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EXHIBIT (b)(11)
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REIMBURSEMENT AGREEMENT
between
LINDAL CEDAR HOMES, INC., a Delaware corporation
and
KEYBANK NATIONAL ASSOCIATION, a national banking association
dated as of December 1, 2000
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WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY NONRECOURSE REVENUE BONDS,
1997 (LINDAL CEDAR HOMES, INC. PROJECT), SERIES A-TAXABLE AND NONRECOURSE
REVENUE BONDS, 1997 (LINDAL CEDAR HOMES, INC. PROJECT), SERIES B-TAX EXEMPT
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions..............................................................1
ARTICLE II
ISSUANCE OF LETTER OF CREDIT
SECTION 2.01. Issuance of the Letter of Credit.........................................8
SECTION 2.02. Termination of Letter of Credit; Alternate Letter of
Credit; Extension........................................................9
SECTION 2.03. Increase or Reduction of Stated Amount and Reinstatement................10
ARTICLE III
REIMBURSEMENT OBLIGATION AND INTEREST
SECTION 3.01. Reimbursement Obligations...............................................10
SECTION 3.02. Reimbursement...........................................................10
SECTION 3.03. Manner, Method, Place and Time of Payment...............................11
SECTION 3.04. Obligation to Pay Unconditional.........................................11
SECTION 3.05. Evidence of Debt........................................................12
ARTICLE IV
OTHER PAYMENTS
SECTION 4.01. Letter of Credit Issuance Fee...........................................12
SECTION 4.02. Letter of Credit Annual Fee.............................................12
SECTION 4.03. Other Fees..............................................................13
SECTION 4.04. Increased Costs.........................................................13
SECTION 4.05. Payment of Expenses and Fees; Applicability.............................14
SECTION 4.06. Calculations; Default Interest; Compounded Interest.....................14
ARTICLE V
CONDITIONS
SECTION 5.01. Conditions Precedent to Issuance of Letter of Credit....................15
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.01. Representations, Warranties and Covenants of Borrower...................18
ARTICLE VII
FURTHER COVENANTS
SECTION 7.01. Covenants...............................................................24
SECTION 7.02. Conditions Precedent to Disbursements of Bond Proceeds..................33
SECTION 7.03. Assignment/Miscellaneous................................................35
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default; Acceleration and Remedies............................36
ARTICLE IX
SECURITY
SECTION 9.01. Funds, Accounts and Security Agreement..................................38
SECTION 9.02. Funding and Maintaining the Funds.......................................38
SECTION 9.03. Interest of Bank and Owners of Bonds....................................39
SECTION 9.04. Transfers and Other Liens...............................................39
SECTION 9.05. Priority Of Payment; Application of Sums Upon Notice of
Default.................................................................39
SECTION 9.06. Return of Funds.........................................................39
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc.........................................................40
SECTION 10.02. Notices, Etc............................................................40
SECTION 10.03. No Waiver; Remedies.....................................................41
SECTION 10.04. Accounting Terms........................................................41
SECTION 10.05. Definitions.............................................................41
SECTION 10.06. Security Costs, Expenses and Taxes......................................41
SECTION 10.07. Binding Effect; Assignment..............................................41
SECTION 10.08. Governing Law...........................................................41
SECTION 10.09. Entire Agreement........................................................42
SECTION 10.10. Jury Waiver.............................................................42
SECTION 10.11. Securities Law..........................................................42
SECTION 10.12. Subrogation.............................................................43
SECTION 10.13. Survival of Representations and Warranties..............................43
SECTION 10.14. Washington State Notice.................................................43
Exhibits
Exhibit A Letter of Credit
Exhibit B Legal Descriptions
Exhibit C Permitted Liens
Exhibit D Schedule for Mandatory Redemption of Bonds
Exhibit E Pending Litigation
Exhibit F [deleted]
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REIMBURSEMENT AGREEMENT
THIS REIMBURSEMENT AGREEMENT, dated as of December 1, 2000, is made by
and between LINDAL CEDAR HOMES, INC., a Delaware corporation ("BORROWER") and
KEYBANK NATIONAL ASSOCIATION, a national banking association ("BANK").
RECITALS
THE WASHINGTON ECONOMIC DEVELOPMENT FINANCE AUTHORITY ("ISSUER") has
issued and sold its $3,725,000 aggregate principal amount of its Nonrecourse
Revenue Bonds, 1997 (Lindal Cedar Homes, Inc. Project), Series A-Taxable and
Nonrecourse Revenue Bonds, 1997 (Lindal Cedar Homes, Inc. Project), Series B-Tax
Exempt (the "BONDS") pursuant to that certain Indenture of Trust ("INDENTURE")
dated as of November 1, 1997, between Issuer and U.S. BANK TRUST NATIONAL
ASSOCIATION (formerly known as FIRST TRUST NATIONAL ASSOCIATION), a national
banking association, as Trustee.
In order to secure payment when due of the principal of and interest on
the Bonds, Borrower has requested Bank to issue an unconditional irrevocable
letter of credit substantially in the form of Exhibit A, including Annexes A
through G, which exhibit is attached and incorporated herein by this reference
(the "LETTER OF CREDIT"), in the principal amount of Three Million Four Hundred
Twenty Five Thousand and No/100 Dollars ($3,425,000.00) plus One Hundred Eleven
Thousand Eight Hundred Seventy-Eight and 95/100 Dollars ($111,878.95), which
amount is equal to 210 days' interest on the Bonds. The sum of the principal and
interest components of the Letter of Credit, as reduced and reinstated pursuant
to the terms thereof, is hereafter referenced as the "STATED AMOUNT."
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt of which is hereby
acknowledged, and in order to induce Bank to issue the Letter of Credit,
Borrower and Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Terms defined above shall have the
meanings set forth above and the following terms shall have the following
meanings. Any term capitalized but not defined herein shall have the same
meaning as ascribed to it in the Indenture.
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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"AGREEMENT" means this Reimbursement Agreement, as the same may from
time to time be amended, supplemented or modified.
"ALTERNATE CREDIT FACILITY" has the meaning set forth in the Indenture.
"BANK" means KeyBank National Association, a national banking
association and each Participant, whether now or hereafter existing.
"BOND" or "BONDS" means any one or more of the Bonds authorized,
authenticated and delivered pursuant to the Indenture.
"BORROWER" means Lindal Cedar Homes, Inc., a Delaware corporation.
"BUSINESS DAY" means any day other than (i) a Saturday, Sunday or legal
holiday, (ii) a day on which commercial banks in the city or cities in which are
located the principal corporate trust office of the Trustee and the office of
Bank at which demands for payment under the Letter of Credit are to be presented
are authorized or required by law or executive order to close; or (iii) a day on
which the Bank is closed.
"CAPITAL LEASE(S)" means a lease of (or other agreement conveying the
right to use) property to the extent the obligations to pay rent or other
amounts under such lease are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP (including Statement
of Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board), and, for purposes of this Agreement, the amount of such obligations
shall be the capitalized amount of such obligation, determined in accordance
with GAAP (including such Statement No. 13).
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor federal income tax statute or code. Any reference to a provision of
the Code shall include the applicable Department of Treasury regulations.
"CONTINGENT OBLIGATION" means, with respect to any Person, any guarantee
of Indebtedness or any other obligation of any other Person or any assurance
with respect to the financial condition of any other Person, whether direct,
indirect or contingent, including, without limitation, any purchase or
repurchase agreement or keep-well, take-or-pay, through-put or other arrangement
of whatever nature having the effect of assuring or holding harmless any Person
against loss with respect to any obligation of such other Person; provided,
however, that the term "Contingent Obligation" shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined in good faith
by the Person subject to such obligation.
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"CONTRACTUAL OBLIGATION" means, with respect to any Person, any
provision of any security interest of any nature issued, granted or transferred
by such Person or of any agreement, instrument or undertaking to which such
Person is a party or by which it or any of its property is or purports to be
bound.
"CURRENT RATIO" means the ratio described in Section 7.01(G)(ii) hereof.
"DATE OF ISSUANCE" means the date the Letter of Credit is issued by
Bank.
"DEED OF TRUST" means, collectively, two Deeds of Trust, Assignment of
Rents and Leases, and Security Agreements, each dated as of December 1, 2000,
encumbering real and personal property located in Skagit and King Counties,
Washington, whereunder Borrower is grantor and Bank is beneficiary, as amended
from time to time.
"DEFAULT" or "EVENT OF DEFAULT" has the meaning set forth in Section
8.01 hereof.
"DRAWINGS" include:
"A DRAWING (INTEREST)" or "A DRAWING" means a drawing under the Letter
of Credit to make an interest payment on Bonds due on an Interest Payment Date.
"B DRAWING (REDEMPTION)" or "B DRAWING" means a drawing on the Letter of
Credit to pay the principal amount of any Bonds being redeemed pursuant to
Section 3.01 of the Indenture.
"ENVIRONMENTAL INDEMNITY AGREEMENT" means that certain Indemnity
Agreement dated as of December 1, 2000, executed by Borrower in favor of Bank.
"ENVIRONMENTAL LAW" shall include, without limitation, the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq.,
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Section 9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act of 1986, Hazardous Materials Transportation Control Act, 49
U.S.C. Section 1801 et seq., Federal Water Pollution Control Act, Federal Water
Act of 1977, 93 U.S.C. Section 1251 et seq., Federal Insecticide, Fungicide and
Rodenticide Act, Federal Pesticide Act of 1978, 7 U.S.C. Section 2601 et seq.,
Federal Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., Washington
Water Pollution Control Act, RCW Chapter 90.48, Washington Clean Air Act, RCW
Chapter 70.94, Washington Solid Waste Management Recovery and Recycling Act, RCW
Chapter 70.95, Washington Hazardous Waste Management Act, RCW Chapter 70.105,
Washington Hazardous Waste Fees Act, RCW Chapter 70.95E, Washington Model Toxics
Control Act, RCW Chapter 70.105D, Washington Nuclear Energy and Radiation Act,
RCW Chapter 70.98, Washington Radioactive Waste Storage and Transportation Act
of 1980, RCW Chapter 70.99, Washington Underground Petroleum Storage Tanks Act,
RCW Chapter 70.148 and all other local, state, or federal laws, ordinances,
regulations and orders now or hereafter relating to environmental protection,
the use, storage, generation, production, treatment, emission, discharge,
remediation, removal, disposal or
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transport of any Hazardous Substances or any other environmental matters, as
amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"FLSA" means the Fair Labor Standards Act of 1938, as amended from time
to time, and the regulations promulgated pursuant thereto.
"FUNDS" means any one or more of the separate special trust funds
created under Article V of the Indenture and any other fund or account created
thereunder, any supplemental indenture or any Related Document which is or
hereafter becomes available for the payment of principal or interest on Bonds or
to pay any sum due or to become due from Borrower to Bank.
"GAAP" or "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles as in effect from time to time in the United
States and as consistently applied by Borrower.
"GOVERNMENTAL BODY" means any foreign or domestic government, any court
or any foreign, federal, state, municipal or other department, commission,
board, bureau, agency, public authority, instrumentality or any arbitrator or
government regulator with jurisdiction over Borrower and/or the Project.
"GUARANTEE OBLIGATIONS" means, as to any Person (the "guaranteeing
person"), any obligation of (i) the guaranteeing bank under any letter of credit
to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments or documents for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by
such guaranteeing person in good faith.
"INDEBTEDNESS" means, of any Person at any date, (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all obligations of such Person as lessee under Capital
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Leases; (iv) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (v) all liabilities secured by any Lien
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof, (vi) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business), (vii) all obligations of such Person under take-or-pay or
similar arrangements or under commodities agreements, (viii) all Guarantee
Obligations of such Person, (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements,
commodity purchase or option agreements or other interest or exchange rate or
commodity price hedging agreements, and (x) all contingent or non-contingent
obligations of such Person in respect of letters of credit issued or bankers'
acceptances created for the account of such Person; provided that, with respect
to the Borrower or any other Subsidiary or Affiliate of the Borrower,
"Indebtedness" shall not include obligations with respect to any leases of real
property or interests therein which are not Capital Leases or any guarantee of
such leases, and provided, however, that to the extent the same amount may come
within two or more of the sub-paragraphs above, such amounts are to be included
only once in such Person's Indebtedness.
"INDEMNIFICATION AND COMPENSATION AGREEMENT" means that certain
Indemnification and Compensation Agreement executed by the Borrower in favor of
the Issuer.
"INTEREST PAYMENT DATE" shall have the meaning set forth in Article I of
the Indenture, which definition is by this reference incorporated herein.
"ISSUER" means the Washington Economic Development Finance Authority.
"LEASE" means that certain Lease dated July 28, 1994 by and between the
Port of Skagit County as lessor and Mel Edstrom and Timberline Forest Products,
Inc. as lessee, as amended, which Lease was assigned to Borrower by Lessee's
Assignment of Lease, Lessor's Consent and Second Amendment to Lease dated April
10, 1997.
"LIEN" means, with respect to any Person, any security interest, pledge,
mortgage, charge, option, assignment, hypothecation, encumbrance, attachment,
garnishment, sequestration, forfeiture, execution or other voluntary or
involuntary lien upon or affecting the revenues of such Person or any real or
personal property in which such Person has or hereafter acquires any interest,
except (i) Liens for Taxes which are not delinquent or which remain payable
without penalty or the validity or amount of which is being contested in good
faith by appropriate proceedings and with reserves satisfactory to Bank; (ii)
liens imposed by law (such as construction liens) incurred in good faith in the
ordinary course of business which are not delinquent or which remain payable
without penalty or the validity or amount of which is being contested in good
faith by appropriate proceedings and reserves consented to by Bank; and (iii)
deposits or pledges under workmen's compensation, unemployment insurance, social
security, bids, tenders, contracts (except for repayment of borrowed money), or
leases, or to secure statutory obligations or surety or appeal bonds or to
secure indemnity, performance or other similar bonds given in the ordinary
course of business.
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"LOAN AGREEMENT" means that certain Loan Agreement dated as of November
1, 1997, by and between Issuer and Borrower.
"LOAN" means the loan made to Borrower pursuant to the Loan Agreement in
the principal amount of up to $3,725,000, plus interest thereon, in order to
provide for the financing for the Project (as hereinafter defined) and for the
purchase of manufacturing equipment.
"LOAN DOCUMENTS" means the Loan Agreement and the Indemnification and
Compensation Agreement.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
Borrower's business, operations, financial condition, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform its obligations under this Agreement or any
of the Related Documents, (c) the validity or enforceability of this Agreement
or any of the Related Documents, (d) the rights, remedies, powers and privileges
of the Bank under this Agreement or any of the Related Documents or (e) the
timely payment of the Reimbursement Obligations.
