SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission File Number: 001-14649
Trex Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 54-1910453
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 Exeter Drive
Winchester, Virginia 22603-8605
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (540) 542-6300
20 South Cameron Street, Winchester, Virginia 22601
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of the registrant's common stock, par value $.01 per share,
outstanding at November 11, 2001 was 14,154,558 shares.
TREX COMPANY, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 2000
and September 30, 2001 (unaudited).............................. 3
Condensed Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2000 and 2001 (unaudited)... 4
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and 2001 (unaudited)............ 5
Notes to Condensed Consolidated Financial Statements
(unaudited)..................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 14
Item 2. Changes in Securities and Use of Proceeds....................... 14
Item 3. Defaults Upon Senior Securities................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............. 14
Item 5. Other Information............................................... 14
Item 6. Exhibits and Reports on Form 8-K................................ 14
Signatures 16
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TREX COMPANY, INC.
Condensed Consolidated Balance Sheets
December 31, September 30,
2000 2001
------------ -------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................... $ -- $ --
Trade accounts receivable.......................... 10,582,000 5,308,000
Inventories........................................ 23,017,000 32,002,000
Prepaid expenses and other assets.................. 689,000 741,000
Deferred income taxes.............................. 478,000 360,000
------------ ------------
Total current assets............................... 34,766,000 38,411,000
------------ ------------
Property, plant, and equipment, net................. 113,635,000 137,330,000
Intangible assets, net.............................. 7,544,000 7,013,000
Other............................................... 650,000 500,000
------------ ------------
Total assets........................................ $156,595,000 $183,254,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable............................. $ 17,082,000 $ 10,449,000
Accrued expenses................................... 2,053,000 1,156,000
Income taxes payable............................... 574,000 181,000
Other current liabilities.......................... 664,000 894,000
Current portion of long-term debt.................. 697,000 25,662,000
------------ ------------
Total current liabilities.......................... 21,070,000 38,342,000
------------ ------------
Deferred income taxes............................... 5,782,000 6,354,000
Line of credit...................................... 44,748,000 41,764,000
Debt-related derivatives............................ -- 1,906,000
Long-term debt...................................... 15,954,000 15,471,000
------------ ------------
Total liabilities.................................. 87,554,000 103,837,000
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value, 3,000,000 shares
authorized; none issued and outstanding........... -- --
Common stock, $0.01 par value, 40,000,000 shares
authorized; 14,135,060 and 14,151,125 shares
issued and outstanding............................ 141,000 142,000
Additional capital................................. 41,330,000 41,542,000
Retained earnings.................................. 27,570,000 38,915,000
Accumulated other comprehensive net loss........... -- (1,182,000)
------------ ------------
Total stockholders' equity......................... 69,041,000 79,417,000
------------ ------------
Total liabilities and stockholders' equity......... $156,595,000 $183,254,000
============ ============
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED).
3
TREX COMPANY, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- ---------------------------------
2000 2001 2000 2001
----------- ----------- ------------ -----------
Net sales..................................... $25,806,000 $29,868,000 $101,308,000 $99,791,000
Cost of sales................................. 12,703,000 16,716,000 52,030,000 55,754,000
----------- ----------- ------------ -----------
Gross profit.................................. 13,103,000 13,152,000 49,278,000 44,037,000
Selling, general and administrative expenses.. 4,647,000 7,478,000 19,097,000 24,602,000
----------- ----------- ------------ -----------
Income from operations........................ 8,456,000 5,674,000 30,181,000 19,435,000
Interest income............................... 3,000 -- 5,000 2,000
Interest (expense)............................ (79,000) (760,000) (621,000) (1,710,000)
----------- ----------- ------------ -----------
Income before taxes........................... 8,380,000 4,914,000 29,565,000 17,727,000
Income taxes.................................. 3,184,000 1,511,000 11,231,000 6,382,000
----------- ----------- ------------ -----------
Net income.................................... $ 5,196,000 $ 3,403,000 $ 18,334,000 $11,345,000
=========== =========== ============ ===========
Basic earnings per common share............... $ 0.37 $ 0.24 $ 1.30 $ 0.80
=========== =========== ============ ===========
Weighted average basic shares outstanding..... 14,132,959 14,149,049 14,127,938 14,142,686
=========== =========== ============ ===========
Diluted earnings per common share............. $ 0.37 $ 0.24 $ 1.29 $ 0.80
=========== =========== ============ ===========
Weighted average diluted shares outstanding... 14,193,579 14,171,593 14,182,491 14,172,971
=========== =========== ============ ===========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED).
4
TREX COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine Months Ended September 30,
-------------------------------
2000 2001
------------ ------------
OPERATING ACTIVITIES
Net income......................................................................... $ 18,334,000 $ 11,345,000
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes............................................................. 1,465,000 1,414,000
Depreciation and amortization..................................................... 4,899,000 6,254,000
Loss on disposal of property, plant and equipment................................. 14,000 472,000
Changes in operating assets and liabilities:
Trade accounts receivable......................................................... (4,430,000) 5,274,000
Inventories....................................................................... (3,851,000) (8,985,000)
Prepaid expenses and other assets................................................. (819,000) 98,000
Trade accounts payable............................................................ 4,443,000 (6,633,000)
Accrued expenses.................................................................. 941,000 (897,000)
Income taxes payable.............................................................. 2,304,000 (393,000)
Other current liabilities......................................................... (436,000) 230,000
------------ ------------
Net cash provided by operating activities.......................................... 22,864,000 8,179,000
------------ ------------
INVESTING ACTIVITIES
Expenditures for property, plant and equipment..................................... (40,422,000) (29,890,000)
------------ ------------
Net cash used in investing activities.............................................. (40,422,000) (29,890,000)
------------ ------------
FINANCING ACTIVITIES
Borrowing under mortgages and term loans........................................... 5,940,000 --
Principal payments under mortgages and term loans.................................. (329,000) (518,000)
Borrowings under line of credit.................................................... 29,321,000 72,655,000
Principal payments under line of credit............................................ (17,575,000) (50,639,000)
Proceeds from exercise under employee stock purchase and option plans.............. 201,000 213,000
------------ ------------
Net cash provided by financing activities.......................................... 17,558,000 21,711,000
------------ ------------
Net increase in cash and cash equivalents.......................................... -- --
Cash and cash equivalents at beginning of period................................... -- --
------------ ------------
Cash and cash equivalents at end of period......................................... $ -- $ --
============ ============
Supplemental Disclosure:
Cash paid for interest............................................................ $ 1,039,000 $ 3,475,000
Cash paid for income taxes........................................................ $ 7,517,000 $ 5,367,000
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED).
5
TREX COMPANY, INC.
Notes to Condensed Consolidated Financial Statements
For the Three and Nine months Ended September 30, 2000 and 2001 (Unaudited)
1. BUSINESS AND ORGANIZATION
Trex Company, Inc. (the "Company"), a Delaware corporation, was incorporated on
September 4, 1998 for the purpose of acquiring 100% of the membership interests
and operating the business of TREX Company, LLC, a Delaware limited liability
company, in connection with an initial public offering of the Company's common
stock. Through its wholly owned subsidiary, TREX Company, LLC, the Company
manufactures and distributes wood/plastic composite products primarily for
residential and commercial decking applications. Trex Wood-Polymer(R) lumber
("Trex") is manufactured in a proprietary process that combines waste wood
fibers and reclaimed polyethylene. TREX Company, LLC is a limited liability
company formed under the laws of the State of Delaware on July 1, 1996
(inception). It initiated commercial activity on August 29, 1996. On August 29,
1996, TREX Company, LLC acquired substantially all of the assets and assumed
certain liabilities of the Composite Products Division of Mobil Oil Corporation
for a cash purchase price of approximately $29.5 million. The acquisition was
accounted for using the purchase accounting method.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, the accompanying condensed consolidated financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normally recurring
accruals) considered necessary for a fair presentation have been included in the
accompanying condensed consolidated financial statements. The consolidated
results of operations for the three-month and nine-month periods ended September
30, 2001 are not necessarily indicative of the results that may be expected for
the full fiscal year. These condensed consolidated financial statements should
be read in conjunction with the consolidated audited financial statements as of
December 31, 1999 and 2000 and for each of the three years in the period ended
December 31, 2000 included in the annual report of Trex Company, Inc. on Form
10-K (File No. 001-14649), as filed with the Securities and Exchange Commission.
3. INVENTORY
Inventories consist of the following:
December 31, 2000 September 30,2001
----------------- ------------------
(unaudited)
Finished goods................... $19,523,000 $26,103,000
Raw materials.................... 3,494,000 5,899,000
----------- -----------
$23,017,000 $32,002,000
=========== ===========
4. DEBT
On November 13, 2001, the Company and the lender revised the terms of the
Company's bank credit facility, primarily to increase the maximum amount of
borrowings available to the Company, restructure the form of borrowings, and
modify the term of the facility. The terms of the revised credit agreement
provide for borrowings under a revolving credit facility of up to $17.0 million
for working capital and general corporate purposes through January 31, 2003.
Amounts drawn under the revolving credit agreement bear interest at an annual
rate equal to LIBOR plus 3.00% through June 30, 2002 and LIBOR plus 4.00%
thereafter, and are subject to a borrowing base consisting of accounts
receivable and finished goods inventories. The revised agreement also provides
for a $58.0 million term loan, with scheduled
6
principal reductions of $5.0 million on each of March 1, April 1, May 1, June 1
and July 1, 2002. The remaining principal balance and accrued interest on the
term loan will be payable in full on January 31, 2003. Amounts drawn under the
term loan up to $33.0 million bear interest at an annual rate equal to LIBOR
plus 3.00% through June 30, 2002 and LIBOR plus 4.00% thereafter. Amounts drawn
under the term loan in excess of $33.0 million bear interest at an annual rate
equal to LIBOR plus 5.00%. As of the date of this report, the Company has drawn
down $58.0 million under ther term loan. In connection with the revised
agreement, the maturity dates of the Company's real estate mortgage loans with
this lender were modified and the interest rates on these loans were increased
by 200 basis points through June 30, 2002 and by 300 basis points thereafter.
