LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
by and among
KMB PRODUCE, INC.
and
FIRST UNION NATIONAL BANK
Dated as of March 1, 1999
INDEX
Page
ARTICLE I DEFINITIONS 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BORROWER 9
Section 2.1.Organization and Good Standing 9
Section 2.2.Corporate and Governmental 9
Authorization;Contravention 9
Section 2.3.Binding Effect 10
Section 2.4.Litigation 10
Section 2.5.ERISA 10
Section 2.6. Taxes 10
Section 2.7.Subsidiaries. 10
Section 2.8.Investment Company Act 10
Section 2.9.Ownership of Property, Liens 11
Section 2.10. No Default 11
Section 2.11. Full Disclosure 11
Section 2.12. Representations Upon Requests for Advances 11
Section 2.13. Use of Proceeds: Margin Stock 11
Section 2.14. Insider 12
Section 2.15. Environmental 12
Section 2.16. Survival of Representations and Warranties 12
ARTICLE III REIMBURSEMENT AND OTHER PAYMENTS 13
Section 3.1.Letter of Credit 13
Section 3.2.Reimbursement and Other Payments 13
Section 3.3.Tender Advances 13
Section 3.4.[Intentionally Omitted]. 15
Section 3.5.Commission and Fees 15
Section 3.6.Increased Costs Due to Change in Law 15
Section 3.7.Computation 16
Section 3.8.Payment Procedure 16
Section 3.9.Business Days 16
Section 3.10. Reimbursement of Expenses 16
Section 3.11. Extension of Expiration Date 16
Section 3.12. Obligations Absolute 17
ARTICLE IV INSURANCE; NET PROCEEDS 18
Section 4.1.Security 18
Section 4.2.Casualty and Liability Insurance Required 18
Section 4.3.General Requirements Applicable to Insurance 18
Section 4.4.Advances by Bank 19
Section 4.5.Borrowers to Make Up Deficiency in
Insurance Coverage 19
Section 4.6.Eminent Domain 20
Section 4.7.Application of Net Proceeds of Insurance
and Eminent Domain 20
Section 4.8.Parties to Give Notice 20
Section 4.9.Preservation of Security Interest 20
ARTICLE V AFFIRMATIVE COVENANTS 21
Section 5.1.Notice of Default 21
ARTICLE VI NEGATIVE COVENANTS 22
Section 6.1 {RESERVED} 22
ARTICLE VII CONDITIONS TO ISSUANCE OF LETTER OF CREDIT 23
Section 7.1.Conditions on Issuance 23
Section 7.2.Additional Conditions Precedent to
Issuance of the Letter of Credit 25
Section 7.3.Conditions Precedent to Each Tender
Advance 25
ARTICLE VIII DEFAULT 27
Section 8.1.Events of Default 27
Section 8.2.No Remedy Exclusive 28
Section 8.3.Anti-Marshaling Provisions 28
ARTICLE IX MISCELLANEOUS 29
Section 9.1.Indemnification. 29
Section 9.2.Transfer of Letter of Credit 30
Section 9.3.Reduction of Letter of Credit. 30
Section 9.4.Liability of the Bank 30
Section 9.5.Successors and Assigns 31
Section 9.6.Notices 31
Section 9.7.Amendment 31
Section 9.8.Effect of Delay and Waivers 31
Section 9.9.Counterparts 32
Section 9.10.Severability 32
Section 9.11.Cost of Collection 32
Section 9.12.Set Off. 32
Section 9.13.Governing Law 32
Section 9.14.References 33
Section 9.15.Taxes, Etc. 33
Section 9.16. Consent to Jurisdiction, Venue; Waiver
of Jury Trial 33
Section 9.17Assignment and Pledge of Agreement 33
Exhibit A - Irrevocable Letter of Credit Relating to the Bonds
Exhibit B - Form of Opinion of Counsel to the Borrower
Exhibit C - Form of Opinion of Counsel to the Guarantor
LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
THIS AGREEMENT, dated as of March 1, 1999, by and between
KMB PRODUCE, INC., a Texas corporation (the "Borrower") and FIRST
UNION NATIONAL BANK, a national banking association organized and
existing under the laws of the United States with an office
located at Richmond, Virginia (the "Bank");
W I T N E S S E T H:
WHEREAS, arrangements have been made pursuant to a Trust
Indenture of even date herewith (the "Indenture") between the
Carrollton Payroll Development Authority (the "Issuer") and First
Union National Bank, Richmond, Virginia, as trustee (the
"Trustee") for the issuance and sale by the Issuer of its
Industrial Development Revenue Bonds (KMB Produce, Inc. Project),
Series 1999 in the aggregate principal amount of $9,000,000 (the
"Bonds"); and
WHEREAS, the proceeds from the sale of the Bonds will be
used to finance, in whole or in part, the cost of the
acquisition, construction, installation, renovation and equipping
of a manufacturing facility to be located in the City of
Carrollton, Georgia (the "Project");
WHEREAS, the proceeds of the Bonds will be loaned to the
Borrower pursuant to a Loan Agreement of even date herewith
between the Issuer and the Borrower (the "Loan Agreement"); and
WHEREAS, in order to enhance the marketability of the Bonds,
the Borrower has requested that the Bank issue an irrevocable
direct pay letter of credit in the form attached hereto as
Exhibit "A" (such letter of credit or any successor or substitute
letter of credit issued by the Bank herein called the "Letter of
Credit") in an aggregate amount not exceeding $9,187,500 of which
(a) $9,000,000 shall support the payment of principal or portion
of the purchase price corresponding to principal of the Bonds and
(b) $187,500 shall support the payment of up to 50 days interest
or portion of the purchase price corresponding to interest on the
Bonds at an assumed interest rate of 15% per annum;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, including the covenants, terms
and conditions hereinafter appearing, and to induce the Bank to
issue the Letter of Credit, the Borrower does hereby covenant and
agree with the Bank as follows:
ARTICLE I
DEFINITIONS
All words and terms defined in Article I of the Loan
Agreement shall have the same meanings in this Agreement, unless
otherwise specifically defined herein. The terms defined in this
Article I have, for all purposes of this Agreement, the meanings
specified hereinabove or in this Article, unless defined
elsewhere herein or the context clearly requires otherwise.
1.1. "Accountant" means an independent certified public
accountant or a firm thereof as approved by the Borrower.
1.2. "Affiliate" means any other Person directly or
indirectly, controlling, controlled by, or under common control
with, the first Person; or any other Person which directly or
indirectly owns or controls at least ten percent (10%) of the
Voting Stock, partnership or other equity interests of, or at
least ten percent (10%) of its Voting Stock, partnership or other
equity interests are owned or controlled by, directly or
indirectly, the first Person.
1.3. "Agreement" means this Letter of Credit and
Reimbursement Agreement, as the same may from time to time be
amended, modified or supplemented in accordance with the terms
hereof.
1.4. "Alternate Credit Facility" means any irrevocable
direct pay letter of credit, insurance policy or similar credit
enhancement or support facility for the benefit of the Trustee,
the terms of which Alternate Credit Facility shall in all
respects material to the registered owners of the Bonds be the
same (except for the term set forth in such Alternate Credit
Facility) as those of the Letter of Credit.
1.5. "Bank" means First Union National Bank, a national
banking association.
1.6. "Bankruptcy Code" means 11 U.S.C. 101 et seq., as
amended.
1.7. "Bondholder" or "Bondholders" means the initial and any
future registered owners of the Bond or Bonds as registered on
the books and records of the Bond Registrar pursuant to
Section 2.4 of the Indenture.
1.8. "Bond Documents" means, collectively, the Loan
Agreement, the Security Instruments, the Indenture, the Bonds,
the Remarketing Agreement, the Tender Agency Agreement, the
Private Placement Memorandum and the Placement Letter, as the
same may be amended, modified or supplemented from time to time
in accordance with their respective terms.
1.9. "Bonds" means the Carrollton Payroll Development
Authority Industrial Development Revenue Bonds (KMB Produce, Inc.
Project), Series 1999, in the original aggregate principal amount
of $9,000,000.
