HomeMy WebLinkAboutAgenda - 04-19-2016 - 7-a - Adoption of the Final Financing Resolution Authorizing the Issuance of $8,150,000 in Installment Purchase Financing for Various Capital Investment Plan Projects 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 19, 2016
Action Agenda
Item No. 7-a
SUBJECT: Adoption of the FY 2015-16 Final Financing Resolution Authorizing the
Issuance of$8,150,000 in Installment Purchase Financing for Various Capital
Investment Plan Projects
DEPARTMENT: Finance and Administrative
Services
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Resolution Approving Gary Donaldson, (919) 245-2453
Financing Terms and Paul Laughton, (919) 245-2152
Documents for 2016 Robert Jessup, (919) 933-9891
Installment Financing
Attachment 2. Financing Contract
Attachment 3. Deed of Trust
Attachment 4. Grady Brown Lease
Agreement
Attachment 5. Project Completion and
Agency Agreement
Attachment 6. Draft Debt Service
Schedule
PURPOSE: To adopt the final financing resolution authorizing the issuance of approximately
$8,150,000 in installment financing to finance capital investment projects and equipment for
fiscal year 2015-16 and including amounts to pay transaction costs.
BACKGROUND: At the March 22, 2016 meeting, the Board of County Commissioners received
preliminary information on capital projects and equipment financing for the year. At that
meeting, the Board made a preliminary determination to finance costs of these projects and
equipment by the use of an installment financing, as authorized under Section 160A-20 of the
North Carolina General Statutes. The financing will also include amounts to pay transaction
costs.
The statutes require that the County conduct a public hearing on the proposed financing and
refinancing contracts. The Board conducted the public hearing at its March 22, 2016 meeting,
and adopted the resolution supporting the application to the Local Government Commission
(LGC) for approval of the financing. County staff has been in contact with the LGC staff, and
staff expects no issues to receiving LGC approval.
2
The attached resolution formally approves the lending proposal from First Bank, authorizes staff
to complete the financing process, and approves other financing documents as substantially
final drafts. The resolution approves the draft document; the only formal action is on the
resolution. There is no separate action required on the documents.
The four documents that the resolution approves are the following:
• The Installment Financing Contract, between the County and First Bank, which provides
for the Bank's advance of funds to the County for the County's undertaking of the project,
sets out the County's repayment obligation, and sets out the County's other obligations,
such as its obligations to care for the collateral.
• The Deed of Trust and Security Agreement, which provides for a security interest in the
Grady Brown School and its associated real property to secure the County's repayment
obligation. This is the document that provides that if the County defaults on its
obligations, the Bank can foreclose on the school property.
• A Lease between the County and the Orange County Board of Education which provides
for the School Board's continued use of the Grady Brown School property during the
financing term.
• A Project Completion and Agency Agreement between the County and the School Board,
which sets out their respective responsibilities for carrying out the acquisition and
construction of the planned improvements to Grady Brown School.
If the Board adopts the final financial resolution authorizing final approval for the financing, staff
expects the LGC to approve the financing plan at the May 3, 2016 LGC meeting. Under the
current schedule, staff expects to set the final interest rates and other terms of the financing in
April 2016, and to close on the financing the week of May 9th. The Board is requested to
approve a financing amount not to exceed $8,150,000 and a maximum interest rate of 2.55%.
FINANCIAL IMPACT: There will be a financial impact in proceeding with the financing. At
current rates, preliminary estimates of maximum debt service applicable to the capital
investment projects and equipment financing would require the highest debt service payment of
$894,084 in FY 2016-17. The tax rate equivalent for the estimated highest debt service
payment is approximately 1/2 cent. A portion of this debt financing is related to projects where
the debt service payments will be paid from Solid Waste Enterprise funds.
Based on current resources and the retirement of existing debt, no adjustment to the tax rate is
anticipated with this financing during the period noted.
SOCIAL JUSTICE IMPACT: There are no Social Justice Goal impacts associated with this
item.
RECOMMENDATION(S): The Manager recommends that the Board approve the resolution
authorizing the steps to proceed with the financing of the stated capital projects and equipment.
3
RES-2016-032 Attachment 1
Resolution providing final approval of terms and
documents for 2016 County installment financing
WHEREAS--
The Board of Commissioners has previously determined to carry out a plan
(the "Project") to acquire, construct and finance various public improvements, and in
particular the public improvements and undertakings described in Exhibit A.
The Board has also determined to finance Project costs through the use of an
installment financing, as authorized under Section 160A-20 of the North Carolina
General Statutes. The Orange County Board of Education will transfer the Grady
Brown School property to the County for use as collateral for the financing.
The County has solicited competitive proposals from banks and other financial
institutions to provide the desired financing, and First Bank (the "Bank") has
submitted the best proposal.
The County's Finance Officer has made available to this Board the draft
agreements listed on Exhibit A (the "Agreements"), which relate to the County's
carrying out the financing plan.
This resolution provides the County Board's final approval of the financing
terms and documents for the Project.
BE IT THEREFORE RESOLVED by the Board of Commissioners of Orange
County, North Carolina, as follows:
1. Determination To Proceed with Financing - The County confirms its
plans to undertake the Project. The County will carry out the Project with financing
from the Bank substantially in accordance with a financing proposal dated March
21, 2016.
Under the financing plan, the Bank will make funds available to the County for
use on Project costs. The County will repay the amount advanced, with interest, over
time. The County will grant to the Bank a mortgage-type interest in the Grady
Brown School property to secure the County's repayment obligation.
4
2. Approval of Agreements; Direction To Execute Agreements -- The
Board approves the forms of the Agreements submitted to this meeting. The Board
authorizes the Board's Chair and the County Manager, or either of them, to execute
and deliver the Agreements in their final forms. The Agreements in their respective
final forms must be in substantially the forms presented, with such changes as the
Chair or the County Manager may approve. The execution and delivery of any
Agreement by an authorized County officer will be conclusive evidence of that
officer's approval of any changes.
The Agreements in final form, however, must be consistent with the financing
plan described in this resolution and must provide (a) for the amount financed by
the County not to exceed $8,150,000, (b) for an annual interest rate not to exceed
2.95% (in the absence of default, or a change in tax status), and (c) for a financing
term not to extend beyond December 31, 2036.
3. Officers To Complete Closing - The County Manager, the Finance
Officer and all other County officers and employees are authorized to take all proper
steps to complete the financing in cooperation with the Bank and in accordance with
this resolution.
The Board authorizes the Finance Officer to hold executed copies of all
financing documents authorized by this resolution in escrow on the County's behalf
until the conditions for their delivery have been completed to his satisfaction, and
then to release the executed copies of the documents for delivery to the appropriate
persons or organizations.
Without limiting the generality of the foregoing, the Board specifically
authorizes the Finance Officer to approve changes to any documents, agreements or
certifications previously signed by County officers or employees, provided that the
changes do not conflict with this resolution or substantially alter the intent from that
expressed in the form originally signed. The Finance Officer's authorization of the
release of any document for delivery will constitute conclusive evidence of his
approval of the final form.
In addition, the Finance Officer is authorized to take all appropriate steps for
the efficient and convenient carrying out of the County's on-going responsibilities
with respect to the financing of the Project. This authorization includes, without
limitation, contracting with third parties for reports and calculations that may be
required under this resolution or otherwise with respect to the Agreements.
4. Resolutions as to Tax Matters -- The County will not take or omit to
take any action the taking or omission of which will cause its obligations to pay
5
principal and interest (the "Obligations") to be "arbitrage bonds," within the meaning
of Section 148 of the "Code" (as defined below), or "private activity bonds" within the
meaning of Code Section 141, or otherwise cause interest components of the
installment payments to be includable in gross income for federal income tax
purposes. Without limiting the generality of the foregoing, the County will comply
with any Code provision that may require the County at any time to pay to the United
States any part of the earnings derived from the investment of the financing
proceeds. In this resolution, "Code" means the United States Internal Revenue Code
of 1986, as amended, and includes applicable Treasury regulations.
5. Acceptance of Property Transfer- The County agrees to accept title to
the Grady Brown School and its associated real property to facilitate the financing
arrangements contemplated by the Agreements.
6. Miscellaneous Provisions -- All County officers and employees are
authorized to take all further action as they may consider necessary or desirable in
furtherance of the purposes of this resolution. The Board ratifies all prior actions of
County officers and employees to this end. Upon the absence, unavailability or
refusal to act of the County Manager, the Chair or the Finance Officer, any other of
those officers may assume any responsibility or carry out any function assigned in
this resolution. In addition, the Vice Chair or any Deputy or Assistant Clerk to the
Board may in any event assume any responsibility or carry out any function
assigned to the Chair or the Clerk, respectively, in this resolution. All other Board
proceedings, or parts thereof, in conflict with this resolution are repealed, to the
extent of the conflict. This resolution takes effect immediately.
6
Exhibit A - list of projects to be financed with estimated amounts
Project description Est. Amount Financed
Cedar Ridge High School - construction of auxiliary gym 3,328,750
Vehicle replacements 771,209
Various school improvements and repairs for the Chapel
750,000
Hill - Carrboro system
Information Technologies projects - hardware and
746,125
software acquisition
Various school improvements and repairs for the Orange
478,000
County system (including Grady Brown Elementary)
Soccer.com Soccer Center, Phase II land acquisition 425,000
Purchase new truck for rural curbside recycling 310,090
Purchase of solid waste disposal carts 234,000
Rogers Road water project- easement acquisition 212,000
Cedar Grove Community Center Library Kiosk-
180,000
purchase and install
Board of Elections equipment- purchase and install 169,575
Recycling Roll-Cart Distribution and Maintenance
165,000
Building- purchase and construct
Upper Eno Nature Preserve - construct parking lot and
125,000
trail work
7
Purchase new generator for Hillsborough Commons 100,000
Financing and related costs 155,241
TOTAL 8,150,000
* * * * * * *
Exhibit B -- Draft Agreements
(a) A draft dated April 4, 2016, of an Installment Financing Contract to be
dated on or about May 1, 2016 (the "Financing Contract"), between the County and
the Bank, providing for the advance of funds to the County for the County's
undertaking of the project, setting out the County's repayment obligation and
setting out the County's obligations regarding care for the collateral and other
matters.
(b) A draft dated April 4, 2016, of a Deed of Trust and Security Agreement
to be dated on or about May 1, 2016, from the County to a deed of trust trustee for
the Bank's benefit, providing for a security interest in the Grady Brown School and
its associated real property to secure the County's repayment obligation.
(c) A draft dated April 4, 2016, of a Lease to be dated on or about May 1,
2016, from the County to The Orange County Board of Education (the "School
Board"), providing for the School Board's continued use of the Grady Brown School
property during the financing term.
(d) A draft dated April 4, 2016, of a Project Completion and Agency
Agreement to be dated on or about May 1, 2016, between the County and the School
Board, setting out their respective responsibilities for carrying out the acquisition and
construction of the planned improvements to Grady Brown School.
Attachment 2 8
S*H draft of April 4
ORANGE COUNTY, NORTH CAROLINA
and
FIRST BANK
INSTALLMENT FINANCING CONTRACT
9
Installment Financing Contract
THIS INSTALLMENT FINANCING CONTRACT (the "Contract") is dated as
of May 1, 2016, and is between ORANGE COUNTY, NORTH CAROLINA, a political
subdivision of the State of North Carolina (the "County"), and FIRST BANK (the "Lend-
er").
RECITALS:
The County has previously determined to carry out a plan (the "Project") to ac-
quire, construct and improve various County facilities, including the projects described
on Exhibit C, as well as to pay financing costs. The Company has agreed to advance
funds to the County for these purposes. The Lender has agreed to advance funds to the
County for this purpose.
This Contract provides for the Lender's advance of funds, and the County's obli-
gation to repay the funds with interest. In accordance with the County's authority under
Section 160A-20 of the North Carolina General Statutes, the County will secure its obli-
gations under this Contract by granting to the Lender a security interest in the Pledged
Facilities and the Pledged Site.
Unless the context clearly requires otherwise, capitalized terms used in this Con-
tract and not otherwise defined have the meanings set forth in Exhibit A.
NOW, THEREFORE, for and in consideration of the mutual promises and cove-
nants contained in this Contract, the parties agree as follows:
ARTICLE I
ADVANCE
1.1. Advance. The Lender makes two advances to the County under this
Agreement, consisting of a First Advance in the amount of $2,275,000 (the "First Ad-
vance") and a Second Advance in the amount of$5,875,000 (the "Second Advance"), for
an aggregate amount advanced of $8,150,000 (collectively, the "Amount Advanced").
The County accepts the Amount Advanced.
1.2. Form of Advance. The Lender will make the advance on the Closing Date
by a Federal Reserve wire transfer, or other transfer of immediately available funds, to a
bank account in the United States that the County designates.
2
10
ARTICLE II
CONTRACT PAYMENTS
2.1. Installment Payments. The County will repay the First Advance by mak-
ing Installment Payments at the times and in the amounts set forth in Exhibit B-1, and
will repay the Second Advance by making Installment Payments at the times and in the
amounts set forth in Exhibit B-2 (Exhibits B-1 and B-2 are collectively referred to as Ex-
hibit B).
The County's total payment obligation for each Payment Date is the sum of the
amounts stated on Exhibit B-1 and Exhibit B-2 as due for that Payment Date. As indicat-
ed in Exhibit B, the Installment Payments include designated interest components. The
County will make its payments either by check or draft or by Federal Reserve wire trans-
fer, or other transfer of immediately available United States funds, in any case sent on the
payable date directly to the Lender to any address or bank account in the United States as
the Lender may designate from time to time.
2.2. Additional Payments. The County will pay all Additional Payments
on a timely basis directly to the person or entity to which it owes the payment. If the
County fails to pay any Additional Payment when due, the Lender may (but is not re-
quired to) pay the Additional Payment. The County then agrees to reimburse the Lender
for any Additional Payment paid by the Lender, together with interest at an annual rate of
4.00%. All Installment Payments and Additional Payments will be made in lawful money
of the United States.
2.3. Prepayment. The County may prepay the outstanding principal component
of the Amount Advanced, at its option at and at any time, in whole or in part, without pre-
mium or penalty.
The County may direct the application of any amount prepaid, in its discretion, to
prepayment of either the First Advance or the Second Advance. In any event, all amounts
prepaid will be applied (i) first to all Additional Payments then due and payable, (ii) then to
all interest accrued and unpaid to the prepayment date (across the total Amount Advanced),
(iii) then to the outstanding principal component of the portion of the Amount Advanced
directed by the County, in inverse order of the principal repayments associated with that
Advance. In any event, the unpaid principal components of the Installment Payments will
continue to be payable on the dates and in the amounts shown in Exhibit D.
