HomeMy WebLinkAboutAgenda - 03-21-2000-5a,. -
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- ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: March 21, 2000
Action Agenda
Item No.
SUBJECT: Approval of Resolution Concerning Revised Documents Governing Orange
Count Small Business Loan Pro ram
DEPARTMENT: Economic Development PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
Resolution Approving Revised Documents
Governing the Orange County Small
Business Loan Program (Attachment A)
Small Business Loan Program Support
Agreement (Attachment B)
Loan Agreement (Attachment C)
Revised Operating Policies and
Procedures (Attachment D)
INFORMATION CONTACT:
Dianne Reid, ext 2325
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 336-227-2031
PURPOSE: To approve the legal documents and policies and procedures governing the
Orange County Small Business Loan Program and authorize their execution.
BACKGROUND: Last November, the Board of Directors of the Orange County Small Business
Loan Program Company held its initial organization meeting. The directors, who include three
county officials and six bank representatives, agreed that the legal documents governing the
Company should be circulated among the participating lenders for comments and revisions,
then brought back to the Board of County Commissioners for final approval. The legal
documents -drafted by the County Attorney and Robert Jessup, Esq. -govern the operation of
the Orange County Small Business Loan Program. The attached documents (which have been
revised based upon lender comments) include:
• the Support Agreement (Attachment B) which spells out the relationship between the non-
profit Orange County Small Business Loan Program Company and the County;
• the Loan Agreement (Attachment C) which spells out the relationship between the Orange
County Small Business Loan Program Company and the nine banks who have agreed to be
part of the loan program; and
• Revised Operating Policies and Procedures governing the small business loan program
(Attachment D).
All of the participating lenders, and the Board of Directors of the Loan Program Company have
approved the documents.
FINANCIAL IMPACT: The approval of the documents has no unbudgeted financial impact.
The County's loan loss reserve was previously funded.
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RECOMMENDATION(S): The Manager recommends that the Board approve the Resolution.
AttachmemC A
Resolution Re ardin Small Business Loan Pro ram
WHEREAS:
Orange County's Board of Commissioners (the "Board") has determined that it is
appropriate and desirable for the County to stimulate the creation of good jobs for Orange
County citizens as well as to stimulate successful business development and expansion in
Orange County. To that end, the Board has determined to provide far the creation of a
small business loan company to serve as a lender to small businesses, and to support the
company and a program of small business loans by appropriating funds to serve as a loan
loss reserve for the loan program.
The County Manager has presented to this meeting the Articles of Incorporation
and Bylaws for the loan company, along with proposed forms of a "Support Agreement"
and a "Loan Agreement" to- carry out the loan program and a final revised version of
proposed loan program guidelines (collectively referred to below as the "Loan Program
Documents").
BE IT RESOLVED by the Board of Commissioners of Orange County, North
Carolina, as follows:
1. The County approves the Loan Program Documents as presented to this
meeting. The Clerk of this Board shall retain with the permanent records of this meeting
copies of the draft Loan Program Documents as so presented.
2. The Board's Chair is authorized and directed to execute and deliver the
Support Agreement and the Loan Agreement in final forms, and the Clerk to this Board is
authorized and directed to affix the County's seal to such agreements and to attest the
same. The Support Agreement and the Loan Agreement shall be in substantially the
forms submitted to this meeting, with such changes as the Chair may approve upon
recommendation from the County Manager and the County Attorney. The Chair's
execution of such documents shall constitute conclusive evidence of the Chair's approval
of any such changes.
3. The County Manager is authorized and directed to hold executed copies of
the Support Agreement and the Loan Agreement, and any other documents appropriate
for the purposes of this resolution, in escrow on the County's behalf until the conditions
for the delivery of such documents have been completed to his satisfaction, and
thereupon to release the executed copies of such documents for delivery.
~. All County officers are authorized and directed to deliver all certificates
and instruments and to take all such further action as they may consider necessary ar
desirable in connection with the execution and delivery of the Laan Program Documents
and otherwise to initiate the County's small business loan program. All other actions of
County officers in furtherance of the purposes and intents of this resolution are ratified,
approved and confirmed.
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S. .All other resolutions, or parts thereof, in conflict with this resolution are
repealed to the extent of the, conflict. This resolution shall take effect immediately.
Upon motion duly made and seconded the foregoing resolution was passed by the
following votes:
Ayes:
Noes:
I, Beverly A. Blythe, Clerk to the Board of Commissioners far the County of
Orange, North Carolina, DO HEREBY CERTIFY that the foregoing is a true copy of so
much of the proceedings of said Board at a meeting held on , 2000, as
relates in any way to the adoption of the foregoing at~d that said proceedings are recorded
in Minute Book No. of the minutes of said Board
WITNESS my hand and the seal of said County, this day of ,
2000.
[SEAL]
Beverly A. Blythe
Clerk to the Board of Commissioners
Orange County, North Carolina
Attachment B
Draft of March 8, 2000
SMAi,i. BUSINESS LOAN PROGRAM SL~PORT AGRFEMF.NT
THIS SMALL BUSINESS LOAN PROGRAM SUPPORT AGREEMENT is
dated as of March , 2000 (the "Support Agreement"), and is between ORANGE
COUNTY SMALL BUSINESS LOAN PROGRAM COMPANY, a North Cazolina
nonprofit corporation (the "Company"), and ORANGE COUNTY, NORTH
CAROLINA, a North Carolina political subdivision (the "County").
WHEREAS:
The County has determined that it is appropriate and desirable for the County to
stimulate the creation of good jobs for Orange County citizens as well as to stimulate
successful business development and expansion in Orange County. To that end, the
County has determined to provide for the creation of the Company to serve as a lender to
small businesses. The County has also determined to support the Company as provided in
this Support Agreement, to enable the Company to borrow funds far re-lending to small
businesses in furtherance of the County's policy.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Support Agreement and for other good and valuable consideration, the parties agree as
follows:
ARTICLE I
COMPANV'C A F NT TO C RRY O iT OAN pR0 AM
1.01. To carry out the County's public purposes as described above, upon the
terms and conditions set out in this Support Agreement and subject to the limits imposed
by this Support Agreement, the Company agrees to carry out the Loan Program pursuant
to the Guidelines.
1.02. The Company shall use its reasonable discretion in its interpretation of the
Guidelines. The Company in its discretion may at any time request further interpretation
or clarification of the Guidelines from the County, and the County may at any time
amend the Guidelines.
1.03, (a) The Company shall notify the County each time the Company
determines to make a Program Loan. The notice shall include a copy of the commitment
letter sent to the borrower, identifying the borrower and the principal amount of the loan,
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and shall indicate the total of the principal balances of all Program Loans that will be
outstanding after the making of such loan to such borrower.
(b) Within five Business Days after the County's receipt of a notice as
described in subsection (a) above, the County shall send notice to the Company
acknowledging the Company's intent to make a Program Loan in partial reliance upon
the County's obligations under this Support Agreement.
1.04. The Company shall put in place and administer a commercially reasonable
program of collection on overdue Program Loans. The Company shall submit its general
overall plan for collections to the County; and the overall plan shall be subject to the
County's approval. The Company shall thereafter be free in its. reasonable discretion to
administer the plan so approved by the County.
ARTxCLE I~
CU~~~~~S.~S~tEEMENT TO PROVIDE LOAN LOSS RESERVE
2.01. (a) The County agrees to provide. the Loan Loss Reserve to support the
Loan Program. As provided and described below, County will make payments to the
Company. from the Loan Loss Reserve for each Loan Loss.
(b) The County has previously appropriated $150,000 to serve as the Loan
Lass Reserve. The Loan Loss Reserve exists as a separate account for accounting
purposes on the County's books and records, and the County may not use the amounts
designated and appropriated for the Loan Loss Reserve for any other purpose without
additional action by the County's Board of Commissioners. To the extent permitted by
law, the County agrees not to reduce the amount available as the Loan Lass Reserve at
any time before the Termination Date.
2.02. (a) Within five Business Days after receiving notice from the Company
of a Loan Loss, as provided in Section 4.1 of the Loan Agreement, the County shall pay
to the Company, but only from the Loan Loss Reserve and for deposit in the Company
Loan Loss Account, an amount equal to 30% of the Loan Loss stated in such notice. The
Company's determination of a Loan Loss shall bind the County in the absence of
manifest error.
(b) Notwithstanding any other provision of this Support Agreement, however,
(i) the County shall have no obligation to make any payment from the Loan Loss Reserve
at any time that the Company or the Banks are in default under this Support Agreement
or the Loan Agreement, (ii) the County shall have no obligation to make payments from
the Loan Loss Reserve in an aggregate amount exceeding $150,000, and (iii) the County
shall have no obligation to make any payment from the Loan Loss Reserve after the
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Termination Date.
ARTICLE III
I PE TI
3.01. (a) By Mazch 1 of each yeaz, begi:nnixig Mazch 1, 2001, the Company
shall notify the County of its proposed budget for Administrative Expenses for the
coming Fiscal Year. The County shall provide for the County Board to consider
approving the Company's proposed budget as part of the County's normal annual
budgeting process. The Company shall be free to use any amounts paid to it by the
County (other than amounts paid from for the Loan Loss Reserve) for its Administrative
Expenses. Promptly upon the initial delivery of this Support Agreement, the Company
and the County shall work together diligently and in good faith to establish an initial
budget for the Company's operations and its Administrative Expenses for the period
between the date of initial delivery of this Support Agreement and June 30, 2001.
