
(c) Mortgagee Clauses. The insurance policies required by
Section 8.2 hereof and all renewals thereof are hereby assigned to the
Holder and the Authority, shall be deposited with and held by the Holder,
and as collateral and further security for the Borrower's Obligations,
shall have attached thereto standard non-contributing, non-reporting
mortgagee clauses in favor of and entitling the Holder and the Authority,
as their interests may appear, without contribution, to collect any and
all proceeds payable under such insurance, all to be in form and
substance acceptable to the Holder and the Authority.
(d) Cancellation. The Borrower will immediately notify the
Holder and the Authority of any cancellation of or change in any
insurance policy, and each such insurance policy to be provided under
Section 8.2 hereof shall contain an agreement by the insurer that it will
not modify or cancel such policy except upon at least 30 calendar days'
prior written notice to the Holder and the Authority, and that any loss
otherwise payable thereunder shall be payable notwithstanding any act or
negligence of the Holder or the Authority or the Borrower which might,
absent such agreement, result in a forfeiture of all or a part of such
insurance payment.
(e) Collection and Adjustment of Insurance. The Borrower
hereby authorizes the Holder, at its option, to collect, adjust and
compromise any losses or claims under any of such insurance policies
and to deduct from the proceeds thereof all costs and expenses of
collection (including without limitation, all reasonable attorney's fees
and expenses). The Net Proceeds of such insurance, whether collected by
the Holder or the Borrower, shall be held in trust to be applied only as
set forth in Article IX hereof.
(f) Payment of Premiums; Failure of the Borrower to Effect
Insurance. The Borrower will promptly pay when due any and all
premiums on all such insurance. On each anniversary of the Closing
Date, the Borrower shall deliver to the Holder and the Authority, a
certificate, dated as of such date, to the effect that there is then in force
all such insurance which is then required to be maintained by the
Borrower. Should the Borrower fail to effect, maintain or renew any of
<PAGE>
the insurance required by Section 8.2 hereof in the required amounts, or
to pay the premiums therefor, or to deliver to the Holder and the
Authority any evidence of such insurance or payment therefor as required
by this Article VIII, then in any of such events the Holder or the
Authority, at its option, but without obligation so to do, may procure
such insurance, and any sums expended by it to procure any such
insurance shall be payable by the Borrower with interest, on demand, as
provided in Section 12.2 hereof; however, it is expressly understood that
procurement by the Holder or the Authority of any of such insurance
shall not be deemed to waive or release the default of the Borrower, or
the right of the Holder or the Authority, at their option, to exercise the
remedies hereinafter set forth upon the occurrence of an Event of
Default.
(g) Sale Under the Deed of Trust. In the event of a sale of
all or any part of the Property pursuant to the provisions of the Deed of
Trust, the Holder shall succeed to all the rights and interest of the
Borrower, including any right of the Borrower to unearned premiums, in
and to all such policies of insurance.
(h) Separate Insurance. The Borrower shall not take out
separate insurance concurrent in form or contributing in the event of loss
with that required in Section 8.2 hereof, unless each of the Holder and
the Authority is included therein as a named insured or mortgagee, as
appropriate, with loss payable as required in this Agreement. The
Borrower shall immediately notify the Holder and the Authority whenever
any such separate insurance is applied for and shall promptly deliver to
the Holder the policy or policies or binders evidencing the same with
copies thereof to the Authority.
(i) Contravention of Insurance. The Borrower will not do
or permit anything to be done on or about the Property that will affect,
impair or contravene any policies of insurance that may be carried on the
Property, or any part thereof, or the use thereof against loss or Damage
by fire, casualty, public liability, or otherwise.
ARTICLE IX
DAMAGE TO THE PROPERTY
APPLICATION OF NET PROCEEDS
SECTION 9.1. Damage to the Property. If at any time prior to the
Termination Date, the Property or any part thereof is Damaged, either
temporarily or permanently, the Borrower shall be obligated to continue
to pay the amounts specified herein and in the Note, and the Net Proceeds
resulting from any Damage will be applied as set forth in Section 9.2
hereof.
SECTION 9.2. Application of Net Proceeds. (a) General. The Net
Proceeds resulting from any Damage shall be applied in accordance with
the provisions of Section 9.3(a) below, to one of the following purposes:
<PAGE>
(i) to the redemption of the Bond in accordance
with the provisions of Section 2.2(b) hereof; or
(ii) to the restoration of that portion of the
Property which was Damaged, and/or the acquisition by the
Borrower of other land (in the case of Condemnation) or
improvements, by construction or otherwise, suitable for the
Borrower's operations at the Property (which land or
improvements shall be located within the geographical
boundaries and jurisdiction of the County and acquired by the
Borrower subject to no Encumbrances, as evidenced by a
mortgagee's land title insurance policy acceptable to the
Holder, and shall be deemed part of the Property and subject
to the lien of the Deed of Trust).
(b) Conditions Under Which Net Proceeds May be Applied
to Restoration of Property and/or Acquisition of Property. In the event
that, and to the extent that, the Net Proceeds are to be applied to the
restoration of the Property or acquisition of other property in accordance
with subsection (a)(ii) above, the following conditions must be met and
complied with:
(i) There shall not have occurred and be
continuing an Event of Default or an event that with the
passage of time or the giving of notice or both would
constitute an Event of Default;
(ii) The Borrower establishes to the reasonable
satisfaction of the Holder and the Authority that the Facility
User will be able to replace lost brewing capacity during the
period of restoration;
(iii) The Holder and the Authority approve the
plans and specifications for such restoration;
(iv) The Net Proceeds and, if deemed necessary
by the Holder, additional deposits made by the Borrower
which may be necessary in the judgment of the Holder to
restore the Property to its condition immediately prior to the
Damage, shall be deposited into an escrow account to be held
by the Holder, or by such other person as may be approved by
the Holder.
(v) The Borrower will proceed promptly to
restore that part of the Property so Damaged, or that portion
of the Property remaining after any Condemnation, to substan-
tially the same condition as it existed prior to such Damage,
with such changes, alterations and modifications (including
the substitution and addition of other property, and in the
case of Condemnation, other land or improvements) as may be
desired by the Borrower and approved by the Holder and as
will not impair the operating unity or productive capacity of
the Property or the character of the Facility as a "project"
under the Act.
<PAGE>
(vi) The Borrower will observe and comply with
all of the requirements set forth in Section 7.4 of this
Agreement with respect to permitted improvements.
(vii) The Borrower will cause withdrawals to be
made from the escrow account to pay the costs of such
restoration, either on completion thereof or as the work
progresses.
(viii) Of such Net Proceeds in the escrow account,
90% shall be disbursed upon the Borrower's request in
installments and amounts determined as follows:
(A) at the time of each disbursement there
shall exist (1) no right on the part of the Facility User to
terminate the Facility Lease or any other tenant or tenants to
terminate any Leases which either singularly or in the
aggregate affect more than 10% of the leasable area of the
Property or, if terminated, that the same are replaced with
Leases of equal quality, in the reasonable judgment of the
Holder, and (2) no Event of Default shall have occurred and
be continuing, and,
(B) with respect to each disbursement and
accompanying each request therefor, there shall be delivered
to the Holder (l) a certificate signed by the Authorized
Borrower Representative specifying in reasonable detail the
items of cost to be reimbursed from the Net Proceeds and
certifying that, to the best of his knowledge and belief, no
Event of Default has occurred and is continuing, (2) a
certificate addressed to the Holder by the Borrower's
Architect or Borrower's Engineer supervising the restoration
that such disbursement is to pay the cost of restoration not
paid previously by any other prior disbursement, that all
restoration completed to the date of such certificate has been
completed in accordance with then applicable laws,
ordinances and codes, and that the amount of such
disbursement, together with all other disbursements, does not
exceed 90% of the aggregate, of all such costs incurred or
paid on account of work, labor or services performed and
materials installed in or stored upon the Property at the date
of such certificate, and (3) evidence satisfactory to the Holder
that all claims then existing for labor, services and materials
enforceable by the creation of a lien against the Property have
been paid in full or provision acceptable to the Holder has
been made therefor.
(ix) The final 10% shall be disbursed only upon
delivery to the Holder, in addition to the items required by
(v) above, of the following:
<PAGE>
(A) evidence satisfactory to the Holder that
all claims then existing for labor, services and materials
enforceable by the creation of a lien against the Property have
been paid in full or provision acceptable to the Holder has
been made therefor,
(B) a certificate of the Borrower's
Architect or Borrower's Engineer that the restoration or
acquisition of additional property has been completed in a
good and workmanlike manner, in accordance with plans and
specifications approved by the Holder and in accordance with
all laws, rules, regulations, orders, codes and ordinances then
applicable to such restoration or acquisition of additional
property, and
(C) an estoppel affidavit from each tenant
occupying or leasing space in the Property that its respective
Lease is in full force and effect.
(x) Any balance of the Net Proceeds remaining
after the payment of all of the costs of any restoration or
acquisition of additional property permitted by (a)(ii) above
shall be applied to the redemption of the Bond in accordance
with the provisions of Section 2.2(b) hereof.
(xi) The Holder shall be entitled, at the expense
of the Borrower, to consult such professionals as the Holder,
in its sole discretion, may deem necessary to determine the
total costs of restoring the Property to its condition
immediately prior to such Damage.
(xii) Any Leases (including, without limitation,
the Facility Lease) affected in any way by the Damage shall
continue in full force and effect (subject to rent abatement
during restoration as may be provided in such Leases).
(xiii) All proceeds from rent or business
interruption insurance, or both, shall be available to the
Borrower, in such amounts as the Holder, in its reasonable
judgment, considers sufficient, to pay the debt service on the
Note, and all assessments, insurance premiums and other sums
due and payable by the Borrower pursuant to the Documents.
(xiv) All restoration shall be conducted under the
supervision of an Independent Architect or Independent
Engineer, or both, selected and paid by the Borrower and
approved in advance by the Holder, and by a general
contractor who shall be approved by the Holder and shall have
executed a fixed price contract.
(xv) All restoration shall be performed pursuant
to plans and specifications approved by the Holder and by a
contractor or contractors approved in advance by the Holder.
<PAGE>
(xvi) If required by the Holder, the contractor or
contractors performing the restoration work shall have
obtained payment and performance bonds naming the Holder
as dual obligee.
(xvii) All moneys held in the escrow account
shall constitute a part of the Security, and the Borrower
hereby grants to the Holder a security interest therein.
SECTION 9.3. General Provisions.
(a) Determination of Application of Net Proceeds. The
Borrower, in its sole discretion, shall determine whether any Net
Proceeds shall be applied as set forth in Section 9.2(a)(i) or Section
9.2(a)(ii) above; provided, however, that if at any time the Holder shall
determine that the conditions set forth in Section 9.2(b) above have not
been or are no longer satisfied, the Holder, with the prior written
approval of the Authority, shall determine whether any Net Proceeds
shall be applied as set forth in Section 9.2(a)(i) or Section 9.2(a)(ii)
above.
(b) Provisions of this Article to Govern. The Borrower
expressly waives any right or privilege now granted or created under the
provisions of any of the real property laws of the State or any similar law
now or hereafter in effect relating to the Condemnation of or other
Damage to the Property and agrees that the provisions of this Article
shall govern in lieu thereof.
(c) Net Proceeds to be Held in Trust. All Net Proceeds
received by any person shall be held in trust by the recipient thereof to
be applied in accordance with the terms of this Article.
(d) Insufficient Funds. In the event the Net Proceeds are
not sufficient to pay in full the costs of repairing, rebuilding, altering
and restoring the Property or acquiring additional property, as provided
in this Article, the Borrower will nonetheless complete the work or the
acquisition thereof and pay that portion of the costs thereof in excess of
the amount of such Net Proceeds. The Borrower shall not, by reason of
the payment of such excess costs (whether by direct payment thereof or
payment to the Holder therefor), be entitled to any reimbursement from
the Holder or the Issuer or the Authority, or to any abatement or
diminution of the payments payable hereunder or under the Note.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
SECTION 10.1. Events of Default Defined. The following events
shall be "Events of Default" under this Agreement:
<PAGE>
(a) Any representation or warranty made herein or any
statement or representation made in any certificate, report or opinion
(including legal opinions), financial statement or other instrument
furnished in connection with this Agreement (including Requisitions
submitted under Article VI hereof), or any of the other Documents,
proves to have been incorrect in any material respect when made; or
(b) The Issuer fails to pay, on the date which the same is
due and payable, (and such failure continues for a period of ten (10) days
after receipt by the Borrower from the Lender of written notice of such
failure), the principal of, premium, if any, or interest or any other
charges or sums on or under the Bond (whether upon maturity, after
acceleration, on any installment payment date, or after notice of
redemption, or otherwise) or any other payment by the Issuer required by
this Agreement; or
(c) The Borrower fails to pay, on the date on which the
same is due and payable, (i) the principal of, premium, if any, or interest
or any other charges or sums on or under the Note (whether upon
maturity, on any installment payment date, after acceleration, or after
notice of redemption, or otherwise), or (ii) any other payment required
by this Agreement or any of the other Documents to be paid by the
Borrower; or
(d) The Borrower or the Facility User, as applicable, fails
to duly and promptly perform, comply with or observe any of the terms,
covenants, conditions or agreements contained in (i) Sections 5.2 or 5.3
hereof, or (ii) Sections 5.4 and 5.5 hereof; or
(e) The Issuer defaults in the due and punctual performance
or observance of any covenant, condition, agreement or provision
contained in the Bond or in this Agreement on the part of the Issuer to be
performed or observed (other than as specified in subsection (b) of this
Section), and such default shall continue for a period of 30 days after
Notice to the Issuer specifying such default and requiring the same to be
remedied; or
(f) The Borrower defaults in the due and punctual
observance or performance of any other term, covenant or agreement
herein contained (other than as specified in subsections (c) and (d) of
this Section, or with respect to any other of the Borrower's Obligations,
which default shall remain unremedied for 20 days after Notice to the
Borrower thereof or, if such default is under any of the other Documents,
such other cure period, if any, as may be specified herein or in the other
Documents; or
(g) An Act of Bankruptcy occurs with respect to the
Borrower or the Issuer; or the Borrower becomes generally unable to pay
its debts as they become due; or
(h) An order or decree appointing a receiver of any of the
payments to be made by the Borrower pursuant to this Agreement or the
Note is entered with the consent or acquiescence of the Issuer, or such
order or decree is entered without the acquiescence or consent of the
Issuer and it is not vacated, discharged or stayed within 60 days after
entry; or
<PAGE>
(i) The Borrower is dissolved, merged, consolidated or
reorganized, or any change occurs in the ownership or control of the
Borrower without the prior written consent of the Holder and the
Authority; or
(j) Any judgment against the Borrower or any attachment or
any levy against the property of the Borrower (including, without
limitation, the Property or any portion thereof) with respect to a claim
for an amount in excess of $10,000, remains unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 60 days (unless
such judgment, attachment or levy is being contested or litigated in good
faith); or
(k) Default is made with respect to any evidence of
indebtedness or liability for borrowed money of the Borrower (other than
the Loan) if the effect of such default is to accelerate the maturity of
such evidence of indebtedness or liability or to permit the holder or
obligee thereof to cause any indebtedness to become due prior to its
stated maturity, or any such indebtedness is not paid as and when due and
payable (unless the Borrower certifies to the Holder that the reason for
nonpayment is a good faith dispute as to the obligation to pay such
indebtedness or liability); or
(l) Any change in any zoning ordinance or any other public
restriction is enacted, limiting or defining the uses which may be made of
the Property or any part thereof, such that the Permitted Use would be in
violation of such restriction or zoning change; provided that, so long as
the use of the Facility is not materially disrupted by such change, the
Borrower shall have a period of thirty (30) days from the date of the
earlier to occur of (i) the effective date of such change or (ii) notice to
the Borrower of such change, to contest such change and to obtain a
variance or other exception which would permit the Property to be used
for the Permitted Use; or
(m) An Event of Default occurs under any of the other
Documents; provided, however, that with respect to a default under the
Facility Lease, the Borrower shall have a period of thirty (30) days from
the date of a default by the Facility User thereunder to cure the same;
provided, further, however that if such default cannot be cured within
such thirty (30) day period but the Lender, in its sole discretion,
determines that (i) the Borrower is diligently pursuing to cure such
default, (ii) such default is capable of being cured, and (iii) failure to
cure such default within such thirty (30) day period will not materially
impair the ability of the Borrower to otherwise perform the Borrower's
Obligations or the Security, the Borrower shall have an additional period
of time, as determined by the Lender, in which to cure such default; or
(n) Any portion of the Property is sold, transferred or
encumbered, without the prior written consent of the Holder and the
Authority, unless specifically permitted by this Agreement or the other
Documents; or
<PAGE>
(o) Any provision of this Agreement or any of the other
Documents pertaining to the repayment of the principal of or interest on
the Loan or the Bond transcends the limit of validity prescribed by law,
or operates or would prospectively operate to invalidate this Agreement
or any of the other Documents, in whole or in part; or
(p) The Borrower fails to complete the acquisition of the
Facility on or before the Projected Completion Date, time being of the
essence; or
(q) The Lender's Inspector determines that there is not
sufficient time to complete the acquisition of the Facility on or before
the Projected Completion Date, time being of the essence; or
(r) Work on the Facility stops for a period of 15
consecutive days or is not proceeding in a manner reasonably satisfactory
to the Holder, time being of the essence; or
(s) Any mechanics' liens are established against the
Property and are not caused to be discharged or bonded against by the
Borrower within 30 days after it receives notice of the establishment
thereof; or
(t) The Authority, the Holder and their respective Agents
(and including the Lender's Inspector or the Independent Engineer) are
not permitted, at all reasonable times, to enter upon the Property, to
inspect the Facility and all materials, fixtures and articles used or to be
used in the construction of the Building, and to examine all detailed
plans, shop drawings and specifications which relate to the Building or
the appurtenances thereto or to be used in the operation thereof; or the
construction is not in accordance with the Plans and Specifications, and
the Borrower fails promptly upon Notice thereof from the Holder or the
Authority to commence and diligently proceed to correct the same (the
Holder, the Authority and the Lender's Inspector or the Independent
Engineer to determine in its sole discretion whether the Borrower is
acting promptly and diligently); or
(u) The Borrower does not disclose to the Holder and the
Authority upon demand, the names of all contractors, major
subcontractors and material suppliers with whom the Borrower has
contracted for the construction of the Building or for the furnishing of
labor or materials therefor; or
(v) The Borrower is unable to satisfy any condition of its
right to receive any advance of Bond proceeds for a period in excess of
30 days from the date the Requisition therefor is received by the Lender;
or
(w) Any survey required by the Holder or the Authority
during the period of construction shows any matters not approved by the
Holder and the Authority and such matters are not removed within 30
days after Notice thereof to the Borrower; or
<PAGE>
(x) The Borrower fails to comply with any requirement of
any governmental authority having jurisdiction within 30 days after
notice in writing of such requirement shall have been given to the
Borrower; or if any proceeding is commenced or action taken to enforce
any remedy for a violation of any requirement of a governmental
authority or any restrictive covenant affecting the Property or any part
thereof; or
(y) A default or an Event of Default occurs under any of the
documents relating to the Facility User's Bond or the Bridge Loan; or
(z) If (i) the Lender is notified by the issuer of the Guarantor
Letter of Credit that the Guarantor Letter of Credit will not be extended
or renewed and, (ii) the Lender has not received at least sixty (60) days
prior to the expiration of the Guarantor Letter of Credit, a replacement
Guarantor Letter of Credit in form and substance and issued by an issuer
acceptable to the Lender; or
(aa) The Facility Lease expires without extension or
terminates.
(bb) A default by the Facility User under the Connection Fee
Agreement which default shall continue for a period of 10 days after
Notice thereto to the Facility User.
(cc) The failure to satisfy the conditions to the first advance
of the proceeds of the Bonds set forth in Section 6.4(j) of this Agreement
on or before July 26, 1996.
Notwithstanding the foregoing provisions, if by any reason of
Force Majeure the Borrower is unable in whole or in part to carry out the
obligations described in subsections (p) through (x) of this Section, the
Borrower shall not be deemed in default during the continuance of such
inability.
Any notice of default given to the Issuer or the Borrower
pursuant to this Section 10.1 shall also be given at the same time to the
Facility User and the Facility User shall have an opportunity to cure such
default within the same cure period provided to the Issuer and/or the
Borrower hereunder.
SECTION 10.2. Remedies on Default. Whenever any Event of
Default referred to in Section 10.1 hereof shall have occurred, the Holder
(with the prior written approval of the Authority), by Notice to such
effect delivered to the Issuer and the Borrower, may accelerate the
maturity of the Bond and declare all other of the Issuer's Obligations to
be immediately due and payable, bring suit on the Bond, and take such
other actions against the Issuer as it may deem to be appropriate (subject
to the provisions of Section 2.6 hereof with respect to the limited
liability of the Issuer), as permitted by law. Upon such declaration, the
Bond and all accrued and unpaid interest thereon and all other of the
Issuer's Obligations shall become immediately due and payable, without
protest, presentment, further notice or demand, all of which are expressly
waived by the Issuer, at the place of payment provided in such Notice,
anything in any of the Documents to the contrary notwithstanding. In
addition, the Holder (with the approval of the Authority) and the Issuer
(with the prior written approval of the Holder), in its or their sole
discretion, may take any one or more of the following remedial steps:
<PAGE>
(a) Acceleration. Accelerate the maturity of the Note and
declare the unpaid principal of the Note and all interest accrued thereon,
together with all other of the Borrower's Obligations, to be immediately
due and payable, by Notice to that effect delivered to the Borrower and
to the other parties to this Agreement and the other Documents, and upon
such declaration, the Note and all accrued and unpaid interest thereon
and all other of the Borrower's Obligations shall become immediately due
and payable, without protest, presentment, further notice or demand, all
of which are expressly waived by the Borrower, at the place of payment
provided in such Notice, anything in this Agreement or in the Bond or
the Note to the contrary notwithstanding.
(b) Legal Action.
(i) by mandamus or other suit, action or pro-
ceeding at law or in equity, enforce all rights of the Holder,
and require the Borrower to carry out any agreement with or
for the benefit of the Issuer or the Holder, and to perform its
duties under the Act, this Agreement and the Deed of Trust;
(ii) bring suit upon the Note;
(iii) by action or suit in equity to enjoin any acts
or things which may be unlawful or in violation of the rights
of the Issuer or the Holder; or
(iv) take whatever action at law or in equity as
may appear necessary or desirable to collect the payments and
other amounts then due and thereafter to become due, or to
exercise any rights or remedies under, or enforce performance
and observance of any obligation, agreement or covenant of
the Borrower or any other party under this Agreement or
under any of the other Documents.
(c) Books and Records. Except for documents related to the
legal services provided by the Borrower, which are subject to the
attorney-client confidentiality privilege, have access to and inspect,
examine and make copies of the books and records and any and all
accounts and similar data of the Borrower.
(d) Liquidation of Security Interest in Security. Proceed
under the Maryland Uniform Commercial Code as to all or any part of the
security for the Bond and the Security, and in conjunction therewith
exercise all of the rights, remedies and powers of a secured party under
the Maryland Uniform Commercial Code, including, without limitation,
taking possession of the security for the Bond and the Security pursuant
to Section 9-503 of the Maryland Uniform Commercial Code without
resort to judicial process. Upon the occurrence of any Event of Default
hereunder, the Borrower shall assemble all of the security for the Bond
and the Security, and make the same available within the Building. Any
notification required by Section 9-504 of the Maryland Uniform
Commercial Code shall be deemed reasonably and properly given if given
in the manner specified for other Notices under this Agreement, at least
15 days before any sale or other disposition of the security for the Bond
or the Security. Disposition of the security for the Bond or the Security
shall be deemed commercially reasonable if made pursuant to a public
offering advertised at least twice in a newspaper of general circulation in
the community where the security for the Bond or the Security is located.
<PAGE>
(e) For0eclosure. Exercise its right of foreclosure and other
remedies available under the Deed of Trust.
(f) Holder to Enforce Rights of Issuer. The Lender, its
successors and assigns (including, without limitation, any other Holder),
as the assignee of all of the right, title and interest of the Issuer in and
to each of the Documents constituting a part of
the security for the Bond and the Note (except for the Reserved Rights of
the Issuer), may enforce each and every right granted to the Issuer
pursuant to this Agreement and the other Documents (other than the
Reserved Rights of the Issuer); provided, however, that, as provided in
Section 2.8 hereof or in the Authority Insurance Agreement, the Holder
will not exercise any remedies under the Documents without the prior
written approval of the Authority. In any case where action by the
Holder requires simultaneous or subsequent action by the Issuer, the
Issuer will cooperate with the Holder and take any and all action
necessary to effectuate the purposes and intent of this Agreement.
(g) CONFESSION OF JUDGMENT. IN THE EVENT THE
NOTE OR ANY INSTALLMENT DUE THEREUNDER OR ANY AMOUNT
DUE HEREUNDER IS NOT PAID WITHIN 15 DAYS OF THE DATE
WHEN DUE (WHETHER ON THE DATE DUE OR BY ACCELERATION),
THE BORROWER AUTHORIZES THE CLERK OR ANY ATTORNEY OF
ANY COURT OF RECORD TO APPEAR FOR IT AND ENTER
JUDGMENT BY CONFESSION WITHOUT PRIOR NOTICE OR
OPPORTUNITY FOR PRIOR HEARING FOR THE PRINCIPAL
BALANCE THEN OUTSTANDING UNDER THE NOTE AND SUMS DUE
UNDER THIS FINANCING AGREEMENT, TOGETHER WITH
INTEREST, COURT COSTS AND AN ATTORNEY'S FEE EQUAL TO
15% OF THE SUMS THEN DUE THEREUNDER AND HEREUNDER,
HEREBY WAIVING AND RELEASING, TO THE EXTENT PERMITTED
BY LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL,
STAY OF EXECUTION, INQUISITION AND EXTENSION UPON ANY
LEVY ON REAL ESTATE OR PERSONAL PROPERTY TO WHICH THE
BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF
THE UNITED STATES OF AMERICA OR OF ANY STATE OR
<PAGE>
POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE
OR WHICH MAY HEREAFTER BE PASSED. THE AUTHORITY AND
POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE
BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
ENTERED PURSUANT THERETO. SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME
TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN
AS THE HOLDER SHALL DEEM NECESSARY OR DESIRABLE, FOR
ALL OF WHICH THE NOTE SHALL BE A SUFFICIENT WARRANT.
Notwithstanding the provisions of the immediately preceding
paragraph, in enforcing any judgment by confession obtained against the
Borrower in connection with the Loan, in foreclosing against the
Property or in exercising any other remedies available to the Holder, the
Holder shall not demand, solely with respect to attorney's fees incurred
by the Holder in connection with the Loan, any amounts in excess of the
actual amount of attorney's fees charged or billed to the Holder.
SECTION 10.3. No Remedy Exclusive; Delays or Omissions;
Waiver of Breach. No action taken pursuant to this Article X shall
relieve the Borrower or any other person from its obligations hereunder
or under any of the other Documents, all of which shall survive any such
action, and the Issuer and the Holder to the extent provided above) may
take whatever action at law or in equity as may appear necessary and
desirable to collect the payments and other amounts then due and
thereafter to become due or to enforce the performance and observance of
any obligation, agreement or covenant of the Borrower hereunder or of
any other person under any of the Documents.
No remedy herein conferred upon or reserved to the Issuer or the
Holder 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 under
the other Documents or now or hereafter existing at law or in equity or
by statute. Should any right or remedy granted herein be held to be
unlawful, the Issuer or the Holder shall be entitled to every other right
and remedy provided in this Agreement and by law or in equity. No
delay or omission to exercise any right or power accruing upon any
default, omission or failure of performance hereunder or under the
Documents shall impair any such right or power or be construed to be a
waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In the event any
agreement contained in this Agreement should be breached by the
Borrower and is thereafter waived by the Issuer or the Holder, the
Authority or any other party to this transaction, such waiver shall be
limited to the particular breach so waived and shall not be deemed to
waive any other breach. No waiver, amendment, release or modification
of this Agreement shall be established by conduct, custom or course of
dealing, but solely by an instrument in writing duly executed by the
Issuer or the Holder and such other party or parties as may be agreeing to
such waiver, amendment, release or modification. In order to entitle the
Issuer or the Holder 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 herein expressly required.
<PAGE>
SECTION 10.4. Termination of Proceedings. In case any pro-
ceeding taken by the Holder or the Issuer on account of any default shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Holder or the Issuer, then and in every such
case, the Issuer, the Holder and the Borrower and all other parties to this
transaction shall be restored to their former positions and rights
hereunder, respectively, and all rights, remedies and powers of the
Holder and the Issuer and the other parties to this transaction shall
continue as though no such proceeding had been taken.
SECTION 10.5. Application of Moneys. All moneys collected
pursuant to this Article shall, after payment of the cost and expenses of
the proceedings resulting in the collection of such moneys and of the
expenses, liabilities and advances incurred or made by the Issuer and the
Holder and the Authority or others, including interest thereon as
provided in Section 12.3 hereof, be applied as follows:
First - To the payment of any late charges or penalties and
fees and expenses of the Holder;
Second - To the payment of all payments of interest then due
on the Bond and the Note;
Third - To the payment of the unpaid principal balance of the
Bond and the Note;
Fourth - To the payment of all other of the Issuer's
Obligations, in such order and in such amounts as the Holder (with the
prior written approval of the Authority), in its sole discretion, may
determine;
Fifth - To the payment of all other of the Borrower's
Obligations (including, without limitation, any obligations in connection
with any Reimbursement Rights pursuant to Section 12.4 hereof or any
other provision of any of the Documents), in such order and in such
amounts as the Holder (with the prior written approval of the Authority),
in its sole discretion, may determine; and
Sixth - Any remaining amounts may be returned to the
Borrower.
ARTICLE XI
DURATION OF AGREEMENT; DEFEASANCE
SECTION 11.1. Duration of this Agreement. This Agreement shall
become effective on the Closing Date, and shall continue in full force
and effect until the Termination Date; provided that the expiration of this
Agreement shall not affect any Surviving Rights of the Holder or the
Issuer.
<PAGE>
SECTION 11.2. Defeasance and Discharge of Lien of the Holder. If
and when the Bond secured hereby shall become due and payable or shall
be redeemed in accordance with its terms and the whole amount of the
principal, premium (if any) and interest so due and payable thereon and
on the Borrower's Obligations shall be paid, together with all other
amounts payable to the Holder hereunder and under the other Documents,
then in that case, all covenants, agreements and other obligations in
favor of the Holder under this Agreement and under the other Documents
(except with respect to any Surviving Rights of the Holder) shall
thereupon cease, terminate and become void and be discharged and
satisfied. In such event, upon request of the Issuer and the Borrower, the
Holder shall release all security for the Bond and all other Security then
held by the Holder under this Agreement and shall execute such releases
and other documents as may be reasonably required by the Issuer. Any
release by the Holder under this Section shall be without prejudice to the
right of the Holder to any Surviving Rights of the Holder.
ARTICLE XII
ADDITIONAL PAYMENTS
SECTION 12.1. Costs to be Paid by the Borrower; Issuer's Fee. (a)
The Borrower agrees to pay, whether out of the proceeds of the Loan or
other funds, all Acquisition Costs, including, without limitation, all
costs and expenses of the Issuer, the Holder and the Authority (including
the fees and expenses of their counsel and all costs of recording and
filing (fees and taxes)) in connection with the issuance of the Bond, and
the other transactions contemplated by this Agreement and the other
Documents).
(b) The Borrower agrees to pay directly to the Issuer the
Issuer's Fee. The Issuer's Fee is due and payable annually in advance on
the Closing Date and each anniversary thereof and shall be calculated
using the principal balance of the Bond outstanding on the date due. No
portion of the Issuer's Fee shall be refunded if the Bond is redeemed in
whole or in part or otherwise paid in the year for which the Issuer's Fee
has been paid. The Issuer's Fee shall be due and payable from the
Borrower without the necessity of any notice from the Issuer.
SECTION 12.2. Reimbursement of Advances Made or Other Costs
Incurred. If the Borrower fails to make any payment or to perform any
other of the Borrower's Obligations, the Holder, the Authority (subject to
the terms of the Authority Insurance Agreement) or the Issuer, without
notice to or demand upon the Borrower, without waiving any default or
releasing the Borrower from any of the Borrower's Obligations, and
without being under any obligation to do so, may make such payment or
perform any of the Borrower's Obligations. All amounts so paid by the
Holder, the Authority or the Issuer, and all costs, fees and expenses
incurred by the Holder, the Authority or the Issuer, whether in
connection with such payment or performance or otherwise in connection
with their respective duties and responsibilities under this Agreement and
<PAGE>
the other Documents, shall be immediately due and payable by the
Borrower upon demand therefor, as additional payments hereunder,
together with interest thereon as provided in Section 12.3 below. In
addition, notwithstanding anything in this Agreement to the contrary, in
the event that the Borrower should default under any of the provisions of
this Agreement, and the Holder, the Authority or the Issuer should
employ attorneys or incur other expenses for the collection of amounts
due hereunder or the enforcement of performance or observance of any
obligation or agreement on the part of the Borrower herein contained, the
Borrower agrees that it will on demand therefor pay to the Holder, the
Authority or the Issuer the fees of such attorneys and such other expenses
so incurred.
SECTION 12.3 Interest on Additional Payments and Reimburse-
ments. Without limiting any other provisions for the payment of interest,
additional interest, late charges, premiums or like charges under any of
the Documents, in any instance in which any sum other than principal,
premium (if any), and interest is due from the Borrower to the Holder,
the Issuer or any other party to this transaction as a direct payment,
reimbursement or otherwise, and no specific provision is made with
respect to the payment of interest thereon or the rate of interest thereon
is not otherwise specified, such sum shall bear interest from the date on
which it becomes due until paid in full at the Reimbursement Rate.
SECTION 12.4 Indemnification.
(a) General Indemnification. The Borrower shall protect,
indemnify, and save harmless the Holder, the Authority, the Issuer and
their respective Agents against and from any and all Claims (except, with
respect to any Claims arising solely from the Gross Negligence of any
party other than the Issuer) incurred by, or asserted or imposed against,
any of them, and any loss or expense (including all attorneys' fees) in
connection therewith, by reason of: (i) any accident, injury (including
death) or Damage to any person or property, however caused, resulting
from, connected with or growing out of any act of commission or
omission of the Borrower, or any Agents, assignees, contractors or
subcontractors of the Borrower or any use, nonuse, possession,
occupation, condition, operation, service, design, construction,
acquisition, maintenance or management of, or on, or in connection with,
the Property, or any part thereof, (ii) any breach or default on the part of
the Borrower in the performance of any of its obligations under any of
the Documents, (iii) any act or negligence of the Borrower or of any of
its Agents or licensees, (iv) any act or negligence of any assignee or
lessee of the Borrower, or (v) the financing of the Facility by the Lender
and the issuance and sale of the Bond, until the Termination Date,
regardless of whether such Claims are against or are suffered or
sustained by the Holder, the Issuer or any of their respective Agents, or
are against any person to whom the Holder, the Authority, the
<PAGE>
Department, the Issuer or any of their respective Agents may become
liable therefor. Neither the Holder, the Authority, the Department nor
the Issuer is liable for any Damage or injury occurring during the Loan
Term to persons or property of the Borrower or any of its Agents or any
other person who or which may be upon the Property, and the Borrower
hereby releases the Holder, the Authority, the Department and the Issuer
from, and agrees that they shall not be liable for, and the Borrower shall
hold them harmless from, any such liability. The Borrower may, and if
so requested by the Holder, the Authority, the Department or the Issuer
shall, undertake to defend, at its sole cost and expense, any and all
Claims brought against the Holder, the Authority, the Department, the
Issuer or any of their respective Agents in connection with any of the
matters mentioned in this Section, provided that the Holder, the
Authority, the Department and the Issuer shall give the Borrower timely
Notice of and forward to the Borrower every demand, notice, summons or
other process received with respect to any Claim within the purview
hereof. However, failure of the Issuer to forward such Notice shall not
release the Borrower from its obligations under this Section 12.4(a).
(b) Liability of Issuer, etc. The parties intend that neither
the Issuer nor any officer or employee of the Issuer, the Department, the
State or the Authority (except in regard to the Authority Insurance
Agreement) shall incur pecuniary liability by reason of the terms of any
of the Documents, or the undertakings required of the Issuer or any
officer or employee of the Issuer, the Authority, the Department or the
State under any of the Documents by reason of the issuance of the Bond
or the execution and delivery of any of the Documents, or the
performance of any act required of the Issuer or the Authority, or any
officer or employee of the Issuer, the Authority, the Department or the
State by any of the Documents, or the performance of any act requested
of the Issuer by the Borrower, including all claims, liabilities or losses
arising in connection with the violation of any statutes or regulations
pertaining to the foregoing. Notwithstanding the foregoing, if the Issuer
or any officer or employee of the Issuer, the Authority, the Department
or the State should incur any such pecuniary liability, the Borrower shall
indemnify and hold the Issuer and any officer or employee of the Issuer,
the Authority, the Department or the State harmless against all claims by
or on behalf of any person, firm or corporation or other legal entity
arising out of the same, and all costs and expenses incurred in connection
with any such claim or in connection with any action or proceeding
brought thereon, and, upon Notice from the Issuer or the Authority, the
Borrower shall defend the Issuer, the Department, the Authority and/or
the State, or any officer or employee of the Issuer, the Authority, the
Department or the State in any action or proceeding alleging any
pecuniary liability.
(c) Consequential Liability. In addition to any other
amounts payable under any of the Documents by way of indemnification
or otherwise, the Borrower hereby agrees to pay and to indemnify and
save the Issuer harmless from and against any damage, loss, cost or
expense (including reasonable attorneys' fees) which the Issuer may incur
or be subject to as a consequence, direct or indirect, of (A) any breach by
the Borrower of any warranty, covenant, term or condition in, or the
occurrence of any default under, any of the Documents, together with all
expenses resulting from the compromise or defense of any claims or
liabilities arising as a result of any such breach or default and (B) any
defense against any legal action commenced to challenge the validity of
any of the Documents.
<PAGE>
(d) Approvals of Facility. Neither the approval by the
Lender of the Plans and Specifications, nor any subsequent inspections or
approvals of the Facility during or after construction shall constitute a
warranty or representation by the Lender or the Issuer or the Authority or
any of their respective Agents as to the technical sufficiency, adequacy
or safety of any structure or any of its component parts, including
without limitation, any fixtures, equipment or furnishings, nor shall such
approvals or inspections constitute such a warranty or representation as
to the subsoil conditions or any other physical condition or feature
pertaining to the Property. Furthermore, the Issuer's approval of the
proposed financing and its execution and delivery of the Bond and the
other Documents shall not constitute any approval by the Issuer of any
zoning, use, planning, building permit or other similar approvals relating
to the Facility. All acts, including any failure to act, relating to the
Property by any agent, representative or designee of the Issuer or any
Holder are performed solely for the benefit of the Holder, the Issuer and
to assure repayment of the Loan and are not for the benefit of the
Borrower or the benefit of any other person other than the Authority
pursuant to the Authority Insurance Agreement.
(e) Insurance. The Borrower will provide for and insure, in
the general public liability insurance policies required by Article VIII or
Section 5.2(c) hereof, the liability assumed by this Section.
(f) Indemnification of Lender For Loss Incurred Upon
Sale of Bond. In addition to the losses described above, the Borrower
agrees to indemnify the Lender for any loss incurred by the Lender in the
event that the Bond is transferred by the Lender to another Holder after
the occurrence of an Event of Default hereunder, if the purchase price
paid upon such transfer is less than the sum of the outstanding principal
balance thereof, all accrued and unpaid interest thereon, and any and all
other amounts then owed to the Lender under any of the Documents.
SECTION 12.5. Surviving Rights. All of the respective
Reimbursement Rights of the Holder and the Issuer set forth in the
foregoing Sections of this Article XII shall survive the termination of
this Agreement.
SECTION 12.6. Payments Due on Non-Business Days. In any case
where a payment is due under this Agreement on a day other than a
Business Day, then such payment need not be made on such date but may
be made on the next succeeding Business Day, with the same force and
effect as if made on the date due.
<PAGE>
ARTICLE XIII
MISCELLANEOUS
SECTION 13.l. Unconditional Obligations of Borrower. The
payment and performance by the Borrower of the Borrower's Obligations
shall be absolute and unconditional, irrespective of any defense or any
rights of set-off, recoupment or counterclaim it might otherwise have
against the Holder, the Issuer, or any other parties to this transaction,
and the Borrower shall pay absolutely net during the Loan Term all
payments to be made as prescribed in the Note, in this Agreement, and in
each of the other Documents, free of any deductions and without
abatement, diminution or set-off, notwithstanding any term of this
Agreement, any bankruptcy, insolvency, liquidation, dissolution, or non-
existence of the Issuer, or the nonperformance by the Holder, or the
Issuer of any obligation hereunder or under any of the other Documents
or any other matter or event whatsoever (other than prior payment or
performance thereof) which might otherwise relieve the Borrower from
the obligation to pay such amount; and until such time as the principal
of, premium, if any, and interest on the Loan shall have been fully paid,
the Borrower: (a) will not suspend or discontinue any payments provided
for in the Note; (b) will perform and observe all of its other agreements
contained in this Agreement and each of the other Documents, including
(without limitation) all payments required to be made to the Holder and
the Issuer; and (c) will not terminate this Agreement for any cause,
including, without limiting the generality of the foregoing, failure of the
Borrower to complete the acquisition of the Facility, sale or other
transfer of the Property, Damage to the Property or any portion thereof,
commercial frustration of purpose, the occurrence of any acts or
circumstances which may constitute a failure of consideration, any
change in the tax laws of the United States of America or of the State or
any political subdivision thereof, or any failure of the Holder or the
Issuer to perform and observe any agreement, whether express or implied,
or any duty, liability or obligation arising out of or in connection with
this Agreement.
SECTION 13.2. Authorized Representatives. Whenever under the
provisions of this Agreement or any of the other Documents the approval
of the Issuer is required, or the Issuer is required to take some action at
the request of any party to this Agreement, unless specifically provided
otherwise, such approval or request shall be given on behalf of the Issuer
by the Authorized Issuer Representative, and the other parties to this
transaction are authorized to rely upon any such approval or request and
the Issuer shall not have any complaint against such other parties as a
result of such reliance. A specimen signature of the Authorized Issuer
Representative has been provided to the other parties to this transaction.
In the event that the Authorized Issuer Representative designated in
Section l.l hereof shall become unavailable or unable to take any action
or make any certification provided for or required under this Agreement,
a successor or successors shall be appointed by written certificate of the
Issuer furnished to the other parties to this transaction, executed by or on
behalf of the Issuer and containing a specimen signature of such
successor or successors.
<PAGE>
Whenever under the provisions of this Agreement or any of the
other Documents the approval of the Borrower is required, or the
Borrower is required to take some action at the request of any party to
this Agreement, such approval or request shall be given on behalf of the
Borrower by the Authorized Borrower Representative, and the other
parties to this transaction are authorized to rely upon any such approval
or request, and the Borrower shall not have any complaint against such
parties as a result of any such reliance. A specimen signature of the
Authorized Borrower Representative has been provided to the other
parties to this transaction. In the event that the Authorized Borrower
Representative designated in Section l.l hereof should become
unavailable or unable to take any action or make any certification
provided for or required under this Agreement, a successor or successors
shall be appointed by written certificate of the Borrower furnished to the
other parties to this transaction, executed on behalf of the Borrower by
an authorized Agent of the Borrower and containing a specimen signature
of such successor or successors.
SECTION 13.3. Consent to Jurisdiction; Service of Process.
(a) The Borrower hereby agrees and consents that any
action or proceeding arising out of or brought to enforce the provisions
of this Agreement may be brought in any appropriate court in the State or
in any other court having jurisdiction over the subject matter, all at the
sole election of the Holder, and by the execution of this Agreement the
Borrower irrevocably consents to the jurisdiction of each such court.
(b) If for any reason the Borrower should become not
qualified to do business in the State, the Borrower hereby agrees to
designate and appoint, without power of revocation, an agent for service
of process within the State, as the agent for the Borrower upon whom
may be served all process, pleadings, notice or other papers which may
be served upon the Borrower as a result of any of the Borrower's
Obligations.
(c) The Borrower covenants that throughout the period during
which the Bond remains outstanding, if a new agent for service of
process within the State is designated, the Borrower will immediately
file with the Holder, the Authority and the Issuer the name and address
of such new agent and the date on which his appointment is to become
effective.
SECTION 13.4. Further Assurances and Corrective Instruments.
The parties hereto agree that they will, from time to time, execute and
deliver, or cause to be executed and delivered, such Supplements hereto
and such further instruments as may reasonably be required for carrying
out the intention of the parties to, or facilitating the performance of, this
Agreement.
<PAGE>
SECTION 13.5. Estoppel Certificate. The Borrower will, upon not
less than 10 business days' request by the Holder, the Issuer, or any other
party to this transaction, execute, acknowledge and deliver to such
person a statement in writing, certifying (a) that this Agreement is
unmodified and in full force and effect and the payments required by this
Agreement to be paid by the Borrower have been paid, and (b) the then
unpaid principal balance of the Note and the Loan; and stating whether or
not to the knowledge of the signer of such certificate any party to any of
the Documents is in default in the performance of any covenant, agree-
ment or condition contained therein and, if so, specifying each such
default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section may be relied upon
by the Holder, the Issuer and the other parties to this transaction.
SECTION 13.6. Prior Agreements Canceled. Except for (a) the
other Documents, (b) any conditions to disbursements of Bond proceeds
set forth in the Lender's Commitment Letter dated May 13, 1996 and in
the Authority's Commitment Letter dated April 11, 1996, as amended May
29, 1996, or (c) any other document or agreement to the extent
specifically provided therein, (i) this Agreement shall completely and
fully supersede all other prior agreements, both written and oral, by and
among the Borrower, the Lender, the Issuer and the other parties to this
transaction (and any prior agreements by and between any two or more of
the foregoing), relating to the acquisition of the Facility, and (ii) none of
the parties to this Agreement shall hereafter have any rights thereunder,
but shall look solely to this Agreement and the other Documents for
definitions and determination of all of their respective rights, liabilities
and responsibilities relating to the Facility and the financing therefor.
SECTION 13.7. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon each of the parties hereto and their
respective successors and permitted assigns.
SECTION 13.8. Dissolution of Issuer. In the event of the
dissolution of the Issuer, all of the covenants, stipulations, promises and
agreements in this Agreement contained by or on behalf of, or for the
benefit of, the Issuer, shall bind or inure to the benefit of the successors
of the Issuer from time to time and any person to whom or to which any
power or duty of the Issuer shall be transferred.
SECTION 13.9. Illegality. If fulfillment of any provision hereof
or any transaction related hereto or to the other Documents, at the time
performance of such provisions shall be due, shall involve transcending
the limit of validity prescribed by law, then ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity; and if any
clause or provisions herein contained operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such clause
or provision only shall be void, as though not herein contained, and the
remainder of this Agreement shall remain operative and in full force and
effect; provided, however, that, as provided in Section 10.1(o) hereof, if
any such provision pertains to the repayment of the principal of or
interest on the Loan, the occurrence of any such invalidity shall
constitute an Event of Default hereunder.
<PAGE>
SECTION 13.10. Amendments, Changes and Modifications. This
Agreement may not be amended, changed, modified, altered or terminated
except by a written instrument executed by all of the parties hereto with
the prior written consent of the Authority.
SECTION 13.11. Execution of Counterparts. This Agreement may
be executed simultaneously in several counterparts, each of which shall
be deemed an original, but all of which shall together constitute one and
the same instrument.
SECTION 13.12. Law Governing Construction of Agreement. This
Agreement, having been executed, sealed and delivered in the State, shall
be interpreted and construed in accordance with and governed by the laws
of the State.
SECTION 13.13. Assignment. This Agreement and the other
Documents may not be assigned, in whole or in part, by the Borrower,
without the prior written consent of the Holder and the Issuer.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Agreement to
be executed under seal in its name and on its behalf by the Executive
Director of the Issuer, and the Lender has caused this Agreement to be
executed under seal in its name and on its behalf by its duly authorized
officer; the Borrower has caused this Agreement to be executed under
seal in its name and on its behalf by its duly authorized officer; and the
Facility User has caused this Agreement to be executed under seal in its
name and on its behalf by its duly authorized officer for the purposes of
making the covenants set forth in Sections 5.4 and 5.5 hereof, all being
done as of the day and year above first written.
WITNESS: MARYLAND ECONOMIC
DEVELOPMENT
CORPORATION
_________________________
By:________________________________
/s/ Hans F. Mayer,
Executive Director
[SEAL]
WITNESS: BLUE II, LLC, a Maryland limited
liability company
_________________________ By:/s/ Edward D. Scott
Edward D. Scott,
Managing Member
[SEAL]
ATTEST: FREDERICK BREWING CO., a
Maryland corporation
By:______________________ By:_______________________(SEAL)
/s/ Kevin Brannon,
Chief Executive Officer
[SEAL]
WITNESS: SIGNET BANK
_______________________ By:_______________________(SEAL)
/s/ Mark A. Cunningham,
Vice President
[SEAL]
<PAGE>
EXHIBIT A
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II, LLC FACILITY)
1996 ISSUE
FORM OF REQUISITION
TO: Signet Bank Requisition Number: ______
7 Saint Paul Street Date: ______________, 19__
Baltimore, Maryland 21202
Attention: ______________
This Requisition is being submitted pursuant to the Loan and
Financing Agreement dated ____ __, 1996, executed and delivered in
connection with the issuance and sale of the above-captioned Taxable
Economic Development Revenue Bond (the "Financing Agreement").
Unless the context clearly indicates a contrary meaning, all terms used
herein and defined in the Financing Agreement have the meanings set
forth in the Financing Agreement.
We request that you advance Bond proceeds to the following payee
in the following amount:
Payee: ____________________________________
Payee's Address: __________________________
__________________________
__________________________
Amount: ____________________________________
Purpose of Requisition: _____________________
____________________________________
____________________________________
____________________________________
We hereby certify that:
(a) None of the items for which funds are being
requisitioned has formed the basis for any advance of Bond proceeds
heretofore made.
(b) Each item for which funds are being requisitioned is a
proper item to be paid from the Bond proceeds and is necessary in
connection with the acquisition of the Facility.
(c) No written notice of any lien, right to lien or attachment
upon, or claim affecting the right to receive payment of, any of the
moneys payable under this requisition to any of the persons named herein
has been received, or if any notice of any such lien, attachment or claim
has been received, such lien, attachment or claim has been released or
discharged or will be released or discharged upon payment of this
requisition.
<PAGE>
(d) This requisition contains no items representing payment
on account of any retained percentages which are entitled to be retained
as of the date hereof.
(e) With respect to each item for payment for labor or
materials and equipment, the labor was actually performed or the
materials and equipment were actually furnished to or installed in or
about the Building.
(f) Such materials and equipment are not subject to any lien
or security interest, or the funds requisitioned are to be used to satisfy
any such lien or security interest.
(g) This requisition, if for the Direct Costs of Construction
of the Facility, when added to the total of prior requisitions for Direct
Costs of Construction, does not in amount exceed 90% of the cost of
work performed and material in place.
(h) This requisition, if for costs other than the Direct Costs
of Construction of the Facility, does not in amount exceed 100% of the
value of work performed and materials in place for which funds are being
requested.
(i) The remaining unadvanced Bond proceeds are sufficient
to complete the acquisition of the Facility or the Facility has been so
completed.
(j) This requisition is not for materials which are not, as of
the date hereof, physically incorporated into the Facility, unless such
materials have been stored, secured and insured in a manner satisfactory
to the Lender and otherwise in accordance with the terms of the
Financing Agreement.
(k) No Event of Default has occurred and is continuing as
of the date hereof.
If this requisition is for the direct costs of construction, attached
hereto is the AIA Forms G702 and G703, approved and signed by the
General Contractor and the Borrower's Architect and approved by the
Lender's Inspector.
If this requisition is for the final 10% holdback of the Direct Costs
of Construction, attached hereto are:
(i) a true, complete and correct copy of the fully
executed Completion Certificate, together with all completed
exhibits attached thereto; and
(ii) evidence of compliance with any other
requirement set forth in Section 6.4(l) of the Financing
Agreement.
<PAGE>
Attached hereto are lien waivers from the General Contractor and
each subcontractor and supplier to the Facility, for all work performed to
the date of the preceding requisition and for materials included in such
previous requisition.
Attached hereto are invoices and receipts for costs for which
payment or reimbursement is being requested.
BLUE II, LLC
By:__________________________
Authorized Borrower
Representative
Total prior requisitions $ __________________
Amount of this requisition $ __________________
Total $ __________________
Approved:
SIGNET BANK, Lender
By:_________________________
Date:_______________________
<PAGE>
EXHIBIT B
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II, LLC FACILITY)
1996 ISSUE
COMPLETION CERTIFICATE
This Certificate is being executed and delivered pursuant to the
Loan and Financing Agreement dated _____ __, 1996, executed and
delivered in connection with the issuance and sale of the above-
referenced Bond (the "Financing Agreement). Unless the context clearly
indicates a contrary meaning, all terms used herein and defined in the
Financing Agreement have the meanings set forth in the Financing
Agreement.
As required by the Financing Agreement, the Borrower hereby
certifies to the Issuer and the Holder that:
(a) The acquisition of the Facility has been completed and
all labor, services, materials and supplies used in connection therewith
have been paid for.
(b) All other improvements necessary in connection with the
Facility have been acquired and constructed, and all obligations, costs
and expenses incurred in connection therewith and payable out of the
Bond proceeds have been paid and discharged.
(c) The Facility is suitable and sufficient for the Permitted
Use.
(d) Attached hereto are:
1. final lien waivers of the General Contractor and
all subcontractors and suppliers to the Facility;
2. a copy of the permanent certificate of use and
occupancy for the Facility;
3. a final, as built, location survey prepared by an
Independent Engineer;
4. evidence of permanent hazard insurance required
by Article VIII of the Financing Agreement and
5. a copy of the Borrower's rent interruption insurance
policy meeting the requirements of the Financing Agreement.
<PAGE>
(f) This Certificate is given without prejudice to any rights
against third parties which exist as of the date hereof or which may
subsequently come into being.
(g) A copy of this Certificate has been sent to the Issuer
and the Authority.
WITNESS my signature this ______ day of __________, 19__.
BLUE II, LLC
By:_______________________(SEAL)
Authorized Borrower
Representative
APPROVED this ____ day APPROVED this ____ day
of _____________, 19__. of _____________, 19__.
____________________________ ____________________________
(General Contractor) (Lender's Inspector)
By:_________________________ By:_________________________
Name: Name:
Title: Title:
APPROVED this ____ day
of _____________, 19__.
____________________________
(Borrower's Architect)
By:_________________________
Name:
Title:
The Facility User hereby acknowledges completion of the Facility
and approves and accepts the Facility for its use, this _______ day of
____________________, 19___.
FREDERICK BREWING CO.
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT C
SOURCES AND USES OF FUNDS
Exhibit A to
Completion Certificate
FINAL LIEN WAIVERS FROM GENERAL CONTRACTOR
AND ALL SUBCONTRACTORS AND SUPPLIERS
<PAGE>
Exhibit B to
Completion Certificate
PERMANENT USE AND OCCUPANCY CERTIFICATES FOR FACILITY
<PAGE>
Exhibit C to
Completion Certificate
FINAL, AS-BUILT SURVEY
<PAGE>
Exhibit D to
Completion Certificate
EVIDENCE OF PERMANENT HAZARD INSURANCE COVERING
FACILITY
<PAGE>
Exhibit E to
Completion Certificate
COPY OF RENT INTERRUPTION INSURANCE POLICY
<PAGE>
$3,000,000
Maryland Economic Development Corporation
Taxable Economic Development Revenue bond
Blue II, LLCX,
as project borrower
and
Signet Bank,
as lender
with
Frederick Brewing Co.,
as facility user
Summary of Sources and Uses of Loan Proceeds
Sources of Funds:
MEDCO Bond Proceeds $3,000,000
Equity Provided by Frederick Brewing Co. 749,139
--------------
Total Sources of Funds $3,749,139
Uses of Funds:
Payoff First Mortgage Held by Signet 522,040
Architectural (DNC) Costs to Complete 100,000
Interest on Signet Mortgage 2,941
Interest on Construction Advances 60,000
Closing Costs Per Settlement Sheet 151,158
Building Construction & Utility Costs 2,913,000
Total Uses of Funds 3,749,139
EXHIBIT 10 (ii)
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II, LLC FACILITY),
1996 ISSUE
PROMISSORY NOTE
$3,000,000 July 19, 1996
Baltimore, Maryland
FOR VALUE RECEIVED, BLUE II, LLC, a Maryland limited
liability company (the "Borrower"), hereby promises to pay to the order
of MARYLAND ECONOMIC DEVELOPMENT CORPORATION, a body
politic and corporate and a public instrumentality of the State of
Maryland (the "Issuer"), at such place as the Issuer (or any other holder
hereof) may from time to time designate in writing, the principal amount
of THREE MILLION DOLLARS ($3,000,000), together with interest
thereon as hereinafter provided. This Note evidences the loan being
made by the Issuer to the Borrower pursuant to the Loan and Financing
Agreement of even date herewith (the "Financing Agreement") by and
among the Issuer, the Borrower, Frederick Brewing Co., a Maryland
corporation (the "Facility User"), and Signet Bank, a Virginia banking
corporation (the "Lender"). All terms used herein which are defined in
the Financing Agreement have the meanings given such terms in the
Financing Agreement, unless the context clearly indicates a contrary
meaning.
The principal amount hereof (but only to the extent that moneys
have been advanced to the Borrower or for the Borrower's account from
Bond proceeds, as hereinafter provided, and not repaid) shall bear
interest from the date hereof until this Note is paid in full at the
Applicable Rate borne by the Bond, computed as set forth in the Bond.
The proceeds of the Bond are to be advanced by the Lender to the
Borrower or for the Borrower's account, as needed to pay for the
Acquisition Costs; accordingly, this Note shall bear interest only to the
extent that Bond proceeds have actually been advanced to the Borrower
or for the account of the Borrower by the Lender in accordance with the
Financing Agreement.
All payments of principal of and interest on this Note shall be
payable in lawful money of the United States which is legal tender for
the payment of all debts and dues, public and private, at the time of
payment, in accordance with the provisions of the Financing Agreement.
On any date on which any payment of the principal of or interest on
the Bond (at the Applicable Rate) is due and payable, the Borrower shall
pay directly to the Holder an amount sufficient to pay the principal of or
interest on the Bond (or both) on such date.
<PAGE>
The Bond is subject to redemption as provided in the Financing
Agreement. Upon any redemption of the Bond, the Borrower, on a date
no later than the date fixed for redemption, shall pay to the Holder and to
the Issuer the amounts provided for in Section 2.2 of the Financing
Agreement.
In any event, the Borrower shall make payments on this Note in
amounts sufficient to pay, on the date payable, all amounts which become
due and payable on the Bond from time to time.
In the event any payment hereon is not paid on the date on which
the same is due and payable, such payment shall continue as an
obligation of the Borrower, with interest thereon, until paid in full, at
the Reimbursement Rate. In addition, the Borrower shall pay (i) a late
charge in an amount equal to 5% of the amount of any payment of
interest or principal hereunder which is made more than 15 days after the
date on which the same is due and payable, and (ii) all costs of collec-
tion, including attorneys' fees equal to 15% of the sums then due
hereunder, if this Note is referred to an attorney for collection after
default.
All payments hereunder, including all payments for the redemption
of the Bond, shall be applied in accordance with the provisions of the
Financing Agreement, and shall be applied first to late charges or
penalties and the fees and expenses of the Holder and then to accrued and
unpaid interest and the remainder to principal.
Notwithstanding anything herein to the contrary, the Borrower shall
have the right to prepay the outstanding principal balance of the Loan,
plus accrued and unpaid interest, in full or in part at any time.
The Issuer shall have the right to demand prepayment of the
outstanding principal balance hereof, plus accrued and unpaid interest, in
whole but not in part, on the fifth anniversary of the date of this Note, to
the extent that prepayment is required to be made on the Bond on such
date.
The maturity of this Note may be accelerated under certain
circumstances as provided in the Financing Agreement.
The Loan and this Note are secured as provided in the Financing
Agreement.
Reference is hereby made to the provisions of the Financing
Agreement, which are incorporated herein by reference and made a part
hereof, and which Financing Agreement, together with this Note is being
assigned by the Issuer to the Lender as security for the Bond. Nothing
contained in this Note shall in any way impair the obligations of the
Borrower to make all payments required by the Financing Agreement.
<PAGE>
The obligations of the Borrower under this Note shall be terminated
on the Termination Date, except as may be otherwise provided in the
Financing Agreement with respect to any Surviving Rights.
IN THE EVENT THIS NOTE OR ANY INSTALLMENT DUE
HEREUNDER IS NOT PAID WITHIN 15 DAYS OF THE DATE WHEN
DUE (WHETHER ON THE DATE DUE OR BY ACCELERATION), THE
BORROWER AUTHORIZES THE CLERK OR ANY ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR IT AND ENTER JUDGMENT BY
CONFESSION WITHOUT PRIOR NOTICE OR OPPORTUNITY FOR
PRIOR HEARING FOR THE PRINCIPAL BALANCE THEN
OUTSTANDING UNDER THIS NOTE, TOGETHER WITH INTEREST,
COURT COSTS AND AN ATTORNEY'S FEE EQUAL TO 15% OF THE
SUMS THEN DUE HEREUNDER, HEREBY WAIVING AND RELEASING,
TO THE EXTENT PERMITTED BY LAW, ALL ERRORS AND ALL
RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION,
INQUISITION AND EXTENSION UPON ANY LEVY ON REAL ESTATE
OR PERSONAL PROPERTY TO WHICH THE BORROWER MAY
OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED
STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF THE
UNITED STATES OF AMERICA NOW IN FORCE OR WHICH MAY
HEREAFTER BE PASSED. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST THE BORROWER
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND
SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED
PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE
EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME TO TIME,
IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS THE
HOLDER SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF
WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.
Notwithstanding the provisions of the immediately preceding
paragraph, in enforcing any judgment by confession obtained against the
Borrower in connection with the Loan, in foreclosing against the
Property or in exercising any other remedies available to the Holder, the
Holder shall not demand, solely with respect to attorney's fees incurred
by the Holder in connection with the Loan, any amounts in excess of the
actual amount of attorney's fees charged or billed to the Holder.
In case any provision (or any part of any provision) contained in
this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision (or remaining part
of the affected provision) of this Note, but this Note shall be construed
as if such invalid, illegal or unenforceable provision (or any part thereof)
had never been contained herein, but only to the extent it is invalid,
illegal or unenforceable.
The Borrower and any and all guarantors and endorsers hereof
severally waive presentment, protest, demand for payment, notice of
protest, Notice of demand and of dishonor and non-payment of this Note,
and expressly agree that this Note, or the due date of any payment
hereunder, may be extended from time to time without in any way
affecting the liability of the Borrower and any guarantors and endorsers
hereof.
<PAGE>
This Note, having been made, executed, sealed and delivered in the
State, shall be governed and construed, interpreted and enforced in
accordance with the laws of the State, as the same are in effect from time
to time.
In any case where any date of payment of principal of, premium (if
any), or interest on this Note shall be a day other than a Business Day,
then payment of such principal (and premium, if any) or interest need not
be made on such date but may be made on the next succeeding Business
Day, with the same force and effect as if made on the date of payment.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed and sealed as of the date first above written.
WITNESS: BLUE II, LLC
____________________________
By:__________________________
/s/ Edward D. Scott
Managing Member
(SEAL)
<PAGE>
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II, LLC FACILITY),
1996 ISSUE
ASSIGNMENT OF NOTE
Unless the context clearly indicates otherwise, all terms used
herein which are defined in the Loan and Financing Agreement of even
date herewith referred to in the foregoing Note and executed and
delivered in connection with the above-captioned Taxable Economic
Development Revenue Bond (the "Financing Agreement") shall have the
meanings given such terms in the Financing Agreement.
As security for the Bond, the Issuer hereby assigns, transfers and
sets over, without recourse and without warranty, to the Lender, as
registered owner of the Bond, and to its successors and registered
assigns, all of the Issuer's right, title and interest in and to the foregoing
Note; PROVIDED, HOWEVER, that there shall be excluded from this
assignment all Reserved Rights of the Issuer.
WITNESS: MARYLAND ECONOMIC
DEVELOPMENT
CORPORATION
_________________________ By
___________________________
/s/ Hans F. Mayer
Executive Director
EXHIBIT 10 (iii)
THIS BOND DOES NOT CONSTITUTE AN INDEBTEDNESS TO WHICH
THE FAITH AND CREDIT OF THE STATE OF MARYLAND, THE
MARYLAND DEPARTMENT OF BUSINESS AND ECONOMIC
DEVELOPMENT, THE ISSUER, MARYLAND INDUSTRIAL FINANCING
AUTHORITY OR ANY OTHER PUBLIC INSTRUMENTALITY OR
PUBLIC BODY IS PLEDGED.
Registered Registered
No. R-1
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II, LLC FACILITY),
1996 ISSUE
JULY 19, 1996
FOR VALUE RECEIVED, MARYLAND ECONOMIC
DEVELOPMENT CORPORATION (the "Issuer"), a body corporate and
politic and a public instrumentality of the State of Maryland (the
"State"), hereby promises to pay (but only from the sources hereinafter
referred to), to SIGNET BANK, a Virginia banking corporation (the
"Lender" or "Holder"), or its registered assigns or legal representative
(the registered owner of this Bond hereinafter designated as the
"Holder"), the principal sum of THREE MILLION DOLLARS
($3,000,000), and to pay interest from the date hereof on the unpaid
principal balance hereof, but only to the extent that moneys are actually
advanced pursuant to the Financing Agreement (hereinafter defined), at
the rate of interest equal to the LIBOR Rate (as hereinafter defined), plus
one and three-quarters percent (1.75%) per annum, until paid in full (or,
if this Bond, or any portion hereof shall have been duly called for early
redemption and payment of the redemption price shall have been made,
until the date fixed for such early redemption). All principal and interest
due hereunder shall be payable at the times and in the manner set forth
herein.
For purposes of this Bond, the term "LIBOR Rate" shall mean an
interest rate per annum equal to the offered rate on Eurodollar deposits
which appears on the display designated "LIUSO1M" (for one month
deposits) of "Index HP" under the "YIELD" column for the date of
LIBOR determination in the "CLOSE/MID/YIELD TABLE" published by
Bloomberg L.P. (or such other Table as may replace the
"CLOSE/MID/YIELD TABLE" of that service for the purpose of
displaying London interbank offered rates for major banks or, if such
Table in not available at any such time, a comparable source, as
determined in the sole discretion of, and selected by, the Lender in good
<PAGE>
faith, of London interbank offered rates of major banks, as may be
available from a similar service). The LIBOR Rate shall be determined
by the Lender as of 10:00 a.m. (Baltimore time) on each applicable date
of determination. If more than one such rate is published by Bloomberg
L.P. or its replacement, the LIBOR Rate shall be the arithmetic mean of
such offered rates. If no such rate shall be published by Bloomberg L. P.
or its replacement, the LIBOR Rate shall be the rate (or, if applicable,
the arithmetic mean of the rates) published for the immediately preceding
banking day.
The interest rate applicable to this Bond on the date hereof shall be
the LIBOR Rate (determined as set forth above) on the date hereof, plus
one and three-quarters percent (1.75%). The LIBOR Rate shall be
redetermined on the same day of each month after the date hereof (or the
next succeeding Business Day if such day is not a Business Day), and the
interest rate applicable to this Bond shall be adjusted as of such date.
This Bond is issued pursuant to (a) the Constitution and laws of the
State of Maryland, particularly Article 83A, Title 5, Subtitle 2 of the
Annotated Code of Maryland (1995 Replacement Volume), as amended,
(b) a Resolution adopted by the Issuer on March 18, 1996 (the
"Resolution") and (c) the terms and provisions of the Loan and Financing
Agreement of even date herewith (the "Financing Agreement") by and
among the Issuer, the Lender, Blue II, LLC, a Maryland limited liability
company (the "Borrower") and Frederick Brewing Co., a Maryland
corporation (the "Facility User"), for the purpose of financing, with the
proceeds hereof, the costs of the acquisition by the Borrower of certain
land identified a "Lot 13", Wedgewood Business Park, on Wedgewood
Boulevard, Buckeystown, containing approximately 5.6 acres located in
Frederick County, Maryland and the construction thereon of a
warehouse/manufacturing building consisting of approximately 50,000
square feet (the "Facility"), as more particularly described in the
Financing Agreement, and to be leased by the Borrower to the Facility
User. This Bond is secured and entitled to the protection given by the
Financing Agreement.
The principal of and interest on this Bond are payable in lawful
money of the United States which is legal tender for the payment of all
debts and dues, public and private, at the time of payment, in the
following manner:
(a) Commencing on August 1, 1996, and continuing on the
first day of each and every month thereafter until this Bond is repaid in
full, interest shall be paid at the interest rate or rates provided herein;
(b) Commencing on the first day of August, 1997, and on the
first day of each and every month thereafter, continuing to and including
the first day of July, 2006, the principal amount hereof shall be paid by
108 consecutive monthly installments of principal in the amount of
Seventeen Thousand Eight Hundred Fifty-Seven Dollars and Fourteen
Cents ($17,857.14) each; and
<PAGE>
(c) this Bond shall mature, and the entire unpaid balance of
principal hereof and all accrued and unpaid interest hereon shall be due
and payable, on the 1st day of July, 2006 (if not paid earlier).
All payments of principal (including any redemptions) and interest
hereon shall be made by check mailed to the Holder at the address
indicated on the registration books of the Bond Registrar (hereinafter
defined), without the necessity of surrendering or presenting this Bond,
and all such payments shall fully discharge the obligation of the Issuer
herein to the extent of the payments so made.
In the event any payment hereon is not paid within l5 days from the
date on which the same is due and payable, such payment shall continue
as an obligation of the Issuer (limited as herein provided) with interest
thereon, and a late charge in the amount of five percent (5%) of the
amount of such payment shall be imposed.
Upon the occurrence of a default hereunder, the then applicable
interest rate borne by this Bond, shall be increased by two percent (2%)
per annum, until such default is cured.
This Bond is subject to:
(a) optional redemption prior to maturity;
(b) special mandatory redemption prior to maturity from
Receipts Requiring Mandatory Redemption (as defined in the Financing
Agreement); and
(c) mandatory redemption at the option of the Holder, in
whole but not in part, on the fifth anniversary of the date of this Bond;
all as provided and prescribed by and with the effect described in Section
2.2 of the Financing Agreement. The amount of any partial redemption
prior to maturity shall be applied as set forth in Section 2.3 of the
Financing Agreement.