1.10. "Borrower" mean KMB Produce, Inc., a Texas corporation
and its successors and assigns.
1.11. "Capital Stock" means any capital stock of the
Borrower (to the extent issued to a Person other than the
Borrower), whether common or preferred.
1.12. "CERCLA" means Comprehensive, Environmental, Response,
Compensation and Liability Act of 1980, as amended from time to
time, and all rules and regulations from time to time promulgated
thereunder.
1.13. "Code" means the Internal Revenue Code of 1986, as
amended.
1.14. "Closing Date" means the date of issuance of the Bonds.
1.15. "Collateral" means all real and personal property of
the Borrower with respect to which the Bank has been or will be
granted a lien, mortgage or security interest in pursuant to the
Security Instruments.
1.16. "Commission Rate" means the applicable letter of credit
fee based on the following pricing grid:
Guarantor's Ratio of
Pricing Tier Debt/Total Capital Letter of Credit Fee
I <0.2 35.0
II >0.2 and <0.4 40.0
III >0.4 47.5
1.17. "Consistent Basis" means, in reference to the
application of GAAP applied on a basis consistent with that of
the preceding year, that the accounting principles observed in
the period referred to are comparable in all material respects to
those applied in the preceding period, except as to any changes
consented to by the Bank.
1.18. "Controlled" or "controlling" or "under common control
with" means, with respect to any Person, the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by
agreement or otherwise.
1.19. "Controlled Group" means (i) the controlled group of
corporations as defined in Section 1563 of the Code, or (ii) the
group of trades or businesses under common control as defined in
Section 414(c) of the Code, of which the Borrower is a part or
may become a part.
1.20. "Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such
Person as lessee under capital leases in connection with
industrial development revenue bonds, (v) all obligations of such
Person to reimburse any bank or other Person in respect of
amounts payable under a banker's acceptance, (vi) all obligations
of such Person to reimburse any bank or other Person in respect
of amounts paid under a letter of credit or similar instrument,
(vii) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, to
the extent of the fair market value of such assets and (viii) all
Debt of others Guaranteed by such Person to the extent of the
Debt which has been Guaranteed; provided, however, the term
"Debt" shall not include trade indebtedness of the Borrower.
1.21. "Debtor Laws" means all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement,
receivership, insolvency, reorganization, fraudulent transfer or
similar laws from time to time in effect affecting the rights of
creditors generally and general principles of equity.
1.22. "Deed to Secure Debt" means the Deed to Secure Debt
and Security Agreement, dated the date thereof, from the Borrower
to the Bank, securing the obligations of the Borrower under this
Agreement.
1.23. "Default" means an event or condition the occurrence
of which would, with the lapse of time or the giving of notice,
or both become an Event of Default.
1.24. "Environmental Claim" means any accusation,
allegation, notice of violation, claim, demand, abatement order,
or other order or direction (conditional or otherwise) by any
governmental authority or any Person for any damage, including,
without limitation, personal injury (including sickness, disease,
or death), tangible or intangible property damage, contribution,
indemnity, direct or consequential damages, damage to the
environment, nuisance, pollution, contamination, or other adverse
effects on the environment, or for fines, penalties, or
restrictions, in each case relating to, resulting from, or in
connection with Hazardous Materials and relating to the Borrower,
or any property leased, owned, operated, or used by the Borrower.
1.25. "ERISA" means the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time, and all
regulations promulgated under that Act.
1.26. "Event of Default" has the meaning specified in
Section 8.1 hereof.
1.1.
1.27. "Fiscal Year" means the fiscal year of the Borrower
ending on the last Saturday closest to December31.
1.28. "Generally Accepted Accounting Principles" or "GAAP"
means those generally accepted accounting principles and
practices which are recognized as such by the American Institute
of Certified Public Accountants acting through its Accounting
Principles Board or the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which
are consistently applied for all periods after the date hereof so
as to reflect the financial condition, results of operations and
changes in financial position of any Person, except that any
accounting principle or practice required to be changed by such
Accounting Principles Board or Financial Accounting Standards
Board (or other appropriate board or committee of such Boards) in
order to continue as a generally accepted accounting principle or
practice may so be changed, as provided in Section 1.02(c)
thereof. After any change in GAAP that affects any covenants of
this Agreement, the Bank and the Borrower will negotiate in good
faith to revise those covenants in order to make them consistent
with GAAP then in effect.
1.29. "Governmental Authority" means any government (or any
political subdivision or jurisdiction thereof), court, bureau,
agency, department or other governmental subdivision having
jurisdiction over the Borrower, any Affiliate of the Borrower or
any of their respective businesses, operations or properties.
1.30. "Guarantee" of any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds
for the purchase or payment of ) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or
other services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee
shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb
has the corresponding meaning.
1.31. "Guaranty Agreement" has the meaning assigned in
Section 7.1(n) hereof.
1.32. "Hazardous Materials" means any flammable materials,
explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials
defined as such in any Environmental Claim.
1.33. "Indemnities" has the meaning assigned in Section 9.1
hereof.
1.1.
1.34. "Indemnified Matters" has the meaning assigned in
Section 9.1 hereof.
1.35. "Indenture" means the Trust Indenture, dated as of
March 1, 1999, among the Issuer and the Trustee, as from time to
time supplemented and amended.
1.36. "Loan Agreement" means that Loan Agreement, dated as of
March 1, 1999 between the Issuer and the Borrower, as
supplemented and amended from time to time.
1.37. "Letter of Credit" means the Letter of Credit, dated
March 19, 1998 issued by the Bank relating to the Bonds for the
account of the Borrower pursuant hereto and the Bond Documents.
1.38. "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset. For purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own
subject to a Lien any asset which they have acquired or hold
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
1.39. "Material Adverse Effect" means any (i) material
adverse effect upon the validity, performance or enforceability
of this Agreement or any of the Security Instruments or any of
the transactions contemplated hereby or thereby, (ii) material
adverse effect upon the properties, business, prospects or
condition financial or otherwise) of the Borrower, or
(iii) material adverse effect upon the ability of the Borrower or
any other Person to fulfill any obligation under this Agreement
or any of the Security Instruments.
1.40. "Multiemployer Plan" means the multiemployer plan as
set forth in Section 4001(a)(3) of ERISA.
1.41. Obligations" means all loans and all other advances,
debts, liabilities, obligations, covenants and duties owing,
arising, due or payable from the Borrower to the Bank, whether or
not evidenced by any note, guaranty or other instrument, whether
arising under this Agreement or any of the other Bond Documents
or otherwise, whether direct or indirect (including those
acquired by assignment), joint, several, absolute or contingent,
primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes,
without limitation, all interest, charges, expenses, fees,
attorney's fees and any other sums chargeable to the Borrower
under any of the Bond Documents.
1.42. "PBGC" means the Pension Benefit Guaranty Corporation,
and any successor to all or any of the Pension Benefit Guaranty
Corporation's functions under ERISA.
1.43. "Person" means an individual, partnership,
corporation, trust, unincorporated
1.1. organization, association, joint venture or a
government or agency or political subdivision or instrumentality
thereof.
1.44. "Placement Letter" means the Placement Agent Agreement,
dated March 19, 1999 by and among the Company, the Issuer and
First Union Capital Markets Corp., Charlotte, North Carolina, as
Placement Agent for the Bonds.
1.45. "Plan" means an employee benefit plan or other plan
maintained for employees of the Borrower and covered by Title IV
of ERISA, and subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member
of the Controlled Group or (ii) maintained pursuant to a
collective bargaining agreement or any other arrangement under
which more than one employer makes contribution and to which a
member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five
plan years made contributions.
1.46. "Pledge Agreement" means the Pledge Agreement dated as
of even date herewith from the Company to the Bank relating to
the Bonds.
1.47. "Private Placement Memorandum" means the Private
Placement Memorandum dated March 19, 1999 relating to the Bonds.
1.48. "Project" shall mean the financing, in whole or in
part, of the acquisition, construction, installation and
equipping of a manufacturing facility to be located in the City
of Carrollton, Georgia.
1.49. "Project Fund" means the trust fund so designated and
established under the Indenture.