The mortgage loans will be payable in full on January 31, 2003 or, if earlier,
on the date on which the term loan and revolving credit facility are repaid,
subject to an extension of such maturity dates until January 31, 2005 if the
Company meets certain conditions. The revised agreement, which was effective as
of September 30, 2001, contains restrictive and financial covenants, and
borrowings under the agreement are secured by a lien on substantially all of the
Company's assets. In connection with the revised agreement, the Company issued
the lender a warrant exercisable until January 31, 2005 to purchase up to
707,557 shares of the Company's common stock at a price per share equal to the
average of the last sale price of the common stock on the New York Stock
Exchange for the 20 consecutive trading days beginning on October 30, 2001. The
lender's right to purchase one-half of those shares will automatically terminate
if the Company repays the revolving credit facility and term loan and an
outstanding letter of credit on or before June 30, 2002. Before the foregoing
revisions to the credit agreement, the Company was not in compliance with
certain requirements of the agreement, including covenants that require the
Company to maintain minimum leverage and capitalization ratios and to reduce its
outstanding borrowings under the credit facility to $50 million as of a
specified date. As a result of such non-compliance, the Company was also in
violation of certain of its mortgage loans with a total balance of approximately
$9.9 million as of September 30, 2001. The revision of the credit agreement
eliminated such non-compliance as of September 30, 2001 under both the credit
facility and such mortgage loans.
5. STOCKHOLDERS' EQUITY
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 2001 2000 2001
----------- ----------- ----------- -----------
Numerator:
Net income available to common
shareholders, basic and diluted............... $ 5,196,000 $ 3,403,000 $18,334,000 $11,345,000
=========== =========== =========== ===========
Denominator:
Weighted average shares outstanding, basic.... 14,132,959 14,149,049 14,127,938 14,142,686
Impact of potential common shares:
Stock options................................ 60,620 22,544 54,553 30,285
----------- ----------- ----------- -----------
Weighted average shares outstanding, diluted.. 14,193,579 14,171,593 14,182,491 14,172,971
=========== =========== =========== ===========
Basic earnings per share....................... $0.37 $0.24 $1.30 $0.80
===== ===== ===== =====
Diluted earnings per share..................... $0.37 $0.24 $1.29 $0.80
===== ===== ===== =====
6. SEASONALITY
The Company's net sales and income from operations have historically varied from
quarter to quarter. Such variations are principally attributable to seasonal
trends in the demand for the Trex product. The Company has historically
experienced lower net sales during the fourth quarter because of holidays and
adverse weather conditions in certain regions, which reduce the level of home
improvement and new construction activity. Net sales during the third quarter of
2000 accounted for approximately 21.9% of annual sales in 2000. During the third
quarter of 2000, the Company's increased production capacity enabled it to
eliminate the allocation of product supply to its network of wholesale
distributors and retail dealers. Because customer stockpiling of inventories
resulting from this allocation policy affected seasonality, the Company's
historical seasonality may not be a reliable indicator of future seasonality.
7. NEW ACCOUNTING STANDARDS
Effective January 1, 2001, the Company adopted Statement of Financial Accounting
Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by Statement of Financial
7
Accounting Standard No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." SFAS No. 133, as amended, establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value.
In order to manage market risk exposure related to changing interest rates, the
Company has entered into interest rate swap agreements effectively converting
its floating rate mortgage debt to a fixed-rate obligation. These interest rate
swap agreements have the same payment and maturity terms as the underlying debt
and are accounted for under the short-cut method as permitted by SFAS No. 133.
The transition adjustment to implement this new standard, which is presented as
a cumulative effect of change in accounting principle, increased liabilities by
approximately $820,000, with a corresponding reduction in stockholders' equity
through other comprehensive income (approximately $508,000, net of tax). The
Company recognized an increase in the liability of $1,056,000, with a
corresponding decrease to stockholders' equity through other comprehensive
income (approximately $732,000 net of tax and reclassification of earnings), for
the three-month period ended September 30, 2001 and an increase in the liability
of $1,086,000 with a corresponding decrease to stockholders' equity through
other comprehensive income (approximately $825,000, net of tax and
reclassification to earnings), for the nine-month period ended September 30,
2001. The Company estimates that of the amounts included in other comprehensive
income, approximately $410,000, net of taxes of approximately $251,000, will be
reclassified to earnings over the next 12 months.
Comprehensive income for the Company includes net income and derivative gains or
losses that are excluded from net income but included as a separate component of
total stockholders' equity. Comprehensive income for the three-month and nine-
month periods ended September 30, 2000 and 2001 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 2001 2000 2001
---------- ---------- ----------- -----------
Net income................................... $5,196,000 $3,403,000 $18,334,000 $11,345,000
Cumulative effect of a change in accounting
principle................................... -- -- -- (508,000)
Net derivative change in fair value.......... -- (732,000) -- (825,000)
Derivative loss reclassified to earnings..... -- 77,000 -- 151,000
---------- ---------- ----------- -----------
Total comprehensive income................... $5,196,000 $2,748,000 $18,334,000 $10,163,000
========== ========== =========== ===========
The Company implemented the consensus of the Emerging Issues Task Force Issue
00-10, "Accounting for Shipping and Handling Fees and Costs," or EITF 00-10, in
the fourth quarter of 2000. This rule requires that all shipping and handling
fees be recorded in net sales and that the related costs be included in cost of
sales. Previously, the Company had classified shipping and handling fees, net of
shipping and handling costs, as cost of sales. The effect of this
reclassification was to increase net sales and cost of sales by approximately
$0.7 million for three-month period ended September 30, 2000, and approximately
$2.6 million for the nine-month period ended September 30, 2000. This
reclassification had no effect on net income in any period.
In September 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations," and No. 142,
"Goodwill and Other Intangible Assets," effective for fiscal years beginning
after December 15, 2001. Under the new rules, goodwill and intangible assets
deemed to have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives.
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. During 2002, the
Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. The Company has not
yet determined what the effect of these tests will be on its earnings and
financial position.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements regarding the Company's expected financial position and
operating results, its business strategy and its financing plans are forward-
looking statements. These statements are subject to risks and uncertainties that
could cause the Company's actual results to differ materially. Such risks and
uncertainties include the Company's ability to increase market acceptance of its
Trex product; the Company's lack of product diversification; the Company's
current dependence on its two manufacturing facilities; the Company's reliance
on the supply of raw materials used in its production process; the Company's
sensitivity to economic conditions, which influence the level of activity in
home improvements and new home construction; the Company's ability to manage its
growth; the Company's significant capital requirements and ability to raise
capital; and the Company's dependence on its largest distributors to market and
sell its products. A discussion of these risks and uncertainties is contained in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 28, 2001. The Company undertakes no obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Overview
The Company is the nation's largest manufacturer of non-wood decking alternative
products, which are marketed under the brand name Trex(R). Trex Wood-Polymer(R)
lumber ("Trex") is a wood/plastic composite which is manufactured in a
proprietary process that combines waste wood fibers and reclaimed polyethylene.
Trex is used primarily for residential and commercial decking. Trex also has
non-decking product applications, including applications for parks and
recreational areas, floating and fixed docks and other marine applications, and
landscape edging.
Net sales consist of sales and freight, net of returns and discounts. Cost of
sales consists of raw material costs, direct labor costs and manufacturing
costs, including depreciation and freight. The most significant component of
selling, general and administrative expenses is branding and other sales and
marketing costs, which have increased significantly as the Company has sought to
build brand awareness of Trex in the decking market. Sales and marketing costs
consist primarily of salaries, commissions and benefits paid to sales and
marketing personnel, advertising expenses and other promotional costs. General
and administrative expenses include salaries and benefits of personnel engaged
in research and development, procurement, accounting and other business
functions and office occupancy costs attributable to such functions, as well as
amortization expense.
For most fiscal periods since the Company's inception, the Company has had to
allocate its product supply to its customers. In 2000, the Company made capital
expenditures of approximately $60.1 million, primarily to increase production
capacity. Because of the expansion of its production capacity, during the third
quarter of 2000 the Company was able to eliminate the allocation of product
supply to its network of wholesale distributors and retail dealers. As a result
of this development and current adverse economic conditions, customers generally
no longer seek to stockpile inventories. The Company believes there has been a
temporary slowdown in new orders as excess inventories at the wholesale and
retail levels are reduced. The Company also believes that the slowdown in new
orders and the effect of the slowdown on net sales may continue until the more
normal seasonal demand for Trex products is fully resumed in 2002. During the
quarters ended June 30 and September 30, 2001, the Company suspended operations
on a portion of its production capacity and halted a substantial portion of its
capital projects to reduce investments in inventory and working capital and
preserve capital. As of September 30, 2001, the Company's capital projects in
process totaled approximately $44.2 million. The Company has ceased the
capitalization of interest on these projects until they are resumed. The Company
is currently utilizing six of its 15 available production lines, representing
approximately 40% of its production capacity. In connection with the curtailment
of production capacity, the Company in August 2001 terminated approximately 15
employees at its Fernley, Nevada manufacturing facility and in October 2001
terminated a total of approximately 75 employees at its Fernley, Nevada and
Winchester, Virginia manufacturing facilities and its corporate headquarters.
9
Three Months Ended September 30, 2001 Compared with Three Months Ended
September 30, 2000
Net Sales
Net sales in the three months ended September 30, 2001 (the "2001 quarter")
increased 15.7 % to $29.9 million from $25.8 million in the three months ended
September 30, 2000 (the "2000 quarter"). The increase in net sales was
significantly influenced by the increase in the number of dealer outlets, from
approximately 2,500 at September 30, 2000 to approximately 2,900 at September
30, 2001, and to a lesser extent, a price increase of approximately 6.8%.