2.4. No Reduction or Abatement. The County remains liable for full per-
formance of all its covenants under this Contract and the Deed of Trust (subject to the limi-
tations described in Article XII), notwithstanding the occurrence of any event or circum-
stances whatsoever, including any of the following:
(a) Any act or omission by the Lender, or the Lender's waiver of any right grant-
ed or remedy available to it;
3
11
(b) The forbearance or extension of time for payment or performance of any ob-
ligation under this Contract or the Deed of Trust, whether granted to the County or any
other person;
(c) The sale or release of all or part of the Mortgaged Property or the release of
any party who assumes all or any part of such performance; or
(d) Another party's assumption of any of the County's obligations under the Con-
tract or this Deed of Trust.
There will be no abatement or reduction of the Installment Payments or Additional
Payments by the County for any reason, including, but not limited to, any defense, re-
coupment, setoff, counterclaim, or any claim arising out of or related to the Pledged Sites
or the Pledged Facilities. The County assumes and will bear the entire risk of completion,
loss and damage to the Mortgaged Property from any cause whatsoever, it being the par-
ties' intention that the Installment Payments will be made in all events unless the County's
obligation to make Installment Payments is terminated as provided in this Contract.
2.5. Appropriations.
(a) The County will cause the officer who prepares the draft County budget ini-
tially submitted for County Board consideration to include in the initial proposal each
year the amount of all Installment Payments and estimated Additional Payments coming
due during the Fiscal Year to which the budget applies. Notwithstanding that the initial
proposed budget includes an appropriation for Contract Payments, the County Board may
determine not to include the appropriation (in whole or in part) in the final County budget
for any Fiscal Year, or may amend an adopted budget to reduce or delete an approved
appropriation.
(b) If within 15 days after the beginning of any Fiscal Year the County has not
appropriated an amount equal to the Installment Payments and estimated Additional
Payments coming due during the Fiscal Year, or if at any time the County amends the
annual budget to reduce the amounts appropriated for Contract Payments below the
amounts expected to be required for the remainder of that Fiscal Year, then the County
must send a notice to such effect to the Lender and to the LGC, to the attention of its Sec-
retary, at 3200 Atlantic Avenue, Longleaf Building, Raleigh NC 27604.
ARTICLE III
COUNTY'S RESPONSIBILITIES
3.1. Care and Use. The County will use and care for the Mortgaged Prop-
erty in a careful and proper manner. The County must keep the Mortgaged Property in
good condition, repair, appearance and working order for the purposes intended.
4
12
3.2. Utilities. The County will pay all charges for utility services furnished
to or used on or in connection with the Pledged Site and the Pledged Facilities.
3.3. Risk of Loss. The County bears all risk of loss to and condemnation of
the Mortgaged Property.
3.4. Lender's Performance of County's Responsibilities. The Lender may,
but is in no event required to, (a) undertake any performance required of the County or
(b) make any payments required to be made by the County, in either case for the insur-
ance, maintenance or preservation of the Mortgaged Property that the County fails to
make or pay. The County will then reimburse the Lender for any such payments and for
any associated costs and expenses, legal or otherwise, together with interest at the annual
rate of 4.00%.
3.5. Compliance with Requirements.The County will promptly and faithfully
comply with all requirements of governmental authorities relating to the use or condition
of the Mortgaged Property (or be diligently and in good faith contesting the require-
ments), if the violation of any such requirement would adversely affect the use, value or
condition of the Mortgaged Property. This compliance (or contest) is required of the
County whether or not any requirement necessitates structural changes or improvements
or interferes with the County's use or enjoyment of the Mortgaged Property. Unless re-
quired by applicable law or unless the Lender has otherwise agreed in writing, the County
will not use the Mortgaged Property for any purposes other than those for which the
property was intended as of the Closing Date.
The County will in no event use the Mortgaged Property, or any portion, nor allow
it to be used, (a) for any unlawful purpose, (b) in violation of any certificate of occupancy
or other permit or certificate, or (c) in violation of any law, ordinance or regulation.
3.6. Use and Operation; Leasing. (a) The County will use and operate the
Pledged Facilities for their intended public purposes. The County will be solely responsi-
ble for the operation of the Pledged Facilities, and will not contract with any other person
or entity for such operation.
4.6. Use and Operation; Leasing. (a) The County represents that the
Pledged Facilities will be useful to the County in carrying out its required functions. The
County expects that the County and the School Board will need and use the Pledged Fa-
cilities continuously during the Contract term. The County does not expect this need or
use to diminish in any material respect during the Contract term.
(b) The County will be solely responsible for the operation of the Pledged Fa-
cilities, and will not contract with any other person or entity for such operation. The
Pledged Facilities will not be used in any private business or put to any private business use,
except for such minor and occasional uses as may be consistent with their use as local gov-
5
13
ernment facilities and that will not cause the County to be in violation of its covenant as set
forth in Section 7.1(k).
(c) Notwithstanding the provisions of subsection (b), the parties acknowledge
that the County has leased the Pledged Facilities to the School Board, and may otherwise
provide for the School Board's use of the Pledged Facilities. In addition, the County and
the School Board may agree that the School Board will assume some of the County's re-
sponsibilities under this Contract. Notwithstanding any other provision of this Contract to
the contrary, the parties agree that any such lease or other arrangements between the
County and the School Board do not violate any provision of this Contract so long as any
such lease or other arrangement is subordinate to the lien of the Deed of Trust. No such
lease or other arrangement, however, in any way reduces the County's responsibilities
under this Contract.
3.7. Modification of Pledged Facilities; Installation of Equipment and Ma-
chinery. The County has the right to remodel the Pledged Facilities or make substitu-
tions, additions, modifications and improvements to the Pledged Facilities, at its own cost
and expense. These changes, however, must not damage the Pledged Facilities or result in
the use of the Pledged Facilities for purposes substantially different from those contem-
plated on the Closing Date. Further, the Pledged Facilities, upon completion of the
changes, must be of a value not less than the value of the Pledged Facilities immediately
prior to making the changes. All additions, modifications and improvements within the
boundaries of the Pledged Site become a part of the Mortgaged Property and subject to
the lien of the Deed of Trust.
The County may also, from time to time in its sole discretion and at its own ex-
pense, install machinery, equipment and other tangible property in or on the Pledged Fa-
cilities. Neither the Lender nor any assignee will have any interest in any property of this
sort that is not a "Fixture" as defined in Section 1-4 of the Deed of Trust.
3.8. Taxes and Other Governmental Charges. If the Mortgaged Property (or
any portion) is, for any reason, deemed subject to taxation, assessments or charges law-
fully made by any governmental body, the County will, during the Contract term, pay the
amount of all taxes, assessments and governmental charges as Additional Payments. With
respect to special assessments or other governmental charges which may be lawfully paid
in installments over a period of years, the County is obligated to provide for Additional
Payments only for the installments that are required to be paid during the Contract term.
The County must not allow any liens for taxes, assessments or governmental charges with
respect to the Mortgaged Property (or any portion) to become delinquent, including any
taxes levied upon the Lender's interest in the Mortgaged Property, or on any rentals or
other revenues derived from the Mortgaged Property.
The County may, at its own expense and in its own name, in good faith contest
any taxes, assessments and other charges. In the event of a contest, the County may per-
mit the charges to remain unpaid during the period of the contest and any appeal. If, how-
6
14
ever, the Lender notifies the County that, in the opinion of independent counsel selected
by the Lender, the security afforded pursuant to this Contract or the Deed of Trust will be
materially endangered by nonpayment of any items, or the Mortgaged Property (or any
portion) will be subject to loss or forfeiture, then the County must promptly pay those
items (but the payment will not in itself constitute a waiver of the right to continue to
contest the charges).
3.9. County's Insurance.
(a) Property Damage Insurance — The County shall, at its own expense, acquire,
carry and maintain broad-form extended coverage property damage insurance with respect
to the Pledged Facilities in an amount equal to their estimated replacement cost. In the al-
ternative, the County may provide for the School Board to acquire, carry and maintain
this insurance with respect to the Financed Facilities. In either case, this insurance must
include standard mortgagee coverage in favor of the Lender. Any Net Proceeds of the insur-
ance required by this subsection (a) shall be payable as provided in Article VI.
(b) General Liability Insurance — To the extent permitted by law, the County
agrees that it will, at its own expense, acquire, carry and maintain comprehensive general
liability insurance in an amount not less than $2,000,000 for personal injury or death and
$2,000,000 for property damage, and that it will include the Lender as an additional insured
with respect to occurrences related to the Facilities.
(c) Worker's Compensation Insurance — The County will, at its own expense, ac-
quire, carry and maintain worker's compensation insurance in the manner required by law.
(d) Additional Provisions --
(i) The insurance required by this Section must be maintained with generally
recognized responsible insurers and may carry reasonable deductible or risk-retention
amounts. The County must provide copies of all such policies to the Lender upon request.
(ii) In the alternative, the County or the School Board may maintain the insurance
required by subsection (a) and (b) above (A) by one or more blanket or umbrella insurance
policies or (B) by means of an adequate self-insurance fund or risk-retention program, or by
participation in a group risk pool or similar program.
(iii) If the County or the School Board obtains blanket or umbrella coverage, the
County must provide to the Lender, upon the Lender's request, a certificate or certificates of
the respective insurers evidencing the coverage and, with respect to property insurance, stat-
ing the amount of coverage provided with respect to the Pledged Facilities (or any covered
portion). If the County or the School Board provides for any alternative risk management
programs, the County's risk manager or an independent insurance consultant must review
the programs annually for sufficiency. The County must provide to the Lender evidence as
to the sufficiency of any alternative program as the Lender may reasonably request.
15
(iv) The County may settle or adjust insurance claims in its discretion, except that
no County agent or employee will have the power to adjust or settle any property damage
loss greater than $100,000 with respect to the Mortgaged Property, whether or not covered
by insurance, without the Lender's prior written consent. The Lender and the County will
cooperate fully with each other in filing any claim or proof of loss with respect to any in-
surance policy described in this Contract.
(v) The Lender will not be responsible for the sufficiency or adequacy of any re-
quired insurance.
3.10. Title Insurance. The County agrees to obtain, at its own cost and expense,
an American Land Title Association policy of title insurance, in form satisfactory to the
Lender, effective as of the Closing Date, in an amount not less than the amount financed,
and naming the Lender as insured mortgagee. The policy must insure the County's fee
title to the Mortgaged Property, subject only to Permitted Encumbrances, and must be
issued by a title insurance company qualified to do business in the State of North Caroli-
na and reasonably acceptable to the Lender. On or before the Closing Date, the County
must provide the Lender with a copy of an insurer's commitment to issue such a policy
and, promptly after the Closing Date (and in no event more than 30 days after the Closing
Date), the County must provide the Lender with a copy of the final policy.
ARTICLE IV
CONSTRUCTION
4.1. Construction; Changes. (a) The County will comply with the provi-
sions of the North Carolina General Statutes and enter into the Construction Contracts, or
in the alternative the County may provide for the School Board to enter into some or all
of the Construction Contracts. The County will cause the construction of the planned im-
provements to the Pledged Facilities to be carried on continuously in accordance with the
Construction Contracts and all applicable State and local laws and regulations.
(b) The County will provide for the Pledged Facilities to be constructed on the
Pledged Site and will insure (i) that no portion of the Pledged Facilities encroaches upon
nor overhangs any easement or right-of-way, (ii) that the Pledged Facilities will be whol-
ly within any applicable building restriction lines, however established, and (iii) that the
Pledged Facilities will not violate applicable use or other restrictions, whether imposed
by law or rule or by prior conveyances.
(c) The County may approve changes to the Construction Contracts in its dis-
cretion except that the County may not, without the Lender's consent, approve any
changes which (i) increase total estimated Project Costs above the amounts previously
identified and designated therefor, or (ii) result in the use of the Mortgaged Property for
purposes substantially different from the use intended as of the Closing Date.
8
16
4.2. Contractors' Performance and Payment Bonds. The County shall re-
quire each contractor entering into a Construction Contract to furnish a performance bond
and a separate labor and material payment bond as required by State law. The County
shall provide copies of all such bonds to the Lender at the Lender's request.
Upon any material default by a contractor under any Construction Contract, or up-
on any material breach of warranty with respect to any materials, workmanship or per-
formance, the County shall promptly proceed, either separately or in conjunction with
others, to pursue diligently its remedies against the contractor or against the surety of any
bond securing the performance of the applicable Construction Contract.
4.3. Contractors' General Public Liability and Property Damage Insur-
ance. The County shall require each contractor entering into a Construction Agreement
to procure and maintain standard form (a) comprehensive general public liability and
property damage insurance, at such contractor's own cost and expense, during the dura-
tion of such contractor's construction contract, in the amount of at least $2,000,000, and
(b) comprehensive automobile liability insurance on owned, hired and non-owned vehi-
cles for not less than $2,000,000. Such policies shall include the Lender as an additional
named insured. The County shall provide to the Lender a certificate of insurance in a
form acceptable to the Lender with respect to each contractor. Such insurance shall pro-
vide protection from all claims for bodily injury, including death, property damage and
contractual liability, products/completed operations, broad form property damage and
XCU (explosive, collapse and underground damage), where applicable.
4.4. Contractors' Builder's Risk Completed Value Insurance. The County
shall require each contractor entering into a Construction Agreement to purchase and
maintain property insurance (builder's risk) upon all construction, acquisition, installation
and equipping of the Pledged Facilities (excluding contractor's tools and equipment) at
the Pledged Site thereof at the full insurable value thereof. This insurance shall include a
lender's loss payable endorsement in favor of the Lender, and shall insure against "all
risk" subject to standard policy conditions and exclusions. The contractor shall purchase
and maintain similar property insurance for portions of the work stored off the Pledged
Site or in transit when such portions of the work are to be included in an application for
payment. The contractor shall be responsible for the payment of any deductible amounts
associated with this insurance.
4.5. Contractors' Workers' Compensation Insurance. The County shall re-
quire each contractor entering into a Construction Agreement to procure and maintain
workers' compensation insurance during the term of such Construction Agreement, cov-
ering his or her employees working thereunder. A certificate of insurance evidencing
such coverage, in form acceptable to the Lender, shall be provided to the County with re-
spect to each contractor entering into a Construction Agreement. Each Construction
Agreement shall also provide that each subcontractor of any contractor who is a party to
9
17
such Construction Agreement shall be required to furnish similar workers' compensation
insurance.
4.6. Right of Entry and Inspection. The Lender and its representatives and
agents, upon reasonable notice to the County, have the right to enter upon the Pledged
Site and inspect the Pledged Facilities from time to time during construction and at any
other time during the Contract term. The County will cause any contractor or subcontrac-
tor to cooperate with any of those parties and agents during any inspection. Any inspec-
tion under this Section is made only for the Lender's benefit.
4.7. Completion of Construction. When the construction of the Pledged
Facilities has been substantially completed to the County's satisfaction, the County will
promptly prepare and deliver a certificate to that effect to the Lender. The County may
then use any remaining portion of the Amount Advanced not needed to pay remaining
Project Costs for any lawful purpose not in conflict with the County's obligations under
Section 7.1(k).