"OPERATING CASH FLOW TO FIXED CHARGE RATIO" means the ratio described in
Section 7.01(G)(iii) hereof.
"PARTICIPANT" means any entity to whom Bank transfers an interest in
this Agreement or any Related Document. Bank and not any Participant shall be
the sole party authorized or obligated to provide any consent or approval
required, contemplated or authorized by this Agreement or any Related Document
(Bank in its discretion may, however, consult with, take into consideration or
be guided by the views of Participants when determining whether to provide such
consents or approvals).
"PERSON" means an individual, a corporation, a partnership, a limited
liability company, a limited liability partnership, an association, a trust or
any other entity or organization, including a state, government or political
subdivision or an agency or instrumentality thereof.
"PLAN" shall mean (i) any "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA); (ii) any "employee pension benefit plan"
(as such term is defined in Section 3(2) of ERISA) or a "multiemployer plan" (as
such term is defined in Section 4001(a)(3) of ERISA); (iii) any employee benefit
plan maintained in connection with any trust described in Section 501(c)(9) of
the Code; or (iv) a combination of such plans; if such plan or plans is
maintained or contributed to, or at any time during the five calendar years
preceding the date of this Agreement was maintained or contributed to, by
Borrower or under which Borrower has or, during the term of this Agreement, will
have any liability. For purposes of this paragraph, the term "Borrower" shall
include Borrower and any corporation, partnership, sole proprietorship or other
entity if Borrower and such other entity or entities are (i) corporations which
are members of a controlled group of corporations as defined in Section 414(b)
of the Code, (ii) trades or businesses (whether or not incorporated) which are
under common control as defined in
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Section 414(c) of the Code, (iii) members of an affiliated service group as
defined in Section 414(m) or 414(o) of the Code, or (iv) any combination of the
foregoing.
"PRIME RATE" means the rate of per annum interest which Bank announces
publicly or otherwise makes available to the public from time to time as its
"prime rate" (currently calculated on the basis of the actual number of days
elapsed over a year of 360 days) with any change in the "prime rate" to be
effective on and as of the date of any change in said "prime rate." The Prime
Rate and the calculation thereof may be established by Bank in its sole
discretion. The Prime Rate is not necessarily the lowest rate of interest
offered by Bank to its most creditworthy customers. The Prime Rate is a variable
or fluctuating rate which increases or decreases from time to time.
"PROJECT" means the acquisition, modernization and expansion of a 44,000
square foot manufacturing facility on real property leased from the Port of
Skagit County located at Burlington, Washington, and the purchase of additional
manufacturing equipment.
"PROPERTY" means all that real and personal property defined as
"Property" in the Deed of Trust, and more particularly described in Exhibit B-1
("BURLINGTON PROPERTY") and Exhibit B-2 ("TUKWILA PROPERTY") attached hereto and
by this reference incorporated herein.
"RELATED DOCUMENTS" means (individually and collectively) any promissory
note executed to further evidence the obligations of Borrower hereunder ("BANK
NOTE"), the Letter of Credit, the Deed of Trust, the Assignment of Leases, the
Indenture, the Loan Documents, the placement memorandum regarding the Bonds, the
Environmental Indemnity Agreement, and all other certificates, documents or
agreements arising from or related to the Bonds or executed in connection
herewith or therewith.
"REQUIREMENT OF LAW" means, with respect to any Person, the articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule, guideline, standard
(including but not limited to accounting standards and GAAP), order,
restriction, directive, judgment, decree, injunction, writ, or regulation, or a
final and binding determination of an arbitrator or a determination of an
arbitrator, mediator, or a determination of any Governmental Body, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject. With respect to Bank, Requirement
of Law shall include a Requirement of Law or now or hereafter existing request
of a central bank or financial, monetary or other supervisory authority (whether
or not having the force of law).
"SENIOR LIABILITIES TO TANGIBLE CAPITAL RATIO" means the ratio described
in Section 7.01(G)(i) hereof.
"SINKING FUND ACCOUNT" means the account described in Section 7.01(Y)
hereof.
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"SUBORDINATED DEBT" means indebtedness and liabilities of Borrower which
have been subordinated by their respective terms or by written agreement to
indebtedness owed by Borrower to Bank in a manner acceptable to Bank.
"SUBSIDIARY" or "SUBSIDIARIES" means any corporation of which at least
50% of the outstanding stock having ordinary voting powers to elect a majority
of the board of directors of such corporation (irrespective of whether or not at
the time stock of any other class of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by Borrower and/or one or more of its
Subsidiaries.
"SUPPLEMENTAL INDENTURE" means indentures now or hereafter supplementing
the Indenture.
"TAXES" means for any Person any federal or state tax, assessment, duty,
levy, withholding liability, impost and other charges of every nature whatsoever
imposed by any Governmental Body on such Person or on any of its property or
because of any revenue, income, sales, use, product, employee or franchise, and
any interest or penalty with respect to any of the foregoing.
"TENDER OFFER AND PLANNED RESTRUCTURE" means transfers of Borrower's
stock in connection with Borrower's tender offer in process as of the date of
this Agreement, pursuant to which Borrower will repurchase its shares from
current stockholders, in order to become a privately-held corporation, and
subsequent to completion of such tender offer, Borrower will merge with and into
a Washington corporation. Upon completion of the Tender Offer and Planned
Restructure, Borrower shall be a privately-held Washington corporation doing
business under the same corporate name it presently uses.
"TERMINATION DATE" means the date on which the Letter of Credit expires
according to its terms.
"TRUSTEE" means U.S. Bank Trust National Association (formerly known as
FIRST TRUST NATIONAL ASSOCIATION), a national banking association, or any duly
authorized successor thereto appointed pursuant to the Indenture.
"WORK" means the addition and renovation of the Real Property in
accordance with the detailed description of the work and detailed cost breakdown
of expenses as set forth in the Budget annexed hereto as Exhibit F.
ARTICLE II
ISSUANCE OF LETTER OF CREDIT
SECTION 2.01. Issuance of the Letter of Credit. Bank agrees, on the
terms and subject to the conditions set forth in this Agreement, to issue to
Trustee on the Date of Issuance and upon the request of Borrower, the Letter of
Credit. The Stated Amount of the Letter of
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Credit shall never exceed $3,536,878.95, a portion of which Stated Amount shall
be available to support the payment of principal due on Bonds ("PRINCIPAL
COMPONENT") and a portion of which shall be available to support the payment of
not more than two hundred ten (210) days' of interest on the Bonds ("INTEREST
COMPONENT"). Upon the Date of Issuance, the Principal Component shall be, and
shall thereafter never exceed, $3,425,000.00. Upon the Date of Issuance, the
Interest Component shall be, and shall thereafter never exceed $111,878.95.
Borrower hereby agrees to all terms and conditions set forth in the
Letter of Credit, including Annexes A through G thereto, all of which terms and
conditions are incorporated herein by this reference.
Borrower acknowledges:
(a) that upon any drawing under the Letter of Credit for payment of all
or a portion of Bonds outstanding under the Indenture at maturity or earlier
redemption, the Trustee is required to deliver to Bank Annex B to the Letter of
Credit and, upon a drawing for all remaining Bonds, must also deliver Annex B
and surrender the Letter of Credit therewith; and
(b) that upon any replacement of the Letter of Credit with an Alternate
Letter of Credit, the Trustee must promptly deliver Annex G to the Letter of
Credit to Bank and surrender the Letter of Credit therewith.
If the Trustee does not take these actions when required, Borrower
agrees to direct and to use its best efforts to cause the Trustee to take said
actions.
SECTION 2.02. Termination of Letter of Credit; Alternate Letter of
Credit; Extension.
(a) Term of Letter of Credit. Notwithstanding the fact that the Bonds
will not mature until a later date, the Letter of Credit shall terminate on
December 22, 2005, unless earlier terminated or unless it is extended.
(b) Optional Extension of Term of Letter of Credit. Upon the written
request of Borrower at least two years prior to the fifth (5th) anniversary of
the Date of Issuance (and at least two years prior to each succeeding
Termination Date with respect to any succeeding extension or renewal period(s)
as provided for below), Bank shall within 30 days of such request, notify
Trustee and Borrower whether Bank, in its sole discretion, will extend the
Termination Date of the Letter of Credit for a period of time determined by
Bank, either by amendment of the Letter of Credit or replacement of the Letter
of Credit in a form which meets the requirements of the Loan Agreement.
Borrower's request shall state the exact number of years and months for which
extension or renewal is requested; provided, however, that any such renewal or
extension must be for a period of at least one year, and Borrower shall satisfy
the following conditions:
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(a) Borrower shall deliver to Bank Borrower's then-current financial
statements, certified as correct by Borrower, which shall be acceptable
in all respects to Bank.
(b) Borrower shall be in full compliance with all covenants and obligations
under this Agreement and there is then no Event of Default hereunder,
nor any circumstance that would be an Event of Default if not cured
within any applicable cure period.
If Bank notifies Trustee and Borrower that it is willing to so extend or renew
the Letter of Credit for the requested period, Bank shall, within 15 days of
payment by Borrower to Bank of all fees payable pursuant to Article IV hereof
(if such payment be made no later than 30 days before the Termination Date),
deliver to the Trustee an amendment to the Letter of Credit, which amendment
shall extend the Termination Date for the requested period or deliver a
replacement Letter of Credit, which replacement shall be for a term equal to the
requested period. The amended or replacement Letter of Credit shall not be
effective until the Termination Date of the Letter of Credit being amended or
replaced.
Borrower agrees and acknowledges that this agreement of Bank to consider
extending or renewing the Letter of Credit (as set forth in this Section 2.02),
does not and shall not constitute an express or implied commitment or other
promise of any nature whatsoever by Bank to extend credit at any future date,
even if, for example, the then financial condition of Borrower equals or exceeds
its current financial condition or even though the Letter of Credit will expire
before the Bonds mature if Bank determines not to renew or extend the Letter of
Credit. The sole purpose of the second paragraph of this Section 2.02 is to
specify the timing of delivery of any letter of credit Bank determines to extend
or renew; said determination is solely within Bank's unfettered discretion.
If Bank determines to extend or renew the Letter of Credit pursuant to
this Section 2.02, this Agreement and each Related Document (or such substitute
documents to which Bank may in its sole discretion, accept in writing) shall
continue and be effective for said extension or renewal period(s) until all sums
of every nature whatsoever due or to become due Bank have been paid in full.
SECTION 2.03. Increase or Reduction of Stated Amount and Reinstatement.
The Stated Amount of the Letter of Credit shall be decreased and reinstated
according to the terms of the Letter of Credit.
ARTICLE III
REIMBURSEMENT OBLIGATION AND INTEREST
SECTION 3.01. Reimbursement Obligations. Any sums drawn under the Letter
of Credit and paid by Bank shall constitute value requested by and given to or
for the benefit of Borrower and shall be an unconditional, absolute and
irrevocable obligation hereunder of Borrower to Bank. Borrower hereby promises
to pay the principal and interest on the Bonds by reimbursing Bank for the full
amount of any drawings under the Letter of Credit notwithstanding any
cancellation or payment of Bonds. Borrower further promises to repay to Bank the
full
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amount of any drawing under the Letter of Credit, and to pay all sums due or to
become due hereunder, in the manner and at the times provided in this Agreement
(collectively, "REIMBURSEMENT OBLIGATIONS").
SECTION 3.02. Reimbursement.
(a) Reimbursement of A and B Drawings. Borrower agrees to reimburse Bank
in immediately available funds for the amount of any A or B Drawing made under
the Letter of Credit and honored by the Bank; said reimbursement shall be made
by or on behalf of Borrower by 2:00 p.m. local time in Seattle, Washington, on
the date of any drawing simultaneously with or immediately following the Bank's
payment of such drawing. Borrower's Reimbursement Obligation with respect to
such drawings shall be immediately due and payable without notice, presentment,
demand, protest, or other notice of any kind, all of which are hereby waived by
Borrower.
(b) Prior Deposit for Redemption of Bonds. If Borrower determines to
exercise its option to redeem any or all of the Bonds pursuant to Article III of
the Indenture (except for amounts required to redeem Bonds pursuant to Section
7.01(Y) of this Agreement), Borrower shall deposit with Bank all sums necessary
to effect any such redemption or purchase and to pay any premium in connection
therewith, at least 125 days before the earlier of the date (i) any notice is
required to be given by any Person in connection with such redemption, or (ii)
of any drawing for the proposed redemption. No drawing shall be allowed under
the Letter of Credit unless such deposit is timely made. Such sums shall include
the principal amount of all Bonds to be redeemed, the full amount of any premium
due or to be come due thereon, and all interest accrued thereon.
Any monies held by Bank pursuant to the preceding paragraph shall be
invested by Bank in interest bearing investment obligations as directed by
Borrower at the time the deposit is made; failing such direction, Bank shall
have sole discretion to determine all investments, if any. Borrower agrees to
indemnify and hold Bank harmless from and against any responsibility or
liability for any loss incurred in the making of any investment at the express
direction of Borrower as provided herein or upon written directions received
from Borrower, other than as a result of Bank's gross negligence or willful
misconduct. All interest received on said investments shall be credited by Bank
to any sums due or to become due Bank by Borrower.
SECTION 3.03. Manner, Method, Place and Time of Payment. All payments
made or caused to be made by Borrower to Bank shall be made by Bank debiting the
Sinking Fund Account (as defined in Section 7.01(Y) hereof). Borrower covenants
and agrees that on the date any such payment or other amount is due hereunder,
Borrower will have unrestricted funds in the Sinking Fund Account in an amount
no less than the amount then due. However, Borrower shall pay to Bank, on
demand, default interest on said payment for such extended time at the interest
rate set forth in Section 4.06 hereof, and the extended time shall be included
in the computation of fees and other charges. All payments under this Agreement
shall be made without counterclaim, set-off, condition or qualification and free
and clear of and without deduction for any Taxes, levies, imposts, deductions or
charges of any nature whatsoever.
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SECTION 3.04. Obligation to Pay Unconditional. Borrower's obligation to
reimburse or pay Bank hereunder is absolute, unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances:
(i) any lack of validity or enforceability of this Agreement, the Bonds
or any of the Related Documents;
(ii) any amendment, waiver, release or termination of or any consent to
or departure from the terms of all or any of said documents;
(iii) the existence of any claim, set-off, defense or other right which
Borrower may have at any time against any Person, whether in connection with
said documents or any related or unrelated transaction;
(iv) any demand, statement or any other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or not in compliance with the terms of the Letter of Credit or any
Related Document or any statement therein being untrue or inaccurate in any
respect whatsoever;
(v) any determination of invalidity or unenforceability of the Letter of
Credit after payment by Bank thereunder;
(vi) any failure to reduce or reinstate the Stated Amount; or
(vii) any other circumstance, happening or omission, whether or not
similar to any of the foregoing.