Cost of Sales
Cost of sales increased 31.6% to $16.7 million in the 2001 quarter from $12.7
million in the 2000 quarter as a result of the higher sales volume. Cost of
sales as a percentage of net sales increased to 56.0% in the 2001 quarter from
49.2% in the 2000 quarter. The increase principally reflected operating
inefficiencies from the reduced production level in the 2001 quarter.
Gross Profit
Gross profit increased 0.4% to $13.2 million in the 2001 quarter from $13.1
million in the 2000 quarter. The increase in gross profit was primarily
attributable to the higher sales volume, which was substantially offset by
production inefficiencies from the reduced production level in the 2001 quarter.
Gross profit as a percentage of net sales decreased to 44.0% in the 2001 quarter
from 50.8% in the 2000 quarter, primarily because of the increase in cost of
sales as a percentage of net sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 60.9% to $7.5 million in
the 2001 quarter from $4.6 million in the 2000 quarter, primarily because of an
increase of $1.0 million in corporate personnel expenses and related hiring
costs necessary to support the Company's growth and an increase of $1.1 million
in expense incurred in the Company's marketing and branding activities.
Expenses relating to information technology increased $0.3 million as the
Company continued installation of a new enterprise reporting system. During the
2001 quarter, the Company wrote off $0.3 million of previously capitalized costs
relating to work performed on a prospective third plant site in Knoxville,
Tennessee, which the Company decided not to pursue, and unamortized leasehold
improvements of $0.2 million relating to the relocation of the Company's
corporate headquarters. Rental expense increased $0.2 million at the new
headquarters facility. The foregoing increases were partially offset by a
reduction of $1.8 million in the accrual for profit sharing and management
bonuses. The Company reversed these profit sharing and bonus accruals in the
2001 quarter based on management's revised assessment that none of the amounts
would be earned and payable for 2001. As a percentage of net sales, selling,
general and administrative expenses increased to 25.0% in the 2001 quarter from
18.0% in the 2000 quarter.
Interest Expense
Net interest expense increased to $0.8 million in the 2001 quarter from $0.1
million in the 2000 quarter. The increased expense primarily reflected higher
average debt balances incurred since the 2000 quarter to fund the expansion of
the Company's production capacity and, to a lesser extent, higher interest rates
charged on outstanding borrowings. The increase was partially offset by the
capitalization of interest with respect to projects financed with those
borrowings.
Provision for Income Taxes
The Company recorded a provision for income taxes of $1.5 million in the 2001
quarter compared to a provision of $3.2 million in the 2000 quarter. Both
provisions reflect a 38% combined effective tax rate. The provision in the 2001
quarter reflects a $0.3 million adjustment to decrease the accrual for state
taxes payable.
10
Net Income
The Company's net income decreased 34.5% to $3.4 million in the 2001 quarter
from $5.2 million in the 2000 quarter. The decrease in net income in the 2001
quarter was primarily attributable to higher costs of sales attributable to
production inefficiencies from the reduced production level and the increase in
selling, general and administrative expenses.
Nine Months Ended September 30, 2001 Compared with Nine Months Ended
September 30, 2000
Net Sales
Net sales in the nine months ended September 30, 2001 (the "2001 nine-month
period") decreased 1.5% to $99.8 million from $101.3 million in the nine months
ended September 30, 2000 (the "2000 nine-month period"). The decrease in net
sales was primarily attributable to a reduction in sales volume, as the Company
eliminated the allocation of product supply in October 2000, which led to
customers reducing stockpiles of inventory in 2001. The increase in net sales
was significantly influenced by the increase in the number of dealer outlets,
from approximately 2,500 at September 30, 2000 to approximately 2,900 at
September 30, 2001, and to a lesser extent, a price increase of approximately
6.8%.
Cost of Sales
Cost of sales increased 7.2% to $55.8 million in the 2001 nine-month period from
$52.0 million in the 2000 nine-month period. Cost of sales as a percentage of
net sales increased to 55.9% in the 2001 nine-month period from 51.4% in the
2000 nine-month period. The increase principally reflected operating
inefficiencies from the reduced production level in the 2001 nine-month period.
Gross Profit
Gross profit decreased 10.6% to $44.0 million in the 2001 nine-month period from
$49.3 million in the 2000 nine-month period. The decrease in gross profit was
primarily attributable to the lower sales volume and production inefficiencies
from the reduced production level in the 2001 nine-month period. Gross profit as
a percentage of net sales decreased to 44.1% in the 2001 nine-month period from
48.6% in the 2000 nine-month period, primarily because of the increase in cost
of sales as a percentage of net sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 28.8% to $24.6 million in
the 2001 nine-month period from $19.1 million in the 2000 nine-month period. The
increase was primarily attributable to an increase of approximately $2.8 million
in corporate personnel expense and related hiring costs necessary to support the
Company's planned growth, and an increase in marketing and branding expenses of
$1.2 million. Healthcare costs increased $0.6 million due to a larger workforce
and higher medical costs. Expenses relating to information technology increased
$0.3 million as the Company continued installation of a new enterprise reporting
system. During the 2001 quarter, the Company wrote off $0.3 million of
previously capitalized costs relating to work performed on a prospective third
plant site in Knoxville, Tennessee, which the Company decided not to pursue, and
unamortized leasehold improvements of $0.2 million relating to the relocation of
the Company's corporate headquarters. Rental expense increased $0.2 million at
the new headquarters facility. The foregoing increases were partially offset by
a reduction of $1.8 million in the accrual for profit sharing and management
bonuses. The Company reversed these profit sharing and bonus accruals in the
2001 quarter based on management's revised assessment that none of the amounts
would be earned and payable for 2001. As a percentage of net sales, selling,
general and administrative expenses increased to 24.7% in the 2001 nine-month
period from 18.9% in the 2000 nine-month period.
Interest Expense
Net interest expense increased to $1.7 million in the 2001 nine-month period
from $0.6 million in the 2000
11
nine-month period. The increased expense primarily reflected higher average debt
balances incurred since the 2000 nine-month period to fund the expansion of the
Company's production capacity and, to a lesser extent, higher interest rates
charged on outstanding borrowings. The increase was partially offset by the
capitalization of interest with respect to projects financed with those
borrowings.
Provision for Income Taxes
The Company recorded a provision for income taxes of $6.4 million in the 2001
nine-month period compared to a provision of $11.2 million in the 2000 nine-
month period. Both provisions reflect a 38% combined effective tax rate. The
provision in the 2001 nine-month period reflects a $0.3 million adjustment to
decrease the accrual for state taxes payable.
Net Income
The Company's net income decreased 38.1% to $11.3 million in the 2001 nine-month
period from $18.3 million in the 2000 nine-month period. The decrease in net
income in the 2001 nine-month period was primarily attributable to lower net
sales resulting from the stockpiling of inventories by customers, higher costs
of sales attributable to production inefficiencies from the reduced production
level, and the increase in selling, general and administrative expenses.
Liquidity and Capital Resources
The Company's total assets increased from $156.6 million at December 31, 2000 to
$183.3 million at September 30, 2001. Receivables decreased by $5.3 million as
the Company offered some distributors extended payment terms in the fourth
quarter of 2000 to facilitate the addition of new distributors and the
introduction on a national basis of the newest Trex color, Madeira. Inventories
increased by $9.0 million from December 31, 2000 to September 30, 2001 as a
result of lower net sales in the 2001 nine-month period. Property, plant and
equipment, net, increased $23.7 million as the Company continued construction of
a second manufacturing facility in Winchester, Virginia, installation of
manufacturing lines in both its Winchester, Virginia and Fernley, Nevada
facilities, and construction of a plastic processing facility in Winchester,
Virginia. Trade accounts payable decreased $6.6 million as a result of the
timing of payments relating to the foregoing construction projects. The Company
financed these activities in the 2001 nine-month period from operating cash
flows and additional net draws of approximately $22.0 million under its
revolving credit facilities.
The Company historically has financed its operations and growth primarily with
cash flow from operations and borrowings under its credit facilities.
The Company's cash flow from operating activities for the 2001 nine-month period
was $8.2 million compared to cash flow from operating activities of $22.9
million for the 2000 nine-month period. Trade accounts receivable, net,
decreased from $5.7 million at September 30, 2000 to $5.3 million at September
30, 2001. Inventories increased from $12.5 million at September 30, 2000 to
$32.0 million at September 30, 2001 as the Company's production of Trex products
grew at a faster rate than net sales. Trade accounts payable decreased from
$10.9 million at September 30, 2000 to $10.4 million at September 30, 2001 as a
result of the timing of payments relating to the Company's construction
projects.
As of September 30, 2001, the Company's indebtedness, excluding amounts
outstanding under its revolving credit facility, totaled $16.1 million and had
an overall weighted average interest rate of approximately 9.0% per annum.
On November 13, 2001, the Company and the lender revised the terms of the
Company's bank credit facility, primarily to increase the maximum amount of
borrowings available to the Company, restructure the form of borrowings, and
modify the term of the facility. The terms of the revised credit agreement
provide for borrowings under a revolving credit facility of up to $17.0 million
for working capital and general corporate purposes through January 31, 2003.
Amounts drawn under the revolving credit
12
agreement bear interest at an annual rate equal to LIBOR plus 3.00% through
June 30, 2002 and LIBOR plus 4.00% thereafter, and are subject to a borrowing
base consisting of accounts receivable and finished goods inventories. The
revised agreement also provides for a $58.0 million term loan, with scheduled
principal reductions of $5.0 million on each of March 1, April 1, May 1, June 1
and July 1, 2002. The remaining principal balance and accrued interest on the
term loan will be payable in full on January 31, 2003. Amounts drawn under the
term loan up to $33.0 million bear interest at an annual rate equal to LIBOR
plus 3.00% through June 30, 2002 and LIBOR plus 4.00% thereafter. Amounts drawn
under the term loan in excess of $33.0 million bear interest at an annual rate
equal to LIBOR plus 5.00%. As of the date of this report, the Company has drawn
down $58.0 million under the term loan. In connection with the revised
agreement, the maturity dates of the Company's real estate mortgage loans with
this lender were modified and the interest rates on these loans were increased
by 200 basis points through June 30, 2002 and by 300 basis points thereafter.