The amount of any partial redemption prior to maturity, and the
date on which the same is made, shall be noted by the Holder on
Schedule A attached hereto and made a part hereof, but the failure to so
note any such partial redemption shall not affect the validity of any
amounts actually received by the Holder. The redemption price of any
redemption (whether by optional or mandatory redemption) shall be an
amount equal to the principal amount to be redeemed, plus all unpaid
interest accrued to the date fixed for redemption.
<PAGE>
All payments made hereunder, including all redemptions, shall be
applied first to accrued and unpaid interest and the remainder to
principal, unless otherwise provided in Section 2.3 of the Financing
Agreement.
Pursuant to the Promissory Note of even date herewith executed and
delivered by the Borrower and made payable to the Issuer (the "Note"),
the Borrower has agreed to make payments of principal, premium (if any)
and interest to the Issuer in amounts at least equal to the payments of
principal of, premium (if any) and interest on this Bond. With the
exception of the Reserved Rights of the Issuer, such payments have been
assigned by the Issuer to the Holder for the purpose of repaying the
principal of, premium (if any) and interest on this Bond, at the applicable
rates set forth above. The Financing Agreement provides that all
payments by the Borrower pursuant to the Note are to be made by the
Borrower directly to the Holder at the address designated on the
registration books maintained by the Bond Registrar (as hereinafter
defined).
The Borrower's obligations under the Financing Agreement and the
Note are secured as provided in the Financing Agreement.
The maturity of this Bond is subject to acceleration as provided in
the Financing Agreement.
Reference is hereby made to the Financing Agreement for a full and
complete statement of the provisions with respect to the application of
the proceeds of this Bond, the collection and disposition of the
Documents assigned as security for the payment of this Bond and the
interest hereon, the nature and extent of the security and the rights of the
Holder of this Bond, the terms and conditions on which, and the purposes
for which, this Bond is issued, the terms and conditions under which this
Bond may or shall be redeemed prior to maturity, and the rights, duties
and obligations of the Issuer thereunder, to all of which the Holder
hereof, by acceptance of this Bond, assents and agrees.
THIS BOND AND THE INTEREST ON IT ARE LIMITED
OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF, PREMIUM, IF
ANY, AND INTEREST ON WHICH ARE PAYABLE SOLELY FROM THE
SECURITY DESCRIBED IN SECTION 2.7 OF THE FINANCING
AGREEMENT OR FROM THE PROPERTY (AS DEFINED IN THE
FINANCING AGREEMENT); PROVIDED, HOWEVER, THAT UNDER
THE FINANCING AGREEMENT, THE ISSUER HAS RESERVED TO
ITSELF, AND HAS NOT PLEDGED OR ASSIGNED, THE RESERVED
RIGHTS OF THE ISSUER. NEITHER THIS BOND NOR THE INTEREST
HEREON SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A
CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF
THE ISSUER, THE STATE OF MARYLAND, THE MARYLAND
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT, THE
MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY,
ANY OTHER PUBLIC INSTRUMENTALITY OR ANY PUBLIC BODY
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER
PROVISION OR STATUTORY LIMITATION, AND NEITHER SHALL
EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY
OF THE ISSUER, THE STATE OF MARYLAND, THE MARYLAND
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT, THE
MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY
(EXCEPT IN REGARD TO THE AUTHORITY INSURANCE
AGREEMENT) ANY OTHER PUBLIC INSTRUMENTALITY OR ANY
PUBLIC BODY.
<PAGE>
This Bond shall be registered on the books of the Issuer to be kept
for that purpose by the Lender or any other person maintaining books for
the registration and transfer of this Bond pursuant to the provisions of
the Financing Agreement (the "Bond Registrar"). This Bond shall be
transferable only upon such books (which transfer shall be similarly
noted on the registration table attached hereto as Schedule B and made a
part hereof) at such office by the Holder hereof or by its duly authorized
officer or attorney. This Bond may be transferred upon presentation
hereof at the office of the Bond Registrar with a written instrument of
transfer satisfactory to the Bond Registrar, duly executed by the Holder
hereof or its duly authorized attorney. Such transfers shall be without
charge to the Holder hereof, but any taxes or other governmental charges
required to be paid with respect to the same shall be paid by the Holder
requesting such transfer as a condition precedent to the exercise of such
privilege.
The Issuer may deem and treat the person in whose name this Bond
is registered as the absolute owner hereof for all purposes; and the Issuer
shall not be affected by any notice to the contrary (other than the written
notice of transfer referred to in the preceding paragraph).
This Bond, having been made, executed, sealed and delivered in the
State of Maryland, shall be construed, interpreted and enforced in
accordance with the laws of the State of Maryland as the same are in
effect from time to time.
All acts, conditions and things required by the Constitution and
laws of the State of Maryland and the Resolution to exist, to have
happened and to have been performed precedent to and in connection with
the execution and delivery of this Bond, do exist, have happened and
have been performed.
Except as may be otherwise provided in the Financing Agreement,
in any case where any date of payment of principal of, premium (if any),
or interest on this Bond, or the date fixed for any redemption of this
Bond, shall be a day other than a Business Day (as defined in the
Financing Agreement), then payment of such principal (and premium, if
any) or interest need not be made on such date but may be made on the
next succeeding Business Day, with the same force and effect as if made
on the date of payment or the date fixed for redemption.
No covenant or agreement contained in this Bond or in the
Financing Agreement shall be deemed to be a covenant or agreement of
any Agent (as defined in the Financing Agreement) of the Issuer in his or
her individual capacity, and neither the members of the Board of
Directors of the Issuer nor any person executing this Bond or any other
Documents (as defined in the Financing Agreement) entered into by the
Issuer shall be liable personally on this Bond or be subject to any
personal liability or accountability by reason of the issuance, execution
or delivery hereof.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be
executed in its name and on its behalf by the Executive Director of the
Issuer, by his manual signature, as of the date first above written.
WITNESS: MARYLAND ECONOMIC
DEVELOPMENT
CORPORATION
_________________________
By____________________________
/s/ Hans F. Mayer,
Executive Director
[SEAL]
<PAGE>
SCHEDULE A
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II LLC FACILITY),
1996 ISSUE
_____________________________________________________________
____
REDEMPTION SCHEDULE
Date of Redemption Amount of Redemption
$
<PAGE>
SCHEDULE B
$3,000,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(BLUE II LLC FACILITY),
1996 ISSUE
_____________________________________________________________
____
Transfer of Bond
The transfer of this Bond may be registered only by the registered
owner in person or by its duly authorized officer or attorney upon
presentation hereof to the Bond Registrar, who shall make note thereof in
the books kept for such purpose and in the registration blank below.
Date of Name of Signature of
Registration Registered Owner Bond Registrar
_______________ ________________ ______________
_______________ ________________ ______________
_______________ ________________ ______________
_______________ ________________ ______________
_______________ ________________ ______________
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED
the undersigned hereby sells, assigns and transfers unto
________________________________________________________
(Please Print or Typewrite Name and Address of Transferee)
_________________________________________________________
the within Bond of
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer such Bond
on the books of the within-named Issuer, with full power of
substitution in the premises.
Dated: _______________________
______________________________
Notice: The signature to this
assignment must correspond with
the name as it appears on the face
of the within Bond in every
particular, without alteration or
enlargement or any change
whatever.
In the presence of:
___________________________
Please insert Social Security
or other Identifying Number
of Assignee:
______________________________
______________________________
Signature Guaranteed
<PAGE>
Standard Form of agreement Between
Owner and Construction Manager
where the Construction Manager is also the
Constructor
AIA Document Al 21/CMc and AGC Document 566 - Electronic Format
AGREEMENT
made as of the day of in the year of
(in words, indicate day,. month and year)
BETWEEN
the Owner:
(Name and address)
Frederick Brewing Company
and Blue 11 LLC
II7 W. Patrick Street
Frederick, MD 21701
and the Construction Manager:
Name and address)
Morgan-Keller, Inc.
60 Thomas Johnson Drive
Frederick, MD 21702
The Project is:
(Name, address and brief description)
Frederick Brewing Company
Lot 13 Owner /s/ KEB, EDS Date 07/11/96
Wedgewood Business Park Contr. /s/ BCG Date 07/10/96
Frederick- MD 21701
The Architect is:
(Name and Address)
DNC Architects Inc.
1370 Piccard Drive
Rockville . MD 20850
The Owner and Construction Manager agree as set forth below,
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY
USING AIA DOCUMENT D401.
The 1987 Edition of AIA Document A201, General Conditions of the Contract
for Construction, is referred to herein. This Agreement requires
modification if other general conditions are utilized. Portions of this
document are derived from AIA Document Al I 1, Standard Form of Agreement
Between the Owner and Contractor where the Basis of Payment is the Cost
of the Work Plus a I", copyright 1920,1925, 1951, 1958,1961, 1963, 1967,
1974,1979, copyright 1987 by The American Institute of Architects; other
portions differing from that found in AIA Dominant Al I I and AOC
Document 500 is copyrighted 1991 by The American Institute of Architects
and The Associated General Contractors of America. Reproduction of the
material herein or substantial quotation of its Provisions without
written permission of AIA and AOC violates the copyright laws of the
United States and will subject the violator to legal prosecution.
<PAGE>
Table of Contents
ARTICLE 1 GENERAL PROVISIONS
1.1 Relationship of Parties
1.2 General Conditions
ARTICLE 2 CONSTRUCTION MANAGER'S RESPONSIBILITIES
2.1 Preconstruction Phase
2.2 Guaranteed Maximum Price Proposal and Contract Time
2.3 Construction Phase
2.4 Professional Services
2.5 Unsafe Materials
ARTICLE 3 OWNER'S RESPONSIBILITIES
3.1 Information and Services
3.2 owner's Designated Representative
3.3 Architect
3.4 Legal Requirements
ARTICLE 4 COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES
4.1 Compensation
4.2 Payments
ARTICLE 5 COMPENSATION FOR CONSTRUCTION PHASE SERVICES
5.1 Compensation
5.2 Guaranteed Maximum Price
5.3 Changes in the Work
ARTICLE 6 COST OF THE WORK FOR CONSTRUCTION PHASE
6.1 Costs To Be Reimbursed
6.2 Costs Not To Be Reimbursed
6.3 Discounts, Rebates and Refunds
6.4 Accounting Records
ARTICLE 7 CONSTRUCTION PHASE
7.1 Progress Payments
7.2 Final Payment
ARTICLE 8 INSURANCE AND BONDS
8.1 Insurance Required of the Construction Manager
8.2 Insurance Required of the Owner
8.3 Performance Bond and Payment Bond
ARTICLE 9 MISCELLANEOUS PROVISIONS
9.1 Dispute Resolution for the Preconstruction Phase
9.2 Dispute Resolution for the Construction Phase
9.3 Other Provisions
ARTICLE 10 TERMINATION OR SUSPENSION
10.1 Termination Prior to Establishing Guaranteed Maximum Price
10.2 Termination Subsequent to Establishing Guaranteed Maximum Price
10.3 Suspension
ARTICLE 11 OTHER CONDITIONS AND SERVICES
Attachments: AMENDMENT NO. I to Agreement Between Owner and Construction
Manager
<PAGE>
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND CONSTRUCTION MANAGER WHERE
THE CONSTRUCTION MANAGER IS ALSO THE CONSTRUCTOR
ARTICLE 1
GENERAL PROVISIONS
1.1 RELATIONSHIP OF PARTIES
The Construction Manager accepts the relationship of trust and confidence
established with the owner by this Agreement, and covenants with the Owner
to furnish the Construction Manager's reasonable skill and judgment and to
cooperate with the Architect in furthering the interests of the Owner.
The Construction Manager shall furnish construction administration and
management services and use the Construction Manager's best efforts to
perform the Project in an expeditious and economical manner consistent with
The Owner shall endeavor to promote harmony and cooperation among the
Owner, Architect, Construction Manager and other persons or entities
employed by the Owner for the Project.
1.2 GENERAL CONDITIONS
For the Construction Phase, the General Conditions of the Contract shall
be the 1987 Edition of AIA Document A201, General Conditions of the
Contract for Construction, which is incorporated herein by reference.
For the Preconstruction Phase, or in the event that the Preconstruction
and Construction Phases proceed concurrently, AIA Document A201 shall apply
to the Proconstruction Phase only as specifically provided in this
Agreement. The term "'Contractor" as used in AIA Document A201 shall
mean the Construction Manager.
ARTICLE 2
CONSTRUCTION MANAGER'S RESPONSIBILITIES
The Construction Manager shall perform the services described in this
Article. The services to be provided under Paragraphs 2.1 and 2.2
constitute the Preconstruction Phase services. If the Owner and
Construction Manager agree, after consultation with the Architect,
the Construction Phase may commence before the Preconstruction Phase is
completed, in which case both phases shall proceed concurrently.
2.1 PRECONSTRUCTION PHASE
2.1.1 PRELIMINARY EVALUATION
The Construction Manager shall provide a preliminary evaluation of the
Owner's program and Project budget requirements, each in terms of the other.
2.1.2 CONSULTATION
The Construction Manager with the Architect shall jointly schedule and attend
regular meetings with the Owner and Architect. The Construction Manager
shall consult with the Owner and Architect regarding site use and
improvements, and the selection of materials, building systems and
equipment. The Construction Manager shall provide recommendations on
construction feasibility; actions designed to minimize adverse effects
of labor or material shortages; time requirements for procurement,
installation and construction completion; and factors related to construction
cost including estimates of alternate designs or materials, preliminary
budgets and possible economics.
2.1.3 PRELIMINARY PROJECT SCHEDULE
When Project requirements described in Subparagraph 3.1.1 have been
sufficiently identified, the Construction Manager shall prepare, and
periodically update, a preliminary Project schedule for the Architect's
review and the Owner's approval. The Construction Manager shall obtain the
Architect's approval of the portion of the preliminary Project schedule
relating to the performance of the Architect's services. The Construction
Manager shall coordinate and integrate the preliminary Project schedule
with the services and activities of the Owner, Architect and Construciton
Manager. As design proceeds, the preliminary Project schedule shall be
updated updated to indicate proposed activity
sequences and duration's, milestone dates for receipt and approval of
pertinent information, submittal of a Guaranteed Maximum Price proposal,
preparation and processing of shop drawings and samples, delivery of
materials or equipment requiring long-lead time procurement, Owner's
occupancy requirements showing portions of the Project having occupancy
priority, and proposed date of Substantial Completion. If preliminary
Project schedule updates indicate that previously approved schedules may not
be met, the Construction Manager shall make appropriate recommendations to
the Owner and Architect.
<PAGE>
2.1.4 PHASED CONSTRUCTION
The Construction Manager shall make recommendations to the Owner and
Architect regarding the phased issuance of Drawings and Specifications
to facilitate phased construction of the Work, if such phased construction
is appropriate for the Project, taking into consideration such factors as
economies, time of performance, availability of labor and materials. and
provisions for temporary facilities.
2.1.5 PRELIMINARY COST ESTIMATES
2.1.5.1 When the Owner has sufficiently identified the Project requirements
and the Architect has prepared other basic design criteria, the
Construction Manager shall prepare, for the review of the Architect and
approval of the Owner, a preliminary cost estimate utilizing area, volume
or similar conceptual estimating techniques.
2.1.5.2 When Schematic Design Documents have been prepared by the Architect
and approved by the Owner, the Construction Manager shall prepare for the
review of the Architect and approval of the Owner, a more detailed estimate
with supporting data. During the preparation of the Design Development
Documents, the Construction Manager shall update and refine this estimate
at appropriate intervals agreed to by the Owner, Architect and Construction
Manager.
2.1.5.3 When Design Development Documents have been prepared by the
Architect and approved by the Owner- the Construction Manager shall prepare
a detailed estimate with supporting data for review by the Architect and
approval by the Owner. During the preparation of the Construction
Documents, the Construction Manager shall update and refine this estimate
at appropriate intervals agreed to by the Owner, Architect and Construction
Manager.
2.1.5.4 If any estimate submitted to the Owner exceeds previously approved
estimates or the Owner's budget, the Construction Manager shall make
appropriate recommendations to the Owner and Architect.
2.1.6 SUBCONTRACTORS AND SUPPLIERS
The Construction Manager shall seek to develop subcontractor interest in
the Project and shall furnish to the Owner and Architect for their
information a list of possible subcontractors, including suppliers who
are to furnish materials or equipment fabricated to a special design,
from whom proposals will be requested for each principal portion of the
Work. The Architect will promptly reply in writing to the Construction
Manager if the Architect or Owner know of any objection to such
subcontractor or supplier. The receipt of such list shall not require the
Owner or Architect to investigate the qualifications of proposed
subcontractors or suppliers, nor shall it waive the right of the Owner
or Architect later to object to or reject any proposed subcontractor
or supplier.
2.1.7 LONG-LEAD TIME ITEMS
The Construction Manager shall recommend to the Owner and Architect a
schedule for procurement of long-lead time items which will constitute
part of the Work as required to meet the Project schedule. If such long-
lead time items are procured by the Owner, they shall be procured on terms
and conditions acceptable to the Construction Manager. Upon the Owner's
acceptance of the Construction Manager's Guaranteed Maximum Price proposal,
all contracts for such items shall be assigned by the Owner to the Construction
Manager, who shall accept terponsibility for such items as it procured by the
Construction Manager. The Construction Manager shall expedite the
delivery of long-lead time items.
2.1.8 EXTENT OF RESPONSIBILITY
The Construction Manager does not warrant or guarantee estimates and
schedules except as may be included as part of the Guaranteed Maximum
Price. The recommendations and advice of the Construction Manager
concerning design alternatives shall be subject to the review and approval
of the Owner and the Owner's professional consultants. It is not the
Construction Manager's responsibility to ascertain that the Drawings and
Specifications are in accordance with applicable laws, statutes,
ordinances, building codes, rules and regulations. However, if the
Construction Manager recoginzes that portions of the Drawings and
Specifications are at variance therewith, the Construction Manager
shall promptly notify the Architect and Owner in writing.
2.1.9 EQUAL EMPLOYMENT OPPORTUNITY AND AFFIRMATIVE ACTION
The Construction Manager shall comply with applicable laws, regulations
and special requirements of the Contract Documents regarding equal
employment opportunity and affirmative action programs.
<PAGE>
2.2 GUARANTEED MAXIMUM PRICE PROPOSAL AND CONTRACT TIME
2.2.1 When the Drawings and Specifications are sufficiently complete, the
Construction Manager shall propose a Guaranteed Maximum Price, which shall
be the sum of the estimated Cost of the Work and the Construction Manager's
Fee.
2.2.2 As the Drawings and Specifications may not be finished at the time
the Guaranteed Maximum Price proposal is prepared, the Construction Manager
shall provide in the Guaranteed Maximum Price for further development of
the Drawings and Specifications by the Architect that is consistent with
the Contract Documents and reasonably inferable therefrom. Such further
development does not include such things as changes in scope, systems,
kinds and quality of materials, finishes or equipment, all of which, if
required, shall be incorporated by Change Order.
2.2.3 The estimated Cost of the Work shall include the Construction
Manager's contingency, a sum established by the Construction Manager for
the Construction Manager's exclusive use to cover costs arising under
Subparagraph 2.2.2 and other costs which are properly reimbursable as Cost
of the Work but not the basis for a Change Order.
2.2.4 BASIS OF GUARANTEED MAXIMUM PRICE
The Construction Manager shall include with the Guaranteed Maximum Price
proposal a written statement of its basis. which shall include:
1. A list of the Drawings and Specifications including all addenda
thereto and Conditions of the Contract, which were used in preparation of
the Guaranteed Maximum Price proposal.
2. A list of allowances and a statement of their basis.
3. A list of the clarifications and assumptions made by the Construction
Manager in the preparation of the Guaranteed Maximum Price proposal to
supplement the information contained in the Drawings and Specifications.
4. The proposed Guaranteed Maximum Price, including a statement of the
estimated cost organized by trade categories, allowances, contingency, and
other items and the fee that comprise the Guaranteed Maximum Price.
5. The Date of Substantial Completion upon which the proposed Guaranteed
Maximum Price is based, and a schedule of the Construction Documents
issuance dates upon which the date of Substantial Completion is based.
2.2.5 The Construction Manager shall meet with the Owner and Architect to
review the Guaranteed Maximum Price proposal and the written statement of
its basis. In the event that the Owner or Architect discovers any
inconsistencies or inaccuracies in the information presented, they shall
promptly notify the Construction Manager, who shall make appropriate
adjustments to the Guaranteed Maximum Price proposal, its basis or both.
2.2.6 Unless the Owner accepts the Guaranteed Maximum Price proposal in
writing on or before the date specified in the proposal for such acceptance
and so notifies the Construction Manager, the Guaranteed Maximum Price
proposal shall not be effective without written acceptance by the
Construction Manager.
2.2.7 Prior to the Owner's acceptance of the Construction Manager's
Guaranteed Maximum Price proposal and issuance of a Notice to Proceed, the
Construction Manager shall not incur any cost to be reimbursed as part of
the Cost of the Work, except as the Owner may specifically authorize in
writing.
2.2.8 Upon acceptance by the Owner of the Guaranteed Maximum Price proposal,
the Guaranteed Maximum Price and its basis shall be set forth in Amendment
No. 1. The Guaranteed Maximum Price shall be subject to additions and
deductions by a change in the Work as provided in the Contract Documents
and the date of Substantial Completion shall be subject to adjustment as
provided in the Contract Documents.
2.2.9 The Owner shall authorize and cause the Architect to revise the
Drawings and Specifications to the extent necessary to reflect the
agreed-upon assumptions and clerifications contained in Amendment No. 1.
Such revised Drawings and Specifications shall be furnished to the
Construction Manager in accordance with schedules agreed to by the Owner,
Architect and Construction Manager. The Construction Manager shall promptly
notify the Architect and Owner if such revised Drawings and Specifications
are inconsistent with the agreed-upon assumptions and clarifications.
2.2.10 The Guaranteed Maximum Price shall include in the Cost of the Work
only those taxes which are enacted at the time the Guaranteed Maximum Price
is established.
2.3 CONSTRUCTION PHASE
2.3.1 GENERAL
2.3.1.1 The Construction Phase shall commence on the earlier of:
(1) the Owner's acceptance of the Construction Manager's Guaranteed
Maximum Price proposal and issuance of a Notice to Proceed, or
(2) the Owner's first authorization to the Construction Manager to:
(a) award a subcontract, or
(b) undertake construction Work with the Construction Manager's own forces,
or
(c) issue a purchase order for materials or equipment required for the Work.
<PAGE>
2.3.2 ADMINISTRATION
2.3.2.1 Those portions of the Work that the Construction Manager does not
customarily perform with the Construction Manager's own personnel shall be
performed under subcontracts or by other appropriate agreements with the
Construction Manager. The Construction Manager shall obtain bids from
Subcontractors and from Suppliers Of Materials or equipment fabricated to
a special design for the Work from the list previously reviewed and, after
analyzing such bids. shall deliver such bids to the Owner and Architect.
The Owner shall then determine, with the advice of the Construction Manager
and subject to the reasonable objection of the Architect, which, bids
will be accepted. The Owner mav designate specific persons or entities
from whom the Construction Manager shall obtain bids; however, if the
Guaranteed Maximum Price has been established, the Owner may not prohibit
the Construction Manager from obtaining bids from other qualified bidders.
The Construction Manager shall not be required to contract with anvone to
whom the Construction Manager has reasonable objection.
2.3.2.2 If the Guaranteed Maximum Price has been established and a specific
bidder among those whose bids are delivered by the Construction Manager to
the Owner and Architect (1) is recommended to the Owner by the Construction
Manager; (2) is qualified to perform that portion of the Work; (3) has
submitted a bid which conforms to the requirements of the Contract
Documents without reservations or exceptions, but the Owner requires that
another bid be accepted, then the Construction Manager may require that a
change in the work be issued to adjust the Contract Time and the
Guaranteed Maximum Price by the difference between the bid of the person or
entity recommended to the Owner by the Construction Manager and the amount
of the subcontract or other agreement actually signed with the person or
entity designated by the Owner.
2.3.2.3 Subcontracts and agreements with suppliers furnishing materials
or equipment fabricated to a special design shall conform to the payment
provisions of Subparagraphs 7.1.8 and 7.1.9 and shall not be awarded on
the basis of cost plus a fee without the prior consent of the Owner.
2.3.2.4 The Construction Manager shall schedule and conduct meetings at
which the Owner, Architect, Construction Manager and appropriate
Subcontractors can discuss the status of the Work. The Construction
Manager shall prepare and promptly distribute meeting minutes.
2.3.2.5 Promptly after the Owner's acceptance of the Guaranteed Maximum
Price proposal, the Construction Manager shall prepare a schedule in
accordance with Paragraph 3. 1 0 of AIA Document A201, including the
Owner's occupancy requirements.
2.3.2.6 The Construction Manager shall provide monthly written reports to
the Owner and Architect on the progress of the entire Work. The
Construction Manager shall maintain a daily log containinge Construction
Manager and Architect the names and qualifications of persons or entities
who are to perform tests verifying the presence or absence of such material
or substance or who are to perform the task of removal or safe containment
of such material or substance. The Construction Manager and Architect will
promptly reply to the Owner in writing stating whether or not either has
reasonable objection to the persons or entities proposed by the Owner.
If either the Construction Manager or Architect has an objection to a person
or entity proposed by the Owner, the Owner shall propose another to whom the
Construction Manager and Architect have no reasonable objection.
ARTICLE 3
OWNER'S RESPONSIBILITIES
3.1 INFORMATION AND SERVICES
3.1.1 The Owner shall provide full information in a timely manner regarding
the requirements of the Project, including a program which sets forth the
Owner's objectives, constraints and criteria, including space requirements
and relationships, flexibility and expendability requirements, special
equipment and systems, and site requirements.
3.1.2 The Owner, upon Written request from the Construction Manager, shall
furnish evidence of Project financing prior to the start of the Construction
Phase and from time to time thereafter as the Construction Manager may request.
Furnishing of such evidence shall be a conditin precenent to commencement of
continuation of the Work.
<PAGE>
2.5 UNSAFE MATERIALS
In addition to the provisions of Paragraph 10.1 in AIA Document A201, if
reasonable precautions will be inadequate to prevent foreseeable bodily
injury or death to persons resulting from a material or substance
encountered but not created on the site by the Construction Manager, the
Construction Manager shall, upon recognizing the condition, immediately
stop Work in the affected area and report the condition to the Owner and
Architect in writing. The Owner, Construction Manager and Architect shall
then proceed in the same manner described in Subparagraph 10. 1.2 of AIA
Document A201. The Owner shall be responsible for obtaining the services
of a licensed laboratory to verify the presence or absence of the material
or substance reported by the Construction Manager and, in the event such
material or substance is found to be present, to verify that it has been
rendered harmless. Unless otherwise required by the Contract Documents,
the Owner shall furnish in writing to the Construction Manager and
Architect the names and qualifications of persons or entities who are to
perform tests verifying the presence or absence of such material or
substance or who are to perform the task of removal or safe containment of
such material or substance. The Construction Manager and Architect will
promptly reply to the Owner in writing stating whether or not either has
reasonable objection to the persons or entities proposed by the Owner. If
either the Construction Manager or Architect has an objection to a person
or entity proposed by the Owner, the Owner shall propose another to whom
the Construction Manager and Architect have no reasonable objection.
3.1.4.3 The services of geotechnical engineers when such services are
requested by the Construction Manager. Such services may include but are
not limited to test borings, test pits, determinations of soil bearing
values, percolation tests, evaluations of hazardous materials, ground
corrosion and resistivity tests, including necessary operations for
anticipating subsoil conditions, with reports and appropriate professional
recommendations.
3.1.4.4 Structural, mechanical, chemical, air and water pollution tests,
tests for hazardous materials, and other laboratory and environmental
tests, inspections and reports which are required by law.
3.1.4.5 The services of other consultants when such services are reasonably
required by the scope of the Project and are requested by the Construction
Manager.
3.2 OWNER'S DESIGNATED REPRESENTATIVE
The Owner shall designate in writing a representative who shall have
express authority to bind the Owner with respect to all matters requiring
the Owner's approval or authorization. This representative shall have the
authority to make decisions on behalf of the Owner concerning estimates and
schedules, construction budgets, and changes in the Work, and shall render
such decisions promptly and furnish information expeditiously, so as to
avoid unreasonable delay in the services or Work of the Construction Manager.
3.3 ARCHITECT
The Owner shall retain an Architect to provide the Basic Services,
including normal structural, mechanical and electrical engineering
services, other than cost estimating services, described in the edition of
AIA Document B141 current as of the date of this Agreement The Owner shall
authorize and cause the Architect to provide those Additional Services
described in AIA Document B141 requested by the Construction Manager which
must necessarily be provided by the Architect for the Preconstruction and
Construction phases of the Work. such services shall be provided in
accordance with time schedules agreed to by the Owner, Architect and
Construction Manager. Upon request of the Construction Manager, the
Owner shall furnish to the Construction Manager a copy of the Owner's
Agreement with the Architect, from which compensation provisions may be
deleted.
<PAGE>
3.4 LEGAL REQUIREMENTS
The Owner shall determine and advise the Architect and Construction
Manager of any special legal requirements relating specifically to the
Project which differ from those generally applicable to construction in the
jurisdiction of the Project. The Owner shall furnish such legal services
as are necessary to provide the information and services required under
Paragraph 3. 1.
ARTICLE 4
COMPENSATION AND PAYMENTS FOR PRECONSTRUCTION PHASE SERVICES
The Owner shall compensate and make payments to the Construction Manager
for Preconstruction Phase services as follows:
4.1 COMPENSATION
4.1.1 For the services described in Paragraphs 2.1 and 2.2 the Construction
Manager's compensation shall be calculated as follows:
(State basis ofcompensation, whether, a stipulated sum, multiple of Direct
PersonneI Expense, actual cost, etc. Include a statement of reimbursable
cost items as applicable.)
$0
4.1.2 Compensation for Preconstruction Phase services shall be equitably
adjusted if such services extend beyond 0 months from the date of this
Agreement or if the originally contemplated scope of services is
significantly modified.
4.1.3 If compensation is based on a multiple of Direct Personnel Expense,
Direct Personnel Expense is defined as the direct salaries of the
Construction Manager's personnel engaged in the Project and the portion of
the cost of their mandatory and customary contributions and benefits
related thereto, such as employment taxes and other statutory employee
benefits, insurance, sick leave, holidays, vacations, pensions and similar
contributions and benefits.
4.2 PAYMENTS
4.2.1 Payments shall be made monthly following presentation of the
Construction Manager's invoice and, where applicable, shall be in
proportion to services performed.
4.2.2 Payments are due and payable fifteen (15) days from the date the
Construction Manager's invoice is received by the Owner. Amounts unpaid
after the date on which payment is due shall bear interest at the rate
entered below, or in the absence thereof, at the legal rate prevailing from
time to time at the place where the Project is located.
(insert rate of interest agreed upon.)
The rate of interest shall float daily and be equal to the highest rate
quoted by the Wall Street Journal as the base on corporate loans at large
US money center commercial banks (Prime Rate) plus 200 basis points.
Interest will be charged on all amounts payable to Contractor by Owner that
are past due in excess of thirty days on progress payments or final payment
of the Contract sum.
(Usury laws and requirements under the Federal Truth in Lending Act,
similar state and local consumer credit laws and other regulations at the
Owner', and Construction Manager's principal places of business, the
location of the Project and elsewhere may affect the validity of this
provision. Legal advice should be obtained with respect to deletions or
modfications, and also regarding requirements such as written disclosures
or waivers.)
<PAGE>
March 22, 1996
EXHIBIT A
FREDERICK BREWING COMPANY
LABOR BILLING RATES SCHEDULE
Project manager $51.30/hour
Superintendent $36.50/hour
Scheduling Engineer $29.70/hour
Project Engineer $29.70/hour
clerk/Secretary $23.65/hour
Carpenter Foreman $28.65/hour
Carpenter $21.75/hour
Carpenter Helper $18.70/hour
Labor Foreman $24.10/hour
General Labor $18.70/hour
Equipment operator $23.75/hour
Truck Driver $20.70/hour
<PAGE>
ARTICLE 5
COMPENSATION FOR CONSTRUCTION PHASE SERVICES
The Owner shall compensate the Construction Manager for Construction Phase
services as follows:
5.1 COMPENSATION
5.1.1 For the Construction Manager's performance of the Work as described
in Paragraph 2.3, the Owner shall pay the Construction Manager in current
funds the Contract Sum consisting of the Cost of the Work as defined in
Article 7 and the Construction Manager's Fee determined as follows:
Construction Manager shall be paid a lump sum fee for this project of
$100,000 to cover all work up to a total project cost of $2,400,000.
For work performed above the $2.4 million, the Construction Manager
shall be paid an additional fee of 5%.
General Conditions shall be paid on all additions to the contract on any
increase over the GMP after the contract award in the amount of 8-1/2% of
the cost of construction. This cost of General Conditions shall be in
addition to the 5% Construction Manager's fee.
General Conditions:
General Conditions costs will be reimbursed as a cost of the work, and
will be included in the contracts GMP proposal.
5.2 GUARANTEED MAXIMUM PRICE
5.2.1 The sum of the Cost of the Work and the Construction Manager's Fee
are guaranteed by the Construction Manager not to exceed the amount
provided in Amendment No. 1, subject to additions and deductions by
changes in the Work as provided in the Contract Documents. Such maximum
sum as adjusted by approved changes in the Work is referred to in the
Contract Documents as the Guaranteed Maximum Price. Costs which would
cause the Guaranteed Maximum Price to be exceeded shall be paid by the
Construction Manager.
If the cost of the work plus the Construction Manager's fee is less than
the adjusted GMP, all savings from the GMP shall be shared at the rate of
70% for the Owner and 30% for the Construction Manager.
5.3 CHANGES IN THE WORK
5.3.1 Adjustments to the Guaranteed Maximum Price on account of changes in
the Work subsequent to the execution of Amendment No. 1 may be determined
by any of the methods listed in Subparagraph 7.3.3 of AIA Document A201.
5.3.2 In calculating adjustments to subcontracts (except those awarded
with the Owner's prior consent on the basis of cost plus a fee), the
terms 'cost' and "fee" as used in Clause 7.3.3.3 of AIA Document A201 and
the terms "costs"and "a reasonable allowance for overhead and profit" as
used in Subparagraph 7.3.6 of AIA Document A201 shall have the meanings
assigned to them in that document and shall not be modified by this
Article 5. Adjustments to subcontracts awarded with the Owner's prior
consent on the basis of cost plus a fee shall be calculated in accordance
with the terms of those subcontracts.
5.3.3 In calculating adjustments to the Contract, the terms "cost" and
"costs" as used in the above-referenced provisions of AIA Document A201
shall mean the Cost of the Work as defined in Article 6 of this Agreement
and the terms "and a reasonable allowance for overhead and profit" shall
mean the Construction Manager's Fee as defined in Subparagraph 5. 1 .1 of
this Agreement.
5.3.4 If no specific provision is made in Subparagraph 5.1.1 for adjustment
of the Construction Manager's Fee in the case of changes in the Work, or if
the extent of such changes is such, in the aggregate, that application of
the adjustment provisions of Subparagraph 5. 1.1 will cause substantial
inequity to the Owner or Construction Manager, the Construction Manager's
Fee shall be equitably adjusted on the basis of the fee established for
the original Work.
<PAGE>
ARTICLE 6
COST OF THE WORK FOR CONSTRUCTION PHASE
6.1 COSTS TO BE REIMBURSED
6.1.1 The term "Cost of the Work" shall mean costs necessarily incurred by
the Construction Manager in the proper performance of the Work, Such costs
shall be at rates not higher than those customarily paid at the place of
the Project except with prior consent of the Owner. The Cost of the Work
shall include only the items set forth in this Article 6.
6.1.2 LABOR COSTS
.1 Wages of construction workers directly employed by the Construction
Manager to perform the construction of the Work at the site or, with the
Owner's agreement, at off-site workshops.
.2 Wages or salaries of the Construction Manager's supervisory and
administrative personnel when stationed at the site with the Owner's
agreement.
Exhibit A
.3 Wages and salaries of the Construction Manager's supervisory or
administrative personnel engaged, at factories, workshops or on the road,
in expediting the production or transportation of materials or equipment
required for the Work, but only for that portion of their time required
for the Work.
.4 Costs paid or incurred by the Construction Manager for taxes,
insurance, contributions, assessments and benefits required by law or
collective bargaining agreements, and, for personnel not covered by such
agreements, customary benefits such as sick leave, medical and health
benefits, holidays, vacations and pensions, provided that such costs are
based on wages and salaries included in the Cost of the Work under
Clauses 6.1.2.1 through 6.1.2.3.
6.1.3 SUBCONTRACT COSTS
Payments made by the Construction Manager to Subcontractors in accordance
with the requirements of the subcontracts.
6.1.4 COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
.1 Costs, including transportation, of materials and equipment
incorporated or to be incorporated in the completed construction.
.2 Costs of materials described in the preceding Clause 6.1.4.1 in
excess of those actually installed but required to provide reasonable
allowance for waste and for spoilage. Unused excess materials, if any,
shall be handed over to the Owner at the completion of the Work or, at the
Owner's option, shall be sold by the Construction Manager; amounts
realized, if any, from such sales shall be credited to the Owner as a
deduction from the Cost of the Work.
6.1.5 COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES
AND RELATED ITEMS
.1 Costs, including transportation, installation, maintenance, dismantling
and removal of materials, supplies, temporary facilities, machinery,
equipment, and hand tools not customarily owned by the construction
workers, which are provided by the Construction Manager at the site and
fully consumed in the performance of the Work; and cost less salvage value
on such items if not fully consumed, whether sold to others or retained by
the Construction Manager. Cost for items previously used by the Construction
Manager shall mean fair market value.
<PAGE>
.2 Rental charges for temporary facilities, machinery, equipment, and
hand tools not customarily owned by the construction workers, which are
provided by the Construction Manager at the site, whether rented from the
Construction Manager or others, and costs of transportation, installation,
minor repairs and replacements, dismantling and removal thereof. Rates and
quantities of equipment rented shall be subject to the Owner's prior
approval.
.3 Costs of removal of debris from the site.
.4 Reproduction costs, costs of telegrams, facsimile transmissions and
long-distance telephone calls, postage and express delivery charges,
telephone service at the site and reasonable petty cash expenses of the
site office.
.5 That portion of the reasonable travel and subsistence expenses of the
Construction Manager's personnel incurred while traveling in discharge of
duties connected with the Work.
6.1.6 MISCELLANEOUS COSTS
.1 That portion directly attributable to this Contract of premiums for
insurance and bonds.
(If charges for self insurance are to be included, specify the basis of
reimbursement.)
.2 Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Construction Manager is liable.
.3 Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Construction Manager is required
by the Contract Documents to pay.
.4 Fees of testing laboratories for tests required by the Contract
Documents, except those related to nonconforming Work other than that for
which payment is permitted by Clause 6.1.8.2.
.5 Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of
defending suits or claims for infringement of patent or other intellectual
property rights arising from such requirement by the Contract Documents;
payments made in accordance with legal judgments against the Construction
Manager resulting from such suits or claims and payments of settlements
made with the Owner's consent; provided, however, that such costs of legal
defenses, judgements and settlements shall not be included in the
calculation of the Construction Manager's Fee or the Guaranteed Maximum
Price and provided that such royalties, fees and costs are not excluded
by the last sentence of Subparagraph 3.17.1 of AIA Document A201 or other
provisions of the Contract Documents.
.6 Data processing costs related to the Work.
.7 Deposits lost for causes other than the Construction Manager's
negligence or failure to fulfill a specific responsibility to the Owner
set forth in this Agreement.
.8 Legal, mediation and arbitration costs, other than those arising from
disputes between the Owner and Construction Manager, reasonably incurred
by the Construction Manager in the performance of the Work and with the
Owner's written permission, which permission shall not be unreasonably
withheld.
.9 Expenses incurred in accordance with the Construction Manager's
standard personnel policy for relocation and temporary living allowances
of personnel required for the Work, in case it is necessary to relocate
such personnel from distant locations.
6.1.7 OTHER COSTS
.1 Other costs incurred in the performance of the Work if and to the
extent approved in advance in writing by the Owner.
<PAGE>
6.1.8 EMERGENCIES AND REPAIRS TO DAMAGED OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Subparagraph 6.1.1
which are incurred by the Construction Manager:
.1 In taking action to prevent threatened damage, injury or loss in case
of an emergency affecting the safety of persons and property, as provided
in Paragraph 10.3 of AIA Document A201.
.2 In repairing or correcting damaged or nonconforming Work executed by
the Construction Manager or the Construction Manager's Subcontractors or
suppliers, provided that such damaged or nonconforming Work was not caused
by the negligence or failure to fulfill a specific responsibility to the
Owner set forth in this Agreement of the Construction Manager or the
Construction Manager's foremen, engineers or superintendents, or other
supervisory, administrative or managerial personnel of the Construction
Manager, or the failure of the Construction Manager's personnel to supervise
adequately the Work or the Subcontractors or suppliers, and only to the
extent that the cost of repair or correction is not recoverable by the
Construction Manager from insurance, Subcontractors or suppliers.
6.1.9 The costs described in Subparagraphs 6.1.1 through 6.1.8 shall be
included in the Cost of the Work notwithstanding any provision of AIA
Document A201 or other Conditions of the Contract which may require the
Construction Manager to pav such costs, unless such costs are excluded by
the provisions of Paragraph 6.2.
6.2 COSTS NOT TO BE REIMBURSED
6.2.1 The Cost of the Work shall not include:
.1 Salaries and other compensation of the Construction Manager's
personnel stationed at the Construction Manager's principal office or
offices other than the site office, except as specifically provided in
Clauses 6 1.2.2 and 6.1.2.3.
.2 Expenses of the Construction Manager's principal office and offices other
than the site office except as specifically provided in Paragraph 6. 1.
.3 Overhead and general expenses, except as mav be expressly included in
Paragraph 6.1.
.4 The Construction Manager's capital expenses, including interest on the
Construction Manager's capital emploved for the Work.
.5 Rental costs of machinery and equipment, except as specifically
provided in Subparagraph 6. 1.5.2.
.6 Except as provided in Clause 6.1.8.2, costs due to the negligence of
the Construction Manager or to the failure of the Construction Manager to
fulfill a specific responsibility to the Owner set forth in this Agreement.
.7 Costs incurred in the performance of Preconstruction Phase Services.
.8 Except as provided in Clause 6.1.7. 1, any cost not specifically and
expressly described in Paragraph 6. 1.
.9 Costs which would cause the Guaranteed Maximum Price to be exceeded.
6.3 DISCOUNTS, REBATES AND REFUNDS
6.3.1 Cash discounts obtained on payments made by the Construction Manager
shall accrue to the Owner if (1) before making the payments the
Construction Manager included them in an Application for Payment and
received payment therefor from the Owner, or (2) the Owner has deposited
funds with the Construction Manager with which to make payments; otherwise,
cash discounts shall accrue to the Construction Manager. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Construction Manager shall
make provisions so that they can be secured.
6.3.2 Amounts which accrue to the owner in accordance with the provisions
of Subparagraph 6.3.1 shall be credited to the Owner as a deduction from
the Cost of the Work.
6.4 ACCOUNTING RECORDS
6.4.1 The Construction Manager shall keep full and detailed accounts and
exercise such controls as may be necessary for proper financial management
under this Contract; the accounting and control systems shall be
satisfactory to the Owner. The Owner and the Owner's accountants shall be
afforded access to the Construction Manager's records, books,
correspondence, instructions, drawings, receipts, subcontracts, purchase
orders, vouchers, memoranda and other data relating to this Project, and
the Construction Manager shall preserve these for a period of three years
after final payment, or for such longer period as may be required by law.
<PAGE>
ARTICLE 7
CONSTRUCTION PHASE
7.1 PROGRESS PAYMENTS
7.1.1 Based upon Applications for Payment submitted to the Architect by the
Construction Manager and Certificates for Payment issued by the Architect,
the Owner shall make progress payments on account of the Contract Sum to
the Construction Manager as provided below and elsewhere in the Contract
Documents.
7.1.2 The period covered by each Application for Payment shall be one
calendar month ending on the last day of the month, or as follows:
No Application for Payment shall be deemed to have been submitted unless
and until saidApplication, together with all evidence specified in
Subparagraph 7.1.4, has been received by Architect.
7.1.3 Provided an Application for Payment is received by the Architect not
later than the 5th day of a month, the Owner shall make payment to the
Construction Manager not later than the 20th day of the same month. If an
Application for Payment is received by the Architect after the application
date fixed above, payment shall be made by the Owner not later than 20 days
after the Architect receives the Application for Payment.
7.1.4 With each Application for Payment, the Construction Manager shall
submit payrolls, petty cash accounts, receipted invoices or invoices with
check vouchers attached, and any other evidence required by the Owner or
Architect to demonstrate that cash disbursements already made by the
Construction Manager on account of the Cost of the Work equal or exceed
(1) progress payments already received by the Construction Manager; less
(2) that portion of those payments attributable to the Construction
Manager's Fee; plus (3) payrolls for the period covered by the present
Application for Payment.
7.1.5 Each Application for Payment shall be based upon the most recent
schedule of values submitted by the Construction Manager in accordance
with the Contract Documents. The schedule of values shall allocate the
entire Guaranteed Maximum Price among the various portions of the Work,
except that the Construction Manager's Fee shall be shown as a single
separate item. The schedule of values shall be prepared in such form and
supported by such data to substantiate its accuracy as the Architect may
require.
ion Manager's Applications for Payment.
7.1.6 Applications for Payment shall show the percentage completion of
each portion of the Work as of the end of the period covered by the
Application for Payment. The percentage completion shall be the lesser
of (1 ) the percentage of that portion of the Work which has actually been
completed or (2) the percentage obtained by dividing (a) the expense which
has actually been incurred by the Construction Manager on account of that
portion of the Work for which the Construction Manager has made or intends
to make actual payment prior to the next Application for Payment by (b)
the share of the Guaranteed Maximum Price allocated to that protion of the
Work in the schedule of values.
7.1.7 Subject to other provisions of the Contract Documents, the amount
of each progress payment shall be computed as follows:
<PAGE>
7.1.3 ADDENDUM TO CONTRACT FOR CONSTRUCTION
Owner and Contractor agree that paragraph 10.1.4 of the General Conditions
of the Contract for Construction shall be without force and effect and
shall be superseded in their entirety by this Addendum. To the extent
that any other provisions of the Contract for Construction or General
Conditions are inconsistent with or conflict with this Addendum, then the
terms and provisions of this Addendum shall control.
The Owner expressly acknowledges and agrees that it will unconditionally
reimburse, defend, indemnify and hold harmless the Contractor, its
successors and assigns, from and against any and all liabilities which may,
now or in the future be suffered or otherwise incurred by Contractor or
which the Contractor may become subject to as a result of or in connection
with:
(i) the presence of Hazardous material on, under, about, or emanating from
the Property;
(ii) claims relating directly or indirectly, in whole or in part, to the
presence or removal of any Hazardous materials on, under, upon, from, or
about the Property, including, but not limited to, any claims against the
Contractor arising out of or in any manner related to the hauling by the
Contractor, or its employees, agents, or sub-contractors, of debris, dirt,
topsoil, devices, or other substances from the Property which are
contaminated with or contain Hazardous materials and the depositing of such
contaminted debris, dirt, topsoil, devices, or other substances on the real
property of any third party, the Contractor, or other real property of the
Owner;
The foregoing indemnification and agreements shall be continuing and
irrevocable and shall survive the termination of the Contract for
Construction (regardless of the manner of termination) and the completion
of the Work. No act or omission on the part of the Contractor shall in
any way affect, limit, impair, or discharge the Owner's liability under
the indemnification herein set forth. The term "Hazardous Materials" as
used above shall mean any chemical, material, or substance which is
prohibited or regulated by any governmental authority.
<PAGE>
.1 Take that portion of the Guaranteed Maximum Price properly allocable
to completed Work as determined by multiplying the percentage completion
of each portion of the Work by the share of the Guaranteed Maximum Price
allocated to that portion of the Work in the schedule of values. Pending
final determination of cost to the Owner of changes in the Work, amounts
not in dispute may be included as provided in Subparagraph 7.3.7 of AlA
Document A201, even though the Guaranteed Maximum Price has not yet been
adjusted by Change Order.
.2 Add that portion of the Guaranteed Maximum Price properly allocable
to materials and equipment delivered and suitably stored at the site for
subsequent incorporation in the Work or, if approved in advance by the
Owner, suitably stored off the site at a location agreed upon in writing.
.3 Add the Construction Manager's Fee, less retainage of ten percent
(10-%). The Construction Manager's Fee shall be computed upon the Cost
of the Work described in the two preceding Clauses at the rate stated in
Subparagraph 5.1.1 or, if the Construction Manager's Fee is stated as a
fixed sum in that Subparagraph, shall be an amount which bears the same
ratio to that fixed-sum Fee as the Cost of the Work in the two preceding
Clauses bears to a reasonable estimate of the probable Cost of the Work
upon its completion.
.4 Subtract the aggregate of previous payments made by the Owner.
.5 Subtract the shortfall, if any, indicated by the Construction Manager
in the documentation required by Subparagraph 7.1.4 to substantiate prior
Applications for Payment, or resulting from errors subsequentlydiscovered
by the Owner's accountants in such documentation.
.6 Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of AIA
Document A201.
7.1.8 Except with the Owner's prior approval, payments to Subcontractors
shall be subject to retention of not less than ten percent (tO %). The
Owner and the Construction Manager shall agree upon a mutually acceptable
procedure for review and approval of payments and retention for subcontracts.
7.1.9 Except with the Owner's prior approval, the Construction Manager
shall not make advance payments to suppliers for materials or equipment
which have not been delivered and stored at the site.
7.1.10 In taking action on the Construction Manager's Applications for
Payment, the Architect shall be entitled to rely on the accuracy and
completeness of the information furnished by the Construction Manager
and shall not be deemed to represent that the Architect has made a
detailed examination, audit or arithmetic verification of the documentation
submitted in accordance with Subparagraph 7.1.4 or other supporting data;
that the Architect has made exhaustive or continuous on-site inspections or
that the Architect has made examinations to ascertain how or for what
purposes the Construction Manager has used amounts previously paid on
account of the Contract. Such examinations, audits and verifications,
if required by the Owner, will be performed by the Owner's accountants
acting in the sole interest of the Owner.
7.2 FINAL PAYMENT
7.2.1 Final payment shall be made by the Owner to the Construction Manager
when (1) the Contract has been fully performed by the Construction Manager
except for the Construction Manager's responsibility to correct
nonconforming Work. as provided in Subparagraph 12.2.2 of AIA Document
A201, and to satisfy other requirements, if any, which necessarily survive
final payment; (2) a final Application for Payment and a final accounting
for the Cost of the Work have been submitted by the Construction Manager and
reviewed by the Owner's accountants; and (3) a final Certificate for
Payment has then been issued by the Architect; such final payment shall be
made by the Owner not more than 30 days after the issuance of the
Architect's final Certificate for Payment, or as follows:
7.2.2 The amount of the final payment shall be calculated as follows:
.1 Take the sum of the Cost of the Work substantiated by the Construction
Manager's final accounting and the Construction Manager's Fee; but not more
than the Guaranteed Maximum Price.
.2 Subtract amounts, if any, for which the Architect withholds, in whole
or in part, a final Certificate for Payment as provided in Subparagraph
9.5.1 of AIA Document A201 or other provisions of the Contract Documents.
.3 Subtract the aggregate of previous payments made by the Owner. If
the aggregate of previous payments made by the Owner exceeds the amount
due the Construction Manager, the Construction Manager shall reimburse
the difference to the Owner.
<PAGE>
7.2.3 The Owner's accountants will review and report in writing on the
Construction Manager's final accounting within 30 days after delivery of
the final accounting to the Architect by the Construction Manager. Based
upon such Cost of the Work as the Owner's accountants report to be
substantiated by the Construction Manager's final accounting, and provided
the other conditions of Subparagraph 7.2. 1 have been met, the Architect
will, within seven days after receipt of the written report of the Owner's
accountants, either issue to the Owner a final certificate for Payment with
a copy to the Construction Manager, or notify the Construction Manager and
Owner in writing of the Architect's reasons for withholding a certificate
as provided in Subparagraph 9.5.1 of AlA Document A201. The time periods
stated in this Paragraph 7.2 supersede those stated in Subparagraph 9.4.1
of AIA Document A201.
7.2.4 If the Owner's accountants report the Cost of the Work as
substantiated by the Construction Manager's final accounting to be less
than claimed by the Construction Manager, the Construction Manager shall
be entitled to proceed in accordance with Article 9 without a further
decision of the Architect. Unless agreed to otherwise, a demand for
mediation or arbitration of the disputed amount shall be made by the
Construction Manager within 60 days after the Construction Manager's
receipt of a copy of the Architect's final Certificate for Payment. Failure
to make such demand within this 60 day period shall result in the
substantiated amount reported by the Owner's accountants becoming
binding on the Construction Manager. Pending a final resolution of
the disputed amount, the Owner shall pay the Construction Manager the
amount certified in the Architect's final Certificate for Payment.
7.2.5 If, subsequent to final payment and at the Owner's request, the
Construction Manager incurs costs described in Paragraph 6.1 and not
excluded by Paragraph 6.2 (1) to correct nonconforming Work, or (2)
arising from the resolution of disputes, the Owner shall reimburse the
Construction Manager such costs and the Construction Manager's Fee, if
any, related thereto on the same basis as if such costs had been incurred
prior to final payment, but not in excess of the Guaranteed Maximum Price.
If the Construction Manager has participated in savings, the amount of such
savings shall be recalculated and appropriate credit given to the Owner in
determining the net amount to be paid by the Owner to the Construction
Manager.
ARTICLE 8
INSURANCE AND BONDS
8.1 INSURANCE REQUIRED OF THE CONSTRUCTION MANAGER
During both phases of the Project, the Construction Manager shall purchase
and maintain insurance as set forth in Paragraph I 1. 1 of AIA Document
A201. Such insurance shall be written for not less than the following
limits, or greater if required by law:
8.1.1 Workers' Compensation and Employers' Liability meeting statutory
limits mandated by State and Federal laws. If (1) limits in excess of
those required by statute are to be provided or (2) the employer is not
statutorily bound to obtain such insurance coverage or (3) additional
coverages are required, additional coverages and limits for such insurance
shall be as follows:.
8.1.2 Commercial General Liability including coverage for Premises-
Operations, Independent Contractors' Protective, Products-Completed
Operations, Contractual Liability, Personal Injury, and Broad Form
Property Damage (including coverage for Explosion, Collapse and Underground
hazards):
Exhibit B Insurance Requirements
$Each Occurrence
sGeneral Aggregate
$Personal and Advertising Injury
<PAGE>
ARTICLE 11
INSURANCE
11.1 CONTRACTOR'S LIABILITY INSURANCE
11.1.1 Contractor shall purchase and maintain such insurance as shall
protect him from claims set forth below which may arise out of or result
from Contractor's operations under the Contract, whether such operations
be by himself or by any Subcontractor or by anyone directly or indirectly
employed by any of them, or by anyone for whose acts anyone for whose acts
any of them may be liable:
.1 claims under workers' or workmen's compensation, disability benefit
and other similar employee benefit acts;
.2 claims for damages because of bodily injury, occupational sickness or
disease, or death of his employees;
.3 claims for damages because of bodily injury, sickness or disease, or
death of any persons other than his employees;
.4 claims for damages insured by usual personal injury liability coverage
which are sustained (1) by any person as a result of an offense directly
or indirectly related to the employment of such person by Contractor, or
(2) by any other person;
.5 claims for damages, other than to the Work itself, because of injury
to or destruction of tangible property, including loss of use resulting
therefrom; and
.6 claims for damages because of bodily injury or death of any person or
property damage arising out of the ownership, maintenance or use of any
motor vehicle.
11.1.2 The insurance required by Subparagraph 11.1.1 shall be written for
not less than any limits of liability specified in the Contract Documents,
or required by law, whichever is greater. Before commencement of the Work
and until Final Payment (except that products liability coverage shall
continue in force until two years after the date of Final Payment),
Contractor shall procure, deposit, and maintain for Owner with
respect to the Project insurable satisfactory to owner, as follows:
11.1.2.1 Worker's Compensation and Employer's Liability Insurance as
required by the Worker's Compensation Laws of the state where the Project
is located.
11.1.2.2 Commercial General Liability Insurance (broad form) covering Bodily
Injury and Property Damage as follows:
<PAGE>
A. Minimum Limits of Liability
General Aggregate $1,000,000
Products/Completed Operations Aggregate 1,000,000
Personal & Advertising Injury 750,000
Each Occurrence 750,000
Fire Damage (any one fire) 50,000
Medical Expense (any one person) 5,000
B. The Commercial General Liability Policy shall provide insurance for
Contractor for Bodily Injury to third parties and Property Damage to third
parties' property, other than to the Work, arising out of:
1. Work performed by Contractor himself with his own employees, called
"Premises - operations."
2. Work performed by his subcontractors, called "Sublet Work" or
"Contractors - Subcontractors Work."
3. Contractual Liability assumed under this Agreement, called "Hold
Harmless" clauses or indemnity agreements, subject to the terms and
conditions of the policy.
4. Products Liability coverage covering the completed building or
installation of products furnished.
5. If any work is to be performed below the surface of the ground, the
coverage shall be extended to include protection against property damage
caused by explosion, collapse of structure and damage to underground pipes
and utilities.
11.1.2.3 Automobile Liability Insurance covering Bodily Injury and Property
Damage, as follows:
A. Limits of Liability - The Combined Single Limit for Bodily Injury and
Property Damage is $1,000,000.
B. This insurance is to apply with respect to all owned, non-owned or
hired vehicles of Contractor.
11.1.2.4 Excess liability insurance in the amount of not less than
$10,000,000 following the form and amounts of the primary insurance
described in paragraph 11.1.2.2 and 11.1.2.3, and Employer's Liability
Insurance in paragraph 11.1.2.1.
11.1.2.5 All insurance maintained by Contractor shall provide that:
A. Certificates signed by the insurance carrier stating the limits of
liability and expiration date shall be filed in triplicate with Owner
before operations are begun. Such certificates clearly shall indicate
conformity to requirements of this Agreement, and shall be sufficiently
comprehensive as to permit Owner to determine that the required insurance
coverage has been provided without the necessity of examining the individual
insurance policies. If the initial insurance expires prior to completion
of the work, renewal certificates shall be furnished by the date of
expiration.
<PAGE>
B. Owner shall be included as an additional insured on all policies
except Workers' Compensation with the understanding that any obligation
imposed upon the insured (including without limitation the liability to
pay premiums) shall be the sole obligation of Contractor and not that of
any other insured;
C. Except in the case of worker's compensation insurance, proceeds for
losses, if any, shall be adjusted by and payable to the party purchasing
the insurance;
D. The insurer thereunder waives all rights of subrogation against Owner,
any right of set-off and counterclaim and any other right to deduction
whether by attachment or otherwise as respects property insurance up to
the limit of insurance carried;
E. Such insurance shall be primary without right of contribution of any
other insurance carried by or on behalf of Owner.
11.1.2.6 [Not Used]
11.1.2.7 Contractor shall require each of his Subcontractors to procure
and maintain, until the completion of that Subcontractor's work, insurance
of the types specified below. It shall be the responsibility of Contractor
to ensure that all his subcontractors comply with all of the insurance
requirements contained herein relating to such subcontractors.
Subcontractors shall, at a minimum, maintain the following insurance:
1. Commercial General Liability Policy
a. General Aggregate $ 1,000,000
b. Products/Completed Operations Aggregate 1,000,000
c. Personal & Advertising Injury 500,000
d. Each Occurrence 500,000
e. Fire Damage (any one fire) 50,000
f. Medical Expense (any one person) 5,000
2. Workmen's Compensation and Employer's Liability
a. Coverage A: Workers Compensation Statutory
b. Coverage B: Employers Liability $100,000 each
accident
(policy limit) $500,000 disease
(each employee) $100,000 disease
<PAGE>
3. Automobile Liability
a. Combined Single Limit Bodily Injury and
Property Damage $1,000,000
4. Excess Liability
a. Each Occurrence $1,000,000
b. Aggregate $1,000,000
11.1.2.8 Contractor shall carry Risk of Physical Loss, or "Special" form
Builders Risk Insurance, including extended coverage, vandalism, malicious
mischief to the full replacement value of all the Work and all materials,
equipment and supplies on or near the site of the Work. Such insurance
shall be written in the name of the Owner and Contractor. Contractor,
Subcontractors, and Sub-subcontractors shall all be responsible for
insuring their own tools, equipment and appliances.
11.1.3 Contractor's liability insurance shall include contractual
liability insurance applicable to Contractor's obligations under Paragraph
4.18.
11.1.4 Certificates of insurance acceptable to Owner shall be filed with
Owner prior to commencement of the Work. These Certificates, as well as
insurance policies required by this Paragraph ii. 1, shall contain a
provision that coverage shall not be canceled or allowed to expire until
at least thirty (30) days' prior written notice has been given to Owner.
Such Certificates shall also indicate that the foregoing insurance policies
have been endorsed to name Owner as an additional insured. If any of the
foregoing insurance coverages are required to remain in force after final
payment, an additional certificate evidencing continuing of such coverage
shall be submitted along with the Application for Final Payment.
11.2 OWNER'S LIABILITY INSURANCE
11.2.1 Owner shall be responsible for purchasing and maintaining his own
liability insurance and, at his option, may purchase and maintain such
insurance as shall protect him against claims which may arise from
operations under the Project.
<PAGE>
Products-Completed Operations Aggregate
.1 The policy shall be endorsed to have the General Aggregate apply to
this Project only.
.2 Products and Completed Operations insurance shall be maintained for a
minimum period of at least ___ year(s) after either 90 days following
Substantial Completion or final payment, whichever is earlier.
.3 The Contractual Liability insurance shall include coverage sufficient
to meet the obligations in AIA Document A201 under Paragraph 3.18.
8.1.3 Automobile Liability (owned, non-owned and hired vehicles) for
bodily injury and property damage:
$ Each Accident
8.1.4 Other coverage:
8.2 INSURANCE REQUIRED OF THE OWNER
During both phases of the Project, the Owner shall purchase and maintain
liability and property insurance, including waivers of subrogation, as set
forth in Paragraphs 11.2 and 11.3 of AIA Document A201. Such insurance
shall be written for not less than the following limits, or greater if
required by law:
8.2.1 Property Insurance:
$ Deductible Per Occurrence
$ Aggregate Deductible
8.2.2 Boiler and Machinery insurance with a limit of $
8.3 PERFORMANCE BOND AND PAYMENT BOND
8.3.1 The Construction Manager Shall furnish bonds covering faithful
performance of the Contract and payment of obligations arising thereunder.
Bonds may be obtained through the Construction Manager's usual source and
the cost thereof shall be included in the Cost of the Work. The amount of
each bond shall be equal to One Hundred percent (100 %) of the Contract Sum.
8.3.2 The Construction Manager shall deliver the required bonds to the
Owner at least three days before the commencement of any Work at the
Project site.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 DISPUTE RESOLUTION FOR THE PRECONSTRUCTION PHASE
9.1.1 Claims, disputes or other matters in question between the parties to
this Agreement which arise prior to the commencement of the Construction
Phase or which relate solely to the Preconstruction Phase services of the
Construction Manager or to the Owner's obligations to the Construction
Manager during the Preconstruction Phase, shall be resolved by mediation
or by arbitration.
<PAGE>
9.1.2 Any mediation conducted pursuant to this Paragraph 9 1 shall be held
in accordance with the Construction Industry Mediation Rules of the
American Arbitration Association currently in effect, unless the parties
mutually agree otherwise. Demand for mediation shall be filed in writing
with the other party to this Agreement and with the American Arbitration
Association. Any demand for mediation shall be made within a reasonable
time after the claim, dispute or other matter in question has arisen. In
no event shall the demand for mediation be made after the date when
institution of legal or equitable proceedings based upon such claim,
dispute or other matter in question would be barred by the applicable
statute of limitations.
9.1.3 Any claim, dispute or other matter in question not resolved by
mediation shall be decided by arbitration in accordance with the
Construction industry Arbitration Rules of the American Arbitration
Association currently in effect unless the parties mutually agree
otherwise.
9.1.4 Demand for arbitration shall be filed in writing with the other
party to this Agreement and with the American Arbitration Association.
A demand for arbitration may be made concurrently with a demand for
mediation and shall be made within a reasonable time after the claim,
dispute or other matter in question has arisen. In no event shall the
demand for arbitration be made after the date when institution of legal
or equitable proceedings based upon such claim, dispute or other matter
in question would be barred by the applicable statute of limitations.
9.1.5 No arbitration arising out of or relating to the Contract Documents
shall include, by consolidation or joinder or in any other manner, the
Architect, the Architect's employees or consultants, except by written
consent containing specific reference to the Agreement and signed by the
Architect, Owner, Construction Manager and any other person or entity
sought to be joined. No arbitration shall include, by consolidation or
joinder or in any other manner, parties other than the Owner, Construction
Manager, a separate contractor as described in Article 6 of AIA Document
A201 and other persons substantially involved in a common question of fact
or law whose presence is required if complete relief is to be accorded in
arbitration. No person or entity other than the Owner or Construction
Manager or a separate contractor as described in Article 6 of AIA
Document A201 shall be included as an original third party or additional
third party to an arbitration whose interest or responsibility is
insubstantial. Consent to arbitration involving an additional person
or entity shall not constitute agreement to arbitration of a dispute not
described in such consent or with a person or entity not named or described
therin. The foregoing agreement to arbitrate and other agreements to
arbitrate with an additional person or entity duly consented to by parties
to this Agreerment shall be specifically enforceable under applicable law
in any court having jurisdiction thereof.
9.1.6 The award rendered by the arbitrator or arbitrators shall be final,
and judgment may be entered upon it in accordance with applicable law in
any court having jurisdiction thereof.
9.2 DISPUTE RESOLUTION FOR THE CONSTRUCTION PHASE
9.2.1 Any other claim, dispute or other matter in question arising out of
or related to this Agreement or breach thereof shall be settled in
accordance with Article 4 of AIA Document A201, except that in addition
to and prior to arbitration, the parties shall endeavor to settle disputes
by mediation in accordance with the Construction Industry Mediation Rules
of the American Arbitration Association currently in effect unless the
parties mutually agree otherwise. Any mediation arising under this
Paragraph shall be conducted in accordance with the provisions of
Subparagraphs 9.1.2 and 9.1.3.
9.3 OTHER PROVISIONS
9.3.1 Unless otherwise noted, the terms used in this Agreement shall have
the same meaning as those in the 1987 Edition of ATA Document A201, General
Conditions of the Contract for Construction.
9.3.2 EXTENT OF CONTRACT
This Contract, which includes this Agreement and the other documents
incorporated herein by reference, represents the entire and integrated
agreement between the Owner and Construction Manager and supersedes all
prior negotiations, representations or agreements, either written or oral.
This Agreement may be amended only by written instrument signed by both the
Owner and Construction Manager. If anything in any document incorporated
into this Agreement is inconsistent with this Agreement, this Agreement
shall govern.
9.3.3 OWNERSHIP AND USE OF DOCUMENTS
The Drawings, Specifications and other documents prepared by the Architect,
and copies thereof furnished to the Construction Manager, are for use
solely with respect to this Project, They are not to be used by the
Construction Manager, Subcontractors, Sub-subcontractors or suppliers on
other projects, or for additions to this Project outside the scope of the
Work, without the specific written consent of the Owner and Architect.
The Construction Manager, Subcontractors, Sub-subcontractors and suppliers
are granted a limited license to use and reproduce applicable portions of
the Drawings, Specifications and other documents prepared by the
Architect appropriate to and for use in the of their Work under the
Contract Documents.
<PAGE>
9.3.4 GOVERNING LAW
The Contract shall be governed by the law of the place where the Project
is located.
9.3.5 ASSIGNMENT
The Owner and Construction Manager respectively bind themselves, their
partners, successors, assigns and legal representatives to the other party
hercto and to partners, successors, assigns and legal representatives of
such other party in respect to covenants, agreements and obligations
contained in the Contract Documents. Neither party to the Contract shall
assign the Contract as a whole without written consent of the other. If
either party attempts to make such an assignment without such consent, that
party shall nevertheless remain legally responsible for all obligations
under the Contract.
ARTICLE 10
TERMINATION OR SUSPENSION
10.1 TERMINATION PRIOR TO ESTABLISHING GRARANTEED MAXIMUM PRICE
10.1.1 Prior to execution by both parties of Amendment No 1 establishing
the Guaranteed Maximum Price, the Owner may terminate this Contract at any
time without cause, and the Construction Manager may terminate this
Contract for any of the reasons described in Subparagraph 14.1.1 of AIA
Document A201.
10.1.2 If the Owner or Construction Manager terminates this Contract
pursuant to this Paragraph 10.1 prior to commencement of the Construction
Phase, the Construction Manager shall be equitably compensated for
Preconstruction Phase services performed prior to receipt of notice of
termination; provided, however, that the compensation for such services
shall not exceed the compensation set forth in Subparagraph 4.1.1.
10.1.3 If the Owner or Construction Manager terminates this Contract
pursuant to this Paragraph 10.1 after commencement of the Construction
Phase, the Construction Manager shall, in addition to the compensation
provided in Subparagraph 10.1.2, be paid an amount calculated as follows:
.1 Take the Cost of the Work incurred by the Construction Manager.
.2 Add the Construction Manager's Fee computed upon the Cost of the Work
to the date of termination at the rate stated in Paragraph 5.1 or, if the
Construction Manager's Fee is stated as a fixed sum in that Paragraph, and
amount which bears the same ratio to that fixed sum Fee as the Cost of Work
at the time of termination bears to a reasonable estimate of the probable
Cost of the Work upon its completion.
.3 Subtract the aggregate of previous payments made by the Owner on
account of the Construction phase.
The Owner shall also pay the Construction Manager fair compensation, either
by purchase or rental at the election of the Owner, for any equipment owned
by the Construction Manager which the Owner elects to retain and which is
not otherwise included in the Cost of the Work under Clause 10.1.3.1. To
the extent that the Owner elects to take legal assignment of subsontracts
and purchase orders (including rental agreements), the Construction Manager
shall, as a condition of receiving the payments referred to in this Article
10, execute and deliver all such papers and take all such steps, including
the legal assignment of such subcontracts and other contractual rights of
the Construction Manager, as the Owner may require for the purpose of fully
vesting in the Owner the rights and benefits fo the Construction Manager
under such subcontracts or purchase orders.