(b) The Company agrees that it shall endeavor over time to provide for full
funding of its Administrative Expenses through the passing along of costs to Loan
Program borrowers (bath through the assessment and collection of loan fees and through
interest rate mark-ups).
3.02. By August 1 of each yeaz, beginning August 1, 2000, the Company shall
provide a written report to the County describing Company's activities for the most
recently completed Fiscal Year. Each such report shall, at a minimum, specify (a) the
amount and borrower for each Program Loan made by Company in the applicable Fiscal
Year, (b) the outstanding balance and borrower for each Program Loan outstanding at the
end of such Fiscal Year, and (c) a summary of cash and investments on hand at the end of
the Fiscal Year.
3.03. (a) Promptly at the end of each Fiscal Yeaz, the Company, at its own
cost, shall provide for the conduct of an independent annual audit of its books and records
by an accounting f rm reasonably acceptable to the County. The Company shall send a
copy of such audit to the County promptly upon the Company's acceptance of the audit.
(b) ~ The Company shall famish to the County, at such times as the County shall
request, all other financial information as the County may request. The Company shall
penmit the County or its agents and representatives to inspect the Company's books and
records and make copies and extracts. The County, however, recognizes that the County's
coming into possession of certain Company records may result in the unwanted exposure to
publicity of confidential information of Program Loan borrowers, and the County agrees to
obtain copies of such borrower information only when the County deems such copies
necessary for carrying out its oversight of the Company and the County funds supporting
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the Company and the Loan Program.
3.04. The Company shall not amend any provision of its Governing Documents
without the, County's prior express approval.
ARTICLE IV
RFPUFCFNTATION W RRANTIFc
The County and Company hereby represent and warrant, one to the other, as
follows:
(a) Each has full power and authority to enter into this Support Agreement, and
each has duly authorized, executed and delivered this Support Agreement.
(b) The execution and delivery of this Support Agreement, the approval and
consummation of the transactions contemplated by this Support Agreement, and the
fulfillment of the terms and conditions of this Support Agreement do not and will not
constitute on the part of either party a breach of or default under any mortgage, contract
or other agreement or instrument to which such organization is a party or by which it is
bound, or result in any material breach of any existing law, public administrative rule or
regulation, judgment, court order or consent decree to which such organization is subject.
(c) There is no action, suit, proceeding, inquiry or investigation, at law or in
equity; before or by any .court, public board or body, pending or known to be threatened
against or affecting the County (or any official thereof in an official capacity) or the
Company, nor to the best knowledge of the County or the Company is there any basis
therefor, wherein an unfavorable decision, ruling, or fmding would materially and
adversely affect the ability of such party to perform its obligations under this Support
Agreement or which would adversely affect, in any way, the validity or enforceability of
this Support Agreement.
(d) Upon the execution and delivery of this Support Agreement, all acts,
conditions and things required by the Constitution and statutes of the State of North
Carolina to have happened, exist and to be performed precedent to such execution and
delivery shall have happened, exist and. have been performed. This Support Agreement,
when executed and delivered by the Caunty and Company, will be the legal, valid and
binding obligation of each party, enforceable in accordance with its terms.
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ARTICLE V
S.O1. D (a) Upon the occurrence and continuation of
any Event of Default, the non-defaulting party may (i) incur and pay such reasonable
expenses for the defaulting party's account as may be necessary to cure the cause of any
default, (ii) avail itself of all remedies available under this Support Agreement, and (iii)
proceed to protect and enforce its rights under this Support Agreement by all means
available a law ar in equity, including by an action far the specific performance of any
covenant, agreement or other provision of this Support Agreement as may be most
effectual to protect and enforce such rights.
(b) All remedies under this Support Agreement are cumulative and may be
exercised concurrently or separately. The exercise of any one remedy shall not be deemed
an election of such remedy or preclude the exercise of any other remedy. If any Event of
Default shall occur and thereafter be waived, such waiver shall be limited to the
particular breach so waived and shall not be deemed a waiver of any other breach under
this Support Agreement.
5.02. To the extent permitted by law, the Company shall
indemnify, protect and save the County and its officers harmless from all liability,
obligations, losses, claims, damages, actions, suits, proceedings, costs and expenses,
including attorneys' fees and costs of investigation and discovery, arising out of,
connected with, or resulting directly or indirectly from the transactions contemplated by
this Support Agreement, the Loan Agreement or otherwise with respect to the Loan
Program. The indemnification arising under this Section shall, survive this Support
Agreement's termination.
5.03. fights of Third P~i~. The Banks are the only intended third-party
beneficiaries of this Support Agreement.
5.04. Limitation of Liabili o~Officials. No covenant, condition or agreement
contained in this Support Agreement shall be deemed to be a covenant, agreement or
obligation of a present or future officer, employee or agent of the Campany or the County
in such person's individual capacity. No Company or County officer, employee or agent
shall incur any personal liability with respect to any action taken pursuant to this Support
Agreement, provided such person acts in good faith.
5.05. ~,e b~-,~. The provisions of this Support Agreement .are hereby
declared to be severable. If any court of competent jurisdiction shall hold any provision
of this Support Agreement to be invalid and unenforceable, such holding shall not
invalidate any other provision.
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ARTICLE V
l1'II~CELLANEOUS
5.01. Remedies on Default. (a) Upon the occurrence and continuation of
any Event of Default, the non-defaulting party may (i) incur and pay such reasonable
expenses for the defaulting party's account as may be necessary to cure the cause of any
default, (ii) avail itself of all remedies available under this Support Agreement, and (iii)
proceed to protect and .enforce its rights under this Support Agreement by all means
available a law or in equity, including by an action for the specific performance of any
covenant, agreement or other provision of this Support Agreement as may be most
effectual to protect and enforce such rights.
(b) All remedies under this Support Agreement are cumulative and may be
exercised concurrently or separately. The exercise of any one remedy shall not be deemed
an election of such remedy or preclude the exercise of any other remedy. If any Event of
Default shall occur and thereafter be waived, such waiver shall be limited to the
particular breach so waived and shall not be deemed a waiver of any other breach under
this Support Agreement.
5.02. ~ ' i i To the extent permitted by law, the Company shall
indemnify, protect and save the County and its officers harmless from all liability,
obligations, losses; claims, damages, actions, suits, proceedings, costs and expenses,
including attorneys' fees and costs of investigation and discovery, arising out of,
connected with, or resulting dixectly or indirectly from the transactions contemplated by
this Support Agreement, the Loan Agreement or otherwise with respect to the Loan
Program. The indemnification arising under this Section shall survive this Support
Agreement's termination.
5.03. Rights of Third Parties. The Banks are the only intended third-party
beneficiaries of this Support Agreement.
5.04. f ili No covenant, condition or agreement
contained in this Support Agreement shall be deemed to be a covenant, agreement ar
obligation of a present or fixture officer, employee or agent of the Company or the County
in such person's individual capacity. No Company or County officer, employee or agent
shall incur any personal liability with respect to any action taken pursuant to this Support
Agreement, provided such person acts in goad faith.
5.05. Severabilitv. The provisions of this Support Agreement are hereby
declared to be severable. if any court of competent jurisdiction shall hold any provision
of this Support Agreement to be invalid and unenforceable, such holding shall not
invalidate any other provision.
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5:06. Applicable Law. The parties intend that North Carolina law shall govern
all matters pertaining to this Support Agreement.
5.07. ~ptices. (a) All notices, requests, approvals, demands and other
communications given or made in connection with the terms and provisions of this
Support Agreement shall be in writing (unless otherwise provided for in this Support
Agreement) and shall be deemed to have been given or made when either delivered by
hand or shown as delivered by a receipt for delivery from the United States Postal
Service, and sent as follows:
(i) If to the Company, addressed as follows: President, Orange County
Small Business Loan Program Company; Post Office Box 1177, Hillsborough, NC
27278; or,
(ii) If to the County, to Orange County Manager, Attn: Small Business
Loan Program Notice, 200 South Cameron St., Hillsborough, NC 27278.
(c) Either party may designate additional or different addresses for
communications by notice given under this Section to each the other party.
5.08. Definitions. Capitalized terms used in this Support Agreement and not
otherwise deemed shall have the meanings ascribed thereto in Exhibit A.
5.09. ®s,~ig Neither the County nor the Company shall transfer or
assign any interest in this Support Agreement without the other party's express prior
written consent. Subject to the specific provisions of this Support Agreement, however,
this Support Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
5.10. P.~rfQr~nance on H to idays. If the date for making any payment or the last
day for performance o£ any act or the exercising of any right shall not be a Business Day,
such payment shall be made or act performed or right exercised on or before the next
succeeding Business Day.
5.11. Entire A Bement; Amendme~#~, This Support Agreement constitutes the
entire contract between the parties with respect to its subject matter, and this Support
Agreement shall not be changed except in writing signed by both parties.
8.12. This Support Agreement may be executed in
several counterparts, including separate counterparts. Each shall be an original, but all of
them together constitute the same instrument.
IN WITNESS WHEREOF, the parties have caused this Support Agreement to be
signed, sealed and delivered in their corporate names by their duly authorized officers, all
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as of the date first above written.