1.50. "Property" or "Properties" means all real property
owned, leased or otherwise used or occupied by the Borrower,
wherever located.
1.51. "RCRA" means the Resource Conservation and Recovery
Act, as amended from time to time, and all rules and regulations
from time to time promulgated thereunder.
1.52. "Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal,
discharge, dispersal, dumping, leaching, or migration of
Hazardous Materials into the indoor or outdoor environment
(including, without limitation, the abandonment or disposal of
any barrels, containers, or other closed receptacles containing
any Hazardous Materials), or into or out of any property owned,
leased, operated, or used by the Borrower or any subsidiaries (if
any), including the movement of any Hazardous Material through
the air, soil, surface water, groundwater, or property.
1.53. "Remarketing Agreement" means the Remarketing
Agreement, dated as of March 1, 1999, by and between the Company
and First Union Capital Markets Corp., as Remarketing Agent, as
supplemented and amended from time to time.
1.54. "SARA" means the Superfund Reauthorization and
Amendments Act of 1986, as amended from time to time, and all
rules and regulations promulgated thereunder.
1.55. "Security Instruments" means, collectively, the Pledge
Agreement, the Deed to Secure Debt, any Swap Agreement, and any
and all other agreements or instruments relating to the Project
now or hereafter executed and delivered by any of the Borrower or
any other Person in connection with, or as security for the
payment or performance of, the Letter of Credit or this Agreement
or any other obligations of any of the Borrower to the Bank as
described therein, as such agreements may be amended, modified or
supplemented from time to time in accordance with their
respective terms.
1.56. "Solvent" means, as to any Person, that such Person
has capital sufficient to carry on its business and transactions
and all business and transactions in which it is about to engage
and is able to pay its debts as they mature and owns property
having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay its
debts.
1.57. "State" means the State of Georgia.
1.58. "Stated Expiration Date" means March 15, 2004.
1.59. "Stated Termination Date" means March 15, 2004, the
expiration date of the Letter of Credit, as such date may be
extended in accordance with terms of Section 3.11 hereof.
1.60. "Subsidiary" means any corporation, more than fifty
percent (50%) of the outstanding Voting Stock of which is at the
time, directly or indirectly, owned by the Borrower and/or one or
more Subsidiaries (irrespective of whether, at the time, capital
stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency).
1.61. "Swap Agreement" means (A) an agreement (including
teams and conditions incorporated by reference therein) which is
a rate swap agreement, basis swap, forward rate agreement,
commodity swap, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement,
rate floor agreement, rate collar agreement, currency swap
agreement, cross-currency rate swap agreement, currency option,
any other similar agreement (including any option to enter into
any of the foregoing); (B) any combination of the foregoing; or
(C) a master agreement for any of the forgoing together with all
supplements.
1.62. "Tender Advance" has the meaning assigned to that term
in Section 3.3 of this Agreement.
1.63. "Tender Agency Agreement" means the Tender Agency
Agreement dated as of March 1, 1999 by and between the Borrower
and the Trustee, as Tender Agent, as amended, from time to time
thereunder.
1.64. "Tender Draft" has the meaning assigned to that term in
the Letter of Credit.
1.65. "Termination Date" means the last day a drawing is
available under the Letter of Credit.
1.66. "Trustee" means any Person or group of Persons at the
time serving as trustee under the Indenture.
1.67. "UCC" means the Uniform Commercial Code in effect in
jurisdictions where assets of the Borrower is located at anytime
during the term hereof, as the same may be amended from time to
time.
1.68. "Voting Stock" of any corporation means shares of any
class or classes (however designated) of capital stock of such
corporation having ordinary voting power for the election of at
least a majority of the members of the board of directors (or
other governing bodies) of such corporation, other than shares
having such power only by reason of the happening of a
contingency.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the
documents mentioned herein and the issuance of the Letter of
Credit) that:
Section 2.1. Organization and Good Standing. The Borrower
is a Texas corporation which is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation. The Borrower is duly qualified to transact
business in every jurisdiction where, by the nature of its
business, such qualifications are necessary, and has all
corporate powers and governmental licenses, authorizations,
consents and approvals required to carry on its business as now
conducted, except where the failure to be so qualified or the
failure to have such licenses, authorizations, consents and
approvals will not have a Material Adverse Effect.
Section 2.2. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the
Borrower of this Agreement, the Bond Documents to which the
Borrower is a party, (i) are within the Borrower's corporate
powers, (ii) have been duly authorized by all necessary corporate
action, (iii) require no action by or in respect of, or filing
with, any governmental body, agency or official (except for any
resolution or resolutions of the Issuer relating to the Bonds),
(iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the operating
agreement, certificate of incorporation or by-laws of the
Borrower, or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower or any of
its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
Section 2.3. Binding Effect. This Agreement, the Bond
Documents and Security Instruments to which the Borrower is a
party constitute valid and binding agreements of the Borrower
enforceable in accordance with their terms, provided, that the
enforceability hereof and thereof are limited by Debtor Laws.
Section 2.4. Litigation. Except as disclosed in writing
to the Bank, there is no action, suit or proceeding pending, or
to the knowledge of the Borrower threatened, against or affecting
the Borrower or any of its Affiliates before any court or
arbitrator or any governmental body, agency or official which
could have a Material Adverse Effect on the businesses, financial
positions or results of operations of the Borrower.
Section 2.5. ERISA. (a) The Borrower and each member of
the Controlled Group have fulfilled their obligations under
minimum funding standards of ERISA and the Code with respect to
each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have
not incurred any liability to the Pension Benefit Guaranty
Corporation (or any successor thereto).
(b) Neither the Borrower nor any member of the Controlled
Group is or ever has been obligated to contribute to any
Multiemployer Plan.
Section 2.6. Taxes. There have been filed on behalf of
the Borrower all federal, state and local income and other tax
returns which are required to be filed by it and all taxes due
pursuant to such returns or pursuant to any assessment received
by or on behalf of the Borrower have been paid. The charges,
accruals and reserves on the books of the Borrower in respect of
taxes or other governmental charges are adequate.
Section 2.7. Subsidiaries. Except as otherwise disclosed
in writing to the Bank, there are no Subsidiaries of the
Borrower.
Section 2.8. Investment Company Act. The Borrower is not
an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, and is not
controlled by such company.
Section 2.9. Ownership of Property, Liens. The Borrower has
title to its Properties sufficient for the conduct of its
business.
Section 2.10. No Default. To the best of its knowledge, the
Borrower is not in default under or with respect to any
agreement, instrument or undertaking to which they are a party or
by which they or any of their properties are bound which will
have a Material Adverse Effect to the business, operations,
properties or financial or other conditions of the Borrower, or
which will have a Material Adverse Effect to the Borrower to
perform its obligations under the Bond Documents. No Default has
occurred and is continuing.
Section 2.11. Full Disclosure. There is no material fact
which is known or which should be known by the Borrower or any
Affiliate that the Borrower has not disclosed to the Bank which
could have a Material Adverse Effect. Neither this Agreement nor
any agreement, document, certificate or statement delivered by
the Borrower or any Affiliate of the Borrower to the Bank,
contains any untrue statement of a material fact or omits to
state any material fact which is known or which should be known
by the Borrower necessary to keep the other statements from being
misleading.
Section 2.12. Representations Upon Requests for Advances.
Every draw under the Letter of Credit shall constitute, without
the necessity of specifically containing a written statement, a
representation and warranty by the Borrower that no Default or
Event of Default exists and that all representations and
warranties by the Borrower contained in this Agreement, and the
Bond Documents are true and correct as of the date the advance is
to be made.
Section 2.13. Use of Proceeds: Margin Stock. The proceeds
of the Bonds will be used by the Borrower only for the purposes
set forth herein and in the Bond Documents. The Borrower's uses
of the proceeds are, and continue to be, legal and proper
corporate uses, and the uses are and will be consistent with all
applicable laws and regulations, as in effect from time to time.