4.8. Cooperation. The Lender and the County will cooperate fully with each
other in filing any claim or proof of loss with respect to any bond or insurance policy de-
scribed in this Contract. So long as no Event of Default has occurred and is continuing
under this Contract, neither the Lender or the County may voluntarily settle, or consent to
the settlement of, any proceeding arising out of any claim with respect to the Project or
the Pledged Facilities without the other's written consent.
ARTICLE V
TITLE; LIENS
5.1. Title. Title to the Mortgaged Property and any and all additions, repairs,
replacements or modifications thereto will at all times be in the County, subject to the
lien of the Deed of Trust and to the Permitted Encumbrances. Simultaneously with the
execution and delivery of this Contract, the County will deliver to the Lender the Deed of
Trust in form mutually satisfactory to the Lender and the County, and will cause the Deed
of Trust to be recorded in the Office of the Register of Deeds of Orange County, North
Carolina.
5.2. Encumbrance, Mortgage or Pledge of Mortgaged Property.
(a) The County will not permit any mechanic's or other lien to be perfected or
remain against the Mortgaged Property (or any portion). If the County, however, first no-
tifies the Lender of the County's intention to do so, the County may in good faith contest
any mechanic's or other lien filed or perfected against the Mortgaged Property (or any
portion). In that event the County may permit the contested items to remain undischarged
and unsatisfied during the contest period and any appeal. The Lender will cooperate fully
with the County in any contest, upon the request and at the expense of the County.
to
18
(b) Except as provided in subsection (a) above, the County will not directly or
indirectly create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, en-
cumbrance or claim on or with respect to the Mortgaged Property, except Permitted En-
cumbrances. The County will promptly, at its own expense, take appropriate action to
discharge any encumbrance or claim not excepted above which it has created, incurred or
suffered to exist.
(c) The County will reimburse the Lender for any expense incurred by the
Lender to discharge or remove any encumbrance or claim, together with interest at an an-
nual rate of 4.00%.
ARTICLE VI
CONDEMNATION OR LOSS OF TITLE;
USE OF NET PROCEEDS
6.1. Damage, Destruction or Condemnation. The County will promptly noti-
fy the Lender if(a) the Mortgaged Property (or any portion) is destroyed or damaged by
fire or other casualty, (b) any governmental authority takes, or notifies the County of any
intent to take, title to, or the temporary or permanent use of the Mortgaged Property (or
any portion), or the estate of the County or the Lender in the Mortgaged Property (or any
portion), under the power of eminent domain, (c) a material defect in the construction of
the Pledged Facilities becomes apparent, or (d) title to or the use of all or any portion of
the Mortgaged Property is lost by reason of a defect in title.
Each notice must describe generally the nature and extent of such damage, de-
struction or taking. The County will provide any additional information concerning such
matter as the Lender may reasonably request.
The County will file its claims under insurance coverages and claims for awards or
payments in the nature of condemnation awards resulting from any such damage, destruc-
tion or taking. The County will prosecute all such claims for such awards or payments in
good faith and with due diligence. Any Net Proceeds received by the County will be used
as provided in Section 6.2.
6.2. Security Interest in Net Proceeds; Deposit and Disbursement.
(a) If the Net Proceeds arising from any single event, or any single series of relat-
ed events, is not more than $100,000, then the County has no obligation to account to the
Lender or any other person or entity with respect to the use of those Net Proceeds. The
County, however, acknowledges that its use of such funds may be constrained by the re-
quirements of the Code and the County's obligations under Section 7.1(i).
11
19
(b) If the amount of Net Proceeds received by the County from any single
event or any single series of related events is more than $100,000, then the County grants
a security interest in the Net Proceeds to the Lender to secure the County's obligations
under this Contract, subject to the further provisions of this Section. This Contract is in-
tended as and constitutes a security agreement with respect to this security interest. All
Net Proceeds remain subject to the security interest provided for in this subsection until
expended in compliance with this Contract.
(c) If the amount of Net Proceeds received by the County from any single
event or any single series of related events is more than $100,000 but less than
$1,000,000, the County will retain the Net Proceeds and promptly apply those amounts to-
ward the repair or restoration of the Mortgaged Property, to the extent that can be accom-
plished with those amounts.
(d) If the amount of Net Proceeds received by the County from any single
event or any single series of related events is at least $1,000,000, the County will cause
those Net Proceeds to be paid to an escrow agent (which must be a bank, trust company or
similar entity exercising fiduciary responsibilities and reasonably acceptable to the Lender)
for deposit in a special escrow fund to be held by the escrow agent and disbursed by the es-
crow agent pursuant to requisitions in form and substance reasonably acceptable to the
Lender. The County will then promptly apply those amounts toward the repair or restoration
of the Mortgaged Property, to the extent that can be accomplished with those amounts.
(e) In the case of any use of Net Proceeds for repair or restoration, the County
must act with due diligence and in a commercially reasonable manner to provide for the
repair and restoration. After the County has finished applying Net Proceeds to repair or res-
toration, the County will promptly report to the Lender regarding the use of those Net Pro-
ceeds.
(f) In any event, the County may apply any Net Proceeds toward the prepay-
ment of the Amount Advanced subject to the terms of Section 2.3.
(g) The County is not entitled to any reimbursement of any supplemental funds
it provides under this subsection, nor is the County entitled to any postponement or dimi-
nution of its obligation to make Contract Payments as a result of any contribution. Any
repair or replacement paid for in whole or in part out of Net Proceeds will be the County's
property and will be part of the Mortgaged Property.
12
20
ARTICLE VII
COUNTY'S WARRANTIES, REPRESENTATIONS AND COVENANTS
7.1. By the County, Generally. The County makes the following statements of
fact, with the understanding and intent that the Lender will rely on these statements in
making its decision to enter into this Contract:
(a) The County is a duly organized and validly existing political subdivision of
the State. The County has all powers necessary to enter into the transactions contemplat-
ed by this Contract and the Deed of Trust, and to carry out its obligations under those in-
struments.
(b) The County will take no action that would adversely affect its existence as
a political subdivision in good standing in the State.
(c) The County has duly and validly authorized, executed and delivered this
Contract and the Deed of Trust. Assuming due authorization, execution and delivery
thereof by the other parties, this Contract and the Deed of Trust constitute valid, legal and
binding obligations of the County, enforceable (in the case of the Deed of Trust, by the
Deed of Trust Trustee and the Lender) in accordance with their respective terms, subject
to bankruptcy, insolvency and other similar laws affecting the enforcement of creditors'
rights generally and such principals of equity as a court having jurisdiction may impose.
(d) The County requires no further approval or consent from any governmental
authority with respect to the County's entering into or performing under this Contract or
the Deed of Trust.
(e) No County representation, covenant or warranty in this Contract is false or
misleading in any material respect.
(f) The County Board resolutions relating to the County's authorization and
performance of this Contract, the Deed of Trust, and the transactions contemplated in
those documents have been duly adopted, are in full force and effect, and have not been
in any material respect modified, revoked or rescinded.
(g) The County reasonably expects that the Project can be completed for a total
price within the total amount of funds to be available from the Amount Advanced, in-
come anticipated to be derived from the investment of those funds, and other funds ex-
pected to be available for the intended purpose. The County will pay any excess costs,
with no resulting reduction or offset in the amounts otherwise payable by the County.
(h) The County reasonably believes funds will be available to satisfy all of its
obligations under this Contract.
13
21
(i) The Pledged Facilities have been designed and constructed so as to comply
with all applicable subdivision, building and zoning ordinances and regulations, if any,
and any and all applicable federal and State standards and requirements relating to the
Pledged Facilities. The County has complied with all required public bidding and related
procedures regarding the acquisition and construction of the Pledged Facilities.
(j) The Pledged Facilities have not been and will not be used in any private
business or put to any private business use.
(k) The County will not take or permit, or omit to take or cause to be taken, any
action that would cause its obligations under this Contract to be "arbitrage bonds" or
"private activity bonds" within the meaning of the Code, or otherwise adversely affect the
exclusion from gross income for federal income tax purposes of the designated interest
component of Installment Payments to which such components would otherwise be enti-
tled and, if it should take or permit, or omit to take or cause to be taken, any such action,
the County will take or cause to be taken all lawful actions within its power necessary to
rescind or correct such actions or omissions promptly upon having knowledge thereof.
(1) The County has determined to undertake the Project after extensive consid-
eration of the County's needs and responsibilities, and consideration of alternative means
of carrying out those responsibilities.
(m) The County will send the Lender a copy of the County's audited financial
statements for each Fiscal Year within 30 days of the County's acceptance of the state-
ments, but in any event within 180 days of the completion of each Fiscal Year. The County
shall also furnish the Lender, at such reasonable times as the Lender may request, all oth-
er financial information (including, without limitation, the County's annual budget as
submitted or approved) as the Lender may reasonably request. The County shall permit
the Lender or its agents and representatives to inspect the County's books and records
and make extracts therefrom.
(n) The Lender has not acted as a financial adviser to the County, and the
County has not relied on the Lender for any financial advice.
7.2. County's Undertakings as to Environmental Matters.
(a) The County makes the following statements of fact, with the understanding
and intent that the Lender will rely on these statements in making its decision to enter in-
to this Contract.
(i) The County has no knowledge (A) that any industrial use has been made of
the Mortgaged Property, (B) that the Mortgaged Property has been used for the storage,
treatment or disposal of chemicals or any wastes or materials that are classified by feder-
al, State or local laws as hazardous or toxic substances, (C) that any manufacturing, land-
filling or chemical production has occurred on the Mortgaged Property, or (D) that there
14
22
is any asbestos or other contaminant on, in or under the Mortgaged Property. Any haz-
ardous materials or substances that have been kept on the Mortgaged Property have been
used in the routine maintenance and operation of the Mortgaged Property and have been
used in accordance with label instructions.
(ii) To the County's knowledge, the Mortgaged Property is in compliance with
all federal, State and local environmental laws and regulations. The County will keep the
Mortgaged Property, and the activities at the Mortgaged Property, in compliance with all
such environmental laws and regulations. The County will, in a timely manner, take all
lawful action necessary to maintain such compliance or to remedy any lack of such com-
pliance. Any hazardous materials or substances kept on the Mortgaged Property will be
used in the routine maintenance and operation of the Mortgaged Property and will be
used in accordance with label instructions.
(iii) The County will promptly notify the Lender of any change in the nature or
extent of any hazardous materials, substances or wastes maintained on, in or under the
Mortgaged Property or used in connection therewith. The County will promptly send to
the Lender copies of any citations, orders, notices or other material governmental or other
communication received with respect to any other hazardous materials, substances,
wastes or other environmentally regulated substances affecting the Mortgaged Property.
(b) To the extent permitted by law, the County will indemnify and hold the
Lender and the Deed of Trust Trustee harmless from and against (i) 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 Lender or the Deed of Trust Trustee as
a direct or indirect result of any warranty or representation made by the County in sub-
section (a) being false or untrue in any material respect, or (ii) any requirement under any
law or regulation which requires the elimination or removal of any hazardous materials,
substances, wastes or other environmentally regulated substances by the Lender, the
County or any transferee or assignee of the County or the Lender.
(d) The County's obligations under this Section will continue in effect notwith-
standing satisfaction of the Obligations (as defined in the Deed of Trust), foreclosure un-
der the Deed of Trust or delivery of a deed in lieu of foreclosure.
ARTICLE VIII
INDEMNIFICATION
To the extent permitted by law, the County will indemnify, protect and save
(a) the Deed of Trust Trustee,
(b) the Lender and its officers, employees, and directors, and
15
23
(c) the LGC's members and employees,
in all cases harmless from all liability, obligations, losses, claims, damages, actions, suits,
proceedings, costs and expenses, including legal fees, arising out of, connected with, or
resulting directly or indirectly from the Project, the Mortgaged Property or the transactions
contemplated by this Contract, including without limitation the possession, condition,
installation, construction or use of the Pledged Facilities. The indemnification arising under
this Section will survive the Contract's termination.
ARTICLE IX
DISCLAIMER OF WARRANTIES
The County acknowledges as follows:
(a) that the Lender has not designed the Pledged Facilities;
(b) that the Lender has not supplied any plans or specifications with respect to
the Pledged Facilities;
(c) that the Lender is not a manufacturer of, nor a dealer in, any of the compo-
nent parts of the Pledged Facilities or similar facilities;
(d) that the Lender has not made any recommendation, given any advice nor
taken any other action with respect to (i) the choice of any supplier, vendor or designer
of, or any other contractor with respect to, the Pledged Facilities or any component part
thereof or any property or rights relating thereto, or (ii) any action taken or to be taken
with respect to the Pledged Facilities or any component part thereof or any property or
rights relating thereto at any stage of the construction thereof;
(e) that the Lender has not at any time had physical possession of the Pledged
Facilities or any component part thereof or made any inspection thereof or any property
or rights relating thereto;
(f) that the Lender has not made any warranty or other representation, express
or implied, that the Pledged Facilities or any component part thereof or any property or
rights relating thereto (i) will not result in or cause injury or damage to persons or proper-
ty, (ii) has been or will be properly designed, or will accomplish the results which the
County intends therefor, or (iii) is safe in any manner or respect.
THE LENDER MAKES NO EXPRESS OR IMPLIED WARRANTY OR REP-
RESENTATION OF ANY KIND WHATSOEVER WITH RESPECT TO THE MORT-
GAGED PROPERTY OR THE PLEDGED FACILITIES OR ANY COMPONENT
PART THEREOF, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OR
16
24
REPRESENTATION WITH RESPECT TO THE MERCHANTABILITY OR THE
FITNESS OR SUITABILITY THEREOF FOR ANY PURPOSE, and further including
the design or condition thereof; the safety, workmanship, quality or capacity thereof;
compliance thereof with the requirements of any law, rule, specification or contract per-
taining thereto; any latent defect; the ability of the Pledged Facilities to perform any func-
tion; that the Amount Advanced will be sufficient to pay all Project Costs; or any other
characteristic of the Pledged Facilities; it being agreed that the County is to bear all risks
relating to the Pledged Facilities, the completion thereof or the transactions contemplated
by this Contract or by the Deed of Trust, and the County waives the benefits of any and
all implied warranties and representations of the Lender.
The provisions of this Article will survive the Contract's termination.
ARTICLE X
DEFAULT AND REMEDIES
10.1. Events of Default. An "Event of Default" is any of the following:
(a) The County fails to make any Installment Payment when due.
(b) The occurrence of an Event of Nonappropriation.
(c) The County breaches or fails to perform or observe any term, condition or
covenant of this Contract or the Deed of Trust on its part to be observed or performed,
other than as referred to in subsections (a) or (b) above, including payment of any Addi-
tional Payment, for a period of 90 days after written notice specifying such failure and
requesting that it be remedied has been given to the County (by any person or entity), un-
less the Lender agrees in writing to an extension of such time prior to its expiration; pro-
vided, however, that if the failure stated in the notice cannot reasonably be corrected
within the applicable period and the County institutes corrective action within the appli-
cable period, no Event of Default will be deemed to have occurred so long as the County
diligently pursues the corrective action.
(d) Proceedings under any bankruptcy, insolvency, reorganization or similar
law are instituted by or against the County as a debtor, or a receiver, custodian or similar
officer is appointed for the County or any of its property.