[SEAL]
Dianne Reid
Secretary-Treasurer
[SEAL]
Beverly A. Blythe
Clerk, Board of Commissioners
This instrument has, been preaudited
in the manner required by The Local
Government Budget and Fiscal Control
Act.
Kenneth T. Chavious
Finance Officer
Orange County, North Carolina
Estiviis:
A -Definitions
[Small Business Loan Program Support
Agreement dated as of March ~, 2000]
ORANGE COUNTY SMALL BUSINESS
LOAN PROGRAM COMPANY
By
B. Troy Ferguson
President
ORANGE COUNTY, NORTH CAROLINA
By
Moses Carey, Jr.
Chair, Board of Commissioners
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Exhibit A -- Defin'h~ 'ans
For all purposes of this Support Agreement, the following terms shall have the
following meanings, unless the context cleazly requires otherwise:
"Administrative Expenses" means all of the Company's general and office
expenses of operation and of administration of the Loan Program, for such things as
office supplies and equipment, utilities, insurance, and banking and professional fees.
"Banks" means those financial institutions that are parties to the Loan Agreement
with the Company and the County.
"Business Day" means any day on which banks in North Cazolina are not by law
authorized or required to remain closed.
"Company Loan Lass Account" means the bank account or accounts awned by the
Company to which the Company directs the County to pay over amounts from the Loan
Loss Reserve upon a Loan Loss.
"County Board" means the County's governing Board of Commissioners, or any
successor to its functions, as from time to time constituted.
"Fiscal Year" means the County's fiscal year beginning July 1, or such other fiscal
year as the County may later lawfully establish.
"Event of Default" means any party's breaching or failing to perform or observe any
term, condition or covenant of this Support Agreement on its part to be observed or
performed for a period of 45 days after written notice specifying such failure and requesting
that it be remedied shall have been given to the defaulting party by the non-defaulting party,
unless the non-defaulting party shall agree in writing to an extension of such time prior to its
expiration.
"Governing Documents" means the Company's Articles of Incorporation and
bylaws, the Loan Agreement and this Support Agreement, and any resolution or other
corporate proceeding adopted at the County's request or authorizing any of the foregoing.
"Guidelines" means the guidelines for the Loan Program finally approved by the
County Board by resolution adopted , 2000, as the County Boazd may
duly amend the same from time to time.
"Loan Agreement" means the Loan Agreement dated as of Mazch , 2000,
among the Company, the County and certain financial institutions providing for loans to
the Company for the Loan Program. .
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"Loan Loss" has the meaning assigned in the Loan Agreement.
"Loan Loss Reserve" means .the separate account for accounting purposes (and the
funds on deposit to the credit of such account, initially in the amount of $150,000)
created and existing an the County's books and records to contain amounts appropriated
and earmarked by the County to serve as a reserve against losses from the failure of
borrowers to repay Program Loans in a full and timely manner.
"Loan Program" means the program for making for making loans to small
businesses pursuant to the Guidelines in furtherance of the County's policy to stimulate
the creation of good jobs for Orange County citizens as well as to stimulate successful
business development and expansion in Orange County.
"Program Loans" means loans by the Company to small businesses as part of the
Loan Program.
"Termination Date" means the earlier of (a) July 1, 2010, or (b) the date all
Program Loans have been paid in full.
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Attachment C
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Draft of March 8, 2000
THIS LOAN AGREEMENT is dated as of March , 2000 (the "Agreement"),
and is by and among ORANGE COUNTY SMALL BUSINESS LOAN PROGRAM
COMPANY, a North Cazolina nonprofit corporation (the "Company"), ORANGE
COUNTY, NORTH CAROLINA, a North Carolina political subdivision (the
"County"), and the national banking associations and North Carolina banking
corporations (the "Banks") listed on Schedule 1.
WHEREAS: The County has determined that it is appropriate and desirable for
the County to stimulate the creation of good jobs for Orange County citizens as well as to
stimulate successful business development and expansion in Orange County. To that end,
the County has created the Company to serve as a lender to qualifying small businesses.
The County and the Company have requested that the Banks provide loans to the
Company to provide funds for the Company to make small business loans, and the Banks
are willing to do so upon the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained in this
Agreement and for other good and valuable consideration, the parties agree as follows:
SECTION 1
B~n1~Commitments To Make Advances for Loans
1.1. ~:o~mi~ment To Make,.,~dvanc~r Subject to the terms -and
conditions of this Agreement each Bank severally (and not jointly) commits (a) to make
Advances to the Company from time to time during the Commitment Period in an
aggregate amount not to exceed its Loan Commitment and (b) to share in Loan Losses.
The Company shall not be entitled to reborrow funds that it has repaid or prepaid, and
upon each Borrowing, each Bank's Loan Commitment. shall be permanently reduced by
the amount of such Bank's Advance included in such Borrowing.
1.2. e e (a) Each Bank shall be obliged
to make its initial Advance upon its receipt of the following:
(i) A duly executed Note, substantially in the form of Exhibit A, payable to the
order of that Bank;
(ii) A duly executed Security Agreement, substantially in the form of Exhibit
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B, in favor of such Bank;
(iii) The notice described in Section 3.2(a); and
(iv) Such additional information and documents as such Bank and its counsel
may reasonably require.
(b) Each Bank's obligation to :make any further Advance is subject to the
further condition of there being no Default Condition or Event of Default existing as of
the date of such Advance. .
SECTION Z
Pursuant to the Support Agreement, the County has provided a Loan Loss Reserve
in the amount of $150,000. The County .shall make payments from the Loan Loss
Reserve to the Company Loan Loss Account pursuant to Section 2.02 of the Support
Agreement for use as provided in Section 4.2 of this Agreement.
SECTION 3
to
3.1. Use of Proceeds. The Company will use the proceeds of all Advances
exclusively to fund Program Loans.
3.2. ed f
(a) The Company will request Advances by giving notice to the Banks and the
County of (i) the total amount of the proposed Borrowing (which must be a minimum of
$5,000, and a maximum of $50,000), (ii) the amount of the Advance required of each
Bank, based upon its Percentage Share, and (iii) the date of the proposed Borrowing
(which must be at least five Business Days after the notice date). The notice to the
County will also comply with the requirements of Section 1.03(a) of the Support
Agreement.
(b) On the date of the proposed Borrowing as specified in the notice, each
Bank will make an Advance by depositing immediately available funds in an amount
equal to its Percentage Share of the Borrowing to such account as the Company may
direct. In addition, the County will, not later than such date, give the notice provided for
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in Section 1.03(b) of the Support Agreement.
(c) Any Bank's failure to make any Advance required under this Agreement
will not relieve any other Bank of its obligation to make an Advance. No Bank will be
responsible for any other Bank's performance of its obligations under this Agreement.
Advances made by aay Bank under this Agreement shall be evidenced as provided for in
the terms of the Note payable to that Bank. The County's failure to make any required
payment to the Company Loan Loss Account, however, will relieve each Bank of its
obligation to make fiu-ther Advances and shall constitute an Event of Default.
3.3. Com~a~y's Loa~Repa~w The Company shall pay principal of and
interest on the Loan monthly, not later than the 25th day of each month. The monthly
amount due and payable by the Company on the Loan shall be equal to the preceding
month's Net Cash Proceeds; provided, however, that on July 25, 2009, the aggregate
outstanding balance of the Loan, including all principal and all accrued but unpaid
interest, shall be payable in full.
The Company shall make all payments on the Loan separately to each Bank pro
rata according to its Percentage Share. All payments on a Note shall be credited (a) fast,
against the amount of interest accrued and unpaid on the Note, and (b) second, against
principal. If Net Cash Proceeds ~ for any month are insufficient to pay in full the accrued
unpaid interest on the Notes, payment of the deficiency in accrued unpaid interest shall
be deferred and be payable out of subsequent Net Cash Proceeds, to the extent that Net
Cash Proceeds are available therefor. Paymeats (and adjustments) to any Bank shall be
evidenced as provided for in the terms of the Nate payable to that Bank.
3.4. Collateral, (a) To secure payment of the Notes, and to secure the
Company's performance of its covenants contained in this Agreement, the Company
hereby grants to .each Bank a security interest in the Collateral. The Company shall
execute and deliver to each Bank a Security Agreement to evidence the grant of such
security interest. ~ .
(b) Notwithstanding any other provision of this Agreement to the contrary, the
Collateral does not include, and the Banks shall have no security interest in, (i) interest
payments by obligors of Program Loans to the extent the payments represent interest at
rates above the Prime Rate, however held, (ii) any amounts paid to the Company by the
County from time to time for use on the Company's Administrative Expenses, or (iii) any
funds or amounts held by the Company and not derived from the Loan.Program.
3.5. ~,imited Recourse. Notwithstanding any provision of this Agreement or of
the Notes to the contrary, the Banks' sole recouxse for the recovery of moneys due and
owing on the Notes shall be against the Net Cash Proceeds and the collateral granted by
the Company to the Banks pursuant to the Security Agreements. Nothing contained in
1S
this Section, however, shall limit (a) the Company's liability to account fox Net Cash
Proceeds not applied in accordance with this Agreement, or (b) any liability for fi-aud on
the part of any Company official, employee or agent.