The mortgage loans will be payable in full on January 31, 2003 or, if earlier,
on the date on which the term loan and revolving credit facility are repaid,
subject to an extension of such maturity dates until January 31, 2005 if the
Company meets certain conditions. The revised agreement, which was effective as
of September 30, 2001, contains restrictive and financial covenants, and
borrowings under the agreement are secured by a lien on substantially all of the
Company's assets. In connection with the revised agreement, the Company issued
the lender a warrant exercisable until January 31, 2005 to purchase up to
707,557 shares of the Company's common stock at a price per share equal to the
average of the last sale price of the common stock on the New York Stock
Exchange for the 20 consecutive trading days beginning on October 30, 2001. The
lender's right to purchase one-half of those shares will automatically terminate
if the Company repays the revolving credit facility and term loan and an
outstanding letter of credit on or before June 30, 2002. Before the foregoing
revisions to the credit agreement, the Company was not in compliance with
certain requirements of the agreement, including covenants that require the
Company to maintain minimum leverage and capitalization ratios and to reduce its
outstanding borrowings under the credit facility to $50 million as of a
specified date. As a result of such non-compliance, the Company was also in
violation of certain of its mortgage loans with a total balance of approximately
$9.9 million as of September 30, 2001. The revision of the credit agreement
eliminated such non-compliance as of September 30, 2001 under both the credit
facility and such mortgage loans.
Capital expenditures during the 2001 nine-month period totaled $29.9 million and
for the balance of 2001 are expected to total approximately $2.1 million. The
Company is currently utilizing six of its 15 available production lines,
representing approximately 40% of its production capacity. The nine other
production lines can resume operation at nominal expense. The Company has
temporarily halted a substantial portion of its capital projects to preserve
capital. The Company believes that cash flow from operations and borrowings
expected to be available under the Company's bank credit facility will provide
sufficient funds to enable the Company to continue its business as currently
planned and meet scheduled debt service obligations for the next 12 months. The
actual amount and timing of the Company's future capital requirements may differ
materially from the Company's estimate depending on the demand for Trex products
and evolving market and economic conditions. The Company may determine that it
is necessary or desirable to obtain financing for such requirements through the
issuance of debt or equity securities. Debt financing would increase the
leverage of the Company, while equity financing may dilute the ownership of the
Company's stockholders. There can be no assurance as to whether, or as to the
terms on which, the Company will be able to obtain such financing.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary existing market risk exposure is to changing interest
rates. The Company's policy is to manage interest rates through a combination of
variable-rate debt under its revolving credit and term loan facilities and
interest rate swap agreements with respect to its other debt. Amounts drawn
under the Company's revolving credit and term loan facilities bear interest at
annual rates between LIBOR plus 3.0% and LIBOR plus 5.0%. As of September 30,
2001, pursuant to interest rate swap agreements on its variable-rate mortgage
debt, the Company had effectively fixed its interest rate exposure at a rate of
9.0% on $16.1 million of such variable-rate debt.
The Company does not have any material foreign currency forward contracts or
commodity contracts and does not have any material foreign currency exposure.
13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in the Company's report on Form 10-Q for the quarter ended June 30,
2001, commencing on or about July 11, 2001, four purported class action lawsuits
(the "Class Actions") were filed in the United States District Court for the
Western District of Virginia naming as defendants Trex Company, Inc. and certain
directors and officers of the Company, including Robert G. Matheny, the
President and a director of the Company, Roger A. Wittenberg, the Executive Vice
President of Technical Operations and Materials Sourcing and a director of the
Company, and Anthony J. Cavanna, the Executive Vice President, Chief Financial
Officer and a director of the Company. The plaintiffs in the lawsuits purport to
represent a class of purchasers of the Company's common stock between
November 2, 2000 and June 18, 2001. The complaints, one of which since has been
dismissed voluntarily, principally allege that the Company and certain directors
and officers of the Company violated Sections 10(b) and 20(a) of, and Rule 10b-5
under, the Securities Exchange Act of 1934 by, among other things, making false
and misleading public statements concerning the Company's operating and
financial results and expectations and by filing misleading and inaccurate
financial statements with the Securities and Exchange Commission. They also
allege that Mr. Matheny and Mr. Wittenberg sold shares of the Company's common
stock during a period in which the price of the common stock was inflated
artificially due to the purportedly misleading statements. The plaintiffs in the
lawsuits seek unspecified monetary damages together with any other relief
permitted by law, equity and federal statutory provisions identified in the
complaints. The Company believes that the lawsuits are without merit and intends
to vigorously defend these lawsuits and any other similar lawsuits that may be
served on the Company.
On or about September 21, 2001, Trex Company, Inc. was named in a related
complaint filed in the Circuit Court for the City of Winchester, Virginia (the
"Bennett Complaint"). The Bennett Complaint purports to assert a derivative suit
for the benefit of the Company against each of its directors. It alleges that
during the same period at issue in the Class Actions and in violation of
applicable state and/or federal laws, the individual defendants caused the
Company to issue materially misleading disclosures in order to inflate the
Company's common stock price and permit insider trading by two of the individual
defendants, Mr. Matheny and Mr. Wittenberg. The Bennett Complaint further
alleges that the individual defendants thereby exposed the Company to potential
damages in connection with the Class Actions. The Bennett Complaint seeks a
constructive trust in favor of the Company over the profits received from the
allegedly improper insider sales, as well as an unspecified amount of damages
allegedly sustained by the Company, together with attorneys' fees, costs and
expenses. No damages or other relief are sought from the Company. On October 19,
2001, the Bennett Complaint was removed to the federal court in which the
related Class Actions are pending.
Item 2. Changes in Securities and Use of Proceeds
Not Applicable
Item 3. Defaults Upon Senior Securities
The information set forth in this report under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" is incorporated by reference in this Item.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The Company files herewith the following exhibits:
14
10.1 Second Amended and Restated Credit Agreement, dated as of
September 30, 2001, among TREX Company, LLC, Trex Company, Inc.,
and First Union National Bank.
10.2 Security Agreement, dated as of September 30, 2001, among TREX
Company, LLC, Trex Company, Inc., and First Union National Bank.
10.3 Deed of Trust, Security Agreement and Assignment of Leases and
Rents, dated as of September 30, 2001, granted by TREX Company,
LLC to Western Title Company, Inc. securing First Union National
Bank.
10.4 Modified Deed of Trust, Security Agreement and Assignment of
Leases and Rents, dated as of September 30, 2001, granted by
TREX Company, LLC to TRSTE, Inc. securing First Union National
Bank.
10.5 $5,940,000 Amended and Restated Promissory Note, dated
September 30, 2001, made by TREX Company, LLC and Trex Company,
Inc. payable to First Union National Bank.
10.6 $1,035,000 Amended and Restated Promissory Note, dated
September 30, 2001, made by TREX Company, LLC and Trex Company,
Inc. payable to First Union National Bank.
10.7 $3,780,000 Amended and Restated Promissory Note, dated
September 30, 2001, made by TREX Company, LLC and Trex Company,
Inc. payable to First Union National Bank.
10.8 $58,000,000 Promissory Note, dated September 30, 2001, made by
TREX Company, LLC and Trex Company, Inc. payable to First Union
National Bank.
10.9 Registration Rights Agreement, dated as of November 13, 2001,
among Trex Company, Inc., First Union National Bank and the
other Holders from time to time thereafter.
10.10 Trex Company, Inc. Common Stock Purchase Warrant, dated November
13, 2001, issued to First Union National Bank.
(b) The following Current Report on Form 8-K was filed by the
Company during the period covered by this report:
Date of Report Item Covered
-------------- ------------
September 18, 2001 Item 5 (termination of land purchase contract
for prospective third plant site)
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TREX COMPANY, INC.
(Registrant)
Date: November 14, 2001 By: /s/ Anthony J. Cavanna
----------------------------------
Anthony J. Cavanna, Executive Vice
President and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
16
Exhibit Index
Number Exhibit Description
- ------ -------------------
10.1 Second Amended and Restated Credit Agreement, dated as of September 30,
2001, among TREX Company, LLC, Trex Company, Inc., and First Union
National Bank.
10.2 Security Agreement, dated as of September 30, 2001, among TREX Company,
LLC, Trex Company, Inc., and First Union National Bank.
10.3 Deed of Trust, Security Agreement and Assignment of Leases and Rents,
dated as of September 30, 2001, granted by TREX Company, LLC to Western
Title Company, Inc. securing First Union National Bank.
10.4 Modified Deed of Trust, Security Agreement and Assignment of Leases and
Rents, dated as of September 30, 2001, granted by TREX Company, LLC to
TRSTE, Inc. securing First Union National Bank.
10.5 $5,940,000 Amended and Restated Promissory Note, dated September 30,
2001, made by TREX Company, LLC and Trex Company, Inc. payable to First
Union National Bank.
10.6 $1,035,000 Amended and Restated Promissory Note, dated September 30,
2001, made by TREX Company, LLC and Trex Company, Inc. payable to First
Union National Bank.
10.7 $3,780,000 Amended and Restated Promissory Note, dated September 30,
2001, made by TREX Company, LLC and Trex Company, Inc. payable to First
Union National Bank.
10.8 $58,000,000 Promissory Note, dated September 30, 2001, made by TREX
Company, LLC and Trex Company, Inc. payable to First Union National
Bank.
10.9 Registration Rights Agreement, dated as of November 13, 2001, among
Trex Company, Inc., First Union National Bank and the other Holders
from time to time thereafter.
10.10 Trex Company, Inc. Common Stock Purchase Warrant, dated November 13,
2001, issued to First Union National Bank.