Subcontracts, purchase orders and rental agreements entered into by the
Construction Manager with the Owner's written approval prior to the
execution of Amendment No.1 shall contain provisions permitting assignment
to the Owner as described above. If the Owner accepts such assignment, the
Owner shall reimburse or indemnify the Construction Manager with respect to
all costs arising under the subcontract, purchace order or rental agreement
except those which would not have be reimbursable as Cost of the Work if
the contract had not been terminated. If the Owner elects not to accept
the assingment of any subcontract, purchase order or rental agreement
which would have constituted a Cost of the Work had this agreement not
been terminated, the Construction Manager shall terminate such subcontract,
pruchase order or rental agreement and the Owner shall pay the Construction
Manager the costs necessarily incurred by the Construction Manager by
reason of such termination.
10.2 TERMINATION SUBSEQUENT TO ESBABLISHING GUARANTEED MAXIMUM PRICE
Subsequent to execution by both parties of Amendment No.1, the Contract may
be terminated as provided in Article 14 of AIA Document A201.
10.2.1 In the event of such termination by the Owner, the amount payable
to the Construction Manager under Subparagraph 14.1.2 of AIA Document A201
shall not exceed the amount the Construction Manager would be entitled to
receive under Subparagraphs 10.1.2 or 10.1.3 above, except that the
Construction Manager's Fee shall be calculated as if the Work had been
fully completed by the Construction Manager, Including a reasonable
estimate of the Cost of the Work for Work not actually completed.
10.3 SUSPENSION
The Work may be suspended by the Owner as provided in Article 14 of AIA
Document A201; in such case, the Guaranteed Maximum Price, if established,
shall be increased as provided in Subparagraph 14.3.2. of AIA Document A201
except that the term "cost of performance of the Contract" in that
Subparagraph shall be understood to mean the Cost of the Work and the term
"profit" shall be understood to mean the Construction Manager's Fee as
described in Subparagraphs 5.1.1 and 5.3.4 of this Agreement.
Article 11
Other Conditions and Services
11.1 The parties agree that the General Conditions of the Contract for
Construction (AIA201) referred to in paragraph 1.2 may be amended by the
Construction Manager at the time of its submission of the GMP. In the event
the General Conditions are amended, all provisions and references herein shall
be deemed to be modified to be consistent therewith.
11.2 The Owner acknowledges that the Construction Manager may perform
additional work using its own forces only in the event that the bids
received from subcontractors for a given phase of work is higher that
that which is included in the GMP. Said work shall be considered to be
a part of the initial capitals cost of the work in addition to the
Contractor's fee.
11.3 It shall be understood that Blue II shall be responsible for funding
the work under this contract to the Contractor to the extent of net
receipts available from a $3,000,000 loan from its lender. The Frederick
Brewing Company shall be responsible for providing for all funding for
the remaining balance of the contract. The relationship between
Frederick Brewing Company and Blue II, is strictly that of Tenant
and Landlord. Nothing contained in this contract shall be deemed or
construed to create or imply any other relationship between them,
including that of partners, joint ventures, principal and agent,
employer and employee or other such relationship.
11.4 The parties acknowledge that the Owner may elect to delete all or a
significant portion of certain components of the work, including the work
relating to the administration and office areas of the project. In the
event the Owner elects to do so, an appropriate equitable adjustment will
be made to the Contract. To the extent any deletion of work adversely
affects the Contractor's ability to obtain any government approval of it's
work for it's intended purpose will not be a condition for substantial
completion, the Contractor will not be required to obtain such governmental
approval of it's work and/or a Use or Occupancy adjustment will be made to
the Contract. To the extent any deletion of work adversely affects the
Contractor's ability to obtain any government approval of it's work for
it's occupancy permit for the project, the Owner's occupancy or ability to
use the work for it's intended purpose will not be a condition for
substantial completion, the Contractor will not be required to obtain such
governmental approroval of it's work and/or a Use and Occupancy permit, and
the Contractor will be entitled to progress payments and/or final payment
as applicable, upon the approval by the Architect of the work actually
performed.
Article 1
Guaranteed Maximum Price
The Construction Manager's Guaranteed Maximum Price for the Work, including
the estimated Cost of the Work as defined in Article 6 and the Construction
Manager's Fee as defined in Article 5, is $2,742,903 (Two million seven
hundred forty two thousand nine hundred three dollars).
ARTICLE 11
CONTRACT TIME
The date of Substantial Completion established by this Amendment is:
December 17, 1996.
OWNER: Frederick Brewing Co. By: /s/Kevin E. Brannon
Chairman
Blue II LLC By: /s/Edward D. Scott
Managing Member
CONSTRUCTION MANAGER By: /s/Bradley C. Guyton
ATTEST: /s/Teresa White
EXHIBIT 10 (v)
KLINE SCOTT VISCO
COMMERCIAL REAL ESTATE, INC.
117 WEST PATRICK STREET
FREDERICK, MARYLAND 21701
301-694-8444
LEASE AGREEMENT AND
OPTION TO PURCHASE
THIS LEASE AGREEMENT AND OPTION TO PURCHASE
("Lease") is made this 17th day of July, 1996, by and between BLUE II,
LLC, a Maryland limited liability company (hereinafter called
"Landlord") and FREDERICK BREWING CO., a Maryland corporation
(hereinafter called "Tenant").
EXPLANATORY NOTE:
Landlord is the owner of a certain parcel of real property situate,
lying and being in the Wedgewood Business Park, Frederick County,
Maryland. It is the intention of the parties that Landlord will construct a
building and other improvements to be located on such parcel of real
property subject to the limitations described herein and in accordance
with certain plans and specifications which have been prepared and
approved by the parties. It is also the intention of the parties that upon
the completion by Landlord of such building and other improvements and
the acceptance thereof by Tenant, that Landlord will lease and rent unto
Tenant and Tenant will rent and lease from Landlord such parcel of real
property and the buildings and other improvements located thereon
pursuant to and in accordance with the hereinafter described plans and
specifications and the terms and conditions hereof. In addition, during
the term of this Lease, as extended, Landlord has granted to Tenant the
right and option to purchase such real property and the building and
improvements located thereon at and for a specified purchase price and
upon the terms and conditions described below.
NOW, THEREFORE, THIS LEASE, WITNESSETH: That for and in
consideration of the mutual covenants and agreements contained herein,
the rent to be paid by Tenant hereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do mutually covenant and agree as
follows:
1. DEMISED PREMISES: The Landlord does hereby lease unto
Tenant, and Tenant does hereby rent from Landlord, that certain real
property known as Lot 13 within the Wedgewood Business Park,
containing 243,906 square feet, more or less, as such Lot 13 is shown and
depicted on a certain plat entitled "Final Plat, Lots 13, 15 & 17, Section
One, Plat Four, Wedgewood Business Park" with revisions dated
November 21, 1994, and recorded among the Plat Records of Frederick
County, Maryland at Plat Book 55, page 77 (the "Land"), which shall be
leased to Tenant, together with the hereinafter described: (i) building to
be known as The Blue Ridge Brewery Building containing 45,454 square
feet, more or less (hereinafter the "Building"), (ii) tenant improvements
(hereinafter the "Improvements") (with the Land, Building and the
Improvements being hereinafter collectively the "Project"), and (iii) all
appurtenances, fixtures, equipment, utilities, rights, easements, rights-
of-way, tenements and hereditaments incident thereto, utilities,
structures and all other improvements of every nature and every kind to
be constructed by Landlord upon the Land (with the Land, the Building,
the Improvements and all other rights leased hereunder being hereinafter
collectively the "Premises"), all of which shall be set forth and shown on
the detailed construction Plans and Specifications (hereinafter defined).
<PAGE>
2. DEVELOPMENT, PLANS AND SPECIFICATIONS:
A. Landlord and Tenant have agreed upon certain plans and
specifications for the Project upon which the parties have based the
acquisition and development cost limitation of the Landlord as
hereinafter set forth ("Maximum Amount" as defined in paragraph 2.E
below). The plans and specifications have been approved and initialed
by the parties and are attached hereto as EXHIBIT A and made a part
hereof ("Plans and Specifications"). The Plans and Specifications
include the M-K Work (the scope of which is defined in EXHIBIT B-1
which is attached hereto and made a part hereof) and the Tenant's Work
(the scope of which is defined in EXHIBIT B-2 which is attached hereto
and made a part hereof).
B. (1) Subject to the limitation of the Maximum Amount
and final closing of Landlord's financing ("Bond Financing") from Signet
Bank and Maryland Economic Development Corporation ("MEDCO"),
Landlord shall commence and thereafter complete construction of the M-
K Work with due diligence in accordance with such Plans and
Specifications and utilizing Morgan-Keller, Inc. ("M-K"), as the general
contractor, DNC Architects, Inc., as the architect, and Harris, Smariga &
Associates, Inc., as the engineer, or such other contractors/design
professionals as Tenant shall designate from time to time. It is
understood and agreed by the parties that Tenant shall be a party to any
and all contracts and/or agreements with the above-described contractors
and design professionals and that Tenant shall have the responsibility for
the day-to-day management of the construction process. In addition,
Tenant shall have the right, prior to the commencement of work
hereunder, to approve all subcontractors and/or materialmen retained by
Landlord and/or its contractor in connection herewith, and Tenant shall
be made a party to any and all such agreements. Such approval shall be
undertaken in cooperation with Landlord. The agreement with M-K is
attached hereto and made a part hereof and marked EXHIBIT B-1. Upon
<PAGE>
the substantial completion of the M-K Work the parties shall make a
joint, physical inspection of the Project and as a result of such joint,
physical inspection, prepare a punchlist of unfinished, defective or
otherwise unacceptable M-K Work. Landlord shall use reasonable
diligence to have M-K complete and/or repair such punchlist items prior
to the Commencement Date. For purposes hereof, the term "substantial
completion of the M-K Work" shall be the stage in the progress of
construction when both of the following conditions are met: (1) the M-K
Work has been constructed in accordance with the Plans and
Specifications such that the total cost to complete and/or repair any
punchlist items shall not exceed Ten Thousand Dollars ($10,000.00); and
(2) Landlord has received a conditional Use and Occupancy permit from
the governing authorities. The Commencement Date shall occur on the
fourteenth (14th) day following the substantial completion of the M-K
Work. It is understood and agreed that Landlord shall have no obligation
with respect to Tenant's Work nor shall the failure to complete the
Tenant's Work affect the Commencement Date.
(2) Tenant (or Tenant's agent) shall enter upon the
Premises on a day-to-day basis during the period of construction of the
Project for purposes of observing the progress of the work and the
compliance by Landlord of its obligations hereunder. Tenant agrees to
promptly send written notice to Landlord and M-K in the event Tenant
observes or has actual knowledge of any patent deficiency or default by
Landlord in the construction of the M-K Work. No such entry or
inspection, including the joint physical inspection described above, shall
be a waiver of Landlord's obligations and warranties hereunder or M-K's
obligations pursuant to the general contract, and the failure by Tenant to
discover any defect in the work performed by Landlord and/or M-K shall
not relieve Landlord and/or M-K of any of its obligations, including its
obligation to correct such defect. In the event Landlord has not
completed and/or repaired the punchlist items described herein prior to
the Commencement Date hereunder, then Tenant is hereby authorized to
withhold from M-K the final payment until the completion of all
remaining punchlist items and acceptance thereof by Tenant. In the event
such remaining punchlist items have not been completed or repaired to
the satisfaction of Tenant within sixty (60) days following the
Commencement Date hereunder (unless Landlord is delayed in such
completion and/or repair by Tenant), Tenant shall have the right to use
such withheld amounts for the completion and/or repair of such punchlist
items. Any amounts remaining following the payment for such
completion and/or repairs shall be delivered to Landlord. Landlord and
Tenant are co-parties to the general contract with M-K, and therefore,
each shall have privity of contract with M-K and each party shall be
entitled to pursue any and all rights and remedies of the "owner" as set
forth in such contract in the event of a breach or default by M-K. In the
event Tenant determines that such a breach or default has occurred,
Landlord hereby agrees to cooperate, to the extent requested by Tenant,
in enforcing any and all rights pursuant to such general contract as is
necessary to remedy such breach. Notwithstanding anything in this
paragraph to the contrary, Landlord's obligations to Tenant are limited to
what the Contract between Landlord and M-K allows for regarding time
period payment, etc.
<PAGE>
C. Tenant shall have the right to order changes in the M-K
Work before and during construction provided said changes do not
materially alter the design or configuration of the Building as a whole
and provided such changes have been agreed to in writing (including the
price thereof) and signed by Tenant, M-K and Landlord's mortgagee.
Such changes may consist of additions, deletions or other revisions, and
the cost thereof to the extent such changes cause the total cost and
expense of completing the Project to exceed the Maximum Amount, then
such additional amounts shall be paid by Tenant directly to the supplier
providing such materials and/or the contractor installing such changes
within thirty (30) days from the completion thereof. The cost or credit to
Tenant of said changes shall be determined by mutual acceptance between
Tenant and M-K of a lump sum amount properly itemized and supported
by sufficient substantial data to permit evaluation of the proposed change
by Tenant. Any additional costs required by the changes described in the
immediately preceding sentences shall be paid by Tenant directly to the
supplier thereof prior to the commencement of the work for such changes,
or in the alternative, placed in escrow by Tenant to insure that the
amounts required for the payment of such changes are available for
payment by Landlord. In the event that Tenant makes changes to
Tenant's Work as shown on EXHIBIT B-2 or Tenant fails to perform its
obligations and requirements during the construction process, then any
delay in completing the Building caused by Tenant shall not in any
manner affect the Commencement Date. Under such circumstances,
Landlord agrees to make the Building ready for Tenant's occupancy not
later than the Commencement Date plus the number of days delay
resulting from Tenant's failure to comply with the provisions of this
paragraph. Tenant shall make all selections for work described on
EXHIBIT B-1 and shall meet with Landlord's architect, general
contractor and other agents and contractors promptly on Landlord's
request. Tenant shall comply with all time deadlines provided for in this
Lease and the M-K Contract and shall provide written confirmation of its
approval and/or selections of work and plans for preparation of work in
and to the Building.
D. Subject to the Maximum Amount, Landlord shall be
responsible for obtaining all necessary and appropriate permits, licenses,
agreements and/or other approvals from the applicable governmental
authorities or as otherwise necessary to complete the construction of the
M-K Work, and in connection therewith, Landlord shall be obligated to
pay any and all fees, deposits, costs or expenses incurred by Landlord in
obtaining such items. Subject to the terms and conditions hereof, it is
the intention of the parties that Tenant will be acquiring a finished and
completed "turn-key" project with regard to the M-K Work (in accordance
<PAGE>
with the Plans and Specifications) and the rent reflects any and all such
costs, fees and expenses. In no event shall the rent be increased for any
concealed or unknown conditions the risks of which are assumed by
Landlord, and no changes, adjustments for allowances, claims or other
adjustments to the Plans and Specifications shall result in an increase to
the rent, except for those changes expressly requested by Tenant in
accordance with paragraph 2.C. above.
E. Landlord shall, at its sole cost and expense, purchase
the Land and construct the Project in accordance with the terms and
conditions hereof; provided, however, in no event shall the cost and
expense incurred by Landlord exceed Three Million Dollars
($3,000,000.00) for the acquisition of the Land, the construction of the
"shell" building and all hard and soft costs associated with the Project,
and tenant improvements further set forth and shown on the Plans and
Specifications ("Maximum Amount"). To the extent the cost and expense
incurred in constructing the Project exceeds the Maximum Amount, such
amounts shall be paid by Tenant; provided, however, it shall not be the
obligation of Tenant to pay any amounts incurred by Landlord in the
acquisition and construction of the Project with respect to any penalties
and/or fines incurred by Landlord which would increase the cost and
expense which was initially bid for the development of the Project to the
extent such penalties and/or fines are incurred as the result of
Landlord's acts or omissions. For purposes hereof, the hard and soft
costs which are includible within the Maximum Amount are limited to the
following: all architectural design, engineering, legal, loan, acquisition
and financing costs in connection with the Bond Financing, permitting
and assessment fees, all interest costs from the date of acquisition
through the Commencement Date, real estate commissions payable in
accordance with paragraph 30 below, construction costs, grading, site
work, utilities, closing costs, tap fees, letters of credit and performance
bonding, insurance, and property taxes. Any other improvements to the
Building or other work shall be performed by Tenant at Tenant's sole
expense. Landlord shall not be deemed a principal, partner, or joint
venturer in relation to Tenant or any of said work done by Tenant.
Notice is hereby given to all persons furnishing labor and materials to
Tenant for such other work that no mechanics', materialmens', or other
liens sought to be taken against the building shall in any manner affect
the right, title, or interest of Landlord therein.
F. In the event Tenant enters the Building as described
herein, then Tenant shall bear all risk of loss, damage or other casualty
to its fixtures, equipment and/or other personal property arising out of
the acts or omissions of Tenant, its contractors and agents, it being
intended by the parties that if Tenant enters the Building prior to the
Commencement Date, Tenant shall be responsible for any damages caused
by its acts or omissions. All general liability insurance required to be
maintained by Tenant under this Lease shall be in place prior to Tenant
entering the Building.
<PAGE>
3. LEASE TERM:
A. The term of this Lease ("Lease Term") shall begin as of
the Commencement Date. Subject to sooner termination as provided
herein, and except as otherwise provided herein, the Lease Term shall
expire twenty (20) years following the Commencement Date ("Lease
Expiration Date"). Prior to the Commencement Date, Landlord shall
deliver to Tenant a Certificate of Commencement ("Certificate") in the
form attached hereto as EXHIBIT D to be made a part hereof, which
Certificate Tenant shall promptly execute and return to Landlord.
Landlord and Tenant hereby acknowledge and agree that it is anticipated
that the Commencement Date shall be on or before December 17, 1996.
B. If the Commencement Date is other than the first day of a
calendar month, the Lease Term shall be computed from the first day of
the calendar month next succeeding the Commencement Date. A "year of
the Lease" or a "Lease Year" as used in this Lease shall be defined as
each successive period of twelve (12) calendar months commencing on
the first day of January of each year during the Term hereof and ending
on each subsequent December 31 of each year during the Lease Term. If
the Commencement Date is other than January 1 of any year, the period
between the Commencement Date and December 31 of that year shall be a
partial lease year and this Lease shall continue for a period of twenty
(20) years (as may be extended) from the first day of January following
the Commencement Date.
C. In the event Landlord should be unable to deliver
possession of the Premises on the anticipated Commencement Date for
any reasons, then Landlord shall not be subject to any liability for failure
to give possession on the anticipated Commencement Date. Under any of
the aforesaid circumstances, the Commencement Date shall not occur
until the M-K Work is substantially completed. Except in the case of
Landlord's default, no such failure to give possession of the Building to
Tenant on the Commencement Date shall in any other respect operate to
affect the validity of this Lease or the obligations of the Tenant
hereunder.
D. Subject to the terms and conditions hereof and except for
latent defects which are only discoverable following Tenant's occupancy
and use of the Building, which Tenant shall look to M-K solely for any
remedy thereof, Tenant's occupancy of the Building shall constitute
satisfactory acceptance thereof by Tenant as complying with all
requirements of Landlord with respect to the condition, order and repair
thereof as required by the terms of this Lease, and such occupancy by
Tenant shall be conclusive evidence that the Building is in good and
satisfactory condition at the time of such occupancy.
<PAGE>
E. Tenant shall have the right to terminate this Lease at
any time following the tenth (10th) anniversary of the Commencement
Date, provided Tenant is not in default at such time and Tenant provides
Landlord with written notice of Tenant's intention to terminate not less
than six (6) months prior to the effective date of such termination. In
the event of termination, Tenant, at its sole expense, shall remove any
and all personal property or interior improvement beyond a shell building
as Landlord shall require at its sole discretion in accordance with
paragraph 7 hereof.
4. RENT: During the Lease Term hereof and commencing on the
first anniversary of the closing of Landlord's financing, Tenant shall pay
Landlord for the Premises, and without deduction, set-off or abatement, a
minimum monthly rent which shall be equal to the principal and interest
payment of Landlord to Landlord's lender which on a monthly basis shall,
at all times, be based upon the following equation:
A. $17,857.14 (equal monthly principal curtailments of
$3,000,000.00 over a 14-year period)
PLUS
B. Interest on the unpaid principal balance of such loan (on a
declining basis) which shall be equal to one hundred seventy-five basis
points over and above the 30-day London Interbank Offered Rate
(LIBOR) for the first five (5) years and can be adjusted up or down by
Signet Bank for years 6 through 10.
PLUS
C. $3,000.00 per month
(with the sum of such equation being hereinafter referred to as the "basic
monthly rent"). The rent to be paid from the Commencement Date until
the first anniversary of the closing for Landlord's financing shall be
equal to the sum of the items described in paragraphs 4.B. and 4.C.
above. Such basic monthly rent shall be payable five (5) days prior to
the due date of Landlord's primary loan described above, with the first
such monthly installment to be paid at the time of substantial completion
of the M-K Work in accordance herewith. Rent for any partial month
shall be prorated at the rate of one thirtieth (1/30) of the basic monthly
rent per day. The equation set forth above shall be adjusted downward in
the event Landlord does not expend the entire Maximum Amount. In
addition, Landlord shall provide written notice to Tenant during the Term
hereof of any and all changes to the LIBOR effective on the first day of
each calendar month during the Term hereof. Written notice shall be
construed as sending to Tenant the bank notification of payment sent to
Landlord on a monthly payment. Tenant covenants and agrees to pay, as
additional rent, a late fee equal to ten percent (10%) of any rent due or
basic monthly rent due or other payments due under this Lease, if said
payments are not paid within ten (10) days of their due date plus any
accrued interest on the unpaid principal balance of the Landlord's loan
referenced above to the date of payment of said rent.
<PAGE>
5. ADDITIONAL RENT:
A. In addition to the minimum annual rent and subject to
the limitations set forth in paragraph 14 below, Tenant shall contract for
services and pay the costs thereof for all Project maintenance, which
shall include, all costs and expenses of every kind and nature equipping,
lighting, repairing, and maintaining the Building or the grounds,
including, but not limited to, the cost and expenses of: utilities,
gardening, snow removal, landscaping and maintenance of grass, trees,
shrubbery, and designated parking spaces line painting.
B. As part of the rental Tenant shall pay any and all real
estate taxes or assessments levied against the Project (land and
improvements). A tax bill issued by the appropriate governmental
authorities shall be accepted by the Tenant as conclusive evidence of the
amount of said real estate taxes and assessments to be paid by Tenant.
Tenant agrees to pay to Landlord within ten (10) days after the receipt by
Tenant of a billing therefor. Should any governmental taxing authority
acting under any present or future law, ordinance or regulation, levy,
assess, or impose a tax, excise and/or assessment (other than an income
or franchise tax) upon or against the rent, or any part of it, payable by
Tenant to Landlord, either by way of substitution (in whole or in part)
for or in addition to any existing tax or otherwise, Tenant shall be
responsible for and shall pay such tax, excise and/or assessment, or shall
reimburse Landlord for the amount hereof within thirty (30) days of
demand, as the case may be. Tenant shall have the right at any time and
from time to time during the Lease Term to contest and/or appeal any
such assessment at Tenant's sole cost and expense, and Landlord shall
reasonably cooperate with Tenant with respect to any such action.
C. Tenant shall insure the Project against damage by fire,
including extended coverage, and shall maintain such insurance
throughout the Term, and Tenant shall be liable for all premiums for all
insurance carried in connection with the Project. Tenant shall insure all
of its property in the Building against damage by fire, including extended
coverage, in an amount as shall be reasonably determined by Landlord in
consultation with Tenant, and Tenant shall maintain such insurance
throughout the term hereof. In addition, Tenant shall also maintain with
respect to the Building, comprehensive public liability insurance, with
minimum limits of $3,000,000/$1,000,000 for personal injury, and
$3,000,000 for property damage. Tenant shall maintain workers'
compensation insurance to the extent required by law, and shall also
insure all plate glass on the Building. Landlord and Tenant shall have a
continuing obligation to cause the M-K Work to be finally completed.
<PAGE>
D. Tenant shall maintain the insurance coverage required
herein with a company or companies reasonably acceptable to the
Landlord, insuring the Landlord, its agents and lenders as additional
named insureds, as well as Tenant, against bodily injury to or death of
persons, and against property damage as herein provided. Tenant shall
deliver certificates of insurance indicating the above-specified coverage
to the Landlord upon the commencement of the term of this Lease, and
continuing evidence of such coverage annually. Such insurance policy or
policies shall be in a form reasonably acceptable to Landlord and its
lender, and shall be placed with a company qualified to do business in
the jurisdiction in which the Building is located, and shall provide that
such insurance policies cannot be canceled without at least thirty (30)
days prior written notice to the Landlord and the Landlord's lender. In
the event lender requires as a condition to making the above-described
loan that real estate taxes and/or insurance premiums are required to be
paid on a monthly basis in escrow with such lender, then Tenant hereby
agrees to pay such amounts on a monthly basis as required by the lender.
6. PAYMENT:
A. Tenant shall pay as additional rent and without notice,
abatement, deduction or set-off, all sums, costs and expenses which
Tenant, in any of the provisions of this Lease, or through a separate
agreement relating to the Building, assumes or agrees to pay, including,
but not limited to Tenant work, and in the event of any non-payment
thereof, the Landlord shall have (in addition to all other rights and
remedies) all the rights and remedies provided herein or by law in the
case of non-payment of rent.
B. All payments due to Landlord, including the basic
monthly rent, additional rent, real estate taxes, and all other rent,
reimbursements and charges due under the terms of this Lease, shall be
made at the office of Landlord or such other address of which Tenant is
given written notice by Landlord. Rent checks are to be made payable to
Landlord.
C. Tenant shall pay as additional rent all fees, costs,
expenses and reimbursements payable by the Landlord in connection with
the Bond Financing, except that Tenant shall not be responsible for late
fees, attorneys' fees or other similar costs incurred as a result of
Landlord's negligence or willful misconduct.
<PAGE>
7. TENANT'S COVENANTS: The Tenant agrees that it will keep
the Building and the fixtures therein in good order and condition, and
will, at the expiration or other termination of the term hereof, surrender
and deliver up the same in like good order and condition as the same now
is or shall be at the commencement of the term hereof, ordinary wear and
tear, and damage by the elements, not due to the act or omissions of
Tenant or its employees, agents and contractors, excepted. Tenant
further agrees not to make any structural additions or alterations in or
upon the Building, without first having obtained the Landlord's written
consent, which consent shall not be unreasonably withheld or delayed;
PROVIDED, HOWEVER, in the event Landlord fails to respond to
Tenant's request within ten (10) business days following the delivery of
such written request to Landlord, then such request shall be deemed
approved without further action by the parties. Any additions or
alterations performed by Tenant must conform to any and all applicable
building code standards, as well as any and all other applicable
requirements of the federal, state and local governments. It is distinctly
understood that any and all additions, alterations, installations, changes,
replacements or improvements upon the Building shall remain upon the
Building, and be surrendered with the Building at the expiration or other
termination of this Lease without disturbance, molestation or injury, at
the Landlord's sole discretion; PROVIDED, HOWEVER, Tenant shall
have the unilateral right to remove from the Project prior to the
expiration of the Lease Term: (i) all trade fixtures and equipment
installed by Tenant, (ii) all improvements of every nature and every type
installed by Tenant at the cost of Tenant (i.e., the amounts incurred by
Tenant in excess of the Maximum Amount, (iii) any and all other
modifications, additions and alterations which Tenant has installed
during the Lease Term provided that in all such cases, Tenant shall be
responsible to repair and correct any and all damage caused to the "shell"
building upon such removal, and/or (iv) any other interior improvement
Landlord requests Tenant to remove. Should Landlord elect that certain
alterations, installations, changes, replacements, additions to or
improvements upon the Building be removed upon the expiration or other
termination of this Lease, or any renewal period hereof, Tenant hereby
agrees to cause the same to be removed at Tenant's sole cost and expense,
and to repair any damages to the Building arising from the installation of
or the removal of same, and should Tenant fail to remove the same, then
and in such event, the Landlord shall promptly cause same to be removed,
is herewith relieved of liability for such action, and the reasonable
expenses will be billed to the Tenant; PROVIDED, HOWEVER, Tenant
shall not be obligated to remove any such modifications, additions or
alterations which are shown and depicted on the Plans and Specifications
except that irrespective of whether such improvements are shown on the
Plans and Specifications, Tenant shall be obligated to remove: (i) any
interior partitions requested by Landlord to be removed, and (ii) all
brewing equipment of every nature and every kind. This covenant shall
survive the expiration or termination of this Lease. It is understood and
acknowledged by the parties that the Plans and Specifications call for the
installation of a steam boiler system which is necessary in the operation
of Tenant's manufacturing process and will also be used to heat the
Building and a chiller system which is necessary in the operation of
Tenant's manufacturing process. Notwithstanding anything herein to the
contrary, it is understood and agreed that Tenant shall have the right to
remove such steam boiler/chiller system in accordance herewith.
<PAGE>
8. USE OF BUILDING:
A. Tenant shall use and occupy the Building solely for a
brewery or in connection with Tenant's brewery operation and for related
uses thereto, subject to and in accordance with, all applicable zoning and
other governmental regulations. Tenant will not use or permit the
Building, or any part thereof, to be used for any disorderly, unlawful or
extra hazardous purpose, nor for any purpose other than hereinbefore
specified, and will not manufacture any commodity therein other than
drinks and beverages of every type and every nature, without the prior
written consent of Landlord, which consent shall not be unreasonably
withheld or delayed.
B. All parties hereby confirm that the Building is leased
exclusively for uses as specified herein, and such other ancillary and
related uses as Landlord may approve, which approval shall not be
unreasonably withheld or delayed. Notwithstanding any provision to the
contrary, the Building shall not be used, in whole or in part, for any
residential purposes, and shall not be subject to any rent control act or
redemption right relating to residential leases, or any other such
provision of law now or hereafter in effect in the jurisdiction in which
the Building is located.
C. The Landlord and its agents assume no liability or
responsibility whatever with respect to the conduct and operation of
Tenant's business to be conducted in the Building, nor with respect to the
conduct and operation of any other use of the Building which the
Landlord may permit by prior written consent, which consent shall not be
unreasonably withheld or delayed.
9. QUIET ENJOYMENT: Upon payment by Tenant of all rent,
additional rent, and any and all other sums to be paid by Tenant to
Landlord hereunder and the observance and performance of all of the
material covenants, terms and conditions to be observed and performed
by Tenant, Tenant shall have the peaceful and quiet use of the Building,
and all rights, servitudes and privileges belonging, or in any way
appertaining thereto or granted hereby, for the term of this Lease,
without hindrance or interruption by Landlord, or any person or persons
lawfully claiming by, through or under Landlord, subject nevertheless to
the terms and conditions of this Lease. Landlord warrants that it has full
right and authority to enter into this Lease for the full term hereof.
<PAGE>
10. WAIVER OF TRIAL BY JURY: THE TENANT HEREBY,
WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ON ANY MATTERS WHATSOEVER ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE AND
OCCUPANCY OF THE BUILDING AND/OR ANY CLAIM OF INJURY
OR DAMAGE. IN THE EVENT THE LANDLORD COMMENCES ANY
PROCEEDINGS FOR NON-PAYMENT OF RENT, MINIMUM RENT OR
ADDITIONAL RENT, TENANT WILL NOT INTERPOSE ANY
COUNTERCLAIM OF WHATEVER NATURE OR DESCRIPTION IN ANY
SUCH PROCEEDINGS UNLESS THE FAILURE TO ASSERT SUCH
COUNTER CLAIM WOULD BE FOREVER LOST. THIS SHALL NOT,
HOWEVER, BE CONSTRUED AS A WAIVER OF TENANT'S RIGHT TO
ASSERT SUCH CLAIMS IN ANY SEPARATE ACTION OR ACTIONS
BROUGHT BY TENANT.
11. BINDING EFFECT OF LEASE: It is agreed that all rights,
remedies and liabilities herein given to or imposed upon either of the
parties hereto, shall extend to their respective heirs, executors,
administrators, successors and assigns. Landlord may freely and fully
assign its interest hereunder; PROVIDED, HOWEVER, no such
assignment shall be deemed a novation hereunder.
12. APPLICABLE LAW AND CONSTRUCTION: The laws of the
state in which the Building is located shall govern the validity,
performance and enforcement of this Lease. If any provision of this
Lease shall at any time be deemed to be invalid or illegal by any court of
competent jurisdiction, this Lease shall not be invalidated thereby; and
in such event, this Lease shall be read and construed as if such invalid or
illegal provision only had not been contained herein, thereby preserving
all of the other terms, conditions and provisions of this Lease.
13. SIGNS AND ADVERTISING: Any and all signage shall be in
accordance with Frederick County sign ordinances and shall be at the
sole expense and cost of the Tenant. Landlord shall have the right to
approve such signage, which approval shall not be unreasonably withheld
or delayed.
14. REPAIR: Except for matters which arise from the acts,
omissions and/or negligence of Landlord, Tenant will repair or replace
any damage to the Building including, but not limited to the roof, glass,
doors, air conditioning system, heating plant, pipes, radiators, or
plumbing fixtures; will repair or replace any other damages caused to the
Building by the acts or omissions of its employees, agents or contractors
or caused through normal wear and tear, including any damages to the
Building or the fixtures therein, caused by improper use, or caused by
failure of the Tenant to give them proper service. Notwithstanding any
Tenant obligation to repair or replace any fixture or system, Landlord
shall transfer and assign to Tenant on the Commencement Date all
warranties, contracts and/or representations received by Landlord with
respect to the Project provided from the suppliers of the materials and
services in the construction and development of the Project.
<PAGE>
15. MUTUAL WAIVER OF SUBROGATION RIGHTS: Neither
Landlord nor Tenant shall be liable (by way of subrogation or otherwise)
to the other party (or to any insurance company insuring the other party)
for any loss or damage to any property of the Landlord or Tenant, as the
case may be, covered by insurance, even though such loss or damage
might have been occasioned by the negligence of the Landlord or Tenant,
or their respective agents, employees, invitees, etc. This release shall be
in effect only so long as the applicable insurance policies shall contain a
clause or endorsement to the effect that the aforementioned waiver shall
not affect the right of the insured to recover under such policies; each
party shall use reasonable efforts (including payment of additional
premium) to have its insurance policies contain the standard waiver of
subrogation clause. In the event Landlord's or Tenant's insurance carrier
declines to include in such carrier's policies a standard waiver of
subrogation clause, Landlord or Tenant, as the case may be, shall
promptly notify the other party, in which event the other party shall not
be required to have its insurance policies contain such waiver of
subrogation clause and this paragraph shall be of no force and effect.
16. UTILITIES: The Tenant will have registered in its name and
pay the costs of all utilities or its proportionate share thereof, including
gas, electric, sewer, water, telephone, or other. In no event shall
Landlord be liable for interruption or failure in the supply of any such
utilities.
17. CONDEMNATION: Tenant agrees that if the said Building,
or a substantial part thereof, shall be taken or condemned or sold for
public or quasi-public use or purpose by or to any competent authority,
this Lease shall fully terminate as of the date when title vests in such
authority, and Tenant shall have no claim against the Landlord, and shall
not have any claim or right to any portion of the amount that may be
awarded as damages or paid as a result of any such condemnation; and all
rights of Tenant to damages therefor, if any, are hereby assigned by
Tenant to the Landlord; PROVIDED, HOWEVER, Tenant shall be entitled
to maintain an independent action for any and all claims: (i) which
Tenant may have and which do not diminish the award to be paid to
Landlord hereunder; and (ii) with respect to Tenant's fixtures, equipment
and leasehold improvements to the extent paid by Tenant and in excess of
the Maximum Amount. Upon such condemnation or taking, the term of
this Lease shall cease and terminate from the date when title vests in
such governmental authority, and Tenant shall have no claim against the
Landlord for the value of any unexpired term of this Lease or goodwill.
For purposes of this paragraph, a substantial part shall mean twenty-five
percent (25%) or more of the Building.
<PAGE>
18. SUBORDINATION: This Lease is subject and subordinate to
all ground or underlying leases, and to any mortgage and/or deed of trust
(which terms shall include both construction and permanent financing)
which may now or hereafter encumber or otherwise affect the real estate
including the Building, and to all renewals, extensions, modifications,
consolidations, replacements, recastings and/or refinancing thereof. This
clause shall be self-operative, and no further instrument of subordination
shall be required by any mortgagee or trustee. In confirmation of such
subordination, Tenant shall, at Landlord's request, promptly execute any
requisite or appropriate certificate or document. Tenant hereby
constitutes and appoints Landlord as Tenant's attorney-in-fact to execute
any such certificate or certificates for or on behalf of Tenant. Tenant
agrees that in the event that any proceedings are brought for the
foreclosure of any such mortgage, Tenant shall attorn to the purchaser at
such foreclosure sale, if requested to do so by such purchaser, and to
recognize such purchaser as the Landlord under this Lease, and Tenant
waives the provisions of any statute or rule of law, now or hereafter in
effect, which may give or purport to give Tenant any right to terminate
or otherwise adversely affect this Lease and the obligations of Tenant
hereunder, in the event that any such foreclosure proceeding is
prosecuted or completed. And Tenant covenants and agrees that it will,
at the written request of the party secured by any such deed of trust,
execute, acknowledge, and deliver any instrument that has for its purpose
and effect the subordination of said deed of trust to this Lease. The
subordination set forth above shall, in all cases, be conditioned upon the
(i) mortgagee, (ii) the trustees of the deed of trust, or (iii) any other
authorized officer of any secured party executing and delivering to
Tenant in form reasonably acceptable to Tenant a non-disturbance
agreement which provides, in principal, that this Lease shall remain in
full force and effect provided that Tenant is not in default pursuant to
the terms and conditions hereof. Tenant hereby acknowledges the
delivery of an acceptable non-disturbance agreement which has been
received by Tenant in connection with the Bond Financing extended to
Landlord. Without limiting the generality of the foregoing, the rights
and obligations of Tenant and Landlord hereunder are subject to the
covenants and agreements of the Landlord as "Borrower" and the Tenant
as "Facility User" contained in the documents executed in connection
with the Bond Financing.
<PAGE>
19. ESTOPPEL CERTIFICATES AND NOTICE:
A. Tenant agrees, at any time and from time to time, upon
not less than five (5) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord, a statement in writing certifying
that this Lease is unmodified and in full force and effect.
B. Tenant further agrees that, from the date of execution of
this Lease, it will not seek to terminate this Lease by reason of any act or
omission of the Landlord, until the Tenant shall have given written
notice of such act or omission to Landlord's mortgagee, and until a
reasonable period of time (but in no event less than 30 days, except in
the case of an emergency resulting in the interruption of Tenant's
brewing process, in which case the time frame shall be ten (10) days)
shall have elapsed following the giving of such notice, during which
period of time Landlord's mortgagee shall have the right, but shall not be
obligated, to remedy such act or omission; PROVIDED, HOWEVER, if
Landlord (or Landlord's mortgagee) shall proceed with due diligence to
cure said breaches after said notice, then such thirty (30)-day period
shall be extended to such a period of time as may be required to cure
such listed breaches while proceeding with due diligence.
C. Landlord further agrees that, from the date of execution
of this Lease, Landlord will not seek to terminate this Lease by reason of
any act or omission of Tenant, until Landlord shall have given written
notice of such act or omission to Tenant and Tenant's lender and shall
have provided Tenant and Tenant's Lender an opportunity to cure such
default. Such written notice (i) in the case of Tenant's failure to pay any
installment of the rent hereby reserved or any sum of money payable
hereunder shall be not less than ten (10) days and (ii) in the case of
Tenant's failure to comply with any non-monetary term, provision, or
covenant of the lease, shall be not less than twenty (20) days;
PROVIDED, HOWEVER, if Tenant or Tenant's Lender shall proceed with
due diligence to cure said breach after said notice, then such twenty (20)-
day period shall be extended to such a period of time as may be required
to cure such listed breaches while proceeding with due diligence.
20. DEFAULT:
A. Subject to the notice requirements set forth above, it is
agreed that if Tenant shall fail to pay the rent, or any installments
thereof as aforesaid, at the time the same shall become due and payable,
and/or any additional rent as is herein provided; or if Tenant shall
violate or fail or neglect to keep and perform any of the other covenants,
conditions and agreements herein contained on the part of Tenant to be
kept and performed; or if the Building shall become vacant or deserted;
then, and in each and every such event from thenceforth, and at all times
thereafter, at the option of the Landlord, Tenant's right of possession
shall thereupon cease and terminate, and the Landlord shall be entitled to
immediate possession of the Building, and Landlord may proceed to
recover possession under and by virtue of the provisions of the laws of
the state in which the Building is located, or by such other proceedings,
including re-entry and possession as may be applicable, any notice to
quit, or of intention to re-enter, the same, being hereby expressly waived
by Tenant. And in the event of such re-entry by process of law or
<PAGE>
otherwise, Tenant nevertheless agrees to remain liable for any and all
damages, including, but not limited to, reasonable attorney's fees,
brokerage fees, and expenses of placing the Building in first-class
rentable condition, deficiency or loss of rent which the Landlord may
sustain by such re-entry, whether or not the Landlord re-lets the
Building, and in the event of such re-entry, the Landlord shall have full
power, which is hereby acceded to by Tenant, to re-let the said Building
for and on behalf of Tenant, and upon such re-letting, the Landlord shall
have the right each month to sue for and recover any loss of rents or
monthly deficits, with the right reserved to the Landlord to bring any
action(s) or proceedings(s) for the recovery of any deficits remaining
unpaid without being obligated to await the end of the term of this Lease
for a final determination of Tenant's account, the commencement or
maintenance of any one or more actions shall not bar the Landlord from
bringing other or subsequent actions for further accruals pursuant to
provisions of this section. Anything to the contrary herein
notwithstanding, Landlord may, at its option, await the expiration of the
term of this Lease before seeking to recover any such deficits, in which
event, the cause of action shall not be deemed to have accrued until the
date of expiration of said term of this Lease. All remedies of Landlord
hereunder shall be cumulative and concurrent. Notwithstanding anything
in this Lease to the contrary, in no event shall the total damages or other
amounts paid by Tenant under this paragraph 20 exceed the amount of
basic monthly rent and additional rent for which Tenant would have
otherwise been responsible hereunder except for such default had Tenant
continued to make the timely payments of basic monthly rent and
additional rent hereunder. The limitations described in the immediately
preceding sentence shall in no event apply to the actual damages incurred
by Landlord for any damage or destruction to the Project caused by
Tenant. Notwithstanding anything herein to the contrary, in the event of
Landlord's breach of its financing documents with Landlord's mortgagee,
Landlord's mortgagee shall have the right to accelerate the rental
payments due hereunder in the event of Tenant's default hereunder. In no
event shall Landlord have the right to accelerate the rent due and payable
hereunder in the event of Tenant's default.
<PAGE>
B. In the event of the employment of an attorney by the
Landlord because of the violation by Tenant of any term or provision of
the Lease, including non-payment of rent as due, Tenant shall pay, and
agrees to pay, reasonable attorneys' fees, and all other costs incurred
therein by Landlord, provided a judgment in favor of the Landlord is
rendered by a court of competent jurisdiction.
C. Notwithstanding anything in this Lease to the contrary,
in the event Tenant shall elect to pay any amounts directly to the
Landlord's mortgagee on behalf of the Landlord (to the extent such
payments are not the obligation of the Tenant hereunder), as may be
necessary to (i) avoid and/or cure a default by Landlord of its agreements
with Landlord's mortgagee or (ii) preserve the rights of the Tenant
hereunder, such amounts shall be immediately payable by the Landlord to
the Tenant and Tenant shall have such rights as may be available under
Maryland law from time to time to collect such amounts from Landlord
including, without limitation, the right to (i) offset such amounts to any
future payments which may be due and payable by Tenant to Landlord
and (ii) obtain a lien against the property with the prior written consent
of Landlord's mortgagee. In the event Landlord fails to reimburse Tenant
in accordance with this paragraph 20.C. within ten (10) days following
the written demand by Tenant for such reimbursement, then the amounts
paid by Tenant hereunder shall accrue interest at the rate of eighteen
percent (18%) commencing on the date Tenant made such payment. In no
event shall anything set forth in this paragraph 20.C. be deemed to create
an obligation on behalf of the Tenant to make such payments over and
above the obligations of Tenant set forth in this Lease.
21. BANKRUPTCY: If the Tenant shall (i) make an assignment
for the benefit of creditors, (ii) file or acquiesce in a petition in any
court (whether or not pursuant to any statute of the United States or of
any state) in any bankruptcy, reorganization, composition, extension,
arrangement or insolvency proceedings, or (iii) make an application in
any such proceedings for, or acquiesce in, the appointment of a trustee or
receiver for it, over all or any portion of its property, or if any petition
shall be filed against Tenant in any court (whether or not pursuant to any
statute of the United States or of any state) in any bankruptcy,
reorganization, composition, extension, arrangement of insolvency
proceedings, and (i) Tenant shall thereafter be adjudicated a bankrupt or
insolvent, or (ii) such petition shall be approved by any such court, or
(iii) such proceedings shall not be dismissed, discontinued or vacated
within thirty (30) days after such petition is filed; then, in any of said
events, this Lease shall immediately cease and terminate, at the option of
the Landlord, with the same force and effects as though the date of
occurrence of said event was the day fixed herein for expiration of the
term of this Lease.
<PAGE>
22. NO WAIVER: And, it is further provided that if under the
provisions hereof, a compromise or settlement thereof shall be made, it
shall not be constituted a waiver of any breach of any covenant,
condition, or agreement herein contained, and that no waiver of any
breach of any covenant, condition or agreement herein contained shall
operate as a waiver of the covenant, condition or agreement itself, or of
any subsequent breach thereof. No payment by Tenant or receipt by the
Landlord of a lesser amount than the monthly installments of rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check, or
any letter accompanying any check or payment as rent, be deemed an
accord and satisfaction, and the Landlord may accept any such check or
payment without prejudice to the Landlord's right to recover the balance
of such rent, or to pursue any other remedy in this Lease. No re-entry by
the Landlord, and no acceptance by Landlord of keys from Tenant, shall
be considered an acceptance of a surrender of this Lease.
23. LANDLORD'S CURE OF DEFAULT BY TENANT
REIMBURSEMENT OF EXPENSES: In all cases subject to the notice
requirements set forth above, if Tenant defaults in the making of any
payment or in the doing of any act herein required to be made or done by
Tenant, then the Landlord may, but shall not be required to, make such
payment or do such act, or if the Landlord shall incur any charge or
expense on behalf of Tenant under the terms of this Lease, the amount of
the expense thereof, if made or done by the Landlord, with interest
thereon at the rate of ten percent (10%) per annum, from the date paid by
Landlord, shall be paid by Tenant to Landlord, and shall constitute
additional rent hereunder, due and payable with the monthly installment
of rent next due and payable after Landlord sends a written invoice
therefor; provided, however, that the making of such payment or the
doing of such act by the Landlord shall not operate to cure such default
by Tenant, or to estop Landlord from the pursuit of any remedy to which
Landlord would otherwise be entitled. In addition to any late fees
charged hereunder for delinquent rent payments, and not in lieu thereof,
any installment of rent which is not paid by Tenant within ten (10) days
after the same becomes due and payable shall bear interest at the rate of
ten percent (10%) per annum, from the date such installment first became
due and payable, to the date of payment thereof by Tenant, and such
interest shall constitute additional rent hereunder due and payable with
the next monthly installment of rent.
24. INSPECTION OF PREMISES REPAIRS BY LANDLORD:
Upon twenty-four (24) hours prior written notice from Landlord to
Tenant, Tenant further agrees that it will allow the Landlord, its agents
or employees, to enter the Building at all reasonable times, without
charge therefor to Landlord, and without diminution of the rent payable
by Tenant, to examine, inspect or to protect the same, or to prevent
damage or injury to the same, or to make such alternations and repairs as
the Landlord may deem necessary, or to exhibit the same to prospective
tenants during the last twelve (12) months of the term of this Lease.
<PAGE>
25. LIABILITY FOR DAMAGE TO PERSONAL PROPERTY AND
PERSON: The Landlord shall not be liable for any accident or damage
caused by electric lights or wires, or any accident or damage which may
occur through the operation of elevators, heating, lighting or plumbing
apparatus, or any accident or injury occurring in connection with the
Building and its services, unless caused by the negligence of Landlord.
The Landlord will not be liable for loss of or damage to property of
Tenant caused by rain, snow, water or steam that may leak into the
Building or flow from any part of said building through any defects in
the roof or plumbing or from any other source, including, but not limited
to, acts or omissions on the part of other tenants or unit owners of the
building or persons using the building, or present therein, not resulting
from acts of gross negligence on the part of Landlord. All goods,
property or personal effects stored or placed by the Tenant in or about
the Building shall be at the risk of the Tenant, unless the loss is caused
by the gross negligence of the Landlord and is covered by casualty or
liability insurance carried by Landlord. It is understood and agreed that
the Tenant covenants to save the Landlord harmless and indemnified from
all loss, damage, liability or expense incurred by reason of the Tenant's
neglect in its use of the Building or of said building or of any part
thereof, including the use of the water, steam, electric or other systems,
and the injury, loss or damage to any person or property upon or about
the Building.
26. INDEMNIFICATION: Except in the case of Landlord's
negligence or intentional acts, Tenant shall indemnify Landlord and its
lease Agent, and shall save them harmless from and against any and all
claims, actions, damages, liability and expense, including reasonable
architect's and attorney's fees, in connection with loss of life, personal
injury and/or damage to property arising from or out of any occurrence
in, upon or at the Building, or the occupancy or use by Tenant of the
Building or any part thereof, or occasioned by any act or omission of
Tenant, its agents, servants, employees, assignees, or invitees. In case
Landlord and/or its lease Agent shall, without fault or on their part, be
made a party(ies) to any litigation commenced by or against Tenant, then
Tenant shall protect and hold them harmless, and shall pay all costs,
expenses and reasonable attorney's fees incurred or paid by the Landlord
and/or its lease Agent in connection with such litigation. Tenant shall
also pay all costs, expenses and reasonable attorney's fees that may be
incurred or paid by Landlord in enforcing the covenants and agreements
in this Lease. Except in the case of Landlord's negligence or intentional
acts, Landlord or its lease Agent shall not be liable for any accident or
damage to property of Tenant, its agents, servants, employees, assignees,
and invitees, resulting from the use or operation of the heating, cooling,
electrical, or plumbing apparatus. All personal property of Tenant, its
agents, servants, employees or invitees, in the Building shall be at its
(their) sole risk.
<PAGE>
27. DESTRUCTION: In the case of damage by fire or other
casualty to the Building or a substantial part thereof, the Landlord shall
have the obligation to promptly repair and restore the same without
terminating this Lease. During the period that Tenant is deprived of the
use of the damaged portion of said Building, Tenant shall be required to
pay rental covering only that part of the Building that it is able to
occupy; the rent for said remaining space shall be that portion of the
total rent which the amount of square foot area remaining that can be
occupied bears to the total square foot area of all of the Building covered
by this Lease. Tenant shall use its best efforts to contract with outside
third party brewers as is necessary to replace the then existing brewing
capacity of the Tenant at the Project. If during the term of this Lease the
Project shall be so damaged by fire or other casualty so as to be wholly
untenable, then rent shall abate as of the date of such casualty and shall
not commence until the Project has been repaired and restored by
Landlord in accordance herewith. Notwithstanding anything in this
paragraph 27 to the contrary, in the event the Project is damaged or
destroyed by fire or other casualty at any time following the eighth (8th)
anniversary of the Commencement Date and such damage or destruction
is in excess of fifty percent (50%) of the then current value of the
Project, then either party shall have the right to terminate this Lease
upon written notice to the other party and there shall be no obligation on
the part of either party to restore and/or repair the Project, nor shall
Tenant have any obligation to replace the above described brewing
capacity.
28. PERMITS: Except for the permits and licenses required by
Landlord for the construction of the Project in accordance herewith,
Tenant agrees to obtain and maintain occupancy and other permits
required by any and various governmental, environmental and other
authority, at no cost to the Landlord even though the deficiency is to the
Landlord; this provision to be considered as additional rental, and
intended to provide the Landlord with a net rental, and to charge the
Tenant with compliance with said permit citations, orders, requirements,
or conditions now or hereafter imposed upon them by ordinances, laws,
or regulations of the county or state, or by various departments whether
required of lessor or otherwise.
29. SHOWING PROPERTY AND PROHIBITION ON POSTING:
Tenant hereby authorizes Landlord or Landlord's agent to show said
property inside and outside, upon reasonable notice and at reasonable
hours, to prospective purchasers, tenants, lenders, and mortgagees;
PROVIDED, HOWEVER, in no event shall Landlord be entitled to post or
place any signs and/or banners upon the Premises which advertise the
Premises for lease or for rent.
<PAGE>
30. AGENCY:
A. The parties acknowledge that real estate commissions
are due to Kline Scott Visco Commercial Real Estate, Inc. ("KSV")in the
amount of Fifty-Six Thousand Four Hundred Eighty Dollars ($56,480.00)
in consideration for all activities undertaken by KSV in the acquisition
and leasing of the Property as of the date of this Lease, including the
tenancy created hereunder. It is understood and agreed by the parties
that Twenty-Eight Thousand Two Hundred Forty Dollars ($28,240.00) of
such commissions shall be paid by Landlord to KSV out of the Maximum
Amount. The remaining $28,240.00 commissions due and payable to KSV
shall be paid by Tenant in equal, monthly installments of Four Hundred
Seventy Dollars and Sixty-Six Cents ($470.66), with such payments
commencing on the Commencement Date and continuing on a monthly
basis until the fifth anniversary of the Commencement Date. Should
Tenant, directly or indirectly, purchase the Building, or the property of
which the Building is a part, during the term of this Lease, or any
renewal or extension thereof, upon any terms, or should Tenant acquire
the Building, or the property of which the Building is a part, during the
term of this Lease, or any renewal or extension thereof, by sale, trade or
exchange, KSV's successor or assign will be deemed the procuring agent
in the transaction and will be paid by Landlord, at settlement, from
proceeds of sale or exchange (after Landlord's mortgage indebtedness
shall have been satisfied), a commission of six percent (6%) of the sales
price, or exchange value, less any leasing commissions that have been
paid. The foregoing provisions for the payment of compensation in
connection with the Building is an integral part of this Lease, and a
covenant which runs with the land, and it shall be binding upon any
assignee of the fee or any part thereof.
B. Each party represents that it has not had dealings with
any real estate broker, finder or other person, with respect to this Lease
in any manner, except KSV, whose commissions and fees shall be paid in
accordance with paragraph 30.A. above. Each party shall indemnify and
hold harmless the other party from any and all damages resulting from
any claims that may be asserted against the other party by any broker,
finder or other persons, with whom the other party has or had dealt.
Except in the event of Tenant's breach of the representation set forth in
this paragraph 30.B. and for that portion of the commissions described in
30.A. above, in no event shall Tenant be liable for the payment of any
commissions with respect to this Lease and/or the purchase of the
Premises.
<PAGE>
31. ATTORNEYS' FEES:
A. In the event of the employment of an attorney by the
Landlord or its Agent because of the violation by Tenant of any term or
provision of the Lease, including non-payment of rent as due, Tenant
shall pay, and agrees to pay, reasonable attorneys' fees, and all other
costs incurred therein by Landlord, provided a judgment in favor of the
Landlord is rendered by a court of competent jurisdiction.
B. In the event of the employment of an attorney by Tenant
because of the violation by Landlord of any term or provision of the
Lease, Landlord shall pay, and agrees to pay, reasonable attorneys' fees,
and all other costs incurred therein by Tenant, provided a judgment in
favor of Tenant is rendered by a court of competent jurisdiction;
PROVIDED, HOWEVER, such reasonable attorneys' fees shall be payable
by Tenant irrespective of receiving a judgment in the event rent payable
in accordance herewith has not been paid on or before the required due
date.
32. ASSIGNMENT AND SUBLETTING: The Tenant will not
sublet the Building or any part thereof, or transfer possession or
occupancy thereof, to any person, firm or corporation, or transfer or
assign this Lease, without the prior written consent of the Landlord, in
its sole discretion, nor shall any subletting or assignment hereof be
effected by operation of law or otherwise than by the prior written
consent of the Landlord. The consent by Landlord to any assignment,
transfer or subletting to any party, shall not be construed as a waiver or
release of Tenant from the terms of any covenant or obligation under this
Lease, nor shall the collection or acceptance of rent from any such
assignee, transferee, subtenant or occupant constitute a waiver or release
of Tenant or any covenant or obligation contained in this Lease. For the
purpose of this paragraph, the term assignment shall include in the case
of a corporation, partnership or entity other than individual, the sale,
transfer, assignment or other disposition of more than a majority of the
stock or ownership interest of said corporation, partnership or other
entity. Notwithstanding the provisions of this paragraph 32, in no event
shall a prohibition on assignment and/or subleasing hereunder apply to:
(i) any merger, consolidation and/or joint venture of Tenant with any
other person, party or entity during the Term hereof; (ii) any contract
brewing undertaken by Tenant on behalf of another person, party or
entity; (iii) the transfer or conveyance of all or substantially all of the
stock/equity interest in the Tenant to any person, party or entity; or (iv)
the transfer or conveyance of all or substantially all of the assets of the
Tenant to any person, party or entity.
33. HOLDING OVER: In the event that Tenant shall not
immediately surrender the Building on the date of expiration of the term
hereof, Tenant shall, by virtue of the provisions hereof, become a Tenant
on a month-to-month basis, at twice the monthly rental in effect during
the last month of the term of this Lease, which said monthly tenancy
shall commence with the first day next after the expiration of the term of
this Lease. The Tenant as a month-to-month Tenant shall be subject to
all of the conditions and covenants except for the monthly rental to be
paid. Tenant shall give to Landlord at least thirty (30) days' written
<PAGE>
notice of any intention to quit the Building, and Tenant shall be entitled
to thirty (30) days' written notice to quit the Building, except in the
event of nonpayment of rent in advance or of the breach of any other
covenant by the Tenant, in which event Tenant shall not be entitled to
any notice to quit, the usual thirty (30) days' notice to quit being hereby
expressly waived. Notwithstanding the foregoing provisions of this
paragraph, in the event that Tenant shall hold over, after the expiration
of the term hereby created, and if Landlord shall desire to regain
possession of the Building promptly at the expiration of the term of this
Lease, then at any time prior to Landlord's acceptance of rent from
Tenant as a month-to-month tenant hereunder, Landlord at its option, may
forthwith re-enter and take possession of the Building without process, or
by any legal process in force in the state in which the Building is
located.
34. NO PARTNERSHIP: Nothing contained in this Lease shall be
deemed or construed to create a partnership or joint venture of or
between Landlord and Tenant, or create any other relationship between
the parties hereto other than that of Landlord and Tenant.
35. [Intentionally Omitted].
36. GENDER: Feminine or neuter pronouns shall be substituted
for the masculine form, and the plural substituted for the singular
number, in any place or places herein in which the context may require
such substitution or substitutions. The Landlord herein for convenience
has been referred to in neuter form.
37. IN THE EVENT OF SALE: Subject to the option to purchase
set forth in paragraph 39 below, in the event the Premises are sold,
Landlord shall transfer and assign to such purchaser or transferee all
amounts of pre-paid Minimum Rent, and Landlord thereupon and without
further act by either party hereto shall be released from all liability and
obligations hereunder derived from this Lease arising out of any act,
occurrence or omission relating to the leased Building or this Lease
occurring after the consummation of such sale or transfer.
38. ENTIRE AGREEMENT: This Lease contains the entire and
only agreement between the parties, and no oral statements or
representations or prior written matter not contained or referred to in this
instrument shall have any force or effect. This Lease shall not be
modified in any way except by a writing subscribed by both parties
hereto. The failure of the Landlord or Tenant to insist upon strict
performance by the other or any of the covenants or conditions of this
Lease in any one or more instances shall not be construed as a waiver or
relinquishment for the future of any such covenants or conditions, but the
same shall be and remain in full force and effect. No waiver of any
provision of this Lease shall be deemed to have been made, unless it be
in writing and signed by the party to be charged therewith.
<PAGE>
39. PURCHASE OPTION: Provided Tenant is not in default of
any material terms and conditions of this Lease and as a material part
hereof, Landlord or its assigns, hereby grants to Tenant (or to the
stockholder(s) of Tenant), at Tenant's option, during the Term of this
Lease, an exclusive, irrevocable option and/or right to purchase
(hereinafter "Option") the Premises following the sixth (6th) anniversary
and the eleventh (11th) anniversary of the Commencement Date. Tenant
may exercise its Option hereunder by delivering to Landlord at any time
during the sixth (6th) lease year of this Lease or the eleventh (11th)
lease year of this Lease, as the case may be, two (2) originals of the
Contract of Sale in form as that Contract of Sale is attached hereto as
EXHIBIT C, which shall have been executed by Tenant. The executed
Contract of Sale may not be delivered by Tenant prior to the sixth (6th)
anniversary of the Commencement Date in the case of the first Option
described above, or prior to the eleventh (11th) anniversary of the
Commencement Date in the case of the second Option described above.
If Tenant shall fail to properly elect to purchase the Premises during the
seventh (7th) lease year or the twelfth (12th) lease year as described
above, then Tenant shall be deemed to have forfeited its exclusive right,
option and/or privilege of purchasing the Premises. Upon the
consummation of settlement in accordance with the terms and conditions
of EXHIBIT C, this Lease shall expire. The parties hereby agree to
execute within thirty (30) days following the execution of this Lease, in
recordable form, a short form memorandum of the option granted
hereunder which may be recorded among the Land Records of Frederick
County, Maryland by Tenant at Tenant's expense.
<PAGE>
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS LEASE.
WITNESS: FREDERICK BREWING CO.
/s/ Marjorie A. McGinnis
____________________________
BY:_____________________________
/s/ Kevin Brannon, CEO
DATE:___________________________
TENANT
BLUE II, LLC
____________________________
BY:_____________________________
/s/ Edward D. Scott, Member
DATE:___________________________
LANDLORD
<PAGE>
EXHIBIT
C
CONTRACT OF SALE
THIS CONTRACT OF SALE (hereinafter "Contract") is made and
executed in duplicate this _____ day of __________, _____, by and
between Blue II LLC, hereinafter referred to as "Seller", and Frederick
Brewing Co., hereinafter referred to as "Purchaser".
WHEREAS, Seller is the owner of certain real property and
improvements located on Wedgewood Boulevard in the Wedgewood
Business Park, Frederick County, Maryland, and Purchaser desires to
purchase such real property and improvements thereon; and
WHEREAS, the parties did enter into a certain Lease Agreement
and Option to Purchase dated May ___, 1996 ("Lease"), pursuant to
which Purchaser did lease and rent such Premises from Seller and which
Lease did contain a provision which granted to Purchaser an option to
purchase such Premises; and
WHEREAS, Purchaser has exercised such option and Seller now
wishes to transfer, sell and convey the Premises unto Purchaser, and
Purchaser wishes to acquire the Premises from Seller upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, THIS CONTRACT, WITNESSETH: That for
and in consideration of the mutual promises and payments hereinafter
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties do hereby agree
as follows:
1. CONTRACT OF SALE. Seller hereby bargains and sells unto
Purchaser, and Purchaser hereby purchases from Seller, in fee simple,
that certain parcel or parcels of land described in a deed dated
_________________ 19___, and recorded among the Land Records of
Frederick County, Maryland, in Liber _______, folio ______, together
with all appurtenances, fixtures, equipment, utilities, rights, easements,
privileges, rights-of-way, tenements and hereditaments incident thereto,
and all improvements thereon, and all right, title and interest, if any, of
Seller in and to any land lying in the bed of any street, road or avenue,
open or proposed, in front of or adjoining such parcel or parcels of land
(hereinafter the "Property").
2. PURCHASE PRICE. The purchase price ("Purchase Price") to
be paid for the Property shall be the sum of Three Million Six Hundred
Forty-Nine Thousand Nine Hundred Fifty-Nine Dollars ($3,649,959.00),
payable as follows:
A. A deposit of THREE HUNDRED THOUSAND DOLLARS
($300,000.00) (the "Deposit") in the form of a check shall be paid by
Purchaser unto Seller, which Deposit shall be paid at the time of the
signing of this Contract by all parties and receipt by Purchaser of a fully
executed copy thereof (hereinafter "Effective Date").
<PAGE>
B. Purchaser shall pay the Purchase Price by depositing in
escrow in the form of a cashier's check, certified check or wired transfer
of current funds at Settlement (as hereinafter defined) the sum of Three
Million Six Hundred Forty-Nine Thousand Nine Hundred Fifty-Nine
Dollars ($3,649,959.00), of which the Deposit shall be a part.
3. TITLE. Title to the Property shall be good and marketable, free
and clear of all liens, leases, encumbrances and other matters
unacceptable to Purchaser. Title shall be insurable at standard rates on
the standard form of the latest edition of ALTA-Owner's Insurance
Policy, with only those exceptions as shall be acceptable to Purchaser.
Purchaser shall cause a reputable title insurance attorney or company to
examine the title to the Property and to issue a written preliminary title
report based upon such examination. If such title search and report shall
disclose defects in title such that title does not comply with the
provisions of this paragraph (hereinafter a "Title Defect"), then
Purchaser shall so notify Seller by written notice of an objection to title.
If the aforesaid title search and report shall reveal a Title Defect and
such Title Defect is one which can be remedied by Seller, then Seller
shall take such action as may be necessary, at Seller's expense, to correct
such Title Defect. If such Title Defect is corrected and remedied by
Seller within six (6) months from the Effective Date, then this Contract
shall continue in full force and effect in the same manner and for all
intents and purposes as if such Title Defect had never existed. If the
aforesaid title search and report shall reveal a Title Defect and such Title
Defect is not one which Seller can remedy within six (6) months from the
Effective Date, then Purchaser, at Purchaser's election, shall either (i)
waive such uncured Title Defect, in which event the parties shall proceed
with Settlement under this Contract in accordance with and subject to the
terms and provisions hereof, without reduction in the Purchase Price for
the Property; or (ii) cancel and rescind this Contract, in which event the
Deposit shall be promptly refunded to Purchaser, and Seller shall
reimburse Purchaser for Purchaser's reasonable costs and expenses
incurred in connection with this Contract, and thereupon all parties
hereto shall be released from all further liability hereunder, at law and in
equity. Nothing in this paragraph 3 shall prevent Purchaser from
objecting to any Title Defect which occurs, becomes a matter of record,
arises or is only discoverable after the date of the original title
examination but prior to Settlement or for any Title Defect which may
only be discoverable upon a survey of the Property. Seller further agrees
to execute such affidavits and/or certifications as requested by
Purchaser's title insurance company to remove any Title Defects and/or
exceptions to title from the title insurance policy.
<PAGE>
4. SELLER'S WARRANTIES. In order to induce Purchaser to enter
into this Contract and to purchase the Property, Seller makes the
following representations and warranties unto Purchaser, each of which
shall be deemed a substantial and material term of this Contract, and
which representations and warranties are being relied upon by Purchaser.
A. Seller is now, or at the time set for Settlement will be, the
fee simple owner of the Property, and has the right, power and authority
to enter into this Contract and to sell the Property in accordance with the
terms and conditions hereof.
B. Seller has no knowledge of any condemnation or eminent
domain proceedings pending or contemplated against the Property or any
part thereof or interest therein, and Seller has received no notice, oral or
written, of the desire of any public authority or other entity to take or
use the Property or any part thereof or interest therein.
C. Seller is not a party to any litigation affecting the Property
or any part thereof or interest therein, or affecting Seller's right to sell
the Property, and Seller has no knowledge of any threatened litigation
affecting the Property or any part thereof or interest therein. Seller shall
give Purchaser prompt notice of any such litigation of which Seller
becomes aware prior to Settlement.
D. Neither the execution of this Contract nor the consummation
of the transactions contemplated hereby will (i) conflict with, or result in
a breach of, the terms, conditions or provisions of, or constitute a default
under, any agreement or instrument to which Seller is a party; or (ii)
violate any restrictions to which Seller is subject.
E. Seller has no knowledge of, nor has Seller received written
notice of, any present action to increase the real estate tax assessment.
F. Seller will, during the term of this Contract, keep any and all
existing mortgage(s) against the Property current and not in default and
pay all taxes and other public charges against the Property so as to avoid
forfeiture of Purchaser's rights hereunder.
Seller will not cause or suffer any action to be taken which
would cause any of the foregoing representations or warranties to be
untrue as of the date of Settlement. Seller shall immediately notify
Purchaser, in writing, of any event or condition known to Seller which
occurs prior to the date of Settlement which causes a change in the facts
relating to, or the truth of, any of the above representations or
warranties.
<PAGE>
5. SETTLEMENT. The purchase and sale contemplated by this
Contract shall be consummated at Settlement (the "Settlement"), which
shall take place on or before the ninetieth (90th) day following the
Effective Date. The exact date, time and place for Settlement shall be
designated by Purchaser in a written notice to Seller at least ten (10)
days prior to the date set for Settlement in such notice. In the event
Purchaser shall not otherwise properly notify Seller as set forth above,
Settlement shall occur on the ninetieth (90th) day following the Effective
Date, at 10:00 a.m. at the law offices of the Escrow Agent, or on the next
business day thereafter if such ninetieth (90th) day falls on a holiday or
weekend. Delivery to the Escrow Agent of the Purchase Price paid in
accordance with paragraph 2 hereof, the deed and such other papers
and/or documents as are required by either party under the terms of this
Contract, in each case properly executed, shall be considered good and
sufficient tender of performance. Seller hereby authorizes and directs
the settlement agent to deduct from Seller's proceeds at Settlement, any
and all amounts necessary to satisfy any existing mortgages, deeds of
trust, assessments or other amounts which may constitute a lien upon the
Property at the time of Settlement.
6. DELIVERIES AT AND CONDITION TO SETTLEMENT. In
addition to other conditions precedent set forth in this Contract, Seller
shall deliver to Purchaser at Settlement all of the following, the delivery
of which shall be a condition precedent to Purchaser's obligation to
consummate the purchase of the Property:
A. A certificate signed by Seller, under seal, that the
representations and warranties set forth in paragraph 5 of this Contract
are true and correct, on and as of the date of Settlement; and
B. A special warranty deed, signed, sealed and acknowledged by
Seller, in recordable form, which shall convey fee simple title to the
Property to Purchaser, free and clear of all liens, encumbrances,
easements and restrictions of every nature and description, all in
accordance with paragraph 4 hereof.
7. EXPENSES, PRORATED ITEMS AND ADJUSTMENTS. State
and local transfer and recordation taxes shall be paid equally by Seller
and Purchaser. Purchaser shall pay title insurance premiums and charges,
tax certifications, notary fees, and survey costs for any surveys ordered
by Purchaser. Seller shall pay all costs and expenses necessary to obtain
a release of any liens or encumbrances on the Property. Each party shall
pay their own attorneys' fees.
8. CONDEMNATION. In the event of condemnation or receipt of
notice of condemnation or taking of any part of the Property by
governmental authority prior to the date of Settlement which would
adversely affect Purchaser's use of the Property, in Purchaser's sole
discretion, Purchaser, at Purchaser's option, shall have the right to
terminate this Contract, and the Deposit shall thereupon be refunded to
Purchaser, at which time this Contract shall be and become null and void,
and all parties hereto shall be released from all further liability
hereunder. If Purchaser does not elect to terminate this Contract, then
Settlement hereunder shall be consummated as herein provided, without
reduction of the Purchase Price, but all condemnation awards or payments
shall be paid or assigned to Purchaser at Settlement.