The liability of Borrower hereunder and under any Related Document shall be
reinstated and revived and the rights of Bank shall continue, with respect to
any amount at any time paid by or on behalf of Borrower which amount shall
thereafter be required to be restored, returned or forfeited by Bank pursuant to
any law, and Borrower's liability therefor shall continue as if such amount had
not been paid.
SECTION 3.05. Evidence of Debt. The books and records of Bank shall be
conclusive evidence, absent manifest error, of all amounts of principal,
interest, fees and other charges advanced, outstanding or repaid pursuant to
this Agreement or any Related Document to which Bank is a party. Bank agrees to
provide statements to Borrower upon its written request.
ARTICLE IV
OTHER PAYMENTS
SECTION 4.01. Letter of Credit Issuance Fee. Borrower shall pay to Bank
on or prior to the Date of Issuance, an issuance fee equal to one percent
(1.00%) of the Stated Amount
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of the Letter of Credit. The issuance fee and all other fees of any letter of
credit amended, extended, replaced or renewed pursuant to Section 2.02 hereof
shall be established by Bank in its sole discretion at the time of such
amendment, extension, replacement or renewal. Such fees shall at least include
the category of fees referenced in this Article IV (in amounts which may be less
than, equal to or exceed the amounts referenced herein) and such additional fees
as Bank then deems appropriate in its sole discretion. The foregoing fee and all
other fees in this Article IV are or are deemed to be fully earned and
nonrefundable.
SECTION 4.02. Letter of Credit Annual Fee. Borrower hereby agrees to pay
Bank an annual fee which shall equal one percent (1.00%) per annum of the Stated
Amount (which amount shall be calculated by Bank) as of each anniversary date
following the Date of Issuance until the Termination Date. The annual fee shall
be payable in advance commencing on the Date of Issuance and on each anniversary
date of the Date of Issuance thereafter until the Termination Date.
SECTION 4.03. Other Fees
(a) Transfer Fee and Amendments. Bank agrees to issue a substitute
Letter of Credit to any successor Trustee duly appointed pursuant to the
Indenture and applicable law upon surrender to Bank of the original Letter of
Credit together with payment to Bank of a fee of $500 and any attorneys' fees or
other expenses incurred by Bank in connection therewith. Borrower agrees to pay
the same fees and expenses to Bank on the day of any amendment to the Letter of
Credit if to effectuate said amendment, a written change is made to the Letter
of Credit or an amended, substitute, replacement or additional Letter of Credit
is issued. As used herein, "amendment" shall not include any documents Bank
determines to issue to reflect a reduction of the Stated Amount but shall
include each reinstatement (other than an automatic reinstatement) of any
portion of the Stated Amount.
(b) Draw Fee. Upon each draw under the Letter of Credit, Borrower agrees
to pay Bank on demand, the actual draw fee then charged by Bank's International
Department. As of the date of this Agreement, Bank's draw fee is $200.
(c) Cancellation Fee. If the Letter of Credit is canceled prior to the
Termination Date, Borrower agrees to pay Bank a cancellation fee of one percent
(1.00%) of the then Stated Amount of the Letter of Credit, and shall cause the
Trustee to tender to Bank the fee with the original Letter of Credit then
outstanding. No cancellation shall be effective to discharge or reduce the
liability of Borrower to pay the annual fee payable pursuant to Section 4.02
hereof for the year in which such cancellation occurs or to pay all other sums
due Bank under this Agreement or any Related Document. Until such sums are fully
paid to Bank, no such cancellation shall diminish or affect any security or
other interest granted to or for the benefit of Bank.
SECTION 4.04. Increased Costs If after the Date of Issuance there is the
adoption of or any change in any law, rule, regulation, guideline or request
from any central bank or financial, monetary or other supervisory or
governmental authority (whether or not having the
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force of law), or in the interpretation thereof by any court or administrative
or governmental body charged with the administration thereof, which imposes on
Bank any condition affecting or relating to this Agreement, any Related Document
evidencing an obligation of Borrower to Bank, or to the Letter of Credit, the
result of which shall be to reduce the rate of return on the Letter of Credit or
this Agreement to a level below which Bank could have achieved but for such law,
rule or regulation or shall increase the cost to Bank of issuing or maintaining
the Letter of Credit (or any substitute, additional, renewed or amended Letter
of Credit) or of funding amounts drawn thereunder, including but not limited to
any law, rule, regulation or change which shall (a) impose, modify or deem
applicable any capital adequacy requirement, reserve, special deposit or similar
requirement or impose any insurance premium or assessment against letters of
credit issued by, or assets held by, or deposits in or for the account of, Bank,
or (b) require or make advisable (in the opinion of legal counsel to Bank),
qualification, registration, filing or any other act by Bank to avoid violation
of or to effect compliance with any law, rule or regulation (or judicial,
administrative or regulatory decision, interpretation, opinion, order,
agreement, directive or request regarding same) relating to underwriting,
selling, distribution of, marketing or dealing in securities; or (c) subject
Bank to any Tax, charge, fee, deduction or withholding of any kind whatsoever,
then, upon demand therefor, Borrower shall pay to Bank additional amounts which
shall be sufficient to compensate Bank for such reduction in the rate of return
or increased cost, together with interest on each such amount from the date said
amount is due until payment in full thereof at the Prime Rate. The amount of any
reduction in the rate of return or increase in cost shall be the result of
Bank's good faith discretionary allocation of the aggregate of such reduction or
cost increases resulting from such events; Bank shall in connection with its
demand for such additional amounts furnish to Borrower a certificate setting
forth with reasonable explanation such increased cost incurred by Bank; absent
manifest error, said certificate shall be conclusive as to the amount thereof.
Bank shall use its best efforts to promptly demand payment pursuant to this
Section 4.04.
SECTION 4.05. Payment of Expenses and Fees; Applicability.
(a) Upon demand therefor, Borrower agrees to pay to Bank all of its
out-of-pocket or incurred costs, reasonable attorneys' fees, fees of collection
or other agents, and other fees and expenses of every nature whatsoever
(hereinafter, collectively "Costs and Fees") directly or indirectly incurred in
connection with the preparation, negotiation, amendment, renewal, extension,
forbearance (if any), refinance, renegotiation or restructure of this Agreement
or any Related Document and any other document prepared or service performed in
connection herewith or therewith; Borrower shall also pay the fees charged from
time to time by rating agencies for any rating or "preference opinion," if any,
regarding the Bonds (but not regarding any general rating of Bank not related to
the Bonds). Upon demand therefor, Borrower further agrees to pay to Bank all
Costs and Fees (whether or not a lawsuit is brought) incurred in collecting any
sums due Bank by Borrower or incurred by Bank in protecting, enforcing or
preserving its rights under this Agreement or any of the Related Documents, all
whether or not suit is brought and including but not limited to all Costs and
Fees incurred in any court action, arbitration, mediation, on appeal, in any
bankruptcy or state receivership or other insolvency or similar proceedings or
circumstances, in any forfeiture or other proceeding that could affect Bank's
rights under this Agreement or in any security therefor.
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(b) The obligations of Borrower under Section 4.04 and Section 4.05 of
this Agreement shall (i) survive until all sums due Bank under this Agreement or
any Related Document have been paid in full, notwithstanding any termination of
the Letter of Credit or payment of the Bonds; and (ii) include any reduction in
the rate of return, increased costs, and Costs and Fees incurred by any
Participant.
SECTION 4.06. Calculations; Default Interest; Compounded Interest.
Except as otherwise expressly set forth in this Agreement, all computations of
interest and fees under this Agreement shall be made on the basis of a 360 day
year and actual days elapsed. Interest shall accrue during each period from but
excluding the first day thereof to and including the last day thereof. In the
event that any payment due hereunder shall not be made within fifteen (15) days
of the date when due, a late charge of five cents ($.05) for each dollar ($1.00)
so overdue (the "LATE CHARGE FEE") may be charged by Bank for the purpose of
defraying the expense incident to handling such delinquent payments. Such Late
Charge Fee represents the reasonable estimate of Bank and Borrower of a fair
average compensation for the loss that will be sustained by Bank due to the
failure of Borrower to make timely payments. Such Late Charge Fee shall be paid
without prejudice to the right of Bank to collect any other amounts provided to
be paid or to declare an Event of Default hereunder or under the Deed of Trust.
If an Event of Default occurs, then the interest rate applicable in calculating
any defaulted payments from the due date of the defaulted payment shall be the
Default Rate and the Late Charge Fee shall apply to any such payments. All
amounts that are not paid when due under this Agreement shall bear interest at
the Prime Rate plus five percent (5%) per annum (the "DEFAULT RATE"), from the
date due until paid. All interest not paid when due shall be added to principal
and interest shall thereafter accrue on said increased principal amount. All
amounts due hereunder shall be paid in United States dollars.
ARTICLE V
CONDITIONS
SECTION 5.01. Conditions Precedent to Issuance of Letter of Credit.
(a) Bank will issue the Letter of Credit upon the request of Borrower in
accordance with Section 2.01 and subject to fulfillment of the conditions set
forth in subsections (b), (c) and (d) below.
(b) Except as otherwise indicated and unless waived by Bank in its sole
discretion, Bank shall have received on or before the Date of Issuance the
following, each addressed to Bank and dated on or as of such date, in form and
substance satisfactory to Bank:
(i) Copies of (a) Articles of Incorporation and Bylaws for
Borrower certified by the corporate secretary of Borrower as a true and correct
copy, together with a certificate of existence issued by the Secretary of State
of the State of Washington dated within thirty (30) days of the Date of
Issuance; (b) borrowing resolutions adopted by Borrower's Board of Directors and
certified by Borrower's corporate secretary and incumbency certificates executed
by Borrower's
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corporate secretary; and (c) copies of each of the foregoing documents as
amended to the Date of Issuance.
(ii) Evidence satisfactory to Bank of the adoption by Borrower of
each Related Document to which Borrower is a party and of this Agreement;
(iii) A written opinion of bond counsel in form and substance
satisfactory to Bank and covering such matters relating to the transactions
contemplated by this Agreement and the Related Documents as Bank may reasonably
request, including without limitation, an opinion identifying the Project Costs
that have been approved for financing with Bond proceeds;
(iv) An opinion of independent counsel selected by Borrower
(subject to Bank's reasonable approval) in form and substance satisfactory to
Bank and covering such matters relating to the transactions contemplated by this
Agreement and the Related Documents as Bank may reasonably request. Borrower
hereby requests and instructs its independent counsel to issue such an opinion;
(v) A certificate of the corporate secretary of Borrower
certifying (a) the name and true signature of the officers of Borrower
authorized to enter into and execute this Agreement and the Related Documents on
behalf of Borrower; (b) that the documents delivered pursuant to Section
5.01(b)(i) have not been amended or canceled since the date of certification
thereunder; and (c) the certificate described in paragraph (c) below;
(vi) The amounts specified to be paid on the Date of Issuance
pursuant to Section 4.01, Section 4.02 and Section 7.04, establishment of the
account contemplated by Section 7.01(Y) and proof of insurance required
hereunder or under any Related Documents;
(vii) Duly executed originals in form and substance satisfactory
to Bank of this Agreement and each Related Document in favor of or to which Bank
is a party;
(viii) Recordation with the Auditor of King and Skagit Counties,
Washington, of the duly executed original Deed of Trust and Assignment of Leases
and filing with the Department of Licensing of appropriate UCC financing
statement(s) providing record notice, among other things, of Bank's security
interest in the Property; receipt by Bank of an ALTA extended coverage
mortgagee's policy of title insurance (Form B-1970 with 1984 revisions), issued
by a title insurance company satisfactory to Bank and in favor of Bank as the
insured with liability in the Stated Amount showing: title to the Property
vested in fee in Borrower, insuring the first lien priority of the Deed of Trust
subject only to the Liens approved in writing by Bank, and containing such
endorsements as are requested by Bank;
(ix) Application for the Letter of Credit;
(x) Copies of all agreements (including but not limited to each
Related Document) and documents, articles of incorporation and bylaws of
Borrower, including records of corporate proceedings, governmental approvals and
incumbency certificates executed in
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connection with the transactions contemplated by this Agreement and the Related
Documents, all certified to the extent requested by Bank;
(xi) MAI appraisals for the Project and all Property in form,
substance and amount satisfactory to Bank;
(xii) Financial statements including balance sheets, profit and
loss statements and cash flow projections of Borrower in form and substance
satisfactory to Bank;
(xiii) Environmental Questionnaire and Phase I environmental
reports on the Project and Property satisfactory to Bank;
(xiv) ADA Questionnaire and Disclosure Statement and ADA
Certificate of Compliance for the Project and the Property satisfactory to Bank;
(xv) A certificate by an architect or other person or entity
acceptable to Bank confirming that the Project complies with all applicable
building codes and zoning ordinances and all other applicable federal and state
laws, rules, regulations, codes and orders;
(xvi) [intentionally deleted]
(xvii) Evidence acceptable to Bank that all utility services
necessary for the uninterrupted and orderly operation of the Project and the
Property are available and that all connections have been made to abutting
public water, sewer, storm drains, gas and electrical facilities;
(xviii) Evidence acceptable to Bank that the Project and the
Property is accessible via completed, dedicated streets which have been accepted
for public maintenance and use by the appropriate government agencies or that an
easement creating a perpetual right of public access to a publicly dedicated
street, road or highway is in effect;
(xix) If requested by Bank, an ALTA survey for the Property
certified to and satisfactory to Bank and the title insurance company insuring
the Deed of Trust;
(xx) Budget for the Project satisfactory to Bank;
(xxi) Plans and Specifications for the Project satisfactory to
Bank and approved by all necessary Governmental Bodies including, without
limitation, a copy of the building permit;
(xxii) All licenses, permits and approvals necessary to construct
the Project from all governmental authorities with jurisdiction over the
Project;
(xxiii) Each of the documents required to be delivered to the
placement agent pursuant to the Placement Agent Agreement between Borrower and
the placement agent
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regarding the Bonds, and in the case of opinions of counsel therein required
(other than Bank counsel opinions, any preference opinion and any opinion which
the placement agent's counsel delivers solely to the placement agent) such
opinions shall be addressed or confirmed to Bank; and
(xxiv) Estoppel certificate and agreement with the Port of Skagit
County regarding the Lease.