17
Exhibit 10.1
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of September
30, 2001 among TREX COMPANY, LLC, a Delaware limited liability company, TREX
COMPANY, INC., a Delaware corporation, (collectively the "Borrower") and FIRST
UNION NATIONAL BANK (the "Bank"), a national banking association.
RECITALS:
WHEREAS, TREX Company, LLC, Trex Company, Inc. and the Bank entered into
an Amended and Restated Credit Agreement dated as of August 3, 1999 as amended
from time to time (the "Original Credit Agreement") pursuant to which the Bank
made available to TREX Company, LLC a revolving line of credit and a term loan
facility which revolving line of credit and term loan facility were guaranteed
by Trex Company, Inc.;
WHEREAS, this Agreement amends and restates in its entirety the Original
Credit Agreement and applies to all loan or loans (individually and collectively
the "Obligations") between Bank and Borrower as evidenced by one or more
promissory notes and other documents, as modified from time to time (the Loan
Documents as defined in the Appendix);
WHEREAS, Trex Company, Inc. has agreed to be added to the Loan Documents
as a Borrower;
WHEREAS, Borrower and Bank have agreed to restructure the Obligations;
WHEREAS, in furtherance of the foregoing the Borrower and the Bank have
agreed to amend and restate the Original Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank agree to amend, restate and replace the
Original Credit Agreement as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. All capitalized terms used in this Agreement or
in any Appendix, Schedule or Exhibit hereto which are not otherwise defined
herein or therein shall have the respective meanings set forth in the Appendix
attached hereto identified as the Definitions Appendix. The Definitions Appendix
is incorporated herein by reference in its entirety and is a part of this
Agreement to the same extent as if it had been set forth in this Section 1.01 in
full.
Section 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles in the United States of America as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
Consolidated Subsidiaries delivered to the Bank.
ARTICLE II
THE CREDIT
Section 2.01. Commitment To Lend.
(a) Term Loan. The Bank agrees, on the terms and conditions set
forth in this Agreement, to convert $58,000,000 of the Revolving Loans of
TREX Company, LLC made pursuant to the Original Credit Agreement to a term
loan to the Borrower ("Term Loan A").
(b) Revolving Commitment. The Bank agrees, on the terms and
conditions set forth in this Agreement, to make Revolving Loans to the
Borrower from time to time during the Revolving Credit Period in amounts
such that the aggregate principal amount of Revolving Loans at any one
time outstanding will not exceed the lesser of (i) the available Borrowing
Base or (ii) the Revolving Commitment. Within the foregoing limit, the
Borrower may borrow, prepay and reborrow Revolving Loans at any time
during the Revolving Credit Period.
(c) Borrowing Base. Revolving loans will be subject to monthly
borrowing base reporting.
i. "Borrowing Base" means 85.00% of the net amount of Eligible
Accounts, plus 60.00% of the value of Eligible Inventory, less
the amount of any Reserves required by Bank.
ii. "Eligible Account" means an account receivable which is (a)
not more than 90 days from the date of the original invoice
and (b) not more than 60 days from the due date of the
original invoice that arises in the ordinary course of
Borrower's business and meets the following eligibility
requirements:
1. the sale of goods or service reflected in such account
is final and such goods and services have been
delivered or provided and accepted by the account
debtor and payment for such is owing:
2. the invoices comprising an account are not subject to
any claims, returns or disputes of any kind;
3. the account debtor is not insolvent;
2
4. the account debtor has its principal place of business
in the United States;
5. the account debtor is not an Affiliate of Borrower and
is not a supplier to Borrower and the account is not
otherwise exposed to risk of set-off; and
6. the account is not subject to any lien prior to the
lien of Bank
iii. "Eligible Inventory" means inventory of finished goods in
Borrower's possession that is held for use or sale in the
ordinary course of Borrower's business and is not
unmerchantable or obsolete and is subject to a first priority
perfected security interest in favor of Bank. The value of the
inventory will be valued at the lower of cost or market on a
first-in, first-out basis as determined in accordance with
generally accepted accounting principles applied on a
consistent basis.
iv. "Reserves" means such amounts as may be required by Bank, at
any time and from time to time without prior notice to
Borrower, which Bank deems, in its sole but reasonable
discretion, to be adequate to reserve against outstanding
letters of credit, outstanding banker's acceptances,
Borrower's obligations to Bank or its affiliates or any
guaranties or other contingent debts of Borrower.
Section 2.02. Existing Loans
(a) Term Real Estate Term Loan 1.
(b) Real Estate Term Loan 2.
(c) Real Estate Term Loan 3.
(d) ISDA Master Agreement.
(e) Letter of Credit SM413821.
Section 2.03. Methods of Borrowing.
(a) Notice of Borrowing. Except as otherwise provided in this
Section and/or the Services Agreement, the Borrower may, with the approval
of the Bank, give the Bank notice substantially in the form of Exhibit A
hereto (a "Notice of Borrowing") not later than 12:00 p.m. (local time in
Winchester, Virginia) on the date of each requested Loan, specifying the
date of such Loan and the amount of such Loan.
(b) Cash Management Services. The Borrower subscribes to the Bank's
cash management services and such services are applicable to the Revolving
Loans. The terms of such services, as set forth in the Services Agreement,
shall control the manner in which funds are transferred between the
Operating Account and the Revolving Loans for credit or debit to the
Revolving Loans.
3
(c) Overdrafts in Other Accounts. The Bank may, at its option, pay
any Item which will cause any deposit account maintained by the Borrower
with the Bank to become overdrawn; and such payment shall be deemed a
Revolving Loan hereunder.
Section 2.04. Funding of Revolving Loans. The Bank shall disburse the
proceeds of each Loan made pursuant to Section 2.01 as follows: the proceeds of
each Loan under Section 2.01 shall be made available by the Bank to the Borrower
in federal or other funds immediately available at the Bank's address referred
to in Section 9.01.
Section 2.05. Revolving Loans Note.
(a) Evidence of Loans. The Revolving Loans shall be evidenced by a
single Note payable to the order of the Bank in an amount equal to the
Revolving Commitment.
(b) Records of Amounts Due. The Bank shall record the date and
amount of each Loan made by it and the date and amount of each payment of
principal made by the Borrower with respect thereto, and may, if the Bank
so elects in connection with any transfer or enforcement of each Note,
endorse on the schedule forming a part thereof appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding, provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under such Note. The Bank is hereby irrevocably
authorized by the Borrower so to endorse each Note and to attach to and
make a part of such Note a continuation of any such schedule as and when
required. The Bank shall send the Borrower a copy of any endorsements and
continuations so made.
Section 2.06. Interest Rate.
(a) Revolving Loans. From the date hereof until and including June
30, 2002, each Revolving Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made
until it becomes due, at a rate per annum equal to the applicable LIBOR
Market Index-Based Rate for such day plus 300 basis points. From July 1,
2002 and continuing while the Revolving Loans remain outstanding, each
Revolving Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made until it becomes
due, at a rate per annum equal to the applicable LIBOR Market Index-Based
Rate for such day plus 400 basis points. Such interest shall be payable
for each month in arrears on the first day of the immediately succeeding
calendar month.
(b) Term Loan A. From the date hereof until and including June 30,
2002, the first $33,000,000 of unpaid principal balance on Term Loan A
shall bear interest, payable monthly in arrears, at a rate per annum equal
to the applicable LIBOR Market Index-Based Rate for such day plus 300
basis points and any unpaid principal balance in excess of $33,000,000
shall bear interest, at a rate per annum equal to the applicable LIBOR
Market Index-Based Rate for such day plus 500 basis points. From July 1,
2002, the first $33,000,000 of unpaid principal balance on Term Loan A
shall bear interest, at a rate per annum equal to the applicable LIBOR
Market Index-Based Rate for such day
4
plus 400 basis points and any unpaid principal balance in excess of
$33,000,000 shall bear interest, at a rate per annum equal to the
applicable LIBOR Market Index-Based Rate for such day plus 500 basis
points.
"LIBOR Market Index-Based Rate" shall be the rate per annum equal to
the LIBOR Market Index Rate as that rate may change from day to day.
"LIBOR Market Index Rate," for any day, is the rate for one-month U.S.
Dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London
time, on such day, or if such day is not a London business day, then the
immediately preceding London business day (or, if not so reported, then as
determined by the Bank from another recognized source or interbank
quotation).
(c) Real Estate Term Loans 1, 2 & 3. From the date hereof until and
including June 30, 2002, each of Real Estate Term Loans 1, 2 & 3 shall
bear interest on the unpaid principal balance thereof, payable monthly in
arrears at a rate per annum equal to LIBOR + 300 basis points. From July
1, 2002, each of Real Estate Term Loans 1, 2 & 3 shall bear interest on
the unpaid principal balance thereof, payable monthly in arrears at a rate
per annum equal to LIBOR + 400 basis points.
As further provided in the Real Estate Term Loan Notes, "LIBOR" is
the rate for U.S. dollar deposits with a one-month maturity, as reported
on Telerate page 3750 as of 11:00 a.m., London time, on the second London
business day before the relevant one-month interest period begins (or if
not so reported, then as determined by the Bank from another recognized
source or interbank quotation).
(d) Overdue Amounts. Any overdue principal of or interest on any
Loan shall bear interest, payable on demand, for each day from and
including the date payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the sum of 2% over the rate,
as calculated above, applicable to such Loan on such day.
Section 2.07. Unused Commitment Fee. The Borrower shall pay to the Bank an
unused commitment fee (the "Unused Commitment Fee") for each day at a rate per
annum equal to the product of (i) 15 basis points multiplied by (ii) the excess
of the Revolving Commitment over the aggregate amount of the Revolving Loans on
such day. Such unused commitment fee shall accrue from and including the
Effective Date to but excluding the Termination Date (or earlier date of
termination of the Revolving Commitment in its entirety) and shall be payable
quarterly in arrears on each Quarterly Date and on the Termination Date.
Section 2.08. Adjustments of Commitment.