(e) Any lien, charge or encumbrance (other than Permitted Encumbrances) pri-
or to or affecting the validity of the Deed of Trust is found to exist, or proceedings are
instituted to enforce any lien, charge or encumbrance against the Mortgaged Property and
such lien, charge or encumbrance would be prior to the lien of the Deed of Trust.
17
25
10.2. Remedies on Default. Upon the occurrence and during the continuation of
any Event of Default, the Lender may, without any further demand or notice, exercise
any one or more of the following remedies:
(a) Declare the unpaid principal components of the Installment Payments, and
the accrued interest thereon, immediately due and payable;
(b) Proceed by appropriate court action to enforce performance by the County
of the applicable covenants of this Contract or the Deed of Trust or to recover for the
breach thereof; and
(c) Avail itself of all available remedies under the Deed of Trust, including
foreclosure on the Mortgaged Property and recovery of attorneys' fees and other expens-
es, and of all other remedies available at law or in equity.
The Lender's exercise of remedies is subject to the limitations set forth in Article X.
10.3. No Remedy Exclusive; Delay Not Waiver. All remedies under this Con-
tract are cumulative and may be exercised concurrently or separately. The exercise of any
one remedy will not be deemed an election of such remedy or preclude the exercise of
any other remedy. If any Event of Default occurs and is thereafter waived, such waiver
will be limited to the particular breach so waived and will not be deemed a waiver of any
other breach under this Contract.
ARTICLE XI
ASSIGNMENTS
11.1. County's Assignments. The County may not sell or assign any interest in
this Contract without the Lender's prior written consent.
11.2. Lender's Assignment. The Lender may, at any time and from time to time,
assign all or any part of its interest in the Mortgaged Property or this Contract, including,
without limitation, the Lender's rights to receive Installment Payments. Any assignment
made by the Lender or any subsequent assignee must not purport to convey any greater
interest or rights than those held by the Lender pursuant to this Contract.
The County agrees that this Contract may become part of a pool of obligations at
the Lender's or its assignee's option. The Lender or its assignees may assign or reassign all
or any part of this Contract, including the assignment or reassignment of any partial interest
through the use of certificates evidencing participation interests in this Contract. Any as-
signment by the Lender may be only to a Lender, insurance company, or similar financial
institution or any other entity approved by the LGC. Notwithstanding the foregoing, no as-
signment or reassignment of the Lender's interest in the Mortgaged Property or this Con-
tract will be effective unless and until the County receives a duplicate original counterpart of
18
26
the document by which such assignment or reassignment is made disclosing the name and
address of each such assignee.
The County further agrees that the Lender's interest in this Contract may be
assigned in whole or in part upon terms which provide in effect that the assignor or assignee
will act as a collection and paying agent for any holders of certificates of participation in
this Contract, provided the County receives a copy of such agency contract and such
collection and paying agent covenants and agrees to maintain for the full remaining term of
this Contract a written record of each assignment and reassignment of such certificates of
participation.
The Lender covenants that any disclosure document circulated by it or an assignee
in connection with the sale of the Lender's rights under this Contract will contain a
statement to the effect that the County has not reviewed and is not responsible for the dis-
closure document. The Lender covenants to defend, indemnify and hold harmless the
County and its officers, employees and agents against any and losses, claims, damages or
liabilities, joint or several, including fees and expenses incurred in connection therewith,
to which such indemnified party may become subject on account of any statement in-
cluded in a disclosure document, or that fails to be included in a disclosure document, un-
less the County has expressly approved the use of such disclosure document.
The County agrees to execute any document reasonably required in connection with
any assignment. Any assignor must provide notice of any assignment to the County, and
the County will keep a complete and accurate record of all assignments as required by the
Code. After the giving of any such notice, the County will thereafter make all payments in
accordance with the notice to the assignee named therein and will, if so requested,
acknowledge such assignment in writing, but such acknowledgment will in no way be
deemed necessary to make the assignment effective.
Notwithstanding any of the foregoing, in no event will the County ever be required
to make Installment Payments to more than one person or entity on any payment date.
ARTICLE XII
COUNTY'S LIMITED OBLIGATION
Notwithstanding any other provision of this Contract, the parties intend that this
transaction comply with North Carolina General Statutes Section 160A-20. No deficiency
judgment may be entered against the County in violation of such Section 160A-20.
No provision of this Contract should be construed or interpreted as creating a
pledge of the County's faith and credit within the meaning of any constitutional debt limi-
tation. No provision of this Contract should be construed or interpreted as an illegal dele-
gation of governmental powers or as an improper donation or lending of the County's
credit within the meaning of the North Carolina constitution. The County's taxing power
19
27
is not and may not be pledged directly or indirectly or contingently to secure any moneys
due under this Contract.
No provision of this Contract will be construed to pledge or to create a lien on any
class or source of the County's moneys (other than the Amount Advanced and any Net
Proceeds), nor will any provision of this Contract restrict the County's future issuance of
any of its bonds or other obligations payable from any class or source of the County's
moneys (except to the extent the this Contract and the Deed of Trust restrict the incur-
rence of additional obligations secured by the Mortgaged Property).
To the extent of any conflict between this Article and any other provision of this
Contract, this Article takes priority. Nothing in this Article is intended to impair or pro-
hibit foreclosure of the Deed of Trust upon occurrence of an Event of Default under this
Contract or the Deed of Trust.
ARTICLE XIII
MISCELLANEOUS
13.1. Notices.
(a) Any communication provided for in this Contract must be in writing (not
including facsimile transmission or electronic mail).
(b) Any communication under this Contract will be sufficiently given and
deemed given on the delivery date shown on a certified mail receipt, or a delivery receipt
from a national commercial package delivery service, if addressed as follows:
(i) If intended for the County, to Orange County Manager, Re: Notice
under 2016 Financing Contract, Post Office Box 8181, Hillsborough, NC 27278
(ii) If intended for the Lender, to First Bank, Attention: Notice related to
financing for Orange County, 1333 Plaza Blvd., Sanford, NC 27330
(c) Any addressee may designate additional or different addresses for commu-
nications by notice given under this Section to the other.
13.2. Non-Business Days. If the date for making any payment or the last day for
performance of any act or the exercising of any right is not a Business Day, such payment
may be made or act performed or right exercised on or before the next succeeding Busi-
ness Day. For this Contract, a "Business Day" is any day on which banks in the State are
not by law authorized or required to remain closed.
13.3. Governing Law. The parties intend that North Carolina law will govern
this Contract. To the extent permitted by law, the parties agree that any action brought
20
28
with respect to this Contract must be brought in the North Carolina General Court of Jus-
tice in Orange County, North Carolina.
13.4. Severability. If any provision of this Contract is determined to be unen-
forceable, that will not affect any other provision of this Contract.
13.5. Amendments. This Contract may not be modified or amended unless such
amendment is in writing and signed by the County and the Lender and approved by the
LGC.
13.6. Binding Effect. Subject to the specific provisions of this Contract, this
Contract will be binding upon and inure to the benefit of and be enforceable by the par-
ties and their respective successors and assigns.
13.7. Third-Party Beneficiaries. The Deed of Trust Trustee and the LGC are the
only parties intended as third-party beneficiaries of this Contract.
13.8. Time. Time is of the essence of this Contract and each and all of its provi-
sions.
13.9. Limitation on Liability of Officers and Agents. No officer, agent or em-
ployee of the County, of the LGC or the Lender will be subject to any personal liability or
accountability by reason of the execution of this Contract or any other documents related
to the transactions contemplated by this Contract. Such officers, agents or employees will
be deemed to execute such documents in their official capacities only, and not in their in-
dividual capacities. This Section will not relieve any such officer, agent or employee
from the performance of any official duty provided by law.
13.10. Counterparts. This Contract may be executed in several counterparts, in-
cluding separate counterparts. Each will be an original, but all of them together constitute
the same instrument.
13.11. Definitions. Unless the context clearly requires otherwise, capitalized terms
used in this Contract and not otherwise defined have the meanings set forth in Exhibit A.
[The remainder of this page has been left blank intentionally.]
21
29
IN WITNESS WHEREOF, the County and the Lender have caused this instru-
ment to be executed as of the day and year first above written by duly authorized officers.
ATTEST: (SEAL) ORANGE COUNTY,
NORTH CAROLINA
By:
Donna S. Baker Bonnie B. Hammersley
Clerk, Board of Commissioners County Manager
FIRST BANK
By:
[Name/Title]
This contract has been approved under the
provisions of Article 8, Chapter 159 of
the General Statutes of North Carolina.
Greg C. Gaskins
Secretary, North Carolina
Local Government Commission
By
[Greg C. Gaskins or
Designated Assistant]
[Installment Financing Contract dated as of May 1, 2016]
Exhibits —
A - Definitions
B - Payment schedule
22
30
EXHIBIT A — Definitions
For all purposes of this Contract, unless the context requires otherwise, the follow-
ing terms have the following meanings:
"Additional Payments" means any amounts payable by the County as a result of
its obligations under this Contract or the Deed of Trust (other than its obligation to pay
Installment Payments), and any of the Lender's expenses (including attorneys' fees) in
prosecuting or defending any action or proceeding in connection with this Contract and
any taxes or any other expenses, including, but not limited to, the Lender's administrative
or legal costs, licenses, permits, state and local sales and use or ownership taxes or prop-
erty taxes that the Lender is required to pay as a result of this Contract (together with in-
terest that may accrue on any of the above if the County fails to pay the same, as set forth
in this Contract).
"Amount Advanced" has the meaning assigned in Article I.
"Closing Date" means the date on which this Contract is first executed and deliv-
ered by the parties, which is expected to be on or about May , 2016.
"Code" means the Internal Revenue Code of 1986, as amended, including regula-
tions, rulings and revenue procedures promulgated thereunder or under the Internal Rev-
enue Code of 1954, as amended, as applicable to the County's obligations under this Con-
tract. Reference to any specific Code provision will be deemed to include any successor
provisions thereto.
"Construction Agreement" means any agreement between the County and any
other person or entity related to any part of the construction of the Pledged Facilities, in-
cluding contracts for site preparation and related work.
"Contract Payments" means Installment Payments and Additional Payments.
"County Board" means the County's Board of Commissioners as from time to time
constituted.
"County Representative" means the County Manager, County finance officer or
any other person or persons at the time designated, by a written certificate furnished to
the Lender and signed on the County's behalf by the County Manager or the Chairman of
the County Board, to act on the County's behalf for the purpose of performing any act (or
any specified act) under this Contract.
23
31
"Deed of Trust" means the Deed of Trust and Security Agreement, dated as of
May 1, 2016, from the County to a deed of trust trustee for the benefit of the Lender and
its assigns, as it may be duly amended or supplemented.
"Event of Default" means one or more events of default as defined in Section 9.1.
"Event of Nonappropriation" means a failure by the County Board to include
funds for Contract Payments in the County's budget for any Fiscal Year, or any reduction
or elimination of an appropriation for Contract Payments, all as further described in Sec-
tion 2.5.
"Fiscal Year" means the County's fiscal year beginning July 1, or such other fiscal
year as the County may later lawfully establish, and also includes the period between the
Closing Date and June 30, 2016.
"Installment Payments" means the payments payable by the County pursuant to
Section 2.1.
"LGC" means the North Carolina Local Government Commission, or any succes-
sor to its functions.
"Mortgaged Property" has the meaning assigned in the Deed of Trust, and general-
ly includes the Pledged Site and the Pledged Facilities.
"Net Proceeds," when used with respect to any amounts derived from claims made
on account of insurance coverages required under this Agreement, any condemnation award
arising out of the condemnation of all or any portion of the Mortgaged Property, payments
on any bonds required by Section 4.2, any amounts recovered from any contractor on an
action for default or breach, or any amounts received in lieu or in settlement of any of the
foregoing, means the amount remaining after deducting from the gross proceeds thereof all
expenses (including attorneys' fees and costs) incurred in the collection of such proceeds,
and after reimbursement to the County or the Lender for amount previously expended to
remedy the event giving rise to such payment or proceeds.
"Permitted Encumbrances" means, as of any particular time, (a) the encumbrances
on the County's title to the Mortgaged Property that are stated on Exhibit B to the Deed
of Trust, (b) liens for taxes and assessments not then delinquent, or liens which may re-
main unpaid pursuant to Sections 3.8 or 5.2, (c) the Deed of Trust, (d) any lien or encum-
brance which is made by its terms expressly subordinate to the lien of the Deed of Trust,
including a lease of the Financed Facilities to the School Board, and (e) easements and
rights-of-way granted by the County pursuant to Section 1-6 of the Deed of Trust.
"Pledged Facilities" has the meaning ascribed to that term in the Deed of Trust,
and generally includes Grady Brown School.
24
32
"Pledged Site" has the meaning ascribed to that term in the Deed of Trust, and
generally includes the real property upon which the Pledged Facilities are located.
"Project" has the meaning ascribed to that term in the recitals to this Contract.
"Project Costs" means all capital costs of the Project as determined in accordance
with generally accepted accounting principles and that will not adversely affect the
exclusion from gross income for federal income tax purposes of the designated interest
component of Installment Payments payable under this Contract, including (a) sums
required to reimburse the County or its agents for advances made for any such costs, and
(b) all costs related to the financing of the Project through this Contract and all related
transactions.
"School Board" means The Orange County Board of Education, and its succes-
sors.
"State" means the State of North Carolina.
All references in this Contract to designated "Sections" and other subdivisions are
to the designated sections and other subdivisions of this Contract. The words "hereof'
and "hereunder" and other words of similar import refer to this Contract as a whole and
not to any particular Section or other subdivision unless the context indicates otherwise.
Words importing the singular number will include the plural number and vice versa. The
use of the term "including" should be understood to mean "including, but not limited to."
25
33
EXHIBIT B-1 —
Schedule of Installment Payments for First Advance
For repayment of the First Advance, principal is payable in the amounts and on the
dates as shown below, subject to prepayment as provided in this Contract. Interest is pay-
able on each May 1 and November 1, beginning November 1, 2016.
Each portion of the Amount Advanced will bear interest from the Closing Date
until paid. Interest on the First Advance is calculated at the annual rate of 2.30%, as de-
scribed below. Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The schedule below shows the expected interest payment
amounts.
First Advance = $2,275,000
[Table to come]
EXHIBIT B-2 —
Schedule of Installment Payments for Second Advance
For repayment of the Second Advance, principal is payable in the amounts and on
the dates as shown below, subject to prepayment as provided in this Contract. Interest is
payable on each May 1 and November 1, beginning November 1, 2016.
Each portion of the Amount Advanced will bear interest from the Closing Date
until paid. Interest on the Second Advance is calculated at the annual rate of 2.95%, as
described below. Interest will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. The schedule below shows the expected interest payment
amounts.