(xxv) Such other documents, interpretations, instruments,
approvals or opinions as Bank or its counsel may reasonably request.
(c) The representations and warranties of Borrower contained in Section
6.01 hereof and in each Related Document shall be correct, accurate and complete
on and as of the Date of Issuance as though made on and as of such date; no
Event of Default and no condition or event which, with the giving of notice or
lapse of time or both, would become such an Event of Default, shall have
occurred and be continuing on the Date of Issuance; and that there has been no
material adverse change in Borrower's financial condition subsequent to the
financial statements delivered by Borrower to Bank and Bank shall have received
a certificate signed by corporate secretary or other authorized officer of
Borrower, dated the Date of Issuance, to that effect. As used in this paragraph,
"Date of Issuance" shall include any date the Letter of Credit is amended or a
substitute letter of credit is issued.
(d) On or before the Date of Issuance:
(i) all conditions precedent to the issuance of the Bonds shall
have occurred; and
(ii) Borrower (and all other parties, as appropriate) shall have
duly executed this Agreement, the Related Documents and all other documents or
instruments referred to, required by or related to the aforesaid.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.01. Representations, Warranties and Covenants of Borrower. The
warranties, representations, and covenants of Borrower contained in this
Agreement or in any Related Document shall be deemed to have been relied upon by
Bank regardless of any investigation made by Bank or on its behalf and shall
survive the Date of Issuance and shall continue until all Reimbursement
Obligations have been paid in full. Borrower hereby represents, warrants,
covenants and agrees with Bank that:
6.01(A) Organization and Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has the power to own its property and carry on its business as now
being conducted; is authorized to do business in every state in which the nature
of the Project, its business or property makes such
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qualification necessary including, but not limited to, the state of Washington;
the name "Lindal Cedar Homes, Inc." is the exact, true and correct name of
Borrower as set forth in its Articles of Incorporation, as amended from time to
time; Borrower has filed with the Washington Department of Licensing a
Certificate of Trade Name, or such other filing as is necessary, for all
business or assumed trade names under which Borrower has done, does or may do
business, except to the extent no such filing is required by law; Borrower's
principal place of business and its chief executive office is located in King
County, Washington; Borrower has not changed its name, acquired any business, or
changed its principal place of business within five years and one month prior to
the date hereof, except as disclosed in writing to Bank.
6.01(B) Authorization. All corporate action on the part of
Borrower, and its officers, directors and/or shareholders necessary for the
authorization, execution, delivery and performance of this Agreement and each
Related Document has been duly taken. Borrower has full power and authority
(corporate or otherwise) to execute, deliver and perform this Agreement and each
Related Document to which Borrower may be a party, and to perform and observe
the terms and conditions hereof and thereof. Borrower has full power, authority
and legal right to engage in the business and activities conducted or proposed
to be conducted by it with respect to the Project.
6.01(C) Enforceability. This Agreement and the Related Documents,
when executed and delivered by Borrower, will be legal, valid and binding
agreements of Borrower, each enforceable in accordance with their respective
terms, except to the extent that the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
6.01(D) Consents or Approvals. No consent, approval, permission,
authorization, or license of any Person with an ownership interest in Borrower
or with a Lien on any asset of Borrower, or of any trustee, issuer or holder of
any Indebtedness or Contractual Obligation of Borrower, and no consent,
approval, permission, authorization, order or license of any Governmental Body
is necessary in connection with the execution, delivery and performance of this
Agreement, the Related Documents or any transaction contemplated hereby or
thereby to be performed by Borrower, except as may have already been obtained by
Borrower and copies certified as to accuracy by Borrower which have been
delivered to Bank on or prior to the Date of Issuance.
6.01(E) Restrictions. There is no provision in the articles of
incorporation or bylaws of Borrower or any Requirement of Law binding on
Borrower which would be contravened by the execution and delivery of this
Agreement or the Related Documents or by the performance of any provision,
condition, covenant, or other terms hereof or thereof.
6.01(F) No Violation. Borrower is in compliance with all
Requirements of Law with respect to which any failure to comply could have a
Material Adverse Effect. The execution, delivery or performance of this
Agreement and each Related Document, the consummation of the transactions
contemplated herein and therein and compliance with the
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terms and provisions hereof or thereof to be performed by Borrower does not and
will not conflict with or result in a breach of any of the terms, conditions or
provisions of the articles of incorporation or bylaws of Borrower or of any
Requirement of Law or of any Contractual Obligation or constitute a default
thereunder or result in the creation or imposition of any Lien (except in favor
of Bank) upon any of the property of Borrower pursuant to the terms of any such
Contractual Obligation or Requirement of Law. Borrower is not in default under
any existing Indebtedness.
6.01(G) Litigation. Other than as disclosed in Exhibit E hereto
or in the financial statements referenced in Section 6.01(H), there is no
pending or threatened litigation, tax claim, action or other proceeding or
dispute of any nature whatsoever or any unsatisfied judgment or award entered in
connection with any claim, action or proceeding affecting Borrower before any
Governmental Body which is not fully covered by insurance or which could have a
Material Adverse Effect on the legal existence or powers of Borrower or its
financial condition or operations or have a Material Adverse Effect on the
ability of Borrower to perform its obligations under this Agreement or any
Related Documents, and Borrower is not in default with respect to any
Requirement of Law that might result in any such effect.
6.01(H) Financial Information. All financial statements and other
information and data furnished by Borrower to Bank are complete and correct;
have been prepared in accordance with GAAP, except as noted therein; and
accurately and fairly represent the financial condition of Borrower and the
results of operations of Borrower as of the dates thereof. There has been no
change in the financial condition of Borrower of such a character as to
materially impair the ability of Borrower to reimburse Bank for any drawing made
under the Letter of Credit in accordance with the terms hereof or thereof; and
Borrower has no Contingent Obligations except as disclosed in Exhibit C attached
hereto except for the obligations hereunder and under any Related Document of
Borrower.
6.01(I) Liens and Encumbrances. Borrower represents and warrants
that at the time of the delivery of the Deed of Trust (i) Borrower is lawfully
possessed and is the lawful owner of the leasehold estate demised under the
Lease and the Lease is a valid and subsisting demise of the premises described
thereunder to Borrower; (ii) Borrower is lawfully possessed and is the lawful
owner of fee simple title to the Tukwila Property; (iii) each Property is free
and clear of any deed of trust, mortgage, lien, charge or encumbrance thereon or
affecting the title thereto, except (a) Liens regarding the Property which are
shown on Schedule B to the policy of title insurance Bank agrees in writing to
accept, and (b) property tax liens for Taxes not yet delinquent by nonpayment.
6.01(J) Business Authorizations. Borrower possesses all patents,
patent rights or licenses, trademarks, trademark rights, trade names or trade
name rights and copyrights required to conduct its business as now conducted
without conflict with the rights or privileges of others.
6.01(K) Taxes. Borrower has filed or caused to be filed and will
continue to file or timely cause to be filed, all Tax returns that are required
to be filed (except for
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extensions applied for and disclosed to Bank), has paid (or will cause to be
paid) all Taxes shown to be due and payable on said returns or on any
assessments made against Borrower or any of Borrower's property and all other
Taxes, fees or other charges imposed on Borrower or any of its respective
property by any Governmental Body (other than those the amount of which is
currently being contested in good faith and by appropriate proceedings and with
respect to which reserves in conformity with GAAP to which Bank has consented
have been provided on the books of Borrower), and has fully satisfied or
provided for all of its sales and use tax, withholding tax and unemployment tax
liabilities; and no Tax liens have been filed and, to the knowledge of Borrower,
no claims are being asserted with respect to any such taxes, fees or other
charges.
6.01(L) Investment Company Act. Borrower is not an "investment
company" or a partnership "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
6.01(M) Federal Reserve Board ("FRB") Regulations. Borrower is
not engaged and will not engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of such terms
under Regulation U. No part of the proceeds of the Bonds will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose that
violates, or would be inconsistent with, the provisions of the regulations of
the Federal Reserve Board. If requested by Bank, Borrower will furnish to Bank a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U to the foregoing effect. Further, Borrower is and
shall remain in compliance with FRB Regulation B (12 C.F.R. Part 202) in
connection with any credit extended now or hereafter by Borrower.
6.01(N) Incorporated Representations, Warranties and Covenants.
Borrower hereby specifically makes to Bank each and every representation,
warranty, and covenant made by Borrower in the Loan Agreement, each of which
representations, warranties and covenants are incorporated herein by this
reference (except to the extent any of the aforesaid would contradict adversely
to Bank any representation, warranty or covenant contained herein other than by
incorporation). All warranties, representations, and covenants made by Borrower
herein or in any certificate or other document delivered by it or on its behalf
pursuant to this Agreement and each Related Document shall be deemed to have
been relied upon by Bank and shall survive the issuance of the Letter of Credit,
regardless of any investigation made by Bank or on its behalf.
6.01(O) Information Correct. No information, exhibit, or report
furnished by Borrower to Bank or any other Person in connection with this
Agreement or any of the Related Documents contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statement contained therein not misleading. Borrower has disclosed to Bank all
information about Borrower which would be of material interest to a reasonably
prudent lender.
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6.01(P) Compliance with ERISA. Borrower is in substantial
compliance with ERISA and the Code as to each "Plan" as defined in Section 1.01
of this Agreement.
As to each Plan maintained by Borrower:
(i) Such Plan has been maintained in substantial
compliance with all statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, applicable to such Plan.
(ii) No "reportable event," as such term is used in
Section 4043 of ERISA, or "prohibited transaction," as such term is used in
Section 406 of ERISA or Section 4975 of the Code, or "accumulated funding
deficiency," as such term is used in Section 412 or Section 4971 of the Code
(whether or not such accumulated funding deficiency has been waived), has
heretofore occurred with respect thereto.
(iii) Each such Plan designed to be a qualified plan since
its adoption and to date qualifies and has qualified under Section 401(a) of the
Code, and each trust, if any, established under each such Plan is exempt from
taxation pursuant to Section 501(a) of the Code.
(iv) Each such Plan has been administered and enforced
substantially in accordance with its terms, no dispute is pending or threatened
with respect thereto, and substantially all contributions due from employees
thereunder, if any, have been made.
(v) No condition exists that could constitute grounds for
termination of any such Plan.
Borrower has not incurred any material liability under Title IV of ERISA
(which remains unsatisfied as of the date hereof) arising in connection with the
complete or partial termination of, or complete or partial withdrawal from, any
Plan covered or previously covered by Title IV of ERISA; and no condition exists
or event has occurred which would be reasonably likely to result in the
imposition of any such liability upon Borrower nor has Borrower been notified
that any such Plan is in reorganization or is insolvent within the meaning of
sections 4241 and 4245 of ERISA, respectively.
For purposes of this Section 6.01(P) and as referenced in Sections
7.01(E) and (I) and 8.01(f), the term "Borrower" shall include Borrower, each
Affiliate, Subsidiary and any corporation, partnership, sole proprietorship or
other entity if Borrower and such other entity or entities are (i) corporations
which are members of a controlled group of corporations as defined in Section
414(b) of the Code, (ii) trades or businesses (whether or not incorporated)
which are under common control as defined in Section 414(c) of the Code, (iii)
members of an affiliated service group as defined in Section 414(m) or 414(o) of
the Code, or (iv) any combination of the foregoing.
6.01(Q) Drug Free Workplace Act. If any portion of Borrower's
gross income, now or hereafter, directly or indirectly stems from any contract
of $25,000 or more for
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the procurement of property or services awarded by a "federal agency" as defined
in the federal Drug-Free Workplace Act of 1988 ("Act"), Borrower (or any party
thereof which is a "contractor" within the meaning of the Act) has not made and
shall not make any false certification to said agency, has not violated or shall
not violate such certification in any manner, and has complied and shall at all
times fully comply with said Act.
6.01(R) Americans with Disabilities Act. The Project and each
Property are and shall at all times be in compliance with all applicable
requirements of the Americans with Disabilities Act of 1990 (as amended) (the
"ADA") and Borrower shall cause the Project and each Property to be continuously
in compliance with the ADA (as the same may be amended from time to time).
Borrower agrees to protect, defend, indemnify and hold Bank harmless from and
against any and all liability threatened against or suffered by Bank by reason
of a breach by Borrower of the foregoing representations and warranties. The
foregoing indemnity shall include the cost of all alterations to the Project or
each Property (including architectural, engineering, legal and accounting
costs), all fines, fees and penalties, and all legal and other expenses
(including attorneys' fees), incurred in connection with the Project or each
Property being in violation of the ADA and for the cost of collection of the
sums due under the indemnity. The obligations of Borrower under this Section
6.01(R) shall survive payment in full of Borrower's obligations under this
Agreement, all Related Documents and termination of the Letter of Credit, and in
the event that Bank shall become the owner of the Project or of each Property or
any portion thereof by foreclosure or deed in lieu of the foreclosure of any
deed of trust the obligations of Borrower under this Section 6.01(R) shall
survive such foreclosure or deed in lieu of foreclosure.
6.01(S) No Commissions. Borrower has not made any agreement or
taken any action that may have caused any Person to become entitled to a
commission or finder's fee as a result of or in connection with the issuance of
the Letter of Credit or any extension of credit by Bank, and in connection
therewith, Borrower agrees to indemnify Bank and hold Bank harmless from any and
all fees, costs (including attorney fees), and expenses arising out of any
claims by Persons relating to any such commission or fee.
6.01(T) Land Use and Zoning Compliance. The current and planned
use of the Project and Property are legal uses permitted outright under
applicable provisions of the applicable zoning codes. The Project and Property
comply with all applicable subdivision and platting requirements and constitute
one or more legal lots. Each Property and Project and their intended uses will
comply fully with all environmental, air quality, zoning, planning, building,
health, safety, labor, discrimination, fire, traffic safety or other
governmental rules, laws, ordinances, statutes, codes and regulations applicable
to the ownership, use, occupancy and operation of the Project and each Property.
6.01(U) Permits. Borrower has received all requisite master use
and building permits and approvals to the Plans and Specifications (defined
below) necessary to commence and complete construction of the Work. The Project
as completed complies in full with all Requirements of Law. Borrower has
obtained all approvals, licenses, permits, certifications and filing necessary
to operate the Project. All streets, easements, utilities and
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related services necessary for the operation of the Project for its intended
purpose are available to the Project.
6.01(V) Value of Collateral. If at any time Bank reasonably
determines that an appraisal of the collateral securing Borrower's Reimbursement
Obligations under this Agreement is necessary or if a reappraisal is required by
any regulatory authority, Bank shall have the right to cause said collateral to
be appraised and the appraisal reviewed both at Borrower's expense.