(a) Optional Termination or Reductions of Revolving Commitment. The
Borrower may, upon at least three Business Days' notice to the Bank, (i)
terminate the Revolving Commitment at any time, if no Revolving Loans are
outstanding at such time, or (ii) reduce from time to time the amount of
the Revolving Commitment in excess of the aggregate outstanding principal
amount of the Revolving Loans. If the Revolving Commitment is terminated
in its entirety, all accrued fees shall be payable on the effective date
of such termination.
5
Section 2.09. Maturity and Repayment of Loan.
(a) Maturity of Revolver on Termination Date. Each Revolving Loan
shall mature, and the principal amount thereof shall be due and payable,
on the Termination Date.
(b) Cash Management Services. The Revolving Loans shall be repaid as
set forth in the Services Agreement, and consistent with this Agreement.
(c) Term Loan A. Term Loan A shall be payable in part by five
consecutive monthly payments of $5,000,000 each beginning on March 1, 2002
and continuing through July 1, 2002. The entire unpaid principal balance
of Term Loan A and all accrued interest thereon shall be due and payable
in full on January 31, 2003.
(d) Real Estate Term Loans 1, 2 & 3. Real Estate Term Loans 1, 2 & 3
shall continue on their current amortization schedule; provided, however,
that the entire unpaid principal balance of Real Estate Term Loans 1, 2 &
3, and all accrued interest thereon shall be due and payable in full on
the earlier of (i) the date that Borrower repays in full all principal and
interest due on Revolving Loans and Term Loan A and (ii) January 31, 2003.
Provided, however, that in the event that Borrower repays in full all
principal and interest outstanding Revolving Loans and Term Loan A, and
Borrower desires to maintain Real Estate Term Loans 1, 2 & 3, Borrower may
elect to extend the maturity date of Real Estate Term Loans 1, 2 & 3 to
January 31, 2005 if it is demonstrated to the Bank's sole satisfaction,
based upon MAI appraisals performed at the time that Borrower makes such
election, that the loan to value of each Real Estate Term Loan to the real
estate, together with all improvements thereon as of the date of the
election, originally secured by such loan does not exceed 70%.
(e) Optional Prepayment of Loans. Provided that with respect to Real
Estate Terms Loans 1, 2 & 3, Borrower shall indemnify Bank against Bank's
loss or expense in employing deposits of as a consequence of Borrower's
payment, prepayment or conversion of Real Estate Term Loans 1, 2 & 3, on a
date other than the last date of the one-month interest period set forth
in the Real Estate Term Notes, the Borrower may upon at least one Business
Day's notice to the Bank, prepay Real Estate Term Loans 1, 2 & 3 and/or
Term Loan A, in whole at any time, or from time to time in part, by paying
the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. The notice of prepayment delivered by the
Borrower to the Bank shall not be revocable by the Borrower following its
receipt by the Bank. Any prepayment of Real Estate Term Loans 1, 2 & 3
shall be applied to Real Estate Term Loans 1, 2 & 3 in the inverse order
of their maturities. Repayment of the Revolving Loans shall be governed by
the Services Agreement.
Section 2.10. General Provisions as to Payments. The Borrower shall make
each payment of principal of and interest on the Loans and fees hereunder not
later than 12:00 noon (local time in Winchester, Virginia) on the date when due,
without setoff, counterclaim or other deduction, in federal or other funds
immediately available to the Bank at its address referred to in Section 9.01 or
such other location as designated by the Bank. Whenever any payment of
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principal of, or interest on, the Loans or of fees shall be due on a day which
is not a Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
Section 2.11. Computation of Interest and Fees. Interest on Loans
hereunder shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
ARTICLE III
COLLATERAL
Section 3.01. Collateral. The Obligations shall be secured by a lien in
the following assets of Borrower and its Subsidiaries.
(a) First priority deed of trust on property located in the City of
Winchester and Frederick County, Virginia, as more particularly described
therein.
(b) Second priority deed of trust on property located in Lyon
County, Nevada, as more particularly described therein.
(c) First priority lien on all of the business assets of any type
and description of Borrower and its Subsidiaries, excluding Winchester
Capital, Inc. and Trex Wood Polymer Espana, S.L. including any property or
acquisitions, whether now owned of hereafter acquired and wherever located
as more particularly described in the Security Agreement; and
(d) First priority lien on all stock of Borrowers' in their
Subsidiaries, excluding the stock of Trex Wood Polymer Espana, S.L, as
more particularly described in the Security Agreement.
ARTICLE IV
CONDITIONS
Section 4.01. Conditions to Closing. The obligation of the Bank to make
the first Loan hereunder is subject to the satisfaction of the following
conditions:
(a) Effectiveness. This Agreement shall have become effective as of
the date hereof.
(b) Notes. On or prior to the Closing Date, the Bank shall have
received a duly executed Revolving Note; Term Loan A Note; Real Estate
Term Loan 1 Note; Real Estate Term Loan 2 Note and Real Estate Term Loan 3
Note dated on or before the Closing Date complying with the provisions of
Section 2 hereof.
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(c) Other Loan Documents. Each of the Loan Documents to be executed
on or before the Closing Date shall be in form and substance reasonably
satisfactory to the Bank and shall have been duly executed and delivered
to the Bank by each of the parties thereto.
(d) Adverse Change, Etc. On the Closing Date, nothing shall have
occurred (and the Bank shall not have become aware of any facts or
conditions not previously known) which has, or could reasonably be
expected to have, a Material Adverse Effect.
(e) Officer's Certificate. The Bank shall have received a
certificate dated the Closing Date signed on behalf of the Borrower by the
Chairman of the Board, the President, any Vice President or the Treasurer
of the Borrower stating that (i) on the Closing Date and after giving
effect to the Loan being made on the Closing Date, and to this Agreement,
no Default or Event of Default shall have occurred and be continuing and
(ii) to the best knowledge and belief of such officer, the representations
and warranties of the Borrower contained in the Loan Documents are true
and correct on and as of the Closing Date.
(f) Opinion of Counsel. On the Closing Date, the Bank shall have
received from counsel to the Borrower an opinion addressed to the Bank,
dated the Closing Date, substantially in the form of Exhibit C hereto and
covering such additional matters incident to the transactions contemplated
hereby as the Bank may reasonably request.
(g) Borrower's Proceedings.
(i) On the Closing Date, the Bank shall have received for TREX
Company, LLC: (A) a copy of the its Certificate of Formation, as
amended, certified by the Secretary of State of Delaware and dated
as of a recent date prior to the Closing Date; (B) a certificate of
the Secretary of State of Delaware and each other state in which it
is qualified as a foreign limited liability company to do business,
dated as of a recent date prior to the Closing Date, as to the good
standing of the Borrower; (C) a copy of the its Limited Liability
Company Agreement, including all amendments thereto; and (D) a
certificate of the appropriate officer or other authorized person of
TREX Company, LLC dated the Closing Date and certifying (1) that the
documents referred to in clause (C) above have not been amended
since the date of said certificate, (2) that attached thereto is a
true, correct and complete copy of resolutions and consents adopted
by its sole member authorizing the execution, delivery and
performance of the Credit Agreement, the Notes and the Security
Agreement and each other document delivered in connection herewith
or therewith and that said resolutions have not been amended and are
in full force and effect on the date of such certificate, (3) as to
the incumbency and specimen signatures of its officer or other
authorized person executing this Agreement, the Notes and the
Security Agreement or any other document delivered in connection
herewith or therewith and (4) certifying as to the names and
respective jurisdictions of organization of all of its Subsidiaries
existing on the Closing Date.
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All company and legal proceedings and instruments and
agreements relating to the transactions contemplated by this
Agreement or in any other document delivered in connection therewith
shall be satisfactory in form and substance to the Bank and its
counsel, and the Bank shall have received all information and copies
of all documents and papers, including records of company
proceedings, governmental approvals, good standing certificates and
bring-down telegrams, if any, which the Bank reasonably may have
requested in connection therewith, such documents and papers where
appropriate to be certified by proper company or governmental
authorities.
(ii) On the Closing Date, the Bank shall have received for
Trex Company, Inc.: (A) a copy of the its Certificate of
Incorporation, as amended, certified by the Secretary of State of
Delaware and dated as of a recent date prior to the Closing Date;
(B) a certificate of the Secretary of State of Delaware and each
other state in which it is qualified as a foreign corporation to do
business, dated as of a recent date prior to the Closing Date, as to
the good standing of the Borrower; (C) a copy of the its by-laws,
including all amendments thereto; and (D) a certificate of the
appropriate officer or other authorized person of Trex Company, Inc.
dated the Closing Date and certifying (1) that the documents
referred to in clause (C) above have not been amended since the date
of said certificate, (2) that attached thereto is a true, correct
and complete copy of resolutions adopted by its directors
authorizing the execution, delivery and performance of the Credit
Agreement, the Notes, the Security Agreement, the Warrant, the
Registration Agreement and each other document delivered in
connection herewith or therewith and that said resolutions have not
been amended and are in full force and effect on the date of such
certificate, (3) as to the incumbency and specimen signatures of its
officer or other authorized person executing this Agreement, the
Notes and the Security Agreement or any other document delivered in
connection herewith or therewith and (4) certifying as to the names
and respective jurisdictions of organization of all of its
Subsidiaries existing on the Closing Date.
All corporate and legal proceedings and instruments and
agreements relating to the transactions contemplated by this
Agreement or in any other document delivered in connection therewith
shall be satisfactory in form and substance to the Bank and its
counsel, and the Bank shall have received all information and copies
of all documents and papers, including records of company
proceedings, governmental approvals, good standing certificates and
bring-down telegrams, if any, which the Bank reasonably may have
requested in connection therewith, such documents and papers where
appropriate to be certified by proper company or governmental
authorities.