None of the proceeds of the Bonds will be used for the purpose of
purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X, or Regulation G of the Code of
Federal Regulations, Parts 221, 224 and 207, respectively, or for
the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry "margin stock," or for
any other purpose which might cause this transaction to be deemed
a "purpose credit" within the meaning of Regulation U,
Regulation X or Regulation G. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or
carrying margin stocks. The Borrower, or any Person acting on
behalf of the Borrower, has not taken or will take any action
which might cause any violation of Regulation U, Regulation X, or
Regulation G or any other regulations of the Board of Governors
of the Federal Reserve System or any violation of Section 8 of
the Securities Exchange Act of 1934 or any rule or regulation
thereunder as now or hereafter in effect.
Section 2.14. Insider. The Borrower is not, and no Person
having "control" (as that term is defined in 12 U.S.C.
375(b)(5) or in regulations promulgated pursuant thereto) of
such Person is, an "executive officer", "director", or "principal
shareholder" (as those terms are defined in 12 U.S.C. 375(b) or
in regulations promulgated pursuant thereto) of the Bank, of a
bank holding company of which the Bank is a subsidiary, or of any
subsidiary of a bank holding company of which the Bank is a
subsidiary, or of any bank at which the Bank maintains a
"correspondent account" (as such term is defined in such statute
or regulations), or of any bank which maintains a correspondent
account with the Bank.
Section 2.15. Environmental. The Borrower is to the best of
its knowledge, in material compliance with the provisions of the
Environmental Laws.
Section 2.16. Survival of Representations and Warranties.
All of the representations and warranties by the Borrower shall
survive delivery of this Agreement and the Bond Documents. Any
investigation at any time made by or on behalf of the Bank will
not diminish the Bank's right to rely on the representations and
warranties.
ARTICLE III
REIMBURSEMENT AND OTHER PAYMENTS
Section 3.1. Letter of Credit. The Bank agrees, on the
terms and conditions hereinafter set forth, to issue and deliver
the Letter of Credit in favor of the Trustee in substantially the
form of Exhibit A attached hereto upon fulfillment of the
applicable conditions set forth in Article VII hereof. The Bank
agrees that any and all payments under the Letter of Credit will
be made with the Bank's own funds.
Section 3.2. Reimbursement and Other Payments. Except as
otherwise provided in Section 3.3 below, the Borrower shall pay
to the Bank:
(a) on or before 3:00 P.M. (prevailing Eastern time),
but after the honoring of a draw by the Bank, on the date
that any amount is drawn under the Letter of Credit, a sum
together with interest on such sum equal to such amount so
drawn under the Letter of Credit, plus to the extent
permitted by applicable law, any and all reasonable charges
and expenses that the Bank may pay or incur relative to the
Letter of Credit which have not been previously paid by or
on behalf of the Borrower; provided, further, the Borrower
and the Bank acknowledge that such amounts due under this
subparagraph (a) shall be due and payable and subject to
interest thereon (at a fluctuating interest rate per annum
equal at all times to the rate applicable to the Bonds plus
two percent (2%) even though no Event of Default has
occurred under Section 8.1 hereof);
(b) on demand, interest on any and all amounts
remaining unpaid by the Borrower when due hereunder from the
date such amounts become due until payment thereof in full,
at a fluctuating interest rate per annum equal at all times
to the rate applicable to the Bonds plus two percent (2%);
(c) on demand, any and all reasonable expenses
incurred by the Bank in enforcing any rights under this
Agreement and the other Security Instruments which have not
been previously paid by or on behalf of the Borrower; and
(d) on demand all charges, commissions, costs and
expenses set forth in Section 3.5 hereof which have not been
previously paid by or on behalf of the Borrower.
Section 3.3. Tender Advances.
(a) If the Bank shall make any payment of that portion
of the purchase price corresponding to principal and interest of
the Bonds drawn under the Letter of Credit pursuant to a Tender
Draft and the conditions set forth in Section 7.3 shall have been
fulfilled, such payment shall constitute a tender advance made by
the Bank to the Borrower on the date and in the amount of such
payment (a "Tender Advance"); provided that if the conditions of
said Section 7.3 have not been fulfilled, the amount so drawn
pursuant to the Tender Draft shall be payable in accordance with
the terms of Section 3.2(a) above. Notwithstanding any other
provision hereof, the Borrower shall repay the unpaid amount of
each Tender Advance, together with all unpaid interest thereon,
on the earlier to occur of (i) such date as any Bonds purchased
pursuant to a Tender Draft are resold as provided in
paragraph 3.3(d) hereof, (ii) on the date one year and one day
following the date of such Tender Advance, or (iii) the
Termination Date. The Borrower may prepay the outstanding amount
of any Tender Advance in whole or in part, together with accrued
interest to the date of such prepayment on the amount prepaid.
The Borrower shall notify the Bank prior to 11:00 A.M.
(prevailing Eastern time) on the date of such prepayment of the
amount to be prepaid.
(b) The Borrower shall pay interest on the unpaid
amount of each Tender Advance from the date of such Tender
Advance until such amount is paid in full, payable monthly, in
arrears, on the first day of each month during the term of each
Tender Advance and on the date such amount is paid in full, at a
fluctuating interest rate per annum in effect from time to time
equal to the rate applicable to the Bonds, provided that the
unpaid amount of any Tender Advance which is not paid when due
shall bear interest at the rate applicable to the Bonds plus two
percent (2%), payable on demand and on the date such amount is
paid in full.
(c) Pursuant to the Pledge Agreement, the Borrower has
agreed that, in accordance with the terms of the Indenture, Bonds
purchased with proceeds of any Tender Draft shall be delivered by
the Tender Agent to the Bank or its designee (or otherwise in the
manner provided in the Pledge Agreement, as applicable) to be
held by the Bank or its designee in pledge as collateral securing
the Borrower's payment obligations to the Bank hereunder. Bonds
so delivered to the Bank or its designee shall be registered in
the name of the Bank, or its designee, as pledgee of the
Borrower, as provided for in the Pledge Agreement, as applicable.
(d) Prior to or simultaneously with the resale of
Pledged Bonds, the Borrower shall prepay the then outstanding
Tender Advances (in the order in which they were made) by paying
to the Bank an amount equal to the sum of (a) the amounts
advanced by the Bank pursuant to the corresponding Tender Drafts
relating to such Bonds, plus (b) the aggregate amount of accrued
and unpaid interest on such Tender Advances. Such payment shall
be applied by the Bank in reimbursement of such drawings (and as
prepayment of Tender Advances resulting from such drawings in the
manner described below), and, upon receipt by the Bank of a
certificate completed and signed by the Trustee in substantially
the form of Annex F to the Letter of Credit, the Borrower
irrevocably authorizes the Bank to rely on such certificate and
to reinstate the Letter of Credit in accordance therewith. Funds
held by the Tender Agent as a result of sales of the Pledged
Bonds by the Remarketing Agent shall be paid to the Bank by the
Tender Agent to be applied to the amounts owing by the Borrower
to the Bank pursuant to this paragraph (d). Upon payment to the
Bank of the amount of such Tender Advance to be prepaid, together
with accrued interest on such Tender Advance to the date of such
prepayment on the amount to be prepaid, the principal amount
outstanding of Tender Advances shall be reduced by the amount of
such prepayment and interest shall cease to accrue on the amount
prepaid.
Section 3.4. [Intentionally Omitted].
Section 3.5. Commission and Fees.
(a) The Borrower shall pay to the Bank a commission at
the applicable Commission Rate per annum on the undrawn amount
available to be drawn under the Letter of Credit (computed on the
date that such commission is payable) from and including the date
of issuance of the Letter of Credit until the Stated Termination
Date, payable annually in advance on the date of issuance of the
Letter of Credit and on each anniversary of the issuance of the
Letter of Credit, subject to adjustment upon demand by the Bank
due to any event that may increase the cost to the Bank of
issuing or maintaining the Letter of Credit.
(b) The Borrower shall pay to the Bank, upon each
drawing under the Letter of Credit in accordance with the terms,
a fee of $100 per drawing.
(c) The Borrower shall pay to the Bank, upon transfer
of the Letter of Credit in accordance with its terms, a transfer
fee of $1,000.