6.01(W) Exemption of Interest from Federal Income Tax. It is the
intention of Borrower that the interest on the Series B Bonds be excluded from
the gross income of the registered owners thereof (other than "substantial
users," or "related persons" of substantial users, as such terms are defined in
Section 147(a) of the Code) for federal income tax purposes. To that end,
Borrower represents to Bank that it has not taken any action, and knows of no
action that any other Person has taken, which would cause interest on the Series
B Bonds to be included in the gross income of the recipients thereof. Borrower
covenants that it will not take any action or omit to take any action which, if
taken or omitted, would cause interest on the Series B Bonds to be included in
the gross income of the owners thereof (other than "substantial users," or
"related persons" of substantial users, as such terms are defined in Section
147(a) of the Code) for federal income tax purposes.
ARTICLE VII
FURTHER COVENANTS
SECTION 7.01. Covenants. Until the Letter of Credit is no longer
outstanding and until all sums of every nature whatsoever due or to become due
from Borrower hereunder or under the Related Documents are paid in full,
Borrower hereby covenants and agrees that unless Bank shall otherwise consent in
writing, Borrower shall:
7.01(A) Use of Proceeds. Take all steps necessary to cause the
proceeds of every drawing on the Letter of Credit to be used solely for the
purpose of payment of principal of or interest on the Bonds (as appropriate
under the Indenture and in accordance with the terms of the Letter of Credit).
7.01(B) Additional Acts. Upon demand by Bank, Borrower will
execute and deliver all such instruments (including but not limited to Uniform
Commercial Code continuation statements) and perform all such other acts as Bank
may reasonably request to carry out the transactions and establish or preserve
the first lien status and priority contemplated by this Agreement or any Related
Document. Borrower shall also furnish to Bank upon demand all approvals of
Governmental Bodies or other Persons as may be required from time to time to
perform its obligations under this Agreement and any Related Documents.
7.01(C) Financial Statements and Reports. Deliver to Bank in form
and detail satisfactory to Bank and, if Borrower now or hereafter has
Subsidiaries, prepared on a consolidated basis:
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(i) Annual Tax Returns. As soon as reasonably possible and
in any event within two hundred seventy (270) days of the fiscal year-end of
each year a copy of its federal income tax return for the preceding calendar
year certified by an authorized officer of Borrower;
(ii) Quarterly Reports. As soon as reasonably possible and
in any event within forty-five (45) days after the close of each quarter, the
Form 10-Qs (if applicable) as filed with the Securities and Exchange Commission
for such period and for the portion of the fiscal year ended with such period,
for Borrower, and copies of a balance sheet and statement of income and expense
for Borrower for such period and for the portion of the fiscal year ended for
such period, all in reasonable detail and otherwise in a form satisfactory to
Bank and certified as to accuracy by the chief financial officer of Borrower,
subject to year-end audit adjustments;
(iii) Annual. As soon as reasonably possible and in any
event within one hundred twenty (120) days after the close of each fiscal year
of Borrower, the consolidated (1) balance sheet of Borrower as at the end of
such fiscal year setting forth in comparative form the corresponding figures as
at the end of the preceding fiscal year, and (2) statements of income, retained
earnings and changes in financial position for such fiscal year of Borrower
setting forth in comparative form the corresponding figures for the previous
fiscal year, prepared in conformity with Generally Accepted Accounting
Principles applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on financial position or results of
operations of any change in the application of accounting principles during the
year, each in a form satisfactory to Bank and certified as to accuracy by the
chief executive officer of Borrower; and (3) proposed operating budget for the
upcoming fiscal year including proposed capital expenditures and such other
information as may be reasonably requested by Bank. Such balance sheet and
income statements shall be accompanied by an unqualified report and opinion of
independent public accountants of recognized standing selected by Borrower and
approved by Bank, which approval shall not be unreasonably withheld, which
report and opinion shall be in accordance with generally accepted auditing
standards relating to reporting or, if qualified, the opinion shall not be
qualified due to any limitation in scope of the examination or due to any
departure from Generally Accepted Accounting Principles, and shall be
accompanied by a statement of such accountants that, in making the audit
necessary for the certification of such financial statements and such report,
such accountants, have obtained no knowledge of any Event of Default under
Article VIII or under any other evidence of Indebtedness or of any event which,
with notice or lapse of time, or both, would constitute an Event of Default
under Article VIII or under any other evidence of Indebtedness or, if in the
opinion of such accountants any such Event of Default or other event shall
exist, shall include a statement as to the nature and status thereof;
(iv) Certificates. As soon as reasonably possible, and in
any event within forty-five (45) days after the close of each quarter, submit
(1) certificate executed by the chief financial officer of Borrower certifying
compliance by Borrower with the requirements of Section 7.01(G) and stating
whether any noncompliance occurred during the period in question, and containing
the calculations used to document compliance therewith; (2) a certificate
executed by the chief financial officer of Borrower certifying that all payments
of principal and interest on
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the Bonds have been made and that all payments required under the provisions of
Section 7.01(Y) have been made; and (3) a statement by the chief financial
officer of Borrower that s/he has no knowledge of any Event of Default under
Article VIII or of any event which, with notice or lapse of time, or both, would
constitute an Event of Default under Article VIII, or if in the opinion of the
chief financial officer of the Borrower any such Event of Default or other event
shall exist, a statement as to the nature and status thereof. Each such
certificate shall be accompanied by an attached and referenced schedule setting
forth in reasonable detail the computations necessary to ascertain compliance;
(v) Filings. Upon request by Bank, copies of all filings
made by or concerning Borrower with any Governmental Body (delivered to Bank
within 10 days of such filing) and such other statements, lists of property and
accounts, budgets, capital expenditure plans, forecasts, and such other
information and reports regarding Borrower, any Property or the Project as Bank
may reasonably request;
7.01(D) Notices. Promptly give written notice to Bank of the
occurrence of any Event of Default or any event which, upon a lapse of time or
notice or both, would become an Event of Default. Borrower shall promptly give
notice to Bank of any pending or threatened litigation or other circumstance or
matter of any nature whatsoever, which exceeds or might reasonably be expected
to exceed $250,000 or which, in the opinion of a reasonably prudent person,
could have a Material Adverse Effect on the ability of Borrower to repay any
amount due or to become due hereunder or any other Indebtedness due or to become
due, including but not limited to, Indebtedness due Persons other than Bank.
Borrower represents and warrants that no such circumstance or matter exists as
of the date hereof.
7.01(E) Compliance with Laws. Conduct its operations and cause
those of any Affiliate or Subsidiary to be conducted in material compliance with
all Requirements of Law including but not limited to ERISA (for purposes of
ERISA compliance, "its operations" shall include all operations of "Borrower" as
defined in Section 6.01(P) of this Agreement), FLSA, Environmental Laws, land
use and zoning, or occupational health and safety.
7.01(F) Compliance with Agreement and Related Documents. Perform
and comply with the terms and conditions of this Agreement and each Related
Document.
7.01(G) Financial Covenants. Maintain at all times until all
Reimbursement Obligations are paid in full, the following on a consolidated
basis:
(i) Senior Liabilities To Tangible Capital Ratio. Maintain a
ratio of Total Senior Liabilities to Tangible Capital of not more than 2.25 to
1.00, calculated at the end of each quarter. "TOTAL SENIOR LIABILITIES" means
total liabilities less Subordinated Debt. "TANGIBLE CAPITAL" means Tangible Net
Worth plus Subordinated Debt. "TANGIBLE NET WORTH" means Borrower's total assets
excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less Total Debt. "TOTAL DEBT" means all
of Borrower's liabilities, including Subordinated Debt. "SUBORDINATED DEBT"
means indebtedness and liabilities of
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Borrower that have been subordinated by written agreement to indebtedness owned
by Borrower to Bank in form and substance acceptable to Bank.
(ii) Current Ratio. Maintain a ratio of Current Assets to
Current Liabilities in excess of (i) 1.25 to 1.00, calculated for the first and
second quarters of each calendar year, and (ii) 1.50 to 1.00, calculated for the
third and fourth quarters of each calendar year. "CURRENT ASSETS" and "CURRENT
LIABILITIES" means all assets and liabilities as defined by GAAP.
(iii) Operating Cash Flow to Fixed Charge Ratio. Maintain a
ratio of Operating Cash Flow to Fixed Charges of not less than 1.25 to 1.00,
calculated at the end of each quarter for the preceding 12-month period.
"OPERATING CASH FLOW" means net income after taxes and exclusive of
extraordinary gains and losses and gains on assets sales and other income, plus
depreciation, amortization, interest expense and lease expense, less dividends
and distributions. "FIXED CHARGES" means interest expense, plus lease expense,
plus current maturities of long-term debt and current maturities of Capital
Leases (calculated for the preceding 12-month period);
(iv) Minimum Clearance Period. Borrower shall reduce the
amount of its short-term Indebtedness owing to Bank to zero ($0) for at least
sixty (60) consecutive days during each fiscal year.
(v) Distributions. So long as the Reimbursement Obligations
remain outstanding, there shall be no dividends, distributions, loans or
advances to any employee, officer or shareholder of Borrower without the prior
written consent of Bank unless Borrower is in compliance with each obligation of
Borrower under this Agreement and each Related Document after giving effect to
said dividend, distribution, loan or advance;
(vi) Contingent Obligations. Not create or incur Contingent
Obligations (except as disclosed pursuant to Section 6.01(H));
(vii) Indebtedness. Not create, incur, commit or become liable
for any Indebtedness in an aggregate amount in excess of One Million Dollars
($1,000,000), except (i) any Reimbursement Obligation or other Indebtedness to
Bank; (ii) existing Indebtedness reflected on the balance sheet referenced in
Section 6.01(H) or to which Bank consents; and (iii) unsecured, short-term
Indebtedness arising from current operations by purchasing on credit goods,
services, supplies, or merchandise and not constituting borrowings.
7.01(H) Maintenance and Inspection of Records. Borrower shall
maintain adequate and complete records and books of account in accordance with
Generally Accepted Accounting Principles, which books shall reflect all
financial transactions of Borrower, in accordance with Generally Accepted
Accounting Principles. Borrower shall permit any of Bank's representatives to
visit and inspect any of the properties of Borrower, to examine all its books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss its affairs, finances and accounts with its respective
officers, employees and
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independent public accountants (and by this provision Borrower authorizes said
accountants to discuss the finances and affairs of Borrower with Bank or its
accountants or other agents) all at such reasonable times and as often as may be
reasonably requested.
7.01(I) Employee Benefit Programs. Conduct its operations so that
the representations, warranties and covenants in Section 6.01(P) with respect to
any Plan continue to be true during the term of this Agreement. For purposes of
this Section 7.01(I), "its operations" shall include all operations of
"Borrower" as defined in Section 6.01(P) of this Agreement.
7.01(J) Indemnification. Indemnify and hold harmless Bank from
and against any and all claims, actions, suits and other legal proceedings and
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever (including, without limitation, interest, penalties, and
reasonable attorneys' fees and expenses) which Bank may incur (or which may be
claimed against Bank by any other Person or entity whatsoever) by reason of or
in connection with (i) the execution and delivery or transfer of, or payment or
failure to pay under, the Letter of Credit (except to the extent directly and
actually resulting from the gross negligence or willful misconduct of Bank);
(ii) the execution, delivery, performance, breach (including but not limited to
the inaccuracy when made of any representation or warranty), enforcement
(including affirmative suits and the defense of any claim or liability
whatsoever), collection, administration, and any amendment of this Agreement
(requested by Borrower) or any Related Document; (iii) the offering, issuance,
sale or distribution of the Bonds or the issuance of the Letter of Credit,
including, but not limited to, any violation or alleged violation of any federal
or state securities law or regulation or restriction of any nature to the extent
related, directly or indirectly, to any untrue statement in disclosure materials
(other than as to information regarding the Bank), or in any Related Documents
of a material fact regarding Borrower, any of its members, the Property or the
Project, or the omission to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading; (iv) any suit, proceeding or governmental action brought or
taken in connection with the execution and delivery of the Bonds or the use of
(or proposed or potential use of) the proceeds of the Bonds or any drawing under
the Letter of Credit; (v) any failure of Bank to honor a drawing under the
Letter of Credit as a result of a Government Act (as hereinafter defined); (vi)
any loss or liability incurred by Bank as a result of or in connection with the
use, release or existence of hazardous wastes, toxic substances or the like
deposited on any property upon which any part of the Project, Property or
Borrower is located prior to foreclosure or deed-in-lieu of foreclosure of such
Property to Bank, including but not limited to, the property subject to the Deed
of Trust; or (vii) the Letter of Credit (except to the extent directly and
actually resulting from the gross negligence or willful misconduct of Bank),
including but not limited to any violations or alleged violations of securities
laws or regulations; it being the intention of the parties that this Agreement
shall be construed and applied to protect and indemnify Bank against any and all
risks set forth in (i) through (vii) above or otherwise involved in the issuance
and maintenance of the Letter of Credit, all of which risks are hereby assumed
by Borrower, including, without limitation, any and all risks of the acts or
omissions, whether rightful or wrongful, of any present or future de jure or de
facto Governmental Body ("Government Acts"). Bank shall not, in any way, be
liable for any failure by Bank to pay any draft under the Letter of Credit as a
result of any Government Acts or any other cause beyond the control of Bank.
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Notwithstanding the foregoing, Borrower shall not be required to indemnify Bank
for any claims, damages, losses, liabilities, costs or expenses to the direct
and actual extent, caused by (i) the gross negligence or willful misconduct of
Bank in determining whether a draft or certificate timely and properly presented
under the Letter of Credit complies with the terms of the Letter of Credit, or
(ii) Bank's willful and wrongful failure to pay under the Letter of Credit after
the timely and proper presentation to it by the Trustee of a draft and
certificate strictly complying with the terms and conditions of the Letter of
Credit and applicable law. Nothing in this Section 7.01(J) is intended to limit
or shall limit any obligation of Borrower to Bank, including but not limited to
the Reimbursement Obligations of Borrower contained in Article III of this
Agreement.