(h) Perfection of Security Interests; Search Reports. On or prior to
the Closing Date, the Bank shall have received:
(i) a Perfection Certificate of the Borrower, substantially in
the form of Exhibit A to the Security Agreement;
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(ii) appropriate Financing Statements (Form UCC-l or such
other financing statements or similar notices as shall be required
by local law) appropriately completed for filing under the Uniform
Commercial Code or other applicable local law of each jurisdiction
in which the filing of a financing statement or giving of notice may
be required, or reasonably requested by the Bank, to perfect the
Liens purported to be created by the Loan Documents;
(iii) appropriate filings for the perfection of the lien on
intellectual property purported to be created by the Loan Documents;
(iv) appropriate Deeds of Trust fully executed for filing
under applicable local law of each jurisdiction in which the filing
of a Deed of Trust is required by the Bank to perfect the liens
purported to be created thereby;
(v) copies of reports from Prentice-Hall Financial Services or
other independent search service reasonably satisfactory to the Bank
listing all effective financing statements that name the Borrower or
any of its Subsidiaries (under its present name and any previous
name and, if requested by the Bank, under any trade names) as debtor
or seller that are filed in Delaware, Nevada and Virginia, together
with copies of such other financing statements filed in Delaware,
Nevada and Virginia (none of which shall cover the Collateral (as
that term is defined in the Security Agreement) except to the extent
evidencing Permitted Liens or for which the Bank shall have received
termination statements (Form UCC-3) or such other termination
statements as shall be required by local law) fully executed for
filing; and
(vi) evidence of the completion of all other filings and
recordings of, or with respect to, the Loan Documents as may be
necessary or, in the opinion of the Bank, desirable to perfect the
security interests intended to be created by the Loan Documents.
(After the aforementioned filings and recordings have been effected,
the Bank shall execute all termination statements submitted by the
Borrower effecting the termination of all filings and recordings
pertaining to previous terminated or superseded agreements between
the parties.)
(i) Payment of Fees. All reasonable costs, fees and expenses due to
the Bank on or before the Closing Date (including, without limitation,
that portion of the Commitment Fee then due and owing, legal fees and
expenses) shall have been paid.
(j) Counsel Fees. The Bank shall have received payment from the
Borrower of the reasonable fees and expenses of Kutak Rock LLP described
in Section 8.03 which are billed through the Closing Date.
(k) Warrants. The Bank shall have received the fully-executed
Warrant and Registration Agreement.
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The Bank shall promptly notify the Borrower of the Closing Date, and
such notice shall be conclusive and binding on all parties hereto. The
documents referred to in this Section shall be delivered to the Bank no
later than the Closing Date. The certificates and opinion referred to in
this Section shall be dated the Closing Date.
Section 4.02. Conditions to All Loans. The obligation of the Bank to make
each Loan is subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred;
(b) with respect to each Revolving Loan, the fact that, immediately
after the making of such Loan, the aggregate outstanding principal amount
of all Revolving Loans will not exceed the Revolving Commitment;
(c) the fact that, immediately before and after the making of such
Loan, no Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Loan; and
(e) (i) the Bank shall in good faith have determined that its
prospect of receiving payment in full of the Obligations then outstanding
or its ability to exercise its rights and remedies hereunder and under the
other Loan Documents have not been impaired, (ii) no event or condition
shall have occurred since the Effective Date which has or could reasonably
be expected to have a Material Adverse Effect or (iii) the Bank shall not
reasonably suspect that one or more Events of Default have occurred and
are continuing.
Each Loan hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Loan as to the facts specified in clauses (c)
and (d) of this Section.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 5.01. Existence and Power. TREX Company, LLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Trex Company, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. Each of the Subsidiaries is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. Each Borrower and the
Subsidiaries is duly qualified as a foreign entity, licensed and in good
standing in each jurisdiction where
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qualification or licensing is required by the nature of its business or the
character and location of its property, business or customers and in which the
failure to so qualify or be licensed, as the case may be, in the aggregate,
could have a Material Adverse Effect.
Section 5.02. Company and Governmental Authorization; No Contravention.
(a) The execution, delivery and performance by TREX Company, LLC of
the Loan Documents to which it is a party are within its limited liability
company powers, have been duly authorized by all necessary company action,
require no action by or in respect of, or filing with, any governmental
body, agency or official (except for any such action or filing as shall
have been taken or made and that is in full force and effect from and
after the Closing Date) and do not contravene, or constitute (with or
without the giving of notice or lapse of time or both) a default under,
any provision of applicable law or of the organizational documents of TREX
Company, LLC or any Subsidiary or of any agreement, judgment, injunction,
order, decree or other instrument binding upon or affecting TREX Company,
LLC or any Subsidiary or result in the creation or imposition of any Lien
on any asset of TREX Company, LLC or any of its Subsidiaries except as
stated therein.
(b) The execution, delivery and performance by Trex Company, Inc. of
the Loan Documents to which it is a party are within its corporate powers
have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency
or official (except for any such action or filing as shall have been taken
or made and that is in full force and effect from and after the Closing
Date) and do not contravene, or constitute (with or without the giving of
notice or lapse of time or both) a default under, any provision of
applicable law or of the organizational documents of Trex Company, Inc. or
any Subsidiary or of any agreement, judgment, injunction, order, decree or
other instrument binding upon or affecting Trex Company, Inc. or any
Subsidiary or result in the creation or imposition of any Lien on any
asset of Trex Company, Inc. or any of its Subsidiaries, except as stated
therein.
Section 5.03. Binding Effect. Each Loan Document other than the Notes to
which the Borrower is a party constitutes a valid and binding agreement of the
Borrower and each Note, when executed and delivered in accordance with this
Agreement, will constitute a valid and binding obligation of the Borrower, in
each case enforceable against the Borrower in accordance with its terms except
in each case as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and by equitable principles
of general applicability (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 5.04. Financial Condition.
(a) Interim Financial Statements. The unaudited consolidated balance
sheet of Trex Company, Inc. and its Consolidated Subsidiaries as of
September 30, 2001 and the related unaudited consolidated income
statements for the fiscal quarter then ended, copies of which have been
delivered to the Bank, fairly present, in conformity with generally
accepted accounting principles applied on a basis consistent with the
audited
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financial statements for the fiscal year ended December 31, 2000, the
consolidated financial position of Trex Company, Inc. and its Consolidated
Subsidiaries as of such date and their consolidated results of operations
and changes in financial position for such 12-month period (subject to
normal year-end audit adjustments).
(b) Material Adverse Change. Since September 30, 2001, there has
been no material adverse change in condition (financial or otherwise),
results of operations, properties, assets, business or prospects of Trex
Company, Inc. or Trex Company, Inc. and its Consolidated Subsidiaries,
considered as a whole.
Section 5.05. Litigation. Except as set forth on Schedule 5.05, there is
no material action, suit, proceeding or investigation pending against, or to the
knowledge of the Borrower threatened against, contemplated or affecting, the
Borrower or any of its Subsidiaries before any court, arbitrator or governmental
body, agency or official which has, or could reasonably be expected to have, a
Material Adverse Effect, or which in any manner draws into question the validity
or enforceability of this Agreement or the Notes, and there is no basis known to
the Borrower or any of its Subsidiaries for any such action, suit, proceeding or
investigation.
Section 5.06. Regulation U; Use of Proceeds. The Borrower and its
Subsidiaries do not own any "margin stock" as such term is defined in Regulation
U. The proceeds of the Loans will be used by the Borrower only for the purposes
set forth in Section 6.15 hereof.
Section 5.07. Regulatory Restrictions on Borrowing. Neither the Borrower
nor any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
otherwise subject to any regulatory scheme which restricts its ability to incur
debt.
Section 5.08. Subsidiaries. Part I of Schedule 5.08 (as such Schedule may
be supplemented by a writing delivered by the Borrower to the Bank from time to
time after the Effective Date) hereto lists each Subsidiary of the Borrower (and
the direct and indirect ownership interests of the Borrower therein), in each
case existing on the Effective Date. Except as set forth on Part I of such
Schedule 5.08, each such Subsidiary existing on the date hereof is, and in the
case of any additional corporate Subsidiaries formed after the Effective Date
each of such additional corporate Subsidiaries will be at each time that this
representation is made or deemed to be made after the Effective Date, a wholly
owned Subsidiary that is a corporation duly incorporated, validly existing and,
to the extent relevant in such jurisdiction, in good standing under the laws of
its jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted. Except as listed on Part II of Schedule 5.08
(as such Schedule may be supplemented by a writing delivered by the Borrower to
the Bank from time to time after the Effective Date), neither the Borrower nor
any of its Subsidiaries are engaged in any joint venture or partnership with any
other Person.
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Section 5.09. Full Disclosure. All factual information (taken as a whole)
furnished by or on behalf of the Borrower or any of its Subsidiaries in writing
to the Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is true and accurate in all material respects on
the date as of which such information is dated or certified and is not
incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. Except for economic
trends generally known to the public affecting generally the industry in which
the Borrower and its Subsidiaries conduct their business, the Borrower has
disclosed to the Bank in writing any and all facts which materially and
adversely affect or may materially and adversely affect (to the extent the
Borrower can now reasonably foresee) the business, operations or financial
condition of Trex Company, Inc. and its Consolidated Subsidiaries taken as a
whole or the ability of the Borrower to perform its obligations under this
Agreement.
Section 5.10. Tax Returns and Payments. Each of the Borrower and its
Subsidiaries has filed all United States federal income tax returns and all
other material tax returns, domestic and foreign, required to be filed by it and
has paid all taxes and assessments payable by it which have become due pursuant
to such returns or pursuant to any assessment received by the Borrower or any
Subsidiary, other than those not yet delinquent and except for those contested
in good faith. Each of the Borrower and its Subsidiaries has paid, or has
provided adequate reserves (in good-faith judgment of the management of the
Borrower) for the payment of, all federal, state and foreign income taxes
applicable for all prior fiscal years and for the current fiscal year to the
date hereof.