Section 3.6. Increased Costs Due to Change in Law. In the
event of any change in any existing or future law, regulation,
ruling or other interpretation affecting the Bank which shall
either (a) impose, modify or make applicable any reserve, special
deposit, capital requirement, assessment or similar requirement
against the Letter of Credit or (b) impose on the Bank any other
condition regarding the Letter of Credit, and the result of any
event referred to in clause (a) or (b) above shall be to increase
the cost (including a reasonable allocation of resources) or
decrease the yield to the Bank of issuing or maintaining the
Letter of Credit (which increase in cost shall be the result of
the Bank's reasonable allocation of the aggregate of such cost
increases or yield decreases resulting from such events), then,
upon demand by the Bank, the Borrower shall immediately pay to
the Bank, from time to time as specified by the Bank, additional
amounts which shall be sufficient to compensate the Bank for such
increased cost or decreased yield. A statement of charges
submitted by the Bank, shall be conclusive, absent manifest
error, as to the amount owed.
Nothwithstanding the foregoing, the Bank shall make written
demand on Borrower for such additional amounts no later than 180
days after the Bank has knowledge of the event giving rise to
such additional payment, and, in the event the Bank fails to give
notice within such period, Borrower shall not have any obligation
to make any payment with respect to claims occurring more than
180 days prior to the giving of such written demand.
Section 3.7. Computation. All payments of interest,
commission and other charges under this Agreement shall be
computed on the per annum basis, based on a 360-day year days
calculated for the actual number of days elapsed.
Section 3.8. Payment Procedure. All payments made by the
Borrowers under this Agreement shall be made to the Bank in
lawful currency of the United States of America and in
immediately available funds at the Bank's offices in Richmond,
Virginia, or at another location as designated in writing by the
Bank to the Borrower, before 12:00 Noon (prevailing Eastern time)
on the date when due, except for payments made pursuant to
Section 3.2(a).
Section 3.9. Business Days. If the date for any payment
hereunder falls on a day which is not a Business Day, then for
all purposes of this Agreement the same shall be deemed to have
fallen on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of
payments of interest or commission, as the case may be.
Section 3.10. Reimbursement of Expenses. The Borrower will
pay all reasonable legal fees (computed without regard to any
statutory presumption) incurred by the Bank in connection with
the preparation, execution and delivery of this Agreement, the
Letter of Credit, the Security Instruments, any and all other
agreements and transactions contemplated hereby and thereby and
by the Bond Documents (including any amendments hereto or thereto
or consents or waivers hereunder or thereunder) and will also pay
all fees, charges or taxes for the recording or filing of
Security Instruments. The Borrower will also pay for all
reasonable out-of-pocket expenses of the Bank in connection with
the administration of the Letter of Credit, this Agreement and
the Security Instruments consisting of filing fees, if any. The
Borrower will, upon request, promptly reimburse the Bank for all
amounts expended, advanced or incurred by the Bank to collect or
satisfy any obligation of the Borrower under this Agreement or
any Security Instrument, or to enforce the rights of the Bank
under this Agreement, or any Security Instrument, which amounts
will include, without limitation, all court costs, reasonable
attorneys' fees, fees of auditors and accountants and out-of-
pocket investigation expenses incurred by the Bank in connection
with any such matters.
Section 3.11. Extension of Expiration Date. Except as
hereinafter provided, the Letter of Credit will expire on the
Stated Expiration Date. The Letter of Credit shall automatically
be extended for an additional one-year period from the then
applicable Stated Termination Date, unless the Bank shall have
notified the Borrower and the Trustee in writing at least 90 days
prior to the Stated Termination Date that the Bank will not
extend such applicable Stated Termination Date for an additional
one-year period from the then applicable Stated Termination Date.
Section 3.12. Obligations Absolute. The Obligations of the
Borrower under this Agreement shall be 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:
(a) any lack of validity or enforceability of the
Letter of Credit, the Bonds, any of the other Bond
Documents, any of the Security Instruments or any other
agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to
departure from the terms of the Letter of Credit, the Bonds,
any of the other Bond Documents, any of the Security
Instruments or any other agreement or instrument related
thereto;
(c) the existence of any claim, set off, defense or
other right which either the Borrower or the Issuer may have
at any time against the Trustee, any beneficiary or any
transferee of the Letter of Credit (or any Person for whom
the Trustee, any such beneficiary or any such transferee may
be acting), the Bank or any other Person, whether in
connection with this Agreement, the Security Instruments,
the Letter of Credit, the Bond Documents, the Project or any
unrelated transaction;
(d) any statement, draft or other document presented
under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect, or any statement
therein being untrue or inaccurate in any respect
whatsoever;
(e) the surrender, exchange or impairment of any
security for the performance or observance of any of the
terms of this Agreement; or
(f) any other circumstance which might otherwise
constitute a defense available to, or a discharge of the
Borrower, except subject to the qualification that
obligations may be reinstated upon bankruptcy.
ARTICLE IV
INSURANCE; NET PROCEEDS
Section 4.1. Security. As security for the full and timely
payment and performance by the Borrower of its obligations
hereunder, the Borrower shall on the date hereof deliver to the
Bank, the Security Instruments, conveying to the Bank duly
perfected liens upon and security interests in the Collateral
related thereto, subject only to Permitted Encumbrances.
Section 4.2. Casualty and Liability Insurance Required.
The Borrower will keep the Collateral continuously insured
against such risks as are customarily insured against by
businesses of like size and type engaged in the same or similar
operations (other than business interruption insurance)
including, without limiting the generality of any other covenant
contained herein or in the Bond Documents:
(a) an all-risk casualty and all-risk builder's
insurance on the Collateral in an amount not less than the full
insurable value thereof;
(b) general comprehensive liability insurance against
claims for bodily injury, death or property damage occurring on,
in or about the Collateral in amounts not less than $1,000,000
with respect to bodily injury to any one person, $1,000,000 with
respect to bodily injury to two or more persons in any one
accident and $1,000,000 with respect to property damage resulting
from any one occurrence;
(c) liability insurance with respect to the operation
of its facilities under the workers' compensation laws of the
State; and
(d) if at any time the site of the Project is in an
area that has been identified by the Secretary of Housing and
Urban Development as having special flood and mud slide hazards,
the Borrower shall purchase and maintain a flood insurance policy
satisfactory to the Bank; provided, however, that the insurance
so required may be provided by blanket policies now or hereafter
maintained by the Borrower.
Section 4.3. General Requirements Applicable to Insurance.
(a) Each insurance policy obtained in satisfaction of
the requirements of Section 4.2 hereof:
(i) shall be by such insurer (or insurers) as shall be
financially responsible, qualified to do business in the
State, and of recognized standing;
(ii) shall be in such form and have such provisions
(including, without limitation, the loss payable clause, the
deductible amount, if any, and the standard mortgagee
endorsement clause), as are generally considered standard
provisions for the type of insurance involved and are
acceptable in all respects to the Bank;
(iii) shall prohibit cancellation or substantial
modification, termination or lapse in coverage by the
insurer without at least 30 days' prior written notice to
the Bank;
(iv) shall provide that losses thereunder, prior to the
occurrence of an Event of Default (or event which, with
notice or lapse of time or both, would constitute an Event
of Default) hereunder shall be adjusted with the insurer by
the Borrower at its expense on behalf of the insured parties
and the decision of the Borrower as to any adjustment shall
be final and conclusive; and
(v) without limiting the generality of the foregoing,
all insurance policies carried on the Collateral shall name
the Bank as mortgagee, loss payee and a party insured
thereunder and any loss thereunder shall be made payable and
shall be applied as provided in Section 4.7 hereof.
(b) Prior to expiration of any such policy, the
Borrower shall furnish the Bank with evidence satisfactory to the
Bank that the policy or certificate has been renewed or replaced
or is no longer required by this Agreement.