Second Advance = $5,875,000
[Table to come]
26
34
EXHIBIT C — Project Description
Component Est. Amount Financed
Cedar Ridge High School - construction of auxiliary gym 3,328,750
Vehicle replacements 771,209
Various school improvements and repairs for the Chapel
750,000
Hill - Carrboro system
Information Technologies projects - hardware and soft- 746,125
ware acquisition
Various school improvements and repairs for the Orange
478,000
County system
Soccer.com Soccer Center, Phase II land acquisition 425,000
Purchase new truck for rural curbside recycling 310,090
Purchase of solid waste disposal carts 234,000
Rogers Road water project- easement acquisition 212,000
Cedar Grove Community Center Library Kiosk- pur-
180,000
chase and install
Board of Elections equipment- purchase and install 169,575
Recycling Roll-Cart Distribution and Maintenance Build-
165,000
ing- purchase and construct
Upper Eno Nature Preserve - construct parking lot and
125,000
trail work
Purchase new generator for Hillsborough Commons 100,000
27
35
Financing and related costs 155,241
TOTAL 8,150,000
The amounts listed above are illustrative only. The County may use any portion of
the Amount Advanced for any of the Financed Facilities, subject only (a) to the County's
obligation to spend at least $50,000 for improvements at Grady Brown School and (b) to
the limitations on the use of funds for Project Costs and Financing Costs.
28
36
Attachment 3
S*H draft of April 4
Prepared by and return after recording to:
Robert M. Jessup Jr.
Sanford Holshouser LLP
209 Lloyd St., Suite 350
Carrboro, NC 27510
Orange County PIN: 9863277482
STATE OF NORTH CAROLINA ) The collateral is or includes fixtures.
ORANGE COUNTY ) This Deed of Trust secures
future advances.
Brief description: Grady Brown School, 1100 New Grady Brown School Road,
Hillsborough NC 27278
THIS DEED OF TRUST AND SECURITY AGREEMENT (this "Deed of
Trust") is dated as of May 1, 2016, and is granted by ORANGE COUNTY, NORTH
CAROLINA, a political subdivision of the State of North Carolina (the "County"), to
, as trustee (the "Deed of Trust Trustee"), for the benefit of FIRST
BANK(the "Lender").
RECITALS:
The Lender is advancing $8,150,000 to the County pursuant to an Installment
Financing Contract dated as of May 1, 2016 (the "Financing Contract"), between the
County and the Lender. The County will use these funds, together with other available
funds, to carry out a plan to acquire, construct and improve various public facilities and
improvements, as well as to pay financing costs.
As a condition to entering into the Financing Contract, the Lender requires the
County to secure its obligations under the Financing Contract by this conveyance of
Grady Brown School and its related real property, as described in Exhibit A, and the
other "Mortgaged Property," as defined below.
37
The Mortgaged Property includes the property described in Exhibit A. The County
is the record owner of the property described in Exhibit A.
This Deed of Trust is given to secure current advances under the Financing
Contract of $8,150,000, as well as potential future advances in the total maximum
principal amount of$25,000,000. The time during which future advances may be made is
30 years from May 1, 2016. The current scheduled date for final repayment is on or about
May 1, 2036.
NOW, THEREFORE,
(1) in consideration of the execution and delivery of the Financing Contract
and other good and valuable consideration, the receipt and sufficiency of which the
parties acknowledge,
(2) to secure the County's performance of all its covenants under this Deed of
Trust and under the Financing Contract, including the repayment of amounts advanced
under the Financing Contract, and
(3) to charge the Mortgaged Property with this payment and performance,
the County sells, grants and conveys to the Deed of Trust Trustee, [his] successors and
assigns forever, in trust, with power of sale, the following (collectively, the "Mortgaged
Property"):
(a) the property described in Exhibit A and any real property later acquired by
the County in exchange for, or in consideration of the exchange of, or with the proceeds
from any disposition of, all or any part of any property described in this paragraph, and in
all cases together with all easements, rights, rights-of-way and appurtenances belonging
to any such property (collectively, the "Pledged Site"); and
(b) all buildings and other improvements and fixtures (including any
"Fixtures," as defined in Section 1-4) now or later attached to or used in or on those
improvements or the Pledged Site, including (i) all renewals, replacements, and additions,
(ii) all articles in substitution, (iii) all building materials for construction, improvement,
modification or repair of improvements upon their delivery to the Pledged Site, and (iv) all
proceeds of all the foregoing in whatever form resulting from the loss or disposition of the
foregoing, including all proceeds of and unearned premiums for any insurance policies
covering the Pledged Site and the improvements, proceeds of title insurance and payments
related to the exercise of condemnation or eminent domain authority, and all judgments or
settlements in lieu of any of the foregoing (collectively, the "Pledged Facilities");
2
38
TO HAVE AND TO HOLD the Mortgaged Property with all privileges and
appurtenances belonging thereto, to the Deed of Trust Trustee, [his] successors and
assigns forever, upon the trusts, terms and conditions and for the purposes set out below,
in fee simple in trust;
SUBJECT, HOWEVER, to the existing encumbrances described in Exhibit B;
BUT THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST: if the
County pays its "Obligations," as defined below, in full in accordance with the Financing
Contract and this Deed of Trust, and the County complies with all of the terms, covenants
and conditions of the Financing Contract and this Deed of Trust, this conveyance will be
null and void and will be canceled of record at the County's request and cost, and title
will revest as provided by law;
BUT IF, HOWEVER, THERE OCCURS AN EVENT OF DEFAULT
UNDER THE FINANCING CONTRACT, then the Lender will have the remedies
provided for in this Deed of Trust, including directing the Deed of Trust Trustee to sell
the Mortgaged Property under power of sale.
THE COUNTY COVENANTS AND AGREES with the Deed of Trust Trustee
and the Lender (and their respective heirs, successors and assigns), in consideration of the
foregoing, as follows:
1. Warranties of Title; Security Provided By This Deed of Trust
1-1 Warranties of Title. The County covenants with the Deed of Trust
Trustee and the Lender that the County is seized of and has the right to convey the
Mortgaged Property in fee simple, that the Mortgaged Property is free and clear of all
liens and encumbrances other than Permitted Encumbrances (as defined in the Financing
Contract), that title to the Mortgaged Property is marketable, and that the County will
forever warrant and defend title to the Mortgaged Property (subject to the Permitted
Encumbrances) against the claims of all persons.
1-2 Security for Payment and Performance. This Deed of Trust secures
the County's payment, as and when the same become due and payable, of all amounts
payable by the County under the Financing Contract and this Deed of Trust (the
"Obligations") and the County's timely compliance with all terms, covenants and
conditions of the Financing Contract and this Deed of Trust.
1-3 Present and Future Advances. This Deed of Trust is executed to secure all
the County's present and future obligations to the Company related to the Mortgaged
Property. The making of future advances is subject to the terms and conditions of the
Financing Contract and this Deed of Trust. The amount of the present obligations secured
by this Deed of Trust is $8,150,000 and the total amount, including present and future
3
39
obligations, that may be secured by this Agreement at any one time is $25,000,000. The
period within which future obligations may be incurred is 30 years from May 1, 2016.
The provisions in this Deed of Trust for future advances are made only to facilitate
possible future financings as provided for under the Trust Agreement. As of the date of
this Deed of Trust there is no agreement or obligation by the County to borrow, or for any
person to lend, any additional funds beyond the $8,150,000 that constitutes the present
obligations.
1-4 Security Interest in Fixtures. This Deed of Trust is intended to be a
security agreement pursuant to the Uniform Commercial Code as in effect in North
Carolina for the "Fixtures," as defined below. The County grants to the Lender and the
Deed of Trust Trustee a security interest in the Fixtures to secure the Obligations.
The County agrees to execute, deliver and file, or cause to be filed, in such place
or places as may be requested by the Lender or the Deed of Trust Trustee, financing
statements (including any continuation statements) in such form as either party may
reasonably request to evidence the security interest provided for in this Section. Upon
the occurrence of an Event of Default under this Deed of Trust or the Financing Contract,
the Lender or the Deed of Trust Trustee is entitled to exercise all rights and remedies of a
secured party under the Uniform Commercial Code as in effect in North Carolina and
may proceed as to the Fixtures in the same manner as provided in this Deed of Trust for
the real property.
The "Fixtures" are all items of personal property attached or affixed to the Pledged
Facilities in such a manner that removing the items would cause damage to the Pledged
Facilities. The Fixtures may include plumbing, heating, lighting, electrical, laundry,
ventilating, refrigerating, incinerating, air-conditioning, fire and theft protection and
sprinkler equipment, including all renewals and replacements thereof and all additions
thereto, and all articles in substitution thereof, and all proceeds of all the foregoing in
whatever form.
The County is not obliged to renew, repair or replace any undesirable or
unnecessary Fixture. If the County determines that any Fixture has become undesirable or
unnecessary, the County may remove that Fixture from the Pledged Facilities and sell,
trade-in, exchange or otherwise dispose of it (as a whole or in part), with an amount
equivalent to the fair market value of the Fixture as removed becoming Net Proceeds and
subject to the provisions of Section 6.2 of the Financing Contract.
With respect to those items of the Mortgaged Property that are or are to become
Fixtures, this Deed of Trust constitutes a financing statement filed as a fixture filing. The
County agrees that the security interest in the Fixtures granted in this Section 1-4 is in
addition to, and not in lieu of, any security interest in the Fixtures acquired by real
property law. The fixtures are located on the land described on Exhibit A, and the County
4
40
is the record owner of that land. The name and address of the County, as debtor, and the
Lender, as secured party, are set forth in Section 5-1.
1-5 County's Obligation Limited. Notwithstanding any other provision of
this Deed of Trust, the parties intend that this transaction will comply with North
Carolina General Statutes Section 160A-20. No deficiency judgment may be entered
against the County in violation of Section 160A-20.
No provision of this Deed of Trust is to be construed or interpreted as creating a
pledge of the County's faith and credit within the meaning of any constitutional debt
limitation. No provision of this Deed of Trust should be construed or interpreted as an
illegal delegation of governmental powers, nor as an improper donation or lending of the
County's credit within the meaning of the North Carolina constitution. The County's
taxing power is not and may not be pledged, directly or indirectly contingently, to secure
any moneys due under this Deed of Trust.
No provision of this Deed of Trust restricts the County's future issuance of any of
its bonds or other obligations payable from any class or source of the County's moneys
(except to the extent the Financing Contract and this Deed of Trust restrict the incurrence
of additional obligations secured by the Mortgaged Property).
Nothing in this Section is intended to impair or prohibit foreclosure on this Deed of
Trust if the Obligations are not paid when due or otherwise upon the occurrence of an Event
of Default under this Deed of Trust or the Financing Contract.
To the extent of any conflict between this Section and any other provision of this
Deed of Trust, this Section takes priority.
1-6 Releases; Grants of Easements and Other Transfers.
(a) So long as no Event of Default is continuing, the Lender and the Deed of
Trust Trustee are required, upon the County's request and at any time, to execute and
deliver all documents necessary to effect the release of all or a portion of the Mortgaged
Property from the lien of this Deed of Trust upon the County's compliance with the
requirements of this Section.
(b) In connection with the release of a portion (but less than all) of the
Mortgaged Property, the County must file with the Lender and the Deed of Trust Trustee
evidence that the appraised or insured value of that portion of the Mortgaged Property
that is proposed to remain subject to the lien of this Deed of Trust will not be less than
75% of the aggregate principal component of the Amount Advanced outstanding at the
time the release is effected.
(c) In the case of a proposed release of all the Mortgaged Property, the County
must pay to some fiduciary reasonably acceptable to the Lender an amount (i) that is
5
41
sufficient to provide for the payment in full of the entire outstanding balance of the
Amount Advanced and (ii) that is required to be used for that payment.
(d) In any event, the County must file with the Lender and the Deed of Trust
Trustee (i) a certified copy of a County Board resolution stating the purpose for which the
County desires the release, giving a brief and general description of the portion of the
Mortgaged Property to be released and requesting the release, (ii) a copy of the proposed
instrument of grant or release, including a complete legal description of the property to be
released, (iii) a written application signed by a County Representative requesting the
execution and delivery of the instrument, and (iv) a certificate executed by a County
Representative to the effect (A) that no Event of Default is continuing and (B) that the
grant or release will not materially impair the intended use of the Pledged Facilities.
(e) In addition to the provisions for release described above,
(i) The County may from time to time grant easements, licenses, rights-of-way
and other similar rights with respect to any part of the Mortgaged Property, and the
County may release similar interests, with or without consideration. The County must
send notice of any grant or release to the Lender, along with a certificate that the grant or
release will not materially impair the intended use of the Pledged Facilities.
(ii) The County may dispose of any undesirable or unnecessary Fixture as
provided in Section 1-4.
1-7 Construction Mortgage. The security interest evidenced by this Deed of
Trust is a "construction mortgage" with respect to the Pledged Facilities within the meaning
of Section 25-9-334 of the North Carolina General Statutes.
2. County's Payment Obligation; Lender's Advances
2-1 Payment of Obligations; Compliance with Covenants. The County
will pay the Obligations as and when the same become due and payable in the manner set
forth in this Deed of Trust and in the Financing Contract, and will comply in all respects
with all of the terms of this Deed of Trust and the Financing Contract.
2-2 Payment of Costs and Legal Fees. (a)If the Deed of Trust Trustee or the
Lender employs an attorney to assist in the enforcement or collection of any Obligations,
or if the Deed of Trust Trustee or the Lender voluntarily or otherwise becomes a party to
any suit or legal proceeding (including a proceeding conducted under any state or federal
bankruptcy or insolvency statute) to protect the Mortgaged Property, to protect the lien of
this Deed of Trust, to enforce collection of the Obligations, or to enforce compliance by
the County with any of the provisions of this Deed of Trust or the Financing Contract,
then the County will pay reasonable legal fees and all costs that may reasonably be
incurred (whether or not any suit or proceeding is commenced). All of those fees and
6
42
costs (together with interest at the annual rate of 4.00%) are secured as Obligations under
this Deed of Trust.
(b) If any suit or proceeding described in subsection (a) is adverse to the
County, however, then the County has this liability only if the Deed of Trust Trustee or
the Lender, as the case may be, is a prevailing party in the suit or proceeding.
2-3 Advances for Performance of County's Obligations. If the County fails
to perform any of its obligations under the Financing Contract or this Deed of Trust, then
the Deed of Trust Trustee and the Lender are authorized, but not obligated, to perform the
obligation or cause it to be performed. All of those fees and costs, together with interest
at the annual rate of 4.00%, are secured as Obligations under this Deed of Trust.
3. The Deed of Trust Trustee
3-1 Deed of Trust Trustee's Liability. The Deed of Trust Trustee will
suffer no liability by virtue of[his] acceptance of this trust except as may be incurred as a
result of any failure on [his] part to account for the proceeds of any sale under this Deed
of Trust.
3-2 Substitute Trustees. If any Deed of Trust Trustee dies, becomes
incapable of acting or renounces the trust, or if for any reason the Lender desires to
replace any Deed of Trust Trustee, then the Lender has the unqualified right to appoint
one or more substitute or successor Deed of Trust Trustees by instruments filed for
registration in the office of the Register of Deeds where this Deed of Trust is recorded.