<PAGE>
9. BROKERAGE FEES AND COMMISSIONS. Each party hereby
represents and warrants unto the other that they have not acted through or
with, or introduced into the transactions contemplated hereby, any
broker, agent, or finder who would be entitled to a commission or fee
upon the execution of this Contract and/or Settlement hereunder, other
than a six percent (6%) commission payable to Kline Scott Visco
Commercial Real Estate, Inc., which commission shall be paid by Seller
hereunder. Each party shall indemnify and hold harmless the other,
respectively, of and from any and all other liability, cost and expense,
including reasonable attorneys' fees, incurred or suffered as a result of
breach of the aforesaid warranty by the indemnifying party.
10. DEFAULT; LIQUIDATED DAMAGES. If all conditions and other
events precedent to either party's obligations to consummate the
transactions contemplated by this Contract have been satisfied or waived,
and either party fails, refuses or is unable to consummate the purchase
and sale contemplated by this Contract, then the non-defaulting party, in
addition to any other remedy the non-defaulting party may otherwise
have at law or in equity (including, but not limited to, the right to bring
suit for specific performance and for monetary damages) shall have the
right to an immediate refund (receipt) of the Deposit, and the defaulting
party shall pay any and all attorneys' fees and court costs incurred by the
non-defaulting party in the enforcement of this Contract.
11. MISCELLANEOUS.
A. This Contract constitutes the entire agreement between the
parties with respect to the transactions contemplated herein, and it
supersedes all prior discussions, understandings or agreements between
the parties. This Contract shall be binding upon and inure to the benefit
of the parties hereto, and their respective successors and assigns. This
Contract may be assigned by Purchaser, upon Purchaser sending written
notice of any such assignment to Seller. Failure by Purchaser or Seller
to insist upon or enforce any of their respective rights hereunder shall
not constitute a waiver thereof, except as provided for herein. Purchaser
and/or Seller may, at their sole discretion, waive any breach by the other
of any of the other's representations, warranties and/or covenants
hereunder, and Purchaser may waive any failure of a condition precedent
to Settlement hereunder.
<PAGE>
B. This Contract shall be governed by, and construed under the
laws of the State of Maryland, without regard to principles of conflict of
laws. The parties further agree, as a material term of this Contract, that
any dispute which may result hereunder or with respect to the Property
shall be subject to the exclusive venue and jurisdiction of the Circuit
Court for Frederick County, Maryland or the United States District Court
for the Northern District of Maryland. The paragraph headings as herein
used are for convenience or reference only and shall not be deemed to
vary the content of this Contract or the covenants, agreements,
representations and warranties herein set forth or to limit the provisions
or scope of any paragraph. After Settlement, either party shall duly
execute and deliver to the other any additional documents and
instruments which such other party may reasonably determine are
necessary to further assure to the other the consummation of the purchase
and sale contemplated herein, without additional expense to the party
requesting such items. To facilitate execution, this Contract is being
executed in duplicate, and it shall not be necessary that the signature of,
or on behalf of, each party, or that the signatures of the persons required
to bind any party, appear on more than one counterpart. All counterparts
shall collectively constitute a single agreement.
C. All notices, requests, consents and other communications
hereunder shall be in writing and shall be (i) personally delivered, (ii)
sent by overnight delivery, or (iii) mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid:
If to Purchaser: With a copy to:
____________________
________________________
____________________
________________________
____________________
________________________
or to such other address as may have been furnished by Purchaser to
Seller in writing.
If to Seller: With a copy to:
____________________
________________________
____________________
________________________
____________________
________________________
or to such other address as may have been furnished by Seller to
Purchaser in writing. Any notice, request, consent or other
communication shall be deemed received (i) in the case of personal
delivery when it is personally delivered, (ii) in the case of overnight
delivery on the day following the date sent, or (iii) on the third (3rd)
business day after it is deposited in the United States mail, as set forth
above, as the case may be.
<PAGE>
D. Time shall be of the essence with respect to each and every
provision of this Contract. All representations, statements, agreements,
warranties, and covenants of Seller and Purchaser set forth in or made
pursuant to this Contract shall be operative, true and correct, as set forth
above, as of the date of Settlement. It is agreed that all representations,
statements, agreements, warranties and covenants of each party hereunder
shall continue to bind the parties and survive Settlement pursuant to this
Contract. The parties acknowledge that they have had the opportunity to
be represented by counsel in the negotiation and execution of this
Contract, and therefore, it is expressly agreed that in the case of any
vagueness or ambiguity with regard to any provision of this Contract,
there shall be no presumption of construction against the drafter of such
provision, but instead this Contract shall be interpreted in accordance
with a fair construction of the law.
E. Purchaser shall have the right at Purchaser's expense to
record this Contract among the Land Records of the County(ies) in which
the Property is located. In the event Purchaser elects to record this
Contract, Purchaser shall be given credit for one-half (1/2) of the
recordation expenses (transfer taxes and stamps) incurred at Settlement.
F. Seller assumes the risk of loss of any damage to the Property
or any part thereof by reason of fire or other casualty until the
consummation of Settlement hereunder. In the event the Property or any
part thereof shall suffer any casualty loss prior to the date of Settlement,
Purchaser may elect (i) to terminate this Contract (and receive the return
of any and all amounts paid towards the Purchase Price, including the
Deposit) or (ii) to proceed with Settlement hereunder and receive any and
all insurance proceeds due and payable as a result of such casualty.
Seller agrees to insure the Property during the period between the
Effective Date and the date of Settlement against such casualties for the
full fair market value of the Property.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
sealed this Contract as of the day and year first above written.
WITNESS: BLUE II, LLC
__________________________
BY:_____________________(SEAL)
Federal ID #:________________
SELLER
FREDERICK BREWING CO.
__________________________
BY:_____________________(SEAL)
Federal ID #:________________
PURCHASER
EXHIBIT 10 (vi)
MARYLAND ECONOMIC DEVELOPMENT CORPORATION, as Issuer,
FREDERICK BREWING CO.,
as Borrower,
and
SIGNET BANK,
as Lender
______________________________
LOAN AND FINANCING AGREEMENT
______________________________
$1,500,000
Maryland Economic Development Corporation
Taxable Economic Development Revenue Bond
(Frederick Brewing Co. Facility)
1996 Issue
__________________________
July 19, 1996
__________________________
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND RULES
OF CONSTRUCTION
SECTION PAGE
1.1. Definitions - General . . . . . . . . . . . . . .2
1.2. ERISA Terms . . . . . . . . . . . . . . . . . . .17
1.3. Accounting Terms . . . . . . . . . . . . . . . .18
1.4. Rules of Construction . . . . . . . . . . . . . .18
1.5. Refs to Bond and Note Ineffective After Termination Date 18
ARTICLE II
THE BOND; REDEMPTION;
SECURITY FOR THE BOND
2.1. The Bond . . . . . . . . . . . . . . . . . . . . 19
2.2. Redemption of the Bond . . . . . . . . . . . . . 19
2.3. Partial Redemptions . . . . . . . . . . . . . . . 20
2.4. Effect of Redemption of Bond . . . . . . . . . . 20
2.5. Negotiability, Registration and Transfer of
Bond; Mutilated, Lost or Destroyed Bond . . . . . 20
2.6. Limited Liability of the Issuer . . . . . . . . . 21
2.7. Security for Bond; Assignment by the Issuer
to the Lender . . . . . . . . . . . . . . . . . . 22
2.8. Insurance Provided by the Authority . . . . . . . 23
ARTICLE III
THE LOAN; THE NOTE; SECURITY FOR THE LOAN
3.1. The Loan; The Note . . . . . . . . . . . . . . . 25
3.2. Payments by Borrower Upon Redemption of
the Bond . . . . . . . . . . . . . . . . . . . . 25
3.3. Intentionally Deleted . . . . . . . . . . . . . . 25
3.4. Security for the Loan . . . . . . . . . . . . . . 25
3.5. Location of Security; Other Covenants
Pertaining to Security . . . . . . . . . . . . . 26
3.6. Loss of Security . . . . . . . . . . . . . . . . 28
3.7. Filings . . . . . . . . . . . . . . . . . . . . . 28
3.8. Consent of the Authority . . . . . . . . . . . . 29
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES;
FINDINGS BY THE ISSUER
4.1. Representations and Warranties of the Issuer . . 29
4.2. Findings by the Issuer . . . . . . . . . . . . . 30
4.3. General Representations and Warranties of the
Borrower . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
COVENANTS
5.1. Covenants of the Issuer . . . . . . . . . . . . . 33
5.2. Affirmative Covenants of the Borrower . . . . . . 34
5.3. Negative Covenants of the Borrower . . . . . . . 40
ARTICLE VI
APPLICATION OF LOAN PROCEEDS
6.1. Application of Loan Proceeds; Advances . . . . . 43
6.2. Advances of Bond Proceeds . . . . . . . . . . . . 43
6.3. Procedure for Making Advances of Bond Proceeds. . 44
6.4. Conditions Precedent to Advances of
Bond Proceeds . . . . . . . . . . . . . . . . . . 46
6.5. Completion of Acquisition of the Facility . . . 47
6.6. Establishment of Completion Date . . . . . . . . 48
6.7. Financing Sign on Building; Publicity . . . . . . 48
6.8. Action by Holder Through and Reliance
Upon Others . . . . . . . . . . . . . . . . . . . 49
6.9. Holder May Rely Upon Instruments. . . . . . . . . 49
ARTICLE VII
COVENANTS, AGREEMENTS, REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO THE FACILITY
7.1. Possession, Ownership and Use of the
Facility . . . . . . . . . . . . . . . . . . . . 49
7.2. Representations, Warranties and Covenants
Pertaining to the Facility . . . . . . . . . . . 50
7.3. No Warranty of Suitability by Issuer or Holder . 51
7.4. Alterations, Additions and Improvements . . . . . 51
7.5. Transfer of Facility; Other Liens; Assignment
and Leasing . . . . . . . . . . . . . . . . . . . 51
<PAGE>
ARTICLE VIII
PROPERTY TAXES; INSURANCE
8.l. Property Taxes; Tax and Insurance Escrow. . . . . 52
8.2. Insurance Required. . . . . . . . . . . . . . . . 53
8.3. Specific Requirements With Respect to
Insurance . . . . . . . . . . . . . . . . . . . . 54
ARTICLE IX
DAMAGE TO THE FACILITY;
APPLICATION OF NET PROCEEDS
9.l. Damage to the Facility . . . . . . . . . . . . . 56
9.2. Application of Net Proceeds . . . . . . . . . . . 56
9.3. General Provisions . . . . . . . . . . . . . . . 57
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
10.1. Events of Default Defined . . . . . . . . . . . . 58
10.2. Remedies on Default . . . . . . . . . . . . . . . 62
10.3. No Remedy Exclusive; Delays or Omissions;
Waiver of Breach. . . . . . . . . . . . . . . . . 65
10.4. Termination of Proceedings. . . . . . . . . . . . 66
10.5. Application of Moneys . . . . . . . . . . . . . . 66
ARTICLE XI
DURATION OF AGREEMENT; DEFEASANCE
11.1. Duration of this Agreement . . . . . . . . . . . . 67
11.2. Defeasance and Discharge of Lien of
the Holder . . . . . . . . . . . . . . . . . . . . 67
ARTICLE XII
ADDITIONAL PAYMENTS
12.1. Costs to be Paid by the Borrower; Issuer's Fee . . 67
12.2. Reimbursement of Advances Made or Other Costs
Incurred . . . . . . . . . . . . . . . . . . . . 68
12.3. Interest on Additional Payments and
Reimbursements . . . . . . . . . . . . . . . . . 68
12.4. Indemnification. . . . . . . . . . . . . . . . . 69
<PAGE>
12.5. Surviving Rights . . . . . . . . . . . . . . . . 71
12.6. Payments Due on Non-Business Days. . . . . . . . 71
ARTICLE XIII
MISCELLANEOUS
13.1. Unconditional Obligations of Borrower. . . . . . 71
13.2. Authorized Representatives . . . . . . . . . . . 72
13.3. Consent to Jurisdiction; Service of Process. . . 72
13.4. Further Assurances and Corrective Instruments. . 73
13.5. Estoppel Certificate . . . . . . . . . . . . . . 73
13.6. Prior Agreements Canceled. . . . . . . . . . . . 73
13.7. Binding Effect . . . . . . . . . . . . . . . . . 74
13.8. Dissolution of Issuer. . . . . . . . . . . . . . 74
13.9. Disclosure of Information 74
13.10. Illegality . . . . . . . . . . . . . . . . . . . 74
13.11. Amendments, Changes and Modifications. . . . . . 75
13.12. Execution of Counterparts. . . . . . . . . . . . 75
13.13. Law Governing Construction of Agreement. . . . . 75
13.14. Assignment . . . . . . . . . . . . . . . . . . . 75
______________________
EXHIBIT A - Form of Requisition
EXHIBIT B - List of Equipment
EXHIBIT C - List of Copyrights, Patents and Trademarks
EXHIBIT D - Sources and Uses of Funds
EXHIBIT E - Schedule of Additional Equipment
<PAGE>
LOAN AND FINANCING AGREEMENT
THIS LOAN AND FINANCING AGREEMENT is entered into
July 19, 1996, by and among MARYLAND ECONOMIC DEVELOPMENT
CORPORATION, a body politic and corporate and a public
instrumentality of the State of Maryland (the "Issuer"), FREDERICK
BREWING CO., a Maryland corporation (the "Borrower"), and SIGNET
BANK, a Virginia banking corporation (the "Lender").
RECITALS
Pursuant to and in accordance with the Act (as hereinafter defined),
the Issuer has determined to issue and sell to the Lender its Taxable
Economic Development Revenue Bond (Frederick Brewing Co. Facility),
1996 Issue, in the principal amount of $1,500,000 (the "Bond"), and loan
the proceeds from the sale thereof to the Borrower, to assist the Borrower
in financing the costs of the acquisition and installation by the Borrower
of a certain facility (the "Facility"), to be housed in a building or
buildings located within the geographical boundaries and jurisdiction of
Frederick County, Maryland, all upon the terms and conditions of this
Financing Agreement.
Pursuant to and in accordance with the MIDFA Act (as hereinafter
defined), the Authority, in its capacity as insurer under the MIDFA Act,
is providing financial assistance (within the meaning of the MIDFA Act)
by insuring, through its Bond Insurance Fund (hereinafter defined), a
portion of the principal of and interest on the Bond.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the
respective representations, covenants and agreements hereinafter
contained, and of the purchase and acceptance of the Bond by those who
shall hold the same from time to time, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows (provided, that
in performance of the agreements of the Issuer herein contained, any
obligation the Issuer, the Authority or the Department (as hereinafter
defined) may thereby incur for the payment of money shall not constitute
an indebtedness or a charge against the general credit or taxing powers of
the Issuer, the Authority (except in regard to the Authority Insurance
Agreement), the Department or of any other public body, shall not create
any pecuniary liability of the Issuer or of any other public body, and
shall be payable solely from the sources herein provided):
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions - General. Certain terms used in
this Agreement and in certain of the other documents executed and
delivered in connection herewith are defined in this Section 1.1. Such
terms shall have the meanings given to them in this Section l.l, unless
specifically provided otherwise or unless the context clearly indicates
otherwise:
"Accountant" means an Independent Person engaged in the
accounting profession as a certified public accountant under the laws of
the State, and qualified to pass upon those matters required by this
Agreement and the other Documents to be passed upon by an Accountant.
"Accounts" means (a) all of the Borrower's present and future
accounts, contract rights, receivables, promissory notes and other
instruments, chattel paper and general intangibles; (b) all present and
future tax refunds of the Borrower and all present and future rights of the
Borrower to refunds or returns of prepaid expenses, including unearned
insurance premiums; (c) all present and future cash of the Borrower; (d)
all deposit accounts now or hereafter maintained or established by, for or
on behalf of the Borrower with any bank or other institution, and all
balances of funds now or hereafter on deposit in all such accounts,
including, without limitation, all checking accounts, collection accounts,
lockbox accounts, disbursement accounts, concentration accounts and all
other deposit accounts of every kind and nature; (e) all present and
future judgments, orders, awards and decrees in favor of the Borrower
and causes of action in favor of the Borrower; (f) all present and future
claims, rights of indemnification and other rights of the Borrower under
or in connection with any contracts or agreements to which the Borrower
is or becomes a party or third party beneficiary; (g) all rights and claims
of the Borrower with respect to any deposits of money or other property
made with any lessors of any property, insurers, bonding agents or any
other persons; (h) all present and future rights and claims which the
Borrower may now or hereafter have under any insurance policies,
contracts or coverages now or hereafter in effect; (i) all goods previously
or hereafter returned, repossessed or stopped in transit, the sale, lease or
other disposition of which contributed to the creation of any account,
instrument or chattel paper of the Borrower; (j) all present and future
rights of the Borrower as an unpaid seller of goods, including rights of
stoppage in transit, detinue and reclamation; (k) all rights which the
Borrower may now or at any time hereafter have, by law or agreement,
against any account debtor or other obligor of the Borrower, and all
rights and Encumbrances which the Borrower may now or at any time
hereafter have, by law or agreement, against any property of any account
debtor or other obligor of the Borrower; (l) all present and future
interests and rights of the Borrower, including rights to the payment of
money, under or in connection with all present and future leases and
subleases of real or personal property to which the Borrower is a party,
as lessor, sublessor, lessee or sublessee; (m) all present and future
customer lists of the Borrower; (n) all present and future contingent and
non-contingent rights of the Borrower to the payment of money for any
reason whatsoever, whether arising in contract, tort or otherwise, whether
or not such rights are otherwise included in this definition; and (o) all
present and future rights of the Borrower with respect to licenses,
patents, copyrights, franchises, trade names and trademarks including,
without limitation, the Intellectual Property.
<PAGE>
"Acquisition" or "acquisition" means, when used in regard to the
Facility, and shall include, where applicable, and without limitation, the
acquisition, construction, rehabilitation, remodeling, extension,
equipping and permanent improvement of the Facility, and paying the
necessary costs of preparing, printing and selling the Bonds, and such
other costs as may be permitted by the Act and approved by the Lender
and the Authority.
"Acquisition Costs" means all costs of the acquisition of the
Facility approved by the Lender and the Authority.
"Act" means Article 83A, Title 5, Subtitle 2 of the Annotated Code
of Maryland (1995 Replacement Volume), as amended, and all future laws
supplemental thereto or amendatory thereof.
"Act of Bankruptcy" means the filing of a petition in bankruptcy
under the Bankruptcy Code or the commencement of a proceeding under
any other applicable law concerning insolvency, reorganization or
bankruptcy by or against the Borrower or the Issuer as debtor.
"Additions" means any and all alterations, additions, accessions
and improvements to property, substitutions therefor, and renewals and
replacements thereof.
"Agent" means any official, officer, employee or agent.
"Applicable Rate" means the applicable rate of interest payable by
the Issuer under the Bond and by the Borrower under the Note from time
to time.
"Assignment of Note" means the Assignment of Note of even date
herewith from the Issuer to the Lender, pursuant to which the Issuer has
assigned to the Lender, without recourse, the payments to be made by the
Borrower under the Note (except for the Reserved Rights of the Issuer).
"Associate Director" means the Associate Director of the Authority
or such other person or office to which the principal functions of the
Associate Director may be transferred.
"Authority" means the Maryland Industrial Development Financing
Authority, a body corporate and politic and a public instrumentality of
the State created pursuant to the MIDFA Act, its successors and assigns.
<PAGE>
"Authority Insurance Agreement" means the Insurance Agreement of
even date herewith by and between the Authority and the Lender,
pursuant to which the Authority, through the Bond Insurance Fund, has
provided financial assistance in connection with the acquisition of the
Facility by insuring the payment of a portion of the principal of, and
interest on the Bond.
"Authority's Insurance Premium" shall mean the Authority's
Insurance Premium as described in Section 5.2(q) hereof.
"Authority's Subrogation Rights" means all of the Authority's rights
of subrogation, as set forth in this Agreement and any of the other
Documents and as may be otherwise available under law.
"Authorized Authority Representative" means the Chairman, the
Vice Chairman, the Executive Director or the Associate Director, or such
other person or persons as may be designated to act on behalf of the
Authority in accordance with the provisions of Section 13.2 of this
Agreement.
"Authorized Borrower Representative" means the Chairman of the
Board and the Chief Executive Officer of the Borrower, or such other
person or persons as may be designated to act on behalf of the Borrower
in accordance with the provisions of Section 13.2 of this Agreement.
"Authorized Issuer Representative" means the Executive Director of
the Issuer, or such other person or persons as may be designated to act on
behalf of the Issuer in accordance with the provisions of Section 13.2 of
this Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code, 11
U.S.C. Section 101 et seq., and all future acts supplemental thereto or
amendatory thereof.
"Blue II" means Blue II, LLC, a Maryland limited liability company
and the owner of the Building, and its successors.
"Blue II Bond" means the Issuer's Taxable Economic Development
Revenue Bond (Blue II, LLC Facility), 1996 Issue, of even date herewith,
issued and delivered on the Closing Date in the principal amount of
$3,000,000, together with all Supplements thereto, the proceeds of which
are being loaned to Blue II to finance a portion of the construction costs
of the Building.
"Bond" means the Issuer's Taxable Economic Development Revenue
Bond (Frederick Brewing Co. Facility), 1996 Issue, of even date
herewith, issued and delivered on the Closing Date in the principal
amount of $1,500,000, together with all Supplements thereto, which is a
"bond" within the meaning of the Act.
<PAGE>
"Bond Counsel" means Miles & Stockbridge, a Professional
Corporation, Baltimore, Maryland, or any other Independent Counsel
approved by the Holder and the Issuer and whose opinions are generally
accepted in the field of municipal finance.
"Bond Insurance Fund" means the continuing, nonlapsing, revolving
fund of the Authority created pursuant to the MIDFA Act. The faith and
credit of the State are not pledged to the Bond Insurance Fund.
"Bond Registrar" means the Lender or such other person as may be
approved by the Issuer to maintain registration books for the registration
and transfer of the Bond.
"Borrower" means Frederick Brewing Co., a Maryland corporation,
its successors and assigns.
"Borrower's Obligations" means the obligations of the Borrower
under this Agreement, the Note and the other Documents to (a) pay the
principal of and interest on the Note, when and as the same shall become
due and payable (whether at the stated maturity thereof, on any
installment payment date, by acceleration of maturity, after notice of
redemption or otherwise), (b) pay all other payments required by this
Agreement, the Note, and the other Documents to be paid by the
Borrower to the Issuer, to the Authority, to the Lender, or to others,
when and as the same shall become due and payable, and (c) timely
perform, observe and comply with all of the terms, covenants, conditions,
stipulations, and agreements, express or implied, which the Borrower is
required by this Agreement, the Note, and any of the other Documents, to
perform or observe.
"Bridge Loan" means the short-term loan made by the Lender to the
Borrower on the date hereof, in the principal amount of Nine Hundred
Sixty-Nine Thousand ($969,000), to provide short-term financing for the
Facility, after disbursement of the proceeds of the Bond.
"Building" means the 50,000 square foot warehouse/manufacturing
building to be constructed on the Land by Blue II.
"Business Day" or "business day" means a day other than a
Saturday, Sunday or legal holiday in the State, and observed as such by
the Holder.
"Carroll Street Facility" means the building currently occupied by
the Borrower located at 103 S. Carroll Street in Frederick County,
Maryland.
"Chairman" means the Chairman of the Authority or such other
person or office to which the principal functions of the Chairman may be
transferred.
<PAGE>
"Claim" means any liability, suit, action, claim, demand, loss,
expense or cost of any kind or nature whatsoever.
"Closing Date" means the date of this Agreement, which is the date
of issue and delivery of the Bond.
"Collateral Assignment of Copyrights" means the Collateral
Assignment of Copyrights of even date herewith, by and between the
Borrower, as assignor, to the Issuer and its assigns including the Lender
and its assigns, and the Authority, together with all Supplements thereto.
"Collateral Assignment of Patents" means the Collateral
Assignment of Patents of even date herewith, by and between the
Borrower, as assignor, to the Issuer and its assigns including the Lender
and its assigns, and the Authority, together with all Supplements thereto.
"Collateral Assignment of Trademarks" means the Collateral
Assignment of Trademarks of even date herewith, by and between the
Borrower, as assignor, to the Issuer and its assigns including the Lender
and its assigns, and the Authority, together with all Supplements thereto.
"Collateral Assignments" means, collectively, the Collateral
Assignment of Copyrights, the Collateral Assignment of Patents and the
Collateral Assignment of Trademarks.
"Completion Date" means the date of completion of the acquisition
of the Facility, as that date is certified as provided in Section 6.6 of this
Agreement, which date shall be no later than January 2, 1997.
"Copyrights" means all of the Borrower's right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to
all domestic and foreign copyrights, copyright registrations and
copyright applications, whether or not registered or filed with any
governmental authority, together with (a) all renewals thereof, (b) all
present and future rights of the Borrower under all present and future
license agreements relating thereto, whether the Borrower is licensee or
licensor thereunder, (c) all income, royalties, damages and payments now
or hereafter due and/or payable to the Borrower thereunder or with
respect thereto, including, without limitation, damages and payments for
past, present or future infringements thereof, (d) all of the Borrower's
present and future claims, causes of action and rights to sue for past,
present or future infringements thereof, and (e) all rights corresponding
thereto throughout the world. The Copyrights shall include, without
limitation, those Copyrights listed on Exhibit C attached hereto and made
a part hereof.
"County" means Frederick County, Maryland, the county within
which the Facility is to be located.
<PAGE>
"Damage" means any damage, destruction or other injury (in whole
or in part) by fire or other casualty. "Damaged" means damaged,
destroyed or injured (in whole or in part) by fire or other casualty.
"Department" means the Department of Business and Economic
Development of the State, a principal department of the government of
the State.
"Documents" means and includes (without limitation) the Bond, this
Agreement, the Note, the Assignment of Note, the Authority Insurance
Agreement, the Collateral Assignments, the Facility Lease, and any and
all other documents which the Issuer, the Authority, the Borrower or any
other party or parties or their representatives, have executed and
delivered, or may hereafter execute and deliver, to evidence or secure the
Issuer's Obligations, the Borrower's Obligations or any part thereof, or in
connection therewith, together with all Supplements thereto.
"Encumbrance" means any mortgage, pledge, lien, security interest,
charge or other encumbrance.
"Environmental Laws" means all federal, state and local laws
relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or Hazardous
Substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, or land), or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals,
or industrial, toxic or Hazardous Substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices
or demand letters issued, entered, promulgated or approved thereunder.
"Equipment" means the Facility and (a) all equipment of the
Borrower of every type and description, now owned and hereafter
acquired and wherever located, including, without limitation, all
machinery, vehicles and other rolling stock, furniture, furnishings, tools,
dies, leasehold improvements, fixtures, and materials and supplies
relating to any of the foregoing; (b) all present and future documents of
title and trust receipts relating to any of the foregoing; (c) all present
and future rights, claims and causes of action of the Borrower in
connection with purchases by the Borrower of (or contracts for the
purchase by the Borrower of), or warranties relating to, or damages to,
goods held or to be held by the Borrower as equipment; (d) all present
and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing;
(e) all present and future rights, claims and causes of action of Borrower
in connection with any agreements pursuant to which any suppliers,
manufacturers or other persons have agreed or may agree, conditionally
or otherwise, to purchase or repurchase from the Borrower, in bulk or
otherwise, any goods held or to be held by the Borrower as equipment;
and (f) all present and future general intangibles of the Borrower in any
way relating to any of the foregoing.
<PAGE>
"Equipment Collateral" means all building materials, fixtures,
machinery, equipment and tangible personal property of every kind and
nature whatsoever of the Borrower, now or hereafter located or contained
in or upon or attached to, the Land or the Building or any part thereof,
and used or usable in connection with any present or future use or
operations of the Land or the Building or any part thereof, whether now
owned or hereafter acquired by the Borrower, together with all Additions
thereto and all Proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means (a) with respect to this Agreement, those
events of default specified in Section 10.1 hereof; and (b) when used
with respect to any of the other Documents, any "event of default"
specified therein, or if none is specified, any failure of any party thereto
to comply with any of the terms thereof, after the expiration of any
applicable cure or grace period set forth therein.
"Executive Director" means the Executive Director of the Authority
or such person or office to which the principal functions of the Executive
Director may be transferred.
"Executive Order" means the Executive Order of even date herewith
executed by the Chairman, approving the form of the Bond and other
details in connection with the Bond and the Loan, as authorized by the
Act.
"Existing Building" means the premises and building located at 103
S. Carroll Street, Frederick, Maryland, where the Borrower currently
conducts its business.
"Facility" means the Equipment listed on Exhibit B attached hereto
and incorporated herein, and all substitutions or replacements thereof,
and together with all Additions thereto and all Proceeds thereof, a
"project" within the meaning of the Act.
"Facility Lease" means the Lease Agreement and Option to
Purchase of even date herewith, by and between Blue II, as lessor, and
the Borrower, as lessee, for the Building and the Land, together with all
Supplements thereto.
"Financial Assistance" or "financial assistance" means financial
assistance within the meaning of the MIDFA Act.
<PAGE>
"Financing Agreement" or "Agreement" means this Loan and
Financing Agreement by and among the Issuer, the Borrower and the
Lender, together with all Supplements hereto.
"Force Majeure" means and includes, without limitation, the
following: acts of God; strikes; lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of the
United States or of the State or any of their departments, agencies or
officials, or any civil or military authority; insurrections; riots;
epidemics; landslides; lightning; earthquakes; fire; hurricanes; storms;
floods; washouts; droughts; arrests; restraint of government and people;
civil disturbances; explosions; breakage or accident to machinery,
transmission pipes or canals; partial or entire failure of utilities; or any
other cause or event not reasonably within the control of the Borrower, it
being agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the Borrower and
the Borrower 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
Borrower, unfavorable to it.
"Full Insurable Value" means such value as shall be determined
from time to time at the request of the Borrower or the Holder or the
Authority (but not more frequently than once every 24 months) by one of
the insurers selected by the Borrower and approved by the Holder and the
Authority.
"Gross Negligence" means gross negligence or willful misconduct.
"Hazardous Substance" means any flammable explosives, radon,
radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum-based products,
methane and all other pollutants, contaminants, chemicals, industrial
substances, industrial wastes, toxic substances, toxic wastes, toxic
materials, hazardous substances, hazardous wastes and hazardous
materials. The meaning of each term used in this definition shall
include, without limitation, the meaning or meanings assigned to such
term by any Environmental Laws.
"Holder" means the Lender and any other registered owner from
time to time of the Bond, their successors and registered assigns.
"Independent Counsel" means an Independent Person duly admitted
to practice law before the highest court of the State.
"Independent Engineer" means an Independent Person registered
and qualified to practice the profession of engineering under the laws of
the State.
"Independent Person" means a person designated by the Borrower,
approved by the Holder and the Authority, and not an employee of the
Issuer, the Holder or the Borrower.
<PAGE>
"Intellectual Property" means (a) all Copyrights; (b) all Patents; (c)
all Trademarks; (d) all licenses; (e) all good will of the Borrower; (f) all
present and further trade secrets of the Borrower; and (g) all other
present and future intellectual property of the Borrower.
"Inventory" means (a) all inventory of the Borrower of every type
and description, now owned and hereafter acquired and wherever located,
including, without limitation, raw materials, work in process, finished
goods, goods returned or repossessed, and goods held for demonstration,
marketing or similar purposes; (b) all present and future materials and
supplies of the Borrower used, usable or consumed in the course of the
Borrower's business, whether relating to the manufacture, assembly,
installation, repair, packaging, packing or shipment of goods by the
Borrower, or relating to advertising or any other aspect of the Borrower's
business; (c) all present and future personal property of the Borrower in
or on which any of the foregoing is stored or maintained; (d) all present
and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing;
(e) all present and future documents of title and trust receipts relating to
any of the foregoing; (f) all present and future customer lists of the
Borrower; (g) all present and future rights of the Borrower in connection
with goods consigned to or by the Borrower; (h) all present and future
rights of the Borrower as an unpaid seller of goods, including rights of
stoppage in transit, detinue and reclamation; (i) all present and future
rights, claims and causes of action of the Borrower in connection with
purchases by the Borrower of (or contracts for the purchase by the
Borrower of), or warranties relating to, or damages to, goods held or to
be held by the Borrower as inventory; (j) all present and future rights,
claims and causes of action of the Borrower in connection with any
agreements pursuant to which any suppliers, manufacturers or other
persons have agreed or may agree, conditionally or otherwise, to
purchase or repurchase from the Borrower, in bulk or otherwise, any
goods held or to be held by the Borrower as inventory; and (k) all present
and future general intangibles of the Borrower in any way relating to any
of the foregoing.
"Issuer" means Maryland Economic Development Corporation, a
body politic and corporate and a public instrumentality of the State of
Maryland.
"Issuer's Fee" means the annual fee payable in advance by the
Borrower to the Issuer equal to 1/8 of 1% of the outstanding principal
balance of the Bond.
"Issuer's Obligations" means the obligations of the Issuer under the
Bond, this Agreement and the other Documents, to (a) pay the principal
of, premium (if any) and interest (at the Applicable Rate) on the Bond,
when and as the same shall become due and payable (whether at the
stated maturity thereof, on any installment payment date, by acceleration
<PAGE>
of maturity, after notice of redemption or otherwise), (b) pay all other
payments (if any) required by the Bond, this Agreement and the other
Documents to be paid by the Issuer to the Holder, or to others, when and
as the same shall become due and payable, and (c) timely perform,
observe and comply with all of the terms, covenants, conditions,
stipulations and agreements, express or implied, which the Issuer is
required by the Bond, this Agreement or any of the other Documents, to
perform and observe; provided, however, that the Issuer's Obligations do
not include any obligation to incur any pecuniary liability or any
obligation to make any payment from any funds other than from moneys
paid to it by the Borrower or as proceeds of any Security.
"Land" means that parcel of land identified as "Lot 13",
Wedgewood Business Park, on Wedgewood Boulevard, Buckeystown,
Election District #1, Frederick County, Maryland, consisting of
approximately 5.6 acres, together with the Building and any and all other
improvements thereon, all of which is or shall be owned by Blue II.
"Laws" or "laws" means federal, state and local laws, rules, and
regulations, and orders of any court or other governmental authority
having jurisdiction.
"Lender" means Signet Bank, a Virginia banking corporation, and
its successors and assigns.
"Lender's Inspector" means Whitney, Bailey, Cox & Magnani or
such other person as may be approved by the Lender for the purpose of
inspecting the progress of the acquisition of the Facility.
"Lien" shall mean any statutory or common law consensual or
nonconsensual mortgage, pledge, security interest, encumbrance, lien,
right of setoff, claim or charge of any kind, including, without
limitation, any conditional sale or other title retention transaction, any
lease transaction in the nature thereof and any secured transaction under
the Uniform Commercial Code of any jurisdiction.
"Loan" means the loan in the principal amount of $1,500,000, made
by the Issuer to the Borrower on the Closing Date from the proceeds of
the Bond, as evidenced by the Note and described in this Agreement and
secured, inter alia, by this Agreement and the other Documents.
"Loan Term" means the period beginning on the Closing Date and
continuing until the Termination Date.
"MIDFA Act" means the Maryland Industrial Development
Financing Authority Act, and all future acts supplemental thereto or
amendatory thereof.
<PAGE>
"MIDFA Resolution" means the resolution adopted by the Authority
November 30, 1995, as amended on December 21, 1995 and further
amended on February 22, 1996.
"Net Proceeds", when used with respect to any insurance proceeds
allocable to the Facility, means the gross proceeds from insurance
received by reason of any Damage remaining after payment of all
expenses (including attorneys' fees) incurred in the collection of such
gross proceeds.
"Note" means the Promissory Note of even date herewith made by
the Borrower payable to the Issuer in the amount of the Loan, together
with all Supplements thereto.
"Notice" means a written communication given by delivery or by
certified mail, postage prepaid, return receipt requested, addressed to the
person to whom such communication is to be given, at the following
addresses:
Authority: Maryland Industrial Development Financing
Authority
217 East Redwood Street
Baltimore, Maryland 21202
Attention: Executive Director
Blue II: Blue II, LLC
117 West Patrick Street
Frederick, Maryland 21701
Attention: Managing Member
Borrower: Frederick Brewing Co.
103 S. Carroll Street
Frederick, Maryland 21701
Attention:Chief Executive Officer
after the Completion Date:
Frederick Brewing Co.
4607 Wedgewood Boulevard
Buckeystown, Maryland 21703
Attention: Chief Executive Officer
Issuer: Maryland Economic Development
Corporation
36 South Charles Street
Suite 1911
Baltimore, Maryland 21201
Attention: Executive Director
Lender: Signet Bank
7 Saint Paul Street
Baltimore, Maryland 21202
Attention: Mark A. Cunningham
<PAGE>
Holder: THE LENDER AT ITS ADDRESS SET FORTH
ABOVE OR TO SUCH OTHER HOLDER WHOSE
NAME APPEARS ON THE REGISTRATION BOOKS
OF THE BOND REGISTRAR AT THE ADDRESS
DESIGNATED THEREIN.
A duplicate copy of each communication given hereunder by any
person listed above to another shall also be given to the Holder and to
the Authority; provided, however, that any failure to give a duplicate
copy of any such communication shall not invalidate any Notice given
hereunder. Any of the persons listed above may, by notice given
hereunder, designate any further or different addresses to which
subsequent notices, certificates or other communications shall be sent.
"Outstanding" or "outstanding" means with respect to the Bond, the
period beginning on the Closing Date and continuing until all principal
of, premium (if any) and interest on the Bond have been paid in full.
"Patents" means all of the Borrower's right, title and interest,
whether now owned or existing or hereafter acquired or arising, in and to
all United States and foreign patents, and pending and abandoned United
States and foreign patent applications, including, without limitation, the
inventions and improvements described or claimed therein, together with
(a) any reissues, divisions, continuations, certificates of reexamination,
extensions, and continuations-in-part thereof, (b) all present and future
rights of the Borrower under all present and future license agreements
relating thereto, whether the Borrower is licensee or licensor thereunder,
(c) all income, royalties, damages and payments now or hereafter due
and/or payable to the Borrower thereunder or with respect thereto,
including, without limitation, damages and payments for past, present or
future infringements thereof, (d) all of the Borrower's present and future
claims, causes of action and rights to sue for past, present or future
infringements thereof, and (e) all rights corresponding thereto throughout
the world. The Patents shall include, without limitation, those Patents
listed on Exhibit C attached hereto and made a part hereof.
"Permitted Liens" shall mean: (a) existing Liens of the Lender;
(b) Liens for taxes not delinquent or for taxes being diligently contested
in good faith by the Borrower by appropriate proceedings, subject to the
conditions set forth herein and provided such Lien is subordinate to any
security interest of the Lender in the property encumbered by such Lien;
(c) mechanic's, artisan's, materialman's, landlord's, carrier's or other like
Liens arising in the ordinary course of business with respect to
obligations which are not due; (d) Liens arising out of a judgment, order
or award with respect to which the Borrower shall in good faith be
prosecuting diligently on appeal or proceeding for review and with
respect to which there shall be in effect a subsisting stay of execution
pending such appeal or proceeding for review, provided appropriate
reserves therefor are established by the Borrower in accordance with
generally accepted accounting principles and provided such Liens are
subordinate to the Lender's security interest in the property encumbered
<PAGE>
by such Lien; (e) any deposit of funds made in the ordinary course of
business to secure obligations of the Borrower under worker's
compensation laws, unemployment insurance laws or similar legislation,
to secure public or statutory obligations of the Borrower, to secure
surety, appeal or customs bonds in proceedings to which the Borrower is
a party, or to secure the Borrower's performance in connection with bids,
tenders, contracts (other than contracts for the payment of money), leases
or subleases made by the Borrower in the ordinary course of business; (f)
Liens granted to the Lender in connection with the Bridge Loan; (g)
Liens to be granted to the SBA in connection with the SBA Loan, as set
forth in the SBA Commitment; (h) existing purchase money Liens on
vehicles and other rolling stock; and (i) Liens specifically consented to
by the Lender and the Authority in writing.
"Permitted Use" means use of the Facility by the Borrower as in its
business as a brewing company, or such other use or uses as may be
approved by the Holder and the Issuer and permitted by the Act.
"Person" or "person" means any natural person, firm, association,
partnership, corporation, limited liability company, trust, public body or
other entity.
"Pledged Receipts" means: (a) scheduled payments of principal of
and interest on the Note, (b) Net Proceeds, (c) Receipts Requiring
Mandatory Redemption, and (d) any other payments required or provided
for by the Documents and paid to the Issuer and its assigns from any
source, including both timely and delinquent payments with late charges.
"Proceeds" or "proceeds" means, when used with respect to any of
the Security, all proceeds within the meaning of the Maryland Uniform
Commercial Code and shall include the proceeds of any and all insurance
policies.
"Projected Completion Date" means January 2, 1997, or such later
date as may be approved in writing by the Holder and the Authority or as
may be extended by reason of Force Majeure pursuant to Section 6.5(a)
of this Financing Agreement.
"Property Taxes" means all taxes, payments in lieu of taxes, water
rents, sewer rents, ground rents, assessments and other governmental or
municipal or public or private dues, charges and levies and any liens
(including federal tax liens) which are or may be levied, imposed or
assessed upon any of the Borrower's properties or any part thereof or any
of the Security, whether any or all of the aforementioned be levied
directly or indirectly or as excise taxes, as income taxes, or otherwise.
<PAGE>
"Receipts Requiring Mandatory Redemption" means amounts
received by the Borrower, by the Holder or by any other person from any
of the following sources:
(a) all amounts received by the Borrower from the proceeds
of any sale of the Facility (or any portion thereof), (including any profit
realized by the Borrower) and required by any of the Documents to be
applied to the redemption of the Bond,
(b) any unadvanced portion of the Bond proceeds remaining
after the Completion Date and final advance of Bond proceeds are
required to be applied to the redemption of the Bond pursuant to Section
6.2(b),
(c) any Net Proceeds received as a result of any Damage to
the Facility and required by the Holder to be applied to the redemption of
the Bond, as provided hereunder,
(d) any other amount or amounts received from any source
and required by the Documents or by the Holder to be applied to the
redemption of the Bond.
"Reimbursement Rate" means the fluctuating rate of interest which
is at all times equal to the Applicable Rate plus 2% per annum.
"Reimbursement Rights" means (a) the rights of the Holder and the
Issuer to receive reimbursement and indemnification pursuant to the
Documents, (b) the Authority's Subrogation Rights, and (c) all
enforcement remedies with respect to the foregoing.
"Rents" means all of the rents, royalties, issues, profits, revenues,
earnings, income and other benefits of the Property, or arising from the
use or enjoyment of all or any portion thereof, or from any lease or other
agreement pertaining thereto.
"Requisition" means the form attached hereto as Exhibit A,
submitted by the Borrower under this Agreement for advance of Bond
proceeds.
"Reserved Rights of the Issuer" means (a) Reimbursement Rights of
the Issuer; (b) the right to receive Notices and to make any determination
and to grant any approval or consent to anything in the Documents
requiring the determination, consent or approval of the Issuer; (c) all
rights of the Issuer set forth in the Documents regarding the use of Bond
proceeds and the Facility; (d) any and all rights, remedies and limitations
of liability of the Issuer set forth in the Documents regarding (l) the
negotiability, registration and transfer of the Bond, (2) the loss or
destruction of the Bond, (3) the limited liability of the Issuer as provided
in the Act and in the Documents, (4) the maintenance of insurance by the
Borrower, (5) no liability of the Issuer to third parties, and (6) no
warranties of suitability or merchantability by the Issuer; and (e) all
rights of the Issuer in connection with any amendment to or modification
of the Documents.
<PAGE>
"Resolution" means the resolution adopted by the Board of
Directors of the Issuer on March 18, 1996.
"SBA Commitment" means the commitment letter dated January 24,
1996, from Mid-Atlantic Business Finance Company to the Borrower,
pursuant to which the SBA Loan will be made to the Borrower.
"SBA Loan" means the loan to be made by Mid-Atlantic Business
Finance Company to the Borrower under the SBA 504 program, in the
principal amount of $1,000,000, pursuant to the SBA Commitment, which
SBA Loan may be secured by a subordinate lien on the Security.
"Security" means all of the security for the Borrower's Obligations
described in Section 3.4 hereof and in all of the other Documents,
together with all Proceeds thereof and Additions thereto.
"State" means the State of Maryland.
"Subsidiary" means any present or future corporation at least a
majority of whose outstanding Voting Stock shall at the time be owned
by the Borrower; or by one or more Subsidiaries of the Borrower; or by
the Borrower and one or more of its Subsidiaries.
"Supplements" means any and all extensions, renewals,
modifications, amendments, supplements and substitutions.
"Surviving Rights" means the Reimbursement Rights, which shall
survive any transfer or payment of the Bond, in full or in part, and, if so
indicated in this Agreement, which shall also survive the termination of
this Agreement.
"Taxes" means all taxes, assessments and governmental charges or
levies imposed upon the applicable person or on its income or its
properties, including, without limitation, all Property Taxes.
"Termination Date" means the date when the principal of, premium
(if any) and interest on the Bond and the Note are paid in full and all of
the Borrower's Obligations and the Issuer's Obligations are fully and
irrevocably satisfied.
"Trademarks" shall mean all of the Borrower's right, title and
interest, whether now owned or existing or hereafter acquired or arising,
in and to all domestic and foreign trademarks, trademark registrations,
trademark applications and trade names, whether or not registered or
filed with any governmental authority, together with (a) all renewals
thereof, (b) all present and future rights of the Borrower under all
present and future license agreements relating thereto, whether the
Borrower is licensee or licensor thereunder, (c) all income, royalties,
damages and payments now or hereafter due and/or payable to the
Borrower thereunder or with respect thereto, including, without
limitation, damages and payments for past, present or future
infringements thereof, (d) all of the Borrower's present and future
claims, causes of action and rights to sue for past, present or future
infringements thereof, and (e) all rights corresponding thereto throughout
the world. The Trademarks shall include, without limitation, those
Trademarks listed on Exhibit D attached hereto and made a part hereof.
<PAGE>
"Transaction" or "transaction" means the financing of the
acquisition of the Facility, as described in this Agreement and the other
Documents, a transaction within the meaning of the MIDFA Act. "Parties
to this transaction" or "parties to this transaction" means the Issuer, the
Borrower, the Authority and the Holder.
"Vice Chairman" means the Vice Chairman of the Authority or such
other person or office to which the principal functions of the Vice
Chairman may be transferred.
"Voting Stock" means the shares of any class of capital stock of a
corporation having ordinary voting power to elect the directors, managers
or trustees thereof (irrespective of whether or not at the time stock of
any class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingencies).
SECTION 1.2. ERISA Terms. Certain terms used in this Agree-
ment and in the other Documents are defined in ERISA. When and if
used in this Agreement and in the other Documents, such terms shall have
the meanings given them in ERISA. Specifically, the following terms
shall have the following meanings:
"Accumulated Funding Deficiency" means an "accumulated funding
deficiency" as defined in Section 302 of ERISA or Section 412(a) of the
Code.
"Commonly Controlled Entity" means any Subsidiary or any other
trade or business (whether or not incorporated) which is under "common
control" (as defined in the Code) and of which the Borrower, or any of its
Subsidiaries, is a part.
"Multiemployer Plan" means a multiemployer plan (as defined in
ERISA) to which the Borrower or any Commonly Controlled Entity, as
appropriate, has or had an obligation to contribute.
"Plan" means any pension, profit sharing, savings, stock bonus or
other deferred compensation plan which is subject to the requirements of
ERISA, together with any related trusts.
"Prohibited Transaction" means a "prohibited transaction" as
defined in Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" means a "reportable event" as defined by Title
IV of ERISA.
<PAGE>
SECTION 1.3. Accounting Terms. Unless specifically provided
otherwise, all accounting terms shall have the definitions given them in
accordance with generally accepted accounting principles ("GAAP") as
applied to the applicable person and its Subsidiaries, if any, on a
consistent basis by its Accountants in the preparation of its annual
financial statements, and unless otherwise indicated, all accounting terms
and covenants shall be applied on a consolidated basis. The parties
hereto understand and acknowledge that the financial covenants
contained in Section 5.2 hereof (the "Financial Covenants") were
structured using GAAP as in effect on the Closing Date. If GAAP
changes to such an extent that the Financial Covenants no longer measure
what was intended to be measured using GAAP as in effect on the
Closing Date as determined by the Lender and the Authority in their sole
and absolute discretion, the parties hereto agree to enter into an
amendment to this Financing Agreement to restructure the Financial
Covenants in form and substance satisfactory to the Lender and the
Authority.
SECTION 1.4. Rules of Construction. Unless otherwise indicated,
all terms used in each of the other Documents shall have the meanings
given them in this Financing Agreement.
As used in each of the Documents, the words "hereof", "herein",
"hereunder", "hereto", "Agreement", and other words of similar import
refer to each Document in its entirety.
The terms "agree" and "agreements" are intended to include and
mean "covenant" and "covenants".
The headings of each Document are for convenience only and shall
not define or limit the provisions thereof.
All references made (a) in the neuter, masculine or feminine gender
shall be deemed to have been made in all such genders, and (b) in the
singular or plural number shall be deemed to have been made,
respectively, in the plural or singular number as well.
Any reference to particular sections or subsections of the Code and
applicable income tax regulations shall include any successor provisions
of law or regulations, to the extent the same shall apply to the Bond.
SECTION 1.5. References to Bond and Note Ineffective After
Termination Date. On the Termination Date, all references in this
Agreement to the Bond and the Note shall be ineffective, and neither the
Issuer nor the Holder nor the Lender shall thereafter have any rights
hereunder, except with respect to any Surviving Rights, as applicable.
<PAGE>
ARTICLE II
THE BOND; REDEMPTION; SECURITY FOR THE BOND
SECTION 2.1. The Bond. Simultaneously with the execution and
delivery of this Agreement, the Issuer has issued, and the Lender has
purchased, the Bond. The Bond bears interest and is payable as provided
therein.
SECTION 2.2. Redemption of the Bond. The Bond is subject to
redemption prior to maturity as follows:
(a) Optional Redemption of Bond Prior to Maturity From
Prepayments By the Borrower. At any time after, but not before, the
Completion Date, the Bond is subject to redemption at the option of the
Issuer, in whole at any time or in part on any interest payment date, but
only upon direction of the Borrower, from moneys made available by the
Borrower for such purpose, at a redemption price equal to the principal
amount of the Bond to be redeemed, together with unpaid interest on the
principal of the Bond to be redeemed accrued to the date fixed for
redemption, without payment of premium or penalty therefor.
Any partial optional redemption pursuant to this Section shall be
made in multiples of $25,000 and shall be applied to the principal
installments to be redeemed in the inverse order of the installment
payment dates under the Bond.
In the event the Bond is called for redemption, in whole or in part,
pursuant to the provisions of this subsection (a), the Borrower shall give
Notice thereof to the Holder, in the name of the Issuer, at least 30 days
prior to the date fixed for redemption, which Notice shall specify the
anticipated redemption date and the principal amount of the Bond to be
redeemed. On a date no later than the date fixed for redemption in such
Notice, the Borrower shall pay to the Holder moneys in an amount
sufficient, together with other moneys (if any) held by the Holder and
available for the redemption of the Bond, to redeem the Bond at the
redemption price set forth above.
(b) Special Mandatory Redemption from Certain Receipts.
The Bond is subject to special mandatory redemption, in whole or in part,
from any and all Receipts Requiring Mandatory Redemption, at a
redemption price equal to the principal amount to be redeemed, together
with all unpaid interest on the principal of the Bond to be redeemed
accrued to the date fixed for redemption. The Holder shall apply such
moneys to the redemption of the Bond promptly upon the receipt thereof,
without premium or penalty, and regardless of amount. Prior to any such
redemption, the Holder shall give Notice thereof to the Borrower,
specifying the date fixed for such redemption and the principal amount to
be redeemed. On a date no later than the date fixed for redemption in
such Notice, the Borrower shall pay to the Holder moneys in an amount
sufficient, together with other moneys (if any) held by the Holder and
available for the redemption of the Bond, to redeem the Bond at the
redemption price set forth above.
<PAGE>
SECTION 2.3. Partial Redemptions. Any partial redemption made
pursuant to Section 2.2(a) or 2.2(b) above shall be applied to the
principal to be redeemed in the inverse order of the installment payment
dates under the Bond, except for any partial redemption pursuant to
Section 2.2(b) from unadvanced proceeds of the Bond that are not needed
to pay Acquisition Costs and are applied to the redemption of the Bond in
accordance with Section 2.2(b), which unadvanced proceeds shall be
deemed to be a redemption of the Bond and the remaining principal
installments on the Bond shall be reduced pro rata in the ratio that the
amount of unadvanced proceeds bears to the outstanding and unpaid
principal of the Bond. The amount of any partial redemption, and the
date on which the same is actually made, shall be noted by the Holder on
Schedule B attached to the Bond and made a part thereof; but the failure
to so note any partial redemption shall not affect the validity of any
payment actually received by the Holder.
SECTION 2.4. Effect of Redemption of Bond. In the event the
Bond (or any portion thereof) is called for redemption pursuant to
Section 2.2 above, the Bond (or portion thereof) so called for
redemption, and which is actually redeemed, shall cease to bear interest
on the specified redemption date, shall no longer be protected by this
Agreement, and shall not be deemed to be outstanding under the
provisions of this Agreement, and all rights of the Holder with respect
thereto (except Surviving Rights) shall cease.
SECTION 2.5. Negotiability, Registration and Transfer of
Bond; Mutilated, Lost or Destroyed Bond. The Bond shall be negotiable,
subject to the provisions for registration and transfer contained in this
Agreement and in the Bond, and shall be registered as to both principal
and interest. So long as the Bond remains outstanding, the Issuer shall
cause to be maintained, at the office of the Bond Registrar, registration
books for the registration (including the name and address of the
registered Holder) and transfer of the Bond. The Bond shall be
transferable only upon the registration books maintained by the Bond
Registrar, which transfer shall be similarly noted on the registration
table attached to the Bond as Schedule C. At the written request of the
Holder or its attorney or officer duly authorized in writing, and upon
presentation of the Bond for transfer, together with a written instrument
of transfer satisfactory to the Bond Registrar duly executed by such
Holder or attorney or officer and duly authorized in writing, the Bond
Registrar shall cause the Bond to be transferred on the registration
books, and the Bond Registrar shall note such transfer on the registration
table attached to the Bond. Any Surviving Rights of the Holder shall
survive any transfer of the Bond.
If the Bond is transferred, the person acting as Bond Registrar prior
to such transfer will continue to serve and act as Bond Registrar until a
successor Bond Registrar has been appointed by the Issuer and has
accepted the duties and responsibilities of Bond Registrar.
<PAGE>
The Issuer, the Borrower, and the other parties to this transaction
may deem and treat the person in whose name the Bond is registered upon
the registration books as the absolute owner of the Bond, whether the
Bond is overdue or not, for the purpose of receiving payment of, or on
account of, the principal of and premium, if any, and interest on the
Bond and for all other purposes, and all such payments so made to any
such registered Holder or upon its order shall be valid and effectual to
satisfy and discharge the liability upon the Bond to the extent of the sum
or sums so paid, and neither the Issuer nor the Borrower nor any other
party to this transaction or any other person shall be affected by any
notice to the contrary.
In the event the Bond is mutilated, lost, stolen or destroyed, the
Issuer may execute a new Bond of like date, maturity, interest rate and
denomination as that of the Bond mutilated, lost, stolen or destroyed;
provided that, in case the Bond is mutilated, such mutilated Bond shall
first be surrendered to the Issuer and cancelled, and in the case the Bond
is lost, stolen or destroyed, there shall be first furnished to the Issuer
evidence of such loss, theft or destruction satisfactory to the Issuer,
together with indemnity satisfactory to the Issuer. The Issuer may
charge the Holder the fees and expenses of the Issuer, if any, in
connection with the foregoing.
SECTION 2.6. Limited Liability of the Issuer.
The provisions of this Section, the Bond and the interest on it are
limited obligations of the Issuer, the principal of, premium, if any, and
interest on which are payable solely from the Pledged Receipts and any
other moneys made available to the Issuer for such purpose. Neither the
Bond nor the interest thereon shall ever constitute an indebtedness or a
charge against the general credit or taxing powers of the State, the
Department, the Authority, the Issuer, or any public body or other public
instrumentality within the meaning of any constitutional or charter
provision or statutory limitation, and neither shall ever constitute or give
rise to any pecuniary liability of the State, the Department, the Issuer,
the Authority (except in regard to the Authority Insurance Agreement), or
any public body or other public instrumentality. The Bond does not
constitute an indebtedness to which the faith and credit of the State, the
Department, the Authority, the Issuer or any public body or other public
instrumentality is pledged.
No covenant or agreement contained in the Bond or in any of the
other Documents shall be deemed to be the covenant or agreement of any
Agent of the Issuer in his or her individual capacity.
<PAGE>
It is recognized that no Holder shall have a Claim against the Issuer
for damages suffered by such Holder as a result of the failure of the
Issuer, while acting in good faith, to perform any covenant, undertaking
or obligation under this Financing Agreement, the Bond or any of the
other Documents, nor as a result of the incorrectness of any
representation made in good faith by the Issuer in the Documents.
Although this Financing Agreement recognizes that the Documents shall
not give rise to any pecuniary liability of the Issuer, nothing contained in
this Financing Agreement shall be construed to preclude in any way any
action or proceeding (other than that element of any action or proceeding
involving a Claim for monetary damages against the Issuer) in any court
or before any governmental body, agency or instrumentality or otherwise
against the Issuer or any of its Agents to enforce the provisions of any of
the Documents.
No covenant or agreement contained in the Bond or in any of the
other Documents shall be deemed to be the covenant or agreement of any
Agent of the Issuer in his or her individual capacity, and, as provided in
the MIDFA Act, neither the members of the Authority nor any Agent of
the Authority executing the Bond or any of the other Documents entered
into by the Authority, nor any Agent of the Department or the State, shall
be liable personally on the Bond or subject to any personal liability or
accountability by reason of the issuance, execution, or delivery thereof.
Notwithstanding any provision of any of the Documents, neither the
Borrower nor the Holder nor any other person shall have any Claim
against the Issuer or any of its Agents for damages suffered as a result of
the Issuer's failure to perform in any respect any covenant, undertaking
or obligation under the Bond or any of the other Documents nor as a
result of the incorrectness of any representation in or any omission from
any of the Documents.
SECTION 2.7. Security for the Bond; Assignment by the Issuer to
the Lender. In order to secure the payment of the principal of, premium
(if any) and interest on the Bond according to its tenor and effect, the
performance and observance by the Issuer of all of the covenants
expressed or implied herein and in the Bond, and the payment and
performance of all other of the Issuer's Obligations, the Issuer has
executed and delivered the Assignment of Note, and does hereby grant,
bargain, sell, convey, pledge and assign, without recourse, to the Lender,
and grants to the Lender and its assigns a continuing security interest in,
the following:
(a) All of the Issuer's right, title and interest in and to and
remedies under all of the Documents, including, without limitation, this
Agreement, the Note, and any and all Security referred to in all of the
foregoing Documents.
(b) The Pledged Receipts.
(c) All right, title and interest in and to and remedies with
respect to any and all other property of every description and nature from
time to time hereafter by delivery or by writing of any kind conveyed,
pledged, assigned or transferred, as and for additional security for the
Issuer's Obligations, by the Issuer or by anyone on its behalf or with its
written consent, to the Lender, 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.
<PAGE>
PROVIDED, HOWEVER, that there shall be excluded from the
assignment set forth above all Reserved Rights of the Issuer.
With respect to such Security and the security interest granted
therein, the Lender and any other Holder shall have all of the rights and
remedies of a secured party under the Maryland Uniform Commercial
Code.
SECTION 2.8. Insurance Provided By the Authority. In addition to
the security for the Bond described in Section 2.7 above, the Authority is
providing financial assistance by insuring, through the Bond Insurance
Fund, the repayment of a portion of the principal of and interest on the
Bond, pursuant to the Authority Insurance Agreement. In recognition of
the interests of the Authority as an insurer, the parties to this Agreement
hereby agree that, in addition to the rights and remedies of the Authority
set forth in the Authority Insurance Agreement and in the other
Documents, the Authority has certain rights and remedies in connection
with this transaction, as follows:
(a) Notices to the Authority; Consents. Each of the
Borrower and the Lender (on behalf of itself and each other Holder of the
Bond) agrees:
(i) to provide the Authority with copies of all
financial statements, certifications, evidence of insurance
coverage, and any other information or documentation
required by the Documents to be given to the Holder or the
Authority by such Person, and to give the Authority Notice of
any occurrences or circumstances requiring Notice to be given
to the Holder or to the Authority by such Person, as provided
in this Agreement and in the other Documents,
(ii) to obtain the consent, approval,
determination, permission, opinion or similar agreement of
the Authority under such circumstances and at such times as
is required by such Person by this Agreement and the other
Documents,
(iii) that none of the Documents may be modified
or amended without the prior written consent of the
Authority, and
(iv) that, as provided in Section 10.2 hereof, the
Holder shall not exercise any remedies after the occurrence of
an Event of Default hereunder without obtaining the prior
approval of the Authority.
<PAGE>
(b) Borrower's Insurance; Inspections. In addition, the
Borrower agrees:
(i) that the Authority and the Holder shall be
named as additional insureds on any general public liability
policy, and
(ii) to permit the Authority, the Lender and their
respective Agents (after prior notice to the Borrower if no
default has occurred under any of the Documents) to visit and
inspect the Building and the Facility, to examine the
Borrower's records and books of account and to discuss the
affairs, finances and accounts pertaining thereto with officers
of the Borrower at its offices during normal business hours
and at such other reasonable times as may be requested by the
Authority or the Lender.
(c) No Warranties by the Authority or the Lender. Neither
the Authority nor the Lender makes any warranty, express or implied, or
makes any assurances that the Facility will be suitable for the needs of
the Borrower or that the proceeds of the Loan will be sufficient to pay
for the costs of the acquisition of the Facility.
(d) Payments by the Authority. Notwithstanding any of the
provisions of this Agreement or any of the other Documents, the
Authority, on behalf of the Borrower, may, in its discretion, but subject
to the provisions of the Authority Insurance Agreement elect to make any
payments required to be made by the Borrower under the Documents and
not paid by the Borrower within the time provided for therein, and may
elect to cure any defaults under any of the Documents if it so chooses.
The Authority shall be entitled to reimbursement pursuant to the
provisions of Section 12.2 hereof for any payments made by it pursuant
to this paragraph.
(e) Subrogation and Reimbursement of the Authority to
the Extent of Payments Made. The Authority, to the extent of any
payments made by it pursuant to any Authority Insurance Agreement or
pursuant to paragraph (d) above, shall be subrogated to (a) all rights of
the Holder to receive payment of such amounts from the Borrower or
others under any of the Documents, and (b) all rights of the Borrower to
receive payment or reimbursement of such amounts from other sources,
subject to the provisions of the Authority Insurance Agreement. In
addition, the Borrower agrees to reimburse the Authority for any
payments made by the Authority under the Authority Insurance
Agreement, and such obligation to reimburse the Authority, as well as the
obligation to reimburse the Authority pursuant to the provisions of
Section 12.2 hereof, shall be deemed to be Borrower's Obligations
secured by this Agreement and the other Documents.
<PAGE>
(f) Authority a Third-Party Beneficiary. The Authority is a
third-party beneficiary of this Agreement and the other Documents to
which the Authority is not a party.
ARTICLE III
THE LOAN; THE NOTE; SECURITY FOR THE LOAN
SECTION 3.1. The Loan; The Note. The Issuer agrees, upon the
terms and subject to the conditions set forth in this Agreement, to make
the Loan to the Borrower. The Loan shall be made on the Closing Date
from the proceeds of the Bond, as provided in Article VI hereof. The
Loan is evidenced by the Note and is payable as provided therein and in
this Agreement. All payments under this Agreement, the Note, and all of
the other Documents shall be payable by the Borrower directly to the
Holder (except for any payments made pursuant to any Reimbursement
Rights, which, if so requested by the person entitled thereto, may be
made directly to such person). The receipt by the Holder of any amounts
payable under the Bond or any of the other Documents and delivered to it
pursuant to this Section shall discharge the respective obligations of the
Borrower to the Issuer and of the Issuer to the Holder, to the extent of
payment.
SECTION 3.2. Payments by Borrower Upon Redemption of the
Bond. Upon any redemption of the Bond pursuant to Section 2.2 hereof,
the Borrower, on a date no later than the date fixed for redemption, shall
pay:
(a) to the Holder moneys in an amount sufficient, together
with other moneys (if any) held by the Holder and available for
redemption of the Bond, to redeem the Bond on such
date at the applicable redemption price set forth in Section 2.2 hereof,
(b) to the Holder moneys in an amount sufficient to pay any
other of the Borrower's Obligations owing to the Holder through the date
fixed for redemption,
(c) to the Issuer moneys in an amount sufficient to pay any
other of the Borrower's Obligations owing to the Issuer through the date
fixed for redemption, and
(d) to the other parties to this transaction, moneys in an
amount sufficient to pay any other of the Borrower's Obligations owing
to any of such persons through the date of redemption.
SECTION 3.3. INTENTIONALLY DELETED.
SECTION 3.4. Security for the Loan. The Borrower's Obligations
are evidenced by the Note and by this Agreement, and are secured by (a)
this Agreement, and (b) by the other Documents executed and delivered
for the purpose of securing the Loan.
<PAGE>
As additional security for payment and performance of the
Borrower's Obligations, the Borrower hereby grants to the Issuer and its
assigns (including the Lender and its assigns), a lien on and a security
interest, all right, title and interest of the Borrower in and to all
Accounts; Inventory; Equipment; Equipment Collateral; Copyrights;
Trademarks; Patents; all amounts now or in the future owed by the
Lender to the Borrower and all property and funds of the Borrower
(including deposit accounts, certificates of deposit, and investments
made or managed by the Lender on behalf of the Borrower), now owned
or hereafter acquired by Borrower and now or hereafter in Lender's
possession or control; all present and future substitutions, replacements,
appurtenances, accessories, accessions and materials and supplies
relating to any of the foregoing; all of the Borrower's present and future
books and records in any form, in or on any media, including data
processing materials in any form (including software, tapes, discs and the
like), whether in the possession of the Borrower or any other person; and
all present and future proceeds and products of all of the foregoing in
any form whatsoever and all rights, including rights to the payment of
money for any reason, arising on account of any sale, assignment, lease,
rental, license, exchange, liquidation, condemnation, taking, theft or any
disposition of any nature of, or any damage or casualty to, or any loss
with respect to, any of the foregoing or any rights or interests of the
Borrower in any of the foregoing, including, without limitation, cash
proceeds (including all payments under any indemnities, warranties or
guaranties payable with respect to any of the foregoing) and all Proceeds
thereof.
The Borrower agrees that with respect to such Security, the Issuer
and its assigns (including the Lender and its assigns) shall have all of the
rights and remedies of a secured party under all applicable laws,
including, without limitation, the Maryland Uniform Commercial Code.
SECTION 3.5. Location of Security; Other Covenants Pertaining to
Security. (a) The Borrower agrees (i) to keep the Holder informed as to
the location of the Security, give the Holder prior Notice of any
contemplated changes of location, and not change the location of any of
the Security without the prior written consent of the Holder, and (ii) to
comply with all of the covenants and agreements set forth herein with
respect to the Facility.
(b) The Borrower will maintain the Security in good order
and condition, ordinary wear and tear excepted, and will use, operate and
maintain the Security in material compliance with all laws, regulations
and ordinances and in material compliance with all applicable insurance
requirements and regulations. The Borrower will promptly notify the
Lender and the Authority in writing of any litigation involving or
affecting the Security which the Borrower knows or has reason to believe
is pending or threatened. The Borrower will promptly pay when due all
Taxes and storage, warehousing and other such charges and fees affecting
or arising out of or relating to the Security and shall defend the Security,
at the Borrower's expense, against all claims and demands of any persons
claiming ny interest in the Security adverse to the Borrower, the Lender
or the Authority.
<PAGE>
(c) At all reasonable times upon prior notice to the
Borrower provided no default has occurred under the Documents (which
may be given orally by telephone) the Lender, the Authority or their
respective Agents may enter the Building and any other premises of
Borrower and inspect the Security and all (i) books and records of the
Borrower (in whatever form), and (ii) quality control processes of the
Borrower. The Borrower agrees that, after the occurrence of an Event of
Default, the Lender or the Authority, as the case may be, or a conservator
appointed by the Lender or the Authority, as the case may be, shall have
the right to establish such additional product quality controls as the
Lender or the Authority, as the case may be, or such conservator, in its
sole judgment, may deem necessary to assure maintenance of the quality
of products sold by the Borrower under any trademarks. Except in
connection with transactions in the ordinary course of the Borrower's
business, the Borrower agrees (i) not to sell or assign its interest in, or
grant any license under, the Intellectual Property, without the prior
written consent of the Lender and the Authority, (ii) to maintain the
quality of any and all products in connection with which the trademarks
are used, consistent with the quality of such products as of the date
hereof, and (iii) to provide the Lender and the Authority, at least
annually, with a certificate of an officer of the Borrower disclosing all
material transactions concerning the Intellectual Property, including,
without limitation, assignments, licenses and sublicenses, and new
Intellectual Property acquired.
(d) All books and records pertaining to the Security will be
located at the Carroll Street Facility or at the Building upon completion
of construction thereof and the Borrower will not change the location of
such books and records without the prior written consent of the Lender
and the Authority.
(e) Whenever required by the Lender or the Authority, the
Borrower shall promptly deliver to the Lender or the Authority, with all
endorsements and/or assignments required by the Lender or the
Authority, all instruments, chattel paper, guaranties and the like received
by the Borrower constituting, evidencing or relating to any of the
Security or proceeds of any of the Security.
(f) If any Accounts arise out of a contract with the United
States of America or any State, county, municipality or any department,
agency or instrumentality thereof, the Borrower shall immediately notify
the Lender and the Authority thereof and, if required by the Lender or the
Authority, execute and deliver any agreements, notices and/or
assignments and do such other things as may be satisfactory to the
Lender and the Authority in order that all sums due and to become due to
the Borrower under such contract shall be duly assigned to the Lender
and the Authority in accordance with the Federal Assignment of Claims
Act (31 United States Code 1203; 41 United States Code 15) and/or
any other applicable federal, State and local laws and regulations relating
to the assignment of governmental obligations.