Section 4.4. Advances by Bank. In the event the Borrower
shall fail to maintain, or cause to be maintained, the full
insurance coverage required hereunder or shall fail to keep the
Collateral in good repair and good operating condition, the Bank
may (but shall be under no obligation to), after 10 days, written
notice to the Borrower, and the failure of the Borrower to obtain
the required insurance or to commence (and complete with due
diligence) the making of the required repairs, renewals and
replacements, contract for the required policies of insurance and
pay the premiums on the same or make any required repairs,
renewals and replacements; and the Borrower agrees to reimburse
the Bank to the extent of the amounts so advanced with interest
thereon at a rate per annum equal to the Prime Rate plus two
percent (2%), from the date of advance to the date of
reimbursement.
Any amounts so advanced by the Bank shall become an
additional obligation of the Borrower secured by the Security
Instruments.
Section 4.5. Borrowers to Make Up Deficiency in Insurance
Coverage. The Borrower agrees that to the extent that they shall
not carry insurance required by Section 4.2 hereof, they shall
pay promptly to the Bank, for application in accordance with the
provisions of Section 4.7(b)(ii) hereof, such amount as would
have been received as Net Proceeds (as hereinafter defined) by
the Bank, under the provisions of Section 4.7(b)(ii) hereof had
such insurance been carried to the extent required.
Section 4.6. Eminent Domain. In the event that title to,
or the temporary use of, the Collateral or any part thereof shall
be taken by Eminent Domain, the Net Proceeds received as a result
of such Eminent Domain shall be applied as provided in
Section 4.7(b) hereof.
Section 4.7. Application of Net Proceeds of Insurance and
Eminent Domain.
(a) The Net Proceeds of the insurance carried pursuant
to the provisions of Sections 4.2(c), 4.2(d) and, if practicable,
7.1(k) hereof shall be applied by the Borrower toward
extinguishment of the defect or claim or satisfaction of the
liability with respect to which such insurance proceeds may be
paid.
(b) The Net Proceeds in excess of $100,000 of the
insurance carried with respect to the Collateral pursuant to the
provisions of Sections 7.1(k) (if not applied pursuant to
clause (a) of this Section 4.7), 4.2(a) and 4.2(b) hereof
(excluding the Net Proceeds of any business interruption
insurance, which shall be paid to the Borrower), and the Net
Proceeds resulting from Eminent Domain shall be paid and applied
as follows:
(i) If the Net Proceeds are with respect to the
Project and if Bonds shall then be outstanding under the
Indenture and no drawing under the Letter of Credit shall
theretofore have been presented, then in the manner and at
the times provided therefor in the Bond Documents; or
(ii) in all other cases, to the payment or reduction,
as the case may be, of the obligations of amounts
outstanding hereunder, with such allocations to principal,
interest, commissions, charges and expenses as the Bank may
elect.
"Net Proceeds" when used with respect to any insurance
proceeds or award resulting from, or other amount received in
connection with, Eminent Domain, shall mean the gross proceeds
from such proceeds, award or other amount, less all expenses
(including attorneys' fees) incurred in the realization thereof.
Section 4.8. Parties to Give Notice. In case of any
material damage to or destruction of all or any part of the
Collateral, the Borrower shall give prompt notice thereof to the
Bank. In case of a taking or proposed taking of all or any part
of the Collateral or any right therein by Eminent Domain, the
Borrower shall give prompt notice thereof to the Bank. Each such
notice shall describe generally the nature and extent of such
damage, destruction, taking, loss, proceeding or negotiations.
Section 4.9. Preservation of Security Interest. At the
request of the Bank at any time or from time to time, the
Borrower will cause to be executed by their duly authorized
officers any agreement, certificate, instrument, statement or
document, and to pay all connected costs, which the Bank may deem
necessary or advisable to create or preserve the security
interest of the Bank contemplated hereby and by the Security
Instruments.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Notice of Default. The Borrower will furnish
to the Bank within five (5) days of becoming aware of a Default
or Event of Default written notice specifying the nature and
period of existence of the Default or Event of Default and the
action which the Borrower is taking or proposes to take to remedy
the Default or Event of Default.
ARTICLE VI
NEGATIVE COVENANTS
{RESERVED}.
ARTICLE VII
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
Section 7.1. Conditions on Issuance. On or prior to the
Closing Date, the Borrower shall have furnished to the Bank, in
form satisfactory to the Bank, the following:
(a) two executed counterparts of this Agreement and
the executed counterparts of the Security Instruments;
(b) executed counterparts of each of the Bond
Documents (except for the Bonds, as to which a specimen copy
may be furnished);
(c) opinion of Bond Counsel in form and substance
acceptable to the Bank;
(d) opinion of counsel for the Borrower dated the date
thereof addressed to, and substantially in the form attached
hereto as Exhibit B;
(e) the Certificate of the Borrower including
references to (i) articles of incorporation, by-laws or
other formation documents of the Borrower, (ii) resolutions
authorizing the execution, delivery and performance of the
appropriate Bond Documents and this Agreement,
(iii) incumbency and specimen signatures of officers, and
(iv) such other matters as the Bank may require;
(f) copies of all governmental approvals required in
connection with this transaction, including resolution of
the Issuer authorizing the issuance of the Bonds;
(g) evidence of payment to the Bank of the initial
annual letter of credit commission pursuant to Section 3.4
of this Agreement;
(h) Certificate of Good Standing of the Borrower
issued by the Texas Secretary of State;
(i) Appraisal of the Project acceptable to the Bank;
(j) A Phase I Environmental Report by an environmental
consultant approved by the Bank;
(k) a mortgagee's title insurance policy dated the
date of closing together with evidence that all premiums in
respect of such policy have been paid, which policy shall
(i) be in an amount equal to the initial stated amount of
the Letter of Credit, (ii) insure that the Deed to Secure
Debt creates a valid first lien on the property covered by
such Deed to Secure Debt free and clear of all defects and
encumbrances (except those acceptable to the Bank);
(iii) name the Bank as the insured party thereunder; (iv) be
in the form of ALTA Loan Policy 1970 (amended 10-17-70) or
other form approved by the Bank; and (v) contain such
endorsements and effective coverage as the Bank may
reasonably request;
(m) a physical survey containing maps or plats of the
perimeter or boundaries of the Project site and any other
property covered by the Deed to Secure Debt certified to the
Bank and the title insurance company, in a manner acceptable
to each of them, dated a date satisfactory to the Bank and
the title insurance company, by an independent
professionally licensed land surveyor satisfactory to the
Bank and the title insurance company, which survey shall
indicate the following: (i) the locations on such site of
all the buildings, structures and other improvements and the
established building setback lines insofar as the foregoing
affect the perimeter or boundary of such property; (ii) the
lines of streets abutting the site and width thereof;
(iii) all access and other easements appurtenant to the site
or necessary or desirable to use the site; (iv) all
roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting
the site, whether recorded, apparent from a physical
inspection of the site or otherwise known to the surveyor;
(v) any encroachments on any adjoining property by the
building structures and improvements on the site; and (vi)
if the site is described as being on a filed map, a legend
relating the survey to said map, all in form satisfactory to
the Bank; together with certification from an independent
professionally licensed land surveyor satisfactory to the
Bank as to the location of the Project or any property
covered by the Deed to Secure Debt in any "special flood
hazard" area within the meaning of the Federal Flood
Disaster Protection Act of 1973;
(m) evidence of compliance with the insurance
requirements contained in Article IV hereof (upon which
there shall be affixed long form loss payable and mortgagee
clauses);
(n) executed counterpart of the Guaranty Agreement,
dated as of March 1, 1999, from Performance Food Group
Company to the Bank (the "Guaranty Agreement").
(o) opinion of counsel to Performance Food Group
Company in the form attached hereto as Exhibit C; and
(p) such other documents, instruments and
certifications as the Bank may require.
Section 7.2. Additional Conditions Precedent to Issuance
of the Letter of Credit.