SECTION 4
4.1. Notice of ~o~n Losses. (a) At any tune the Company declares the
principal of any Program Load due and payable in full after a default pursuant to the
terms of that Program Loan, the Company will give notice of the default and acceleration
to the, Banks and the County. The notice shall specify (i) the Program Loan that is in
default, and' the nature of the default, (ii) the amount of the resulting Loan Loss, (iii) any
collection costs that have been incurred. and that aze included in such Loan Loss, (iv) the
amount to be paid by the County far deposit in the Company Loan Loss Account with
respect to such Loan Loss (along with directions for making such payment), (v) the
amount of the resulting Uncovered Loan Loss, and (vi) the dollaz value of .each Bank's
Percentage Share of the resulting Uncovered Loan Loss.
(b) If additional collection efforts with respect to an accelerated Program Loan
produce additional Loan Losses with respect to that Program Loan, the Company shall
send notice to the Banks and the County (but not more frequently than monthly) of each
additional Loan Loss in substantially the same form as the notice provided for in
subsection (a) above.
4.z. e a After receipt of a notice of a Loan
Loss under Section 4.1(a) or 4.1(b), the County shall make a payment from the Loan Loss
Reserve to the Company for deposit in the Company Loan Lass Account as provided in
Section 2.02 of the Support Agreement. Any amounts so deposited from tune to time in
the Company Laan Loss Account shall constitute Net Cash Proceeds in the month such
funds become readily available funds to the Company.
4.3. Proratement amo ~ Bank of U covered Loan LQSSes. On any date that
the Company notifies the Banks of a Loan Loss, the outstanding principal amount of the
Note payable to each Bank shall be reduced by the dollar value of such Bank's Percentage
Share of the resulting Uncovered Loan Loss, and the amount of accrued unpaid interest
on each Note shall be reduced by the amount of accrued unpaid interest attributable to
that amount of principal.
4.4. Recove of Loan LQ~ses. If the Company recovers funds in connection
with any Program Loan with respect to which the Company has reported a Loan Loss, the
Company shall pay such funds (a) first to the County, to the extent of 30% of the
x9
recovered funds, and (b) then to each Bank pro rata on the basis of each Bank's
Percentage Share.
SEC'ITUN 5
S.omnan~'s Covenants
5.1. Affirmative Covenants. So long as any portion of the Loan remains
unsatisfied, the Company will:
(a) Maintain in force a plan designed to safeguazd the Net Cash Proceeds and
other assets and to assure the reliability of its personnel and the accuracy of its financial
data, and also mauntain accurate and current financial records, including books of
account.
(b) Preserve, for the periods hereinafter specified and in a manner that permits
the immediate location thereof
(i) for a period of ten years after the Loaa has been paid or otherwise
satisfied, all general and subsidiary ledgers reflecting asset, liability, income and
expense accounts; all general and special journals (or other records forming the
basis for entries in such ledgers); and
(ii) for a period of at least six years following final disposition of any
Program Loan, all applications for such loan, all lending agreements, security
agreements and other financing instruments pertaining to such loan, and all other
documents and supporting materials relating to such loan, including
correspondence.
(c) Permit the representatives of the Banks access during all business hours
to, and permit such representatives to examine, copy or make excerpts from, any and all
books, records. and documents in the Company's possession relating to the Program
Loans. .
(d) Comply with all applicable laws, rules, regulations and orders of any
governmental authority.
(e) Promptly notify the Banks of any litigation or proceeding or threatened
litigation or proceeding :involving any of the Program Loans, this Agreement, the Support
Agreement or any other aspect of the Loan Program.
(~ Mazk each document or instrument comprising any part of the Program
z~
Loan Documents, conspicuously and on its face, as follows: "THIS DOCUMENT OR
INSTRUMENT IS THE SUBJECT OF A SECURITY INTEREST IN FAVOR OF THE
BANKS THAT ARE PARTIES TO THAT CERTAIN LOAN AGREEMENT WITH
ORANGE COUNTY SMALL BUSINESS LOAN PROGRAM COMPANY AND
ORANGE COUNTY, NORTH CAROLINA, DATED AS OF MARCH , 2000."
5.2. a So long as any portion of the Loan remains
unsatisfied, the Company will not, unless all the Banks otherwise give their prior written
consent: .
(a) Make any Program Loan that has a term that extends beyond June 30, 2009.
(b) Endorse, assign, pledge or transfer any notes or other instruments
evidencing the Program Loans, except pursuant to the Security Agreements.
- SECTION 6
Events of t; edies
6.1.. Events of lDefa~ ;~~ , Upon the occurrence and continuation of
any of the following events or conditions:
(a) Default by the Company in the payment of principal, interest or any other
amount payable on or with respect to the Loan;
(b) The Company's breach or failure to perform or observe any term, condition
or covenant of this Agreement on its part to be observed or performed, other than as
referred to in subsection (a), for a period of 30 days after written.notice specifying such
failure and requesting that it be remedied shall have been given to the Company by any
Bank, unless the Banks, by affirmative vote of at least a majority by Percentage Share,
shall agree in writing to an extension of such time;
(c) The occurrence and continuation of any Event of Default by the Company
or the County under the Support Agreement; or
(d) Any other event or condition specified as an Event of Default under this
Agreement;
then the Banks, by affirmative vote of at least a majority by Percentage Share, at their
option may:
z~
(i) declare the entire unpaid principal amount of the Loan and the accrued
interest thereon to be immediately due and payable;
(ii) incur and pay such reasonable expenses for the Company's account as may
be necessary to cure the cause of any default;
(iii) seek the appointment of a receiver for the Company for the administration
of the Loan Program and the collection and disbursement of Net Cash Proceeds; or
(iv) proceed to protect and enforce their rights under the Notes and this
Agreement by a suit, action or special proceeding at law or in equity, either for the
specific performance of any covenant or agreement or execution of any power or for the
enforcement of any proper legal or equitable remedy as may be deemed. most effectual to
protect and enforce such rights.
In addition, during the continuation of an Event of Default, (l) no Bank shall have
any obligation to make any further Advances, and (2) any Bank may, at its option, direct
the Company to deposit all Net Cash Proceeds as received by the Company in a
designated special trust account held by a bank. or financial institution (which may be an
affiliate of any Bank) for the account of the Company, the equal benefit of all the Banks
and application as provided in this Agreement. Any such obligation so to deposit Net
Cash Proceeds shall terminate once there are no longer any continuing events or
conditions described in (a), (b) or (c) above.
6.z. c el All remedies under this
Agreement are cumulative and maybe exercised concurrently or separately. The exercise
of any one remedy shall not be deemed an election of such remedy or preclude the
exercise of any other remedy. If any Event of Default shall occur aad thereafter be
waived, such waiver shall be limited to the particular breach so waived and shall not be
deemed a waiver of any other breach under this Agreement.
6.3. ks• ati f E (a) Xf any Bank shall
receive, obtain, or recover any payment or collateral under any Security Agreement
(whether voluntarily, involuntarily, through the exercise of any right of set-off or
otherwise), such Bank shall hold and disburse such recovery in the same fashion as
would have been required of the Company.
(b) Notwithstanding the provisions of subsection (a), however,
(i) the recovering Bank shall be entitled to deduct its reasoaable direct
casts of making the recovery before calculating and making any such distribution;
(ii) the County shall not be entitled to any share of any recovery at any
zz
time the County is in default under the Support Agreement or this Agreement; and
(iii) no Bank shall ,exercise any right of setoff against the Company's
property without the prior agreement of a majority of Banks by Percentage Share.
(c) In pursuing any recovery or taking any action after an Event of Default,
each Bank shall act reasonably and with due regard for the interests of the County and the
other Banks; and each Bank shall act reasonably to coordinate its recovery efforts with
the efforts of the other Banks.
SECTION 7
' ce a s
7.1. Amendme All modifications, consents, amendments or waivers of any
provisions of any Company Loan Document, or waiver or consent to any departure by the
Company therefrom, shall be effective only if the same shall be in writing and consented
to by the Banks holding more than a 65% Percentage Share and the Company, and then
shall be effective only in the specif c instance and for the purposes for which given, and
only if .communicated to all of the Banks; provided, however, that no modification,
consent, amendment or waiver which purports to change the terms of the Notes or the
Loan Commitments shall be effective unless approved in writing by all affected Banks.
7.2. Benefit;As~i~ This Agreement shall be binding upon and shall
inure to the benefit of the Banks and the Company and their respective successors and
assigns. Any Bank may assign its rights and obligations under this Agreement, in whole
or in part, to any other federally-'insured national bankang association or North Carolina
banking corporation, and any Bank making such assignment shall promptly notify the
Company of such assignment and provide the Company with evidence of the assignment
and the assignee's undertaking to comply with the requirements of this Agreement. The
Company may assign its rights and obligations under this Agreement, in whole only and
not in part, but only with the written consent of Banks holding more than a 65%
Percentage Share, which consent shall not be unreasonably withheld.
7.3. Confid 't~ Each Bank agrees to hold any confidential
inforinatian which it may receive from the Company pertaining to the Program Loans in
confidence, except for disclosure (a) to the other Banks, (b) to legal counsel,
accountants, and other professional advisors, (c) to regulatory officials, (d) as required
by law or legal process. ar in connection with any legal proceeding, or (e) to another
financial institution in connection with any disposition or proposed disposition of a
Bank's interests hereunder or under that Bank's Note. In all aspects of carrying out the
terms and purposes of this. Agreement, the Banks and the Company shall maintain the
23
confidentiality of information provided by actual or potential Program Loan borrowers.