<PAGE>
(g) The Borrower agrees that until the Borrower's
Obligations shall have been satisfied in full and this Agreement shall
have been terminated, the Borrower will not, without prior written
consent of the Lender and the Authority, (i) consign any Security to any
consignee, (ii) store or place any Security with any warehouseman,
artisan, processor, contractor or bailee, or (iii) enter into any agreement
(for example, a license agreement) which is inconsistent with the
Borrower's Obligations. The Borrower further agrees that it will not take
any action, or permit any action to be taken by others subject to its
control, including licensees, or fail to take any action, which would
materially adversely affect the validity or enforcement of the rights
transferred to the Lender and the Authority hereunder. Nothing herein
shall be interpreted to prohibit the Borrower from accepting keg deposits
in the ordinary course of business as currently conducted.
(h) The Copyrights, Patents, Trademarks and licenses listed
on Exhibit C constitute all of the Copyrights, Patents, Trademarks and
licenses registered or filed in the United States and now owned by
Borrower. If, before the Borrower's Obligations shall have been satisfied
in full, the Borrower shall (i) obtain rights to any new patentable
inventions, trademarks or licenses, or (ii) become entitled to the benefit
of any patent or trademark application, trademark, trademark
registration, or license renewal, or apply for any reissue, division,
continuation, certificate of reexamination, renewal, extension or
continuation-in-part of any patent or improvement on any patent, the
security interest granted hereunder and under the Collateral Assignments
shall automatically attach thereto and the Borrower shall give to the
Lender and the Authority prompt written notice thereof.
SECTION 3.6. Loss of Security. The Holder shall not be liable for
any loss of any Security in its possession, nor shall such loss diminish
the debt due.
SECTION 3.7. Filings. The security interests created hereby shall
be perfected by the filing of financing statements which fully comply
with the Maryland Uniform Commercial Code - Secured Transactions, in
such offices as may be required by the Lender. The parties agree that:
(a) all necessary continuation statements shall be filed by
the secured party or its assigns named therein within the time prescribed
by the Maryland Uniform Commercial Code in order to continue the
security interests created by the Documents;
(b) if, at any time any of the information contained in any
financing statement filed in connection with the security interests created
by the Documents, including without limitation, the description of the
Security, shall change in such manner as to cause such financing
statement to become misleading in any material respect or as may impair
the perfection of the security interests intended to be created by the
Documents, then the Borrower shall promptly prepare an amendment to
such financing statement as may be necessary to continue the perfection
of the security interest intended to be created by the Documents, obtain
the signatures of the debtor and secured party upon such amendment, and
file the same in any office where such amendment is required to be filed
to continue the perfection of the security interest intended to be created
thereby;
<PAGE>
(c) upon the request of the Holder, the Borrower shall
prepare, have executed and file any amendments to the financing
statements filed with respect to the security interests created by the
Documents in such form as the Holder may require; and
(d) as provided in Article XII hereof, the Borrower shall
bear all costs of any and all of the filings described in this Section 3.7.
SECTION 3.8. Consent of the Authority. The Borrower and the
Holder shall obtain the prior written consent of the Authority with regard
to any transaction described in this Article III with respect to which the
consent or approval of the Holder is required, and will satisfy such other
terms and conditions pertaining to the Security as the Authority may
reasonably require.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES; FINDINGS BY THE ISSUER
SECTION 4.1. Representations and Warranties of the Issuer.
The Issuer makes the following representations and warranties:
(a) Authorized Issuer. The Issuer is a body corporate and
politic and a public instrumentality of the State. Under the provisions of
the Act, the Issuer has the power to enter into this Agreement and the
other Documents entered into by it and the transactions contemplated
hereunder and thereunder and to carry out its obligations hereunder and
thereunder.
(b) Necessary Actions. As required by the MIDFA Act, the
Issuer has approved the Loan and the issuance and sale of the Bond. By
proper action, the Issuer has duly adopted the Resolution, and the Issuer
has duly authorized the execution and delivery of the Bond, this
Agreement and each of the other Documents executed and delivered by it.
(c) Compliance With Laws. The Issuer is not in violation
of any laws of the State which would affect its existence or its ability to
issue and sell the Bond, to enter into any of the Documents, or to
perform any of the Issuer's Obligations.
<PAGE>
SECTION 4.2. Findings by the Issuer. The Issuer hereby confirms
its findings contained in the Resolution.
SECTION 4.3. General Representations and Warranties of
the Borrower. The Borrower makes the following representations and
warranties:
(a) Subsidiaries. The Borrower has no Subsidiaries.
(b) Good Standing. The Borrower (i) is a corporation duly
organized and existing, in good standing, under the laws of the
jurisdiction of the State, and (ii) has the power to own its property and to
carry on its business as now being conducted, and (iii) is duly qualified
to do business and is in good standing in each jurisdiction in which the
character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary, including,
but not limited to, the State.
(c) Authority. The Borrower has full corporate power and
authority to acquire the Facility and to enter into and execute and deliver
this Agreement and each of the other Documents executed and delivered
by the Borrower, and to incur and perform the obligations provided for
herein and therein (including the borrowing of the Loan), all of which
have been duly authorized by all proper and necessary action and all
material governmental licenses, authorizations, consents and approvals
required. No consent or approval of any other Person or public authority
or regulatory body (other than the Issuer and the Authority) is required
as a condition to the validity or enforceability of this Agreement or any
of such other Documents, or if required the same has been duly obtained.
(d) Binding Obligations. This Agreement and each of the
other Documents executed and delivered by the Borrower have been
properly executed by the Borrower, constitute valid and legally binding
obligations of the Borrower, and are fully enforceable against the
Borrower, in accordance with their respective terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the enforceability of creditors generally, and (ii) general
equity principles and the exercise of judicial discretion in accordance
with general principles of equity (whether applied by a court of law or of
equity).
(e) Litigation. There is no litigation or proceeding pending
or, so far as the Borrower knows, threatened before any court or
administrative agency which, in the opinion of the Borrower, will
materially adversely affect the financial condition or operations of the
Borrower or the authority of the Borrower to enter into, or the validity or
enforceability of, this Agreement or any of the other Documents executed
and delivered by the Borrower.
(f) No Conflicting Agreements. There is (i) no provision of
the Borrower's articles of incorporation or bylaws, or stock preference
provision, or provision of any existing Encumbrance, contract or
agreement binding on the Borrower or affecting its property, and (ii) to
the knowledge of the Borrower, no law binding upon the Borrower or
affecting any of its property, which would conflict with or in any way
prevent the execution, delivery or performance of the terms of this
Agreement or of any of the other Documents executed and delivered by
the Borrower, or which would be in default or violated as a result of such
execution, delivery or performance.
<PAGE>
(g) Financial Information. The financial statements of the
Borrower for the fiscal years ending December 31, 1994 and December
31, 1995, and the Form 10-Q filed by the Borrower with the Securities
and Exchange Commission for the quarterly accounting period ending
March 31, 1996, and heretofore furnished to the Lender, the Issuer, the
Authority and to the other parties to this transaction concerning the
Borrower are true and complete and correct and fairly present the
financial condition of the Borrower as at such dates and the results of its
operations for the periods then ended and were prepared in accordance
with generally accepted accounting principles applied on a consistent
basis for prior periods. There are no liabilities, direct or indirect, fixed
or contingent, of the Borrower except as reflected therein. There has
been no material adverse change in the financial condition or operations
of the Borrower since the date of such financial statements (and to the
Borrower's knowledge no such material adverse change is pending or
threatened), and the Borrower has not guaranteed the obligations of, or
made any investment in or advances to, any Person except as disclosed in
such financial statements. The Borrower has good and marketable title to
all of its properties and assets, and all of such properties and assets are
free and clear of Encumbrances (other than Permitted Liens), except as
reflected in such information. The pro forma income statements of the
Borrower for the years ending December 31, 1996, December 31, 1997,
December 31, 1998, and December 31, 1999, heretofore delivered to the
Lender and the Authority, are complete and fairly present the Borrower's
projections for such periods, subject to the assumptions set forth therein
(which assumptions the Borrower believes to be reasonable) and which
projections the Lender, the Issuer and the Authority recognize to be
uncertain and subject to change.
(h) Tax Returns. The Borrower has filed or caused to be
filed all required foreign, federal, state and local tax returns and has paid
all Taxes as shown on such returns to the extent that such Taxes have
become due. No claims have been assessed and are unpaid with respect
to such Taxes except as shown in the financial statements referred to in
(g) above, and the Borrower has established reserves which it believes to
be adequate for the payment of additional Taxes for years which have not
been audited by the respective tax authorities. Without limitation of the
foregoing, the Borrower represents and warrants to the Lender that it has
paid and discharged all gallonage taxes on beer (including without
limitation, those taxes imposed under Section 5051 of the Internal
Revenue Code of 1986, as amended) within the time limits imposed by
applicable law (including Section 5061 of such Code).
<PAGE>
(i) Liens on Facility and Security. There exist no
Encumbrances (except Permitted Liens) on or with respect to any of the
Security.
(j) ERISA. (i) Any Plan established and maintained by the
Borrower or any Commonly Controlled Entity is a qualifying plan under
the applicable requirements of ERISA, and there is no current matter
which would materially adversely affect the qualified tax-exempt status
of any Plan; (ii) neither the Borrower nor any Commonly Controlled
Entity has engaged in or is engaging in any Prohibited Transaction or has
incurred any Accumulated Funding Deficiency in connection with any
such Plan, whether or not waived, and no Reportable Event has occurred
with respect to any Plan subject to the minimum funding requirements of
Section 412 of the Code; (iii) no Multiemployer Plan has "terminated", as
that term is defined in ERISA; (iv) neither the Borrower nor any
Commonly Controlled Entity has "withdrawn" or "partially withdrawn"
from any Multiemployer Plan; and (v) no Multiemployer Plan is in
"reorganization" nor has notice been received from the administrator of
any Multiemployer Plan that any such Plan will be placed in
"reorganization".
(k) Names of Borrower. The Borrower has never done
business under any name other than the name of the Borrower set forth in
this Agreement.
(l) Prohibition on Discrimination. The Borrower prohibits
discrimination on the basis of (i) political or religious opinion or
affiliation, marital status, race, color, creed or national origin, or (ii) sex
or age, except when age or sex constitutes a bona fide occupational
qualification, or (iii) the physical or mental disability of a qualified
individual with a disability.
(m) Licenses and Permits. The Borrower has duly obtained
and now holds all licenses, permits, certifications and other approvals
required by federal, State and local laws of the jurisdictions in which the
Borrower conducts its business and such licenses, permits, certifications
and approvals remain valid and in full force and effect on the date
hereof, and the Borrower has received no notification, written or oral
that such licenses, permits, certifications or approvals have been, have
been threatened to be, rescinded, revoked or restricted.
<PAGE>
(n) Broker's or Finder's Commissions. No broker's or
finder's fee or commission is or will be payable in connection with this
Agreement or the transactions contemplated hereby, and the Borrower
agrees to save harmless and indemnify the Lender, the Issuer and the
Authority from and against any claim, demand, action, suit, proceeding
or liability for any such fee or commission, including any costs and
expenses (including attorney's fees) incurred by the Lender, the Issuer
and the Authority in connection therewith. The provisions of this
subsection shall survive the termination of this Agreement and the
security interests hereunder and the payment of all of the other
Borrower's Obligations.
(o) Regulation U. The Borrower does not own or intend to
acquire any "margin stock" as defined in Regulation U (12 CFR Part 221)
of the Board of Governors of the Federal Reserve System. None of the
proceeds of any advances hereunder will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin stock or for the
purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the
meaning of Regulation U.
(p) Compliance With Laws. Except as disclosed in the
Borrower's Prospectus dated March 5, 1996, under "Business--Legal
Proceedings," none of the Borrower and Subsidiaries is in violation of, or
under investigation with respect to or threatened to be charged or given
notice of a violation of, any applicable law, rule, regulation, order or
judgment relating to any of its businesses, properties or operations,
including, without limitation, ERISA, any law, rule, regulation or order
regarding the collection, payment and deposit of employees' income,
unemployment and social security taxes or of sales, use or excise taxes,
any Environmental Laws, any laws pertaining to occupational safety and
health or any laws relating to public health.
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Issuer. The Issuer hereby
covenants and agrees as follows:
(a) Maintenance of Existence; Compliance with Laws. The
Issuer will not voluntarily take any action towards dissolution unless it
has assured the assumption of its obligations under this Agreement and
the other Documents by any other person succeeding to its powers; and it
will comply with all laws applicable to this Agreement or any of the
other Documents.
(b) Further Instruments and Actions. The Issuer will from
time to time execute and deliver such further instruments and take such
further actions as may be reasonable and as may be required to carry out
the purpose of this Agreement; provided, however, that no such
instruments or actions shall pledge the credit or taxing power of the
State, the Issuer, the Authority or any other public body or require the
State, the Department, the Issuer, the Authority (except in regard to the
Authority Insurance Agreement) or any public body to incur any
pecuniary obligations.
<PAGE>
(c) Priority of Pledge. Except for the assignment to the
Lender under this Agreement and the Assignment of Note, the Issuer will
not sell, lease or otherwise dispose of or encumber its interest in any part
of the security for the Bond, and will cooperate in causing to be
discharged any Encumbrances created by it with respect to any of the
security for the Bond.
(d) Books and Documents Open to Inspection. The Issuer
shall, to the extent required and permitted by law, within a reasonable
time after request, open any and all of its books and documents in its
possession relating to the financing of the Facility, if any, during the
normal business hours of the Issuer, to such Accountants or other persons
as the Holder, the Borrower or the Authority may from time to time
designate.
SECTION 5.2. Affirmative Covenants of the Borrower. Until the
Termination Date, the Borrower will, unless the prior written consent to
do otherwise has been obtained from the Holder and the Authority:
(a) Financial Statements. Furnish to the Holder and the
Authority:
(i) as soon as available but in no event more
than thirty (30) days after the end of each monthly accounting
period of the Borrower, monthly financial statements of the
Borrower (including an income statement and balance sheet),
prepared in accordance with generally accepted accounting
principles, consistently applied, and certified by the chief
financial officer of the Borrower as true and correct;
(ii) as soon as available but in no event more
than 45 days after the end of each of the first three quarterly
accounting periods of the Borrower, a consolidated and
consolidating statement of income and retained earnings of
the Borrower and any Subsidiaries for such period and for the
period from the beginning of the current fiscal year of the
Borrower to the end of each period, and a consolidated and
consolidating statement of cash flows of the Borrower and any
Subsidiaries for such period and for the period from the
beginning of the current fiscal year of the Borrower to the end
of each period, and a consolidated and consolidating balance
sheet of the Borrower and any Subsidiaries as at the end of
such period, setting forth in each case in comparative form
figures for the corresponding periods in the preceding fiscal
year of the Borrower, all in detail and scope satisfactory to
the Holder and the Authority, prepared in accordance with
generally accepted accounting principles consistently applied,
certified by the chief financial officer of the Borrower and
accompanied by a certificate of that officer stating whether
any Event of Default or any event which, with the giving of
notice or lapse of time (or both) would be an Event of
Default, has occurred and, if so, stating the facts with respect
thereto;
<PAGE>
(iii) as soon as available but in no event more
than 90 days after the end of each fiscal year of the Borrower,
a consolidated and consolidating statement of income and
retained earnings of the Borrower and any Subsidiaries for
such year, and a consolidated and consolidating statement of
cash flows of the Borrower and any Subsidiaries for such
year, and a consolidated and consolidating balance sheet of
the Borrower and any Subsidiaries as at the end of such year,
setting forth in each case in comparative form corresponding
figures for the preceding fiscal year of the Borrower, all in
detail and scope satisfactory to the Holder and the Authority,
prepared in accordance with generally accepted accounting
principles consistently applied and examined and audited by
Coopers & Lybrand, LLP, or by such other Accountants
reasonably satisfactory to the Holder and the Authority,
accompanied by a report of such Accountants with respect to
such financial statements which is prepared in accordance
with generally accepted accounting principles, and
accompanied by a certificate of the chief financial officer of
the Borrower stating whether any Event of Default or any
event which, with the giving of notice or lapse of time (or
both) would be an Event of Default, has occurred and, if so,
stating the facts with respect thereto;
(iv) promptly upon transmission thereof, copies
of any financial statements, proxy statements, reports and the
like which the Borrower or any Subsidiary sends to its
shareholders, members or partners and copies of all
registration statements (with exhibits) and all regular, special
or periodic reports which the Borrower or any Subsidiary files
with the United States Securities and Exchange Commission
(or any governmental body or agency succeeding to the
functions of the United States Securities and Exchange
Commission) or with any national stock exchange on which
the Borrower's or any Subsidiary's securities are listed and
copies of all press releases and other statements made
available by the Borrower or any Subsidiary to the public
concerning material developments in the business of the
Borrower and/or any Subsidiary; and
(v) such additional information, reports or
statements as the Holder or the Authority may from time to
time reasonably request.
(b) Current Ratio. Maintain a ratio of current assets to
current liabilities of not less than (i) 1.25 to 1 as of September 30, 1996
and as of the end of each calendar quarter thereafter to and including the
calendar quarter ending September 30, 1997; and (ii) 1.5 to 1 as of
December 31, 1997 and as of the end of each calendar quarter thereafter.
<PAGE>
(c) Debt to Worth Ratio. Maintain a ratio of debt to
tangible net worth of not greater than: (i) 3.25 to 1 as of September 30,
1996 and as of the end of each calendar quarter thereafter to and
including the calendar quarter ending September 30, 1997; (ii) 3.0 to 1 as
of December 31, 1997 and as of March 31, 1998; and (iii) 2.5 to 1 as of
June 30, 1998 and as of the end of each calendar quarter thereafter.
(d) Tangible Net Worth. Maintain a tangible net worth of at
least (i) Two Million Dollars ($2,000,000) as of September 30, 1996 and
as of the end of each calendar quarter thereafter to and including the
calendar quarter ending September 30, 1997 and (ii) Two Million Five
Hundred Thousand Dollars ($2,500,000) as of December 31, 1997 and as
of the end of each calendar quarter thereafter.
(e) Cash Flow to Debt Service Ratio. Maintain a ratio of
cash flow to debt service of not less than (a) 1.5 to 1.0 as of December
31, 1997 and as of the end of each calendar quarter thereafter to and
including December 31, 1998, and (b) 2.0 to 1.0 as of March 31, 1999
and as of the end of each calendar quarter thereafter. For purposes
hereof, "cash flow" shall mean net profits plus depreciation and
amortization expense of the Borrower, and shall be measured (x) as of
December 31, 1997, for the calendar quarter then ending, and (y) as of
the end of each calendar quarter thereafter, on a cumulative year-to-date
basis. For purposes hereof, "debt service" shall mean, for each period
during which cash flow is measured, the current portion of long term debt
of the Borrower (including, without limitation, the current portion of
capital lease obligations) due and/or paid during such period.
(f) Appraisals. Permit the Lender and/or the Authority
from time to time, at the expense of the Borrower, to order an appraisal
of the Equipment to be performed by an appraiser or appraisers selected
by the Lender and/or the Authority, in their sole discretion; provided,
however, that the Borrower shall only be obligated to pay for one
appraisal of Equipment in any twelve (12) month period unless (i) a
default or an Event of Default shall have occurred under the Documents,
(ii) such appraisal is being conducted due to regulatory requirements of
the Lender, or (iii) the Lender determines, in good faith, that the value of
the Security has been materially impaired. The Borrower agrees to (i)
cooperate with such appraiser or appraisers, (ii) provide such appraiser
or appraisers with access to the Equipment and with any information
regarding the Equipment as is reasonably requested, and (iii) permit the
Lender and the Authority and their Agents to disclose to such appraiser
or appraisers any and all information they may have with regard to the
Equipment, the Borrower and the transactions contemplated by the
Documents as the Lender and the Authority, in their reasonable
discretion, determine is necessary to provide for an accurate appraisal of
the Equipment.
<PAGE>
(g) Licenses and Permits. Maintain any and all licenses and
permits necessary for the operation of a brewery and the operation of the
Equipment.
(h) Taxes and Claims. Pay and discharge all Taxes prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become an Encumbrance upon any of its properties, subject
to the right of the Borrower to contest the same in accordance with the
provisions of Section 8.1(b) hereof. If the Borrower fails to pay any of
such Taxes at the time or in the manner provided in this Section, the
Holder or the Authority, may, at its option, pay such Taxes and the
Borrower shall pay to the Holder or the Authority the amount of any sum
so paid, with interest thereon as provided in Article XII hereof.
The fact that the Issuer or the Authority is assisting in the
financing of the acquisition of the Facility shall not imply that the
Borrower is or shall be eligible for any decrease in or immunity from any
applicable Taxes ordinarily imposed by the State, the County or any
other public body.
(i) Insurance. In addition to the insurance required by
Article VIII hereof, maintain insurance with responsible insurance
companies on such of its properties, in such amounts and against such
risks as is customarily maintained by similar businesses operating in the
same vicinity. The Borrower shall file with the Authority and the
Holder, upon request, a detailed list of the insurance then in effect
covering the Borrower's properties, stating the names of the insurance
companies, the amounts and rates of insurance, dates of the expiration
thereof and the properties and risks covered thereby; and, within 30 days
after Notice from the Authority or the Holder, obtain such additional
insurance as the Authority or the Holder may reasonably request.
(j) Maintenance of Existence. Maintain in good standing
its existence as a Maryland corporation.
(k) Compliance With Laws. Comply with all applicable
federal, state and local laws, rules and regulations.
(l) Books and Records; Inspections. Keep adequate records
and books of account with respect to the Building, the Existing Building,
the Facility and its business in accordance with generally accepted
accounting principles; and permit the Holder or the Authority, by their
respective Agents, accountants and attorneys, after prior notice unless a
default has occurred under any of the Documents, to visit and inspect the
Building, the Existing Building and the Facility, to examine such records
and books of account and to discuss the affairs, finances and accounts
pertaining thereto with Agents of the Borrower at its offices during
normal business hours and at such other reasonable times as may be
requested by the Holder or the Authority.
<PAGE>
(m) Facility Lease. The Borrower shall (i) comply with all
the terms of the Facility Lease required of it in its role as tenant,
(ii) provide the Lender and the Authority with Notices of Events of
Default under the Facility Lease, and (iii) notify the Lender and the
Authority promptly of the exercise of its option to renew the Facility
Lease or purchase the Building.
(n) Equal Employment. Comply with applicable laws
prohibiting discrimination on the basis of (i) political or religious
opinion or affiliation, marital status, race, color, creed or national
origin, (ii) sex or age, except when sex or age constitutes a bona fide
occupational qualification, or (iii) the physical or mental disability of a
qualified individual with a disability. Upon the request of the Authority
or the Department, the Borrower will submit to the Authority or the
Department, as appropriate, information relating to its employment
practices and operations, with regard to this subsection (m) on a form to
be prescribed by the Department.
(o) Drug and Alcohol Free Workplace. Make a good faith
effort to eliminate illegal drug use and alcohol and drug abuse from its
workplace and the Building and the Existing Building during the term of
this Financing Agreement by:
(i) prohibiting the unlawful manufacture,
distribution, dispensation, possession, or use of drugs in its
workplace, the Building and the Existing Building;
(ii) prohibiting its employees from working
while under the influence of alcohol or illegal drugs or
abusing alcohol or drugs;
(iii) not hiring or assigning to work on an
activity funded in whole or part with State funds, anyone
whom it knows, or in the exercise of due diligence should
know, currently abuses alcohol or drugs and is not actively
engaged in a bona fide rehabilitation program;
(iv) promptly informing the appropriate law
enforcement agency of every drug-related crime that occurs in
its workplace, the Building and the Existing Building if it or
its employee has observed the violations or otherwise has
reliable information that a violation has occurred; and
(v) notifying employees that illegal drug use and
alcohol and drug abuse are banned in the workplace the
Building, and the Existing Building imposing sanctions on
employees who abuse drugs and alcohol in the workplace, in
the Building or in the Existing Building, and instituting steps
to maintain a workplace, the Building and the Existing
Building free from illegal drug use and drug and alcohol
abuse.
<PAGE>
(p) Employment Count. Upon request, but not more
frequently than twice annually, supply the employment count at Existing
Building and/or at the Building to the Authority.
(q) Environmental Inspections. Permit the Lender and its
Agents, to enter upon the Building and/or the Existing Building and
inspect the Facility and to conduct thereon, at the expense of the
Borrower (unless otherwise paid by Blue II), such audit tests and
examinations, including subsurface exploration and testing as the Lender
may deem necessary to determine whether the occupation or operation of
the Existing Building or the Building or the operation and/or use of the
Facility, as the case may be, and the conduct of the activities engaged in
thereon, are in compliance with all applicable Environmental Laws.
(r) Authority's Insurance Premium. Pay directly to the
Lender, for remittance to the Authority, the Authority's insurance
premium payable in advance on the Closing Date and on the first day of
each anniversary of the Closing Date in the amount of the greater of (a)
one-half of one percent (1/2%) of the outstanding insured portion of the
principal balance of the Bond, or (b) Five Hundred Dollars ($500.00).
(s) Notice of Event of Default. Immediately notify the
Lender and the Authority of the occurrence of any Event of Default or
any event which, with the giving of notice or lapse of time (or both)
would be an Event of Default, and the facts with respect thereto.
(t) Litigation. Promptly notify the Lender and the
Authority in writing of any action, suit or proceeding at law or in equity
by or before any court, governmental agency or instrumentality which
could result in any material adverse change in the business, operations,
prospects, properties or assets or in the condition, financial or otherwise,
of the Borrower or any Subsidiary.
(u) Extraordinary Loss; Change in Condition. Promptly
notify the Lender and the Authority in writing of (i) any event causing
extraordinary loss or depreciation of the value of the Borrower's or any
Subsidiary's assets (whether or not insured) and the facts with respect
thereto, and (ii) the occurrence of any material adverse change in the
Borrower's or any Subsidiary's business, assets, operations, business
prospects or financial condition.
(v) Maintenance of Properties. Maintain, and cause each
Subsidiary to maintain, all properties and improvements necessary to the
conduct of its business in good working order and condition, ordinary
wear and tear excepted, and cause replacements and repairs to be made
when necessary for the proper conduct of its business.
<PAGE>
(w) Patents, Franchises, etc.. Maintain, preserve and protect
all licenses, Patents, franchises, Trademarks and trade names of the
Borrower and each Subsidiary or licensed by the Borrower or any
Subsidiary which are necessary to the conduct of the business of the
Borrower or any Subsidiary as now conducted, free of any conflict with
the rights of any other person. Without limitation of the foregoing, the
Borrower shall have the duty (a) to pay all Taxes, fees or other amounts
necessary to maintain in full force and effect all of the Intellectual
Property, (b) to prosecute in a commercially reasonable manner any
application or registration of the Intellectual Property pending as of the
date hereof or thereafter until this Agreement is no longer in effect, (c)
to make application or registration on Copyrights and Trademarks which
have not been registered but which may be registered, as appropriate, (d)
to preserve and maintain all rights in applications and registrations of
the Intellectual Property, and (e) to take all steps as required by the
Lender or the Authority to perfect any Liens acquired by the Lender
and/or the Authority pursuant to subsection 3.5(h) hereof, including,
without limitation, filing and recording such new collateral assignments
as may be required by the Lender and/or the Authority. Any expenses
incurred in connection with such applications shall be borne by the
Borrower, and neither the Lender nor the Authority shall have any
obligation or liability to pay any Taxes or fees nor shall the Lender or
the Authority have any duties in connection with applications or
maintenance of rights in the Intellectual Property.
SECTION 5.3. Negative Covenants of the Borrower. Until the
Termination Date, the Borrower will not, without the prior written
consent of the Holder and the Authority, directly or indirectly:
(a) ERISA Compliance. (i) Restate or amend any Plan
established and maintained by the Borrower or any Commonly Controlled
Entity, in a manner designed to disqualify such Plan under the applicable
requirements of the Code; (ii) permit any officers of the Borrower or any
Commonly Controlled Entity to materially adversely affect the qualified
tax-exempt status of any Plan of the Borrower or any Commonly
Controlled Entity; (iii) engage in or permit any Commonly Controlled
Entity to engage in any Prohibited Transaction; (iv) incur or permit any
Commonly Controlled Entity to incur any Accumulated Funding
Deficiency, whether or not waived, in connection with any Plan; (v) take
or permit any Commonly Controlled Entity to take any action or fail to
take any action which causes a termination of any Plan in a manner which
could result in the imposition of a lien on the property of the Borrower
or any Commonly Controlled Entity pursuant to Section 4068 of ERISA;
(vi) fail to notify the Holder that notice has been received of a
termination of any Multiemployer Plan to which the Borrower or any
Commonly Controlled Entity has an obligation to contribute; (vii) incur
or permit any Commonly Controlled Entity to incur a complete or partial
withdrawal from any Multiemployer Plan to which the Borrower or any
Commonly Controlled Entity has an obligation to contribute; or (viii) fail
to notify the Holder that notice has been received from the administrator
of any Multiemployer Plan to which the Borrower or any Commonly
Controlled Entity has an obligation to contribute that any such plan will
be placed in "reorganization".
<PAGE>
(b) Borrowings. Create, incur, assume or suffer to exist any
liability for borrowed money, except:
(i) indebtedness in existence on the Closing
Date and of which the Borrower has informed the other parties
to this transaction in writing prior to the Closing Date and
which such other parties have agreed may remain outstanding
after the Closing Date (including the Bridge Loan and the
SBA Loan);
(ii) short-term indebtedness incurred in the
ordinary course of the Borrower's business operations;
(iii) existing indebtedness to the Lender; and
(iv) indebtedness which may be consented to by the
Lender and the Authority in writing in advance, in the sole
discretion of the Lender and the Authority and, if required by the
Lender and the Authority, subordinated to the other obligations of
the Borrower to the Lender and the Authority by written agreement
satisfactory to the Lender and the Authority in form and substance.
(c) Mortgages and Pledges. Create, incur, assume or suffer
to exist any Encumbrance of any kind upon any of its property or assets,
whether now owned or hereafter acquired, except for Permitted Liens.
(d) Merger, Acquisition; Dissolution or Sale of Assets. Enter
into any merger or consolidation, dissolution or acquire all or
substantially all of the assets of any Person, or (except as set forth in
subsection (o) hereof) sell, lease, or otherwise dispose of any substantial
portion of its assets, except assets disposed of in the ordinary course of
business.
(e) Loans. Make loans or advances to any Person, except
advances to employees in the ordinary course of business.
(f) Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the
obligation of any Person, except by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business.
(g) Investments. (i) Except for the Equipment or any other
equipment purchased with the proceeds of the Bridge Loan, make any
investment in non-current assets (which shall include fixed assets and
capitalized value of leased equipment and leased real property) during
any twelve-month period which exceeds $50,000 or (ii) make any capital
contribution to any other person or purchase or acquire a beneficial
interest in any stock, securities or evidences of indebtedness of, or make
any investment or acquire any interest in, any other person, except (a)
investments in federally insured certificates of deposit, (b) direct
obligations of the United States of America maturing within one year
from the date of acquisition, and (c) repurchase agreements with the
Lender.
<PAGE>
(h) Sale and Leaseback. Directly or indirectly enter into
any arrangement whereby the Borrower shall sell or transfer all or any
substantial part of its fixed assets then owned by it and shall thereupon
or within one year thereafter rent or lease the assets so sold or
transferred.
(i) Dividends or Redemptions. Pay dividends on or make
distributions with respect to any stockholders of the Borrower, or make
redemptions of any stockholder interests.
(j) Redemption of Debt. Redeem or prepay any long-term
indebtedness of the Borrower except for debt redeemed or prepaid from
the proceeds of the sale of Equipment permitted to be sold pursuant to
subsection (o) hereof provided such debt was secured by such Equipment.
(k) Subsidiaries. Create or acquire any Subsidiaries.
(l) Management. Fail to notify the Lender and the
Authority in writing of any change in the executive management of the
Borrower, including, without limitation, the offices of President and
Chief Executive Officer.
(m) Leases. Enter into any leases of real property and/or
equipment as lessee which involve property with a value in excess of
$25,000 in any one instance, or $100,000 in the aggregate over any
twelve-month period, not including (i) rental payments under current
leases of the Borrower for facilities currently occupied by the Borrower;
(ii) the Facility Lease; (iii) leases of equipment described on Exhibit E
attached hereto and made a part hereof (provided, however, that the value
of such equipment shall not exceed $427,500 in the aggregate); and (iv)
any other leases in place as of the date hereof, of which the Borrower has
disclosed to the Lender and the Authority, and consented to by the
Lender and the Authority, in writing.
(n) Payments to Stockholders. Pay or lend any money to the
Borrower's stockholders for any purpose whatsoever, except for salaries
and advances for customary and reasonable business expenses and
dividends authorized by the Borrower's board of directors, except
scheduled payments in an aggregate amount not to exceed $70,993 made
pursuant to existing promissory notes of the Borrower to stockholders;
provided, however, that optional prepayments with respect to such
indebtedness shall not be permitted.
<PAGE>
(o) Sale or Lease of Security. Sell or lease any of the
Security except in the ordinary course of the Borrower's business as now
being conducted; provided, however, that during the first eighteen (18)
months after the Closing Date but after the Completion Date, the
Borrower shall be permitted to sell in arm's-length transactions any part
of the Equipment Collateral consisting of the brewing and packaging
equipment of the Borrower currently located at the Carroll Street Facility
(but excluding the Equipment Collateral or any equipment purchased with
the proceeds of the Bridge Loan or the Bond).
(p) Fiscal Year. Change the Borrower's fiscal year.
(q) Trade Names. Use any trade name other than the
Borrower's true corporate name or permit any Subsidiary to use any trade
name other than such Subsidiary's true corporate name.
(r) Amendment of Contract. Amend, modify, extend or
otherwise supplement its current contract with The Johnson Beer
Company for the processing of beer.
ARTICLE VI
APPLICATION OF LOAN PROCEEDS
SECTION 6.1. Application of Loan Proceeds; Advances. As
provided in Section 3.1 hereof, the Loan has been made to the Borrower,
to be used by the Borrower to pay a portion of the Acquisition Costs.
The proceeds of the Bond will be advanced by the Lender from time to
time in accordance with the procedures set forth in this Article VI
directly to the Borrower, or for the account of the Borrower, as the
acquisition of the Facility progresses. The Bond and the Note will bear
interest based upon the aggregate amount of Bond proceeds advanced to
the Borrower by the Lender pursuant to this Article VI.
SECTION 6.2. Advances of Bond Proceeds. The Lender shall
advance the proceeds of the Bonds in accordance with the provisions of
Sections 6.2, 6.3 and 6.4 hereof; provided, however, that no advances
shall be made until all conditions to the first advance under the Blue II
Bond have been satisfied.
(a) Payment of Acquisition Costs; Sources and Uses of
Funds. The Borrower certifies to the Issuer, the Lender and MIDFA that
the projected sources and uses of funds constituting total Facility costs
are as set forth in the Sources and Uses of Funds Schedule attached
hereto as Exhibit C and incorporated herein. The Lender may approve
changes in the amounts in each category of Acquisition Costs set forth on
Exhibit C as long as the total amount of Acquisition Costs as set forth on
Exhibit C does not increase as the acquisition of the Facility progresses.
(b) Remaining Amounts. Any unadvanced Bond proceeds
remaining after the Completion Date and the final advance of Bond
proceeds shall be deemed a redemption of the Bond as provided in the
Bond and in Section 2.2(b) of this Agreement.
<PAGE>
(c) Deficiency. If at any time, either on the Closing Date
or thereafter, in the opinion of the Lender or the Authority, the Bond
proceeds are insufficient to pay for all Acquisition Costs, the Borrower
shall (i) complete, or cause to be completed, the acquisition of the
Facility and pay or finance, or cause to be paid or financed, that portion
of the Acquisition Costs as may be in excess of the Bond proceeds, and
(ii) immediately, upon receipt of Notice from the Lender or the
Authority, pay to the Lender, from funds other than the proceeds of the
Bond, for deposit in escrow, a sum of money in cash or cash equivalent
or letter of credit (provided that such cash equivalent or letter of credit
is in all respects satisfactory to the Holder and the Authority) which,
when added to the Bond proceeds, will be sufficient to pay for all
Acquisition Costs. Neither the Authority, the Issuer nor the Lender
makes any warranty, either express or implied, that the Loan will be
sufficient to pay all of the Acquisition Costs. If the Borrower finances
any portion of the Acquisition Costs pursuant to the provisions of this
Section from sources other than the proceeds of the Loan, it shall not be
entitled to any reimbursement therefor from the Issuer, from the Lender,
from the Authority or from any other Holder, nor shall it be entitled to
any abatement or diminution of any payments required by the Note or this
Agreement. Any moneys deposited in escrow with the Lender pursuant to
this subsection (c) and remaining after the Completion Date shall be
returned to the Borrower.
(d) Waiver of Conditions to Advances. Anything herein to
the contrary notwithstanding, the Lender, with the prior written consent
of the Authority, may waive any requirement or condition precedent to
the advance of Bond proceeds.
(e) Lender's Obligations Following Final Advance. Upon
the final advance of Bond proceeds to the Borrower, the Lender shall be
under no further obligation to make any advance of Bond proceeds to the
Borrower.
SECTION 6.3. Procedure for Making Advances of Bond Proceeds.
Each advance of Bond proceeds to pay the Acquisition Costs set forth in
Section 6.2(a) hereof shall be made only upon the receipt by the Holder
of a Requisition, substantially in the form attached hereto as Exhibit A
and made a part hereof, executed by the Authorized Borrower
Representative and approved by the Lender and, if required by the
Lender, the Lender's Inspector, and only upon satisfaction of the
conditions precedent set forth in Section 6.4 hereof, in accordance with
the following procedures:
(a) Requisitions. Requisitions for Acquisition Costs must
(i) include an itemization of the costs for which payment is requested,
(ii) indicate that the delivery and installation of any Equipment for
which payment is requested has been completed except for the payment of
progress payments to vendors of the Equipment in such amounts as shall
be agreed to by the Lender, (iii) have attached thereto invoices for costs
to be paid, (iv) be approved by the Lender and, if required by the Lender,
the Lender's Inspector prior to any disbursement, and (v) have attached
thereto any additional documents or information (including any financing
statements or amendments to financing statements, and all filing fees
necessary for the filing thereof) reasonably required by the Lender in
order to create and/or perfect the security interests of Issuer and the
Lender in such Equipment.
<PAGE>
(b) Timing. The Holder shall have a period of 10 business
days within which to fund each Requisition and shall not be required to
advance Bond proceeds more than once each month.
(c) Payment of Advances; Joint Checks. Unless the Lender
requires that Bond proceeds be disbursed by joint check as further
provided in this paragraph, advances of Bond proceeds shall be disbursed
into an escrow account of the Borrower with the Lender and disbursed to
pay Acquisition Costs, as set forth herein. The Holder reserves the right
to require that all advances of Bond proceeds be made jointly to the
Borrower and any contractor or supplier for which payment is requested
by a Requisition; provided, however, that upon the occurrence of an
Event of Default under this Agreement, the Holder may, in its sole
discretion, make all advances or any advance directly to the Borrower, or
to any contractor or to subcontractors, laborers, materialmen, or persons
furnishing labor, services, materials in connection with the acquisition of
the Facility or to any combination thereof, and pay all loan fees, Taxes,
appraisals, inspection fees, recording charges, legal fees and any other
outstanding amounts due relating to the Facility and the full cost of
completion of the acquisition thereof. Any such advance or payment
shall be deemed to have been made to the Borrower or for its account.
The Authority also reserves the right to require at any time that payments
be made directly to the Borrower or to any contractor or supplier, and the
Holder shall, upon direction from the Authority, make disbursements in
such manner as the Authority may request.
Upon receipt of any funds requested by a Requisition, the Borrower
shall immediately apply such funds to payment of the Acquisition Costs
for which such funds are requested by the Requisition or, if the Borrower
shall have advanced funds for such payment, the Borrower may reimburse
itself for sums so advanced, provided that the Borrower has expended
$731,000 as evidenced to the satisfaction of the Lender and the
Authority.
(d) Payment of Interest. Notwithstanding the foregoing
provisions of this Section 6.3, the Borrower hereby irrevocably
authorizes the Holder to make advances of Bond proceeds to pay all
interest bills rendered by the Holder in connection with the Loan,
regardless of whether or not a Requisition therefor has been submitted by
the Borrower, although it is anticipated that, in the normal course of
events, such interest bills shall be delivered to and paid by the Borrower
after submission of a Requisition therefor in accordance with the
provisions of this Article.
<PAGE>
(e) Stored Materials. No advances will be made for
materials that are not physically incorporated into the Existing Building
or the Building, other than for materials (i) actually delivered to the site
and stored in a place secured and insured against theft, vandalism and
other Damage, all in a manner satisfactory to the Holder and the Lender
and the Authority, in their discretion, (ii) owned by the Borrower subject
to no Encumbrances, other than those permitted hereby, and (iii) subject
to the lien created by the Loan Documents.
(f) Holder's Reliance on Requisitions. In making any
advance of Bond proceeds, the Holder may rely on any Requisitions and
certifications delivered to it pursuant to this Section 6.3, and the Holder
shall be relieved of all liability with respect to making such payments in
accordance with such Requisitions and certifications, except only for its
Gross Negligence. Each Requisition submitted pursuant to this
Agreement, or the receipt of the advance of Bond proceeds requested
thereby, shall constitute an affirmation that the representations and
warranties of the Borrower set forth in this Agreement are true and
correct in all material respects as of the date of such Requisition.
(g) No Liability to Third Parties. Neither the issuance of
the Bond nor the making of the Loan shall in any way be construed as
obligating the Issuer or the Holder to any Person for the payment of any
expense incurred with respect to the Facility, and no Person contracting
with the Borrower in connection with the Facility shall be reimbursed by
the Issuer or the Holder under any circumstances whatsoever. Neither
the Lender, any other Holder, the Department, nor the Authority, shall in
any event be responsible or liable to any Person other than the Borrower
for the advance of or failure to advance Bond proceeds, or any part
thereof, and no contractor or subcontractor, or material or equipment
supplier shall have any right or claim against the Lender, any other
Holder, the Authority, the Department or the Issuer under this Agreement
or in connection with the administration hereof.
SECTION 6.4. Conditions Precedent to Advances of Bond
Proceeds. The Lender shall not be obligated to advance any Bond
Proceeds until all of the following conditions precedent shall have been
fully met and complied with in all respects:
(a) No Event of Default. No Event of Default shall have
occurred hereunder, other than any Event of Default waived by, or cured
to the satisfaction of, the Holder and the Authority.
(b) Sufficient Time to Complete Facility. There shall be
sufficient time in the opinion of the Lender and the Lender's Inspector to
complete the Facility no later than the Projected Completion Date.
<PAGE>
(c) Waivers of Liens; Receipts. At the request of the
Holder, the Borrower shall furnish waivers of liens and receipts of
payment as to any contractor or subcontractor for all work performed to
the date of each Requisition at the time such Requisition is submitted and
waivers of liens as to each supplier for materials included in the last
previous Requisition within 30 days from the date of funding of the last
previous Requisition, or prior to the next Requisition, whichever shall
first occur.
(d) Compliance with Agreement. The Lender's Inspector
shall have certified to the Holder that all installation of the Facility is in
conformity with the Equipment described on Exhibit B attached hereto.
(e) Proper Application of Prior Advances. The Holder shall
have received evidence satisfactory to it that all prior advances have
been properly applied to the Acquisition Costs.
(f) Sufficient Funds to Complete Acquisition of Facility.
The sum of the funds being requisitioned, and unadvanced funds, plus
any amounts remaining on deposit in escrow with the Lender in
accordance with Section 6.2(c) of this Agreement, shall be sufficient, in
the sole opinion of the Holder, to complete the acquisition of the Facility
and to pay all unpaid Acquisition Costs. In the event the Borrower is
required to deposit moneys in escrow in order to pay all costs of
completing the acquisition of the Facility pursuant to Section 6.2(c),
whether on or after the Closing Date, the Borrower shall have made such
deposit.
SECTION 6.5. Completion of Acquisition of Facility. The
Borrower hereby covenants and agrees with the Lender and the Authority
that:
(a) Commencement of Acquisition; Time of Completion. It
will cause the acquisition of the Facility to be commenced within 30 days
after the Closing Date and prosecuted with diligence and continuity in
accordance with the terms hereof, and will complete, on or before the
Projected Completion Date, free and clear of Encumbrances and free and
clear of Claims in connection with materials supplied or labor or services
performed in connection with the acquisition of the Facility. The
Projected Completion Date shall not be extended without the prior
written consent of the Holder and the Authority. In the event of the
occurrence of Force Majeure, the Holder and the Authority shall consent
to an extension of the Projected Completion Date upon written request of
the Borrower setting forth the reasons for such extension in form and
substance reasonably satisfactory to the Holder and the Authority.
(b) Permits and Licenses. All necessary governmental
permits and licenses have been obtained with respect to the Facility or
will be obtained prior to commencing the particular work for which they
are required.
<PAGE>
(c) Changes in Equipment. The Borrower shall not, without
the prior written consent of the Holder, the Authority and any
governmental authorities having jurisdiction if such consent is required,
permit any changes in the Equipment.
(d) Delivery of Certain Documents. It will deliver to the
Holder, on demand, any contracts, bills of sale, statements, receipted
vouchers or agreements, under which the Borrower claims title to any
materials, fixtures or articles constituting any part of the Facility or
subject to the lien of this Agreement.
(e) Fees of Lender's Inspector. It will pay the reasonable fees
of the Lender's Inspector.
(f) Compliance With Restrictions, etc. It will comply with
all applicable building restrictions, zoning ordinances, building codes,
environmental protection requirements and other governmental
regulations applicable to the Existing Building, the Building and/or the
Facility.
(g) Payment of Contractors. It will promptly pay any
contractor and all materialmen the amounts justly due to them, and
receive the advances of Bond proceeds in trust to be applied for the
purpose of paying the Acquisition Costs.
No Person contracting with the Borrower with respect to the
Facility shall have the right to be reimbursed by the Holder, or the Issuer
under any circumstances whatsoever. The participation of the Holder,
the Authority and the Issuer in the transactions contemplated hereby
shall not in any way be construed as obligating the Holder, the Authority,
the Department or the Issuer to any person or entity for the payment of
any expense incurred with respect to the Facility.
(h) Requirements of Authority. It shall deliver to the
Authority copies of all documents and information delivered to the
Holder pursuant to Section 6.4 or this Section 6.5, shall provide the
Authority with such other information as the Authority may reasonably
request, and shall satisfy such other conditions as the Authority may
reasonably require.
SECTION 6.6. Establishment of Completion Date. The Completion
Date shall be evidenced to the Holder, the Authority and to the Issuer by
delivery of the fully executed and completed Completion Certificate,
together with all completed exhibits attached thereto. It shall be the
duty of the Borrower to cause such items to be furnished as soon as the
acquisition of the Facility shall have been completed.
SECTION 6.7. Financing Sign on Building; Publicity. The
Borrower authorizes the Lender, the Authority and the Issuer to place
signs at the Building at any locations selected by the Lender, the
Authority and the Issuer and to prepare and furnish news releases to the
news media or any other publications selected by the Lender or the
Authority advertising the fact that financial assistance for the Facility
has been obtained from the Lender, the Authority and the Issuer, and the
details of such financial assistance and the Facility, upon prior
consultation with the Borrower. Any sign placed on the Building by the
Borrower (other than a sign identifying the brewery and the Borrower's
name) which identifies the Facility shall identify the Lender, the
Authority and the Issuer as the parties providing financing for the
Facility.
<PAGE>
SECTION 6.8. Action by Holder Through and Reliance Upon
Others. The Holder may execute and perform any of the duties or powers
required of it hereunder by or through attorneys, receivers or Agents,
shall be entitled to advice of counsel concerning all matters with respect
to its duties hereunder, and shall not be answerable for the default or
misconduct of any such attorney, receiver or Agent selected by it with
reasonable care, or for the exercise of any discretion or power under this
Agreement except only for its own Gross Negligence.
SECTION 6.9. Holder May Rely Upon Instruments. The Holder
shall be protected and shall incur no liability in acting or proceeding in
good faith upon any resolution, notice, telegram, request, consent,
waiver, certificate, statement, affidavit, voucher, bond, requisition or
other paper or document which it shall in good faith believe to be
genuine and to have been passed or signed by the proper person or to
have been prepared and furnished pursuant to any of the provisions of
this Agreement, and the Holder shall be under no duty to make any
investigation or inquiry as to any statements contained or matters
referred to in any such instrument, but may accept and rely upon the
same as conclusive evidence of the truth and accuracy of such statements.
ARTICLE VII
COVENANTS, AGREEMENTS, REPRESENTATIONS AND
WARRANTIES WITH
RESPECT TO THE FACILITY
SECTION 7.1. Possession, Ownership and Use of the Facility. The
Facility shall be the property of the Borrower, and the Borrower shall
enjoy the ownership and possession thereof only for the Permitted Use,
subject to rights of the Holder, the Authority and the Issuer and the other
parties to this transaction to enter (after prior notice to the Borrower
unless a default has occurred under any of the Documents) the Building
and/or the Existing Building for inspection and other purposes pursuant
to this Agreement and the other Documents. The Issuer and the Holder
covenant and agree that they will not take any action, other than pursuant
to this Agreement and the other Documents, to prevent the Borrower from
having quiet and peaceable enjoyment of the Facility.
SECTION 7.2. Representations, Warranties and Covenants
Pertaining to the Facility. The Borrower hereby represents, warrants and
agrees that:
<PAGE>
(a) Use of Loan Proceeds. The Borrower intends that the
proceeds of the Loan will be used solely for the Acquisition Costs.
(b) Zoning, Restrictive Covenants, etc. The Existing
Building and the Building, and the use of the Facility for the Permitted
Use, will not violate any zoning or other ordinance, regulation or law,
restrictive covenant or agreement of the Borrower (either now in
existence or known by the Borrower to be proposed) applicable to the
Facility or its use, and all requirements for such use have been satisfied.
The Borrower shall not, without the prior written consent of the Holder
and the Authority, initiate, join in, or consent to any change in, any
restrictive covenant, easement, zoning ordinance, or other public or
private restriction limiting or defining the uses which may be made of
the Building or any part thereof. The Borrower will promptly perform
and observe, or cause to be performed and observed, all of the terms,
covenants and conditions of all instruments of record affecting the
Building, and/or the Existing Building, non-compliance with which may
affect any of the Security, and the Borrower shall do or cause to be done
all things necessary to preserve intact and unimpaired any and all
easements, appurtenances and other interests and rights in favor of, or
constituting any portion of, the Facility or the Security.
(e) Maintenance and Repair of the Equipment; Com-
pliance with Laws; etc. The Borrower will, at its sole cost and expense:
(i) Maintenance and Repair. Keep and maintain
the Equipment and each part thereof in good condition,
working order and repair, and make all necessary or
appropriate repairs, replacements and renewals thereto so that
each part thereof shall at all times be in good condition, fit
and proper for the respective purposes for which it was
originally intended, erected, or installed and to insure that the
security for the Bond and the Security for the Loan shall not
be impaired.
(ii) Permits, Licenses, Etc. Procure or cause to be
procured, any and all necessary permits, certificates, licenses
or other authorizations required for the Permitted Use, and
observe and comply with all conditions and requirements
necessary to preserve and extend any and all rights, licenses,
permits, privileges, franchises and concessions which are now
applicable to the Facility or which may be applicable in the
future.
(iii) Compliance with Laws. Not use the Facility or
permit the same to be used contrary to any uniformly
applicable laws affecting the Facility and the operation or use
thereof, whether or not any such laws which may be hereafter
enacted involve a change of policy on the part of the
governmental body enacting the same.
<PAGE>
SECTION 7.3. No Warranty of Suitability by Issuer or Holder.
The Borrower recognizes that since the Equipment was selected by it,
neither the Issuer nor the Holder makes any warranty, either express or
implied, and offers no assurances that the Facility will be suitable for the
Borrower's purposes or needs. Without limiting the generality of the
foregoing provisions of this Section, the Borrower hereby acknowledges
that THERE ARE NO IMPLIED WARRANTIES OR WARRANTIES OF
FITNESS MADE BY THE ISSUER OR THE HOLDER.
SECTION 7.4. Alterations, Additions and Improvements. No
portion of the Equipment or the Equipment Collateral, or any other
Security now or hereafter covered by the lien and security interest of this
Agreement, shall be removed, demolished or materially altered, without
the prior written consent of the Holder and the Authority; provided,
however, that the Borrower may, at its sole cost and expense, remove and
dispose of, free from the lien and security interest of this Agreement,
such of the Equipment Collateral as from time to time may be deemed by
the Borrower to be in need of upgrade or substantial improvement or
become worn out or obsolete, provided that no Event of Default has
occurred and is continuing, and either: (1) simultaneously with or prior
to such removals any such Equipment Collateral is replaced with other
equipment of value at least equal to that of the replaced Equipment
Collateral and free from the lien or security interest of any title retention
or security agreement or other encumbrance, and by such removal and
replacement the Borrower shall be deemed to have subjected such
equipment to the lien and security interest of this Agreement, or (2) such
Equipment Collateral is sold at fair market value for cash and the net
cash proceeds received from such disposition are paid over promptly to
the Holder to be applied to the redemption of the Bond in accordance
with the provisions of Section 2.2(b) hereof.
SECTION 7.5. Transfer of Facility; Other Liens; Assignment
and Leasing. Except as provided in Section 7.4 above, without the prior
written consent of the Holder and the Authority, the Borrower will not
encumber, transfer, sell, assign, lease, dispose of, or contract to transfer
all or any part of the Facility or suffer to exist any Encumbrance on the
Facility or the Security (except for Permitted Liens), whether superior to
or junior to this Agreement. The Borrower will give the Holder and the
Authority Notice of any default in any permitted senior, junior or
subordinated Encumbrance on the Facility or on the Security and Notice
of any foreclosure or threat of foreclosure of such permitted senior,
junior or subordinated Encumbrance. In the event of any permitted
removal, replacement, or sale of the Facility, the Borrower shall
promptly notify the Holder and the Authority of such removal,
replacement or sale, and if so requested, shall provide the Holder with
such financing statements or other documents necessary to perfect or
continue the lien and security interest of the Holder in such Security.
<PAGE>
ARTICLE VIII
PROPERTY TAXES; INSURANCE
SECTION 8.1. Property Taxes; Tax and Insurance Escrow. Subject
to its right to contest as set forth in subsection (c) below, the Borrower
will promptly pay in full and discharge all Property Taxes before
delinquency and before any penalty for nonpayment attaches thereto. The
Borrower, upon payment of any of the Property Taxes, will exhibit to the
Holder and the Issuer, upon demand, the receipted bills therefor, prior to
the day upon which the same shall become delinquent. If the Borrower
fails to pay or cause to be paid the Property Taxes (or any deficiency as
hereinafter set forth) at the time or in the manner provided in this
Section, the Holder may, at its option, pay such Property Taxes, and the
Borrower shall pay to the Holder the amount of any Property Taxes so
paid, with interest thereon, as provided in Section 12.2 hereof. As
provided in Section 2.8 hereof, the Authority may also pay such Property
Taxes not paid by the Borrower, and the Borrower shall be required to
reimburse the Authority in accordance with the provisions of Section
12.2 hereof.
(a) Tax and Insurance Escrow. In addition to, together
with, and at the same time and place as any installments of principal of
or interest on the Note are to be paid, the Borrower shall pay to the
Holder, upon request, an amount which shall be estimated by the Holder
in its sole discretion from time to time, to be sufficient to enable the
Holder to pay (out of the moneys so paid by the Borrower) at least 30
days before due, all Property Taxes and premiums on the insurance
required by this Article VIII, which sums shall be held by the Holder in
an interest bearing account to pay the Property Taxes and such premiums.
To the extent permitted by law, upon the occurrence of an Event of
Default under any of the Documents, the Holder may apply any sums so
deposited to the Borrower's Obligations in such order and in such manner
as the Holder may determine. If funds accumulated under the terms of
this subsection (a) are not sufficient to pay the Property Taxes and
insurance premiums when and as the same are due and payable, the
Borrower shall pay on demand the amount of any such deficiency. If
from time to time there are funds accumulated under the terms of this
subsection in excess of the amount needed to pay Property Taxes and
such insurance premiums, at least annually the Borrower shall be given
the option of (i) receiving a refund of such excess funds, (ii) applying
such excess funds to the payment of principal of and interest on the
Loan, or (iii) permitting such excess funds to remain in the escrow
account established pursuant to this subsection (a). Within 30 days after
receipt of a request for a refund from the Borrower, the Holder shall
refund such excess funds to the Borrower. If the Borrower fails to notify
the Holder of its intent with respect to the application of such excess
funds as provided in this subsection within 30 days from the date the
Holder mailed notice of the accumulation of such excess funds, the
Holder shall return such excess funds to the Borrower within ten (10)
days thereafter.
<PAGE>
(b) Right of Borrower to Contest. Notwithstanding any of
the foregoing provisions, the Borrower shall have the right, without
creating an Event of Default hereunder, to contest the validity or amount
of any Property Taxes by timely and appropriate proceedings, provided
that the Borrower shall (i) give the Holder and the Authority written
notice of its intention to contest, (ii) diligently prosecute such contest,
(iii) at all times effectively stay or prevent any official or judicial sale
of the property which is the subject of the Property Tax or any part
thereof by reason of nonpayment of any such Property Taxes, and (iv)
establish reasonable reserves for such liabilities being contested if the
Holder or the Authority reasonably determines such reserves to be
necessary, and, provided further, that the security for the Bond and the
Borrower's Obligations is not, in the opinion of the Holder and the
Authority, materially impaired during the period of contest.
SECTION 8.2. Insurance Required. The Borrower shall, at all times
during the Loan Term beginning with the Closing Date and at the
Borrower's sole cost and expense, maintain or cause to be maintained
insurance coverage in accordance with the customary insurance practices
of businesses similar to the business which is carried on in the Existing
Building or which will be carried on in the Building, but in all events at
least to the following extent:
(a) Insurance of Land, Building, Facility and Other Assets.
The Borrower will keep the Land, the Building, the Facility and all other
insurable assets insured to the extent required in the Facility Lease, but
in any event against loss or Damage from:
(i) the perils of fire and hazards ordinarily
included under standard extended coverage endorsements, in
amounts necessary to prevent the application of any co-
insurance provisions of the applicable policies up to the Full
Insurable Value thereof within the terms of applicable
policies, but in no event in an amount which is less than the
aggregate principal amount of the Loan outstanding from time
to time, and
(ii) war risks when a state of war or national
public emergency exists and such insurance is obtainable from
a department or agency of the United States Government,
upon reasonable terms, in the full amount necessary to
prevent the application of any co-insurance provisions of the
applicable policies up to the then Full Insurable Value, or, if
such amounts are not obtainable, then in the highest amount
which can be so obtained, and
(iii) boiler or pressure vessel explosion (if there
are boilers or pressure vessels located on the Property) in an
amount customarily carried in the case of similar industrial or
commercial operations.
<PAGE>
(b) General Public Liability, Worker's Compensation,
and Property Damage Insurance. The Borrower shall maintain or cause to
be maintained any and all insurance required to be maintained under the
Facility Lease, and in any event, at least to the following extent:
(i) general public liability insurance and
worker's compensation insurance in amounts usually carried
by similar operations against claims for bodily injury or death
occurring upon, in or about the Property, with such insurance
(other than worker's compensation insurance) to afford
protection to the limit of not less than $1,000,000 in respect
of bodily injury or death for any one occurrence, and to the
limit of not less than $3,000,000 for the aggregate of all
occurrences during any such given annual policy period, each
such policy naming the Holder as additional insured;
(ii) property damage insurance against claims for
damage to property (including loss of use) occurring upon, in
or about the Building with such insurance to afford protection
to the full insurable value thereof, but in any event not less
than $2,500,000; and
(iii) business interruption insurance, in amounts
and with such coverage as shall be approved by the Lender
and the Authority.
(c) Additional Insurance. The Borrower will obtain and
keep in force such other and further insurance as may be required from
time to time by the Holder and the Authority in similar transactions.
SECTION 8.3. Specific Requirements With Respect to Insurance.
The following provisions shall apply with respect to the insurance
coverage required by Section 8.2 hereof:
(a) Insurance Companies. All insurance required by Section
8.2 hereof shall be carried with responsible insurance companies selected
by the Borrower and approved by the Holder and the Authority, and may
be effected by endorsement of blanket insurance policies; provided,
however, that all policies of insurance shall be written by companies of
recognized standing which are authorized to do business in the State and
are well rated by national rating organizations.
(b) Evidence of Insurance. The Borrower shall deliver to
the Holder and the Authority, promptly upon the execution and delivery
of this Agreement, original policies or duplicates thereof, or binders
evidencing such insurance, and the Borrower shall deliver to the Holder
and the Authority, at least 30 days prior to the expiration of any such
insurance, additional policies or duplicates thereof, or binders
evidencing the renewal of such insurance and the payment of the
premiums therefor.
<PAGE>
(c) Mortgagee Clauses. The insurance policies required by
Section 8.2 hereof and all renewals thereof are hereby assigned to the
Holder and the Authority, shall be deposited with and held by the Holder,
and as collateral and further security for the Borrower's Obligations,
shall have attached thereto standard non-contributing, non-reporting
mortgagee clauses in favor of and entitling the Holder and the Authority,
as their interests may appear, without contribution, to collect any and
all proceeds payable under such insurance, all to be in form and
substance acceptable to the Holder and the Authority.
(d) Cancellation. The Borrower will immediately notify the
Holder and the Authority of any cancellation of or change in any
insurance policy, and each such insurance policy to be provided under
Section 8.2 hereof shall contain an agreement by the insurer that it will
not modify or cancel such policy except upon at least 30 calendar days'
prior written notice to the Holder and the Authority, and that any loss
otherwise payable thereunder shall be payable notwithstanding any act or
negligence of the Holder or the Authority or the Borrower which might,
absent such agreement, result in a forfeiture of all or a part of such
insurance payment.
(e) Collection and Adjustment of Insurance. The Borrower
hereby authorizes the Holder, at its option, to collect, adjust and
compromise any losses or claims under any of such insurance policies
and to deduct from the proceeds thereof all costs and expenses of
collection (including without limitation, all reasonable attorney's fees
and expenses). The Net Proceeds of such insurance, whether collected by
the Holder or the Borrower, shall be held in trust to be applied only as
set forth in Article IX hereof.
(f) Payment of Premiums; Failure of the Borrower to Effect
Insurance. The Borrower will promptly pay when due any and all
premiums on all such insurance. On each anniversary of the Closing
Date, the Borrower shall deliver to the Holder and the Authority, a
certificate, dated as of such date, to the effect that there is then in force
all such insurance which is then required to be maintained by the
Borrower. Should the Borrower fail to effect, maintain or renew any of
the insurance required by Section 8.2 hereof in the required amounts, or
to pay the premiums therefor, or to deliver to the Holder and the
Authority any evidence of such insurance or payment therefor as required
by this Article VIII, then in any of such events the Holder or the
Authority, at its option, but without obligation so to do, may procure
such insurance, and any sums expended by it to procure any such
insurance shall be payable by the Borrower with interest, on demand, as
provided in Section 12.2 hereof; however, it is expressly understood that
procurement by the Holder or the Authority of any of such insurance
shall not be deemed to waive or release the default of the Borrower, or
the right of the Holder or the Authority, at their option, to exercise the
remedies hereinafter set forth upon the occurrence of an Event of
Default.
<PAGE>
(g) Separate Insurance. The Borrower shall not take out
separate insurance concurrent in form or contributing in the event of loss
with that required in Section 8.2 hereof, unless each of the Holder and
the Authority is included therein as a named insured or mortgagee, as
appropriate, with loss payable as required in this Agreement. The
Borrower shall immediately notify the Holder and the Authority whenever
any such separate insurance is applied for and shall promptly deliver to
the Holder the policy or policies or binders evidencing the same with
copies thereof to the Authority.
(h) Contravention of Insurance. The Borrower will not do
or permit anything to be done on or about the Land, the Building or the
Existing Building that will affect, impair or contravene any policies of
insurance that may be carried by the Borrower or by Blue II with respect
to the Building, the Existing Building or the Facility, or any part thereof,
or the use thereof against loss or Damage by fire, casualty, public
liability, or otherwise.
ARTICLE IX
DAMAGE TO THE FACILITY
APPLICATION OF NET PROCEEDS
SECTION 9.1. Damage to the Facility. If at any time prior to the
Termination Date, the Facility or any part thereof is Damaged, either
temporarily or permanently, the Borrower shall be obligated to continue
to pay the amounts specified herein and in the Note, and the Net Proceeds
resulting from any Damage will be applied as set forth in Section 9.2
hereof.
SECTION 9.2. Application of Net Proceeds. (a) General. The Net
Proceeds resulting from any Damage shall be applied in accordance with
the provisions of Section 9.3(a) below, (i) to the redemption of the Bond
in accordance with the provisions of Section 2.2(b) hereof; or (ii) to the
restoration or replacement of that portion of the Equipment which was
Damaged.
(b) Conditions Under Which Net Proceeds May be Applied
to Restoration or Replacement of Equipment. In the event that, and to
the extent that, the Net Proceeds are to be applied to the restoration or
replacement of the Equipment, the following conditions must be met and
complied with:
(i) There shall not have occurred and be
continuing an Event of Default or an event that with the
passage of time or the giving of notice or both would
constitute an Event of Default;
(ii) The Borrower establishes to the reasonable
satisfaction of the Holder and the Authority that the Borrower
will be able to replace lost brewing capacity during the period
of restoration or replacement of the Equipment;
<PAGE>
(iii) The Holder and the Authority approve the
plans and specifications, if any, for such restoration or
replacement of the Equipment;
(iv) The Net Proceeds and, if deemed necessary
by the Holder, additional deposits made by the Borrower
which may be necessary in the judgment of the Holder to
restore or replace the Equipment, shall be deposited into an
escrow account to be held by the Holder, or by such other
person as may be approved by the Holder.
(v) The Borrower will proceed promptly to
replace the Equipment Damaged, or to restore that part of the
Equipment Damaged, to substantially the same condition as it
existed prior to such Damage, with such changes, alterations
and modifications as may be desired by the Borrower and
approved by the Holder and as will not impair the operating
unity or productive capacity or the character of the Facility as
a "project" under the Act.
(vi) The Borrower will observe and comply with
all of the requirements set forth in Section 7.4 of this
Agreement with respect to permitted improvements.
(vii) The Borrower will cause withdrawals to be
made from the escrow account to pay the costs of such
restoration, either on completion thereof or as the work
progresses.
(viii) Any balance of the Net Proceeds remaining
after the payment of all of the costs of any restoration or
replacement of the Equipment permitted by (a)(ii) above shall
be applied to the redemption of the Bond in accordance with
the provisions of Section 2.2(b) hereof.
(ix) The Holder shall be entitled, at the expense
of the Borrower, to consult such professionals as the Holder,
in its sole discretion, may deem necessary to determine the
total costs of restoring the Facility to its condition
immediately prior to such Damage.
(x) All proceeds from business interruption
insurance shall be available to the Borrower, in such amounts
as the Holder, in its reasonable judgment, considers
sufficient, to pay the debt service on the Note, and all
assessments, insurance premiums and other sums due and
payable by the Borrower pursuant to the Documents.
(xi) All restoration shall be subject to the
approval by the Lender's Inspector and any and all contracts
therefor shall be subject to the approval of the Lender and the
Authority.
<PAGE>
(xii) All moneys held in the escrow account shall
constitute a part of the Security, and the Borrower hereby
grants to the Holder a security interest therein.
SECTION 9.3. General Provisions.
(a) Determination of Application of Net Proceeds. The
Borrower, in its sole discretion, shall determine whether any Net
Proceeds shall be applied as set forth in Section 9.2(a)(i) or Section
9.2(a)(ii) above; provided, however, that if at any time the Holder shall
determine that the conditions set forth in Section 9.2(b) above have not
been or are no longer satisfied, the Holder, with the prior written
approval of the Authority, shall determine whether any Net Proceeds
shall be applied as set forth in Section 9.2(a)(i) or Section 9.2(a)(ii)
above.
(b) [Reserved].
(c) Net Proceeds to be Held in Trust. All Net Proceeds
received by any person shall be held in trust by the recipient thereof to
be applied in accordance with the terms of this Article.