The obligation of the Bank to issue the Letter of
Credit shall be subject to the further conditions precedent that
on the date of issuance (a) the following statements shall be
true and the Bank shall have received a certificate signed by an
authorized officer of the Borrowers, dated the date of issuance,
stating that:
(i) The representations and warranties contained in
Article II of this Agreement, Section 6 of the Pledge
Agreement and Section 2.02 of the Loan Agreement are correct
on and as of the date of issuance of the Letter of Credit as
though made on and as of such date; and
(ii) No event has occurred or would result from the
issuance of the Letter of Credit, which constitutes an Event
of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both;
and
(b) there shall have been no introduction of or change
in, or in the interpretation of, any law or regulation that would
make it unlawful or unduly burdensome for the Bank to issue the
Letter of Credit, no outbreak or escalation of hostilities or
other calamity or crisis affecting the Bank, no suspension of or
material limitation on trading on the New York Stock Exchange or
any other national securities exchange, no declaration of a
general banking moratorium by United States or Connecticut
banking authorities, and no establishment of any new restrictions
on transactions in securities or on banks materially affecting
the free market for securities or the extension of credit by
banks.
Section 7.3. Conditions Precedent to Each Tender Advance.
Each payment made by the Bank under the Letter of Credit pursuant
to a Tender Draft shall constitute a Tender Advance hereunder
only if on the date of such payment the following statements
shall be true:
(i) The representations and warranties contained in
Article II of this Agreement, Section 6 of the Pledge
Agreement and Section 2.02 of the Lease Agreement are
correct on and as of the date of such Tender Advance as
though made on and as of such date; and
(ii) No event has occurred or would result from such
Tender Advance, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
Unless the Borrower shall have previously advised the Bank in
writing or the Bank has actual knowledge that one or more of the
above statements is no longer true, the Borrower shall be deemed
to have represented and warranted, on the date of payment by the
Bank under the Letter of Credit pursuant to a Tender Draft, that
on the date of such payment the above statements are true and
correct.
ARTICLE VIII
DEFAULT
Section 8.1. Events of Default. Each of the following
shall constitute an Event of Default under this Agreement,
whereupon all Obligations of the Borrower hereunder, whether then
owing or contingently owing, will, at the option of the Bank or
its successors or assigns, immediately become due and payable by
the Borrower without presentation, demand, protest or notice of
any kind, all of which are hereby expressly waived, and the
Borrower will pay the reasonable attorneys' fees incurred by the
Bank, or its successors or assigns, in connection with such Event
of Default or recourse against any collateral held by the Bank,
or its successors or assigns, as security for the Obligations:
(a) Failure of the Borrower to pay when due any
payment of principal, interest, commission, charge or
expense referred to in Article III hereof; or
(b) The occurrence of an "Event of Default" under any
of the Bond Documents or the Guaranty Agreement; or
(c) Default shall occur in the performance of any
other covenant herein (not covered by clause (a) above) and
such Default shall continue for 30 days after written notice
thereof has been given to the Borrower by the Bank;
(d) Any representation or warranty made under this
Agreement, the Bond Documents, Security Instruments, or in
any certificate or statement furnished or made to the Bank
pursuant hereto or in connection herewith or with the Letter
of Credit hereunder, oral or written, shall prove to be
untrue or inaccurate in any material respect as of the date
on which such representation or warranty is made;
(e) This Agreement or any of the Bond Documents to
which the Borrower is a party shall cease to be legal, valid
and binding agreements enforceable against the Person
executing the same in accordance with the respective terms
thereof, except as may be limited by Debtor Laws, or shall
in any way be terminated or become or be declared
ineffective or inoperative or shall in any way whatsoever
cease to give or provide the respective liens, security
interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby, except as may be
limited by Debtor Laws;
(f) The Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of its
assets, (ii) file a voluntary petition in bankruptcy,
(iii) admit in writing that it is unable to pay its debts as
they become due or generally not pay its debts as they
become due, (iv) make a general assignment for the benefit
of creditors, (v) file a petition or answer seeking
reorganization or an arrangement with creditors or to take
advantage of any bankruptcy or insolvency laws, (vi) file an
answer admitting the material allegations of, or consent to,
or default in answering, a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or
(vii) take corporate action for the purpose of effecting any
of the foregoing;
(g) An involuntary petition or complaint shall be
filed against the Borrower seeking bankruptcy relief or
reorganization or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of such Person, or all or
substantially all of its assets, and such petition or
complaint shall not have been dismissed within sixty
(60) days of the filing thereof; or an order, order for
relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority
approving or ordering any of the foregoing actions;
then upon the occurrence of an Event of Default and at any time
thereafter, the Bank may (a) pursuant to Section 9.1 of the
Indenture, advise the Trustee that an Event of Default has
occurred and instruct the Trustee to declare the principal of all
Bonds then outstanding and interest thereon to be immediately due
and payable, and (b) proceed hereunder, and under any of the
Security Instruments and, to the extent therein provided, under
the Bond Documents, in such order as it may elect and the Bank
shall have no obligation to proceed against any Person or exhaust
any other remedy or remedies which it may have and without
resorting to any other security, whether held by or available to
the Bank.
Upon the occurrence of an Event of Default, any obligation
of the Borrower to an Affiliate shall be subordinated to the
Obligations.
Section 8.2. No Remedy Exclusive. No remedy herein
conferred upon or reserved to the Bank is intended to be
exclusive of any other available remedy or remedies, but each and
every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder, under the Security
Instruments, or now or hereafter existing at law or in equity or
by statute.
Section 8.3. Anti-Marshaling Provisions. The right is
hereby given by the Borrower to the Bank to make releases
(whether in whole or in part) of all or any part of the
collateral under the Security Instruments agreeable to the Bank
without notice to, or the consent, approval or agreement of other
parties and interests, including junior lienors, which releases
shall not impair in any manner the validity of or priority of the
liens and security interest in the remaining collateral conferred
under such documents, nor release the Borrower from liability for
the obligations hereby secured. Notwithstanding the existence of
any other security interest in the collateral held by the Bank,
the Bank shall have the right to determine the order in which any
or all of the collateral shall be subjected to the remedies
provided herein, or in the Security Instruments. The Borrower
hereby waives any and all right to require the marshaling of
assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or therein.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Indemnification.
(a) The Borrower hereby indemnifies and holds the Bank
and its Affiliates and all of their respective officers,
directors, employees, attorneys, consultants and agents
(collectively, the "Indemnities") harmless from and against any
and all claims, damages, losses, liabilities, costs or expenses
whatsoever which the Bank may incur (or which may be claimed
against the Bank by any Person) (i) by reason of or in connection
with the execution and delivery or transfer of, or payment or
failure to pay under, the Letter of Credit, provided that the
Borrower shall not be required to indemnify the Bank for any
claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (a) the gross
negligence or willful misconduct of the Bank in connection with
paying drafts presented under the Letter of Credit or (b) the
Bank's wrongful failure to pay under the Letter of Credit (other
than in connection with a court order) after the presentation to
it by the Trustee or a successor corporate fiduciary under the
Indenture of a sight draft and certificate strictly complying
with the terms and conditions of the Letter of Credit; or (ii) by
reason of or in connection with the execution, delivery or
performance of any of this Agreement, the Bond Documents, or any
transaction contemplated by any thereof.
(b) The Borrower hereby indemnifies and holds the Bank
harmless from and against any and all damages, penalties, fines,
claims, liens, suits, liabilities, costs (including cleanup
costs), judgments and expenses (including attorneys',
consultants' or experts' fees and expenses) of every kind and
nature suffered by or asserted against the Bank as a direct or
indirect result of any warranty or representation made by the
Borrower herein, being false or untrue in any material respect or
any requirement under any law, regulation or ordinance, local,
state, or federal, which requires the elimination or removal of
any hazardous materials, substances, wastes or other
environmentally regulated substances.
(c) The Borrower's obligations hereunder to the Bank
(collectively, the "Indemnified Matters") shall not be limited to
any extent by the term of this Agreement, and, as to any act or
occurrence prior to the termination of this Agreement which gives
rise to liability hereunder, shall continue, survive and remain
in full force and effect notwithstanding the termination of the
Bank's obligations hereunder.
Anything herein to the contrary notwithstanding,
nothing in this Section 9.1 is intended or shall be construed to
limit the Borrower's reimbursement obligations contained in
Article III hereof. Without prejudice to the survival of any
other obligation of the Borrower, the indemnities and obligations
of the Borrower contained in this Section 9.1 shall survive the
payment in full of amounts payable pursuant to Article III and
the Termination Date.