Any removal or appointment may be made at any time without notice, without specifying
any reason, and without any court approval. Any appointee becomes vested with title to
the Mortgaged Property and with all rights, powers, and duties conferred upon the Deed
of Trust Trustee by this Deed of Trust in the same manner and to the same effect as if that
Deed of Trust Trustee were named as the original Deed of Trust Trustee.
4. Defaults and Remedies; Foreclosure
4-1 Defaults and Remedies. During the continuation of an Event of Default
under the Financing Contract, the Lender may pursue its rights and remedies as provided
under the Financing Contract and this Deed of Trust.
4-2 Foreclosure; Sale under Power of Sale.
(a) Right to foreclosure or sale. During the continuation of an Event of
Default, at the Lender's request, the Deed of Trust Trustee must foreclose this Deed of
Trust by judicial proceedings or, at the Lender's option, the Deed of Trust Trustee must
sell (and is empowered to sell) all or any part of the Mortgaged Property at public sale to
the last and highest bidder for cash (free of any equity of redemption, homestead, dower,
curtesy or other exemption, all of which the County expressly waives to the extent
43
permitted by law) after compliance with applicable State laws relating to foreclosure
sales under power of sale. The Deed of Trust Trustee will execute and deliver a proper
deed or deeds to the successful purchaser at such sale. If only a part of the Mortgaged
Property is sold, the partial sale in no way adversely affects the lien created by this Deed
of Trust against the remainder.
(b) Lender's Bid. The Lender may bid and become the purchaser at any
sale under this Deed of Trust. Instead of paying cash, the Lender may make settlement
for the purchase price by crediting against the Obligations the bid price net of sale
expenses, including the Deed of Trust Trustee's commission, and after payment of any
taxes and assessments as may be a lien on the Mortgaged Property superior to the lien of
this Deed of Trust (unless the Mortgaged Property is sold subject to those liens and
assessments, as provided by law).
(c) County's Bid. The County may bid for all or any part or parts of the
Mortgaged Property at any foreclosure sale. The County, however, may not bid less than
an amount sufficient to provide for full payment of the Obligations unless the Lender
consents in writing.
(d) Successful bidder's deposit.At any sale the Deed of Trust Trustee may, at
[his] option, require any successful bidder (other than the Lender) immediately to make a
deposit with the Deed of Trust Trustee against the successful bid in the form of cash or a
certified check in an amount of up to 5% of the sale price. The advertised notice of sale
need not include notice of this requirement.
(e) Application of sale proceeds. The Deed of Trust Trustee must apply
the proceeds of any foreclosure sale in the manner and in the order prescribed by State
law. The parties agree (i) that the sale expenses will include a commission to the Deed of
Trust Trustee equal to one-half of one percent of the gross sales price (but not exceeding
a total of $25,000) for all services performed by the Deed of Trust Trustee under this
Deed of Trust, and (ii) that any sale proceeds remaining after the payment of all
obligations and the prior application of the proceeds in accordance with State law will be
paid to the County.
4-3 Possession of Mortgaged Property. During the continuation of an Event
of Default, upon the Lender's demand the County must deliver possession of the
Mortgaged Property to the Lender. In addition, the County must surrender possession of
the Mortgaged Property to the purchaser of the Mortgaged Property at any judicial or
foreclosure sale under this Deed of Trust.
During the continuation of an Event of Default, the Lender, to the extent permitted
by law, is also authorized to (a) take possession of the Mortgaged Property, with or
without legal action, (b) lease the Mortgaged Property, (c) collect all rents and profits
from the Mortgaged Property, with or without taking possession of the Mortgaged
Property, and (d) after deducting all costs of collection and administration expenses,
8
44
apply the net rents and profits to the payment of necessary maintenance and insurance
costs, and then apply all remaining amounts to the County's account and in reduction of
the Obligations. The Lender will be liable to account only for rents and profits it actually
receives.
4-4 Due on Sale Provision; Acceleration. The Lender may, at its option, require
the immediate payment in full of the Installment Payments and all other amounts secured by
this Deed of Trust upon the sale, transfer, conveyance or encumbrance of all or any part of
the Mortgaged Property, or any legal or beneficial interest in the Mortgaged Property,
without the Lender's prior written consent. This option applies whether the sale, transfer,
conveyance or encumbrance is voluntary, involuntary, by operation of law or otherwise, and
includes any lien or encumbrance that is not a Permitted Encumbrance.
4-5 No Remedy Exclusive; Delay not Waiver. All remedies under this Deed of
Trust are cumulative and may be exercised concurrently or separately. The exercise of any
one remedy is not an election of that remedy as an exclusive remedy, nor does the exercise
of one remedy preclude the exercise of any other remedy. If any Event of Default occurs
and is later waived by the other party or parties, that waiver is limited to the particular
default waived and does not constitute a waiver of any other default. Every power or
remedy given by this Deed of Trust to the Deed of Trust Trustee or the Lender may be
exercised from time to time as often as may be deemed expedient by the Deed of Trust
Trustee or the Lender.
5. Miscellaneous
5-1 Notices.
(a) Any communication provided for in this Deed of Trust must be in writing
(not to include facsimile transmission or electronic mail).
(b) Any communication under this Deed of Trust will be deemed given on the
delivery date shown on a United States Postal Service certified mail receipt, or a delivery
receipt (or similar evidence) from a national commercial package delivery service, if
addressed as follows:
(i) if to the County, to County Manager, Orange County, Attention: Notice
under 2016 Financing Deed of Trust, Post Office Box 8181, Hillsborough, NC 27278
(ii) if to the Deed of Trust Trustee, to
(iii) if to the Lender, to First Bank, Attention: Notice related to financing
for Orange County, 1333 Plaza Blvd., Sanford, NC 27330
9
45
(c) Any addressee may designate additional or different addresses for
communications by notice given under this Section to each of the others. The County
must send copies of any notices it sends to the Deed of Trust Trustee also to the Lender.
5-2 Successors. This Deed of Trust is binding upon, will inure to the benefit of,
and is enforceable by the County, the Deed of Trust Trustee and the Lender, and their
respective successors and assigns.
5-3 No Marshalling. The County waives any and all rights to require
marshalling of assets in connection with the exercise of any remedies provided in this
Deed of Trust or as permitted by law.
5-4 Definitions. All capitalized terms used in this Deed of Trust and not
otherwise defined have the meanings ascribed to them in the Financing Contract.
5-5 Governing Law; Forum. The County, the Lender and the Deed of Trust
Trustee intend that North Carolina law will govern the interpretation of this Deed of
Trust. To the extent permitted by law, the County, the Lender and the Deed of Trust
Trustee agree that any action brought with respect to this Deed of Trust must be brought
in the North Carolina General Court of Justice in Orange County, North Carolina.
5-6 Limitation of Liability of Officers and Agents. No officer, agent or
employee of the County, the Lender or the Deed of Trust Trustee will be subject to any
personal liability or accountability by reason of the execution of this Deed of Trust or any
other documents related to the transactions contemplated by this Deed of Trust. Those
officers or agents are deemed to execute documents in their official capacities only, and
not in their individual capacities. This Section does not relieve any officer, agent or
employee from the performance of any official duty provided by law.
5-7 Covenants Run with the Land. All covenants contained in this Deed of
Trust run with the real estate encumbered by this Deed of Trust.
5-8 Further Instruments. Upon the request of the Lender or the Deed of Trust
Trustee, the County will execute, acknowledge and deliver any further instruments
reasonably necessary or desired by the Lender or the Deed of Trust Trustee to carry out
more effectively the purposes of this Deed of Trust or any other document related to the
transactions contemplated by this Deed of Trust, and to subject to the liens and security
interests of this Deed of Trust all or any part of the Mortgaged Property intended to be
given or conveyed, whether now given or conveyed or acquired and conveyed subsequent
to the date of this Deed of Trust.
5-9 Severability. If any provision of this Deed of Trust is determined to
be unenforceable, that will not affect any other provision of this Deed of Trust.
10
46
5-10 Non-Business Days. If the date for making any payment or the last
day for performance of any act or the exercising of any right is not a Business Day, that
payment may be made or act performed or right exercised on or before the next
succeeding Business Day.
5-11 Entire Agreement; Amendments. This Deed of Trust, together with
the Financing Contract, constitutes the County's entire agreement with the Lender and the
Deed of Trust Trustee with respect to its general subject matter. This Deed of Trust may
not be changed without the written consent of the County and the Lender, but the consent
of the Deed of Trust Trustee is not required.
[The remainder of this page has been left blank intentionally.]
11
47
IN WITNESS WHEREOF, the County has caused this instrument to be signed,
sealed and delivered by duly authorized officers, all as of May 1, 2016.
ATTEST: ORANGE COUNTY,
NORTH CAROLINA
By:
Donna S. Baker Bonnie B. Hammersley
Clerk, Board of Commissioners County Manager
* * * * * *
STATE OF NORTH CAROLINA;
ORANGE COUNTY
I, a Notary Public of such County and State, certify that Bonnie B. Hammersley
and Donna S. Baker personally came before me this day and acknowledged that they are
the County Manager and the Clerk of the Board of Commissioners, respectively, of
Orange County, North Carolina, and that by authority duly given and as the act of such
County, the foregoing instrument was signed in the County's name by such County
Manager, sealed with its corporate seal and attested by such Clerk.
WITNESS my hand and official stamp or seal, this day of May, 2016.
[SEAL]
Notary Public
My commission expires:
[Deed of Trust and Security Agreement
for the benefit of First Bank,
dated as of May 1, 2016]
12
48
EXHIBIT A — Pledged Site Description
EXHIBIT B -- Existing Encumbrances
13
49
Attachment 4
S*H draft of April 4
Prepared by and return after recording to:
Robert M. Jessup Jr.
Sanford Holshouser LLP
209 Lloyd St., Suite 350
Carrboro,NC 27510
STATE OF )
NORTH CAROLINA )
LEASE
ORANGE COUNTY )
Orange County PIN
Brief description: Grady Brown Elementary School
THIS LEASE is dated as of May 1, 2016, and is entered into by and between
ORANGE COUNTY, NORTH CAROLINA, as lessor (the "County"), and THE
ORANGE COUNTY BOARD OF EDUCATION, as lessee (the "School Board").
WITNESSETH:
The County and the School Board have previously agreed to cooperate in a plan to
carry out capital improvements for public schools, including the installation of new roofs
(the "Project") for Grady Brown Elementary School ("Grady Brown").
The County has entered into an Installment Financing Contract dated as of May 1,
2016 (the "Financing Contract"), to provide funds for the Project. The County has granted a
Deed of Trust and Security Agreement, also dated as of May 1, 2016 (the "Deed of Trust"),
to secure the County's repayment obligations under the Financing Contract.
The County proposes to lease Grady Brown and its associated real property, as
described on Exhibit A (the "Site"), to the School Board, so that the School Board can
continue to operate Grady Brown, both during the Project period and then throughout the
County's financing term. The School Board has determined to accept this lease.
50
The County is the record owner of the Site.
NOW THEREFORE, for and in consideration of the mutual promises contained in
this Lease, the parties agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
All capitalized terms used in this Lease and not otherwise defined have the
meanings assigned to them in the Financing Contract, unless the context clearly requires
otherwise.
In addition, the following terms have the meanings specified below, unless the
context clearly requires otherwise:
"Event of Default" means one or more events of default as defined in Section 11.1.
"Lease" means this Lease, as it may be duly amended.
"Lease Term" means the term of this Lease as determined pursuant to Article IV.
"Lease Year" means, initially, the period from the Closing Date through June 30,
2016, and thereafter, means each twelve-month period commencing on July 1 and ending
on the next June 30.
"Leased Property" means the Site and all improvements on the Site, including
Grady Brown.
All references to articles or sections are references to articles or sections of this
Lease, unless the context clearly indicates otherwise.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
The County and the School Board each represents, covenants and warrants for the
other's benefit as follows:
(a) Neither the execution and delivery of this Lease, nor the fulfillment of or
compliance with its terms and conditions, nor the consummation of the transactions
2
51
contemplated by this Lease, results in a breach of the terms, conditions and provisions of
any agreement or instrument to which either is now a party or by which either is bound, or
constitutes a default under any of the foregoing.
(b) To the knowledge of each party, there is no litigation or other court or
administrative proceeding pending or threatened against such party (or against any other
person) affecting such party's rights to execute or deliver this Lease or to comply with its
obligations under this Lease. Neither such party's execution and delivery of this Lease, nor
its compliance with its obligations under this Lease, requires the approval of any regulatory
body or any other entity the approval of which has not been obtained.
ARTICLE III
DEMISE; PRIORITY OF FINANCING CONTRACT
3.1. Demise. The County hereby leases the Leased Property to the School Board,
and the School Board hereby leases the Leased Property from the County, in accordance
with the provisions of this Lease, to have and to hold for the Lease Term, subject to the
provisions of Sections 3.2.
3.2. Priority of Deed of Trust. Notwithstanding anything in this Lease to the
contrary, the School Board's rights to possession of the Leased Property and all its
other rights under this Lease are subordinate to the rights of the beneficiary under
the Deed of Trust. Any judicial sale of, or foreclosure on, the Leased Property
pursuant to the Deed of Trust terminates all the School Board's rights under this
Lease.
ARTICLE IV
LEASE TERM
4.1. Commencement. The Lease Term commences on the date of the initial
execution and delivery of this Lease.
4.2. Termination. The Lease Term terminates upon the earliest of the following:
(a) Judicial sale of or foreclosure on the Leased Property under the Deed of
Trust;
(b) The occurrence of an Event of Default under this Lease and subsequent
termination by the County pursuant to Section 11.2; or
3
52
(c) The date that is 30 days after [May 1, 2036], which is the scheduled date for
final payment on the Financing Contract, except that the Lease Term ends immediately
upon the termination of the Financing Contract if the Financing Contract is terminated
following an event of default by the County under the Financing Contract.
Termination of the Lease Term terminates all the County's obligations under this Lease,
and terminates the School Board's rights of possession under this Lease; but all other
provisions of this Lease, including the receipt and disbursement of funds, continue until the
Financing Contract is discharged as provided therein.
ARTICLE V
QUIET ENJOYMENT; RECONVEYANCE
5.1. Quiet Enjoyment. The County covenants that the School Board will
during the Lease Term peaceably and quietly have and hold and enjoy the Leased Property
without suit, trouble or hindrance from the County, except as expressly required or
permitted by this Lease. The County will not interfere with the School Board's quiet use
and enjoyment of the Leased Property during the Lease Term. The County will, at the
School Board's request and the County's cost,join and cooperate fully in any legal action in
which the School Board asserts its right to such possession and enjoyment, or which
involves the imposition of any taxes or other governmental charges on or in connection
with the Leased Property. In addition, the School Board may at its own expense join in any
legal action affecting its possession and enjoyment of the Leased Property and will be
joined (to the extent legally possible, and at the School Board's expense) in any action
affecting its liabilities under this Lease.