(d) Insufficient Funds. In the event the Net Proceeds are
not sufficient to pay in full the costs of restoring or replacing the
Equipment, as provided in this Article, the Borrower will nonetheless
complete the work or the acquisition thereof and pay that portion of the
costs thereof in excess of the amount of such Net Proceeds. The
Borrower shall not, by reason of the payment of such excess costs
(whether by direct payment thereof or payment to the Holder therefor),
be entitled to any reimbursement from the Holder or the Issuer or the
Authority, or to any abatement or diminution of the payments payable
hereunder or under the Note.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
SECTION 10.1. Events of Default Defined. The following events
shall be "Events of Default" under this Agreement:
(a) Any representation or warranty made herein or any
statement or representation made in any certificate, report or opinion
(including legal opinions), financial statement or other instrument
furnished in connection with this Agreement (including Requisitions
submitted under Article VI hereof), or any of the other Documents,
proves to have been incorrect in any material respect when made; or
(b) The Issuer fails to pay, on the date which the same is
due and payable, (and such failure continues for a period of ten (10) days
after receipt by the Borrower from the Lender of written notice of such
failure), the principal of, premium, if any, or interest or any other
charges or sums on or under the Bond (whether upon maturity, after
acceleration, on any installment payment date, or after notice of
redemption, or otherwise) or any other payment by the Issuer required by
this Agreement; or
<PAGE>
(c) The Borrower fails to pay, on the date on which the
same is due and payable, (i) the principal of, premium, if any, or interest
or any other charges or sums on or under the Note (whether upon
maturity, on any installment payment date, after acceleration, or after
notice of redemption, or otherwise), or (ii) any other payment required
by this Agreement or any of the other Documents to be paid by the
Borrower; or
(d) The Borrower fails to duly and promptly perform,
comply with or observe any of the terms, covenants, conditions or
agreements contained in Sections 5.2 or 5.3 hereof; or
(e) The Issuer defaults in the due and punctual performance
or observance of any covenant, condition, agreement or provision
contained in the Bond or in this Agreement on the part of the Issuer to be
performed or observed (other than as specified in subsection (b) of this
Section), and such default shall continue for a period of 30 days after
Notice to the Issuer specifying such default and requiring the same to be
remedied; or
(f) The Borrower defaults in the due and punctual
observance or performance of any other term, covenant or agreement
herein contained (other than as specified in subsections (c) or (d) of this
Section, or with respect to any other of the Borrower's Obligations,
which default shall remain unremedied for 20 days after Notice to the
Borrower thereof, or, if such default is under any of the other
Documents, such other cure period, if any, as may be specified herein or
in the other Documents; or
(g) An Act of Bankruptcy occurs with respect to the
Borrower or the Issuer; or the Borrower becomes generally unable to pay
its debts as they become due; or
(h) An order or decree appointing a receiver of any of the
payments to be made by the Borrower pursuant to this Agreement or the
Note is entered with the consent or acquiescence of the Issuer, or such
order or decree is entered without the acquiescence or consent of the
Issuer and it is not vacated, discharged or stayed within 60 days after
entry; or
(i) The Borrower is dissolved, merged, consolidated or
reorganized, or any change occurs in the ownership or control of the
Borrower without the prior written consent of the Holder and the
Authority; or
(j) Any judgment against the Borrower or any attachment or
any levy against the property of the Borrower (including, without
limitation, the Facility or any portion thereof) with respect to a claim for
an amount in excess of $25,000, remains unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 60 days (unless
such judgment, attachment or levy is being contested or litigated in good
faith); or
<PAGE>
(k) Default is made with respect to any evidence of
indebtedness or liability for borrowed money of the Borrower (other than
the Loan) in excess of $25,000 if the effect of such default is to
accelerate the maturity of such evidence of indebtedness or liability or to
permit the holder or obligee thereof to cause any indebtedness to become
due prior to its stated maturity, or any such indebtedness is not paid as
and when due and payable (unless the Borrower certifies to the Holder
that the reason for nonpayment is a good faith dispute as to the
obligation to pay such indebtedness or liability); or
(l) Any change in any zoning ordinance or any other public
restriction is enacted, limiting or defining the uses which may be made of
the Building, the Facility or any part thereof, such that the Permitted Use
would be in violation of such restriction or zoning change; or
(m) An Event of Default occurs under any of the other
Documents; or
(n) Any portion of the Facility is sold, transferred or
encumbered, without the prior written consent of the Holder and the
Authority, unless specifically permitted by this Agreement or the other
Documents; or
(o) Any provision of this Agreement or any of the other
Documents pertaining to the repayment of the principal of or interest on
the Loan or the Bond transcends the limit of validity prescribed by law,
or operates or would prospectively operate to invalidate this Agreement
or any of the other Documents, in whole or in part; or
(p) The Borrower fails to complete the acquisition of the
Facility on or before the Projected Completion Date, time being of the
essence; or
(q) The Lender's Inspector determines that there is not
sufficient time to complete the acquisition of the Facility on or before
the Projected Completion Date, time being of the essence; or
(r) The Authority, the Holder and their respective Agents
(and including the Lender's Inspector) are not permitted, at all reasonable
times, to enter the Existing Building or the Building, to inspect the
Facility in accordance with this Agreement; or
(s) A default or an Event of Default occurs under any of the
documents relating to the Blue II Bond, the Bridge Loan or the SBA
Loan; or
<PAGE>
(t) The Facility Lease is terminated or the Borrower
abandons or terminates the operation of its business; or
(u) A court of competent jurisdiction shall issue an
injunction or restraint of the Borrower or any Subsidiary in any manner
from conducting its business in whole or in part deemed material by the
Holder in good faith.
(v) Any assets of the Borrower or any Subsidiary deemed
material by the Holder in good faith shall be attached, levied upon,
seized or repossessed or come into the possession of a trustee, receiver
or other custodian.
(w) An adverse change deemed material by the Lender in
good faith shall occur with respect to the business, assets, operations or
financial condition of the Borrower or any Subsidiary or otherwise with
respect to the risks to the Lender attending the Security, any
commitments of the Lender which could give rise to any of the
Borrower's Obligations or the prospect for payment in full of the
Borrower's Obligations, whether or not such adverse change otherwise
constitutes an Event of Default.
(x) Termination or cancellation, without the Lender's and
the Authority's prior written consent, of any lease or sublease of the
Borrower or any Subsidiary of any business premises of the Borrower or
any Subsidiary which the Lender in good faith deems material to the
conduct of the business of the Borrower or any Subsidiary, including
expiration of any such lease or sublease without renewal or extension, or
the occurrence of any event or condition which could result in the
termination or cancellation of any such lease or sublease unless such
event or condition is waived by all parties to the lease or sublease and all
other appropriate parties, or cured by the Borrower or such Subsidiary, as
the case may be, in accordance with the provisions of such lease or
sublease.
(y) Termination of any contract, franchise, license, permit,
authorization, certificate or right of the Borrower or any Subsidiary
which the Lender in good faith deems material to the Borrower's or such
Subsidiary's business, assets, operations or financial condition.
(z) Suspension or revocation of any license, permit,
certification, approval or the like required to be held by the Borrower or
any Subsidiary by federal, State, local or foreign laws and which the
Lender in good faith deems material to the Borrower's or such
Subsidiary's business, assets, operations or financial condition of the
Borrower.
(aa) Kevin Brannon, Marjorie A. McGinnis or Steven T.
Nordahl shall for any reason (including death) cease to be the chief
executive officer, President, and Vice President - Brewing Operations
and Brewmaster, respectively, of the Borrower, unless, within 60 days
thereafter, the Borrower shall have engaged a replacement officer who is
satisfactory to the Lender in its discretion exercised in good faith.
<PAGE>
(bb) The Borrower, any guarantor of all or any part of the
Borrower's Obligations or any other person shall revoke or terminate, or
attempt to revoke or terminate, or notify the Lender of revocation or
termination of, any continuing obligations or agreements of the
Borrower, such guarantor or such other person relating in any way to any
of the Borrower's Obligations, including, without limitation, any
continuing obligations or agreements of the Borrower, such guarantor or
such other person under any guaranty or subordination agreement.
SECTION 10.2. Remedies on Default. Whenever any Event of
Default referred to in Section 10.1 hereof shall have occurred, the Holder
(with the prior written approval of the Authority), by Notice to such
effect delivered to the Issuer and the Borrower, may accelerate the
maturity of the Bond and declare all other of the Issuer's Obligations to
be immediately due and payable, bring suit on the Bond, and take such
other actions against the Issuer as it may deem to be appropriate (subject
to the provisions of Section 2.6 hereof with respect to the limited
liability of the Issuer), as permitted by law. Upon such declaration, the
Bond and all accrued and unpaid interest thereon and all other of the
Issuer's Obligations shall become immediately due and payable, without
protest, presentment, further notice or demand, all of which are expressly
waived by the Issuer, at the place of payment provided in such Notice,
anything in any of the Documents to the contrary notwithstanding. In
addition, the Holder (with the prior written approval of the Authority)
and the Issuer (with the approval of the Holder), in its or their sole
discretion, may take any one or more of the following remedial steps:
(a) Acceleration. Accelerate the maturity of the Note and
declare the unpaid principal of the Note and all interest accrued thereon,
together with all other of the Borrower's Obligations, to be immediately
due and payable, by Notice to that effect delivered to the Borrower and
to the other parties to this Agreement and the other Documents, and upon
such declaration, the Note and all accrued and unpaid interest thereon
and all other of the Borrower's Obligations shall become immediately due
and payable, without protest, presentment, further notice or demand, all
of which are expressly waived by the Borrower, at the place of payment
provided in such Notice, anything in this Agreement or in the Bond or
the Note to the contrary notwithstanding.
(b) Legal Action.
(i) by mandamus or other suit, action or
proceeding at law or in equity, enforce all rights of the
Holder, and require the Borrower to carry out any agreement
with or for the benefit of the Issuer or the Holder, and to
perform its duties under the Act and this Agreement;
<PAGE>
(ii) bring suit upon the Note;
(iii) by action or suit in equity to enjoin
any acts or things which may be unlawful or in violation of
the rights of the Issuer or the Holder; or
(iv) take whatever action at law or in equity
as may appear necessary or desirable to collect the payments
and other amounts then due and thereafter to become due, or
to exercise any rights or remedies under, or enforce
performance and observance of any obligation, agreement or
covenant of the Borrower or any other party under this
Agreement or under any of the other Documents.
(c) Books and Records. Except for documents related to the
legal services provided by the Borrower, which are subject to the
attorney-client confidentiality privilege, have access to and inspect,
examine and make copies of the books and records and any and all
accounts and similar data of the Borrower.
(d) Liquidation of Security Interest in Security. Proceed
under the Maryland Uniform Commercial Code as to all or any part of the
security for the Bond and the Security, and in conjunction therewith
exercise all of the rights, remedies and powers of a secured party under
the Maryland Uniform Commercial Code, including, without limitation,
taking possession of the security for the Bond and the Security pursuant
to Section 9-503 of the Maryland Uniform Commercial Code without
resort to judicial process. Upon the occurrence of any Event of Default
hereunder, the Borrower shall assemble all of the security for the Bond
and the Security, and make the same available within the Building. Any
notification required by Section 9-504 of the Maryland Uniform
Commercial Code shall be deemed reasonably and properly given if given
in the manner specified for other Notices under this Agreement, at least
15 days before any sale or other disposition of the security for the Bond
or the Security. Disposition of the security for the Bond or the Security
shall be deemed commercially reasonable if made pursuant to a public
offering advertised at least twice in a newspaper of general circulation in
the community where the security for the Bond or the Security is located.
(e) Other Actions.
(i) establish and maintain at the Lender, subject to
the Lender's customary arrangements and charges therefor as established
by the Lender from time to time, a repayment account, which shall be
under the exclusive control of and subject to the sole order of the
Lender, and require the Borrower to deposit in the repayment account,
not later than the first Business Day following the day on which the same
are received by the Borrower, as a tender of payment of the Borrower's
Obligations, all cash, checks, drafts, money orders and other items of
payment constituting, or collections or other proceeds of the Security.
<PAGE>
(ii) notify postal authorities to change the address
for delivery of mail addressed to the Borrower to such address as the
Lender may designate and receive, open and dispose of all mail addressed
to the Borrower.
(iii) indorse the Borrower's name on any promissory
notes or other instruments, acceptances, checks, drafts, money orders or
other items of payment constituting the Security, or collections or other
proceeds of the Security, that may come into the Lender's possession or
control from time to time;
(iv) sign the Borrower's name on any invoices to,
drafts against and other notices and documents to account debtors or
other obligors of the Borrower and requests for verification of accounts
and other amounts which may be due to the Borrower;
(v) with respect to any accounts, notes, instruments,
chattel paper, tax refunds, contract rights, general intangibles or other
debts or liabilities payable to the Borrower securing the Borrower's
Obligations, notify any Account debtors and other obligors thereon to
make payments thereon directly to the Lender, take control of the cash
and noncash proceeds thereof, demand, collect, sue for and receive any
money or property at any time due, payable or receivable on account
thereof, compromise and settle with any person liable thereon, and extend
the time of payment or otherwise change the terms thereof, without
incurring liability or responsibility therefor to the Borrower.
(vi) sue in its own name to enforce the Intellectual
Property, and any licenses thereunder, and if the Lender shall commence
any such suit, the Borrower shall, at the request of the Lender, do any
and all lawful acts and execute any and all proper documents required by
the Lender in aid of such enforcement and the Borrower shall promptly,
upon demand, reimburse and indemnify the Lender in the exercise of its
rights hereunder; and
(vii) endorse the Borrower's name on all applications,
documents, papers and instruments deemed necessary or desirable by the
Lender in the use of the Intellectual Property; take any other actions with
respect to the Intellectual Property as the Lender deems in the best
interest of the Lender; grant or issue exclusive or non-exclusive licenses
under the Intellectual Property to any person; and assign, pledge, convey
or otherwise transfer title in or dispose of the Intellectual Property to
any person.
(f) Holder to Enforce Rights of Issuer. The Lender, its
successors and assigns (including, without limitation, any other Holder),
as the assignee of all of the right, title and interest of the Issuer in and
to each of the Documents constituting a part of the security for the Bond
and the Note (except for the Reserved Rights of the Issuer), may enforce
each and every right granted to the Issuer pursuant to this Agreement and
the other Documents (other than the Reserved Rights of the Issuer);
provided, however, that, as provided in Section 2.8 hereof or in the
Authority Insurance Agreement, the Holder will not exercise any
remedies under the Documents without the prior written approval of the
Authority. In any case where action by the Holder requires simultaneous
or subsequent action by the Issuer, the Issuer will cooperate with the
Holder and take any and all action necessary to effectuate the purposes
and intent of this Agreement.
<PAGE>
(g) CONFESSION OF JUDGMENT. IN THE EVENT THE
NOTE OR ANY INSTALLMENT DUE THEREUNDER OR ANY AMOUNT
DUE HEREUNDER IS NOT PAID WITHIN 15 DAYS OF THE DATE
WHEN DUE (WHETHER ON THE DATE DUE OR BY ACCELERATION),
THE BORROWER AUTHORIZES THE CLERK OR ANY ATTORNEY OF
ANY COURT OF RECORD TO APPEAR FOR IT AND ENTER
JUDGMENT BY CONFESSION WITHOUT PRIOR NOTICE OR
OPPORTUNITY FOR PRIOR HEARING FOR THE PRINCIPAL
BALANCE THEN OUTSTANDING UNDER THE NOTE AND SUMS DUE
UNDER THIS FINANCING AGREEMENT, TOGETHER WITH
INTEREST, COURT COSTS AND AN ATTORNEY'S FEE EQUAL TO
15% OF THE SUMS THEN DUE THEREUNDER AND HEREUNDER,
HEREBY WAIVING AND RELEASING, TO THE EXTENT PERMITTED
BY LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL,
STAY OF EXECUTION, INQUISITION AND EXTENSION UPON ANY
LEVY ON REAL ESTATE OR PERSONAL PROPERTY TO WHICH THE
BORROWER MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF
THE UNITED STATES OF AMERICA OR OF ANY STATE OR
POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE
OR WHICH MAY HEREAFTER BE PASSED. THE AUTHORITY AND
POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE
BORROWER SHALL NOT BE EXHAUSTED BY ONE OR MORE
EXERCISES THEREOF, OR BY ANY IMPERFECT EXERCISE
THEREOF, AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT
ENTERED PURSUANT THERETO. SUCH AUTHORITY AND POWER
MAY BE EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME
TO TIME, IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN
AS THE HOLDER SHALL DEEM NECESSARY OR DESIRABLE, FOR
ALL OF WHICH THE NOTE SHALL BE A SUFFICIENT WARRANT.
Notwithstanding the provisions of the immediately preceding
paragraph, in enforcing any judgment by confession obtained against the
Borrower in connection with the Loan or in exercising any other remedies
available to the Holder, the Holder shall not demand, solely with respect
to attorney's fees incurred by the Holder in connection with the Loan,
any amounts in excess of the actual amount of attorney's fees charged or
billed to the Holder.
SECTION 10.3. No Remedy Exclusive; Delays or Omissions;
Waiver of Breach. No action taken pursuant to this Article X shall
relieve the Borrower or any other person from its obligations hereunder
or under any of the other Documents, all of which shall survive any such
action, and the Issuer and the Holder (to the extent provided above) may
take whatever action at law or in equity as may appear necessary and
desirable to collect the payments and other amounts then due and
thereafter to become due or to enforce the performance and observance of
any obligation, agreement or covenant of the Borrower hereunder or of
any other person under any of the Documents.
<PAGE>
No remedy herein conferred upon or reserved to the Issuer or the
Holder 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 under
the other Documents or now or hereafter existing at law or in equity or
by statute. Should any right or remedy granted herein be held to be
unlawful, the Issuer or the Holder shall be entitled to every other right
and remedy provided in this Agreement and by law or in equity. No
delay or omission to exercise any right or power accruing upon any
default, omission or failure of performance hereunder or under the
Documents shall impair any such right or power or be construed to be a
waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In the event any
agreement contained in this Agreement should be breached by the
Borrower and is thereafter waived by the Issuer or the Holder, the
Authority or any other party to this transaction, such waiver shall be
limited to the particular breach so waived and shall not be deemed to
waive any other breach. No waiver, amendment, release or modification
of this Agreement shall be established by conduct, custom or course of
dealing, but solely by an instrument in writing duly executed by the
Issuer or the Holder and such other party or parties as may be agreeing to
such waiver, amendment, release or modification. In order to entitle the
Issuer or the Holder 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 herein expressly required.
SECTION 10.4. Termination of Proceedings. In case any pro-
ceeding taken by the Holder or the Issuer on account of any default shall
have been discontinued or abandoned for any reason, or shall have been
determined adversely to the Holder or the Issuer, then and in every such
case, the Issuer, the Holder and the Borrower and all other parties to this
transaction shall be restored to their former positions and rights
hereunder, respectively, and all rights, remedies and powers of the
Holder and the Issuer and the other parties to this transaction shall
continue as though no such proceeding had been taken.
SECTION 10.5. Application of Moneys. All moneys collected
pursuant to this Article shall, after payment of the cost and expenses of
the proceedings resulting in the collection of such moneys and of the
expenses, liabilities and advances incurred or made by the Issuer and the
Holder and the Authority or others, including interest thereon as
provided in Section 12.3 hereof, be applied as follows:
First - To the payment of any late charges or penalties and
fees and expenses of the Holder;
Second - To the payment of all payments of interest then due
on the Bond and the Note;
<PAGE>
Third - To the payment of the unpaid principal balance of the
Bond and the Note;
Fourth - To the payment of all other of the Issuer's
Obligations, in such order and in such amounts as the Holder (with the
prior written approval of the Authority), in its sole discretion, may
determine;
Fifth - To the payment of all other of the Borrower's
Obligations (including, without limitation, any obligations in connection
with any Reimbursement Rights pursuant to Section 12.4 hereof or any
other provision of any of the Documents), in such order and in such
amounts as the Holder (with the prior written approval of the Authority),
in its sole discretion, may determine; and
Sixth - Any remaining amounts may be returned to the
Borrower.
ARTICLE XI
DURATION OF AGREEMENT; DEFEASANCE
SECTION 11.1. Duration of this Agreement. This Agreement shall
become effective on the Closing Date, and shall continue in full force
and effect until the Termination Date; provided that the expiration of this
Agreement shall not affect any Surviving Rights of the Holder or the
Issuer.
SECTION 11.2. Defeasance and Discharge of Lien of the Holder. If
and when the Bond secured hereby shall become due and payable or shall
be redeemed in accordance with its terms and the whole amount of the
principal, premium (if any) and interest so due and payable thereon and
on the Borrower's Obligations shall be paid, together with all other
amounts payable to the Holder hereunder and under the other Documents,
then in that case, all covenants, agreements and other obligations in
favor of the Holder under this Agreement and under the other Documents
(except with respect to any Surviving Rights of the Holder) shall
thereupon cease, terminate and become void and be discharged and
satisfied. In such event, upon request of the Issuer and the Borrower, the
Holder shall release all security for the Bond and all other Security then
held by the Holder under this Agreement and shall execute such releases
and other documents as may be reasonably required by the Issuer. Any
release by the Holder under this Section shall be without prejudice to the
right of the Holder to any Surviving Rights of the Holder.
ARTICLE XII
ADDITIONAL PAYMENTS
<PAGE>
SECTION 12.l. Costs to be Paid by the Borrower; Issuer's Fee.
(a) The Borrower agrees to pay, whether out of the proceeds of the Loan
or other funds, all Acquisition Costs, including, without limitation, all
costs and expenses of the Issuer, the Holder and the Authority (including
the fees and expenses of their counsel and all costs of recording and
filing (fees and taxes)) in connection with the issuance of the Bond, and
the other transactions contemplated by this Agreement and the other
Documents).
(b) The Borrower agrees to pay directly to the Issuer the
Issuer's Fee. The Issuer's Fee is due and payable annually in advance on
the Closing Date and each anniversary thereof and shall be calculated
using the principal balance of the Bond outstanding on the date due. No
portion of the Issuer's Fee shall be refunded if the Bond is redeemed in
whole or in part or otherwise paid in the year for which the Issuer's Fee
has been paid. The Issuer's Fee shall be due and payable from the
Borrower without the necessity of any notice from the Issuer.
SECTION 12.2. Reimbursement of Advances Made or Other Costs
Incurred. If the Borrower fails to make any payment or to perform any
other of the Borrower's Obligations, the Holder, the Authority (subject to
the Authority Insurance Agreement) or the Issuer, without notice to or
demand upon the Borrower, without waiving any default or releasing the
Borrower from any of the Borrower's Obligations, and without being
under any obligation to do so, may make such payment or perform any of
the Borrower's Obligations. All amounts so paid by the Holder, the
Authority or the Issuer, and all costs, fees and expenses incurred by the
Holder, the Authority or the Issuer, whether in connection with such
payment or performance or otherwise in connection with their respective
duties and responsibilities under this Agreement and the other
Documents, shall be immediately due and payable by the Borrower upon
demand therefor, as additional payments hereunder, together with interest
thereon as provided in Section 12.3 below. In addition, notwithstanding
anything in this Agreement to the contrary, in the event that the
Borrower should default under any of the provisions of this Agreement,
and the Holder, or the Issuer should employ attorneys or incur other
expenses for the collection of amounts due hereunder or the enforcement
of performance or observance of any obligation or agreement on the part
of the Borrower herein contained, the Borrower agrees that it will on
demand therefor pay to the Holder, the Authority or the Issuer the fees of
such attorneys and such other expenses so incurred.
SECTION 12.3 Interest on Additional Payments and Reimburse-
ments. Without limiting any other provisions for the payment of interest,
additional interest, late charges, premiums or like charges under any of
the Documents, in any instance in which any sum other than principal,
premium (if any), and interest is due from the Borrower to the Holder,
the Issuer or any other party to this transaction as a direct payment,
reimbursement or otherwise, and no specific provision is made with
respect to the payment of interest thereon or the rate of interest thereon
is not otherwise specified, such sum shall bear interest from the date on
which it becomes due until paid in full at the Reimbursement Rate.
<PAGE>
SECTION 12.4 Indemnification.
(a) General Indemnification. The Borrower shall protect,
indemnify, and save harmless the Holder, the Authority, the Issuer and
their respective Agents against and from any and all Claims (except, with
respect to any Claims arising solely from the Gross Negligence of any
party other than the Issuer) incurred by, or asserted or imposed against,
any of them, and any loss or expense (including all attorneys' fees) in
connection therewith, by reason of: (i) any accident, injury (including
death) or Damage to any person or property, however caused, resulting
from, connected with or growing out of any act of commission or
omission of the Borrower, or any Agents, assignees, contractors or
subcontractors of the Borrower or any use, nonuse, possession,
occupation, condition, operation, service, design, construction,
acquisition, maintenance or management of, or on, or in connection with,
the Property, or any part thereof, (ii) any breach or default on the part of
the Borrower in the performance of any of its obligations under any of
the Documents, (iii) any act or negligence of the Borrower or of any of
its Agents or licensees, (iv) any act or negligence of any assignee or
lessee of the Borrower, or (v) the financing of the Facility by the Lender
and the issuance and sale of the Bond, until the Termination Date,
regardless of whether such Claims are against or are suffered or
sustained by the Holder, the Issuer or any of their respective Agents, or
are against any person to whom the Holder, the Authority, the
Department, the Issuer or any of their respective Agents may become
liable therefor. Neither the Holder, the Authority, the Department nor
the Issuer is liable for any Damage or injury occurring during the Loan
Term to persons or property of the Borrower or any of its Agents or any
other person who or which may be upon the Land, in the Building or in
the Existing Building, and the Borrower hereby releases the Holder, the
Authority, the Department and the Issuer from, and agrees that they shall
not be liable for, and the Borrower shall hold them harmless from, any
such liability. The Borrower may, and if so requested by the Holder, the
Authority, the Department or the Issuer shall, undertake to defend, at its
sole cost and expense, any and all Claims brought against the Holder, the
Authority, the Department, the Issuer or any of their respective Agents in
connection with any of the matters mentioned in this Section, provided
that the Holder, the Authority, the Department and the Issuer shall give
the Borrower timely Notice of and forward to the Borrower every
demand, notice, summons or other process received with respect to any
Claim within the purview hereof. However, failure of the Issuer to
forward such Notice shall not release the Borrower from its obligations
under this Section 12.4(a).
(b) Liability of Issuer, etc. The parties intend that neither
the Issuer nor any officer or employee of the Issuer, the Department or
the State or the Authority (except in regard to the Authority Insurance
Agreement) shall incur pecuniary liability by reason of the terms of any
of the Documents, or the undertakings required of the Issuer or any
officer or employee of the Issuer, the Authority, the Department or the
<PAGE>
State under any of the Documents by reason of the issuance of the Bond
or the execution and delivery of any of the Documents, or the
performance of any act required of the Issuer or any officer or employee
of the Issuer, the Authority, the Department or the State by any of the
Documents, or the performance of any act requested of the Issuer by the
Borrower, including all claims, liabilities or losses arising in connection
with the violation of any statutes or regulations pertaining to the
foregoing. Notwithstanding the foregoing, if the Issuer or any officer or
employee of the Issuer, the Department, the Authority or the State should
incur any such pecuniary liability, the Borrower shall indemnify and hold
the Issuer and any officer or employee of the Issuer, the Department, the
Authority or the State harmless against all claims by or on behalf of any
person, firm or corporation or other legal entity arising out of the same,
and all costs and expenses incurred in connection with any such claim or
in connection with any action or proceeding brought thereon, and, upon
Notice from the Issuer, the Borrower shall defend the Issuer or any
officer or employee of the Issuer, the Authority, the Department or the
State in any action or proceeding alleging any pecuniary liability.
(c) Consequential Liability. In addition to any other
amounts payable under any of the Documents by way of indemnification
or otherwise, the Borrower hereby agrees to pay and to indemnify and
save the Issuer harmless from and against any damage, loss, cost or
expense (including reasonable attorneys' fees) which the Issuer may incur
or be subject to as a consequence, direct or indirect, of (A) any breach by
the Borrower of any warranty, covenant, term or condition in, or the
occurrence of any default under, any of the Documents, together with all
expenses resulting from the compromise or defense of any claims or
liabilities arising as a result of any such breach or default and (B) any
defense against any legal action commenced to challenge the validity of
any of the Documents.
(d) Approvals of Facility. Neither the approval by the
Lender of the Equipment, nor any subsequent inspections or approvals of
the Facility shall constitute a warranty or representation by the Lender or
the Issuer or the Authority or any of their respective Agents as to the
technical sufficiency, adequacy or safety of any structure or any of its
component parts. Furthermore, the Issuer's approval of the proposed
financing and its execution and delivery of the Bond and the other
Documents shall not constitute any approval by the Issuer of any zoning,
use, planning, building permit or other similar approvals relating to the
Facility. All acts, including any failure to act, relating to the Property
by any agent, representative or designee of the Issuer or any Holder are
performed solely for the benefit of the Holder, the Issuer and to assure
repayment of the Loan and are not for the benefit of the Borrower or the
benefit of any other person other than the Authority pursuant to the
Authority Insurance Agreement.
(e) Insurance. The Borrower will provide for and insure, in
the general public liability insurance policies required by Article VIII or
Section 5.2(c) hereof, the liability assumed by this Section.
<PAGE>
(f) Indemnification of Lender For Loss Incurred Upon
Sale of Bond. In addition to the losses described above, the Borrower
agrees to indemnify the Lender for any loss incurred by the Lender in the
event that the Bond is transferred by the Lender to another Holder after
the occurrence of an Event of Default hereunder, if the purchase price
paid upon such transfer is less than the sum of the outstanding principal
balance thereof, all accrued and unpaid interest thereon, and any and all
other amounts then owed to the Lender under any of the Documents.
SECTION 12.5. Surviving Rights. All of the respective
Reimbursement Rights of the Holder and the Issuer set forth in the
foregoing Sections of this Article XII shall survive the termination of
this Agreement.
SECTION 12.6. Payments Due on Non-Business Days. In any case
where a payment is due under this Agreement on a day other than a
Business Day, then such payment need not be made on such date but may
be made on the next succeeding Business Day, with the same force and
effect as if made on the date due.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.l. Unconditional Obligations of Borrower. The
payment and performance by the Borrower of the Borrower's Obligations
shall be absolute and unconditional, irrespective of any defense or any
rights of set-off, recoupment or counterclaim it might otherwise have
against the Holder, the Issuer, or any other parties to this transaction,
and the Borrower shall pay absolutely net during the Loan Term all
payments to be made as prescribed in the Note, in this Agreement, and in
each of the other Documents, free of any deductions and without
abatement, diminution or set-off, notwithstanding any term of this
Agreement, any bankruptcy, insolvency, liquidation, dissolution, or non-
existence of the Issuer, or the nonperformance by the Holder, or the
Issuer of any obligation hereunder or under any of the other Documents
or any other matter or event whatsoever (other than prior payment or
performance thereof) which might otherwise relieve the Borrower from
the obligation to pay such amount; and until such time as the principal
of, premium, if any, and interest on the Loan shall have been fully paid,
the Borrower: (a) will not suspend or discontinue any payments provided
for in the Note; (b) will perform and observe all of its other agreements
contained in this Agreement and each of the other Documents, including
(without limitation) all payments required to be made to the Holder and
the Issuer; and (c) will not terminate this Agreement for any cause,
including, without limiting the generality of the foregoing, failure of the
Borrower to complete the acquisition of the Facility, sale or other
transfer of the Facility, Damage to the Facility or any portion thereof,
commercial frustration of purpose, the occurrence of any acts or
circumstances which may constitute a failure of consideration, any
change in the tax laws of the United States of America or of the State or
any political subdivision thereof, or any failure of the Holder or the
Issuer to perform and observe any agreement, whether express or implied,
or any duty, liability or obligation arising out of or in connection with
this Agreement.
<PAGE>
SECTION 13.2. Authorized Representatives. Whenever under the
provisions of this Agreement or any of the other Documents the approval
of the Issuer is required, or the Issuer is required to take some action at
the request of any party to this Agreement, unless specifically provided
otherwise, such approval or request shall be given on behalf of the Issuer
by the Authorized Issuer Representative, and the other parties to this
transaction are authorized to rely upon any such approval or request and
the Issuer shall not have any complaint against such other parties as a
result of such reliance. A specimen signature of the Authorized Issuer
Representative has been provided to the other parties to this transaction.
In the event that the Authorized Issuer Representative designated in
Section l.l hereof shall become unavailable or unable to take any action
or make any certification provided for or required under this Agreement,
a successor or successors shall be appointed by written certificate of the
Issuer furnished to the other parties to this transaction, executed by or on
behalf of the Issuer and containing a specimen signature of such
successor or successors.
Whenever under the provisions of this Agreement or any of the
other Documents the approval of the Borrower is required, or the
Borrower is required to take some action at the request of any party to
this Agreement, such approval or request shall be given on behalf of the
Borrower by the Authorized Borrower Representative, and the other
parties to this transaction are authorized to rely upon any such approval
or request, and the Borrower shall not have any complaint against such
parties as a result of any such reliance. A specimen signature of the
Authorized Borrower Representative has been provided to the other
parties to this transaction. In the event that the Authorized Borrower
Representative designated in Section l.l hereof should become
unavailable or unable to take any action or make any certification
provided for or required under this Agreement, a successor or successors
shall be appointed by written certificate of the Borrower furnished to the
other parties to this transaction, executed on behalf of the Borrower by
an authorized Agent of the Borrower and containing a specimen signature
of such successor or successors.
SECTION 13.3. Consent to Jurisdiction; Service of Process.
(a) The Borrower hereby agrees and consents that any
action or proceeding arising out of or brought to enforce the provisions
of this Agreement may be brought in any appropriate court in the State or
in any other court having jurisdiction over the subject matter, all at the
sole election of the Holder, and by the execution of this Agreement the
Borrower irrevocably consents to the jurisdiction of each such court.
<PAGE>
(b) If for any reason the Borrower should become not
qualified to do business in the State, the Borrower hereby agrees to
designate and appoint, without power of revocation, an agent for service
of process within the State, as the agent for the Borrower upon whom
may be served all process, pleadings, notice or other papers which may
be served upon the Borrower as a result of any of the Borrower's
Obligations.
(c) The Borrower covenants that throughout the period during
which the Bond remains outstanding, if a new agent for service of
process within the State is designated, the Borrower will immediately
file with the Holder, the Authority and the Issuer the name and address
of such new agent and the date on which his appointment is to become
effective.
SECTION 13.4. Further Assurances and Corrective Instruments.
The parties hereto agree that they will, from time to time, execute and
deliver, or cause to be executed and delivered, such Supplements hereto
and such further instruments as may reasonably be required for carrying
out the intention of the parties to, or facilitating the performance of, this
Agreement.
SECTION 13.5. Estoppel Certificate. The Borrower will, upon not
less than 10 business days' request by the Holder, the Issuer, or any other
party to this transaction, execute, acknowledge and deliver to such
person a statement in writing, certifying (a) that this Agreement is
unmodified and in full force and effect and the payments required by this
Agreement to be paid by the Borrower have been paid, and (b) the then
unpaid principal balance of the Note and the Loan; and stating whether or
not to the knowledge of the signer of such certificate any party to any of
the Documents is in default in the performance of any covenant, agree-
ment or condition contained therein and, if so, specifying each such
default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section may be relied upon
by the Holder, the Issuer and the other parties to this transaction.
SECTION 13.6. Prior Agreements Canceled. Except for (a) the
other Documents, (b) any conditions to disbursements of Bond proceeds
set forth in the Lender's Commitment Letter to the Borrower dated March
6, 1996, and in the Authority's Commitment Letter to the Borrower dated
February 15, 1996, as amended May 29, 1996 or (c) any other document
or agreement to the extent specifically provided therein, (i) this
Agreement shall completely and fully supersede all other prior
agreements, both written and oral, by and among the Borrower, the
Lender, the Issuer and the other parties to this transaction (and any prior
agreements by and between any two or more of the foregoing), relating to
the acquisition of the Facility, and (ii) none of the parties to this
Agreement shall hereafter have any rights thereunder, but shall look
solely to this Agreement and the other Documents for definitions and
determination of all of their respective rights, liabilities and
responsibilities relating to the Facility and the financing therefor.
<PAGE>
SECTION 13.7. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon each of the parties hereto and their
respective successors and permitted assigns.
SECTION 13.8. Dissolution of Issuer. In the event of the
dissolution of the Issuer, all of the covenants, stipulations, promises and
agreements in this Agreement contained by or on behalf of, or for the
benefit of, the Issuer, shall bind or inure to the benefit of the successors
of the Issuer from time to time and any person to whom or to which any
power or duty of the Issuer shall be transferred.
SECTION 13.9. Disclosure of Information. The Borrower consents
and agrees that the Lender and the Authority may issue press releases
concerning, and otherwise publicly announce or publicize, financings
provided by the Lender and the Authority to the Borrower. The Borrower
hereby authorizes the Lender and the Authority to disclose to any
subsidiary or affiliate of the Lender, to any fiduciary institution (as
"fiduciary institution" is defined in Subtitle 3 of Title 1 of the Financial
Institutions Article of the Annotated Code of Maryland, or any successor
legislation) or to any banking institution, credit union or savings and
loan association organized under the laws of any State, and hereby
authorizes all subsidiaries and affiliates of the Lender, all fiduciary
institutions (as defined as above provided) and all banking institutions,
credit unions and savings and loan associations organized under the laws
of any State to disclose to the Lender, the financial record of the
Borrower (as "financial record" is defined in Subtitle 3 of Title 1 of the
Financial Institutions Article of the Annotated Code of Maryland, or any
successor legislation). Subject to the foregoing, the Lender and the
Authority agree to hold all non-public information obtained pursuant to
this Agreement and the Other Agreements in accordance with their
respective customary procedures for handling confidential information.
SECTION 13.10. Illegality. If fulfillment of any provision hereof
or any transaction related hereto or to the other Documents, at the time
performance of such provisions shall be due, shall involve transcending
the limit of validity prescribed by law, then ipso facto, the obligation to
be fulfilled shall be reduced to the limit of such validity; and if any
clause or provisions herein contained operates or would prospectively
operate to invalidate this Agreement in whole or in part, then such clause
or provision only shall be void, as though not herein contained, and the
remainder of this Agreement shall remain operative and in full force and
effect; provided, however, that, as provided in Section 10.1(o) hereof, if
any such provision pertains to the repayment of the principal of or
interest on the Loan, the occurrence of any such invalidity shall
constitute an Event of Default hereunder.
<PAGE>
SECTION 13.11. Amendments, Changes and Modifications. This
Agreement may not be amended, changed, modified, altered or terminated
except by a written instrument executed by all of the parties hereto with
the prior written consent of the Authority.
SECTION 13.12. Execution of Counterparts. This Agreement may
be executed simultaneously in several counterparts, each of which shall
be deemed an original, but all of which shall together constitute one and
the same instrument.
SECTION 13.13. Law Governing Construction of Agreement. This
Agreement, having been executed, sealed and delivered in the State, shall
be interpreted and construed in accordance with and governed by the laws
of the State.
SECTION 13.14. Assignment. This Agreement and the other
Documents may not be assigned, in whole or in part, by the Borrower,
without the prior written consent of the Holder and the Issuer.
<PAGE>
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the Issuer has caused this Agreement to
be executed under seal in its name and on its behalf by the Executive
Director of the Issuer, and the Lender has caused this Agreement to be
executed under seal in its name and on its behalf by its duly authorized
officer; the Borrower has caused this Agreement to be executed under
seal in its name and on its behalf by its duly authorized officer, all being
done as of the day and year above first written.
WITNESS: MARYLAND ECONOMIC DEVELOPMENT CORPORATION
/s/John R. Devine
/s/Marjorie A. McGinnis
/s/Kevin G. Gralley
By:___________________________
/s/ Hans F. Mayer,
Executive Director
[SEAL]
ATTEST: FREDERICK BREWING CO., a Maryland corporation
By:______________________
By:_____________________(SEAL)
/s/Kevin Brannon,
Chief Executive Officer
[SEAL]
WITNESS: SIGNET BANK
_______________________
By:_____________________(SEAL)
/s/Mark A. Cunningham,
Vice President
[SEAL]
<PAGE>
EXHIBIT A
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY)
1996 ISSUE
FORM OF REQUISITION
TO: Signet Bank Requisition Number: ______
7 Saint Paul Street Date: ______________, 19__
Baltimore, Maryland 21202
Attention: ______________
This Requisition is being submitted pursuant to the Loan and
Financing Agreement dated ________ __, 1996, executed and delivered in
connection with the issuance and sale of the above-captioned Taxable
Economic Development Revenue Bond (the "Financing Agreement").
Unless the context clearly indicates a contrary meaning, all terms used
herein and defined in the Financing Agreement have the meanings set
forth in the Financing Agreement.
We request that you advance Bond proceeds to the following payee
in the following amount:
Payee: ____________________________________
Payee's Address: __________________________
__________________________
__________________________
Amount: ____________________________________
Purpose of Requisition: _____________________
____________________________________
____________________________________
____________________________________
We hereby certify that:
(a) None of the items for which funds are being
requisitioned has formed the basis for any advance of Bond proceeds
heretofore made.
(b) Each item for which funds are being requisitioned is a
proper item to be paid from the Bond proceeds and is necessary in
connection with the acquisition of the Facility.
(c) No written notice of any lien, right to lien or attachment
upon, or claim affecting the right to receive payment of, any of the
moneys payable under this requisition to any of the persons named herein
has been received, or if any notice of any such lien, attachment or claim
has been received, such lien, attachment or claim has been released or
discharged or will be released or discharged upon payment of this
requisition.
<PAGE>
(d) With respect to each item for payment for labor or
Equipment, the labor was actually performed or the Equipment was
actually furnished to or installed in or about the Building or the Existing
Building.
(e) Such Equipment is not subject to any lien or security
interest, other than the security interest in favor of the Issuer and the
Lender and Permitted Liens, or the funds requisitioned are to be used to
satisfy any such lien or security interest.
(f) This requisition does not in amount exceed 100% of the
value of work performed and materials in place for which funds are being
requested.
(g) The remaining unadvanced Bond proceeds are sufficient
to complete the acquisition of the Facility or acquisition of the Facility
has been so completed.
(h) This requisition is not for materials which are not, as of
the date hereof, physically incorporated into the Building or the Existing
Building, unless such materials have been stored, secured and insured in
a manner satisfactory to the Lender and otherwise in accordance with the
terms of the Financing Agreement.
(i) No Event of Default has occurred and is continuing as
of the date hereof.
Attached hereto are invoices and receipts for costs for which
payment or reimbursement is being requested.
FREDERICK BREWING CO.
By:__________________________
Authorized Borrower
Representative
Total prior requisitions $ __________________
Amount of this requisition $ __________________
Total $ __________________
Approved:
SIGNET BANK, Lender
By:_________________________
Date:_______________________
<PAGE>
EXHIBIT B
LIST OF EQUIPMENT TO
BE PURCHASED WITH BOND PROCEEDS
<PAGE>
EXHIBIT C
LIST OF COPYRIGHTS, PATENTS AND TRADEMARKS
<PAGE>
EXHIBIT D
$1,500,000
Maryland Economic Development Corporation
Taxable Economic Development Revenue Bond
Frederick Brewing Co.,
as borrower
and
Signet Bank,
as lender
Summary of Sources and Uses of Loan Proceeds
Sources of Funds:
MEDCO Bond Proceeds $1,500,000
SBA Loan / Signet Bridge Loan 969,000
Equity Provided by Frederick Brewing Co. 858,538
Total Sources of Funds $3,327,538
Uses of Funds
Closing Costs Per Settlement Sheet 39,038
Equipment Acquisition Costs 3,288,500
Total Uses of Funds $3,327,538
EXHIBIT 10 (vii)
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY),
1996 ISSUE
PROMISSORY NOTE
$1,500,000 July 19, 1996
Baltimore, Maryland
FOR VALUE RECEIVED, FREDERICK BREWING CO., a Maryland
corporation (the "Borrower"), hereby promises to pay to the order of
MARYLAND ECONOMIC DEVELOPMENT CORPORATION, a body
politic and corporate and a public instrumentality of the State of
Maryland (the "Issuer"), at such place as the Issuer (or any other holder
hereof) may from time to time designate in writing, the principal amount
of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000),
together with interest thereon as hereinafter provided. This Note
evidences the loan being made by the Issuer to the Borrower pursuant to
the Loan and Financing Agreement of even date herewith (the "Financing
Agreement") by and among the Issuer, the Borrower and Signet Bank, a
Virginia banking corporation (the "Lender"). All terms used herein which
are defined in the Financing Agreement have the meanings given such
terms in the Financing Agreement, unless the context clearly indicates a
contrary meaning.
The principal amount hereof (but only to the extent that moneys
have been advanced to the Borrower or for the Borrower's account from
Bond proceeds, as hereinafter provided, and not repaid) shall bear
interest from the date hereof until this Note is paid in full at the
Applicable Rate borne by the Bond, computed as set forth in the Bond.
The proceeds of the Bond are to be advanced by the Lender to the
Borrower or for the Borrower's account, as needed to pay for the
Acquisition Costs; accordingly, this Note shall bear interest only to the
extent that Bond proceeds have actually been advanced to the Borrower
or for the account of the Borrower by the Lender in accordance with the
Financing Agreement.
All payments of principal of and interest on this Note shall be
payable in lawful money of the United States which is legal tender for
the payment of all debts and dues, public and private, at the time of
payment, in accordance with the provisions of the Financing Agreement.
On any date on which any payment of the principal of or interest on
the Bond (at the Applicable Rate) is due and payable, the Borrower shall
pay directly to the Holder an amount sufficient to pay the principal of or
interest on the Bond (or both) on such date.
<PAGE>
The Bond is subject to redemption as provided in the Financing
Agreement. Upon any redemption of the Bond, the Borrower, on a date
no later than the date fixed for redemption, shall pay to the Holder and to
the Issuer the amounts provided for in Section 2.2 of the Financing
Agreement.
In any event, the Borrower shall make payments on this Note in
amounts sufficient to pay, on the date payable, all amounts which become
due and payable on the Bond from time to time.
In the event any payment hereon is not paid within 15 days from the
date on which the same is due and payable, such payment shall continue
as an obligation of the Borrower, with interest thereon, until paid in full,
at the Reimbursement Rate. In addition, the Borrower shall pay (i) a late
charge in an amount equal to 5% of the amount of any payment of
interest or principal hereunder which is made more than 15 days after the
date on which the same is due and payable, and (ii) all costs of collec-
tion, including attorneys' fees equal to 15% of the sums then due
hereunder, if this Note is referred to an attorney for collection after
default.
All payments hereunder, including all payments for the redemption
of the Bond, shall be applied in accordance with the provisions of the
Financing Agreement, and shall be applied first to late charges or
penalties and the fees and expenses of the Holder and then to accrued and
unpaid interest and the remainder to principal.
Notwithstanding anything herein to the contrary, the Borrower shall
have the right to prepay the outstanding principal balance of the Loan,
plus accrued and unpaid interest, in full or in part at any time.
The maturity of this Note may be accelerated under certain
circumstances as provided in the Financing Agreement.
The Loan and this Note are secured as provided in the Financing
Agreement.
Reference is hereby made to the provisions of the Financing
Agreement, which are incorporated herein by reference and made a part
hereof, and which Financing Agreement, together with this Note is being
assigned by the Issuer to the Lender as security for the Bond. Nothing
contained in this Note shall in any way impair the obligations of the
Borrower to make all payments required by the Financing Agreement.
The obligations of the Borrower under this Note shall be terminated
on the Termination Date, except as may be otherwise provided in the
Financing Agreement with respect to any Surviving Rights.
<PAGE>
IN THE EVENT THIS NOTE OR ANY INSTALLMENT DUE
HEREUNDER IS NOT PAID WITHIN 15 DAYS OF THE DATE WHEN
DUE (WHETHER ON THE DATE DUE OR BY ACCELERATION), THE
BORROWER AUTHORIZES THE CLERK OR ANY ATTORNEY OF ANY
COURT OF RECORD TO APPEAR FOR IT AND ENTER JUDGMENT BY
CONFESSION WITHOUT PRIOR NOTICE OR OPPORTUNITY FOR
PRIOR HEARING FOR THE PRINCIPAL BALANCE THEN
OUTSTANDING UNDER THIS NOTE, TOGETHER WITH INTEREST,
COURT COSTS AND AN ATTORNEY'S FEE EQUAL TO 15% OF THE
SUMS THEN DUE HEREUNDER, HEREBY WAIVING AND RELEASING,
TO THE EXTENT PERMITTED BY LAW, ALL ERRORS AND ALL
RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION,
INQUISITION AND EXTENSION UPON ANY LEVY ON REAL ESTATE
OR PERSONAL PROPERTY TO WHICH THE BORROWER MAY
OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED
STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF THE
UNITED STATES OF AMERICA NOW IN FORCE OR WHICH MAY
HEREAFTER BE PASSED. THE AUTHORITY AND POWER TO
APPEAR FOR AND ENTER JUDGMENT AGAINST THE BORROWER
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES
THEREOF, OR BY ANY IMPERFECT EXERCISE THEREOF, AND
SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED
PURSUANT THERETO. SUCH AUTHORITY AND POWER MAY BE
EXERCISED ON ONE OR MORE OCCASIONS, FROM TIME TO TIME,
IN THE SAME OR DIFFERENT JURISDICTIONS, AS OFTEN AS THE
HOLDER SHALL DEEM NECESSARY OR DESIRABLE, FOR ALL OF
WHICH THIS NOTE SHALL BE A SUFFICIENT WARRANT.
Notwithstanding the provisions of the immediately preceding
paragraph, in enforcing any judgment by confession obtained against the
Borrower in connection with the Loan, in foreclosing against the
Property or in exercising any other remedies available to the Holder, the
Holder shall not demand, solely with respect to attorney's fees incurred
by the Holder in connection with the Loan, any amounts in excess of the
actual amount of attorney's fees charged or billed to the Holder.
In case any provision (or any part of any provision) contained in
this Note shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision (or remaining part
of the affected provision) of this Note, but this Note shall be construed
as if such invalid, illegal or unenforceable provision (or any part thereof)
had never been contained herein, but only to the extent it is invalid,
illegal or unenforceable.
The Borrower and any and all guarantors and endorsers hereof
severally waive presentment, protest, demand for payment, notice of
protest, notice of demand and of dishonor and non-payment of this Note,
and expressly agree that this Note, or the due date of any payment
hereunder, may be extended from time to time without in any way
affecting the liability of the Borrower and any guarantors and endorsers
hereof.
This Note, having been made, executed, sealed and delivered in the
State, shall be governed and construed, interpreted and enforced in
accordance with the laws of the State, as the same are in effect from time
to time.
<PAGE>
In any case where any date of payment of principal of, premium (if
any), or interest on this Note shall be a day other than a Business Day,
then payment of such principal (and premium, if any) or interest need not
be made on such date but may be made on the next succeeding Business
Day, with the same force and effect as if made on the date of payment.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
duly executed and sealed as of the date first above written.
ATTEST: FREDERICK BREWING CO.
/s/Marjorie A. Mcginnis
____________________________
By:__________________________
/s/Kevin Brannon
Chief Executive Officer
(SEAL)
<PAGE>
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY),
1996 ISSUE
ASSIGNMENT OF NOTE
Unless the context clearly indicates otherwise, all terms used
herein which are defined in the Loan and Financing Agreement of even
date herewith referred to in the foregoing Note and executed and
delivered in connection with the above-captioned Taxable Economic
Development Revenue Bond (the "Financing Agreement") shall have the
meanings given such terms in the Financing Agreement.
As security for the Bond, the Issuer hereby assigns, transfers and
sets over, without recourse and without warranty, to the Lender, as
registered owner of the Bond, and to its successors and registered
assigns, all of the Issuer's right, title and interest in and to the foregoing
Note; PROVIDED, HOWEVER, that there shall be excluded from this
assignment all Reserved Rights of the Issuer.
WITNESS: MARYLAND ECONOMIC
DEVELOPMENT
CORPORATION
/s/John R. Devine
_________________________ By
___________________________
/s/Hans F. Mayer
Executive Director
EXHIBIT 10 (viii)
THIS BOND DOES NOT CONSTITUTE AN INDEBTEDNESS TO WHICH
THE FAITH AND CREDIT OF THE STATE OF MARYLAND, THE
MARYLAND DEPARTMENT OF BUSINESS AND ECONOMIC
DEVELOPMENT, THE ISSUER, MARYLAND INDUSTRIAL FINANCING
AUTHORITY OR ANY OTHER PUBLIC INSTRUMENTALITY OR
PUBLIC BODY IS PLEDGED.
Registered Registered
No. R-1
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY),
1996 ISSUE
JULY 19, 1996
FOR VALUE RECEIVED, MARYLAND ECONOMIC
DEVELOPMENT CORPORATION (the "Issuer"), a body corporate and
politic and a public instrumentality of the State of Maryland (the
"State"), hereby promises to pay (but only from the sources hereinafter
referred to), to SIGNET BANK, a Virginia banking corporation (the
"Lender" or "Holder"), or its registered assigns or legal representative
(the registered owner of this Bond hereinafter designated as the
"Holder"), the principal sum of ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000), and to pay interest from the date
hereof on the unpaid principal balance hereof, but only to the extent that
moneys are actually advanced pursuant to the Financing Agreement
(hereinafter defined), at the rate of interest equal to the LIBOR Rate (as
hereinafter defined), plus one and one-half percent (1.5%) per annum
until paid in full (or, if this Bond, or any portion hereof shall have been
duly called for early redemption and payment of the redemption price
shall have been made, until the date fixed for such early redemption).
All principal and interest due hereunder shall be payable at the times and
in the manner set forth herein.
For purposes of this Bond, the term "LIBOR Rate" shall mean an
interest rate per annum equal to the offered rate on Eurodollar deposits
which appears on the display designated "LIUSO1M" (for one month
deposits) of "Index HP" under the "YIELD" column for the date of
LIBOR determination in the "CLOSE/MID/YIELD TABLE" published by
Bloomberg L.P. (or such other Table as may replace the
"CLOSE/MID/YIELD TABLE" of that service for the purpose of
displaying London interbank offered rates for major banks or, if such
Table in not available at any such time, a comparable source, as
determined in the sole discretion of, and selected by, the Lender in good
<PAGE>
faith, of London interbank offered rates of major banks, as may be
available from a similar service). The LIBOR Rate shall be determined
by the Lender as of 10:00 a.m. (Baltimore time) on each applicable date
of determination. If more than one such rate is published by Bloomberg
L.P. or its replacement, the LIBOR Rate shall be the arithmetic mean of
such offered rates. If no such rate shall be published by Bloomberg L. P.
or its replacement, the LIBOR Rate shall be the rate (or, if applicable,
the arithmetic mean of the rates) published for the immediately preceding
banking day.
The interest rate applicable to this Bond on the date hereof shall be
the LIBOR Rate (determined as set forth above) on the date hereof, plus
one and one-half percent (1.5%). The LIBOR Rate shall be redetermined
on the same day of each month after the date hereof, and the interest rate
applicable to this Bond shall be adjusted as of such date.
This Bond is issued pursuant to (a) the Constitution and laws of the
State of Maryland, particularly Article 83A, Title 5, Subtitle 2 of the
Annotated Code of Maryland (1995 Replacement Volume), as amended,
(b) a Resolution adopted by the Issuer on March 18, 1996 (the
"Resolution") and (c) the terms and provisions of the Loan and Financing
Agreement of even date herewith (the "Financing Agreement") by and
among the Issuer, the Lender and the Borrower for the purpose of
financing, with the proceeds hereof, the costs of the acquisition and
installation by the Borrower of certain necessary or useful brewing and
fermentation equipment to consist of a bottle/filler capper and
manufactured bottle rinsing, labeling and paper packaging equipment (the
"Facility"), to be used by the Borrower in its business as a craft brewer
of beers and ales. This Bond is secured and entitled to the protection
given by the Financing Agreement.
The principal of and interest on this Bond are payable in lawful
money of the United States which is legal tender for the payment of all
debts and dues, public and private, at the time of payment, in the
following manner:
(a) Commencing on August 1, 1996, and continuing on the
first day of each and every month thereafter until this Bond is repaid in
full, interest shall be paid at the interest rate or rates provided herein;
(b) Commencing on the first day of August, 1997, and on the
first day of each and every month thereafter, continuing to and including
the first day of July, 2006, the principal amount hereof shall be paid by
108 consecutive monthly installments of principal in the amount of
$13,888.89 each; and
(c) This Bond shall mature, and the entire unpaid balance of
principal hereof and all accrued and unpaid interest hereon shall be due
and payable, on the 1st day of July, 2006 (if not paid earlier).
<PAGE>
All payments of principal (including any redemptions) and interest
hereon shall be made by check mailed to the Holder at the address
indicated on the registration books of the Bond Registrar (hereinafter
defined), without the necessity of surrendering or presenting this Bond,
and all such payments shall fully discharge the obligation of the Issuer
herein to the extent of the payments so made.
In the event any payment hereon is not paid within 15 days from the
date on which the same is due and payable, such payment shall continue
as an obligation of the Issuer (limited as herein provided) with interest
thereon, and a late charge in the amount of five percent (5%) of the
amount of such payment shall be imposed.
Upon the occurrence of a default hereunder, the then applicable
interest rate borne by this Bond, shall be increased by two percent (2%)
per annum, until such default is cured.
This Bond is subject to:
(a) optional redemption prior to maturity; and
(b) special mandatory redemption prior to maturity from
Receipts Requiring Mandatory Redemption (as defined in the Financing
Agreement),
all as provided and prescribed by and with the effect described in Section
2.2 of the Financing Agreement. The amount of any partial redemption
prior to maturity shall be applied as set forth in Section 2.3 of the
Financing Agreement.
The amount of any partial redemption prior to maturity, and the
date on which the same is made, shall be noted by the Holder on
Schedule A attached hereto and made a part hereof, but the failure to so
note any such partial redemption shall not affect the validity of any
amounts actually received by the Holder. The redemption price of any
redemption (whether by optional or mandatory redemption) shall be an
amount equal to the principal amount to be redeemed, plus all unpaid
interest accrued to the date fixed for redemption.
All payments made hereunder, including all redemptions, shall be
applied first to accrued and unpaid interest and the remainder to
principal, unless otherwise provided in Section 2.3 of the Financing
Agreement.
Pursuant to the Promissory Note of even date herewith executed and
delivered by the Borrower and made payable to the Issuer (the "Note"),
the Borrower has agreed to make payments of principal, premium (if any)
and interest to the Issuer in amounts at least equal to the payments of
principal of, premium (if any) and interest on this Bond. With the
exception of the Reserved Rights of the Issuer, such payments have been
assigned by the Issuer to the Holder for the purpose of repaying the
principal of, premium (if any) and interest on this Bond, at the applicable
rates set forth above. The Financing Agreement provides that all
payments by the Borrower pursuant to the Note are to be made by the
Borrower directly to the Holder at the address designated on the
registration books maintained by the Bond Registrar (as hereinafter
defined).
<PAGE>
The Borrower's obligations under the Financing Agreement and the
Note are secured as provided in the Financing Agreement.
The maturity of this Bond is subject to acceleration as provided in
the Financing Agreement.
Reference is hereby made to the Financing Agreement for a full and
complete statement of the provisions with respect to the application of
the proceeds of this Bond, the collection and disposition of the
Documents assigned as security for the payment of this Bond and the
interest hereon, the nature and extent of the security and the rights of the
Holder of this Bond, the terms and conditions on which, and the purposes
for which, this Bond is issued, the terms and conditions under which this
Bond may or shall be redeemed prior to maturity, and the rights, duties
and obligations of the Issuer thereunder, to all of which the Holder
hereof, by acceptance of this Bond, assents and agrees.
THIS BOND AND THE INTEREST ON IT ARE LIMITED
OBLIGATIONS OF THE ISSUER, THE PRINCIPAL OF, PREMIUM, IF
ANY, AND INTEREST ON WHICH ARE PAYABLE SOLELY FROM THE
SECURITY DESCRIBED IN SECTION 2.7 OF THE FINANCING
AGREEMENT OR FROM THE PROPERTY (AS DEFINED IN THE
FINANCING AGREEMENT); PROVIDED, HOWEVER, THAT UNDER
THE FINANCING AGREEMENT, THE ISSUER HAS RESERVED TO
ITSELF, AND HAS NOT PLEDGED OR ASSIGNED, THE RESERVED
RIGHTS OF THE ISSUER. NEITHER THIS BOND NOR THE INTEREST
HEREON SHALL EVER CONSTITUTE AN INDEBTEDNESS OR A
CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF
THE ISSUER, THE STATE OF MARYLAND, THE MARYLAND
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT, THE
MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY,
ANY OTHER PUBLIC INSTRUMENTALITY OR ANY PUBLIC BODY
WITHIN THE MEANING OF ANY CONSTITUTIONAL OR CHARTER
PROVISION OR STATUTORY LIMITATION, AND NEITHER SHALL
EVER CONSTITUTE OR GIVE RISE TO ANY PECUNIARY LIABILITY
OF THE ISSUER, THE STATE OF MARYLAND, THE MARYLAND
DEPARTMENT OF BUSINESS AND ECONOMIC DEVELOPMENT, THE
MARYLAND INDUSTRIAL DEVELOPMENT FINANCING AUTHORITY
(EXCEPT IN REGARD TO THE AUTHORITY INSURANCE
AGREEMENT), ANY OTHER PUBLIC INSTRUMENTALITY OR ANY
PUBLIC BODY.
This Bond shall be registered on the books of the Issuer to be kept
for that purpose by the Lender or any other person maintaining books for
the registration and transfer of this Bond pursuant to the provisions of
the Financing Agreement (the "Bond Registrar"). This Bond shall be
<PAGE>
transferable only upon such books (which transfer shall be similarly
noted on the registration table attached hereto as Schedule B and made a
part hereof) at such office by the Holder hereof or by its duly authorized
officer or attorney. This Bond may be transferred upon presentation
hereof at the office of the Bond Registrar with a written instrument of
transfer satisfactory to the Bond Registrar, duly executed by the Holder
hereof or its duly authorized attorney. Such transfers shall be without
charge to the Holder hereof, but any taxes or other governmental charges
required to be paid with respect to the same shall be paid by the Holder
requesting such transfer as a condition precedent to the exercise of such
privilege.
The Issuer may deem and treat the person in whose name this Bond
is registered as the absolute owner hereof for all purposes; and the Issuer
shall not be affected by any notice to the contrary (other than the written
notice of transfer referred to in the preceding paragraph).
This Bond, having been made, executed, sealed and delivered in the
State of Maryland, shall be construed, interpreted and enforced in
accordance with the laws of the State of Maryland as the same are in
effect from time to time.
All acts, conditions and things required by the Constitution and
laws of the State of Maryland and the Resolution to exist, to have
happened and to have been performed precedent to and in connection with
the execution and delivery of this Bond, do exist, have happened and
have been performed.
Except as may be otherwise provided in the Financing Agreement,
in any case where any date of payment of principal of, premium (if any),
or interest on this Bond, or the date fixed for any redemption of this
Bond, shall be a day other than a Business Day (as defined in the
Financing Agreement), then payment of such principal (and premium, if
any) or interest need not be made on such date but may be made on the
next succeeding Business Day, with the same force and effect as if made
on the date of payment or the date fixed for redemption.
No covenant or agreement contained in this Bond or in the
Financing Agreement shall be deemed to be a covenant or agreement of
any Agent (as defined in the Financing Agreement) of the Issuer in his or
her individual capacity, and neither the members of the Board of
Directors of the Issuer nor any person executing this Bond or any other
Documents (as defined in the Financing Agreement) entered into by the
Issuer shall be liable personally on this Bond or be subject to any
personal liability or accountability by reason of the issuance, execution
or delivery hereof.
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this Bond to be
executed in its name and on its behalf by the Executive Director of the
Issuer, by his manual signature, as of the date first above written.
WITNESS: MARYLAND ECONOMIC DEVELOPMENT CORPORATION
/s/John R. Devine
By____________________________
/s/Hans F. Mayer,
Executive Director
<PAGE>
SCHEDULE A
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY),
1996 ISSUE
_____________________________________________________________
REDEMPTION SCHEDULE
Date of Redemption Amount of Redemption
$
<PAGE>
SCHEDULE B
$1,500,000
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
TAXABLE ECONOMIC DEVELOPMENT REVENUE BOND
(FREDERICK BREWING CO. FACILITY),
1996 ISSUE
_____________________________________________________________
Transfer of Bond
The transfer of this Bond may be registered only by the registered
owner in person or by its duly authorized officer or attorney upon
presentation hereof to the Bond Registrar, who shall make note thereof in
the books kept for such purpose and in the registration blank below.
Date of Name of Signature of
Registration Registered Owner Bond Registrar
_______________ ________________
______________
_______________ ________________
______________
_______________ ________________
______________
_______________ ________________
______________
_______________ ________________
______________
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED
the undersigned hereby sells, assigns and transfers unto
________________________________________________________
(Please Print or Typewrite Name and Address of Transferee)
_________________________________________________________
the within Bond of
MARYLAND ECONOMIC DEVELOPMENT CORPORATION
and does hereby irrevocably constitute and appoint
______________________________ Attorney to transfer such Bond
on the books of the within-named Issuer, with full power of
substitution in the premises.
Dated: _______________________
______________________________
Notice: The signature to this
assignment must correspond with
the name as it appears on the face
of the within Bond in every
particular, without alteration or
enlargement or any change
whatever.
In the presence of:
___________________________
Please insert Social Security
or other Identifying Number
of Assignee:
______________________________
______________________________
Signature Guaranteed
EXHIBIT 10 (ix)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (Agreement) is
made this _____ day of ________________________________, 1996, by
and between FREDERICK BREWING CO., a Maryland corporation
(Borrower), and SIGNET BANK (Bank).
RECITALS
WHEREAS, Borrower has requested Bank to extend credit to
Borrower in the aggregate principal amount of Nine Hundred Sixty-Nine
Thousand Dollars ($969,000.00); and
WHEREAS, Bank is willing to extend such credit to Borrower
upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Borrower and Bank do hereby agree as follows:
1. CONSTRUCTION AND DEFINITION OF TERMS
All terms used herein without definition which are defined by
the Maryland Uniform Commercial Code shall have the meanings
assigned to them by the Maryland Uniform Commercial Code unless and
to the extent varied by this Agreement. Unless the context otherwise
requires, all of the accounting terms used herein without definition shall
have the meanings assigned to them as determined by GAAP except to the
extent varied by this Agreement. Whenever the phrase satisfactory to
Bank is used in this Agreement such phrase shall mean satisfactory to
Bank in its sole discretion. The use of any gender or the neuter herein
shall also refer to the other gender or the neuter and the use of the plural
shall also refer to the singular, and vice versa. In addition to the terms
defined elsewhere in this Agreement, unless the context otherwise
requires, when used herein, the following terms shall have the following
meanings:
Affiliate shall mean: (a) any person in which Borrower
legally or beneficially owns or holds, directly or indirectly, any capital
stock or other equity interest; (b) any person that is a partner in or of
Borrower, a partnership in which Borrower is a partner, a joint venture in
which Borrower is a joint venturer, or a joint venturer in or of Borrower;
(c) any person that is a director, officer, employee, stockholder (legally
or beneficially) or other affiliate of any of the foregoing or of Borrower;
and (d) any person that directly or indirectly controls, is under the
control of, or is under common control with, Borrower, including,
without limitation, any person that directly or indirectly has the right or
power to direct the management or policies of Borrower and any person
whose management or policies Borrower directly or indirectly has the
right or power to direct.
Banking Day shall mean any day that banks in the State of
Maryland are not required or not permitted to be closed.
Blue II shall mean Blue II, LLC, a Maryland limited
liability company.
Blue II Bond Financing shall mean the transaction pursuant
to which, among other things, (a) MEDCO shall issue a taxable economic
development revenue bond in the principal amount not to exceed
$3,000,000.00, (b) such bond shall be purchased by Bank, and (c) the
proceeds from the sale of such bond shall be lent by MEDCO to Blue II
to finance the acquisition and construction of certain improvements upon
the New Business Premises.
Business Premises shall mean the Existing Business
Premises and the New Business Premises.
Certified shall mean that the information, statement,
schedule, report or other document required to be Certified contains a
representation by Borrower, that to Borrowers knowledge and belief
after diligent inquiry, such information, statement, schedule, report or
other document is true and complete in all material respects.
Closing shall mean the first date on which funds are
advanced to Borrower hereunder.
Code shall mean the Internal Revenue Code of 1986, as the
same may be amended from time to time.
Collateral shall mean: (a) all Receivables, Inventory and
Equipment and, in addition, all other property of Borrower in which Bank
has, or may in the future acquire or be granted, a Lien hereunder or under
any of the Other Agreements; (b) all amounts now or in the future owed
by Bank to Borrower and all property and funds of Borrower (including
deposit accounts, certificates of deposit, and investments made or
managed by Bank on behalf of Borrower), now owned or hereafter
acquired by Borrower and now or hereafter in Banks possession or
control; (c) all present and future substitutions, replacements,
appurtenances, accessories, accessions and materials and supplies
relating to any of the foregoing; (d) all of Borrowers present and future
books and records in any form, in or on any media, including data
processing materials in any form (including software, tapes, discs and the
like), whether in the possession of Borrower or any other person; and
(e) all present and future proceeds and products of all of the foregoing in
any form whatsoever and all rights, including rights to the payment of
money for any reason, arising on account of any sale, assignment, lease,
rental, license, exchange, liquidation, condemnation, taking, theft or any
disposition of any nature of, or any damage or casualty to, or any loss
with respect to, any of the foregoing or any rights or interests of
Borrower in any of the foregoing, including, without limitation, cash
proceeds (including all payments under any indemnities, warranties or
guaranties payable with respect to any of the foregoing), noncash
proceeds and proceeds acquired with cash proceeds, whether any such
proceeds constitute consumer goods, farm products, equipment,
inventory, documents of title, chattel paper, accounts, instruments or
general intangibles, and all proceeds of insurance policies insuring any
of the foregoing or any risks to Borrower associated with any of the
foregoing.
Copyrights shall mean all of Borrowers right, title and
interest, whether now owned or existing or hereafter acquired or arising,
in and to all domestic and foreign copyrights, copyright registrations and
copyright applications, whether or not registered or filed with any
governmental authority, together with (a) all renewals thereof, (b) all
present and future rights of Borrower under all present and future license
agreements relating thereto, whether Borrower is licensee or licensor
thereunder, (c) all income, royalties, damages and payments now or
hereafter due and/or payable to Borrower thereunder or with respect
thereto, including, without limitation, damages and payments for past,
present or future infringements thereof, (d) all of Borrowers present and
future claims, causes of action and rights to sue for past, present or
future infringements thereof, and (e) all rights corresponding thereto
throughout the world. The Copyrights shall include, without limitation,
those Copyrights listed on Schedule 1 attached hereto and made a part
hereof.
Default shall mean any event which, with the giving of
notice or passage of time (or both), would constitute an Event of Default.
Default Rate of Interest shall mean a fluctuating rate of
interest equal to the applicable LIBOR Rate in effect from time to time
plus three and one-half percent (3.5%) per annum.
Determination Date shall mean the date of Closing and the
same day of each succeeding month thereafter.
Environmental Laws shall mean all federal, state, local and
foreign laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes, and any and all regulations, codes, plans, orders, decrees,
judgments, injunctions, notices or demand letters issued, entered,
promulgated or approved thereunder.
Equipment shall mean: (a) all equipment of Borrower of
every type and description, now owned and hereafter acquired and
wherever located, including, without limitation, all machinery, vehicles
and other rolling stock, furniture, furnishings, tools, dies, leasehold
improvements, fixtures, and materials and supplies relating to any of the
foregoing; (b) all present and future documents of title and trust receipts
relating to any of the foregoing; (c) all present and future rights, claims
and causes of action of Borrower in connection with purchases by
Borrower of (or contracts for the purchase by Borrower of), or warranties
relating to, or damages to, goods held or to be held by Borrower as
equipment; (d) all present and future warranties, manuals and other
written materials (and packaging thereof or relating thereto) relating to
any of the foregoing; (e) all present and future rights, claims and causes
of action of Borrower in connection with any agreements pursuant to
which any suppliers, manufacturers or other persons have agreed or may
agree, conditionally or otherwise, to purchase or repurchase from
Borrower, in bulk or otherwise, any goods held or to be held by Borrower
as equipment; and (f) all present and future general intangibles of
Borrower in any way relating to any of the foregoing.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor
legislation, and all regulations, codes, plans, orders, decrees, judgments,
injunctions, notices or demand letters issued, entered, promulgated or
approved thereunder.
Event of Default shall mean any of the events described in
Section 8 hereof.
Existing Business Premises shall mean 103 South Carroll
Street, Frederick, Maryland 21701.
Frederick Bond Financing shall mean the transaction
pursuant to which, among other things, (a) MEDCO shall issue a taxable
economic development revenue bond (the Bond) in the principal
amount not to exceed $1,500,000.00, (b) the Bond shall be purchased by
Bank, and (c) the proceeds from the sale of the Bond shall be lent by
MEDCO to Borrower to finance the purchase of brewing equipment for
use at the New Business Premises and at the Existing Business Premises.