7.4. Nonliability_ Qf Ban sM The relationship between the Company and the
Banks is, and shall at all times remain, solely that of borrower and lenders. The Banks do
not undertake or assume any responsibility or duty to the Company to review, inspect,
supervise, pass judgment upon, or inform the Company in connection with any phase of
the Company's operations, Program Loans, or otherwise.
7.5. S?~~iaations S,~veral. Unless otherwise expressly provided for herein, each
Bank's obligations under this Agreement are several, and not joint. No Bank shall be
responsible for the obligations of any other Bank, nor will the failure of any Bank to
perform any of its obligations under this Agreement relieve any other Bank from the
performance of its respective obligations.
7.6. 'ca a The parties intend that North Cazolina law shall govern
all matters pertauung to this Agreement.
7.7. Notices. (a) All notices, requests, approvals, demands and other
communications given or made in connection with the terms and provisions of this
Agreement shall be in writing (unless otherwise provided for in this Agreement) and shall
be deemed to have been given or made when either delivered by hand or shown as
delivered by a receipt for delivery from the United States Postal Service, and sent as
follows:
(1) If to the Company, addressed as follows: President, Orange County
Small Business Loan Program Company, Post Office Box 1177, Hillsborough, NC
27278; or,
(2) If to the County, to Orange County Manager, Attn: Small Business
Loan Progrram Notice, 200 South Cameron St., Hillsborough, NC 2727$; or
(3) If to the Banks, as indicated on each Bank's respective signature
page to this Agreement.
(c) Any addressee may designate additional or different addresses for
communications. by notice given under this Section to each of the others.
7.8. a ili The provisions of this Agreement . are declared to be
severable. If any court of competent jurisdiction shall hold any provision of this
Agreement to be invalid and unenforceable, such holding shall not invalidate any other
provision hereof.
7.9. Definitions. Capitalized terms used in this Agreement and not otherwise
z~
defined shall have the meanings ascribed thereto in Exhibit C.
7,10. cc nc t Each Bank, by its entering into this
Agreement, acknowledges its acceptance of the terms of the Support Agreement.
7.11. 'a ' ' e a No covenant, condition or agreement
contained in this Agreement shall be deemed to be a covenant, agreement or obligation of
a present or future officer, employee or agent of any party hereto in such person's
individual capacity. No such officer, employee or agent shall incur any personal liability
with respect to any action taken under this Agreement, provided such person acts in good
faith.
7.12, Third-Par Bene 'arie~ There aze no intended thud-party
beneficiaries of this Agreement.
7,13, o If the date for making any. payment or the last
day for performance of any act or the exercising of any right shall not be a Business Day,
such payment shall be made or act performed or right exercised on or before the next
succeeding Business Day.
7'.14. mire Ag~eemen,~,;_Amen~ 'This Agreement constitutes the entire
contract among the parties with respect to its subject matter, and this Agreement shall not
be changed except in writing signed by all the parties.
7.15. ec 'n This Agreement may be executed in several
counterparts, including separate counterparts. Each sha11 be an original, but all of them
,together constitute the same instrument.
[The. remainder of this page has been intentionally left blank)
z~
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their corporate names by their duly authorized officers, all as of the date fixst
above written.
[SEAL]
Dianne Reid
Secretary-Treasurer
~S~].
Beverly A. Blythe
Clerk, Board of Commissioners
Kenneth T. Chavious
Finance Officer
Orange County, North Carolina
[Signatures of Banks appear on the follawing
[Loan Agreement dated as of March ^, 2Qp0]
Schedule 1--Table of Loan Commitments and Percentage Shares
ORANGE COUNTY SMALL BUSINESS
LOAN PROGRAM COMPANY
By
B. Tray Ferguson
President
ORANGE COUNTY, NORTIi CAROLINA
By
Moses Carey, Jr.
Chair, Board of Commissioners
This instrument has been preaudited
in the manner requixed by The Local
Government Budget and Fiscal Control Act.
pages)
A -Form of Company's Promissory Notes
B -Form of Security Agreement
C -- Definitions
26
BANK SIGNATURE PAGE TO LOAN AGR~E.N~E_N'['
The undersigned [national banking association] [North Carolina banking
corporation] accepts and enters into that certain Loan Agreement dated as of March ,
2000, by and among ORANGE COUNTY SMALL BUSINESS LOAN PROGRAM
COMPANY, a North Carolina nonprofit corporation, ORANGE COUNTY, NORTH
CAROLINA, a North Carolina political subdivision, and certain national banking
associations and North Carolina banking corporations (including the undersigned).
ATTEST: (SEAL)
[Printed name]
Assistant Secretary
Address for natives:
Tel:
Fax:
[BANK NAME)
By:
[Loan Agreement dated as of March ~, 2000]
[Printed name]
Vice President
Y A
Z7
c - T i ce t r
as
F~i6it A Form of Promiasorv Note from Comoanv to Bsnks
March ~, 2000
FOR VALUE RECEIVED, the undersigned ORANGE COUNTY SMALL
BUSINESS LOAN PROGRAM COMPANY, a North Carolina nonprofit corporation
(the "Company"), promuises to pay to the order of
a [national banking association] [North Carolina banking corporation] (the "Bank"),
at its offices at North Carolina,
or at such other place as the holder hereof may from time to time designate in writing, the
principal suns of
Dollars ($ ~,
or so much thereof as may have been loaned and outstanding hereunder, together with
interest from the date hereof on the unpaid principal balance at the "Prime Rate," as
defined below, all in lawful money of the United States of America.
This is one of the Notes referred to in that certain Loan Agreement among the
Company, Orange County; North Carolina, the Bank, and certain other financial
institutions of even date herewith (the "Loan Agreement").
Capitalized terms used in this Note and not otherwise defined have the meanings
ascribed thereto in the Loan Agreement
PRINCIPAL ADVANCES; INTEREST. Principal of this Note shall be
.advanced to the Company from time to time as provided under the Loan Agreement.
Each Advance shall bear interest from the date of such Advance at the Prime Rate. An
authorized Bank officer shall note the amount and date of each Advance on the
Certificate of Principal Advances, and shall also identify on the Certificate of Principal
Advances (in a manner reasonably acceptable to both the County and the Bank) the
corresponding Program Loan to which the Advance relates. For the purposes of this
Note, the "Prime Rate" means the interest rate so denominated and set by the Bank in its
discretion as its "Prime Rate," as in effect from time to time. Changes in the Prime Rate
z9
shall be effective immediately to change the interest rate payable on this Note. The Bank
makes no representation that the Prime Rate is the best or lowest rate of interest that the
Bank charges on loans; the Bank makes other loans at rates above and below its Prime Rate.
PAYMENT SCHEDULE. The unpaid principal balance of this Note at any date
shall be equal to (a) the sum of all Advances made by the Bank through that date, minus
(b) all payments on account of principal actually made by the undersigned through that
date, and minus (c) all reductions pursuant to Section 4.3 of the Loan Agreement in the
principal balance reflecting the Bank's Percentage Share of Uncovered Loan Losses.
Payments on this Note shall be made and shall be applied as provided for in the
Loan Agreement. If not sooner. paid, all unpaid principal and all accrued and unpaid
interest on this Note shall be due and payable on July 25, 2009:
LIMITED RECOURSE. Notwithstanding any provisions hereof or of the Loan
Agreement to the contrary, the holder's sole recourse for the recovery of monies due and
owing on the Notes shall be against the holder's Percentage Share of the Net. Cash
Proceeds and any collateral granted by the Company to the Banks pursuant to the
Security Agreements; provided, however, that nothing contained in this paragraph will
limit (a) the liability of the undersigned to account for the holder's Percentage Share of
any Net Cash Proceeds not applied on a current basis by the Company in accordance with
the provisions of this Note and the Loan Agreement, or (b) any liability for fraud on the
part of any Company official, employee or agent.
DEFAULT. Upon the occurrence of any Event of Default described in the Loan
Agreement, the Bank shall have all rights granted by the Loan Agreement
EXPENSES OF COLLECTION. Notwithstanding the "Limited Recourse"
provisions of this Note, in the event of default under this Note, the holder shall be entitled
to collect (in addition to all principal; interest and other amounts due hereon) the holder's
reasonable costs and expenses incurred in the collection of this Note, including, but not
limited to, reasonable attorneys' fees.
COVENANTS. All parties to this Note, including the maker and any sureties,
endorsers or guarantors, . hereby waive (to the extent permitted by law) protest,
presentment, notice of dishonor and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and all other sums due
under this Note, notwithstanding any change or changes by way of release, surrender,
exchange, modification or substitution of any security for this Note or by way of any
extensions or extensions of time for the payment of this Note or by way of any extension
or extensions of time for the payment of principal and interest; and all such parties waive
(to the extent permitted by law) all and every kind of notice of such change or changes
and agree that the same may be made without notice or consent of any of them.
,r
3J
GOVERNING LAW. The Company and the Bank intend that. North Carolina
law shall govern all matters related to this Note:
RIGHTS CUMULATIVE. The rights and remedies of the holder as provided in
this Note and in any instrument securing this Note shall be cumulative and may be
pursued singly, successively, or together, in the sole discretion of the holder. The failure
to exercise any such right or remedy shall not be a waiver or release of such rights or
remedies or the right to exercise any of them at another time.