As between Borrower and Bank, Borrower shall assume all risks of the
acts, omissions or misuse of the Letter of Credit by the Trustee or any
transferee of the Letter of Credit ("transferee"). Bank shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted to Bank by any party in connection with
the application for and issuance of the Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) for the
use made of the Letter of Credit or any acts or omissions of the Trustee or any
transferee or for failure of the Trustee or any transferee to comply fully with
conditions required in order to draw upon the Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, wire, telegraph, telex or otherwise, whether or not they be in
cipher; (v) for errors in interpretation of terms; (vi) for reliance upon
telecopy purportedly made or sent by the Trustee or any transferee in lieu of
submission of any draft, annex, certificate or other document required under the
Letter of Credit, or for any loss or delay in the transmission or otherwise of
any draft, certificate or document required in order to make a drawing under the
Letter of Credit or of the proceeds thereof; (vii) for the misapplication by the
Trustee, any transferee or any Person to whom payment was made pursuant to order
of the Trustee or any transferee, of the proceeds of any drawing under the
Letter of Credit; (viii) for payment by Bank under the Letter of Credit against
presentation of documents which do not strictly comply with the terms of the
Letter of Credit, including failure of any document to bear any or adequate
reference to the Letter of Credit (except to the extent directly and actually
resulting from the gross negligence or willful misconduct of Bank); (ix) any
delay in giving or failing to give any notice, demand or protest; and (x) for
any consequence arising from causes beyond the control of Bank, including,
without limitation, any Government Acts. None of the above shall affect, impair,
or prevent the vesting of any of Bank's rights or powers hereunder. Borrower
hereby waives all rights (if any) to receive notice of any of the foregoing and
of any other matter or action related to the Letter of Credit except for such
notices as Bank expressly agrees herein to provide.
Bank shall not be responsible for calculating the amount of, determining
the authority for, or notifying Borrower with respect to any draw on the Letter
of Credit. In supplementation and not in limitation of the above provisions, any
action taken or omitted by Bank under or in
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connection with the Letter of Credit or the annexes, if taken or omitted in good
faith, shall not put Bank under any resulting liability to Borrower.
Upon demand by Bank, Borrower shall reimburse Bank for any reasonable
legal or other expenses (including attorneys' fees) incurred in connection with
investigating or defending against any of the foregoing. If any action, suit or
proceeding arising from any of the foregoing is brought against Bank, Borrower,
to the extent determined by Bank as necessary or advisable in order to protect
Bank's rights hereunder, will resist and defend such action, suit or proceeding
or cause the same to be resisted and defended by counsel designated by Borrower
(which counsel shall be reasonably satisfactory to Bank).
Borrower hereby expressly acknowledges that each reference to Bank in
this Section 7.01(J) is and shall be deemed to be a reference to all officers,
agents, directors and counsel for or of Bank, which Persons shall be indemnified
to the same extent as and shall have the same rights and obligations of Bank
under this Section 7.01(J). The obligations of Borrower under this Section
7.01(J) shall survive payment in full of Borrower's obligations under this
Agreement, all Related Documents and termination of the Letter of Credit.
7.01(K) Disclosure. Make all written disclosure relating to the
Borrower, each Property and the Project necessary to ensure that this Agreement,
the placement memorandum and the Related Documents do not contain any untrue
statement of a material fact relating to the Borrower, each Property and the
Project and do state all material facts relating to the Borrower, each Property
and the Project necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
There is, to the best of Borrower's knowledge, no fact which would have a
Material Adverse Effect on its business, prospects, condition, affairs or
operations of Borrower, the Property, the Project or any of their respective
properties or assets which has not been disclosed to Bank in writing.
7.01(L) Legal Existence. Preserve and maintain its legal
existence, rights, franchises and privileges in the jurisdiction of its
organization and qualify and remain qualified as a corporation in each
jurisdiction where the failure to so qualify would have a Material Adverse
Effect on the business of Borrower or its operations. Borrower shall take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable to the normal conduct of its business, and will comply with all
Contractual Obligations and Requirements of Law except to the extent that the
failure to comply therewith would not, in the aggregate, have a Material Adverse
Effect on the business, operations, property or financial or other condition of
Borrower.
7.01(M) Maintenance of Business; No Mergers, Etc. Except for
completion of the Tender Offer and Planned Restructure, cause its business to be
carried on and conducted only in the ordinary course and not merge, consolidate,
reorganize, liquidate, dissolve or otherwise dispose of, terminate or change the
corporate structure of Borrower, without the prior written consent of Bank which
consent shall not be unreasonably withheld. Borrower shall cause its properties
to be maintained, preserved and kept in accordance with Requirements of Law and
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in good repair, working order and condition and cause all needful and proper
repairs, renewals and replacements thereof to be made. Borrower shall not change
in any material way the design, ownership, or management of the Project or the
Property without the prior written consent of Bank. Upon demand of Bank,
Borrower shall correct any structural defect in the Project or the Property or
any material departure from the plans and specifications approved by any
Governmental Body or any encroachment by any part of the real property
constituting the Project or the Property or any other structure on or over any
building lines, easements, property lines or other restricted areas which any
survey or inspection reflects. Borrower shall not sell, lease or otherwise
dispose of its properties and assets (except for sales of inventory and
equipment in the ordinary course of business) until payment in full of all
Indebtedness under this Agreement. Borrower shall not sell, lease or otherwise
dispose of its real property and buildings with a fair market value or sales
price in excess of $250,000 without the prior written consent of Bank which
consent shall be unreasonably withheld. Nothing in this Section shall prevent
Borrower from selling, leasing, abandoning or otherwise disposing of worn out or
obsolete property which serves as collateral for the Reimbursement Obligations
of Borrower under this Agreement so long as the proceeds of such sale are used
to purchase replacement property of at least comparable quality, value and
utility.
7.01(N) Claims. Promptly pay or otherwise satisfy, and discharge
all of its Indebtedness, Contractual Obligations and all demands and claims
against it as and when the same become due and payable, other than any thereof
whose validity, amount or collectability is being contested in good faith and
for which reserves in an amount reasonably requested by Bank have been set
aside.
7.01(O) Compliance with Liens. Comply with all terms, conditions,
covenants and provisions of any Liens at such time existing upon its properties
or any part thereof or securing any of its Indebtedness.
7.01(P) Insurance. Maintain for itself such insurance against
loss or damage to its tangible property of the kinds customarily insured against
by Persons similarly situated, with reputable companies or with the United
States government or any agency or instrumentality thereof, in such amounts and
by such methods as shall be adequate, and will at all times maintain or cause to
be maintained in full force and effect, with reputable companies and in such
amounts and by such methods as shall be adequate, public liability insurance
against loss or damage to it for bodily injury or death in or about any premises
occupied by it, and liability insurance against loss or damage to it for bodily
injury or death or injury to property occurring by reason of the operation by it
of any motor vehicle or other equipment. The requirements of this Section
7.01(P) shall be in addition to the insurance provisions contained in the Deed
of Trust with respect to the collateral described therein. Upon demand by Bank,
Borrower shall furnish to Bank certificates of insurance or duplicate policies
evidencing such insurance together with evidence to the satisfaction of Bank
that Bank is shown as a loss payee to the extent of its insurable interest.
7.01(Q) Third Party Beneficiary. Borrower acknowledges that in
addition to all rights and benefits of Bank herein, Bank is a beneficiary of all
representations, warranties,
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and covenants made by Borrower to or for the benefit of owners of Bonds or made
in any Related Document to or for the benefit of any Person.
7.01(R) Special Statutes. Issuance of the Bonds, the proposed use
of Bond proceeds, and execution, delivery and performance of the Reimbursement
Agreement and the Related Documents does not violate any Requirement of Law.
7.01(S) Bank Accounts. Borrower shall maintain its primary
deposit account and the Sinking Fund Account described in Section 7.01(Y) with
Bank.
7.01(T) Amendments. Not modify, supplement, amend or consent to
the modification, supplementation or amendment of the Indenture, or any
Supplemental Indenture or any other Related Document in any respect whatsoever,
and not accept the benefit of any waiver of any provision or condition of the
foregoing, without the prior written consent of Bank.
7.01(U) Liens. Not create, assume or suffer to exist (excluding
Liens listed on Exhibit C hereto) any Lien (including the lien of an attachment,
judgment or execution) or security interest, securing a charge or obligation, on
or of any of its property, real or personal, whether now owned or hereafter
acquired and which secures the Borrower's obligations under this Agreement,
except:
(i) Liens or charges for current taxes, assessments, or
other governmental charges which are not delinquent or remain payable without
any penalty, or the validity of which is contested in good faith by appropriate
proceedings diligently prosecuted upon stay of execution of the enforcement
thereof;
(ii) Deposits or pledges securing (1) statutory
obligations; (2) surety or appeal bonds; (3) bonds for release of attachment,
stay of execution or injunction; or (4) performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, for purposes of like
general nature in the ordinary course of Borrower's business;
(iii) Easements, rights of way, covenants, restrictions
and other encumbrances affecting Borrower's property, whether or not currently
existing, which are accepted in writing by Bank and (1) do not directly or
indirectly constitute a lien securing an obligation for the payment of money and
(2) have no Material Adverse Effect on the use of such property for its
purposes; and
(iv) Minor irregularities in the title to any such
property which have no Material Adverse Effect on the use of such property for
its purposes and which are accepted in writing by Bank.
7.01(V) Restrictions on Future Debt. After the Date of Issuance
and except as set forth in Section 7.01(G)(vi) above, not participate with any
Person in a manner which would cause issuance of debt (including but not limited
to bonds or warrants of every nature whatsoever) which is a direct or indirect
obligation of Borrower or which relates in any manner
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to Indebtedness of Borrower or other Person for the benefit of Borrower, unless
such Indebtedness and the security therefor has been approved in writing by Bank
and is expressly subordinate to the Bonds and the liens, pledges and security
interests granted the owners of Bonds and Bank in the Indenture, or in any
Related Document. Borrower agrees to give Bank notice of every proposed issuance
of debt by Borrower or other Person for the benefit of Borrower at least thirty
(30) days before the proposed date of issuance.
7.01(W) [Intentionally Deleted]
7.01(X) Conditions Precedent. Borrower represents and warrants
that (1) each condition precedent to the issuance of the Bonds has been
satisfied in full; and (2) the Bonds will be issued solely for a purpose or
purposes set forth in and as authorized by the Indenture.
7.01(Y) Mandatory Sinking Fund Payments; Redemption of Bonds.
Commencing on the first day of January, 2001, and on the first day of each and
every month thereafter, Borrower shall pay Bank the mandatory principal,
interest and other sinking fund payments set forth in the Schedule annexed
hereto as Exhibit D and by this reference incorporated herein. Such payments
shall be deposited in an account to be maintained by Borrower with Bank,
presently identified as Account No. 479681014201 (the "SINKING FUND ACCOUNT").
The Sinking Fund Account shall be maintained at Bank and shall be invested in
Permitted Investments or as otherwise agreed in writing by Bank and Borrower.
SECTION 7.02. Conditions Precedent to Disbursements of Bond Proceeds.
A. Initial Disbursement. [Intentionally deleted.]
B. Subsequent Disbursements. [Intentionally deleted.]
C. Final Disbursement. [Intentionally deleted.]
D. Disbursements Generally. There shall be no disbursement out of
the Loan Fund held by the Trustee without the written approval of Bank, which
approval shall be given in accordance with the provisions of this Agreement and
the Loan Documents. Bank is hereby authorized without any request or direction
by Borrower, to approve disbursements out of the Loan Fund held by the Trustee
and other deposits, if any, of the Borrower with the Trustee, from time to time
to pay interest on the Bonds, to reimburse Bank for drawings made on the Letter
of Credit or to pay directly Bank's expenses and advances, whether or not there
are adequate reserves therefor in accordance with the provisions of this
Agreement. Bank shall provide Borrower with invoices prior to each disbursement
of funds out of the Loan Fund held by the Trustee.
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SECTION 7.03. Assignment/Miscellaneous.
A. Borrower Assignment. Borrower may not convey, assign,
mortgage, pledge, transfer, hypothecate, encumber or otherwise dispose of its
rights or obligations under this Agreement, the Related Documents, or the
Project (except as provided in the Deed of Trust) without the prior written
consent of Bank. A breach of this provision, directly or indirectly, shall be an
Event of Default under this Agreement and shall not vest any rights in the
purported transferee.
B. Bank Assignment. Bank may assign its rights and obligations in
and to this Agreement and the Related Documents to another lender having the
financial ability to perform Bank's obligations. Any such assignment by Bank
shall be deemed to have been made pursuant to this Agreement and not to be a
modification hereof, and the disbursements made by any such assignee hereunder
shall be evidenced and secured by the Deed of Trust.
C. Advertising. Bank may place a sign upon the Project specifying
that it is providing the financing of the Project and, further, Bank reserves
the right to publicize the financing and may include in publicity releases, if
applicable, the names of the owner and a general description of the Project, its
occupancy and use.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01. Events of Default; Acceleration and Remedies. The
following shall be defaults under this Agreement and the terms "EVENT OF
DEFAULT" or "DEFAULT" shall mean any one or more of the following events:
(a) Borrower shall fail to pay or cause to be paid when due any amount
of money required to be paid under this Agreement or any of the Related
Documents; or
(b) Any Lien(s) of Bank in any portion of the collateral which secures
Borrower's Reimbursement Obligations under this Agreement or any of the Related
Documents shall, for any reason, be impaired or cease to exist as valid and
binding first priority Liens (other than for Liens expressly permitted under
Section 7.01(U) of this Agreement, any portion of the collateral which secures
Borrower's Reimbursement Obligations under this Agreement or any of the Related
Documents shall be materially adversely affected (as determined by Bank) by any
uninsured loss, theft or becomes the subject of or affected by any forfeiture,
seizure or similar claim; or
(c) Borrower shall fail to perform, keep or observe any term, covenant,
agreement, warranty, or condition (not involving a payment obligation) contained
in this Agreement or any of the Related Documents and any such failure shall
remain unremedied for ten (10) days after written notification thereof shall
have been given to Borrower by Bank; notwithstanding the preceding clause, if
the Default is of a nature that is not susceptible to cure within 10 days and if
Borrower commences to cure the Default within said period, Borrower shall not be
deemed to be in Default if it diligently prosecutes said cure thereafter to
completion and, notwithstanding such
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diligence, cures said Default by the thirtieth (30th) day after the date of said
written notification; or
(d) Any representation or warranty made by Borrower under or in
connection with this Agreement or any Related Document shall prove to have been
untrue when made; or
(e) Borrower shall default in the payment of the principal of or
interest on any Indebtedness of Borrower to any Person, or under any other
agreement with Bank, if any, which default has a Material Adverse Effect on
Borrower and with respect to which all applicable cure periods have expired; or
(f) A Plan shall fail to maintain the minimum funding standard required
by Section 412 of the Code for any Plan Year or a waiver of such standard is
sought or granted under Section 412(d) of the Code; a Plan is, shall have been
or is likely to be terminated or the subject of termination proceedings under
Title IV of ERISA; or Borrower (for purposes of this paragraph, "Borrower" shall
have the meaning set forth in Section 6.01(P) of this Agreement) has incurred or
is likely to incur a liability to or on account of a Plan in connection with the
complete or partial termination of, or complete or partial withdrawal from, any
Plan covered or previously covered by Title IV of ERISA, which liability or
material risk of liability, in the opinion of Bank, will have a Material Adverse
Effect upon the business, operations or the financial condition of Borrower; or
(g) Borrower shall consolidate, dissolve or liquidate or take an
equivalent action or an involuntary petition shall have been filed under any
federal or state bankruptcy, bankruptcy reorganization, insolvency, moratorium
or similar statute against Borrower, or a custodian, receiver, trustee, assignee
for the benefit of creditors or other similar official shall be appointed to
take possession, custody, or control of the property of Borrower, or Borrower
shall become insolvent or shall admit in writing its inability to pay its debts
as they mature, or Borrower shall file any petition or action for relief
relating to any bankruptcy, reorganization, insolvency or moratorium law, or any
other law or laws for the relief of, or relating to, debtors; or Borrower shall
make an assignment for the benefit of creditors or enter into an agreement of
composition with its creditors; or Borrower shall fail generally to pay its
debts as they become due; or Borrower shall fail to promptly have discharged any
judgment, execution, garnishment or attachment of such consequence as could
impair the ability of Borrower to carry on its operations as presently conducted
or to fulfill its obligations under this Agreement or the Related Documents;
(h) There is any default by Borrower under the Lease; or
(i) The occurrence of an "event of default" under any Related Document,
except that such shall not be an Event of Default hereunder until expiration,
without cure, of any period to effect cure contained in the Related Document.