GAAP shall mean generally accepted accounting principles
in the United States of America in effect from time to time. In the event
of a change in GAAP affecting the covenants contained in
Subsections 6.15-6.18 of this Agreement or definitions contained in
Section 1 of this Agreement relating to such covenants, such covenants
and definitions shall continue to be applied as though such change in
GAAP had not occurred unless and until Bank and Borrower shall agree
in writing to amend or adjust such covenants or definitions as deemed
necessary as a result of such change in GAAP.
good faith shall mean, with respect to a determination to be
made by Bank in good faith, that Bank shall make such determination
honestly and not maliciously.
Hazardous Substance shall mean any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum-based
products, methane and all other pollutants, contaminates, chemicals,
industrial substances, industrial wastes, toxic substances, toxic wastes,
toxic materials, hazardous substances, hazardous wastes and hazardous
materials. The meaning of each term used in this definition shall
include, without limitation, the meaning or meanings assigned to such
term by any Environmental Laws.
Indebtedness shall include all items which would properly
be included in the liability section of a balance sheet or in a footnote to
a financial statement in accordance with GAAP, and shall also include all
contingent liabilities.
Intellectual Property shall mean: (a) all Copyrights; (b) all
Patents; (c) all Trademarks; (d) all Licenses; (e) all goodwill of
Borrower; (f) all present and future trade secrets of Borrower; and (g) all
other present and future intellectual property of Borrower.
"Interest Period" shall mean each one-month period beginning
on a Determination Date and ending on the next succeeding
Determination Date
Inventory shall mean: (a) all inventory of Borrower of
every type and description, now owned and hereafter acquired and
wherever located, including, without limitation, raw materials, work in
process, finished goods, goods returned or repossessed, and goods held
for demonstration, marketing or similar purposes; (b) all present and
future materials and supplies of Borrower used, usable or consumed in
the course of Borrowers business, whether relating to the manufacture,
assembly, installation, repair, packaging, packing or shipment of goods
by Borrower, or relating to advertising or any other aspect of Borrowers
business; (c) all present and future personal property of Borrower in or
on which any of the foregoing is stored or maintained; (d) all present and
future warranties, manuals and other written materials (and packaging
thereof or relating thereto) relating to any of the foregoing; (e) all
present and future documents of title and trust receipts relating to any of
the foregoing; (f) all present and future customer lists of Borrower;
(g) all present and future rights of Borrower in connection with goods
consigned to or by Borrower; (h) all present and future rights of
Borrower as an unpaid seller of goods, including rights of stoppage in
transit, detinue and reclamation; (i) all present and future rights, claims
and causes of action of Borrower in connection with purchases by
Borrower of (or contracts for the purchase by Borrower of), or warranties
relating to, or damages to, goods held or to be held by Borrower as
inventory; (j) all present and future rights, claims and causes of action of
Borrower in connection with any agreements pursuant to which any
suppliers, manufacturers or other persons have agreed or may agree,
conditionally or otherwise, to purchase or repurchase from Borrower, in
bulk or otherwise, any goods held or to be held by Borrower as
inventory; and (k) all present and future general intangibles of Borrower
in any way relating to any of the foregoing.
LIBOR Rate shall mean, with respect to any Interest
Period, an interest rate per annum equal to the offered rate on Eurodollar
deposits for a term comparable to the duration of such Interest Period,
which appears on the display designated "LIUS01M" (for one month
deposits) of "Index HP" under the "YIELD" column for the date of
LIBOR Rate determination in the "CLOSE/MID/YIELD TABLE"
published by Bloomberg L.P. (or such other Table as may replace the
"CLOSE/MID/YIELD TABLE" of that service for the purpose of
displaying London interbank offered rates of major banks or, if such
Table is not available at any such time, a comparable source, as
determined in the sole discretion of, and selected by, Bank in good faith,
of London interbank offered rates of major banks, as may be available
from a similar service). The LIBOR Rate for any Interest Period shall be
determined by Bank as of 10:00 a.m. (Baltimore time) on the first day of
such Interest Period. If more than one such rate is published by
Bloomberg L.P. or its replacement, the LIBOR Rate shall be the
arithmetic mean of such offered rates. If no such rate shall be published
by Bloomberg L.P. or its replacement, the LIBOR Rate shall be the rate
(or, if applicable, the arithmetic mean of the rates) published for the
immediately preceding Banking Day.
Lien shall mean any statutory or common law consensual or
nonconsensual mortgage, pledge, security interest, encumbrance, lien,
right of setoff, claim or charge of any kind, including, without
limitation, any conditional sale or other title retention transaction, any
lease transaction in the nature thereof and any secured transaction under
the Uniform Commercial Code of any jurisdiction.
Loan shall mean the loan made to Borrower by Bank
pursuant to Subsection 2.01 hereof.
Loan Maturity Date shall mean July , 1997.
Maximum Loan Amount shall mean Nine Hundred Sixty-
Nine Thousand Dollars ($969,000.00).
MEDCO shall mean the Maryland Economic Development
Corporation, a body corporate and politic created and existing under the
constitution and laws of the State of Maryland.
New Business Premises shall mean the Business Premises of
Borrower to be leased from and acquired and constructed by Blue II with
the proceeds of the Blue II Bond Financing, such Premises to be located
at 4607 Wedgewood Boulevard, Frederick, Maryland 21703, being further
identified as Lot 13, Wedgewood Business Park, situate on Wedgewood
Boulevard, Buckeystown Election District No. 1, Frederick County,
Maryland.
Non-Default Rate of Interest shall mean a fluctuating rate
of interest equal to the applicable LIBOR Rate in effect from time to
time plus one and one-half percent (1.5%) per annum.
Note shall mean a promissory note of Borrower in the form
attached hereto as Exhibit A, and all renewals, replacements and
extensions thereof.
Obligations shall mean, as the same may be amended,
modified, extended, renewed, supplemented, increased, refinanced,
consolidated or replaced from time to time, all present and future
obligations, indebtedness and liabilities of Borrower to Bank arising
under this Agreement or any of the Other Agreements (including, without
limitation, all principal amounts, including future advances, interest
charges, service charges, late charges, fees and all other charges and
sums, as well as all costs and expenses, including attorneys fees and
expenses, payable or reimbursable by Borrower under or pursuant to this
Agreement and the Other Agreements), whether direct or indirect, joint
or several, contingent or non-contingent, matured or unmatured, accrued
or not accrued, liquidated or unliquidated, secured or unsecured, whether
or not any instrument or agreement relating thereto specifically refers to
this Agreement, and all claims of Bank against Borrower arising or re-
arising on account of or as a result of any payment made by Borrower
with respect to any obligations included in this definition which is
rescinded or recovered from or restored or returned by Bank under
authority of any law, rule, regulation, order of court or governmental
agency, or in connection with any compromise or settlement relating
thereto or relating to any pending or threatened action, suit or proceeding
relating thereto, whether arising out of any proceedings under the United
States Bankruptcy Code or otherwise.
Other Agreements shall mean, as the same may be amended,
modified, extended, renewed, supplemented or replaced from time to
time, any and all agreements, contracts, promissory notes and other
instruments (including the Note), drafts, checks, bankers acceptances,
security agreements, assignments, pledge agreements, hypothecation
agreements, indemnification agreements, letters of credit and
applications and agreements relating thereto, subordination agreements,
mortgages, deeds of trust, leases, guaranties and other documents now or
hereafter existing (a) executed and/or delivered in connection with this
Agreement or any of the Obligations, or (b) evidencing, guaranteeing,
securing (directly or indirectly), subordinating other obligations of
Borrower to, containing any warranties, covenants, agreements or
representations of any person relating to, or in any other manner relating
to, any of the Obligations. The Other Agreements shall include, without
limitation, the instruments and documents referred to in Subsection 5.01
hereof.
Patents shall mean all of Borrowers right, title and
interest, whether now owned or existing or hereafter acquired or arising,
in and to all United States and foreign patents, and pending and
abandoned United States and foreign patent applications, including,
without limitation, the inventions and improvements described or claimed
therein, together with (a) any reissues, divisions, continuations,
certificates of reexamination, extensions and continuations-in-part
thereof, (b) all present and future rights of Borrower under all present
and future license agreements relating thereto, whether Borrower is
licensee or licensor thereunder, (c) all income, royalties, damages and
payments now or hereafter due and/or payable to Borrower thereunder or
with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) all of
Borrowers present and future claims, causes of action and rights to sue
for past, present or future infringements thereof, and (e) all rights
corresponding thereto throughout the world. The Patents shall include,
without limitation, those Patents listed on Schedule 1 attached hereto and
made a part hereof.
Permitted Liens shall mean: (a) Liens of Bank; (b) Liens
for taxes not delinquent or for taxes being diligently contested in good
faith by Borrower by appropriate proceedings, subject to the conditions
set forth in Subsection 6.02 hereof and provided such Lien is subordinate
to any security interest of Bank in the property encumbered by such Lien;
(c) mechanics, artisans, materialmans, landlords, carriers or other
like Liens arising in the ordinary course of business with respect to
obligations which are not due; (d) Liens arising out of a judgment, order
or award with respect to which Borrower shall in good faith be
prosecuting diligently an appeal or proceeding for review and with
respect to which there shall be in effect a subsisting stay of execution
pending such appeal or proceeding for review, provided appropriate
reserves therefor are established by Borrower in accordance with GAAP
and provided such Liens are subordinate to Banks security interest in the
property encumbered by such Lien; (e) any deposit of funds made in the
ordinary course of business to secure obligations of Borrower under
workers compensation laws, unemployment insurance laws or similar
legislation, to secure public or statutory obligations of Borrower, to
secure surety, appeal or customs bonds in proceedings to which Borrower
is a party, or to secure Borrowers performance in connection with bids,
tenders, contracts (other than contracts for the payment of money), leases
or subleases made by Borrower in the ordinary course of business; (f)
Liens granted to MEDCO (and assigned by MEDCO to Bank) in
connection with the Frederick Bond Financing; (g) existing purchase
money Liens on vehicles and other rolling stock; and (h) Liens
specifically consented to by Bank in writing (including, without
limitation, those Liens described in the Permitted Liens Exhibit attached
hereto and incorporated herein).
person shall mean any individual, corporation, partnership,
joint venture, association, trust, government (or subdivision, agency or
department thereof) or any other entity of any kind.
Prime Rate shall mean the annual percentage rate
periodically chosen and recorded by Bank as an index (called the prime
rate), at, above or below which interest rates are established for certain
nonconsumer loans. Any adjustment in the Prime Rate shall be made
effective for purposes of this Agreement as of the date of such
adjustment.
Receivables shall mean: (a) all of Borrowers present and
future accounts, contract rights, receivables, promissory notes and other
instruments, chattel paper and general intangibles; (b) all present and
future tax refunds of Borrower and all present and future rights of
Borrower to refunds or returns of prepaid expenses, including unearned
insurance premiums; (c) all present and future cash of Borrower; (d) all
deposit accounts now or hereafter maintained or established by, for or on
behalf of Borrower with any bank or other institution, and all balances of
funds now or hereafter on deposit in all such accounts, including, without
limitation, all checking accounts, collection accounts, lockbox accounts,
disbursement accounts, concentration accounts and all other deposit
accounts of every kind and nature; (e) all present and future judgments,
orders, awards and decrees in favor of Borrower and causes of action in
favor of Borrower; (f) all present and future claims, rights of
indemnification and other rights of Borrower under or in connection with
any contracts or agreements to which Borrower is or becomes a party or
third party beneficiary; (g) all rights and claims of Borrower with respect
to any deposits of money or other property made with any lessors of any
property, insurers, bonding agents or any other persons; (h) all present
and future rights and claims which Borrower may now or hereafter have
under any insurance policies, contracts or coverages now or hereafter in
effect; (i) all goods previously or hereafter returned, repossessed or
stopped in transit, the sale, lease or other disposition of which
contributed to the creation of any account, instrument or chattel paper of
Borrower; (j) all present and future rights of Borrower as an unpaid
seller of goods, including rights of stoppage in transit, detinue and
reclamation; (k) all rights which Borrower may now or at any time
hereafter have, by law or agreement, against any account debtor or other
obligor of Borrower, and all rights and Liens which Borrower may now or
at any time hereafter have, by law or agreement, against any property of
any account debtor or other obligor of Borrower; (l) all present and
future interests and rights of Borrower, including rights to the payment
of money, under or in connection with all present and future leases and
subleases of real or personal property to which Borrower is a party, as
lessor, sublessor, lessee or sublessee; (m) all present and future customer
lists of Borrower; (n) all present and future contingent and non-
contingent rights of Borrower to the payment of money for any reason
whatsoever, whether arising in contract, tort or otherwise, whether or not
such rights are otherwise included in this definition; and (o) all present
and future rights of Borrower with respect to licenses, patents,
copyrights, franchises, trade names and trademarks including, without
limitation, the Intellectual Property.
State shall mean any State of the United States and the
District of Columbia.
Subsidiary shall include any corporation at least a majority
of the outstanding Voting Stock of which, now or in the future, is owned
or controlled by Borrower, directly or indirectly through one or more
Subsidiaries.
Trademarks shall mean all of Borrowers right, title and
interest, whether now owned or existing or hereafter acquired or arising,
in and to all domestic and foreign trademarks, trademark registrations,
trademark applications and trade names, whether or not registered or
filed with any governmental authority, together with (a) all renewals
thereof, (b) all present and future rights of Borrower under all present
and future license agreements relating thereto, whether Borrower is
licensee or licensor thereunder, (c) all income, royalties, damages and
payments now or hereafter due and/or payable to Borrower thereunder or
with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) all of
Borrowers present and future claims, causes of action and rights to sue
for past, present or future infringements thereof, and (e) all rights
corresponding thereto throughout the world. The Trademarks shall
include, without limitation, those Trademarks listed on Schedule 1
attached hereto and made a part hereof.
Voting Stock shall mean the shares of any class of capital
stock of a corporation having ordinary voting power to elect the
directors, officers or trustees thereof, including such shares that shall or
might have voting power by reason of the occurrence of one or more
conditions or contingencies.
2. THE LOAN
2.01 Loan. (a) Bank agrees to make a loan to Borrower in
the Maximum Loan Amount, subject to all of the terms and conditions of
this Agreement (the Loan). If the entire principal amount of the Loan
is not advanced at Closing, any request for an advance by Borrower
subsequent to Closing shall be made not less than two Banking Days
prior to the requested date for the making of such advance and shall be
accompanied by such information and documents (which shall be certified
if required by Bank) concerning (i) the amount of the requested advance
(which may not exceed one hundred percent (100%) of the purchase price
(exclusive of delivery, installation and related charges) of the equipment
being financed with the proceeds thereof), (ii) the date such advance is to
be made, (iii) the equipment to be purchased with the proceeds of such
advance (including, without limitation, copies of invoices) as Bank may
reasonably require, (iv) the financial condition of Borrower, and (v) such
other matters as Bank may from time to time require. In no event shall
Bank be obligated to make any advance hereunder (A) if a Default or an
Event of Default shall have occurred, (B) if such advance would cause
the total principal amount of advances made under the Loan to exceed (or
to further exceed) the Maximum Loan Amount, or (C) for the purpose of
refinancing or reimbursing Borrower for any required equity contribution
in connection with the Blue II Bond Financing and/or the Frederick Bond
Financing. Even if the total principal amount of advances outstanding
under the Loan shall at any time and for any reason exceed the Maximum
Loan Amount, Borrower and all guarantors shall nonetheless be liable for
the entire principal amount outstanding, with interest thereon at the rate
and calculated in the manner provided herein and in the Note, in
accordance with and subject to this Agreement, the Note and the
guaranties of such guarantors. If the total principal amount of advances
outstanding under the Loan shall at any time exceed the Maximum Loan
Amount, Borrower shall immediately pay to Bank upon demand the
amount of such excess, with interest thereon at the rate and calculated in
the manner provided herein and in the Note. Borrower agrees that
Borrower shall be liable for, and the Collateral shall secure, the
repayment of each advance made by Bank to or for Borrower under the
Loan, with interest at the rate and calculated in the manner provided
herein and in the Note, whether or not such advance was duly requested
or authorized by Borrower and whether or not any person requesting such
advance was duly authorized to make such request. Advances made under
the Loan which are repaid may not be reborrowed.
(b) Borrowers obligation to repay all advances under the
Loan with interest shall be evidenced by, and such advances shall be
repaid with interest in accordance with, the Note. The entire unpaid
principal amount of the Loan, together with all accrued and unpaid
interest thereon, shall be due and payable on the Loan Maturity Date.
2.02 Interest. Until the occurrence of an Event of Default,
all principal sums outstanding under the Loan and/or the Note shall bear
interest at the Non-Default Rate of Interest. After the occurrence of an
Event of Default, all principal sums outstanding under the Loan and/or
the Note shall bear interest until paid at the Default Rate of Interest.
Interest shall be payable monthly as provided in the Note and shall be
calculated on a year of 360 days based upon the actual number of days
elapsed.
2.03 Prepayment. Borrower may at its option prepay any or
all of the Loan in whole at any time or in part from time to time without
penalty or premium. All prepayments shall be accompanied by the
payment of accrued and unpaid interest on the Loan to the date of
payment. All payments may, in Banks discretion, be applied first to the
payment of accrued and unpaid interest and then to the unpaid principal
balance.
2.04 Late Charge. If any payment required to be made by
Borrower hereunder or under the Note is not paid within 15 days after the
date on which such payment is due, Borrower shall pay to Bank on
demand a late charge equal to 5% of the amount of such payment.
3. SECURITY
3.01 Security Interest. As security for the payment and
performance of all of the Obligations, whether or not any instrument or
agreement relating to any Obligation specifically refers to this
Agreement or the security interest created hereunder, Borrower hereby
grants to Bank a lien and continuing security interest in, and pledges and
assigns to Bank, the Collateral. Banks security interest shall
continually exist until (a) all Obligations have been paid in full, and
(b) there exists no commitment by Bank which could give rise to any
Obligations, whether or not all Obligations shall at any time or from time
to time be reduced to zero. Borrower shall make notations, satisfactory
to Bank, on its books and records disclosing the existence of Banks
security interest in the Collateral. Bank shall have no liability or duty,
either before or after the occurrence of an Event of Default hereunder, on
account of loss of or damage to, or to collect or enforce any of its rights
against, the Collateral, or to preserve any rights against account debtors
or other parties with prior interests in the Collateral, the sole duty of
Bank in this regard being to exercise reasonable care with respect to
tangible Collateral in its actual possession.
3.02 Covenants and Representations Concerning Collateral.
With respect to all of the Collateral, Borrower covenants, warrants and
represents that:
(a) No financing statement covering any of the
Collateral is on file in any public office or land or financing records
except for financing statements in favor of Bank and financing statements
with respect to any Permitted Liens described in the Permitted Liens
Exhibit and Borrower is the legal and beneficial owner of all of the
Collateral, free and clear of all Liens, except for Permitted Liens.
(b) The security interest granted Bank hereunder shall
constitute a first priority Lien upon the Collateral, except for any
existing Liens described in the Permitted Liens Exhibit. Borrower will
not, except in the ordinary course of business, transfer, discount, sell,
grant or assign any interest in the Collateral nor, without Banks prior
written consent, permit any other Lien to be created or remain thereon
except for Permitted Liens.
(c) Borrower will maintain the Collateral in good
order and condition, ordinary wear and tear excepted, and will use,
operate and maintain the Collateral in material compliance with all laws,
regulations and ordinances and in material compliance with all applicable
insurance requirements and regulations. Borrower will promptly notify
Bank in writing of any litigation involving or affecting the Collateral
which Borrower knows or has reason to believe is pending or threatened.
Borrower will promptly pay when due all taxes and all transportation,
storage, warehousing and other such charges and fees affecting or arising
out of or relating to the Collateral and shall defend the Collateral, at
Borrowers expense, against all claims and demands of any persons
claiming any interest in the Collateral adverse to Borrower or Bank.
(d) At all reasonable times (after prior notice to
Borrower (which may be given orally by telephone) if no Default or
Event of Default shall have occurred) Bank and its agents and designees
may enter the Business Premises and any other premises of Borrower and
inspect the Collateral and all (i) books and records of Borrower (in
whatever form), and (ii) quality control processes of Borrower. Borrower
agrees that, after the occurrence of an Event of Default, Bank, or a
conservator appointed by Bank, shall have the right to establish such
additional product quality controls as Bank, or said conservator, in its
sole judgment, may deem necessary to assure maintenance of the quality
of products sold by Borrower under the Trademarks. Except in
connection with transactions in the ordinary course of Borrowers
business, Borrower agrees (i) not to sell or assign its interest in, or grant
any license under, the Intellectual Property, without the prior written
consent of Bank, (ii) to maintain the quality of any and all products in
connection with which the Trademarks are used, consistent with the
quality of said products as of the date hereof, and (iii) to provide Bank,
at least annually, with a certificate of an officer of Borrower disclosing
all material transactions concerning the Intellectual Property, including,
without limitation, assignments, licenses and sublicenses, and new
Intellectual Property acquired.
(e) Borrower will maintain comprehensive casualty
insurance on the Collateral against such risks, in such amounts, with
such loss deductible amounts and with such companies as may be
satisfactory to Bank, and each such policy shall contain a clause or
endorsement satisfactory to Bank naming Bank as mortgagee and a clause
or endorsement satisfactory to Bank that such policy may not be
cancelled or altered and Bank may not be removed as mortgagee without
at least 30 days prior written notice to Bank; provided, however, that
notwithstanding anything in this Agreement to the contrary, Borrower
shall not be required to obtain receivables insurance. In all events, the
amounts of such insurance coverages shall conform to prudent business
practices and shall be in such minimum amounts that Borrower will not
be deemed a coinsurer under applicable insurance laws, regulations,
policies or practices. Borrower hereby assigns to Bank and grants to
Bank a security interest in any and all proceeds of such policies and
authorizes and empowers Bank to adjust or compromise any loss under
such policies and to collect and receive all such proceeds. Borrower
hereby authorizes and directs each insurance company to pay all such
proceeds directly and solely to Bank and not to Borrower and Bank
jointly. Borrower authorizes and empowers Bank to execute and endorse
in Borrowers name all proofs of loss, drafts, checks and any other
documents or instruments necessary to accomplish such collection, and
any persons making payments to Bank under the terms of this paragraph
are hereby relieved absolutely from any obligation or responsibility to
see to the application of any sums so paid. After deduction from any
such proceeds of all costs and expenses (including attorneys fees)
incurred by Bank in the collection and handling of such proceeds, the net
proceeds may be applied, at Banks option, either toward replacing or
restoring the Collateral, in a manner and on terms satisfactory to Bank,
or as a credit against such of the Obligations, whether matured or
unmatured, as Bank shall determine in Banks sole discretion.
(f) All books and records pertaining to the Collateral
are located at the Business Premises and Borrower will not change the
location of such books and records without the prior written consent of
Bank.
(g) Except for (i) any vehicles of Borrower,
(ii) Collateral in transit to Borrower or to customers of Borrower, and
(iii) mobile goods of a type normally used in more than one jurisdiction,
all of the Collateral is, and, unless Bank shall consent otherwise in
writing, shall remain located at the Business Premises.
(h) Borrower shall do, make, execute and deliver all
such additional and further acts, things, deeds, assurances, instruments
and documents as Bank may request to vest in and assure to Bank its
rights hereunder or in any of the Collateral, including, without
limitation, the execution and delivery of financing statements, financing
statement amendments and/or continuation statements, assignments of
trademarks and powers of attorney in connection therewith, and Borrower
agrees to pay all taxes, fees and costs (including attorneys fees) paid or
incurred by Bank in connection with the preparation and filing or
recordation thereof.
(i) A carbon, photographic or other reproduction of
this Agreement or any financing statement signed by Borrower in
connection with this Agreement shall be sufficient as a financing
statement.
(j) Whenever required by Bank, Borrower shall
promptly deliver to Bank, with all endorsements and/or assignments
required by Bank, all instruments, chattel paper, guaranties and the like
received by Borrower constituting, evidencing or relating to any of the
Collateral or proceeds of any of the Collateral.
(k) If any Receivable arises out of a contract with the
United States of America or any State, county, municipality or any
department, agency or instrumentality thereof, Borrower shall
immediately notify Bank thereof and, if required by Bank, execute and
deliver any agreements, notices and/or assignments and do such other
things as may be satisfactory to Bank in order that all sums due and to
become due to Borrower under such contract shall be duly assigned to
Bank in accordance with the Federal Assignment of Claims Act (31
United States Code 1203; 41 United States Code 15) and/or any other
applicable federal, State and local laws and regulations relating to the
assignment of governmental obligations.
(l) Borrower agrees that until the Obligations shall
have been satisfied in full and this Agreement shall have been
terminated, Borrower will not, without Banks prior written consent,
(i) consign any Collateral to any consignee, (ii) store or place any
Collateral with any warehouseman, artisan, processor, contractor or
bailee, or (iii) enter into any agreement (for example, a license
agreement) which is inconsistent with Borrowers obligations under this
Agreement. Borrower further agrees that it will not take any action, or
permit any action to be taken by others subject to its control, including
licensees, or fail to take any action, which would materially adversely
affect the validity or enforcement of the rights transferred to Bank under
this Agreement. Nothing herein shall be interpreted to prohibit Borrower
from accepting keg deposits in the ordinary course of business as
currently conducted.
(m) The Copyrights, Patents, Trademarks and Licenses
listed on Schedule 1 constitute all of the Copyrights, Patents, Trademarks
and Licenses registered or filed in the United States and now owned by
Borrower. If, before the Obligations shall have been satisfied in full,
Borrower shall (i) obtain rights to any new patentable inventions,
copyrights, trademarks, trademark registrations, tradenames or licenses,
or (ii) become entitled to the benefit of any patent, copyright or
trademark application, trademark, trademark registration, or license
renewal, or apply for any reissue, division, continuation, certificate of
reexamination, renewal, extension or continuation-in-part of any Patent
or improvement on any Patent, the security interest of Bank granted
hereunder shall automatically attach thereto and Borrower shall give to
Bank prompt written notice thereof.
3.03 Collateral Collections. Bank shall have the right at any
and all times following the occurrence of an Event of Default, to: (a)
notify and/or require Borrower to notify any or all account debtors and
other obligors on Receivables to make payments thereon directly to Bank
or in care of a post office lock box under the sole control of Bank
established at Borrowers expense subject to Banks customary
arrangements and charges therefor, and to take any or all action with
respect to Receivables as Bank shall determine in its sole discretion,
including, without limitation, the right to demand, collect, sue for and
receive any money or property at any time due, payable or receivable on
account thereof, compromise and settle with any person liable thereon,
and extend the time of payment or otherwise change the terms thereof,
without incurring liability or responsibility to Borrower or any guarantor
therefor; (b) require Borrower to segregate and hold in trust for Bank
and, on the day of Borrowers receipt thereof, transmit to Bank in the
exact form received by Borrower (except for such assignments and
endorsements as may be required by Bank), all cash, checks, drafts,
money orders and other items of payment constituting Collateral or
proceeds of Collateral for application, upon collection when applicable,
against such of the Obligations, whether matured or unmatured, as Bank
shall determine in its sole discretion; and/or (c) establish and maintain at
Bank a Repayment Account, which shall be under the exclusive control
of and subject to the sole order of Bank and which shall be subject to the
imposition of such customary charges as are imposed by Bank from time
to time upon such accounts, for the deposit, as a tender of payment of the
Obligations, of cash, checks, drafts, money orders and other items of
payment constituting Collateral or proceeds of Collateral coming into
Banks possession pursuant to the terms of this Agreement and from
which Bank may, in its sole discretion, at any time and from time to
time, withdraw all or any part of the balance for application against such
of the Obligations, whether matured or unmatured, as Bank shall
determine in its sole discretion.
4. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement, Borrower
represents and warrants to Bank that:
4.01 Good Standing. Borrower and each Subsidiary is a
corporation duly organized, legally existing and in good standing under
the laws of the State of its incorporation, has the power to own its
property and to carry on its business and is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
properties owned by it therein or in which the transaction of its business
makes such qualification necessary.
4.02 Authority. Borrower has full power and authority to
enter into this Agreement and all Other Agreements executed by it in
connection with this Agreement, to execute and deliver all documents and
instruments required hereunder and thereunder, and to incur and perform
the obligations provided for herein and therein, all of which have been
duly authorized by all necessary corporate, partnership and other action,
and no consent or approval of any person, including, without limitation,
its stockholders or partners, and any governmental authority, which has
not been obtained, is required as a condition to the validity or
enforceability hereof or thereof.
4.03 Binding Agreements. This Agreement and all Other
Agreements executed by Borrower in connection with this Agreement
have been duly executed and delivered by Borrower, and constitute, and
will continue to constitute, the valid and legally binding obligations of
Borrower, and are, and will continue to be, fully enforceable against
Borrower in accordance with their terms, subject to bankruptcy and other
laws affecting the rights of creditors generally.
4.04 No Conflicting Agreements. The execution, delivery
and performance by Borrower of this Agreement and all Other
Agreements executed by Borrower in connection with this Agreement,
and the borrowings hereunder, will not violate (i) any provision of law or
any order, rule or regulation of any court or governmental authority,
(ii) the corporate Articles of Incorporation or bylaws of Borrower or any
Subsidiary, or (iii) any instrument, contract, agreement, indenture,
mortgage, deed of trust or other document or obligation to which
Borrower or any Subsidiary is a party or by which any one or more of
them, or any of their property, is bound.
4.05 Litigation. Except as heretofore disclosed to Bank in
writing, there are no judgments, injunctions or similar orders or decrees,
claims, actions, suits or proceedings pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any Subsidiary, or
any property of Borrower or any Subsidiary, at law or in equity, by or
before any court or any federal, State, county, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which could result in any material
adverse change in the business, operations, properties or in the
condition, financial or otherwise, of Borrower, and neither Borrower nor
any Subsidiary is, to Borrowers knowledge, in default with respect to
any judgment, order, writ, injunction, decree, rule or regulation of any
court or any federal, State, county, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which could have a material adverse effect on
Borrower.
4.06 Financial Condition. (a) None of Borrower and
Subsidiaries is insolvent (as defined in Section 101 of the United States
Bankruptcy Code), unable to pay its debts as they mature or engaged in
business for which its property is an unreasonably small capital.
(b) None of Borrower and Subsidiaries is or has been
the subject of any bankruptcy, reorganization, insolvency, readjustment
of debt, trusteeship, receivership, dissolution or liquidation law, statute
or proceeding.
(c) The financial statements of Borrower for the fiscal
years ending December 31, 1994, and December 31, 1995, and the Form
10-Q filed by Borrower with the Securities and Exchange Commission for
the quarterly accounting period ending March 31, 1996, and heretofore
delivered to Bank are true and complete, fairly present the financial
condition of Borrower as at such dates and the results of its operations
for the periods then ended and were prepared in accordance with GAAP
applied on a consistent basis for prior periods. There is no Indebtedness
of Borrower as of the date of such statements which is not reflected
therein and no material adverse change in the operations or financial
condition of Borrower has occurred since the date of such statements.
The pro forma income statements of Borrower for the years ending
December 31, 1996, December 31, 1997, December 31, 1998, and
December 31, 1999, heretofore delivered to Bank, are complete and fairly
present Borrowers projections for such periods, subject to the
assumptions set forth therein (which assumptions Borrower believes to be
reasonable) and which projections Bank recognizes to be uncertain and
subject to change.
4.07 Taxes. Borrower and each Subsidiary has paid or caused
to be paid all federal, State, local and foreign taxes to the extent that
such taxes have become due and has filed or caused to be filed all
federal, State, local and foreign tax returns which are required to be filed
by Borrower and each Subsidiary. Without limitation of the foregoing,
Borrower represents and warrants to Bank that it has paid and discharged
all gallonage taxes on beer (including, without limitation, those taxes
imposed under Section 5051 of the Code) within the time limits imposed
by applicable law (including, without limitation, those time limits
imposed pursuant to Section 5061 of the Code).
4.08 Title to Properties. Borrower has good and marketable
title to all of its properties and assets (including the Collateral) and all
of the properties and assets of Borrower are free and clear of Liens,
except for Permitted Liens.
4.09 Place of Business. Borrowers only places of business
are located at the Business Premises and Borrowers chief executive
office is currently located at 103 South Carroll Street, Frederick,
Maryland 21701. Upon the commencement of Borrowers lease with Blue
II with respect to the New Business Premises, the chief executive office
of Borrower will be located at the New Business Premises. Borrower
will not change such location(s) or have or maintain any other place of
business without Banks prior written consent.
4.10 Financial Information. All financial statements,
schedules, reports and other information supplied to Bank by or on behalf
of Borrower heretofore and hereafter are and will be true and complete.
4.11 Subsidiaries. Except for Subsidiaries hereafter formed
or acquired with Banks prior written consent, there are and will be no
Subsidiaries.
4.12 Licenses and Permits. Borrower and each Subsidiary
that is not an individual has duly obtained and now holds all licenses,
permits, certifications, approvals and the like required by federal, State
and local laws of the jurisdictions in which Borrower and each
Subsidiary conducts its business and each remains valid and in full force
and effect.
4.13 Certain Indebtedness. There is no Indebtedness of
Borrower owing to any employee, officer, stockholder or director of
Borrower other than accrued salaries, commissions and the like except as
disclosed in Borrowers Prospectus dated March 5, 1996, under Certain
Transactions - Related Party Transactions.
4.14 Brokers or Finders Commissions. No brokers or
finders fee or commission is or will be payable in connection with this
Agreement or the transactions contemplated hereby, and Borrower agrees
to save harmless and indemnify Bank from and against any claim,
demand, action, suit, proceeding or liability for any such fee or
commission, including any costs and expenses (including attorneys fees)
incurred by Bank in connection therewith. The provisions of this
Subsection shall survive the termination of this Agreement and Banks
security interest hereunder and the payment of all other Obligations.
4.15 Outstanding Indebtedness; Defaults. Borrower has no
outstanding Indebtedness except as permitted by Subsection 7.01 hereof.
None of Borrower and Subsidiaries is in default under any instrument,
contract, agreement, indenture, mortgage, deed of trust or other document
or obligation to which Borrower or any Subsidiary is a party or by which
any one or more of them, or any of their property, is bound.
4.16 Regulation U. Neither Borrower nor any Subsidiary
owns or presently intends to acquire any margin stock as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal
Reserve System. None of the proceeds of any advances hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry a margin stock or for
any other purpose which might constitute this transaction a purpose
credit within the meaning of Regulation U.
4.17 Employee Matters. (a) With respect to each employee
pension benefit plan, as defined in Section 3(2) of the ERISA (a
Retirement Plan), established or maintained or to which contributions
have been made by or for Borrower, or any Subsidiary (including, for
purposes of this Section, any other entity, whether or not incorporated,
which is part of a controlled group including Borrower or which is under
common control with Borrower, as defined in Sections 414(b) and (c) of
the Code): (i) the Retirement Plan, including all amendments, is the
subject of a favorable determination letter from the Internal Revenue
Service (or an application for such a letter is presently pending); (ii) the
Retirement Plan is and has at all times been qualified, in form and
operation, under Section 401(a) of the Code; (iii) the Retirement Plan is
and has at all times been administered, maintained and operated in
compliance with its terms and with all applicable provisions of the Code,
ERISA and all other applicable federal, state and local laws (and all rules
and regulations promulgated thereunder); (iv) neither Borrower nor any
Subsidiary, nor, to the knowledge of any director or officer of Borrower
or any Subsidiary, any other person or entity who or which is a party in
interest as defined in Section 3(14) of ERISA, or a disqualified person as
defined in Section 4975(e)(2) of the Code, has acted or failed to act with
respect to the Retirement Plan in any manner which constitutes a breach
of fiduciary responsibility within the meaning of Title I, Part 4 of
ERISA, a prohibited transaction within the meaning of Section 4975 of
the Code or Sections 406 through 408 of ERISA, or any other violation of
ERISA; (v) no contributions to the Retirement Plan are past due; (vi) no
proceedings, investigations, filings or other matters are pending before
the Internal Revenue Service, the Department of Labor or any court with
respect to the Retirement Plan or the operation thereof; (vii) if the
Retirement Plan is a multiemployer plan, as defined in Sections 3(37) or
4001(a)(3) of ERISA, neither Borrower nor any Subsidiary has incurred,
and neither Borrower nor any Subsidiary expects to incur, any withdrawal
liability which has not been satisfied in connection with any complete or
partial withdrawal from the Retirement Plan occurring on or before the
date hereof; and (viii) if subject thereto, the Retirement Plan has been
funded in accordance with the minimum funding standards described in
Section 412 of the Code and Title I, Subtitle B, Part 3 of ERISA (for
which purpose there is no accumulated funding deficiency), and in
accordance with principles that are actuarially sound for such Retirement
Plan.
(b) With respect to each Retirement Plan which is a
defined benefit plan, as defined in Section 3(35) of ERISA: (i) no event
has occurred within the l2 month period preceding the date hereof, or, to
the knowledge of any director or officer of Borrower or any Subsidiary is
threatened or about to occur, which would materially adversely affect the
actuarial status of the Retirement Plan; (ii) no fact exists in connection
with the Retirement Plan (or with respect to any other defined benefit
plan maintained by Borrower or any Subsidiary at any time after
September 2, 1974) which constitutes a reportable event (other than those
for which notice has been waived by the Pension Benefit Guaranty
Corporation (the PBGC)) under Section 4043(b) of ERISA or which
constitutes grounds for termination by, or other liability to, the PBGC
pursuant to Title IV of ERISA; (iii) all premiums due the PBGC have
been timely paid; and (iv) if the Retirement Plan were terminated, the
termination would qualify under the standard termination procedure, as
described in Section 4041(b) of ERISA (and Part 2617 of the PBGC
regulations), without payment of any additional contributions by
Borrower or any Subsidiary.
(c) With respect to each employee welfare benefit
plan, as defined in Section 3(1) of ERISA (a Welfare Plan), established
or maintained or to which contributions have been made by or for
Borrower or any Subsidiary: (i) the Welfare Plan is and has at all times
been administered, maintained and operated in compliance with its terms
and with all applicable provisions of ERISA and the Code (including the
continuation coverage requirements for group health plans, commonly
known as COBRA requirements, under Sections 106(b), 162(i)(2) &
(3), and 162(k) of the Code and Sections 601-607 of ERISA) and all other
applicable federal, state and local laws (and all rules and regulations
promulgated thereunder); (ii) neither Borrower nor any Subsidiary nor to
the knowledge of any director or officer of Borrower or any Subsidiary,
any other person or entity who or which is a party in interest as defined
in Section 3(14) of ERISA, has acted or failed to act with respect to the
Welfare Plan in any manner which constitutes a breach of fiduciary
responsibility within the meaning of Title I, Part 4 of ERISA, a
prohibited transaction within the meaning of Sections 406 through 408 of
ERISA, or any other violation of ERISA; (iii) no contributions to the
Welfare Plan are past due; (iv) no proceedings, investigations, filings or
other matters are pending before the Department of Labor or any court,
with respect to the Welfare Plan or the operation thereof; and (v) the
Welfare Plan is either unfunded or is funded solely through insurance
contracts.
(d) All Retirement Plans and Welfare Plans (jointly
Benefit Plans) are in substantial compliance with all applicable
reporting, disclosure and other requirements of the Code and ERISA.
(e) There are no actions, suits or claims pending or, to
the best knowledge of Borrower or any Subsidiary, threatened with
respect to any Benefit Plan, or any administrator or fiduciary thereof.
(f) There are no strikes, work stoppages, material
grievance proceedings or other material controversies pending, imminent
or, to Borrowers knowledge and belief, threatened between Borrower and
any employees of Borrower or between Borrower and any union or other
collective bargaining unit representing employees of Borrower.
4.18 Compliance With Laws. Except as disclosed in
Borrowers Prospectus dated March 5, 1996, under Business - Legal
Proceedings, none of Borrower and Subsidiaries is in violation of, or
under investigation with respect to or threatened to be charged or given
notice of a violation of, any applicable law, rule, regulation, order or
judgment relating to any of its businesses, properties or operations,
including, without limitation, ERISA, any law, rule, regulation or order
regarding the collection, payment and deposit of employees income,
unemployment and social security taxes or of sales, use or excise taxes,
any Environmental Laws, any laws pertaining to occupational safety and
health or any laws relating to public health.
4.19 Representations. All representations and information
heretofore made or supplied to Bank by or on behalf of Borrower or any
Subsidiary, including, without limitation, all representations and
information heretofore made or supplied to Bank pursuant to or in
connection with this Agreement or any of the Other Agreements or in
connection with the Blue II Bond Financing and/or the Frederick Bond
Financing, were, at the time made or supplied to Bank, true and complete
in all material respects, and all representations and information hereafter
made or supplied to Bank by or on behalf of Borrower or any Subsidiary,
including, without limitation, all representations and information
hereafter made or supplied to Bank pursuant to or in connection with this
Agreement or any of the Other Agreements or in connection with the Blue
II Bond Financing and/or the Frederick Bond Financing, will be, at the
time made or supplied to Bank, true and complete in all material
respects.
5. CONDITIONS OF LENDING
Unless Bank shall otherwise agree, Bank shall have no
obligation to advance any funds to Borrower hereunder unless each of the
following conditions precedent shall be satisfied as provided below or
waived by the Bank in writing:
5.01 Documents. There shall have been delivered to Bank,
appropriately completed and duly executed (when applicable), the
following, each in form and substance satisfactory to Bank: (a) the Note;
(b) a certificate of the Secretary of Borrower to the effect that
resolutions in form and content satisfactory to Bank authorizing the
transactions contemplated hereby have been duly adopted and remain in
full force and effect; (c) evidence satisfactory to Bank that all insurance
coverages and all insurance clauses or endorsements required pursuant to
this Agreement and the Other Agreements are in effect, together with
copies of all insurance policies and endorsements; (d) a written opinion
of counsel to Borrower, dated as of Closing and addressed to Bank,
relating to such matters in connection with the transactions contemplated
hereby as may be required by Bank; (e) such financing statements,
assignments of copyrights, patents and trademarks and special powers of
attorney in connection therewith as may be required by Bank; (e) a
written agreement of the owner and landlord of each Business Premises
and each storage location maintained by Borrower which is not owned by
Borrower (including, without limitation, the New Business Premises)
consenting to Banks security interest and enforcement of Banks rights
in connection therewith; and (f) copies of all lease(s) to Borrower of any
Business Premises not owned by Borrower (including, without limitation,
the New Business Premises).
5.02 No Default. At Closing and at the time of every
subsequent advance under this Agreement, Bank shall be fully satisfied
that (a) all of the covenants, conditions, warranties and representations
set forth herein and in the Other Agreements have been complied with
and are true and complete on and as of such time with the same effect as
though such covenants, conditions, warranties and representations had
been made on and as of such time, (b) no Default and no Event of Default
shall have occurred, and (c) the documents and matters required to be
executed, delivered and/or Certified pursuant to Subsection 5.01 hereof
shall be in full force and effect and/or true and complete, as the case may
be.
5.03 Legal Matters. At Closing, all legal matters in
connection therewith or incidental thereto shall be fully satisfactory to
Banks counsel.
5.04 Related Transactions. All agreements, documents and
instruments executed and/or delivered in connection with (a) the
Frederick Bond Financing, (b) the Blue II Bond Financing, and (c) the
leasing of the New Business Premises from Blue II to Borrower shall be
satisfactory to Bank and all things required to be done by the parties
thereto at or prior to closing thereunder shall be done prior to or
contemporaneously with Closing hereunder. Without limitation of the
foregoing, Bank shall have no obligation to advance any funds to
Borrower hereunder unless and until MEDCO shall have advanced to
Borrower the full amount of the proceeds from the sale of the Bond and
such amount shall have been applied to the purchase of brewing
equipment for use at the Business Premises.
5.05 SBA Commitment. Bank shall have received a
commitment, in form and substance satisfactory to Bank, from the Mid-
Atlantic Business Finance Company to provide from the U.S. Small
Business Administration (the SBA) 504 program equipment loan
financing in an amount sufficient to repay the Loan on the Loan Maturity
Date (the SBA Loan). Such commitment shall further provide that the
obligations of Borrower with respect to the SBA Loan (and Liens on
property of Borrower securing such Loan) shall be subordinated to the
obligations of Borrower in connection with the Frederick Bond Financing
(and Liens on property of Borrower securing such obligations).
5.06 Financial Condition at Closing. The financial condition
of Borrower shall be satisfactory to Bank and there shall have been
delivered to Bank such written statements, schedules or reports in such
form, containing such information and accompanied by such documents as
may be satisfactory to Bank concerning the financial condition of
Borrower, any of the Collateral or any other matter or matters as Bank
may require.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees with Bank that, until (a) all
Obligations have been paid in full and (b) there exists no commitment by
Bank which could give rise to any Obligations, Borrower will:
6.01 Financial Statements. Furnish to Bank in writing:
(a) as soon as available but in no event more than 30 days after the end
of each monthly accounting period of Borrower, a consolidated and
consolidating statement of income and retained earnings of Borrower and
any Subsidiaries for such period and for the period from the beginning of
the current fiscal year of Borrower to the end of each period, and a
consolidated and consolidating statement of cash flows of Borrower and
any Subsidiaries for such period and for the period from the beginning of
the current fiscal year of Borrower to the end of each period, and a
consolidated and consolidating balance sheet of Borrower and any
Subsidiaries as at the end of such period, setting forth in each case in
comparative form figures for the budgeted results for such period and,
commencing with the statements for the period ending April 30, 1997,
figures for the corresponding periods in the preceding fiscal year of
Borrower, all in detail and scope satisfactory to Bank, prepared in
accordance with GAAP consistently applied, Certified by the chief
financial officer of Borrower and accompanied by a certificate of that
officer stating whether any Default or Event of Default has occurred and,
if so, stating the facts with respect thereto; (b) as soon as available but
in no event more than 90 days after the end of each fiscal year of
Borrower, a consolidated and consolidating statement of income and
retained earnings of Borrower and any Subsidiaries for such year, and a
consolidated and consolidating statement of cash flows of Borrower and
any Subsidiaries for such year, and a consolidated and consolidating
balance sheet of Borrower and any Subsidiaries as at the end of such
year, setting forth in each case in comparative form corresponding
figures for the preceding fiscal year of Borrower, all in detail and scope
satisfactory to Bank, prepared in accordance with GAAP consistently
applied and examined and audited by Coopers & Lybrand, LLP, or such
other independent certified public accountants satisfactory to Bank in its
discretion reasonably exercised, accompanied by a report of such
independent certified public accountants with respect to such financial
statements which is in accordance with GAAP, and accompanied by a
certificate of the chief financial officer of Borrower stating whether any
Default or Event of Default has occurred and, if so, stating the facts with
respect thereto; and (c) promptly upon transmission thereof, copies of
any financial statements, proxy statements, reports and the like which
Borrower or any Subsidiary sends to its shareholders and copies of all
registration statements (with exhibits) and all regular, special or periodic
reports which Borrower or any Subsidiary files with the United States
Securities and Exchange Commission (or any governmental body or
agency succeeding to the functions of the United States Securities and
Exchange Commission) or with any national stock exchange on which any
of Borrowers or any Subsidiarys securities are listed and copies of all
press releases and other statements made available by Borrower or any
Subsidiary to the public concerning material developments in the
business of Borrower and/or any Subsidiary.
6.02 Taxes. Pay and discharge, and cause each Subsidiary to
pay and discharge, all taxes, assessments and governmental charges upon
Borrower and each Subsidiary, its income and properties, prior to the
date on which penalties attach thereto unless and to the extent only that
the same are being diligently contested by Borrower or a Subsidiary, as
the case may be, in good faith by appropriate proceedings, provided,
however, that (a) Bank shall have been given reasonable prior written
notice of intention to contest, (b) nonpayment of the same will not, in
Banks sole discretion, materially impair any of the Collateral or Banks
rights or remedies with respect thereto or the prospect for full and
punctual payment of all of the Obligations, (c) no notice of lien with
respect thereto is filed in any recording office, (d) Borrower or such
Subsidiary at all times effectively stays or prevents any official or
judicial sale of or action against any of the Collateral by reason of
nonpayment of the same, and (e) Borrower or such Subsidiary establishes
reasonable reserves for any liabilities being contested and for expenses
arising out of such contest in accordance with GAAP. Notwithstanding
the foregoing, Borrower unconditionally covenants to pay and discharge
all gallonage taxes on beer (including, without limitation, those taxes
imposed under Section 5051 of the Code) within the time limits imposed
by applicable law (including, without limitation, those time limits
imposed pursuant to Section 5061 of the Code).
6.03 Corporate Existence, Continuation of Business and
Compliance with Laws. Maintain, and cause each Subsidiary to maintain,
its corporate existence in good standing; maintain, and cause each
Subsidiary to maintain, in good standing its qualification to do business
in each jurisdiction in which such qualification is required by law;
continue, and cause each Subsidiary to continue, its business operations
as now being conducted; and comply with, and cause each Subsidiary to
comply with, all applicable federal, State and local laws, rules,
ordinances, regulations and orders (including, without limitation, ERISA
and all Environmental Laws).
6.04 Litigation. Promptly notify Bank in writing of any
action, suit or proceeding at law or in equity by or before any court,
governmental agency or instrumentality which could result in any
material adverse change in the business, operations, properties or assets
or in the condition, financial or otherwise, of Borrower or any
Subsidiary.
6.05 Extraordinary Loss; Change in Condition. Promptly
notify Bank in writing of (a) any event causing extraordinary loss or
depreciation of the value of Borrowers or any Subsidiarys assets
(whether or not insured) and the facts with respect thereto, and (b) the
occurrence of any material adverse change in Borrowers or any
Subsidiarys business, assets, operations, business prospects or financial
condition.
6.06 Books and Records. Keep and maintain, and cause each
Subsidiary to keep and maintain, proper and current books and records in
accordance with GAAP consistently applied and permit access by Bank
to, reproduction by Bank of, copying by Bank from, and verification (by
such means, including audits, as Bank may determine at Banks sole
expense) by Bank of any information contained in, such books and
records.
6.07 Maintenance of Properties. Maintain, and cause each
Subsidiary to maintain, all properties and improvements necessary to the
conduct of its business in good working order and condition, ordinary
wear and tear excepted, and cause replacements and repairs to be made
when necessary for the proper conduct of its business.
6.08 Patents, Franchises, etc. Maintain, preserve and protect
all licenses, patents, franchises, trademarks and trade names of Borrower
and each Subsidiary or licensed by Borrower or any Subsidiary which are
necessary to the conduct of the business of Borrower or any Subsidiary as
now conducted, free of any conflict with the rights of any other person.
Without limitation of the foregoing, Borrower shall have the duty (a) to
pay all taxes, fees or other amounts necessary to maintain in full force
and effect all of the Intellectual Property, (b) to prosecute in a
commercially reasonable manner any application or registration of the
Intellectual Property pending as of the date hereof or thereafter until this
Agreement is no longer in effect, (c) to make application or registration
on copyrights and trademarks which have not been registered but which
may be registered, as appropriate, (d) to preserve and maintain all rights
in applications and registrations of the Intellectual Property, and (e) to
take all steps as required by Bank to perfect any Liens acquired by Bank
pursuant to Subsection 3.02(m) hereof, including, without limitation,
filing and recording such new collateral assignments as may be required
by Bank. Any expenses incurred in connection with such applications
shall be borne by Borrower, and Bank shall have no obligation or
liability to pay any taxes or fees nor shall Bank have any duties in
connection with applications or maintenance of rights in the Intellectual
Property.
6.09 Insurance. (a) Maintain or cause to be maintained
(i) comprehensive casualty insurance policies insuring the Collateral, all
other property of Borrower and all property of each Subsidiary against
loss by fire, theft, explosion, collision and such other risks, in such
amounts, subject to such loss deductible amounts and with such
responsible insurance companies as may be satisfactory to Bank, in
Banks discretion exercised in good faith, and, in all events, against such
risks, in such amounts and subject to such loss deductible amounts as are
customary in Borrowers or such Subsidiarys industry, as applicable,
and in such minimum amounts that neither Borrower nor any Subsidiary
will be deemed a coinsurer under applicable insurance laws, regulations,
policies or practices; provided, however, that notwithstanding anything
in this Agreement to the contrary, Borrower shall not be required to
obtain receivables insurance., and (ii) endorsements to such insurance
policies satisfactory to Bank, in Banks discretion exercised in good
faith, naming Bank as loss payee with respect to all Collateral insured
thereunder; (b) maintain or cause to be maintained (i) in the maximum
amount available, flood insurance policies insuring all property of
Borrower or any Subsidiary which is located in an area that has been, or
subsequently is, identified as having special flood or mudslide hazards
and in which the sale of flood insurance has been made available under
the National Flood Insurance Act of 1968, as amended from time to time,
and (ii) endorsements to such insurance policies satisfactory to Bank, in
Banks discretion exercised in good faith, naming Bank as loss payee
with respect to all Collateral insured thereunder; (c) maintain, and cause
each Subsidiary to maintain, in amounts and with responsible insurance
companies satisfactory to Bank, in Banks discretion exercised in good
faith, such additional insurance against such risks and subject to such
loss deductible amounts as may be satisfactory to Bank, in Banks
discretion exercised in good faith, including, without limitation, personal
injury and property damage liability insurance, automobile liability
insurance, product liability insurance, workers compensation insurance,
business interruption insurance, employee dishonesty insurance, and
directors and officers liability insurance, all such insurance in all
events to insure against such risks, in such amounts and subject to such
loss deductible amounts as are customary in Borrowers or such
Subsidiarys industry, as applicable; (d) maintain endorsements to all
insurance policies of Borrower and Subsidiaries naming Bank as
additional insured, which endorsements shall be satisfactory to Bank, in
Banks discretion exercised in good faith, and endorsements to such
policies satisfactory to Bank, in Banks discretion exercised in good
faith, providing that such policies may not be cancelled or materially
altered, and that Bank may not be removed as loss payee or additional
insured, without at least 30 days prior written notice to Bank; and
(e) deliver to Bank from time to time, and periodically if Bank shall so
require, evidence satisfactory to Bank that all insurance and policy
endorsements required pursuant to this Agreement and the Other
Agreements are in effect.
6.10 Information. (a) Deliver to Bank promptly upon Banks
request, and periodically if Bank shall so require, such written
statements, schedules or reports (which shall be Certified if required by
Bank) in such form, containing such information and accompanied by
such documents as may be satisfactory to Bank from time to time
concerning the Collateral, Borrowers or any Subsidiarys business,
assets, operations, business prospects or financial condition or any other
matter or matters, including, without limitation, copies of federal, State
and local tax returns of Borrower and Subsidiaries, and permit Bank, its
agents and designees, to discuss Borrowers or any Subsidiarys business,
assets, operations, business prospects or financial condition with
Borrowers or any Subsidiarys directors, officers, employees or agents;
and (b) promptly notify Bank in writing if any financial statement,
schedule, report, certificate or information previously or hereafter
supplied to Bank by or on behalf of Borrower or any Subsidiary,
including, without limitation, any of the same previously or hereafter
supplied to Bank pursuant to or in connection with this Agreement or any
of the Other Agreements or any transaction involving or affecting
Borrower or any Subsidiary , shall, to Borrowers knowledge or belief,
subsequently become inaccurate or misleading in any material respect.
6.11 Use of Proceeds. Use the proceeds of advances made
under the Loan only for the purchase of brewing equipment for use at the
New Business Premises and to pay the costs, expenses and fees payable
by Borrower under this Agreement and the Other Agreements.
6.12 Notice of Event of Default. Immediately notify Bank of
the occurrence of any Default or Event of Default and the facts with
respect thereto.
6.13 Employee Benefit Plans. (a) At all times administer,
maintain and operate, and cause each Subsidiary at all times to
administer, maintain and operate, each of its Benefit Plans in conformity
with all applicable provisions of ERISA and other federal and state
statutes relating to employee benefit plans (including the continuation
coverage requirements of ERISA and the Code for group health plans
under Sections 106(b), 162(i)(2) & (3), and 162(k) of the Code and
Sections 601-607 of ERISA); (b) at all times make, and cause each
Subsidiary at all times to make, all required contributions and premium
payments under each Benefit Plan for all periods after the date hereof;
(c) comply with, and cause each Subsidiary to comply with, all
applicable reporting, disclosure and other requirements of ERISA and the
Code as they relate to Benefit Plans, and furnish Bank with copies of all
reports filed in connection therewith promptly after the filing thereof;
(d) notify Bank immediately of any fact, including, without limitation,
any reportable event under Section 4043(b) of ERISA, arising in
connection with any Retirement Plan which might constitute grounds for
the termination thereof by the PBGC; and (e) furnish to Bank, promptly
upon its request therefor, such additional information concerning any
Benefit Plan as Bank may request.
6.14 Environmental Laws. (a) At all reasonable times (after
prior notice to Borrower (which may be given orally by telephone) if no
Default or Event of Default shall have occurred), permit Bank, and its
agents and designees, to enter upon and inspect all business premises
owned, leased, subleased, occupied, operated or used by Borrower or any
Subsidiary, and to conduct thereon, at Borrowers expense, such audit
tests and examinations, including subsurface exploration and testing, as
Bank may deem necessary to determine whether Borrowers or such
Subsidiarys ownership, tenancy, occupation, operation and/or use of the
premises, as the case may be, and the conduct of the activities engaged in
thereon, are in compliance with Environmental Laws; provided, however,
that Borrower shall not be required to pay the expense of any such audit
test or examination more than once in any twelve-month period unless (i)
an Event of Default shall have occurred, (ii) such audit or examination is
required to be performed pursuant to any statute, law, regulation or order
of any regulatory authority, or (iii) Bank in good faith believes that there
is a reasonable basis for believing that a violation of the provisions of
this Subsection 6.14 has occurred; (b) maintain, and cause all operators,
tenants, subtenants, licensees and occupants of all property owned,
leased, subleased, occupied, used or operated by Borrower or any
Subsidiary to maintain, all such property free of all Hazardous
Substances, and prevent all such property from being used for the
manufacture, generation, production, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous
Substances; (c) promptly upon its receipt thereof, provide Bank with
copies of all reports prepared by governmental and regulatory agencies,
and all environmental auditors, engineers and others relating to or in
connection with Borrowers compliance with Environmental Laws; and
(d) notify Bank in writing, promptly upon learning thereof, of (i) any
notice that Borrower is not in compliance in any material respect with all
terms and conditions of all permits, licenses and authorizations which are
required under Environmental Laws, or that Borrower is not in
compliance in any material respect with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental
Laws, and (ii) any notice or claim of any civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or threatened against
Borrower relating in any way to Environmental Laws.
6.15 Current Assets/Liabilities. Maintain a ratio of current
assets to current liabilities of not less than (a) 1.25 to 1 as of September
30, 1996, and as of the end of each calendar quarter thereafter to (and
including) the calendar quarter ending September 30, 1997, and (b) 1.5 to
1 as of December 31, 1997, and as of the end of each calendar quarter
thereafter.
6.16 Tangible Net Worth. Maintain tangible net worth of not
less than, and a ratio of debt to tangible net worth of not greater than (a)
$2,000,000.00 and 3.25 to 1, respectively, as of September 30, 1996, and
as of the end of each calendar quarter thereafter to (and including) the
calendar quarter ending September 30, 1997, (b) $2,500,000.00 and 3.0 to
1, respectively, as of December 31, 1997, and as of March 31, 1998, and
(c) $2,500,000.00 and 2.5 to 1, respectively, as of June 30, 1998, and as
of the end of each calendar quarter thereafter.
6.17 Cash Flow/Current Funded Debt. Maintain a ratio of
cash flow to debt service of not less than (a) 1.5 to 1.0 tested as of
December 31, 1997, as of March 31, 1998, as of June 30, 1998, as of
September 30, 1998, and December 31, 1998, and (b) 2.0 to 1.0 tested as
of March 31, 1999, and as of the end of each calendar quarter thereafter.
For purposes hereof, cash flow shall mean net profits plus depreciation
and amortization expense of Borrower, and shall be measured (x) as of
December 31, 1997, for the calendar quarter then ending, and (y) as of
the end of each calendar quarter thereafter, on a cumulative year-to-date
basis. For purposes hereof, debt service shall mean, for each period
during which cash flow is measured, the current portion of long term debt
of Borrower (including, without limitation, the current portion of capital
lease obligations) due and/or paid during such period.
7. NEGATIVE COVENANTS
Borrower covenants and agrees with Bank that, until (a) all
Obligations have been paid in full, and (b) there exists no commitment by
Bank which could give rise to any Obligations, Borrower will not,
directly or indirectly, without Banks prior written consent:
7.01 Indebtedness. Create, incur, assume or permit to exist
any Indebtedness except (a) Indebtedness to Bank, (b) current
Indebtedness incurred in the ordinary course of business,
(c) Indebtedness to MEDCO in connection with the Frederick Bond
Financing, (d) existing Indebtedness disclosed herein or previously
disclosed by Borrower to Bank in writing, and (e) Indebtedness which
shall be consented to by Bank in writing in advance, in Banks sole
discretion and, if required by Bank, subordinated to the Obligations by a
written agreement satisfactory to Bank in form and substance.
7.02 Liens. Create, incur, assume or permit to exist, directly
or indirectly, any Lien upon any of Borrowers properties or assets, now
owned or hereafter acquired by Borrower, other than Permitted Liens.
7.03 Merger, Sale of Assets, etc. Enter into or be a party to
any merger, consolidation or share exchange, or suffer or permit to occur
any merger, consolidation or share exchange to which any Subsidiary is a
party, or suffer or permit any of Borrowers business, assets, operations
or books and records to be merged, consolidated or commingled with any
business, assets, operations or books and records of any other person;
sell, assign, transfer, convey or lease any interest in all or any
substantial part of its property except in the ordinary course of
Borrowers business as now being conducted; purchase or otherwise
acquire, or suffer or permit the purchase or acquisition by any Subsidiary
of, all or substantially all of the assets of any other person, any assets of
any other person in a transaction which is subject to the Bulk Transfers
Title of the Uniform Commercial Code of any jurisdiction, or any shares
of stock of, or similar interest in, any other person; or enter into any
transaction with any Affiliate except for transactions with Affiliates
entered into in the ordinary course of Borrowers business on terms no
less favorable to Borrower than would apply in a comparable arms
length transaction with a person that is not an Affiliate. Notwithstanding
the foregoing, Bank agrees that during the first eighteen (18) months
after the date hereof, Borrower may sell in an arms-length transaction or
transactions (collectively, the Permitted Equipment Dispositions)
Equipment located at the Existing Business Premises on the date hereof
(but in any event excluding any Equipment directly or indirectly
purchased in whole or in part with the proceeds of the Frederick Bond
Financing or the Loan).
7.04 Guaranties. Guarantee or otherwise in any way become
or be responsible for obligations or Indebtedness of any other person,
whether by agreement to purchase the Indebtedness of any other person,
by agreement for the furnishing of funds to any other person for the
purchase of goods, supplies or services, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or
discharging Indebtedness of any other person, or otherwise, except that
Borrower may endorse negotiable drafts for collection in the ordinary
course of business.
7.05 Investments. Make any capital contribution to any other
person or purchase or acquire a beneficial interest in any stock,
securities or evidences of Indebtedness of, or make any investment or
acquire any interest in, any other person, except (i) investments in
federally insured certificates of deposit, (ii) direct obligations of the
United States of America maturing within one year from the date of
acquisition, and (iii) repurchase agreements with Bank.
7.06 Fiscal Year. Change Borrowers fiscal year.
7.07 Loan. Make or permit to exist any loan to any person,
not including advances for travel and the like made to officers and
employees in the ordinary course of business.
7.08 Subsidiaries. Form or acquire any Subsidiary.
7.09 Change of Name. Change the name of Borrower or
permit any Subsidiary to change such Subsidiarys name.
7.10 Trade Names. Use any trade name other than
Borrowers true corporate name or permit any Subsidiary to use any trade
name other than such Subsidiarys true corporate name.
7.11 Employee Pension Plans. With respect to any
Retirement Plan: (a) engage, or knowingly permit any party in interest
(as defined in Section 3(l4) of ERISA) or any disqualified person (as
defined in Section 4975(e)(2) of the Code) to engage, in any prohibited
transaction; (b) knowingly incur, or permit any Subsidiary to knowingly
incur, any accumulated funding deficiency under Section 302 of ERISA
or Section 412 of the Code, whether or not waived; (c) terminate, or
permit any Subsidiary to terminate, any Retirement Plan in a manner
which could result in the imposition of a Lien on any property of
Borrower or any Subsidiary pursuant to Section 4068 of ERISA; or
(d) take, or permit any Subsidiary to take, any action which would
adversely affect the qualification of any Retirement Plan.
7.12 Sale-Leaseback. Except for leases in existence on the
date hereof and previously disclosed to Bank in writing, and renewals or
extensions thereof, become or be, or suffer or permit any Subsidiary to
become or be, liable as lessee with respect to any lease of any property
(real, personal or mixed) which has been or is to be sold or transferred
by Borrower or such Subsidiary to any person or which Borrower or such
Subsidiary intends to use for substantially the same purpose as any other
property which has been or is to be sold or transferred by Borrower to
any person in connection with such lease.
7.13 Stock Redemptions. Purchase, redeem, retire or
otherwise acquire for value any shares of Borrowers capital stock or any
other equity interest in Borrower, or suffer or permit any Subsidiary to
purchase, redeem or otherwise acquire or retire for value any shares of
such Subsidiarys capital stock or any other equity interest in such
Subsidiary.
7.14 Leases. Become or be liable as lessee with respect to
any lease of any property, real, personal or mixed; provided, however,
that Banks consent shall not be required in connection with (a) leases in
existence on the date hereof and previously disclosed to Bank in writing
and renewals or extensions thereof, (b) leases of equipment described on
Schedule 2 attached hereto and incorporated herein (provided, however,
that the value of such equipment shall not exceed
$427,500.00 in the aggregate), and (c) such other leases which do not
involve the lease of any property with a value in excess of $25,000.00 in
any one instance, or $100,000.00 in the aggregate over any twelve-month
period.
7.15 Dividends. Directly or indirectly declare or pay any
dividend on, or make any other distribution with respect to (whether by
reduction of capital or otherwise), any shares of its capital stock.
7.16 Asset Investments. Except for assets to be acquired
with the proceeds of the Loan and/or the Frederick Bond Financing, make
any investment(s) in noncurrent assets (which shall include fixed assets
and capitalized value of leased equipment and leased real property)
during any twelve-month period which exceeds $50,000.00.
7.17 Funded Debt. Redeem, call for redemption, purchase or
otherwise acquire or retire, directly or indirectly, or make any optional
prepayment of principal on, any Funded Debt (other than Funded Debt
payable to Bank), or amend, alter or otherwise modify the provisions
relating to any Funded Debt, if the effect of such amendment, alteration
or other modification would or might be to accelerate such Funded Debt.
For purposes of this Subsection, Funded Debt shall include any
obligation of Borrower to any person payable more than one year from
the date of its creation which, under GAAP, is shown on the balance
sheet as a liability (excluding reserves for deferred income taxes and
other reserves to the extent that such reserves do not constitute an
obligation). Notwithstanding the foregoing, Borrower shall be permitted
to prepay any Funded Debt secured by the Equipment sold in any
Permitted Equipment Disposition; provided, however, that such Funded
Debt may only be prepaid from the proceeds of such Dispositions.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events
shall constitute an Event of Default:
(a) Any representation or information previously or
hereafter made or supplied to Bank by or on behalf of Borrower or any
Subsidiary, including, without limitation, any representation or
information previously or hereafter made or supplied to Bank pursuant to
or in connection with this Agreement or any of the Other Agreements or
any transaction with Bank involving or affecting Borrower or any
Subsidiary, shall prove to have been, when made or supplied, false or
misleading in any respect deemed material by Bank in good faith.
(b) Failure of Borrower to pay any of the Obligations,
including, without limitation, any sum due Bank under this Agreement or
any of the Other Agreements, when and as the same shall become due,
whether at the due date thereof, by demand, by acceleration or otherwise,
and such failure shall remain uncured for a period of 10 days after Bank
shall have made written demand therefore.
(c) Occurrence of a default or event of default by Borrower
or any Subsidiary with respect to, or acceleration or demand for payment
prior to maturity of, any Indebtedness of Borrower or any Subsidiary to
any person which is deemed material by Bank in good faith, or with
respect to any Lien securing any Indebtedness of Borrower or any
Subsidiary to any person which is deemed material by Bank in good faith.
(d) Failure of Borrower or any Subsidiary to observe or
perform any warranty, covenant, condition or agreement to be observed
or performed by Borrower or such Subsidiary under this Agreement or
any of the Other Agreements.
(e) Borrower or any Subsidiary shall (i) admit in writing its
insolvency or its inability to pay its debts as they mature, (ii) make a
general assignment for the benefit of creditors, whether conditional or
unconditional and whether or not such assignment is filed in court and
whether or not any court assumes jurisdiction thereof, (iii) commence a
case under or otherwise seek to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or
liquidation law, statute or proceeding, or (iv) by any act indicate its
consent to, approval of or acquiescence in any such proceeding or the
appointment of any receiver of or trustee for Borrower or any Subsidiary
or a substantial part of its property, or suffer any such receivership,
trusteeship or proceeding to continue undismissed for a period of 60
days.
(f) Borrower or any Subsidiary shall become a debtor in any
case under any chapter of the United States Bankruptcy Code.
(g) Dissolution of, or entry of any order, judgment, award
or decree for the dissolution of, Borrower or any Subsidiary.
(h) Entry of any unstayed judgment, order, award or decree
against Borrower or any Subsidiary which is uninsured to an extent
deemed material by Bank in good faith, or which Bank determines in
good faith, when aggregated with all other judgments, orders, awards and
decrees outstanding against Borrower and Subsidiaries, could have a
material adverse effect on the business, assets, operations or financial
condition of Borrower or any Subsidiary, or on any rights of Bank with
respect to any of the Collateral or any of the Obligations, or on the
prospect for full and punctual payment and performance of all of the
Obligations.
(i) A court of competent jurisdiction shall issue an
injunction or restraint of Borrower or any Subsidiary in any manner from
conducting its business in whole or in part deemed material by Bank in
good faith.
(j) Any assets of Borrower or any Subsidiary deemed
material by Bank in good faith shall be attached, levied upon, seized or
repossessed or come into the possession of a trustee, receiver or other
custodian.
(k) An adverse change deemed material by Bank in good
faith shall occur with respect to the business, assets, operations or
financial condition of Borrower or any Subsidiary, or otherwise with
respect to the risks to Bank attending the Collateral, any commitments of
Bank which could give rise to any Obligations or the prospect for
payment in full of the Obligations, whether or not such adverse change
otherwise constitutes an Event of Default.
(l) [INTENTIONALLY OMITTED]
(m) Borrower or any Subsidiary shall be or become insolvent
(as defined in Section 101(31) of the United States Bankruptcy Code) or
unable to pay its debts as they mature.