AMENDMENT AND MODIFICATION. No waiver by the holder of any of the
terms and conditions of this Note shall be effective unless it is in writing and signed by
the holder. No modification or amendment to this Note may be made except in writing,
signed by the maker and the holder.
IN WITNESS WHEREOF, the undersigned has caused dais ~ instrument to be
signed, sealed and delivered by its duly authorized officers on the day and yeaz first
above written.
[SEAL]
Dianne Reid
Secretary-Treasurer
[Promissory Note dated March , 2000]
By
B. Troy Ferguson
President
RTIFI A OF P iNCIP i • ADV N F.C
The amount and date of principal advances not to exceed the face amount hereof
shall be entered hereon by an authorized officer of the Bank when the proceeds of each
such principal advance are delivered to the Company.
ORANGE COUNTY SMALL BUSINESS
LOAN PROGRAM COMPANY
ou at S~orre~ond' ~ oa ~ ut i a
31
ibi m ecuri
A REE T
THIS SECURITY AGREEMENT is dated as of Mazch , 2000, and is by and
between ORANGE COUNTY SMALL BUSINESS LOAN PROGRAM COMPANY,
a North Carolina nonprofit corporation (the "Company"), and , a
[national banking association] [North Carolina banking corporation] (the "Bank").
RECITALS:
The Company is indebted to the Bank up to the sum of $ as evidenced
by the Company's Promissory .Note of even date herewith (the "Note"). The Note
evidences the Company's obligations under that certain Loan Agreement by and among
the Company, Orange County, North Carolina, the Bank and certain other financial
institutions of even date herewith (the "Loan Agreement"). This is one of the security
agreements referred to in the Loan Agreement.
The Company desires to secure its obligations under the Note and the Loan
Agreement by granting to the Bank a security interest in certain chattel paper and other
collateral.
Capitalized terms used in this Security Agreement and not otherwise defined
have the meanings ascribed thereto in the Loan Agreement
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties agree as follows:
1. The Company pledges, assigns and grants to the Bank a continuing security
interest in, and a lien upon, (a) all of the Program Loan Documents, (b) .any other chattel
paper (as defined under the North Carolina Uniform Commercial Code) held by the
Company and arising from Program Loans, (c) all amounts in the Company's possession
from time to time constituting Net Cash Proceeds, and (d) any other collateral for
Program Loans held by the Company (the property described in clauses (a), (b), (c) and
(d) of this paragraph is referred to collectively in this Security Agreement as the
"Collateral").
The Company grants this security interest to secure the Company's prompt and
complete performance of all of its obligations to the Bank under the Loan Agreement and
the Note (and all other documents executed and delivered pursuant thereto or in
connection therewith), whether now existing or hereafter arising, whether primary or
secondary, direct or indirect, absolute, contingent or conditional or due or to become due
17
32
(the "Liabilities").
2, This Agreement is intended as, and. constitutes, a security agreement within
the meaning of the North Cazolina Uniform Commercial Code. The Company agrees to
execute and deliver to the Bank Uniform Commercial Code financing statements and
such other documents, instruments,. supplemental security agreements. and chattel
mortgages as the Bank may reasonably deem necessary to obtain the benefits of this
Agreement. The Company further agrees to assign to the Bank its rights in or under any
financing statements relating to the Collateral fled in favor of the Company.
3. Until satisfaction in full of all Liabilities, the Company shall not permit or
suffer to exist any other lien, security interest or encumbrance upon the Collateral, except
for the similaz security interests created and existing under the other security agreements
delivered by the Company pursuant to the Loan Agreement. Upon the satisfaction in full
of all Liabilities, the Bank shall execute and deliver to the Company all such documents
and instruments as shall be necessary to evidence termination of this Agreement.
4. If any one or mare events of default under the Loan Agreement or the Note
shall have occurred and be continuing beyond any applicable cure period therefor, or if
there shall otherwise be a default in the satisfaction of any of the Liabilities or any of the
Company's obligations under this Agreement, which default is not cured within any
applicable cure period therefor (any of the foregoing being hereinafter referred to as an
"Event of Default), the Bank shall have, in addition to all other rights and remedies given
to it by this Agreement, the Loan Agreement and the Note, all the rights and remedies of
a secured party under the North Carolina Uniform Commercial Code or otherwise
allowed by law. Without limiting the generality of the foregoing, the Bank may
immediately, .without demand of performance and without other notice (except as set
forth below or in the Loan Agreement, Note or other documents executed and delivered
pursuant thereto or in connection therewith) or demand whatsoever to the Company, all
of which are hereby waived (to the extent permitted by law), and without advertisement,
sell at public or private sale or otherwise realize upon, the whole or, from time to time,
any part of the Collateral, or any interest which the Company may have therein. After
deducting from the proceeds of sale or other disposition of the Collateral all expenses
(including all reasonable expenses for legal services), the Bank shall apply the residue of
such proceeds towards the satisfaction of the Liabilities. Any remainder of the proceeds
after satisfaction in full of all Liabilities shall be paid to the Company.
5. The Company agrees that all costs and expenses (including reasonable
attorneys' fees and expenses for legal services of every kind) of, or incidental to, the
custody, care, management, sale or collection of, or realization upon, any of the
Collateral, or in any way relating to the enforcement or protection of the Bank's rights
under this Agreement, shall become part of the .Liabilities and shall be entitled to the
benefits of this Agreement. The Bank may at any .time apply to the payment of all such
,o
33
costs and expenses all monies of the Company or other proceeds arising from the
possession or disposition of all or any portion of the Collateral.
6. All notices, requests, approvals, demands and other communications given
or made in connection with the terms and provisions of this Agreement shall be in writing
and shall be deemed to have been given or made when either delivered by hand or shown
as delivered by a receipt for delivery from the United States Postal Service, and sent as
follows:
(a) If to the Company, addressed as follows: President, Orange County Small
Business Loan Program Company, Post Office Box 1177, Hillsborough, NC 27278; or,
(b) If to the Bank, as indicated on the Bank's respective signature page to the
Loan Agreement;
or to such other addresses as either party shall furnish in writing to the other.
7. The Bank and the Company agree and acknowledge that the Company is
making several simultaneous grants of similar security interests in the Collateral to the
other banks that are parties to the Loan Agreement. Each such grant is being made
pursuant to a security agreement in substantially the same form as this Agreement. The
rights of the banks in the Collateral aze of equal rank with one another. If the Bank shall
receive, obtain, or recover any payment or collateral under this Security Agreement
(whether voluntarily, involuntarily, through the exercise of any right of set-off or
otherwise), the Bank shall hold and disburse such recovery as provided in the Loan
Agreement.
$. .The parties intend that North Carolina law shall govern this Agreement.
9. This Agreement shall inure to the benefit of the Bank, its successors and
assigns, and shall be binding upon the Company, its successors and assigns. Only a
writing signed on behalf of each parry may amend this Agreement.
[The remainder of this page has been intentianally left blanl~.J
34
IN WITNESS WHEREOF, the parties have duly signed, seated and delivered this
Agreement as of the day and year first above written.
[SEAL]
Dianne Reid
Secretary~Treasurer
ATTEST: (SEAL)
[Printed name]
Assistant Secretary
ORANGE COUNTY SMALL BUSINESS
LOAN PROGRAM COMPANY
By
B. Troy Ferguson
President
[BANK NAME]
By:
[Printed name]
Vice President
[Security Agreement dated as oaf March , 2p00]
~n
35
EXHiBYT C ~_D
For all purposes of this Agreement, the. following terms shall have the following
meanings, unless the context clearly requires otherwise:
"Advance" means a payment by a Bank of proceeds loaned to the Company
pursuant to this Agreement relating to a specific Program Loan.
"Borrowing" means an aggregate of Advances by the Banks to the Company
related to a single Program Loan.
"Business Day" has the meaning assigned in the Support Agreement.
"Collateral" has the meaning assigned in the Security Agreement.
"Commitment Period" means the period beginning on the date of this Agreement
and ending on the earliest of (a) June 30, 2002, (b) the date on which the Banks have
advanced the full aggregate amount of their Loan Commitments, or (c) the date on which
the Banks terminate their obligations to make Advances upon the occurrence of an Event
of Default.
"Company Loan Loss. Account" has the meaning assigned in the Support
Agreement.
"Default Condition". means the occurrence or existence of an event or condition
that, upon the giving of notice or the passage of time, or both, would constitute an Event
of Default.
"Event of Default" has the meaning assigned in Section 6.1.
"Loan" means the aggregate of all Advances made by the Banks to the Company
pursuant to this Agreement.
"Loan Commitment," for any Bank, means that Bank's maximum aggregate
obligation to make Advances to the Company during the Commitment Period. Schedule 1
sets forth the izutial Loan Commitment for each Bank.
"Loan Loss" means the sum of (a) any deficiency from scheduled principal
repayments (b) any collection costs, including reasonable attorneys' fees, actually
incurred by the Company, in each case in connection with any Program Loan the
principal of which the Company has declared to be due and payable in full after a default
pursuant to the terms of that Program Loan.
36
"Loan Loss Reserve" has the meaning assigned in the Support Agreement.
"Net Cash Proceeds" means, for any month, (a) all income, revenues, proceeds ,and
payments received during that month by or on behalf of the Company as holder of any
Program Loan, including principal payments, interest (but only to the extent of interest at
the Prime Rate), penalties, and late charges, (b) all amounts deposited in the
Company Loan Loss Account which become, immediately available funds to the
Company in that month.