With respect to any Event of Default, (i) in any such event described in
this Section 8.01(g), all amounts due or to become due under this Agreement
shall automatically be
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due and payable without notice or demand or any action whatsoever by Bank; and
(ii) in all other Events of Default Bank may, upon notice (of any nature allowed
by law) to Borrower, declare all amounts of any nature whatsoever payable under
this Agreement or the Related Documents, to be forthwith due and payable without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower; and may, without notice to Borrower,
deliver Annex D to the Letter of Credit to the Trustee.
In addition, upon any Event of Default, Bank may at its election,
without prior notice or demand, (1) require Borrower to deposit immediately with
Bank in cash, out of legally available funds, as security for the obligations of
Borrower to Bank hereunder, under any Related Document and under the Letter of
Credit, a sum equal to the then Stated Amount of the Letter of Credit (as
defined therein) and to institute legal proceedings against Borrower to collect
that sum if it is not deposited on demand; and (2) exercise any or all rights
available to it under this Agreement, in equity or by applicable law, including
but not limited to (at the sole option of Bank), all actions that could be taken
by a secured party under the Washington Uniform Commercial Code. If the deposit
required by clause (1) of this paragraph is not timely made, Borrower hereby
agrees that Bank may from time to time withdraw all or part of the required
amount from any funds of Borrower then held by Bank without demand, notice or
liability for such withdrawal(s), except that all amounts withdrawn shall be
held by Bank for the purposes specified in clause (1). Borrower specifically
grants Bank a security interest in such moneys and deposit and all income
thereon. Borrower further agrees that Bank may provide notice to the Trustee
upon any Default hereunder for the purpose of causing mandatory redemption of
all Bonds pursuant to Section 7.02 of the Indenture. No action taken by Bank
shall be deemed to be an election of remedies by Bank, it being the intention of
the parties that Bank shall be entitled to exercise all remedies separately or
concurrently and in any manner allowed by law.
ARTICLE IX
SECURITY
SECTION 9.01. Funds, Accounts and Security Agreement. The Borrower
represents, certifies, warrants and covenants to Bank that all monies from time
to time on deposit in the Funds and Accounts established under the Indenture
shall be held by Trustee in trust for the owners of the Bonds and Bank until
full payment of the principal of and interest on the Bonds and of all
obligations of Borrower to Bank under this Agreement or the Related Documents.
Borrower hereby makes to Bank or Trustee (as the case may be) for the
equal benefit of Bank and owners of the Bonds, all pledges, assignments, grants,
covenants and agreements set forth in the Indenture and the Loan Agreement and
all pledges, grants of liens and security interests and covenants contained
therein are incorporated herein by this reference as if fully set forth herein.
Borrower hereby consents to Bank's status as a beneficiary under the Indenture
and acknowledges that the trust estate of the Indenture as supplemented from
time to time secures not only the payment of the Bonds but also secures the
payment of all sums due or to become due Bank pursuant to this Agreement or any
Related Document.
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SECTION 9.02. Funding and Maintaining the Funds. Until the principal of
and interest on the Bonds shall have been fully paid and until all other sums of
every nature whatsoever due or to become due Bank pursuant to this Agreement or
any Related Document are paid in full, Borrower shall maintain the Funds and
cause moneys to be deposited in each fund or subaccount thereof in accordance
with the terms of the Indenture and this Agreement in amounts sufficient to pay
all principal of and interest on the Bonds as well as all other sums due or to
become due to Bank pursuant to this Agreement or any Related Document.
Borrower agrees that whenever any sum is required to be placed in any of
said Funds by the terms of any agreement and whenever any other sum is due and
owing Bank under this Agreement or the Related Documents, Borrower shall place
sufficient moneys in said Funds to pay such sums. Borrower further agrees that
the Trustee is authorized and hereby directed to forward such sums to Bank in
accordance with the Indenture or this Agreement. Nothing contained herein shall
impair the right of Bank to demand and receive payment directly from Borrower in
lieu of or notwithstanding funding of said Funds to the extent such funds are
available to Bank, which demand shall be at the sole option of Bank. Borrower
hereby represents, certifies and warrants to Bank that payment of all debt due
or to become due Bank by virtue of this Agreement is payable from (in addition
to said Funds and the trust estate of the Indenture) all other available sources
of moneys to Borrower whether now or hereafter existing.
SECTION 9.03. Interest of Bank and Owners of Bonds. Any moneys
transferred by the Trustee from any of the Funds for payment on the Bonds or
sums due Bank shall continue to be held in trust for the owners of the Bonds and
Bank until disbursement or deemed disbursement of such moneys by the Trustee to
owners of the Bonds or, to the extent not inconsistent with the rights of the
Owners of the Bonds, to Bank.
Borrower agrees to deliver copies of this Agreement and the Indenture to
the Trustee on the date of execution or adoption of the aforesaid to provide
specific notice of the trust for Bank and the owners of the Bonds in the moneys
in the Funds and to provide notice for all other purposes, including but not
limited to notice to all persons of the security interests, pledges and liens
granted to or for the benefit of the owners of Bonds and Bank in said Funds.
SECTION 9.04. Transfers and Other Liens. Borrower agrees that it will
not (i) sell or otherwise dispose of any interest in the monies in the Funds or
Accounts except as provided herein or in the Indenture, or (ii) create or permit
to exist any pledge, Lien, security interest, or other charge or encumbrance of
any nature whatsoever upon or with respect to the moneys in the Funds (except
the interest of Bank or of the owners of the Bonds and as otherwise allowed in
the Indenture).
SECTION 9.05. Priority Of Payment; Application of Sums Upon Notice of
Default. Upon any drawing under the Letter of Credit honored by Bank, Bank shall
have priority over the owners of the Bonds to all sums then or thereafter in any
of the Funds to the extent of any such drawing (but only to such extent). Upon
an Event of Default and delivery to the Trustee of notice in the form of Annex D
to the Letter of Credit, the Trustee shall apply all sums in the Funds available
for payments on the Bonds to payment of obligations of Borrower in the
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following priority: first, to the reimbursement of Bank for any amount honored
by Bank pursuant to the Letter of Credit; second, payment then due the owners of
the Bonds; and third, payment of any sums then due Bank pursuant to this
Agreement or the Related Documents.
SECTION 9.06. Return of Funds. Upon the payment in full of all
obligations of every nature whatsoever due or to become due Bank pursuant to
this Agreement, any Related Document or due by operation of law or in equity,
the Trustee shall return any sums remaining in the Funds as shall not have been
applied pursuant to the terms hereof or the Related Documents, to Borrower or
whosoever shall then be legally entitled thereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or any Related Document, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by Bank, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 10.02. Notices, Etc. Except as otherwise provided in this
Agreement or as otherwise allowed to Bank by law, all notices, requests, demands
or other communications shall be in a writing addressed to the respective party
at the address given below or to such other address as the parties may from time
to time specify in writing. Notice shall be deemed to have been given when (a)
personally delivered, (b) given by a telex or machine-confirmed facsimile, or
(c) after placement in the U.S. mails as certified or registered, return receipt
requested, first-class postage prepaid, the receipt indicates delivery or
refusal or failure to accept delivery:
If to the Borrower: Lindal Cedar Homes, Inc.
4300 South 104th Place
Post Office Box 24426 (98214)
Seattle, Washington 98124
Attention: Robert W. Lindal
Fax: (206) 725-1615
If to Bank: KeyBank National Association
Corporate Banking, Mailcode WA-31-18-0422
601 - 108th Avenue NE, Fourth Floor
Bellevue, Washington 98004
Attention: Jill Scheuermann
Fax: (206) 344-2332
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If to the Trustee: U.S. Bank Trust National Association
1420 Fifth Avenue, 7th Floor, WWH1022
Seattle, Washington 98101
Attention: Corporate Trust Division
Fax: (206) 344-4632
or as to each party, at such other address as shall be designated by such party
in a written notice to the other parties. Any notice delivered by facsimile
shall also be mailed to each party at its address set forth above.
SECTION 10.03. No Waiver; Remedies. No failure on the part of Bank to
exercise, and any delay in exercising, any right under this Agreement or any
Related Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any of the aforesaid preclude any other or
further exercise thereof or the exercise of any other right from time to time
and as often as Bank may deem expedient and without notice (except any notice
which is specifically required by written agreement). The remedies provided in
this Agreement or the Related Documents are cumulative and not exclusive of any
remedies provided by law or in equity, now or hereafter existing.
SECTION 10.04. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistently applied, except as otherwise stated herein.
SECTION 10.05. Definitions. All capitalized terms not otherwise defined
herein shall have the same meaning as set forth in the Indenture.
SECTION 10.06. Security Costs, Expenses and Taxes. In addition to the
fees and expenses Borrower has agreed to pay pursuant to Section 4.05 hereof,
Borrower also agrees to pay on demand all reasonable costs and expenses in
connection with the preparation, execution, delivery, filing, recording,
continuation, maintenance, administration and termination of the liens, or
security interests or other interests granted by Borrower in any Related
Document or any other documents to be delivered under the Related Documents.
Borrower further agrees to pay all title insurance and recording fees and costs
of every nature whatsoever incurred by Bank (if any).
SECTION 10.07. Binding Effect; Assignment. This Agreement shall become
effective when it shall have been executed by Borrower and Bank and thereafter
shall be a continuing obligation binding upon and inuring to the benefit of
Borrower and Bank and their respective successors and assigns, except that
Borrower shall not have the right to assign any of its rights or obligations
hereunder or under any Related Document (including but not limited to any rights
in Bond proceeds) or any interest herein or therein without the prior written
consent of Bank. Bank without the consent of Borrower, may sell, transfer,
assign, negotiate, pledge or otherwise hypothecate or participate all or any
portion of this Agreement, or grant participations herein, in the Letter of
Credit or in any of its rights or security hereunder or under the Related
Documents, including without limitation, the instruments securing Borrower's
obligations
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hereunder. No such disposition by Bank, however, will relieve Bank of its
obligation under the Letter of Credit. In connection with any such disposition
or in connection with any examination of Bank, Bank may disclose to the proposed
transferee or regulatory authority any information that Borrower is required to
deliver to Bank or to which Bank is otherwise entitled pursuant to this
Agreement or any Related Document from time to time. Bank may also disclose such
information to its affiliates.
SECTION 10.08. Governing Law. This Agreement and each Related Document
in favor or to which Bank is a party shall be governed, construed and enforced
in accordance with the laws of the State of Washington, and venue of any action
concerning this Agreement or any Related Document shall be held in King County,
Washington or such other county as Bank may request.
SECTION 10.09. Entire Agreement. This Agreement constitutes the entire
agreement between the parties regarding the terms hereof and supersedes any and
all other agreements relating to the subject matter of this Agreement, oral or
written, among any or all of the parties (except for the Related Documents). The
headings of the various sections and subsections of this Agreement and of any
Related Documents are for convenience of reference only and do not constitute a
part of the respective document and shall not affect the meaning or construction
of any provision. No amendment, waiver or forbearance of any provision of this
Agreement or of any Related Document shall be effective unless the same shall be
in a writing signed by Bank. Any such waiver or forbearance shall only be
effective for the specific purpose and in the specific instance given and not
for other or subsequent purposes or instances and no forbearance or waiver shall
affect Bank's right to refuse further forbearances or waivers. If any portion of
this Agreement or any Related Document is held to be invalid or unenforceable,
the remaining portions and provisions and conditions thereof regarding
Borrower's obligations shall remain in full force and effect. Time is of the
essence of this Agreement and each Related Document. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement.
SECTION 10.10. Jury Waiver. BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM ARISING OUT OF THIS AGREEMENT, THE LETTER OF CREDIT AND ANY
RELATED DOCUMENT, WHETHER NOW OR HEREAFTER ARISING AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AND HEREBY CONSENTS AND AGREES THAT ANY SUCH CLAIM
MAY, AT BANK'S ELECTION, BE DECIDED BY TRIAL WITHOUT A JURY AND THAT BANK MAY
FILE AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE WAIVER AND AGREEMENT CONTAINED HEREIN.
SECTION 10.11. Securities Law. Borrower acknowledges and agrees that
except for the information describing Bank in its role as the issuer of the
Letter of Credit supplied by Bank and except for matters stated in the opinion
of Bank's counsel, neither Bank (nor its counsel) (a) has and shall not be
deemed to have made any representation regarding sale of the Bonds or the
financial strength, integrity or revenues of Borrower; (b) has any
responsibility or liability for
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the issuance, offer or sale of the Bonds; (c) has participated in the
preparation of the placement memoranda (except with respect to supplying
information about Bank) or is responsible or liable for any statements contained
therein or omissions therefrom, or for the accuracy or completeness thereof; and
that (d) nothing contained in this Agreement, the placement memoranda or any of
the Related Documents is intended to impose any liability or responsibility
related to the aforesaid on Bank in its capacity as the issuer of the Letter of
Credit or its counsel.