The provisions of this Article are subject to rights to inspect the Leased Property
granted to parties under the Financing Contract.
5.2. Reconveyance. The County covenants that it will convey the Leased
Property to the School Board within 30 days after the date of the County's final payment
on the Financing Contract, subject to the priority of the Deed of Trust as described in
Section 3.2. The County will make this conveyance pursuant to a deed in form and
substance reasonably acceptable to each party, and free and clear of all encumbrances other
than (a) any encumbrances existing at the time of the original conveyance of the Leased
Property from the School Board to the County, (b) any encumbrances that arise by
operation of law without regard to action or inaction by the School Board or the County
(such as regulatory encumbrances or encumbrances related to condemnation by another
governmental entity), (c) encumbrances created by the School Board's action, or (d)
encumbrances to which the School Board consents or to which it has previously consented.
4
53
ARTICLE VI
CONSIDERATION FOR LEASE
6.1. Use as School; Assumption of Obligations. In partial consideration for its
acquisition of rights to use the Leased Property during the Lease Term, the School Board
agrees to use the Leased Property for public education in fulfillment of its obligation,
shared by the County, to provide for educational services in the County. In addition, in
consideration of its rights under this Lease, the School Board undertakes the obligations
imposed on it under this Lease, including those imposed by Section 7.1.
6.2. Payments. In partial consideration for its acquisition of rights to use the
Leased Property during the Lease Term and its option to purchase the Leased Property, the
School Board hereby agrees to pay to the County total rent for the Lease Term in the
amount of Ten Dollars, payable in advance on the Closing Date, receipt of which the
County hereby acknowledges.
ARTICLE VII
SCHOOL BOARD'S ASSUMPTION OF COUNTY'S OBLIGATIONS
7.1. Assumption of Obligations. (a) The School Board assumes the
County's obligations under Financing Contract Sections 4.1 (care and use), 4.2 (utilities),
4.5 (compliance with requirements), 4.6(b) (regarding use and operation), 4.8 (payment of
taxes and other governmental charges), 4.9(a) (property damage insurance), 5.2 (prevention
of liens), 6.1 (regarding notice of damage, repair or replacement from Net Proceeds), and
7.2 (compliance with environmental laws). The parties agree that the School Board may
fulfill its requirements to maintain insurance through pooled risk and similar programs
sponsored by or affiliated with the North Carolina School Boards Association, such as the
North Carolina School Boards Association Insurance Trust. [Note: all references to
sections of the Financing Contract will be updated after that document is updated to reflect
the terms of the financing proposal that the County accepts in mid-April.]
(b) Notwithstanding the foregoing, the County retains its rights under Article VI
of the Financing Contract to direct the use of Net Proceeds. All payments of Net Proceeds
are to be made to the County.
7.2. Transfer of Rights. In order to allow the School Board to carry out its
obligations under Section 7.1, the County transfers its rights under Section 4.7 of the
Financing Contract (regarding maintenance, repairs and modifications of and to the Leased
Property). Nothing in this Section, however, may be construed as in any way assigning or
5
54
delegating to the School Board any of the County's rights or responsibilities to make
decisions regarding the School Board's capital and operating budgets.
7.3. County's Cooperation. (a) The County will cooperate fully with the
School Board in filing any proof of loss or taking any other action under this Lease.
Except as and to the extent provided in subsection (b), in no event will the County or the
School Board voluntarily settle, or consent to the settlement of, any proceeding arising out
of any insurance claim with respect to the Leased Property without the other's written
consent.
(b) In the case of a proceeding as to which amounts are to be paid out by the
County or the School Board, either party may settle or consent to settlement without the
other's consent if the amount of the settlement (i) is less than $50,000 or (ii) is to be paid
entirely by insurance providers or other third parties.
7.4. Advances; Performance of Obligations. If the School Board fails to pay
any amount required to be paid by it under this Lease, or fails to take any other action
required of it under this Lease, the County may (but is under no obligation to) pay such
amounts or perform such other obligations. The School Board agrees to reimburse the
County for any such payments or for its costs incurred in connection with performing such
other obligations, together with interest thereon at the annual rate of 4.00%.
ARTICLE VIII
DISCLAIMER OF WARRANTIES; OTHER COVENANTS
8.1. Disclaimer of Warranties. THE COUNTY MAKES NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR FITNESS FOR A PARTICULAR USE OF THE
LEASED PROPERTY OR ANY PART THEREOF OR ANY OTHER
REPRESENTATION OR WARRANTY WITH RESPECT TO THE LEASED
PROPERTY OR ANY PART THEREOF. In no event will the County be liable for any
direct or indirect, incidental, special or consequential damage in connection with or arising
out of this Lease or the existence, furnishing, functioning or use by any of them of any
item, product or service provided for herein.
The School Board acknowledges that the County has not designed the proposed
new auxiliary gymnasium, any other aspect of Grady Brown, or any other improvements
on the Site (together, the "Improvements"), that the County has not supplied any plans or
specifications with respect thereto and that the County (a) is not a manufacturer of, nor a
dealer in, any of the component parts of the Improvements or similar facilities, (b) has
not made any recommendation, given any advice nor taken any other action with respect
6
55
to (1) the choice of any supplier, vendor or designer of, or any other contractor with
respect to, the Improvements or any component part thereof or any property or rights
relating thereto, or (2) any action taken or to be taken with respect to the Improvements
or any component part thereof or any property or rights relating thereto at any stage of the
construction thereof, (c) has not at any time had physical possession of the Improvements
or any component part thereof or made any inspection thereof or any property or rights
relating thereto, and (d) has not made any warranty or other representation, express or
implied, that the Improvements or any component part thereof or any property or rights
relating thereto (1) will not result in or cause injury or damage to persons or property, (2)
have been or will be properly designed, or will accomplish the results which the School
Board intends therefor, or (3) are safe in any manner or respect.
8.2. Further Assurances; Corrective Instruments. The School Board and the
County agree that they will, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, such supplements hereto and such further
instruments as may reasonably be required for correcting any inadequate or incorrect
description of the Leased Property hereby leased, or intended to be leased, or for otherwise
carrying out the intention of this Lease.
8.3. Covenant against Financing Contract Defaults. The School Board
covenants not to take or omit to take any action the taking or omission of which would
cause the County to be in default, technical or otherwise, under the Financing Contract. In
particular, the School Board covenants not to make any use of Grady Brown that would
cause the County's obligations to make Installment Payments under the Financing Contract
to be "private activity bonds" within the meaning of the Code, such as entering into any
leases of any part of the Leased Property or entering into any contracts for the use,
management or operation of any part of the Leased Property without the County's consent.
If the School Board takes or omit to take any such action, then, to the extent permitted by
law, the School Board will proceed with all due diligence to take such actions as may be
necessary to cure such default.
8.4. Compliance with Requirements. The School Board and the County must
observe and comply promptly with all current and future orders of all courts having
jurisdiction over the Leased Property or any portion thereof(or be diligently and in good
faith contesting such orders), and all current and future requirements of all insurance
companies writing policies covering the Leased Property or any portion thereof.
8.5. Personal Property Insurance. The School Board acknowledges that it is
solely responsible for insuring the personal property owned by the School Board that at any
time or from time to time may be located at the Leased Property.
8.6. Permits and Other Authorizations. The School Board covenants and
represents to the County that the School Board has obtained all permits, consents,
approvals or authorizations of all governmental entities and regulatory bodies required as a
56
condition to the School Board's entering into this Lease. The School Board further
covenants and warrants that prior to the use of the new auxiliary gymnasium, the School
Board will obtain, and will thereafter maintain through the duration of this Lease, all
further permits, consents, approval or authorizations of all governmental entities and
regulatory bodies necessary to operate it.
ARTICLE IX
TITLE TO LEASED PROPERTY
Except for personal property purchased by the School Board at its own expense,
title to the Leased Property and any and all additions and modifications to or replacements
of any portion of the Leased Property will be held in the County's name, subject only to
Permitted Encumbrances, until foreclosed upon or conveyed as provided in the Financing
Contract or the Deed of Trust, notwithstanding (a) the occurrence of one or more events of
default as defined in Financing Contract Section 10.1; (b) the occurrence of any event of
damage, destruction, condemnation or construction or title defect; or (c) the County's
violation of any provision of this Lease.
The School Board has no right, title or interest in the Leased Property or any
additions and modifications to or replacements of any portion of the Leased Property,
except as expressly set forth in this Lease, or the deed by which the School Board
conveyed title to the Leased Property to the County.
ARTICLE X
SUBLEASING,ASSIGNMENT,AND INDEMNIFICATION
10.1. School Board's Subleasing and Assignment. (a) Except as provided in
subsection (b), the School Board may not sublease the Leased Property, in whole or in part,
enter into other agreements for the use of any part of the Leased Property or assign any of
its rights or obligations under this Lease, without the County's prior written consent.
(b) The School Board may enter into agreements for the use of portions of the
Leased Property with state and local (but not federal) government entities, and may allow
for the occasional use of portions of the Leased Property by federal or non-government
entities, in each case without the necessity of obtaining the County's prior consent. The
School Board must certify to the County, by September 15 of each year, that the total use
of the Leased Property by entities other than the School Board did not exceed 8% of the
total use of the Leased Property for the Fiscal Year that ended the prior June 30. The
School Board shall provide the County with such additional information as the County may
request to document compliance with the County's covenants under the Financing Contract
8
57
related to the use of the property and the continuing general exemption from federal
income tax of the County's payments of interest under the Financing Contract.
(c) The School Board's obligations under Section 8.3 take priority over the
School Board's rights under this Section 10.1. The School Board's allowing use of the
Leased Property pursuant to this Section 10.1 will not constitute a violation of the School
Board's obligations under Section 6.1 or otherwise to use the Leased Property for public
education purposes.
10.2. Indemnification. To the extent permitted by law, the School Board will
indemnify and save the County harmless against and from all claims, by or on behalf of
any person, firm, corporation or other legal entity, arising from the operation or
management of the Leased Property during the Lease Term, including any arising from:
(a) any condition of the Leased Property, or (b) any negligent act of the School Board or of
any of its agents, contractors or employees or any violation of law by the School Board or
breach of any covenant or warranty by the School Board under this Lease.
The School Board will, upon notice from the County, defend or pay the cost of
defending the County in any action or proceeding brought in connection with any claims
arising out of circumstances described above.
ARTICLE XI
EVENTS OF DEFAULT
11.1. Events of Default. The following will be "Events of Default" under this
Lease and the term "Default" shall mean, whenever it is used in this Lease, any one or
more of the following events:
(a) The School Board's failure to observe and perform any covenant, condition
or agreement on its part to be observed or performed for a period of 30 days after written
notice specifying the failure and requesting that it be remedied has been given to the
School Board by the County, unless the County and the Lender agree in writing to an
extension of such time prior to its expiration.
(b) The dissolution or liquidation of the School Board or the voluntary initiation
by the School Board of any proceeding under any federal or State law relating to
bankruptcy, insolvency, arrangement, reorganization, readjustment of debt or any other
form of debtor relief, or the initiation against the School Board of any such proceeding
which remains undismissed for sixty days, or the entry by the School Board into an
agreement of composition with creditors or the School Board's failure generally to pay its
debts as they become due.
9
58
11.2. Remedies on Default. Whenever any Event of Default is continuing, the
County may take one or any combination of the following remedial steps:
(a) Cure the default and seek reimbursement from the School Board for all
expenses incurred in curing the default;
(b) Have reasonable access to and inspect, examine and make copies of the
School Board's books and records and accounts during the School Board's regular business
hours, if reasonably necessary in the County's opinion; or
(c) Take whatever action at law or in equity may appear necessary or desirable
to collect the amounts then due and thereafter to become due, or to enforce performance
and observance of any obligation, agreement or covenant of the School Board under this
Lease; or
(d) If the County determines that the foregoing remedies are inadequate or
inappropriate to cure the Event of Default or otherwise protect the County's interests, the
County may terminate this Lease, evict the School Board from the Leased Property or any
portion thereof and re-lease the Leased Property or any portion thereof.
11.3. No Remedy Exclusive. No remedy conferred upon or reserved to the
County in this Lease is intended to be exclusive, and every such remedy will be cumulative
and will be in addition to every other remedy given under this Lease and every remedy
now or hereafter existing at law or in equity. No delay or omission to exercise any right or
power accruing upon any default will impair any such right or power, and 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 County to exercise any remedy reserved in this Article XI, it will not
be necessary to give any notice, other than such notice as may be required in this Article
XI.
11.4. Waivers. If either party should breach any agreement contained in this
Lease and thereafter the other party waives the breach, such waiver is limited to the
particular breach so waived and does not waive any other breach under this Lease. A
waiver of an event of default under the Financing Contract constitutes a waiver of any
corresponding Event of Default under this Lease; provided that no such waiver extends to
or affects any subsequent or other Event of Default under this Lease or otherwise impairs
any right consequent thereon.
11.5. Agreement To Pay Legal Fees and Costs. If either party defaults under any
Lease provision and the other party employs attorneys or incurs other expenses for the
collection of any payments due under this Lease, or the enforcement of performance or
observance of any obligation or agreement on the part of the defaulting party contained in
this Lease, each party agrees that, to the extent permitted by law, it will then pay on
demand to the non-defaulting party such legal fees and costs incurred by the non-defaulting
10
59
party, to the extent that such attorneys' fees and expenses may be determined to be
reasonable by a court of competent jurisdiction.
11.6. Waiver of Appraisement, Valuation, Stay, Extension, and Redemption
Laws. The School Board and the County agree, to the extent permitted by law, that upon a
termination of the Lease Term by reason of an Event of Default, neither the School Board
nor the County nor any one claiming through or under either of them will set up, claim or
seek to take advantage of any appraisement, valuation, stay, extension or redemption laws
now or hereafter in force in order to prevent or hinder the enforcement of the Financing
Contract or of any remedy provided under this Lease or under the Financing Contract; and
the School Board and the County, for themselves and all who may at any time claim
through or under either of them, each hereby waives, to the full extent that it may lawfully
do so, the benefit of such laws.
ARTICLE XII
MISCELLANEOUS
12.1. Notices. Any communication provided for in this Lease must be in writing.
Any communication under this Lease will be considered given on the delivery date
shown on a United States Postal Service certified mail receipt, or a delivery receipt (or
similar evidence) from a national commercial package delivery service, if addressed as
follows:
(a) If intended for the County, addressed to it at the following address: Orange
County, Attention: County Manager, Re: Notice under 2016 School Financing Lease —
Grady Brown Project, Post Office Box 8181, Hillsborough,North Carolina 27278
(b) If intended for the School Board, to Superintendent, Chapel Hill - Carrboro
Schools, Attention: Notice under 2016 School Financing Lease — Grady Brown Project,
200 East King St., Hillsborough, North Carolina 27278
12.2. Binding Effect. This Lease will inure to the benefit of and be binding upon
the School Board and the County, and their respective successors and assigns, subject,
however, to the limitations contained in Article X.
12.3. Amendments, Changes and Modifications. This Lease may not be
amended without the written consent of both parties.