(n) Termination or cancellation, without Banks prior
written consent, of any lease or sublease of Borrower or any Subsidiary
of any business premises of Borrower or any Subsidiary which Bank in
good faith deems material to the conduct of the business of Borrower or
any Subsidiary, including expiration of any such lease or sublease
without renewal or extension, or the occurrence of any event or condition
which could result in the termination or cancellation of any such lease or
sublease unless such event or condition is waived by all parties to the
lease or sublease and all other appropriate parties, or cured by Borrower
or such Subsidiary, as the case may be, in accordance with the provisions
of such lease or sublease.
(o) Termination of any contract, franchise, license, permit,
authorization, certificate or right of Borrower or any Subsidiary which
Bank in good faith deems material to Borrowers or such Subsidiarys
business, assets, operations or financial condition.
(p) Suspension or revocation of any license, permit,
certification, approval or the like required to be held by Borrower or any
Subsidiary by federal, State, local or foreign laws and which Bank in
good faith deems material to Borrowers or such Subsidiarys business,
assets, operations or financial condition.
(q) [INTENTIONALLY OMITTED]
(r) Kevin Brannon, Marjorie A. McGinnis or Steven T.
Nordahl shall for any reason (including death) cease to be the chief
executive officer, President and Vice President - Brewing Operations and
Brewmaster, respectively, of Borrower, unless, within 60 days thereafter,
Borrower shall have engaged a replacement officer who is satisfactory to
Bank in its discretion exercised in good faith.
(s) Occurrence of any default or event of default under or
as defined in (i) any of the Other Agreements, (ii) any document,
instrument or agreement executed in connection with the Frederick Bond
Financing, or (iii) any document, instrument or agreement executed in
connection with the Blue II Bond Financing. Without limitation of the
foregoing, the occurrence of any default or event of default under or as
defined in the lease of the New Business Premises between Blue II and
Borrower shall be an Event of Default hereunder.
(t) Borrower, any guarantor of all or any part of the
Obligations or any other person shall revoke or terminate, or attempt to
revoke or terminate, or notify Bank of revocation or termination of, any
continuing obligations or agreements of Borrower, such guarantor or such
other person relating in any way to any of the Obligations, including,
without limitation, any continuing obligations or agreements of
Borrower, such guarantor or such other person under any guaranty or
subordination agreement.
9. RIGHTS AND REMEDIES
9.01 Rights and Remedies of Bank. Upon the occurrence of
an Event of Default described in Subsections 8(e), 8(f) or 8(g) of this
Agreement, all of the Obligations shall automatically and immediately be
due and payable. Upon and after the occurrence of an Event of Default,
Bank may, without notice or demand, exercise in any jurisdiction in
which enforcement hereof is sought, the following rights and remedies, in
addition to the rights and remedies available to Bank under the Other
Agreements, the rights and remedies of a secured party under the
Uniform Commercial Code and all other rights and remedies available to
Bank under applicable law, all such rights and remedies being cumulative
and enforceable alternatively, successively or concurrently:
(a) Declare the Note, all interest accrued and unpaid
thereon and all other Obligations to be immediately due and payable and
the same shall thereupon become immediately due and payable without
presentment, demand for payment, protest or notice of any kind, all of
which are hereby expressly waived.
(b) Enforce the Liens granted to Bank hereunder and
under the Other Agreements by collecting or liquidating all or any part of
the Collateral or selling, assigning, leasing, renting, licensing or
otherwise disposing of all or any part of the Collateral or any interest
therein, in one or more parcels, at the same or different times, at public
or private sale or disposition, or otherwise.
(c) Establish and maintain at Bank, subject to Banks
customary arrangements and charges therefor as established by Bank from
time to time, a repayment account, which shall be under the exclusive
control of and subject to the sole order of Bank, and require Borrower to
deposit in the repayment account, not later than the first Banking Day
following the day on which the same are received by Borrower, as a
tender of payment of the Obligations or as security for any contingent or
future Obligations, all cash, checks, drafts, money orders and other items
of payment constituting Collateral, or collections or other proceeds of
Collateral.
(d) Institute any proceeding or proceedings to enforce
the Obligations and any Liens of Bank.
(e) Notify postal authorities to change the address for
delivery of mail addressed to Borrower to such address as Bank may
designate and receive, open and dispose of all mail addressed to
Borrower.
(f) Indorse Borrowers name on any promissory notes
or other instruments, acceptances, checks, drafts, money orders or other
items of payment constituting Collateral, or collections or other proceeds
of Collateral, that may come into Banks possession or control from time
to time.
(g) Sign Borrowers name on any invoices to, drafts
against and other notices and documents to account debtors or other
obligors of Borrower and requests for verification of accounts and other
amounts which may be due to Borrower.
(h) Execute proofs of claim and loss on behalf of
Borrower.
(i) Apply all Collateral and proceeds of Collateral
delivered to Bank or coming into Banks possession or control from time
to time to any of the Obligations, or hold the same as security for any
contingent or future Obligations.
(j) At Borrowers expense, continue or complete, or
cause to be continued or completed, performance of Borrowers
obligations under any contracts of Borrower.
(k) Use, operate, manage, control and exercise all
rights of Borrower relating to, the Collateral and any other assets of
Borrower, and collect all income and revenues therefrom.
(l) Terminate, or cease extending credit under, any or
all outstanding commitments or credit accommodations of Bank to
Borrower or any Subsidiary.
(m) Take exclusive possession of any or all of the
Collateral from time to time and/or place a custodian in exclusive
possession of any or all of the Collateral from time to time and, so far as
Borrower or the property owner may give authority therefor, enter upon
any premises on which any of the Collateral may be situated and remove
the same therefrom, Borrower hereby waiving any and all rights to prior
notice and to judicial hearing with respect to repossession of Collateral,
and/or require Borrower, at Borrowers expense, to assemble and deliver
any or all of the Collateral to such place or places as Bank may
reasonably request.
(n) With respect to any accounts, notes, instruments,
chattel paper, tax refunds, contract rights, general intangibles or other
debts or liabilities payable to Borrower securing the Obligations, notify
any account debtors and other obligors thereon to make payments thereon
directly to Bank, take control of the cash and noncash proceeds thereof,
demand, collect, sue for and receive any money or property at any time
due, payable or receivable on account thereof, compromise and settle
with any person liable thereon, and extend the time of payment or
otherwise change the terms thereof, without incurring liability or
responsibility therefor to Borrower or any guarantor of the all or any part
of the Obligations.
(o) Sue in its own name to enforce the Intellectual
Property, and any licenses thereunder, and, if Bank shall commence any
such suit, Borrower shall, at the request of Bank, do any and all lawful
acts and execute any and all proper documents required by Bank in aid of
such enforcement and Borrower shall promptly, upon demand, reimburse
and indemnify Bank for all costs and expenses incurred by Bank in the
exercise of its rights hereunder.
(p) Endorse Borrowers name on all applications,
documents, papers and instruments deemed necessary or desirable by
Bank in the use of the Intellectual Property; take any other actions with
respect to the Intellectual Property as Bank deems in the best interest of
Bank; grant or issue exclusive or non-exclusive licenses under the
Intellectual Property to any person; and assign, pledge, convey or
otherwise transfer title in or dispose of the Intellectual Property to any
person.
9.02 Disposition of Collateral. Borrower agrees that
commercial reasonableness and good faith require Bank to give Borrower
no more than ten days prior written notice of the time and place of any
public disposition of Collateral or of the time after which any private
disposition or any other intended disposition is to be made. All sales or
other dispositions of Collateral may be made for cash, upon credit or for
future delivery. In no event shall Borrower be credited with any part of
the proceeds of liquidation, sale or other disposition of any Collateral
until final payment thereon has been received by Bank in immediately
available funds, and Bank shall have no obligation to delay any
liquidation, sale or other disposition because the same may result in the
imposition of any forfeiture, premium or penalty.
9.03 Costs and Expenses. Borrower agrees to pay to Bank,
upon written demand by Bank from time to time, the amount of all
expenses, including attorneys fees and expenses, paid or incurred by
Bank (a) in exercising or enforcing or consulting with counsel concerning
any of its rights hereunder, under the Other Agreements or under law, or
(b) in defending any and all non-meritorious or previously waived
demands, claims, counterclaims, cross-claims, causes of action, litigation
and proceedings of every kind and nature asserted, commenced or
instituted against Bank, or any of Banks officers, directors or
employees, by Borrower or any Subsidiary on account of, as a result of or
relating to, any action taken or not taken by Bank in connection with the
Loan, any other of the Obligations, the Collateral or enforcement or
exercise by Bank of any rights or remedies of Bank under this
Agreement, under any of the Other Agreements or under law. Borrower
also agrees to pay to Bank, upon written demand by Bank from time to
time, interest on the outstanding amount of such expenses paid by Bank,
from the date of Banks demand for payment of such expenses until the
same are paid in full, at the highest rate and calculated in the manner
provided in the Note.
10. MISCELLANEOUS
10.01 Performance for Borrower. Borrower agrees and hereby
authorizes that Bank may, in Banks sole discretion, but Bank shall not
be obligated to, whether or not an Event of Default shall have occurred,
advance funds on behalf of Borrower, without prior notice to Borrower,
in order to insure Borrowers compliance with any covenant, warranty,
representation or agreement of Borrower made in or pursuant to this
Agreement or any of the Other Agreements, to continue or complete, or
cause to be continued or completed, performance of Borrowers
obligations under any contracts of Borrower, to cover overdrafts in any
checking or other accounts of Borrower at Bank or to preserve or protect
any right or interest of Bank in the Collateral or under or pursuant to this
Agreement or any of the Other Agreements, including, without limitation,
the payment of any insurance premiums or taxes and the satisfaction or
discharge of any judgment or any Lien upon the Collateral or other
property or assets of Borrower and compliance by Borrower with
Environmental Laws; provided, however, that the making of any such
advance by Bank shall not constitute a waiver by Bank of any Event of
Default with respect to which such advance is made nor relieve Borrower
of any such Event of Default. Any cost, expense or liability incurred by
Bank or imposed upon Bank arising out of or in connection with the
noncompliance by Borrower with the provisions of any Environmental
Laws shall be treated as an advance of funds on behalf of Borrower under
this Subsection 10.01, and Borrower shall indemnify, defend and save
harmless Bank from and against any such cost, expense or liability.
Borrower shall pay to Bank upon demand all advances made by Bank
under this Subsection 10.01 with interest thereon at the highest rate and
calculated in the manner provided in the Note. All such advances shall
be deemed to be included in the Obligations and secured by the security
interest granted Bank hereunder; provided, however, that the provisions
of this Subsection shall survive the termination of this Agreement and
Banks security interest hereunder and the payment of all other
Obligations.
10.02 Expenses. Whether or not any of the transactions
contemplated hereby shall be consummated, Borrower agrees to pay to
Bank, upon written demand by Bank from time to time, the amount of all
expenses, including attorneys fees and expenses, paid or incurred by
Bank in connection with the preparation, or the amendment, modification,
extension, renewal, refinancing, supplementation, replacement, waiver,
release or termination, of this Agreement or any of the Other Agreements
or any terms or conditions hereof or thereof or any rights or interests of
Bank, Borrower or any other person relating to any of the foregoing, or
otherwise in connection with the extension of credit hereunder and
preparing for the extension of credit hereunder. Borrower agrees to pay
all expenses in connection with the filing or recordation of all financing
statements and other documents as may be required by Bank at the time
of, or subsequent to, the execution of this Agreement, including, without
limitation, all documentary stamps, recordation and transfer taxes, filing
fees and other costs and taxes incident to recordation of any document in
connection herewith, and, if any such expenses shall be paid or incurred
by Bank, to pay to Bank upon written demand the amount of such
expenses. Borrower also agrees to pay to Bank, upon written demand by
Bank from time to time, interest on the outstanding amount of all
expenses paid by Bank referred to in this Subsection, from the date of
Banks demand for payment of such expenses until the same are paid in
full, at the highest rate and calculated in the manner provided in the
Note. Borrower also agrees to indemnify, protect and defend Bank, and
save Bank harmless, from and against any and all claims, demands,
damages, losses, liabilities, obligations, penalties, litigation, defenses,
judgments, suits, actions, proceedings, costs and expenses (including,
without limitation, attorneys fees and expenses and experts fees and
expenses) of any kind or nature whatsoever which may at any time be
imposed upon, paid or incurred by or asserted or awarded against Bank
relating to, resulting from or arising out of (a) the use of any property
owned, leased, subleased, occupied, used or operated by Borrower or any
Subsidiary for the manufacture, generation, production, processing,
distribution, use, treatment, storage, disposal, transport or handling of
any Hazardous Substances, (b) the presence of any Hazardous Substances
in or upon any such property, or (c) any violation of any Environmental
Law.
10.03 Applications of Collateral. Except as may be otherwise
specifically provided in this Agreement, following the occurrence of an
Event of Default all Collateral and proceeds of Collateral coming into
Banks possession may be applied by Bank to any of the Obligations,
whether matured or unmatured, as Bank shall determine in its sole
discretion.
10.04 Further Assurances, Power of Attorney. Borrower
agrees promptly to do, make, execute and deliver all such additional and
further acts, things, deeds, assurances, instruments and documents as
Bank may request in good faith to vest in and assure to Bank its rights
hereunder or under any of the Other Agreements or in any of the
Collateral. Borrower hereby appoints Bank and its designees as attorney-
in-fact of Borrower, irrevocably and with power of substitution, with
authority to execute and deliver from time to time, in the name and stead
of Borrower, all documents which Borrower is required to, but has failed
or refused to, execute and deliver to Bank pursuant to this Agreement or
any of the Other Agreements, and with authority to take all of the actions
from time to time on behalf of Borrower, and in the name and stead of
Borrower, which Bank is authorized to take under this Agreement and the
Other Agreements or which Bank in its good faith discretion deems
necessary or advisable in order to cause Borrower to be in compliance
with any of the terms of this Agreement or any of the Other Agreements
or in order to carry out and enforce this Agreement and the Other
Agreements. Said attorney or designee shall not be liable for any acts of
commission or omission nor for any error of judgment or mistake of fact
or law which does not arise from its gross negligence or willful
misconduct. This power of attorney is coupled with an interest and is
irrevocable so long as any of the Obligations remain unpaid or
unperformed or there exists any commitment by Bank which could give
rise to any Obligations.
10.05 Waiver of Trial by Jury. Borrower and Bank each
agrees that any action, suit or proceeding involving any claim,
counterclaim or cross-claim arising out of or in any way relating,
directly or indirectly, to this Agreement or the Other Agreements, or any
liabilities, rights or interests of Borrower, Bank or any other person
arising out of or in any way relating, directly or indirectly, to any of the
foregoing, shall be tried by a court and not by a jury. Borrower and
Bank each hereby waives any right to trial by jury in any such action,
suit or proceeding, with the understanding and agreement that this waiver
constitutes a waiver of trial by jury of all claims, counterclaims and
cross-claims against all parties to such actions, suits or proceedings,
including claims, counterclaims and cross-claims against parties who are
not parties to this Agreement or the Other Agreements. This waiver is
knowingly, willingly and voluntarily made by Borrower and Bank, and
Borrower and Bank each acknowledges and agrees that this waiver of
trial by jury is a material aspect of the agreements between Borrower and
Bank and that no representations of fact or opinion have been made by
any person to induce this waiver of trial by jury or to modify, limit or
nullify its effect.
10.06 Additional Waivers by Borrower. Borrower hereby
waives, to the extent the same may be waived under applicable law:
(a) notice of acceptance by Bank of this Agreement; (b) all claims,
causes of action and rights of Borrower against Bank on account of
actions taken or not taken by Bank in the exercise of Banks rights or
remedies hereunder or under any of the Other Agreements, or under law,
provided that the same did not arise from Banks gross negligence or
willful misconduct; (c) all claims and causes of action of Borrower
against Bank for punitive, exemplary or other non-compensatory
damages; (d) all rights of redemption of Borrower with respect to any of
the Collateral; (e) in the event Bank seeks to repossess any or all of the
Collateral by judicial proceedings, any bonds or demands for possession
which otherwise may be required; (f) all rights of Borrower to have
marshalled the Collateral or any other security for any of the
Obligations; (g) presentment, protest, notice of protest and notice of
nonpayment with respect to all of the Obligations; (h) settlement,
compromise or release of the obligations of any person primarily or
secondarily liable upon or obligated with respect to any of the
Obligations; (i) substitution, impairment, exchange or release of any
direct or indirect security for any of the Obligations; and (j) any duty or
obligation of Bank to disclose to Borrower any information concerning
any other customer or client, or prospective customer or client, of Bank.
Borrower agrees that Bank may exercise any or all of its rights and/or
remedies hereunder, under the Other Agreements and under law without
resorting to, without regard to, and regardless of the adequacy of, any
security or other sources of liability with respect to any of the
Obligations.
10.07 Waivers by Bank. Neither any failure nor any delay on
the part of Bank in exercising any right, power or remedy hereunder,
under any of the Other Agreements or under applicable law shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or remedy. Without limitation of the foregoing, the failure or
delay of Bank to accrue interest on the Loan at the Default Rate of
Interest following the occurrence of an Event of Default shall not operate
as a waiver of such Event of Default or of Banks right at any time
thereafter to accrue interest on the Loan at the Default Rate of Interest.
10.08 Payments, Setoff. All payments required to be made by
Borrower hereunder shall be made by Borrower without setoff,
counterclaim or deduction and shall be made to Bank in lawful money of
the United States of America at Banks principal office (or at such other
address as Bank may specify to Borrower in writing from time to time).
If any payment required to be made by Borrower hereunder shall be due
on any day that is not a Banking Day, such payment may be made by
Borrower without default on the next succeeding Banking Day but any
interest-bearing portions of such payment shall continue to accrue
interest during such extension of time. Bank shall have the right from
time to time to charge and deduct from any deposit accounts of Borrower
at Bank any amounts credited to such accounts and apply the same in
order to pay principal amounts, interest charges, service charges, fees,
expenses or any other sums or charges due and unpaid under this
Agreement or any of the Other Agreements. Bank shall have the right, in
addition to all other rights and remedies available to it, to set off against
any Obligations due and unpaid any sums or property owing to Borrower
by Bank or held or controlled by Bank for Borrower. Borrower hereby
confirms Banks right to bankers lien and setoff, and nothing in this
Agreement or any of the Other Agreements shall be deemed to replace,
supersede, limit, waive or prohibit Banks right of bankers lien and
setoff.
10.09 Confession of Judgment. Borrower hereby authorizes
any clerk of court or any attorney-at-law to appear for Borrower before
any court, having jurisdiction, within the United States or elsewhere,
and, after one or more complaints filed, confess judgment against
Borrower as of any time after any of the Obligations are due (whether by
demand, stated maturity, acceleration or otherwise) for the unpaid
balance of the Obligations, including principal, interest, fees, court
costs, late charges and expenses, together with attorneys fees equal to
fifteen percent (15%) of the amount of such Obligations, for collection
and release of all errors, and without stay of execution, and inquisition
and extension upon any levy on real estate is hereby waived and
condemnation agreed to, and the exemption of personal property from
levy and sale is also hereby expressly waived, and no benefit of
exemption shall be claimed under any exemption law now in force or
which may be hereafter adopted. The foregoing authorities and powers to
confess judgment shall not be exhausted by one or more exercises of any
of them or by any imperfect exercise of any of them, shall not be
extinguished by any judgment entered because of any of them and may be
exercised before, during or after sale, liquidation or other disposition by
Bank of any property directly or indirectly securing any of the
Obligations or exercise or enforcement by Bank of any other right or
remedy of Bank with respect to the Obligations. Borrower agrees that
any agreements of Borrower contained in this Agreement or any of the
Other Agreements to pay any costs or expenses, including attorneys fees
and expenses, paid or incurred by Bank shall not be merged into, or
otherwise impaired by, any such judgment by confession, but Bank shall
not be entitled to recover on account of such costs or expenses any
amount in excess of the greater of (a) such costs or expenses included in
any judgments by confession (without duplication), or (b) such costs or
expenses actually paid or incurred by Bank.
10.10 Modifications. No modification or waiver of any
provision of this Agreement or any of the Other Agreements, and no
consent by Bank to any failure of Borrower or any other person to comply
with any provision of this Agreement or any of the Other Agreements,
shall in any event be effective unless the same shall be in writing signed
by the person against whom enforcement is sought, and then such waiver
or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand upon Borrower in any
case shall entitle Borrower to any other or further notice or demand in
the same, similar or other circumstances.
10.11 Notices. Any notice or other communication in
connection with this Agreement, including demands for payment by Bank,
shall be deemed to have been given when hand delivered to the party to
whom directed, or, if transmitted by telex, facsimile transmission or by
mail (whether or not registered or certified), when telexed, transmitted
by facsimile transmission or deposited in the mail postage prepaid,
respectively, provided that any such notice or communication shall be
hand delivered or transmitted to a party hereto as provided below (or at
such other address as such party shall specify in writing to the other
parties hereto):
(a) if to Borrower, at 103 S. Carroll Street, Frederick,
Maryland 21701; and
(b) if to Bank, at Post Office Box 1077, Baltimore,
Maryland 21203.
10.12 Disclosure of Information. Borrower consents and
agrees that Bank may issue press releases concerning, and otherwise
publicly announce or publicize, financings provided by Bank to Borrower
or Subsidiaries. Borrower hereby authorizes Bank to disclose to any
subsidiary or affiliate of Bank, to any fiduciary institution (as fiduciary
institution is defined in Subtitle 3 of Title 1 of the Financial
Institutions Article of the Annotated Code of Maryland, or any successor
legislation) or to any banking institution, credit union or savings and
loan association organized under the laws of any State, and hereby
authorizes all subsidiaries and affiliates of Bank, all fiduciary
institutions (as defined as above provided) and all banking institutions,
credit unions and savings and loan associations organized under the laws
of any State to disclose to Bank, the financial record of Borrower (as
financial record is defined in Subtitle 3 of Title 1 of the Financial
Institutions Article of the Annotated Code of Maryland, or any successor
legislation). Subject to the foregoing, Bank agrees to hold all non-public
information obtained pursuant to this Agreement and the Other
Agreements in accordance with its customary procedures for handling
confidential information.
10.13 Law, Jurisdiction, Transfers of Interests and
Unenforceability. The performance and construction of this Agreement
and the Other Agreements shall be governed by the internal laws of the
State of Maryland (exclusive of principles of conflicts of laws).
Borrower agrees that any suit, action or proceeding instituted by Bank
with respect to any of the Obligations, the Collateral, this Agreement or
any of the Other Agreements may be brought in any State or federal court
located in the State of Maryland (in addition to such other courts in
which jurisdiction and venue may be appropriate), and Borrower consents
to the in personam jurisdiction of such courts. Borrower irrevocably
waives any objection to, and any right of immunity from, the jurisdiction
of such courts or the execution of judgments resulting therefrom, on the
grounds of venue or the convenience of the forum. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, and each reference in this Agreement
to any of the parties hereto shall be deemed to include the successors and
assigns of such party, including, in the case of Borrower, the debtor in
possession or trustee in any case under any chapter of the United States
Bankruptcy Code in which Borrower is debtor. Borrower may not assign
this Agreement or any of its rights hereunder without Banks prior
written consent. Bank may at any time, in its discretion, assign, transfer
or pledge to any person, or grant to any person a Lien in, this Agreement,
any of the Other Agreements or any of its rights hereunder or thereunder.
In addition, Bank may sell, in such amounts, upon such terms and to such
persons as Bank may determine, participations in its interests under this
Agreement and/or any of the Other Agreements. In the case of each such
assignment, transfer, pledge, grant or sale (or offer to assign, transfer,
pledge, grant or sell), Bank may from time to time provide to the
assignee, transferee, pledgee, secured party or participant (or to any
potential or prospective assignee, transferee, pledgee, secured party or
participant), any information and documents (or copies thereof) relating
to this Agreement and the Other Agreements and related transactions, and
relating to the business, assets, operations, business prospects or
financial condition of Borrower and Subsidiaries. If any term, provision
or condition, or any part thereof, of this Agreement or any of the Other
Agreements shall for any reason be found or held invalid or
unenforceable by any court or governmental agency, such invalidity or
unenforceability shall not affect the remainder of such term, provision or
condition, nor any other term, provision or condition, and this Agreement
and the Other Agreements shall survive and be construed as if such
invalid or unenforceable term, provision or condition had not been
contained herein or therein; provided, however, that if any rate of
interest provided under this Agreement does or shall exceed the maximum
interest rate which Borrower is permitted by law to contract or agree to
pay, then such rate of interest shall immediately be deemed to be reduced
to such maximum rate and all previous payments of interest in excess of
the maximum rate shall be deemed to have been payments in reduction of
principal and not of interest. All books and records of Bank and
statements of account rendered by Bank to Borrower relating to the
Obligations shall be presumed to be accurate, absent manifest error.
10.14 Changes in Laws. In the event that, at any time or from
time to time after the date of this Agreement, the implementation of, or
any change in, any law or regulation, or any guideline or directive
(whether or not having the force of law), or the interpretation or
administration thereof by any central bank or other authority charged
with the administration thereof, imposes, modifies or deems applicable
any capital adequacy, reserve or similar requirement (including, without
limitation, a request or requirement which affects the manner in which
Bank allocates capital resources to its commitments and extensions of
credit, including, without limitation, its extensions of credit hereunder),
and, as a result thereof, in the sole opinion of Bank, the rate of return on
Banks capital as a consequence of its extensions of credit hereunder, is
reduced to a level below that which Bank could have achieved but for
such circumstances, then, in each such case, within 30 days after written
demand by Bank from time to time, Borrower shall pay to Bank such
additional amount or amounts as shall compensate Bank for such
reduction in rate of return. A certificate of Bank as to any such
additional amount or amounts, in the absence of manifest error, shall be
final and conclusive. In determining such amount or amounts, Bank may
use any reasonable averaging and attribution methods.
10.15 Survival. All covenants, conditions, agreements,
representations and warranties made herein and in the Other Agreements
shall survive the execution and delivery hereof and thereof, shall survive
Closing and shall continue in full force and effect until all Obligations
have been paid in full and there exists no commitment by Bank which
could give rise to any Obligations.
10.16 Merger and Integration. This Agreement and the
attached Schedule(s) and Exhibits contain the entire agreement of the
parties hereto with respect to the matters covered and the transactions
contemplated hereby, and no other agreement, statement or promise made
by any party hereto, or by any employee, officer, agent or attorney of any
party hereto, which is not contained herein, shall be valid or binding.
10.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute one and the
same instrument.
10.18 Headings. The headings and subheadings contained in
the titling of this Agreement are intended to be used for convenience
only and shall not be used or deemed to limit or diminish any of the
provisions hereof.
10.19 Recitals. The Recitals hereto are hereby incorporated
into and made a part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or
caused to be executed this Agreement under seal as of the date first
above written.
ATTEST/WITNESS: FREDERICK BREWING CO.
By:
(SEAL)
Kevin Brannon
Chief Executive Officer
BORROWER
SIGNET BANK
By:
(SEAL)
Mark A. Cunningham
Vice President
BANK
STATE OF MARYLAND, TO WIT:
I HEREBY CERTIFY that on this _____ day of
____________________, 1996, before me, the subscriber, a Notary Public
of the State of Maryland, personally appeared Kevin Brannon, who
acknowledged himself to be the Chief Executive Officer of Frederick
Brewing Co., and that he, as such Chief Executive Officer, being
authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing in my presence the name of the corporation
by himself as Chief Executive Officer.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
Notary Public
My Commission expires:
STATE OF MARYLAND, TO WIT:
I HEREBY CERTIFY that on this _____ day of
____________________, 1996, before me, the subscriber, a Notary Public
of the State of Maryland, personally appeared Mark A. Cunningham, who
acknowledged himself to be the Vice President of Signet Bank, and that
he, as such, being authorized so to do, executed the foregoing instrument
for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
Notary Public
My Commission expires:
PERMITTED LIENS EXHIBIT
Liens publicized by the following Financing Statements
recorded with the Maryland State Department of Assessments and
Taxation are Permitted Liens:
Recording References Secured Party
File #131238264 Chad Kristen Mortgage & Investment
Corporation
File #132288287 JVNW, Inc.
File #140948532 Potomac Industrial Trucks, Inc.
File #151378157 Potomac Industrial Trucks, Inc.
(Assigned to Associates Commercial
Corp.)
File #152408277 Clark Rental System, Inc.
File #161068699 Signet Bank
SCHEDULE 1
COPYRIGHTS, TRADEMARKS, PATENTS AND LICENSES
Copyright Registration No. Registration
STEEPLE STOUT VA728865 June 30, 1995
SUBLIMATOR VA728864 June 30, 1995
DOPPLEBOCK
Trademark Status Application Number. Filing Date
BLUE RIDGE Pending 74/552,082 July 21, 1994
BLUE RIDGE Pending 75/026,821 November 17,
1995
BIRCH BEER
BLUE RIDGE Pending 74/443,560 October 4, 1993
LAGER
BLUE RIDGE Pending 74/551,878 July 21, 1994
BMNT & Design
CRANBERRY Pending 75/026,820 November 17,
1995
NOEL
HOPFEST Pending 75/051,582 January 31, 1996
STEEPLE Published 74/695,024 June 29, 1995
STOUT
SUBLIMATOR Published 74/695,011 June 29, 1995
DOPPLEBOCK
Patent Application No. Filing Date
CARTON FOR DISPLAY 29/031,247 November 8,
1994
AND TRANSPORT OF
BEVERAGES
SCHEDULE 2
(To Be Provided)
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07/18/96
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07/18/96
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EXHIBIT 10 (x)
NOTE
$969,000.00 Baltimore, Maryland
______________________,
1996
FOR VALUE RECEIVED, FREDERICK BREWING CO., a
Maryland corporation (Maker), promises to pay to the order of SIGNET
BANK (Bank) the lesser of (i) principal sum of $969,000.00, or (ii) the
unpaid principal balance of the Loan as defined in that certain Loan
and Security Agreement of even date between Maker and Bank (the
Agreement), together with interest on the unpaid principal balance
outstanding from time to time, all as hereinafter set forth. Capitalized
terms used without definition in this Note which are defined in the
Agreement shall have the meanings assigned to them in the Agreement.
Interest from the date hereof on the principal amount
outstanding from time to time until the occurrence of an Event of Default
shall be payable at a fluctuating rate of interest equal to the Non-Default
Rate of Interest. After the occurrence of an Event of Default until this
Note is paid in full, interest on the principal amount outstanding from
time to time shall be payable at a fluctuating rate of interest equal to the
Default Rate of Interest. From the date hereof, interest accrued shall be
paid by Maker to Bank on or before the ( ) day of each
month, commencing _____________ 1, 1996.
The entire amount of the unpaid principal balance of this
Note, together with all accrued and unpaid interest thereon, shall be due
and payable on ___________________, 1997.
Payments of both principal and interest shall be paid in lawful
money of the United States of America in immediately available funds at
the principal office of Bank or at such other place as Bank may from time
to time designate. If any payment of principal and/or interest due
hereunder is not paid within 15 days after its due date, Maker shall pay
to Bank on demand a late charge equal to 5% of the amount of such
payment.
This Note may be prepaid in whole at any time or in part from
time to time without premium or penalty, provided, however, that each
such prepayment shall be accompanied by payment of accrued and unpaid
interest on the principal balance hereof to the date of prepayment.
If any payment of principal or interest shall be due on a
Saturday, Sunday or any other day on which banking institutions in the
State of Maryland are required or permitted to be closed, such payment
shall be made on the next succeeding business day and such extension of
time shall be included in computing interest hereunder. All payments
hereunder may, in Banks sole discretion, be applied first to the payment
of accrued and unpaid interest and the balance to the payment of
principal.
If any payment of principal and/or interest due hereunder is
not paid on or before its due date then, and at any time thereafter, Bank
may declare the entire unpaid principal balance hereof, together with all
accrued and unpaid interest thereon, to be immediately due and payable.
This Note is given pursuant to the Agreement, which contains, among
others, provisions for securing this Note and for accelerating the
maturity hereof upon the happening of certain specified events.
Maker agrees to pay to Bank and reimburse Bank for any and
all costs and expenses, including attorneys fees and court costs, if any,
incurred by Bank in connection with the enforcement or collection
hereof, both before and after the commencement of any action to enforce
or collect this Note, but whether or not any such action is commenced by
Bank. Maker waives presentment, protest and demand, notice of protest,
notice of dishonor and nonpayment of this Note and expressly agrees that
this Note or any payment hereunder may be extended from time to time
without in any way affecting the liability of Maker hereunder.
Maker acknowledges and warrants that the debt evidenced
hereby is a commercial loan within the meaning of Title 12 of the
Commercial Law Article of the Annotated Code of Maryland (1990 ed.).
Maker warrants that all loan proceeds will be used solely to carry on a
business or commercial enterprise.
The rights and remedies of Bank hereunder and under the
Agreement shall be cumulative and concurrent and may be pursued
singularly, successively or together at the sole discretion of Bank, and
may be exercised as often as occasion therefor shall occur, and the
failure to exercise any such right or remedy shall in no event be
construed as a waiver or release of the same or any other right or remedy.
Maker hereby authorizes any clerk of court or any attorney-at-
law to appear for Maker before any court, having jurisdiction, within the
United States or elsewhere, and, after one or more complaints filed,
confess judgment against Maker as of any time after any sum is due
hereunder (whether by demand, stated maturity, acceleration or
otherwise) for the unpaid balance of this Note and all sums due in
connection herewith, including principal, interest, fees, court costs, late
charges and expenses, together with attorneys fees equal to fifteen
percent (15%) of the total amount then due, for collection and release of
all errors, and without stay of execution, and inquisition and extension
upon any levy on real estate is hereby waived and condemnation agreed
to, and the exemption of personal property from levy and sale is also
hereby expressly waived, and no benefit of exemption shall be claimed
under any exemption law now in force or which may be hereafter
adopted. The foregoing authorities and powers to confess judgment shall
not be exhausted by one or more exercises of any of them or by any
imperfect exercise of any of them, shall not be extinguished by any
judgment entered because of any of them and may be exercised before,
during or after sale, liquidation or other disposition by Bank of any
property directly or indirectly securing this Note or exercise or
enforcement by Bank of any other right or remedy of Bank with respect
hereto. Maker agrees that any agreement of Maker contained in this Note
to pay any costs or expenses, including attorneys fees and expenses,
paid or incurred by Bank shall not be merged into, or otherwise impaired
by, any such judgment by confession, but Bank shall not be entitled to
recover on account of such costs or expenses any amount in excess of the
greater of (a) such costs or expenses included in any judgments by
confession (without duplication), or (b) such costs or expenses actually
paid or incurred by Bank.
This Note, having been executed and delivered under seal in
the State of Maryland, is to be governed by, construed under and
enforced in all respects according to the internal laws of the State of
Maryland.
ATTEST/WITNESS: FREDERICK BREWING CO.
By:
(SEAL)
Kevin Brannon
Chief Executive Officer
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EXHIBIT 10 (xi)
KRONES
FAX TRANSMISSION
KRONES, INC. 9600 South 58th Street, Franklin, Wisconsin 53132,
U.S.A.
Telephone: (414) 421-5650 Fax: (414) 421-2222
To: Frederick Brewing Company Fax: (301) 694-2971
Attn: Mr. Kevin E. Brannon Date: April 8, 1996
Re: Signed Acceptance Letter From: Scott M. Gray
Attached, please find the signed acceptance of your letter and
initialed agreement of modifications to the FINAL quotation and
Terms and Conditions of Sale.
In addition, I would like to advise you that all components, except
wear parts such as belts, rubber goods, etc., of the filler/crowner
covered under Quotation #96-1196-01-F will be warranted for one
year after installation or for 2,000 hours op operation. This
includes items such as motors, electrical and pneumatic
components.
If you have any further questions or require additional assistance,
please feel free to contact Mr. Bart Spinelli or this office at any
time.
With Best Regards,
KRONES, INC.
SMG/Ims
Attachments
cc: Bart Spinelli
<PAGE>
April 3, 1996
Mr. Scott M. Gray
Sales Project Coordinator
Krones, Inc.
9600 South 58th Street
Franklin, WI 53132-0100
Re: Terms of acceptance of Final Quotation #96-1196-01-F
Dear Scott:
When counter-signed by an authorized officer or employee of
Krones, Inc., this letter, together with the amended Final Quotation
and Terms and Conditions of Sale attached hereto and incorporated
herein by this reference, will serve as our purchase order for the
fully automatic Mono-Bloc Filler, Crowner, Type 120, Series VK
36/9KK-104, L/R Bottle Flow machine described and specified in
that quotation and the accompanying sales literature.
Please have our modifications to the attached Final Quotation and
Terms and Conditions of Sale initialed by an authorized employee
and return a fully executed counterpart of this entire package
returned to us at your earliest convenience. Upon receipt, we will
transfer $103,867.50 (representing 30% of all goods to be
purchased, not including estimated freight or start-up assistance
and in-field training) to Krones' account per the wire transfer
instructions previously received. For the purpose of payment, fax
copies of all signed and initialed pages will be sufficient, with the
understanding that a full set of documents will sent promptly.
<PAGE>
Thank you for your prompt attention to this matter.
Sincerely,
/s/Kevin E. Brannon
Chief Executive Officer
Frederick Brewing Co.
Acknowledged, accepted and agreed to by Krones, Inc. This 4 day
of April, 1996 by the undersigned, who warrant that they are
authorized to bind Krones, Inc. To the terms hereof.
Name: /s/Joseph J. Raymond
Title: Vice President Sales and Marketing
<PAGE>
Mr. Ken Mason
FREDERICK BREWING COMPANY
103 South Caroll Street
Frederick, Maryland 21701
We are pleased to submit the following FINAL quotation:
One (1) KRONES Fully Automatic MONO-BLOC Filler, Crowner,
Type 120,
Series VK2V 36/9KK-104, L/R Bottle Flow
Including the following features
VK2V Short Tube Filling Valves for Efficient Dual Pre-
evacuation
Manual Bowl Height Adjustment
Manual Closer Height Adjustment
Centralized Lubrication Cluster
Explosion Guards, Full Height
Automatic Fragmentation Flush
High Efficiency Pre-evacuation System
In-Line Bottle Conveyors
Fully Adjustable, Line Sensing Speed Controls
Recirculating/Rotating CIP System
Product Contact Zones, 304 SS
Certified Pressure Vessel
VK2V Valve Closes Automatically on Exploded or Missing
Bottles
Safeties for Down-Bottle and Missing Closure Conditions
PLC Control - Allen-Bradley - 5/03
Adjustable Frequency Drive -Allen-Bradley
All Control Enclosures mounted on Machine
Mono-Chromatic Operator Interface for Machine Status - NEMA
4
NEMA 4X Machine Base and Operator Control Panel
dBA Sound Levels at Operators Station at Maximum Speed
High Pressure Hot Water Jetter
Missing Crown Detection
Low Crown Detection in Crown Hopper
Internal Water Flush /CIP of crowning Heads
<PAGE>
The Filler, including the specified features and including one (1)
set of change parts for:
(1) 12 oz. Glass Bottle / Crown
Infeed Worm
Starwheels and Centerguide - Filler / Crowner
Filling Tubes
Centering Bells
TOTAL PRICE EX-WORKS FRANKLIN,
WISCONSIN................................................$334,675.00
Additional Bottle Handling Parts
(2) 22 oz. Glass Bottle / Crown..................$7,690.00
Infeed Worm
Starwheels and Centerguide - Filler / Crowner
Filling Tubes
TOTAL CHANGE PARTS...................................$7,690.00
Options:
CIP Valve Recirculation
Canisters............................................$5,160.00
Automatic Central Lubrication
System...............................................$6,390.00
Start-up assistance and in-field training (10 days)...$6,000.00
Estimated
Freight...............................................$4,000.00
<PAGE>
SPECIFICATIONS FOR THE FILLER ARE:
Type of Volume Filling Nominal
No. Bottle Product CO2 Temp. Output Finish
1. 12 oz. Glass Beer 2.5 - 2.8 36F 250BPM Crown
(Pry-off)
2. 22 oz. Glass Beer 2.5 - 2.8 36F 140BPM Crown
(Pry-off)
FILL HEIGHT ACCURACY +/-S = 3MM
MAXIMUM OXYGEN PICK-UP DURING FILLING
PROCESS: .025 MG / L / 36 F HEAVY AND/OR
FOAMY BEERS MAY BE SUBJECT TO A 5 - 10% DECREASE IN
OUTPUT.
Note: This quotation was prepared with sample materials
and is subject to change.
<PAGE>
CONDITIONS OF PROPOSAL
KRONES INC. Agrees to provide the equipment as specified in this
proposal, subject to the following conditions and the attached
'Terms and Conditions of Sales'.
For the quoted price, the equipment shall be complete in every
respect and tested. The prices quoted are Ex-Works Point of
Manufacture, and exclude taxes and tariffs.
Pricing is based on the quoted Scope of Supply. Any changes that
increase or decrease the Scope of Supply are subject to price
revisions. Changes may also result in additional charges for work
in progress.
START-UP SUPERVISION AFTER INSTALLATION
It is the customer's responsibility to place the equipment in the line
and connect it both mechanically and electrically.
Krones can supply a factory-trained technician for start-up after the
machine is in place and properly connected. Consult the equipment
quotation or Krones, Inc. For details on cost and invoicing.
Unless otherwise stated on individual quotations, service support
for installation, start-up, and training is to be arranged separately.
Service can be provided by the following agreements.
Contract for Full Service
Contract for Fixed Term Service
Contract for service on a Time and Materials Basis
For equipment manufactured by others, installation and start-up
supervision is to be arranged for separately by the customer.
EQUIPMENT PERFORMANCE
When installed and operated in accordance with the instructions
and recommendations provided by Krones and represented
suppliers, the equipment quoted in this proposal shall perform as
specified.
It is understood that fulfillment of the above performance is
contingent upon the purchaser providing the following:
A uniform product supply in the quantity, pressures,
temperatures, and stability required to comply with the
performance statement.
Adequate services (steam, air, water, chemicals, etc.) and all
other process requirements not specified as being provided by
Krones.
Competent and adequate personnel available throughout the
start-up and performance test period.
<PAGE>
PRICE VALIDITY
This quotation is in effect for thirty (30) days from this date.
SHIP DATE: September 30, 1996
PAYMENT TERMS: 30% Deposit Payment with Order
60% Payment due upon presentation of invoice and
before shipment of machine(s)
10% To be paid within thirty (30) days after buyer
acceptance as defined in paragraph six (6) of
the attached "Terms and Conditions of Sale," or 75 days after
shipment, whichever first occurs.
NOTES: Quotation is subject to examination of final sample
containers, product specifications, and all packaging materials.
Quoted delivery time is based upon receipt of sample
containers, completed Questionnaire, including your line
layout and all technical details.
KRONES, INC. ORDER CANCELLATION POLICY
Cancellation of an order must be submitted to Krones, Inc., in
writing, and is subject to the following cancellation charges:
All costs incurred up to the cancellation date, such as engineering,
material and labor, will be passed on to the buyer in full, plus 15%
of the sale price of the equipment, parts and/or options affected by
the cancellation.
SMG/mmd
cc: Bart Spinelli
<PAGE>
April 8, 1996
MR. BRIAN BERMAN
Signet Bank
Capital Markets / Money Center
Brian:
this correspondence is your authorization to draw funds from our
investment account (repurchase agreement) with Signet Bank and
execute a wire transfer effective today, April 8, 1996. Wire
instructions are as follows:
Payee: Krones, Inc.
Amount: $103,867.50
Receiving Bank: First Bank Milwaukee, Milwaukee, WI.
ABA Routing: 075000103
Account Number: 1-823-226-39390
Please do not hesitate to call me should you require additional
information. Thank you for your assistance with this matter.
Yours Truly,
/s/Dennis A. Olson Kevin E. Brannon
Chief Financial Officer, Chief Executive Officer,
Frederick Brewing Co. Frederick Brewing Co.
EXHIBIT 10 (xii)
April 3, 1996
Mr. John Brannen
President
Intertrade Packaging Machinery Corporation
201 Inglis Road
PO Box 1218
Cheraw, SC 29520
Re: Terms of Acceptance of Quotation #1086396.2
Dear Mr. Brannon:
When counter-signed by an authorized officer or employee
of Intertrade Packaging Machinery Corporation ("IPMC")
this letter, together with the amended Quotation and Terms
and Conditions of Sale ("Quotation") a reference, attached
hereto and incorporated herein by this reference, will serve
as our purchase order for the remanufactured machinery and
services described and specified in the second column of
the first page (labeled"Remanuf'd") of that quotation.
The following shall be deemed to be modifications of the
Quotation:
1. All installation and start-up assistance services necessary
to commence operation of the bottling line, excepting the
filler capper to be supplied by Krones, Inc, shall be
performed at Frederick Brewing Co.'s ("FBC's") facility by
IPMC at IPMC's sole expense;
2. All equipment purchased hereunder shall be delivered to
FBC's facility not later than October 1, 1996 and shall be
fully installed and operational not later than November 1,
1996; and
3. The re-built Krones Camnatic labeler may be replaced,
without additional cost to FBC, with another rebuilt model of
Krones labeler with comparable capabilities if, in the
reasonable judgment of FBC, the Canmatic is not suitable
for bottling cold, wet beer bottles without unacceptable
operating cost or inefficiency.
Upon receipt of an executed copy of this purchase order, we
will transfer $245,350 (representing 50% of all goods and
services to be purchased) to IPMC's account per the wire
transfer instructions to be received. For purpose of
payment, fax copies of all signed and initialed pages will be
sufficient, with the understanding that a full set of
documents will sent promptly.
<PAGE>
Thank you for your prompt attention to this matter.
Sincerely,
/s/Kevin E. Brannon
Chief Executive Officer
Frederick Brewing Co.
Acknowledged, accepted and agreed to by Intertrade
Packaging Machinery Corporation this _ day of May, 1996 by
the undersigned, who warrant that they are authorized to
bind Intertrade Packaging Machinery Corporation to the
terms hereof.
Name:__________
Title:___________
cc: Ken Mason
Dennis Olson
Craig O'Connor
<PAGE>
PROFORMA INVOICE
INVOICE: 101296 INVOICE DATE: May 1,1996
SOLD TO: Frederick Brewing Co. SHIP TO: Please Advise
103 S. Carroll Street
Frederick, MD 21701
CUSTOMER NUMBER; PAYMENT
CUSTOMER P.O # TERMS:
OUR ORDER # 50% Down Payment
25% Prior to Re-Assembly
15% Prior to Shipment
10% Net 30 days after install.
# DESCRIPTION PP UNIT AMOUNT
1. Wyard Buld Depalletizer $69,000.00 69,000.00
2. Lowerator and Twist Rinser $26,000.00 26,000.00
3. 6'x12' Bi-directional Stainless Steel Accumulation Table
$15,000.00 15,000.00
4 8'x20' Bi-directional Stainless Steel Accumulation Table
$23,000.00 23,000.00
5. Hartness 825 Case Packer $48,000.00 48,000.00
6. Elliott EG80 Case Erector $30,000.00 30,000.00
7. Pearson Multi-Packer $28,000.00 28,000.00
8. Southern Tool Carrier Erector $ 9,500.00 9,500.00
9. Standard Knapp Seal Star HotGlueCase Scaler
$18,600.00 18,600.00
10. Von Gal SPLX 11 Palletizer $69,000.00 69,000.00
11. Case Conveyors - approximately 100 feet $16,600.00 16,600.00
12. Table Top Conveyor - approximitely 200 feet
$37,000.00 37,000.00
l3. Filtec FT12 Fill Height Detector $17,000.00 17,000.00
14. Krones Universella Labeler $84,000.00 84,000.00
15. Mechanical Installation included. (Placing
machine in position, bolting down and
utilities to all machines by others) N/C N/C
TOTAL ORDER $ 490,700.00
Less 25% Progressive Payment due upon dissassembly
prior to reassembly ($ 122,675.00)
Less 15% Due Prior to Shipment ($ 83,605.00)
Less 10% Due Net 30 days after installation ($ 49,070.00)
TOTAL AMOUNT DUE AS OF 5/1/96 $ 245,350.00
/s/PHILIP RAINES
ACCOUNTS RECEIVABLE
<PAGE>
INTERTRADE PACKAGING MACHINERY CORPORATION
"A NEW GENERATION OF QUALITY AND SERVICE"
Transmitted Via Fax: 301-694-2971
April 15, 1996 Quote
#1086M396.2
Page 1 of 1
QUOTATION
Mr. Ken Mason
Frederick Brewing Co.
103 S. Carroll Street
Frederick, MD 21701
The following figures will give you our as is price and our
remanufactured price. Please call if we can be of further
assistance.
As Is Remfgr'd
---------- ---------
1. Weyard Bulk Depalletizer $l2,000.00 69,000.00
2. Lowerator and Twist Rinser $16,000.00 26,000.00
3. 6'x12' Bi-directional Stainless Steel Accumulation Table
$ 8,500.00 15,000.00
4 8'x20' Bi-directional Stainless Steel Accumulation Table
$17,000.00 23,000.00
5. Hartness 825 Case Packer $14,000.00 48,000.00
6. Elliott EG80 Case Erector $l 9,500.00 30,000.00
7. Pearson Multi-Packer $17,000.00 28,000.00
8. Mead Carrier Erector $ 2,500.00 9,500.00
9. Standard Knapp Seal Star HotGlueCase Scaler
$ 8,500.00 18,600.00
10. Von Gal SPLX 11 Palletizer $32,000.00 69,000.00
11. Case Conveyors - approximately 200 feet $ 9,500.00 16,600.00
l 2 Table Top Conveyor - approximitely 200 feet
$28,000.00 37,000.00
l3. Filtec FT12 Fill Height Detector $ 8,000.00 17,000.00
14. Krones Canmatic Labeler $34,000.00 84,000.00
Installation $21,000.00*. Utilities to machines by others.
* If remanufactured IPMC will absorb installation cost.
TERMS: 50% Down payment with purchase order, 25% due
upon disassembly prior to reassembly, 15%
prior to shipment, 10% upon start-up.
Sincerely,
/s/Larry C. Gaddy
Sales Representative
<PAGE>
INTERTRADE PACKAGING MACHINERY CORPORATION
"A NEW GENERATION OF QUALITY AND SERVICE"
May 1, 1996 Page #1 of 1
ORDER ACKNOWLEDGMENT
Frederick Brewing Co
103 S Carroll Streot
Frederick, MD 21701
1. Wyard Buld Depalletizer US$ 69,000.00
2. Lowerator and Twist Rinser US$ 26,000.00
3. 6'x12' Bi-directional Stainless Steel Accumulation Table
US$ 15,000.00
4 8'x20' Bi-directional Stainless Steel Accumulation Tbble
US$ 23,000.00
5. Hartness 825 Case Packer US$ 48,000.00
6. Elliott EG80 Case Erector US$ 30,000.00
7. Pearson Multi-Packer US$ 28,000.00
8. Southern Tool Carrier Erector US$ 9,500.00
9. Standard Knapp Seal Star HotGlueCase Scaler US$ 18,600.00
10. Von Gal SPLX 11 Palletizer US$ 69,000.00
11. Case Conveyors - approximately 100 feet US$ 16,600.00
l 2 Table Top Conveyor - approximitely 200 feet US$ 37,000.00
l3. Filtec FT12 Fill Height Detector US$ 17,000.00
14. Krones Universella Labeler US$ 84,000.00
15. Mechanical Installation included. (Placing machine in
N/C position, bolting down and utilities to all
machines by others)
TOTAL, EX-WORK, CHERAW, SC US $ 490,700.00
IPMC's standard terms and conditions apply.
Intertrade Packaging Machinery Corporation
Sincerely,
/s/John B. Brannen
President
<PAGE>
INTERTRADE PACKAGING MACHINERY CORPORATION
"A NEW GENERATION OF QUALITY AND SERVICE"
TRANSMITTED VIA FAX: 1-301-694-2971
May 1, 1996
Mr. Kevin Brannon, CEO
Frederick Brewing Co
103 S Carroll Streot
Frederick, MD 21701
Dear Mr. Brannon
Thank you for your order. Enclosed you will find our Order
Acknowledgement and Proforma Invoice for the 50% down
payment.
As soon as we are in receipt of your downpayment and
purchase order, the project will begin.
For you convenience, the foiiowing is our wire transfer
information.
The Provident Bank
Cincinnati, OH 45202
Account # 0626 252
A/B/A # 042000424
Phone # (513) 579-2702
Thank you for your order and I look forward talking to you
soon.
Sincerely,
/s/Joyce Ward
Executive Administrator
encl.
cc:
Mr. Ken Mason, Packaging Manager
Frederick Brewing Company
Mr. Salh Khan, CEO
IPMC
Mr. John Brannen, President
IPMC
<PAGE>
June 20, 1996 Quote # 1086M396.3
Change Order
1. Item #1 Wyard Buld Depalletizer remanufactured price $69,000.00 to be
replaced with used 'As Is' Canco depalletizer at a price of $35,000.000 F.B.B.
Location.
2. Item #3 to be 6X16 accumulation table at no extra charge.
3. Item #4 to be cancelled wit no restocking charge to buyer.
4. Item #10 Von Gal SPLX II Palletizer remanufactured price $69,000.00
to be replaced by P7500 Von Gal 'As Is Where Is' machine. F.O. B. Location
$35,000.00
The above machines are the responsibility of Frederick Brewing Co. during
start up. Should unforeseen problems arise during start-up work performed by
IPMC technicians, if required would be charged to Frederick Brewing Co.
account.
Approved by Frederick Brewing Company
/s/Kevin Brannon
Mr. Kevin Brannon's Signature
EXHIBIT 10 (xiii)
June 14, 1996
Mr. J.J. Crewe, Jr., President
J.J. Crewe & Son, Inc.
PO Box 515
Buckeystown, MD 21717
Re: Acceptance of Quotations for various work and
equipment in new brewery
Dear Jay:
When countersigned by you and after our receipt of
reasonably acceptable warranties for the equipment and the
work to be provided hereunder, this letter, together with the
modified quotations attached hereto and incorporated herein
by this reference, will serve as our purchase and work order
for the equipment and installation referenced therein.
Please note that I have revised the payment schedule in
keeping with our conversation earlier this week. Please
initial these 3 changes and return copies of them with the
countersigned copy of this letter.
I hope you will be able to attend the "all-hands" meeting at
Morgan-Keller's office at 10:00 am, Wednesday, June 26th,
where we hope to firm up the schedule, more full delineate
the scope of work for each contractor and attempt to
improve contractor coordination on the project.
Sincerely
/s/Kevin Brannon, CEO
Frederick Brewing Co.
Acknowledged, accepted and agreed to by J.J. Crewe & Son,
Inc., this ___ day of June, 1996 by:
_________________
Jerome J. Crewe, Jr., President
J.J. Crewe & Son, Inc.
Cc: Steve Nordahl, Masterbrewer
Dennis Olson, CFO
<PAGE>
10 June 1996
Mr. Kevin Brannon
Frederick Brewing Company
103 S. Carroll St.
Frederick, MD 21701
Dear Kevin:
RE: Mechanical and Electrical Work
New Brewery
J. J. Crewe & Son, Inc. Agrees to supply all plant, labor,
material and supervision for the contracts listed below. The
period of warranty will be one year from start-up or
beneficial use by customer. This warranty pertains to labor
and material supplied by J. J. Crewe & Son, Inc. All other
warranties on equipment will be reflected by the
manufacturer of said equipment.
PROJECTS
1. Refrigeration - Supply and install on each
500 gpm glycol chiller using ammonia as a
refrigerant.
Price: $355,530.00
2. Steam Plant - Supply and install one each
Johnston 200 hp high pressure steam boiler with
support system and piping.
Price: $190,150.00
3. Glycol Piping System - Supply and install
glycol piping system to support brewery
equipment. Price includes pumps and control
system.
Price: $96,350.00
<PAGE>
10 June 1996
Page Two
4. Compressed Air System - Supply and install
one each 50 hp Sullair air compressor and
associated piping.
Price: $53,870
5. Fuel Holding Tank - Supply and install one each 2,000
gallon daily use fuel tank.
Price: $9,800.00
6. Chemical Treatment - Supply and install
chemical treatment system for the support of
glycol system, boiler feed system and evaporative
condenser.
Price: $16,250.00
Items Not Included
* Freight
* Taxes
* Ammonia piping and installation to Keg Cooling Room
Copies of the original quotations are included with this
correspondence. If these conditions are acceptable to the
Frederick Brewing Company, Please sigh below and return
this letter.
Thank you.
Sincerely,
/s/Jerome J. Crewe, Jr.
President
Enclosure
/s/Kevin Brannon
Frederick Brewing Company
<PAGE>
10 June 1996
Page Three
PAYMENT SCHEDULE
Total Contract Price: $721,950.00
Major equipment requiring 1/3 deposit at placement of
order:
Johnson boiler
Shell and tube glycol Chiller
Compressor skid and motor
Sullair compressor
Microprocessor control system
Glycol and process pumps
Specialty control valves (custom designed)
Evaporative condensers
Price of 1/3 deposit on equipment listed above:
$172,350.00
*
Percent of completion - As project proceed, billing will be
processed under the percent of completion schedule. The
Owner's representative and the Contractor's representative
to agree on percentage of completion before bills are
generated. Minimum billing cycle to be 30 days.
*
Owner will pay the deposits due from the Contractor by the
manufacturers of this equipment within the terms set by the
manufacturers upon receipt of written invoices from the
manufacturers and contractor.
<PAGE>
TO: Steve Nordahl
The Frederick Brewing Company
FROM: J. Crewe
DATE: 3 May 1996
SUBJECT: Boiler Requote
J. J. Crewe & Son, Inc. Agrees to supply all plant, labor,
material and supervision for the installation of process
steam system. Revisions and exclusions are included in this
revised quote.
Items included in this system are listed below:
1 ea. Johnston Super 509 high pressure steam boiler
1 ea. Boiler feed system using steel tank and 1 ea. Boiler
feed pump
1 ea. Exhaust stack fabricated from mild steel
1 lot Boiler Blowdown valves
1 ea. Blowdown separator
1 ea. Steam regulating station
1 lot Steam traps
1 lot Steam shutoff valves
1 lot Piper rollers
1 lot Insulation
1 lot Wiring
1 ea. Steam to hot water heat exchanger for building heat
Scope of Work
Supply 50 psi and 30 psi steam to hot liquor tanks, mash
mixer and brew kettles. Supply steam to hydronic heat
exchanger. Supply steam to key sanitizer. Work to consist
of running 6" steam main to brewing room and hot liquor
tanks. Also, 1 1/2" lateral run to keg sanitizer.
Price: $190,150.00
<PAGE>
3 May 1996
Page Two
Additional price for chemical and boiler treatment includes
the following:
Water softner
Boiler chemicals
Test chemicals
Three each chemical pumps
One each chemical tank and pump
Services of Chemist
Training for personnel and start up
Price: $16,250.00
Items Not Included
Taxes
House keeping pad for boiler
Gas line piping from meter to boiler room
Thank you for giving J. J. Crewe & Son, Inc. The
opportunity to quote this project.
<PAGE>
TO: Steve Nordahl
The Frederick Brewing Company
FROM: J. Crewe
DATE: 3 May 1996
SUBJECT: Compressed Air System
J. J. Crewe & Son, Inc. Agrees to supply all plant, labor,
material and supervision for the installation of two ea. 50
hp air cooled air compressors and support system. Steve,
based on the new information and the meeting we had with
your plant engineer, it was established that the air
requirement for the project would be 148 CFM at 100 psi.
Following is the revised quotation for your air system:
1 ea. 50 hp air compressors
1 ea. Desiccant air dryer
1 lot blowdown valves
1 lot piping and fittings
1 lot valves
Installation and wiring
1 ea. Oil separator
1 ea. Particulate filter
Revised Price: $53,870.00
<PAGE>
Mr. Steve Nordahl
Frederick Brewing Company
103 S. Carroll St.
Frederick, MD 21701
Dear Steve:
RE: Quotation - Glycol Piping System - New Brewery
J. J. Crewe & Son, Inc. Agrees to supply all plant, labor,
material and supervision for the installation of glycol piping
system for Phase I as per JV North West's drawing as issued
by Frederick Brewing Company to J. J. Crewe & Con, Inc.
Work is to consist of the following items:
3 ea. glycol pumps
1 lot pipe
1 lot valves
1 lot pipe trim
Expansion tanks
Insulation
Electrical wiring (pumps only)
Labor
Rigging 1,000 gal. C/B tank
Fabrication of pump manifold
Initial glycol charge
J. J. Crewe & Son, Inc. Is to install 1,000 gal. surge tank
and running from 1,000 surge tank will be three individual
glycol circuits. One circuit will go to Phase I fermentation.
One circuit will go to storage tank room. One circuit will
go to cold liquor tanks.
<PAGE>
3 May 1996
Page Two
The materials of construction are to be as follows:
Schedule 40 A53F pipe
Black hanger iron
Carbon steel fittings
Styrofoam insulation with PVC jacket
Cornell pumps
Items not Included
Taxes
Housekeeping pads for pumps
Control electrical wiring for fermentation tanks
Trim and valves for fermentation tanks
Price: $96,350.00
If you have any questions regarding this quotation, please
call me. Thank you for giving J. J. Crewe & Son, Inc. The
opportunity to quote this project.
Very truly yours,
Jerome J. Crewe, Jr.
President
<PAGE>
TO: Kevin Brannon
Frederick Brewing Company
FROM: J. Crewe
J. J. Crewe & Son, Inc.
DATE: 6 March 1995
SUBJECT: Phase I - Refrigeration - Engine Room and
Boiler
J. J. Crewe & Son, Inc. Agrees to supply all plant, labor,
material and supervision for Phase I refrigeration and
electrical.
Items Included
- Compressors
- Condenser
- Vessels
- Heat Exchangers
- Insulation
- Labor
- Boiler
- Boiler Feed System
- NH3 Valves and Controls
- Pipe and Fittings
- Glycol Pumps
- Glycol
Price: $355,530.00
Please not that electrical switchgear, labor and installation
are to follow.
Terms
Hasegawa compressors - 120 days - more time can be
negotiated if necessary.
All other equipment - Net 30
Delivery 8 to 16 weeks
EXHIBIT 10 (xiv)
July 2, 1996
Mr. Keith Slick
J.J. Crewe & Son, Inc.
PO Box 515
Buckeystown, MD 21717
Re: Purchase Order for Phase I Industrial Wastewater Treatment
Equipment
Dear Mr. Slick:
When counter-signed by an authorized officer or employee of J.J.
Crewe & Son, Inc., this letter, together with the quotation
attached hereto and incorporated herein by this reference, will
serve as our purchase order for the Phase I Industrial Wastewater
Treatment System, more fully described in the Contract
Specifications prepared on behalf of Frederick Brewing Co. By
Boggs Environmental Consultants, including Amendments 1,2 and
3 to those specifications.
Upon receipt of detailed warranty terms, which shall be
reasonably acceptable to Frederick Brewing Co., a countersigned
copy of this letter and an invoice for the proper amount, we will
promptly remit the agreed $2,600 for shop drawings of the
equipment and layout drawings. We do not expect to be prepared
to accept delivery into our new building (currently under
construction) until October of 1996.
Thank you for your prompt attention to this matter.
Sincerely,
/s/ Kevin E. Brannon, CEO
Frederick Brewing Co.
Acknowledged, accepted and agreed to by J. J. Crewe & Son,
Inc., this ___ day of July, 1996 by the undersigned who warrants
that s/he is authorized to bind J. J. Crewe & Son, Inc., to the
terms hereof.
_______________
Name:____________
Title:_____________
cc: Steven T. Nordahl, VP-Brewing Operations
Dennis Olson, CFO
Mark Boggs, Boggs Environmental Consultants
<PAGE>
TO: Steve Nordahl /Mark Barggs
Frederick Brewing Company
FROM: Keith Slick
J. J. Crewe & Son, Inc.
DATE: 26 July 1996
SUBJECT: Waste Water Treatment
J. J. Crewe & Son agrees to supply all plant, labor, material and
supervision for the installation of a waste water treatment plant,
so spelled out in contract specification for stage one industrial
wastewater treatment waterworks at Frederick Brewing Company.
Price: $81,070.00
Drawings Price: $2,600.00
Items not included in this bid:
Permit Fees
Freight
Taxes
Thank you for giving J. J. Crewe & Son, Inc. The opportunity to
quote this product.
EXHIBIT 10 (xv)
June 13, 1996
Mr. Kevin E. Swift
Account Manager
Ball-Foster Glass Container Co., LLC
76 Truex Place
Middletown, NJ 07748
Re: Acceptance of Pricing Proposal
Dear Kevin;
Thank you for your fine presentation of June 11, 1996. We are
pleased to inform you that we have decided to appoint Ball-
Foster as our exclusive supplier for 12 oz., long-neck amber beer
bottles, packed in bulk, effective as of the time our new brewery
becomes operational, which is expected to occur in November of
1996. We have chosen to use the bottle with the inset label panel
(which I believe is # D-8498-1) and a pry-off crown finish. This
letter of acceptance incorporates by reference the terms of your
proposal of June 10, as modified at our meeting on June 11. I
attach a copy of this proposal for your ease of reference.
As you know, this decision was not made on the basis of price,
since several of Ball-Foster's competitors offered identical
pricing. Rather, this decision is based on your statements that
Ball-Foster has appointed you to deal specifically with the craft
brewing market, that Ball-Foster has adequate capacity to fulfill
our projected order volumes among its various plants and that
Ball-Foster is willing to warehouse a supply of glass in a
warehouse near to us to eliminate the possibility that our orders
will be disrupted by production or shipping problems. We also
appreciated your straightforward approach to pricing and other
aspects of our business.
Our filling equipment is currently under construction by Krones,
Inc. No later than Monday, June 17, please contact:
Scott Gray
Sales Project Coordinator
Krones, Inc.
9600 South 58th St.
Franklin, WI 53132
(414) 421-5650 (phone)
(414) 421-2222 (fax)
Krones has said it requires 50 cases of the bottles we intend to
use, in addition to the print, which I am sending to Scott today.
You may be able to get Krones to reduce the amount of its
request if you talk to Scott about this.
<PAGE>
Again, thank you for your attention. We look forward to a long
and mutually satisfying relationship.
Sincerely,
/s/Kevin E. Brannon, CEO
Frederick Brewing Co.
Cc: Scott Gray, Krones, Inc.
Ken Mason, Packaging Mgr.
<PAGE>
June 10, 1996
Mr. Kevin E. Brannon
President
Frederick Brewing Co.
103 S. Carroll St.
Frederick, MD 21701
Re: 12-ounce Amber Supply Proposal
Dear Kevin:
Ball-Foster Glass Container Co. Is pleased to provide you with
the following pricing proposal based on a 100 percent supply
position to your new facility, starting on or about November 1,
1996
Item 12-ounce amber long neck beer container
Mold 1521412 (15214) or 1521912 (15219)
Finish 26-611 Crown finish
Drawing D-7211-6 or D-8498-1 (attached)
Packing Bulk palletized (spec attached)
Projected annual volume 80,000 - 120,000 gross
Length of supply agreement Minimum two years
Delivered pricing See Below
Annual Volume level Invoice Price Rebate Net Price
(in gross) (per gross) (per gross) (per gross)
0 - 50,000 $12.46 0 $12.46
50,001 - 100,000 $12.46 2 percent or $.25 $12.21
100,001 and up $12.46 4 percent or $.50 $11.96
<PAGE>
Rebates will be accrued for a 12-month period effective with the
first shipment and will be rebated quarterly.
Above pricing is guaranteed through December 31, 1997, and is
subject to a maximum increase of 4% in calendar 1998. If Ball-
Foster does increase its price to Frederick, Frederick shall have
the right to obtain competitive quotations and to terminate this
agreement. Provided, however, Ball-Foster shall have the right
to meet the competitive prices, in which case this agreement shall
remain in full force and effect.
Payment terms 1 percent 10 days, net 30 days
Pending review of credit application
Pallets 56 x 44, charge on invoice $15 per pallet
I look forward to reviewing this proposal with you in the very
near future.
Yours truly,
/s/ Kevin E. Swift
Account Manager
mf
Attachments
cc: Tammie Foster
John Hughes
Gordon Love
EXHIBIT 10 (xvi)
<PAGE>
RLC ASSOCIATES
Construction Specialties
8841 Indian Springs Road * Frederick, Maryland 21702
Bob Cheseldine (301)695-8454
Diana Cheseldine Pager: (301) 698-2073
July 17, 1996 Frederick Brewing Co
103 South Carroll St
Frederick, Md 21701
Kevin Brannon
Dear Kevin,
Based upon the letter by Morgan-Keller dated 6/12/96 reflecting
their cost breakdown and description of work our bid/cost for the
interior work to be performed at the expansion site will be
$146,400.00. All labor and material included.
Scope of work will follow.
Sincerely,
/s/ Bob
Bob Cheseldine
<PAGE>
RLC ASSOCIATES
Construction Specialties
8841 Indian Springs Road * Frederick, Maryland 21702
Bob Cheseldine
(301)695-8454
Diana Cheseldine
Pager: (301) 698-2073
July 17, 1996 Frederick Brewing Co
103 South Carroll St
Frederick, Md 21701
Kevin Brannon
Re: Frederick Brewing Co. - Expansion
Kevin,
Below you will find the scope of work included in our bid for the
interior of your new project. Any questions please call. Bob
Cheseldine
All interior studs and drywall
flooring
paint
Installation of interior doors and hardware (supplied by MD)
Closet shelving
Bath Accessories
Bar allowance($4,500.00)
Reception desk allowance(2,500.00)
Caulking(interior only)
Fire Extinguishing Equipment
Wood blocking
Toilet Partitions
Acoustical ceiling
FRP paneling in bath-shower areas
Kitchen cabinets allowance($1,750.00)
Additional shelving
Installation of kitchen appliances (supplied by owner)
Lab counter and cabinets ($900.00 allowance)
Does not include -
Exterior doors, windows and hardware
Access floors for computers
HVAC
Plumbing
Sprinkler
Electric
Elevators (All components)
Masonry
Fume hood and sterile fume hood (will assist in installation)
Interior storefront windows, Glass/Glazing
Misc Metals/Roof ladders.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1267320
<SECURITIES> 0
<RECEIVABLES> 328725
<ALLOWANCES> 0
<INVENTORY> 362009
<CURRENT-ASSETS> 2013345
<PP&E> 1307389
<DEPRECIATION> ( 262311)
<TOTAL-ASSETS> 4167599
<CURRENT-LIABILITIES> 204379
<BONDS> 166956
0
0
<COMMON> 72
<OTHER-SE> 3796192
<TOTAL-LIABILITY-AND-EQUITY> 4167599
<SALES> 797370
<TOTAL-REVENUES> 874741
<CGS> 763845
<TOTAL-COSTS> 687975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> ( 12153)
<INCOME-PRETAX> ( 642297)
<INCOME-TAX> 0
<INCOME-CONTINUING> ( 642297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 642297)
<EPS-PRIMARY> ( 0.39)
<EPS-DILUTED> ( 0.39)
</TABLE>