Section 9.2. Transfer of Letter of Credit. The Letter of
Credit may be transferred and assigned in accordance with the
terms of the Letter of Credit.
Section 9.3. Reduction of Letter of Credit.
(a) The Letter of Credit is subject to reduction
pursuant to its terms.
(b) If the amount available to be drawn under the
Letter of Credit shall be permanently reduced in accordance with
the terms thereof, then the Bank shall have the right to require
the Trustee to surrender the Letter of Credit to the Bank and to
issue on such date, in substitution for such outstanding Letter
of Credit, a substitute irrevocable letter of credit,
substantially in the form of the Letter of Credit but with such
changes therein as shall be appropriate to give effect to such
reduction, dated such date, for the amount to which the amount
available to be drawn under the Letter of Credit shall have been
reduced.
Section 9.4. Liability of the Bank. The Borrower, to the
extent permitted by applicable law, assume all risks of the acts
or omissions of the Trustee and any beneficiary or transferee of
the Letter of Credit with respect to its use of the Letter of
Credit. Neither the Bank nor any of its officers, directors,
employees, agents or consultants shall be liable or responsible
for:
(a) the use which may be made of the Letter of Credit
or for any acts or omissions of the Trustee or any
beneficiary or transferee in connection therewith;
(b) the validity, sufficiency or genuineness of
documents, or of any endorsement(s) thereon, even if such
documents should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(c) payment by the Bank against presentation of
documents which do not comply with the terms of the Letter
of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; or
(d) any other circumstances whatsoever in any way
related to the making or failure to make payment under the
Letter of Credit;
except only that the Borrower shall have a claim against the
Bank, and the Bank shall be liable to the Borrower, to the extent
but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrower which the
Borrower proves were caused by (i) willful misconduct or gross
negligence of the Bank in determining whether documents presented
under the Letter of Credit complied with the terms of the Letter
of Credit or (ii) wrongful failure of the Bank to pay under the
Letter of Credit after the presentation to it by the Trustee or a
successor trustee under the Indenture of a sight draft and
certificate strictly complying with the terms and conditions of
the Letter of Credit. In furtherance and not in limitation of
the foregoing, the Bank may accept documents that appear on their
face to be in order, without responsibility for further
investigation, regardless of any notice or information to the
contrary.
Section 9.5. Successors and Assigns. This Agreement shall
be binding upon the Borrower and its successors and assigns and
all rights against the Borrower arising under this Agreement
shall be for the sole benefit of the Bank, its successors and
assigns, all of whom shall be entitled to enforce performance and
observance of this Agreement to the same extent as if they were
parties hereto.
Section 9.6. Notices. All notices, requests and demands
to or upon the respective parties hereto shall be deemed to have
been given or made when hand delivered or mailed first class,
certified or registered mail, postage prepaid, or by overnight
courier service, addressed as follows or to such other address as
the parties hereto shall have been notified pursuant to this
Section 9.6:
The Bank: First Union National Bank
7 North 8th Street
Richmond, Virginia 23219
Attention: Bonnie Banks
The Borrower: KMB Produce, Inc.
1142 Avenue South
Grand Prairie, Texas 75053
Attention: Tom Lovelace
with a copy to : Performance Food Group, Inc.
6800 Paragon Place, Suite 500
Richmond, Virginia 23230
Attention: John Austin
except in cases where it is expressly herein provided that such
notice, request or demand is not effective until received by the
party to whom it is addressed, in which event said notice,
request or demand shall be effective only upon receipt by the
addressee. Any change in notice addresses shall be effective
upon the giving of such new address to the respective party.
Section 9.7. Amendment. This Agreement may be amended,
modified or discharged only upon an agreement in writing of the
Borrower and the Bank.
Section 9.8. Effect of Delay and Waivers. No delay or
omission to exercise any right or power accruing upon any
default, omission or failure of performance hereunder shall
impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In
order to entitle the Bank to exercise any remedy now or hereafter
existing at law or in equity or by statute, it shall not be
necessary to give any notice, other than such notice as may be
herein expressly required. In the event any provision contained
in this Agreement should be breached by any party and thereafter
waived by the other party so empowered to act, such waiver shall
be limited to the particular breach hereunder. No waiver,
amendment, release or modification of this Agreement shall be
established by conduct, custom or course of dealing, but solely
by an instrument in writing duly executed by the parties
thereunto duly authorized by this Agreement.
Section 9.9. Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
Section 9.10. Severability. The invalidity or
unenforceability of any one or more phrases, sentences, clauses
or Sections contained in this Agreement shall not affect the
validity or enforceability of the remaining portions of this
Agreement, or any part thereof.
Section 9.11. Cost of Collection. The Borrower shall be
liable for the payment of all fees and out-of-pocket expenses,
including reasonable attorneys' fees (computed without regard to
any statutory presumption), incurred in connection with the
enforcement of this Agreement.
Section 9.12. Set Off. Upon the occurrence of an Event of
Default hereunder, the Bank is hereby authorized, without notice
to the Borrower, to set off, appropriate and apply any and all
monies, securities and other properties of the Borrower hereafter
held or received by or in transit to the Bank from or for the
Borrower, against the obligations of the Borrower irrespective of
whether the Bank shall have made any demand hereunder or under
any Security Instrument although such obligations may be
contingent or unmatured; provided, however, that the Bank hereby
waives any such right, and any other right which it may have at
law or otherwise to set off and apply such deposits at any time
held, if, when and after there shall be a drawing under the
Letter of Credit during the pendency of any proceeding by or
against the Borrower or the Issuer seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of either of them or either of their debts under any
law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, custodian, trustee or other
similar official for either of them or for any substantial part
of either of their property.
Section 9.13. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Georgia. The Borrower hereby acknowledges that the
Letter of Credit shall be governed by and construed in accordance
with Uniform Customs and Practice for Documentary Credits (1993
Revisions), International Chamber of Commerce Publication
No. 500.
Section 9.14. References. The words "herein", "hereof",
"hereunder" and other words of similar import when used in this
Agreement refer to this Agreement as a whole, and not to any
particular article, section or subsection.
Section 9.15. Taxes, Etc. Any taxes (excluding income or
similar taxes) payable or ruled payable by federal or state
authority in respect of the Letter of Credit, this Agreement or
the Security Instruments shall be paid by the Borrower upon
demand by the Bank, together with interest and penalties, if any.
Section 9.16. Consent to Jurisdiction, Venue; Waiver of Jury
Trial. In the event that any action, suit or other proceeding is
brought against the Borrower by or on behalf of the Bank to
enforce the observance or performance of any of the provisions of
this Agreement or of any of the Security Instruments, including
without limitation the collection of any amounts owing
thereunder, the Borrower hereby (i) irrevocably consents to the
exercise of jurisdiction over the Borrower and to the extent
permitted by applicable laws, its property, by any United States
District Court or State Court of Georgia, and (ii) irrevocably
waives any objection they might now or hereafter have or assert
to the venue of any such proceeding in any court described in
clause (i) above, and (iii) constitute and appoint the Secretary
of State of Georgia (and, so long as the Borrower shall appoint
and maintain any other qualified Person located within the State
of Georgia as agent for service of process and shall give notice
(effective upon receipt) thereof to the Bank, then such other
Person) for service of process upon it in connection with any
such proceeding.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OF THE SECURITY INSTRUMENTS OR THE ACTIONS OF THE BANK IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT
THEREOF.
Section 9.17 Assignment and Pledge of Agreement. Nothing
herein or in any other Bond Document shall prohibit the Bank from
pledging or assigning the obligations hereunder including the
Collateral therefor, to any Federal Reserve Bank in accordance
with applicable law. The Borrower hereby consents to any such
pledge or assignment pursuant to this Section.
IN WITNESS WHEREOF, the Borrower and the Bank have caused
this Agreement to be executed in their respective names, all as
of the date first above written.
THE BORROWER:
KMB PRODUCE, INC.
By:_________________________
Title:
ATTEST:
________________________
Title:
[Execution Page - Reimbursement Agreement]
THE BANK:
FIRST UNION NATIONAL BANK
By:___________________________
Title:_______________________