"North Carolina Uniform Commercial Code" means the version of the Uniform
Commercial Code as from tune to time in effect in North Caroliaa (currently, Chapter 25
of the North Carolina General Statutes).
"Note" means any of the promissory notes executed by the Company, substantially
in the form of Exhibit A, dated of even date with this Agreement and payable to the order
of each of the Banks up to the amount of each Bank's Loan Commitment.
"Percentage Share" means, with respect to each Bank, the ratio of such Bank's
Loan Commitment to the aggregate of all Banks' Loan Commitments, expressed as a
percentage. Schedule 1 sets forth the initial Percentage Share for each Bank.
"Prime Rate" means the interest rates so denominated and set by the Banks in their
respective discretion as their "Prime Rates," as in effect from time to time.
"Program Loan" has the meaning assigned in the Support Agreement.
"Program Loan Documents" means all documents evidencing Program Loans and
evidencing or representing the security thereof or, including, but not limited to, notes,
security agreements, deeds of trust, assignments; and guarantees, and, any modifications,
amendments, renewals and extensions thereof. .
"Security Agreement" means any of the security agreements. executed by the
Company, in substantially the form of Exhibit B, dated of even date with this Agreement
and made in favor of each of the Banks,. granting each Bank afirst-priority security
interest to the extent of each Bank's Loan Commitment in the collateral. described therein.
"Support Agreement" means the Small Business Loan Program Support
Agreement dated as of March ~ 2000, between the County and the Company.
"Uncovered Loan Loss" means the amount of any Loan Loss 1~ amounts paid
with respect to that Loan Loss to the Company by the County from the Loan Loss
Reserve.
~~
Attachment b
37
ORANGE COUNTY
SMALL BUSINESS LOAN PROGRAM
Operating Policies and Procedures
Revised July 1998
Revised
3$
ORANGE COUNTY SMALL BUSINESS LOAN PROGRAM
PURPOSE
The purpose of this program is to stimulate the creation of good
jobs for Orange County citizens as well as to stimulate
successful business development and e~cpansion in Orange County.
The program will attempt to assist businesses that have limited
access to financing through conventional means or other
government guaranteed sponsored programs. Businesses receiving
funding through this program are strongly encouraged to be good
corporate citizens as defined in Orange County's Economic
Development Strategic Plan. Businesses are also encouraged to
employ Orange County citizens.
AMOUNT
Initial 3-year loan capacity of up to $500,000, funded by
commitments from local financial institutions.
COMMITMENT PERIOD
Three years from the date of execution of the master loan
agreement. After three (3) years, the loan program will be
reviewed by the Board of County Commissioners and participating
financial institutions to determine: whether to continue the
program.
ELIGIBILITY
1. All applicants must be residents pf Orange County. In the
case of non natural arson a licants at least 51~ of the
members artners or owners of shares of stock of the
a liaant must be natural arsons who are Oran a Count
residents. Length of residence in Orange County may be
considered in assessing the applicant's degree of
commitment to the community.
1
a~
2. Businesses must be located within Orange County in areas
zoned appropriately for their use. _,
~~~r~~~re-~_r'_,--_-*~-~~ i e~r~~-L-~e~C-Ct~ri~~ee ;3~E~a-~~s~e
~' c .s ~ _ _ c'' ~e-~1~i e-i ga~e~-i~~~~te-P r7~+7~-~ ~ }
T ee~i.e ~ec~~=~1 e~~ =~'_' e~r~er ( .r.7~ 2T7'c,~G~. F~~ h' "~r~CLZ~..T.~~ SLLC~1 ~.'G'
3.~ Applicants must be er for-profit business entit~~ whose
gross revenues do not exceed $3 million ear.
4.rr. Applicants must be willing to contract far management and
technical assistance if determined to be necessary by the
Loan Committee.
5.E~ Applicants must have an equity contribution in a start-up
business of at least 15~.
6.~ Nan_natural_nersan,_„owners with an ownership
position of 10$ or more and all natural person owners of
the e~~t s-tai-~g-~a-~~~s t~~e~c e~~e bus ine s s wi 11 be
required to execute an Unconditional Guaranty Agreement far
the full amount of the loan.
7. A licants with an natural arson owner who has endin
criminal charues or who has been convicted o_f a crime and
is still servin an active rison sentence is on robatian
ar is an taarale is nat .elicLi;bl.e for .an Orange County Small
Business Laan.
ELIGxBLE USES OF LOAN PROCEEDS
1. Working capital or operational funds.
2. Purchase of equipment, commercial-use vehicles, ar
machinery.
3. Improvement of owner-occupied commercial property. (Owner
must occupy 50~ or more of total space.)
4. Start-up funding.
5. Expansion of business services or products.
2
4d
6. Acquisition of owner-occupied commercial real estate (7-
year maturation).
7. Tenant upfit and lease-hold improvements.
8. A small business loan request that is to be used in
conjunction with other financing --c~~ will be
considered on a case-by-case basis.
LOAN PROCEEDS SHALL NOT BE USED FOR THE FOLLOWING
1. Refinancing of existing bank debt or investor loans. ~
~e~~e~-re~C-e~~~~rsee~i~t- The Doan Committee
may grant an exception of up to 50°s of loan value.}
2. Purchase of equipment or improvement of real estate which
~s are used ~ or to be used for personal ~~ use.
3. Political activities.
4. Owner salary and dividend payments beyond an agreed amount.
5. Speculative ventures (Examples: drilling for gas or oil,
commodity futures).
6. Lending or investment.
7. Real property held for sale or investment.
8. Pyramid sales - distribution plan businesses.
9. Floor plan financing.
1~----I~i~L,~~~~i~~~i~i~a~-e~l~g~s--ex~Yro- ~~G
~~ree'~ee-~~e~eal~e-t~.e~ ~e~~e~e-
10.3-~ Foreign controlled businesses.
11.3-~- Non-profit institutions.
1.2.3 Private membership clubs.
COMPLIANCE WITH APPLICABLE REGULATIONS
In all cases, loans made from this program must be consistent
and in accordance with the following:
3
41
1. All state and local regulations governing the applicant's
~~ business.
2. Policies established by the Loan Committee for each
particular applicant.
3. Policies established by the Board of County Commissioners
dealing with this loan program.
AMOUNT OF LOANS
Maximum: $50,000. Minimum: $5,000. Should market conditions
change, or in the event of an applicant with extraordinary
conditions, - ~'~~Y~''" "" a loan in amount outside of the
maximum or minimum may be considered. All loans are subject to
availability of loan funds.
LOAN TERM
Maximum Term - 5 years (except 7 years for the purchase or
improvement__of real estate used or to be used wholl far the
business purpose of the applicant.)
INTEREST RATE
A3-1--~e~~t;~W~1-~e~~~ ~ xr~~t -ems-~
~~i~~s~ r-awe-~ A11 loans will be char ed finance char es based
on a variable interest rate. The variable interest rates the
"in.terest rate" will be determined b and be based on the
len th of the maturit of the loan and an increment over the
hi hest Prime Rate "Prime" as ublished on the first business
da of the month in the Mane Rate Table in the Eastern Edition
of the Wall Street Journal generally as follows ~~a
0-2 years Prime plus 2.00%
2-3 years Prime plus 2.25%
3-4 years Prime plus 2.50
4-~7 years Prime plus 3.00
~e~arr~g~~.=~~~ The finance char es on the loan will be
calculated b .multi 1 in a Bail eriodic a^ate the interest
rate ~ 365 b the un aid rinci al amount of the loan on the
last da of the billin c cle times the number of da s in the
month, The dail eriodic rate ma va from month to month due
to than es in the interest rate and will be determined in the
same manner as the iatesest rate is determined with the loan
4
42
maturit date unchan ed from that used to calculate the interest
rate when the loan 3s made.
wed--e~t~re-€e~~e~~~•e-~
`~-;~~~e-~e---~frr~y~ ~ ~, ~ ~ ~ty ~~eee~t~a~-~a~•
e~c~i~ra~-rem--~~t~e~ ~e~-r
Y /
FEES AND EXPENSES
An origination fee, which ma be aid fram the loan roceeds,
will be charged, payable at closing, ranging from 1g to 1 ~%,
but, in no case to exceed limits set by North Carolina
Statutes.e-r~--e~~n~err~ee~ -~~~~ The minimum
origination fee will be $100. The applicant will be responsible
for all other expenses related to closing the loan, including,
but not limited to, recording fees and legal fees. The applicant
will also be responsible for any fees related to any appraisals
or reports required by the Loan Committee.
LOAN REPAYMENT
The first Sloan ~epayment~ shall be due, on the first day of the
month followin the 30~' da after the loan is made. Subse eat
a ants shall be due on the first da of each month thereafter.
A late payment will be assessed at 2~ of the payment amount
after the loan becomes 15 days overdue. Loans may be prepaid in
whole or in art at an time without penalty. In the event the
loan payment becomes 30 days overdue, rocedures for the
Collection of Delia eat Loans shall be followed. The Loan
Committee will establish general
collection of de13n eat lawn procedures to a~""'"~"~ bz'
~r .. ^- i~~e~^ ~"a ~-•~'~- be ,presented to the Board of County
Commissioners for approval.