12.4. Net Lease. This Lease will be deemed and construed to be a "net lease," and
the School Board will pay absolutely net during the Lease Term all other payments
required under this Lease, free of any deductions, and without abatement or set-off.
11
60
12.5. Payments Due on Holidays. If the date for making any payment or the last
day for performance of any act or the exercising of any right, as provided in this Lease,
shall not be a Business Day, such payment must be made or act performed or right
exercised on the next preceding day that is a Business Day.
12.6. Severability. If any provision of this Lease, other than the requirement of the
County to provide quiet enjoyment of the Leased Property, is held invalid or unenforceable
by any court of competent jurisdiction, such holding will not invalidate or render
unenforceable any other provision hereof.
12.7. Execution in Counterparts. This Lease may be simultaneously executed in
several counterparts, each of which will be an original and all of which will constitute but
one and the same instrument.
12.8. Applicable Law. The parties intend that this Lease will be governed by and
construed in accordance with North Carolina law.
12.9. School Board and County Representatives. Whenever under the
provisions hereof the approval of the School Board or the County is required to take some
action at the request of the other, unless otherwise provided, such approval or such request
must be given (a) for the County by the County Representative, and (b) for the School
Board by its Superintendent, its Chair or anyone designated in writing by the Chair or
Superintendent to the County Manager to perform any act (or any specified act) under this
Lease, and in any such case the School Board and the County will be authorized to act on
any such approval or request.
12.10. Third-Party Beneficiary. The County and the School Board intend that the
Lender will be the only third-party beneficiary of this Lease.
12.14. Memorandum of Lease. At the request of either party, the County and the
School Board will at any time execute a memorandum of this Lease legally sufficient to
comply with the relevant provisions of the North Carolina General Statutes.
[The remainder of this page has been left blank intentionally.]
12
61
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed in their corporate names by their duly authorized officers, all as of May 1, 2016.
[SEAL] ORANGE COUNTY,
ATTEST: NORTH CAROLINA
By:
Donna S. Baker Bonnie B. Hammersley
Clerk, Board of Commissioners County Manager
[SEAL] THE ORANGE COUNTY
ATTEST: BOARD OF EDUCATION
By:
Donna B. Coffey
Todd Wirt Chair
Secretary
This instrument has been preaudited in the manner
required by The Local Government Budget and
Fiscal Control Act.
Gary Donaldson
Finance Officer
Orange County,North Carolina
[Lease dated as of May 1, 2016]
13
62
STATE OF NORTH CAROLINA; ORANGE COUNTY
I, , a Notary Public of said State and County, do
hereby certify that Bonnie B. Hammersley and Donna S. Baker personally came before me
this day and acknowledged that they are the County Manager and the Clerk of the Board of
Commissioners, respectively, of Orange County, North Carolina, and that by authority duly
given and as the act of such County, the foregoing instrument was signed in the County's
name by such County Manager, sealed with its corporate seal and attested by such Clerk.
Witness my hand and official seal this day of May, 2016.
Notary Public
My commission expires:
STATE OF NORTH CAROLINA; ORANGE COUNTY
I, , a Notary Public of said State and County, do
hereby certify that Todd Wirt, with whom I am personally acquainted, who, being by me
duly sworn, says that he is the Secretary of The Orange County Board of Education and
that Donna B. Coffey is the Chair of such Board of Education, the Board described in and
which executed the foregoing instrument; that he knows the common seal of said Board;
that the seal affixed to the foregoing instrument is said common seal, and the name of the
Board was subscribed thereto by the said Chair, and that said Chair and Secretary
subscribed their names thereto, and said common seal was affixed, all by order of the
Board and that the said instrument is the act and deed of said Board.
Witness my hand and official seal this day of May, 2016.
Notary Public
My commission expires:
14
63
EXHIBIT A — Site Description
[To come.]
15
64
Attachment 5
S*H draft of April 4
PROJECT COMPLETION AND AGENCY AGREEMENT
THIS PROJECT COMPLETION AND AGENCY AGREEMENT is dated as
of May 1, 2016, and is entered into by and between ORANGE COUNTY, NORTH
CAROLINA (the "County"), and THE ORANGE COUNTY BOARD OF
EDUCATION (the "School Board").
WITNESSETH:
The County and the School Board have agreed to carry out capital improvements
for public schools, including the installation of new roofs (the "Project") for Grady Brown
Elementary School ("Grady Brown").
As part of this plan, the County has executed and delivered an Installment
Financing Contract (the "Financing Contract") providing for the financing of the Project.
The County and the School Board have agreed that the School Board will be
responsible for carrying out the Project for and on behalf of both itself and the County,
under the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises set
forth in this Agreement and for other valuable consideration, the parties agree as
follows:
1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined have the
meanings assigned in the Financing Contract.
2. APPOINTMENT; ACCEPTANCE.
The County and the School Board agree that the School Board assumes all rights,
duties and responsibilities for carrying out the Project, except as limited in this
Agreement. The School Board will appoint no further agent to assume these rights or
carry out these duties and responsibilities without the County's prior written consent.
3. CONTRACTS.
The School Board, with the County's approval, may enter into any purchase order,
contract or change order with respect to the Project in the School Board's name. The
County ratifies any such prior actions by the School Board. Alternatively, the County
65
may require that any future purchase orders or contracts be entered into by the County in
its own name or be entered into by the County and the School Board jointly.
All contracts must comply with the public procurement laws and any other State
laws applicable to either the School Board or the County, as appropriate, with regard to
entering into such contracts. The School Board must provide that contractors provide
bonds and insurance coverages that comply with the requirements of North Carolina law.
4. RIGHTS AND RESPONSIBILITIES FOR THE PROJECT.
The School Board will be responsible for carrying out the Project, and the School
Board will have all rights to supervise the Project.
The County and its representatives and agents have the right to enter upon the
Project sites and inspect the Project work from time to time during construction and after
the completion of construction. The School Board will cause any vendor, contractor or sub-
contractor to cooperate with the County and its representatives and agents during such
inspections. No right of inspection or approval granted in this Section imposes upon the
County any duty or obligation whatsoever to undertake any inspection or to make any
approval. No inspection made or approval given by the County imposes upon the County
any duty or obligation whatsoever to identify or correct any defects in Grady Brown or to
notify any person with respect thereto. The County makes no warranties (either express or
implied) as to the quality or fitness of any improvement, any such inspection and approval
being solely for the County's benefit.
5. SCHOOL BOARD'S RIGHT TO ENFORCE CONTRACTS.
So long as the School Board is not in default of any of the provisions of this
Agreement and the "Lease," as defined below, the School Board will have the right to
enforce in its own name or in the County's name purchase orders or contracts entered in
the County's name or the School Board's name for the Project, including the approval of
any change orders to any contracts; provided however, that if the School Board is in
default of any provisions of this Agreement or the Lease for a period of thirty days after
being notified by the County of such default without cure, the County will have the right
to terminate this Agreement and assume all the School Board's responsibilities for the
Project.
Upon any such termination of this Agreement, the School Board will assign to the
County any and all right, title and interest to any and all contracts relating to the Project,
including but not limited to any architect agreements, any and all engineering
agreements, any and all construction agreements, and any and all plans, specifications
and other drawings or documents prepared or to be prepared for the Project.
2
66
The School Board agrees to reimburse the County for any and all costs, expenses,
and damages incurred by the County in the assumption of the rights and responsibilities
of the School Board due to such event of default without cure, and to indemnify and hold
the County harmless for any and all claims for damages by others related to such event of
default without cure. Any assignment by the County of any of its rights under the
Financing Contract will not prevent the County from asserting such rights and powers in
its own behalf.
The "Lease" is the Lease between the County and the School Board dated as of
May 1, 2016, which provides for the School Board's continuing use of Grady Brown,
both during the Project period and then continuing throughout the County's financing
term.
6. DISBURSEMENTS FOR PROJECT COSTS.
The School Board will request funds from the County for the payment of Project
Costs, and will provide the County with the necessary information supporting a
requisition, such as an architect's payment certification. The County will have the right to
obtain such additional evidence as it deems appropriate to determine the accuracy of the
representations set forth in the form of requisition and the propriety of payment. The
School Board will provide the County with such information as the County may
reasonably request.
7. APPLICATION OF CASUALTY INSURANCE PROCEEDS.
Notwithstanding any provision of this Agreement, the County retains the sole
power to control and direct the application and distribution of proceeds of casualty
insurance applicable to Grady Brown.
8. RESERVATION OF RIGHTS.
This Agreement is not to be construed in any way as delegating or limiting the
County's rights under the Financing Contract, except as expressly provided in this
Agreement.
9. CONSIDERATION.
The County and the School Board are undertaking their mutual obligations under
this Agreement in partial consideration for, and in partial fulfillment of, their agreement
to carry out the Project.
[The remainder of this page has been left blank intentionally.]
3
67
IN WITNESS WHEREOF, the parties have caused this Project Completion and
Agency Agreement to be executed in their corporate names by their duly authorized
officers, all as of May 1, 2016.
ORANGE COUNTY,
NORTH CAROLINA
By:
Bonnie B. Hammersley
County Manager
THE ORANGE COUNTY
BOARD OF EDUCATION
By:
Todd Wirt
Superintendent
This instrument has been preaudited
in the manner required by The Local Government Budget and
Fiscal Control Act.
Gary Donaldson
Finance Officer
Orange County, North Carolina
[Project Completion and Agency Agreement dated as of May 1, 2016]
4
68
Attachment 6
Orange County,NC
2016 Installment Financing Contrac -First Bank Proposal
Estimated Debt Service Schedule*
ie*
A B C D E F G H I i
Estimated Debt Service- Estimated Debt Service- Estimated Debt Service-
Short Term Financing(7 Years) Long Term Financing(15 Years)*- Tot,_Einancin v
1
_
2 Fiscal:,ea=a Ps'l.�pa; interest Iota! Principal Irlterest Tote= Principal interest Total
1 39 000 6 9 0i 69 000 .9 0 i ...
�.`�. �04 000 _. v, v _, ,v _ �-r 894,084
333 355 333- - � 3 000... 9,124 888,124
• 2_,10 310,000--- �lv,��� �.... �� �v 1�v,;91 532,;91 103000 1n�,
,Q _ 317,000 33,203 5203 393,000 - 129,770 ..22, ' 710,000 167,973 877,973
• 2020 324,000 30,912 354,912 392,000 119,748 511,748 716,000 150,660 866,660
2021 332,000 23,460 355,460 109,752 724,000 3 857,212
s 2022 340,000 15,824 355,824 392,000 99,756 491,756 732,888 115,580 847,588
O 2023 343,000 8,004 6 004 392,000 39,760 481,760 -_ 01 000 97,764 8 .j.6 i
10 202 4 -... 391.000 79.764 470.764 39 h 000 .u ,64 0
-e r i� ,Y3-v-
2025 391,000 69,794 9.j 39 000 69,794 460,794
12 2026 -... 391.000 59.823 450.823 391.000 59.823 ,15
-e O VGA
l e 2027 _ - 391,000 49,853 440,853 39 000 9,353 440,853
14 2028 -... 391.000 c x-
882 30 882 391.000 39.882
15 2029 39 000 29,9 [ '20,9 [ 39 000 29,9 2 A
2030 -... 391.000 19.941 9 1 391.000 19.941
391,000 9,971 ,00,9'?.... 391,000 9,971 400,9
Es Total ...2,275,000 212,753 2,487,753 1,193,582 7,068,582 8,150,000 1,406,335 9,556,335.....
Preliminary andsubject to change
Davenport&Company LLC 1 4/6/2016
69
Municipal �-�° -�
Advisor Disclosure
���K� �������� �����~~�������� ~�
The U.S.Securities and Exchange Commission(the"SEC")has clarified that a broker,dealer or municipal securities dealer engaging in municipal advisory activities outside the scope of underwriting a particular issuance of
municipal securities should be subject to municipal advisor registration. Davenport& Company uo ("Davenport") has registered as a municipal advisor with the SEC. As a registered municipal advisor Davenport may
provide advice to a municipal entity or obligated person An obligated person is an entity other than a municipal entity such as a not for profit corporation,that has commenced an application or negotiation with an entity to
issue municipal securities on its behalf and for which it will provide support.If and when an issuer engages Davenport to provide financial advisory or consultant services with respect to the issuance of municipal securities,
Davenport is obligated to evidence such a financial advisory relationship with a written agreement.
When acting as a registered municipal advisor Davenport is a fiduciary required by federal law to act in the best interest of a municipal entity without regard to its own financial or other interests.Davenport is not a fiduciary
when it acts as a registered investment advisor,when advising an obligated person,or when acting as an underwriter,though it is required to deal fairly with such persons.
This material was prepared by public finance,or other non-research personnel of Davenport. This material was not produced by a research analyst although it may refer to a Davenport research analyst or research report.
Unless otherwise indicated,these views(if any)are the author's and may differ from those of the Davenport fixed income or research department or others in the firm. Davenport may perform or seek to perform financial
advisory services for the issuers of the securities and instruments mentioned herein.
This material has been prepared for information purposes only and is not a solicitation of any offer to buy or sell any security/instrument or to participate in any trading strategy. Any such offer would be made only after a
prospective participant had completed its own independent investigation of the securities, instruments or transactions and received all information it required to make its own investment decision, including, where
applicable, a review of any offering circular or memorandum describing such security or instrument. That information would contain material information not contained herein and to which prospective participants are
referred. This material is based on public information as of the specified date,and may be stale thereafter. We have no obligation to tell you when information herein may change We make no representation or warranty
with respect to the completeness of this material. Davenport has no obligation to continue to publish information on the securities/instruments mentioned herein. Recipients are required to comply with any legal or
contractual restrictions on their purchase, holding,sale,exercise of rights or performance of obligations under any securities/instruments transaction.
The securities/instruments discussed in this material may not be suitable for all investors or issuers. Recipients should seek independent financial advice prior to making any investment decision based on this material
This material does not provide individually tailored investment advice or offer tax, regulatory, accounting or legal advice. Prior to entering into any proposed transaction, recipients should determine, in consultation with
their own investment legal,tax, regulatory and accounting advisors,the economic risks and merits,as well as the legal,tax, regulatory and accounting characteristics and consequences, of the transaction. You should
consider this material as only a single factor in making an investment decision
The value of and income from investments and the cost of borrowing may vary because of changes in interest rates,foreign exchange rates,default rates, prepayment rates,securities/instruments prices, market indexes,
operational or financial conditions or companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions Past performance is not necessarily a guide
to future performance and estimates of future performance are based on assumptions that may not be realized. Actual events may differ from those assumed and changes to any assumptions may have a material impact
on any projections or estimates Other events not taken into account may occur and may significantly affect the projections or estimates. Certain assumptions may have been made for modeling purposes or to simplify the
presentation and/or calculation of any projections or estimates, and Davenport does not represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated
returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein. This material may not be sold or redistributed without the prior written consent of
Davenport. Version 1.13.1oon I MBI To
DAVENPORT 8L COMPANY