For use in the placement memoranda, Bank agrees to supply the aforesaid
descriptive information and, within thirty (30) days of Borrower's written
demand therefor, an updated version of said information for use in any
subsequent or amended placement memoranda regarding the Bonds. Upon written
request therefor, Bank shall, as soon as practical, also supply copies of Bank's
annual report. To the extent other information is requested of Bank, Borrower
agrees to pay all expenses and fees of every nature whatsoever (including
reasonable attorneys' fees) incurred by Bank in connection therewith.
SECTION 10.12. Subrogation. Notwithstanding the fact that Bank's
obligation under the Letter of Credit is primary, as opposed to the secondary
obligation of a guarantor, Borrower expressly agrees that Bank shall be
subrogated to all rights of every nature whatsoever of the owners of Bonds or
the Trustee in or to the entire trust estate of the Indenture and that upon
payment by Bank under the Letter of Credit, Bank shall be entitled to exercise
all rights and remedies of any person with subrogation rights and all rights and
remedies accorded a guarantor by law or in equity. Nothing in this Section 10.12
shall impair any right of Bank under the Indenture.
SECTION 10.13. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by Borrower
in connection herewith or any Related Document shall survive the execution and
delivery of this Agreement, regardless of any investigation made by Bank or on
its behalf, and shall continue until payment in full of all sums due or to
become due from Borrower to Bank hereunder or under any of the Related
Documents.
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SECTION 10.14.Washington State Notice. Bank hereby notifies
Borrower as follows:
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY/EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
"BORROWER"
LINDAL CEDAR HOMES, INC., a Delaware
corporation
By
----------------------------------------
Robert W. Lindal
Chairman of the Board and
Chief Executive Officer
"BANK"
KEYBANK NATIONAL ASSOCIATION, a national
banking association
By
----------------------------------------
Jill Scheuermann, Vice President
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EXHIBIT A
FORM OF LETTER OF CREDIT
A-1
47
EXHIBIT B-1
LEGAL DESCRIPTION--BURLINGTON
Property located at 1156 Water Tank Road, Burlington, Skagit County,
Washington.
A Leasehold interest in the following described property:
Lot 74, and portions of Lots 66, 67, 72, 73 and 75 of "SKAGIT REGIONAL AIRPORT
BINDING SITE PLAN, PHASE I", approved August 22, 1986, and recorded August 25,
1986, in Book 7 of Short Plats, at Pages 111 through 120, inclusive, records of
Skagit County, Washington, under Auditor's File No. 8608250002, described as
follows:
Beginning at the Northeast corner of said Lot 75; thence South 0 degrees 41' 46"
West along the East line of said Lot 75, a distance of 94.08 feet; thence North
88 degrees 58' 01" West parallel with the South line of said Lot 74, a distance
of 181.02 feet; thence North 74 degrees 30' 01" West, 59.08 feet; thence North
86 degrees 20' 58" West, 36.05 feet; thence South 56 degrees 00' 20" West, 28.59
feet; thence North 88 degrees 58' 01" West, 120.38 feet; thence North 21 degrees
41' 05" West, 246.93 feet; thence North 16 degrees 00' 00" East, 170.03 feet;
thence North 89 degrees 33' 47" West parallel with the North line of said Lot
73, a distance of 18.35 feet; thence North 1 degree 01' 59" East, 125.60 feet to
a point on the North line of said Lot 72, said point also being on the South
margin of Steele Road; thence South 89 degrees 33' 47" East along said South
line, 49.08 feet; thence South 30 degrees 41' 13" East, 42.30 feet; thence North
81 degrees 16' 52" East, 152.32 feet; thence North 43 degrees 24' 00" West,
16.60 feet to a point on said North line of Lot 73; thence South 89 degrees 33'
47" East along said North line, 151.58 feet to the beginning of a curve to the
right having a radius of 50.00 feet; thence Southeasterly along the arc of said
curve to the right and the Northeasterly line of said Lot 73, through a central
angle of 89 degrees 52' 24", an arc distance of 78.43 feet to a point of reverse
curvature to the left, said curve having a radius of 505.26 feet; thence
Southeasterly along the arc of said curve to the left and the East line of said
Lot 73, through a central angle of 17 degrees 31' 42", an arc distance of 154.57
feet to the Southeast corner of said Lot 73; thence continuing Southeasterly
along the arc of said curve to the left having a radius of 505.26 feet and the
East line of said Lot 74, through a central angle of 4 degrees 57' 32", an arc
distance of 43.73 feet to a point of reverse curvature to the right, said curve
having a radius of 425.02 feet; thence Southeasterly along the arc of said curve
to the right and said East line of Lot 74, through a central angle of 22 degrees
52' 25", an arc distance of 169.68 feet; thence South 0 degrees 41' 46" West
along said East line of Lot 74, a distance of 20.00 feet to the point of
beginning; said Site Plan being located in Section 33 and 34 of Township 35
North, Range 3 East, W.M., and Section 3 of Township 34 North, Range 3 East,
W.M.
B-1-1
48
EXHIBIT B-2
LEGAL DESCRIPTION--OFFICE BUILDING
Property located at 10411 Empire Way South, Tukwila, Washington.
Real property located in King County, Washington and more particularly
described as follows:
PARCEL A:
Lots 3 and 4 of King County Short Plat No. 1175023, According to Short Plat
recorded January 23, 1978, under Recording No. 7801230620, in King County,
Washington.
PARCEL B:
Easements for access over the westerly 30 feet of Lots 1 and 2 of said King
County Short Plat No. 1175023 under Recording No. 7801230620;
And over the Westerly 30 feet of Lots 1 through 4 of King County Short Plat No.
1075037, according to Short Plat recorded January 23, 1978 under Recording No.
7801230619, in King County Washington;
And over portion of vacated Northeast 112th Street as granted in Recording Nos.
9504071058, 9504071059, 9504071060 and 9704301125.
B-2-1
49
EXHIBIT C
PERMITTED LIENS
[To be provided by Borrower.]
C-1
50
EXHIBIT D
SCHEDULE FOR MANDATORY SINKING FUND PAYMENTS FOR BONDS
D-1
51
EXHIBIT E
PENDING LITIGATION
[Attach letter from Borrower]
E-1
52
EXHIBIT F
[Intentionally deleted]
F-1
53
LINDAL CEDAR HOMES, INC.
EXHIBIT C TO REIMBURSEMENT AGREEMENT
PERMITTED LIENS
ORIGINAL LOAN MO. PYMT (P&I) BAL. @ 12/10/00 FINAL PYMT
------------- -------------- --------------- ----------
Washington Dept. of Trans. Olympia Property 33,268.56 357.48 28,676.41 357.48
Secured by: Olympia real est. 1-Jan-97 10.00% 180 mos. 1-Dec-11
ORIGINAL LOAN ANNUAL PYMT BAL. @ 12/10/00 FINAL PYMT
------------- ----------- --------------- ----------
WA Economic Dev Fin. Auth. IRB Loan 3,725,000.00 100,000.00 3,425,000.00
Secured by: Deeds of Trust on 1-Nov-97 Interest var.
Burlington facility and Head
Office & Display Court
ORIGINAL LOAN MO. PYMT (P&I) BAL. @ 12/10/00 FINAL PYMT
------------- -------------- --------------- ----------
Puget Sound Leasing Co., Inc. Security System 10,316.45 326.00 1,849.81 931.46
Secured by: Equipment 18-Feb-98 12.899% 36 mos. 1-Apr-01
Toyota Motor Credit Corp. Forklift Model 52- 35,016.00 1,043.47 17,139.35 1,043.92
6FGU40/60342
Secured by: Equipment 25-May-99 4.619% 36 mos. 1-May-02
Toyota Motor Credit Corp. Forklift Model 59,088.00 1,786.23 48,357.55 1,786.23
52-5FD70/12818
Secured by: Equipment 6-Jun-00 5.576% 36 mos. 1-May-03
54
ORIGINAL LOAN MO. PYMT (P&I) BAL. @ 12/10/00 FINAL PYMT
------------- -------------- --------------- ----------
Safeline Leasing 1993 Clark OP-15 14,229.60 356.31 2,106.05 356.31
elect. Forklift
Secured by: Equipment 4-Sep-97 9.326% 48 mos. 4-Aug-01
55
WEDFA
NONRECOURSE REVENUE BONDS, 1997
Par Value of $3,725,000; $425,000 Series A (Taxable); $3,300,000 Series B (Tax-Exempt)
Final Pricing
$3,848,167 U.S. Bank Letter of Credit (Aa3 Moody's Rating)
=============================================================================================================================
Letter of Rating Remarketing Trustee Conduit TOTAL
Year Principal Coupon Interest Credit Fee Fee Fee Fee Fee Misc. PAYMENTS
- -----------------------------------------------------------------------------------------------------------------------------
1998 100,000 6.45% 211,163 -- 0 0 3,000 0 600 314,743
1999 100,000 6.45% 204,693 37,948 0 0 3,000 0 600 346,240
2000 100,000 6.45% 198,243 36,896 0 0 3,000 0 600 338,738
2001 125,000* 6.45% 191,793 35,844 0 0 3,000 0 600 356,237
2002 125,000 4.65% 183,700 34,530 0 0 3,000 0 600 346,860
2003 135,000 4.75% 177,918 33,229 0 0 3,000 0 600 349,746
2004 140,000 0.05% 171,505 31,823 0 0 3,000 0 600 346,928
2005 150,000 5.00% 164,645 30,363 0 0 3,000 0 600 348,608
2006 160,000 5.05% 157,145 28,799 0 0 3,000 0 600 349,544
2007 165,000 5.10% 149,065 27,129 0 0 3,000 0 600 344,794
2008 180,000 5.80% 140,650 25,407 0 0 3,000 0 600 349,657
2009 190,000 5.80% 130,210 23,521 0 0 3,000 0 600 347,331
2010 200,000 5.80% 119,190 21,531 0 0 3,000 0 600 344,321
2011 215,000 5.80% 107,590 19,435 0 0 3,000 0 600 345,625
2012 230,000 5.80% 95,120 17,183 0 0 3,000 0 600 345,903
2013 245,000 5.80% 81,760 14,773 0 0 3,000 0 600 345,153
2014 265,000 5.80% 67,570 12,206 0 0 3,000 0 600 348,376
2015 280,000 5.80% 52,200 9,430 0 0 3,000 0 600 345,230
2016 300,000 5.80% 25,960 6,496 0 0 3,000 0 600 346,056
2017 320,000** 5.80% 18,560 3,353 0 0 3,000 0 600 345,513
- -----------------------------------------------------------------------------------------------------------------------------
3,725,000 2,658,708 449,896 60,000 12,000 6,905,603
BOND YIELD (based on principal and interest payments only) 5.677%
TRUE FINANCING COST (including estimated costs included in financing and all
annual charges) 7.327%
* $425,000 Series A Term Bonds subject to Redemption 1998-2001
** $2,425,000 Series B Term Bonds subject to Redemption 2008-2017
56
EXHIBIT E
PENDING LITIGATION
PENDING LITIGATION WITH POTENTIAL FOR A MATERIAL ADVERSE EFFECT:
LORENZ ET ALL VS LINDAL CEDAR HOMES, INC.
On February 1, 2000, six current and former dealers brought suit against
Lindal Cedar Homes and two of its officers and directors in the U.S.
District Court for the Western District of Washington for damages
arising from the Company's termination or threatened termination of
their dealership agreements. In late 1998 and early 1999, the Company
terminated or threatened to terminate the dealership agreements of these
individuals on the grounds that the dealers had breached their
agreements by selling competitive products. The dealership contract,
signed by each of these claimants, strictly prohibits a dealer from
selling competitive products.
The complaint alleges: (a) the failure of the Company to register as a
franchise in certain states, including Washington, (b) numerous
violations of the Washington Franchise Investment Protection Act, and
(c) illegal tie-in requirements in violation of the Sherman Act and
Washington Consumer Protection Act, including treble damages. The
complaint does not specify the
damages sought. However, in a mediation which preceded the filing of the
lawsuit, the plaintiffs claimed damages, including trebling, of
approximately $10 million (prior to attorneys fees).
The Company's dealer agreement provides that, following unsuccessful
mediation, a dealer may pursue claims under the agreement only through
an arbitration proceeding binding on the dealer and the Company.
The Company believes that neither the Washington Franchise Investment
Protection Act nor the Federal Sherman Act is applicable, nor were there
any violations of either act. The Company will vigorously defend the
lawsuit. Any amount owing as a result of this lawsuit is currently not
estimable and as such, the Company has not accrued any amounts relating
to these claims.
In the second quarter of 2000, the parties to lawsuit agreed to pursue
the claims through binding arbitration before a panel of three
arbitrators. The three arbitrators have been selected. The U.S. District
Court for the Western District of Washington has issued an order staying
the lawsuit pending the outcome of the arbitration. Binding arbitration
is currently scheduled for late in the first quarter of 2001.
SHELL VS LINDAL CEDAR HOMES, INC.
Plaintiff is a former Lindal dealer who alleges that Lindal Cedar Homes,
Inc. infringed on his copyright of a certain design of Lindal home. Suit
was just served on the Company and has not yet been reviewed by legal
counsel.
BURKE VS LINDAL CEDAR HOMES, INC.
Plaintiff is a customer residing in Wyoming, who purchased a Lindal
house package in 1999, and is now seeking to recover costs and damages
for improper engineering, construction, and quality of materials.
Initial attempts to mediate the matter have been postponed so as to
include insurance company representatives in future mediation. The
attorney for plaintiff has outlined in excess of $1 million in damages,
consisting mostly of repair costs estimated at 650,000.
57
SUTTON VS LINDAL CEDAR HOMES, INC.
Plaintiff is a customer residing in Northern California, who purchased a
Lindal house package in 1997, and ceased construction efforts in March
1997 leaving the house unfinished due to alleged engineering
difficulties and delays. In March, 2000, a tentative agreement was
reached sending the matter to binding arbitration in the State of
California. Presently this case is still in the discovery phase. It is
anticipated that a hearing date will be set between 30 and 60 days after
notice that the matter is ready for hearing.
PAN ABODE VS LINDAL CEDAR HOMES, INC.
This matter pertains to a disputed land purchase in Ontario, Canada,
wherein plaintiff claims Lindal Cedar Homes Inc. reneged on an agreement
to purchase said parcel. This matter has been litigated in Lindal's
favor in the lower court, but is presently under appeal in the higher
court. The property in question has been valued in the neighborhood of
$300,000 - 400,000 CDN.