5
' 43
LOAN ANALYSIS
The Loan Committee shall review and consider a number of items
in determining whether a loan should be made. Those items shall
include at least the following:
1. Business plan.
2. Employment plan (including projected need for employees;
skill levels and education required; employee compensation,
health insurance, and other benefits).
3. Business financial statements. (3 years plus interim)
4. Tax returns. (personal and business - 3 years)
5. Pro formers to determine if there will be sufficient cash
flow to meet obligations for 2 years.
6. Personal financial statements,
7. Information regarding collateral and a current credit
report.
8. Other available financing including, but not limited to,
whether other financial institutions have agreed to
consider traditional debt financing and under what
circumstances.
9. ~ Any_ other ~.n.formation that the Loan Committee
determines that it needs a~~iEn r-
gr~~~r~g-end-_._l i _g t'~e~3~-e~ti~r~~l~-~~ey-r-a~
~ee~ed. .
SUGGESTED LOAN GUIDELINES
7.. Creditworthiness - Although applicants will be considered
with credit ratings showing a history of accounts up to 30
days past due, preference will be given to borrowers with
good credit ratings. Applicants with bankruptcy or prior to
prepossessions listed on their credit report will, in most
cases, be considered too great a credit risk for this
program.
2. Cash Flow Coverage - The loan program is targeted to
applicants with a cash flow coverage, prior to loan
6
44
Araaram debt, ~-- '------~~~~~ '--F~~°''-~ of not less than 7:.1
to 1 to current maturities of long-term debt. Cash Flow is
further defined as net income plus depreciation.
3. Debt to Net Worth - The loan program is targeted to
applicants whose total debt does not exceed net worth by 3
to 1.
4. Collateral -- Loans shall be secured by appropriate forms of
collateral, with recorded first lien positions as
appropriate. Acceptable forms of collateral will be based
on commonly accepted definitions (fixed assets, inventory,
accounts receivable, land, building, equipment, or personal
assets) . Ad~-r~rc~~a~t~ Loran amount should be limited to the
following percentages of value of collateral: Inventory -
50%; accounts receivable - 70% e~ (limited to accounts
receivable less than 90 days in age); unimproved real
estate - 50% commercial real estate - owner-occupied
maximum 80~ ~7'tT, or a-5~ TT"_'~__r Vic- ~o =a= non-busime5s
related real estate maximum 85`x; new equipment -~ 80~-~ a~
used equipment - 60°s.
LOAN PROGRAM ADMINISTRATION
Administration of this loan program shall initially be performed
by the Orange County Economic Development Commission and the
Loan Committee. An outside vendor acceptable to the ~~ ~..~..ti'~
___~t-"-~~'_____ banks the Oran a Count Small Business Loan.
Pro ram Com an and the County ~a-i~ ~ be utilized to
underwrite and service these loans, to include billing and
generating administrative reports.
PROCEDURES
1. Applicants will be referred to the Orange County Economic
Development Commission. Commission staff ate will meet with
~ a licants and process applications. ?'~'ee~ee~~~
De~~~ap~teat Ee~r~~A licants ma be referred to the SBTDC
for consultation.
2. Completed applications will
Committee no latex+ than two
scheduled meeting. The Loan
once monthly.
be submitted to
weeks prior to
Committee will
the .Loan
its next
normally meet
7
45
3. At the monthly meeting, the Loan Committee will decide
whether or not to take action on the request, based on the
information provided. The applicant will be informed in
writing of the Loan Committee's decision to deny, ctrant,
grant with condition, or seek mare information. Should the
Loan Committee deny the applicant's application, the Loan
Committee will not thereafter consider any applications
from that applicant for at least six months.
4. At its discretion, the Loan Committee may impose any
additional terms and conditions necessary to improve the
loan or to secure the loan. The Loan Committee
~• m~y require an itemized budget detailing the proposed
use of loan funds.
5.~r- Should the applicant ~~ think that ~e~ the
application has been improperly denied, then
the applicant may notify, in writing, the ~~~e~~ke Loan
Committee e~ '~~ ~ "~~_ r-_-'~-___. The notice to the Loan
Committee shall state why the„aAtalicant thinks ,the•loan
should be annroved. Denial of the application shall then be
_~ _ __._c-_' ~.1. given further consideration by the Loan
Committee . f e~€~~~-eQ~-ire-~~re~r The Loan Cormni.ttee' s
decision on the loan is the final decision.
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_.._..:d~~e3~-a•~~re~e~f~~oa~~~rFrt -
..}_ ----------------'
6. The Loan Committee shall provide_reaular
arterl re arts to the Board of Count
loans that it,-has approved. Any,_, event of
loss shall be repa,rted to the Board of G
in writin and resented to the Board of
Commissioners at its next re lar meeting
event of default or loan loss,
PROPOSED STRUCTURE
fat least
;r Commissioners of
default or loan
runty Commissioners
County
~ following .the
Each bank participant will commit a -_--=_--_ _~ credit line on a
non-recourse basis to ___ ____ ~e~~,ed-•~~r~p•~e~~-s-te-~ega~
the Orange County Small
Business Loan Pro ram Com an a non- rofit ca oration farmed
or to be formed to make and facilitate loans to small businesses
8
46
under the pxQaram described hexe. These credit lines will be
secured by assignment to the participant banks of a pro-rata
op rtion of the loan receivables *~c ~_ck -M}-}~° A 36-month.
commitment period will be established during which time each
~i~ra~~~i~rrt~e~r bank will fund approved loans on a pro--
rata basis. Funding procedures, to include a provision for an
appropriate notice mechanism, d will be established
a reement between the banks and the Oran a Count Small Business
Loan Program Company. At the end of the commitment period, to
the extent there are amounts owed under the loan program, the
amounts owed d wa.l.7, be "termed" for a period of no later
than the latest scheduled maturity date for loans outstanding to
Borrowers under the program. The County will provide an
irrevocable commitment to fund a loan loss reserve equal to 30~
of the x i~ra~i~~i~s~r~r~~e~ bank' s commitment . All F' ~ ~-~
bank participants will bear their share of any
lasses (70% of principal, interest, collection fees, etc.)
incurred under the program. Collection procedures and loss -
procedures will be established. Repayment of the ~~~~~~~-zz
- -- ~- ; ~ ~ • ~-' -- , bank' s 1 oan~ wi 11 be o~t~~ars~-~~
•ee•~.~t~= paid ,from the net proceeds received from Borrowers
under the program. The ~~ .~~_____ ____-_~ Oran a Count Small
Business Loan Proaram_Company will pay each ~~~---~~~--'-
-~~- ~-~ -'-' --~ bank its percentage share of those net proceeds on a
monthly basis.
This proposed structure may be a .. .,.. ...~~___~_-____ modified
from time to time based upon the review and advice of
counsel.
LOAN~• LOSS RESERVE
In the first year a Loan Loss Reserve of $50,000 (30~) must
be 100 irrevocably committed by Orange County prior to
implementation or activation of the Orange County Loan
Program. Tn year two, an additional $50,000 must be
committed. In year three, an additional $50,000 must be
committed, bringing the County total to 30$ of the ~e3re-~~
"' - -'-" - 5500, 000 loan capacity.
• The Loan Loss Reserve. to be provided by Orange County shall
be funded in an amount not less than 30~ of the aggregate
loans made during the term of the program, less amounts
that have been paid from the Loan Loss R•~eserve to ~e
participating ~~r~a~ara~~•s~~~i-ems .banks .
9
47
LOAN COMMxTTEE
The Board of Directors of the Oran e
Count Small Business Loan Pro ram Co an will serve as a
comm~ittee of the whole and as such will serrve as the Loan
Committee. The Loan Cau~ittee Chair shall generally monitor the
duties of the Loan Program administration; ~e make sure Joan
proposal packages are properly prepared prior to their
presentation at Loan Committee meetings; and ~e oversee the
preparation of commitment fetters to approved borrowers. Such
commitment letters will be signed by the Chairs tw _ -'••--' ; ~--~-~
. The Loan Committee will have the
following responsibilities:
1. Find creative ways to utilize loanable funds to stimulate
successful small business development and job creation.
2. Meet monthly to review loan applications and determine
which requests will be approved and under what terms and
conditions.
3. Periodically review status of existing loans and recommend
appropriate corrective action or special monitoring where
needed.
4. Approve modifications to loan agreements.
10
48
5. Evaluate underwriting requirements and make appropriate
adjustments as needed to accomplish the objectives of the
program.
6. Provide direction regarding collection (e.g. legal action,
foreclosure, acceleration of amortization, determination of
default/charge-off, etc.)
7. Conduct annual review of loan documents and credit files.
PORTFOLIO MANAGEMENT GUIDELINES
1. Loans to start-up businesses shall not exceed 25~ of the
loan pool.
2. The natal of loan principal past .due 30 days or more shall
,not for any month exceed 10% of outstanding loan
commitments.
Any exception to the above will result in a moratorium on future
loan requests and a review of these loan guidelines by the Loan
Committee:
SPREAD ALLOCATION
During the first three years of operation, '
rwL~}••~'~~~ banks will fund commitments at the Prime rate in
order to provide sufficient spread to substantially defray
administrative and servicing costs, plus provide a source to
gradually replace the loan loss reserve established by the
County. Annually, this entire issue will be reviewed and
adjustments made as necessary.
mydocuments/smallbusdraft.doc
11