Section 5.11. Compliance With ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (a) sought a waiver of the minimum funding standard wider Section 412 of the
Internal Revenue Code in respect of any Plan, (b) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (c)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
Section 5.12. Intellectual Property. Each of the Borrower and its
Subsidiaries owns or possesses or holds under valid noncancelable licenses all
patents, trademarks, service marks, trade names, copyrights, licenses and other
intellectual property rights that are necessary for the operation of their
respective properties and businesses, and neither the Borrower nor any of its
Subsidiaries are in violation of any provision thereof. The Borrower and its
Subsidiaries conduct their business without infringement or claim of
infringement of any material license, patent, trademark, trade name, service
mark, copyright, trade secret or any other intellectual property right of others
and there is no infringement or, except as set forth on Schedule 5.12, claim of
infringement by others of any material license, patent, trademark, trade name,
service mark, copyright, trade secret or other intellectual property right of
the Borrower and its Subsidiaries.
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Section 5.13. No Burdensome Restrictions. No contract, lease, agreement or
other instrument to which the Borrower or any of its Subsidiaries are a party or
by which any of their property is bound or affected, no charge, corporate
restriction, judgment, decree or order and no provision of applicable law or
governmental regulation have had or are reasonably expected to have a Material
Adverse Effect.
Section 5.14. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Borrower and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for cleanup or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted at any such facility, any costs or liabilities in connection with
off-site disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of Trex
Company, Inc. and its Consolidated Subsidiaries, considered as a whole.
ARTICLE VI
COVENANTS
The Borrower agrees that, so long as the Bank has any commitment to make
Revolving Loans or Term Loans hereunder or any Obligation remains unpaid:
Section 6.01. Information. The Borrower will deliver or cause to be
delivered to the Bank:
(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of the Borrower, a
consolidated and consolidating balance sheet of Trex Company, Inc. and its
Consolidated Subsidiaries as of the end of such fiscal year and the
related consolidated and consolidating statements of income, changes in
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by an opinion thereon by Ernst & Young,
LLP or other independent public accountants reasonably satisfactory to the
Bank, which opinion shall not be qualified as to the scope of the audit
and which shall state that such consolidated financial statements present
fairly the consolidated financial position of Trex Company, Inc. and its
Consolidated Subsidiaries as of the date of such financial statements and
the results of their operations for the period covered by such financial
statements in conformity with generally accepted accounting principles
applied an a consistent basis (except for changes in the application of
which such accountants concur) and shall not contain any "going
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concern" or like qualification or exception or qualification arising out
of the scope of the audit. In addition, within 30 days after the end of
each fiscal year, Borrower shall provide to Bank a copy of its annual plan
for the next succeeding fiscal year. Within 10 days of any change to such
annual plan, Borrower shall provide Bank with a copy of such change.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Trex Company, Inc., a consolidated and
consolidating balance sheet of Trex Company, Inc. and its Consolidated
Subsidiaries as of the end of such fiscal quarter (with all supporting
schedules) and the related consolidated and consolidating statements of
income, changes in equity and cash flows of Trex Company, Inc. and its
Consolidated Subsidiaries for such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter of the previous
fiscal year, all certified (subject to normal year-end audit adjustments)
as to fairness of presentation, generally accepted accounting principles
and consistency by the chief financial officer or chief accounting officer
of Trex Company, Inc.
(c) Monthly Financial Statements. As soon as available and in any
event within 15 days after (i) the end of each month: (A) a Borrowing Base
report and (B) a financial report of accounts receivable, inventory and
production; and (ii) the end of the first two months of each fiscal
quarter, a consolidated and consolidating balance sheet of Trex Company,
Inc. and its Consolidated Subsidiaries and the related consolidated and
consolidating statements of income, changes in equity and cash flows of
Trex Company, Inc. and its Consolidated Subsidiaries for such month all
certified (subject to normal year-end audit adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency by
the chief financial officer or chief accounting officer of Trex Company,
Inc.
(d) Officer's Certificate. Simultaneously with the delivery of each
set of financial statements referred to in subsections (a), (b) and (c)
above, a certificate of the chief financial officer or chief accounting
officer of Trex Company, Inc., (i) if applicable, setting forth in
reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Sections 6.07, 6.11,
6.17 and 6.18, on the date of such financial statements, (ii) including a
copy of the monthly internal memorandum setting forth in reasonable detail
the business of Trex Company, Inc. and its Consolidated Subsidiaries as of
the date of such certificate, (iii) stating whether there exists on the
date of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto, and (iv) stating whether,
since the date of the most recent previous delivery of financial
statements pursuant to subsections (a) and (b) of this Section, there has
been any material adverse change in the condition (financial or
otherwise), results of operations, properties, assets, business or
prospects of Trex Company, Inc. or of Trex Company, Inc. and its
Consolidated Subsidiaries, considered as a whole, and, if so, the nature
of such material adverse change.
16
(e) Accountant's Certificate. Simultaneously with the delivery of
each set of financial statements referred to in subsection (a) above, a
statement of the firm of independent public accountants which reported on
such statements (i) whether anything has come to its attention to cause it
to believe that any Default existed on the date of such statements and
(ii) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to subsection (c) above.
(f) Default. Forthwith upon the occurrence of any Default, a
certificate of the chief financial officer or chief accounting officer of
the Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto.
(g) Litigation. As soon as reasonably practicable after obtaining
knowledge of the commencement of, or of a material threat of the
commencement of, an action, suit, proceeding or investigation against the
Borrower or any of its Subsidiaries which could materially adversely
affect the condition (financial or otherwise), results of operations,
properties, assets, business or prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole, or could otherwise have
a Material Adverse Effect or which in any manner questions the validity of
this Agreement or any of the other transactions contemplated hereby or
thereby, an explanation of the nature of such pending or threatened
action, suit, proceeding or investigation and such additional information
as may be reasonably requested by the Bank.
(h) Auditors' Management Letters. Promptly upon receipt thereof,
copies of each report submitted to Trex Company, Inc. or its Consolidated
Subsidiaries by independent public accountants in connection with any
annual interim or special audit made by them of the books of Trex Company,
Inc. or its Consolidated Subsidiaries, including, without limitation, each
report submitted to Trex Company, Inc. or its Consolidated Subsidiaries
concerning its accounting practices and systems and any final comment
letter submitted by such accountants to management in connection with the
annual audit of Trex Company, Inc. or its Consolidated Subsidiaries.
(i) ERISA Matters. If and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent
or has been terminated, a copy of such notice; (iii) receives notice from
the PBGC under Title IV of ERISA of an intent to terminate; impose
liability (other than for premiums under Section 4007 of ERISA) in respect
of, or appoint a trustee to administer any Plan, a copy of such notice;
(iv) applies for a waiver of the minimum funding standard under Section
412 of the Internal Revenue Code, a copy of such application; (v) gives
notice of intent to terminate any Plan under Section 4041(c) of ERISA, a
copy of such notice and other information filed with the PBGC; (vi) gives
notice of withdrawal from any Plan
17
pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails
to make any payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement which has resulted or could reasonably be expected
to result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief
accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take.
(j) Environmental Matters. Promptly, upon receipt of any complaint,
order, citation, notice or other written communication from any Person
with respect to, or upon the Borrower's obtaining knowledge of, (i) the
existence or alleged existence of a violation of any applicable
Environmental Law in connection with any property now or previously owned,
leased or operated by the Borrower or any of its Subsidiaries, (ii) any
release on such property or any part thereof in a quantity that is
reportable under any applicable Environmental Law and (iii) any pending or
threatened proceeding for the termination, suspension or nonrenewal of any
permit required under any applicable Environmental Law, in each such case
under clause (i), (ii) or (iii) in which there is a reasonable likelihood
of an adverse decision or determination which could result in a Material
Adverse Effect.
(k) Other Information. From time to time such additional financial
or other information regarding the condition (financial or otherwise),
results of operations, properties, assets, business or prospects of the
Borrower or its Consolidated Subsidiaries as the Bank may reasonably
request.
Section 6.02. Payment of Obligations. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, as the same shall
become due and payable, (a) all their respective obligations and liabilities,
including all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons which, in any such case, if
unpaid, might by law give rise to a Lien upon any of their properties or assets
and (b) all lawful taxes, assessments and charges or levies made upon their
properties or assets, by any governmental body, agency or official, except where
any of the items in clause (a) or (b) of this Section 6.02 may be diligently
contested in good faith by appropriate proceedings and the Borrower or such
Subsidiary shall have set aside on its books, if required under generally
accepted accounting principles, appropriate reserves for the accrual of any such
items.
Section 6.03. Maintenance of Property; Insurance.
(a) Maintenance of Properties. The Borrower will keep, and will
cause each of its Subsidiaries to keep, all property useful and necessary
in their respective businesses in good working order and condition,
subject to ordinary wear and tear.
(b) Insurance. The Borrower will maintain, and will cause each of
its Subsidiaries to maintain, insurance with financially sound and
responsible companies in such amounts (and with such risk retentions) and
against such risks as is usually carried by owners of similar businesses
and properties in the same general areas in which the
18
Borrower and its Subsidiaries operate. The Bank shall be named as loss
payee and additional insured on such insurance policies. The Borrower will
deliver to the Bank certificates evidencing that they are named as loss
payee and additional insured and such other information as the Bank shall
reasonably request from time to time.
Section 6.04. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each of its Subsidiaries to continue, to
engage in business of the same general type as now conducted by the Borrower and
its Subsidiaries, and will preserve, renew and keep in full force and effect,
and will cause each of its Subsidiaries to preserve, renew and keep in full
force and effect, their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business.
Section 6.05. Compliance With Laws. The Borrower will comply, and will
cause each of its Subsidiaries to comply, with all applicable laws, ordinances,
rules, regulations and requirements of governmental authorities (including,
without limitation, Environmental Laws, ERISA and the rules and regulations
thereunder) except (a) where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or (b) where noncompliance could not
reasonably be expected to have a Material Adverse Effect.
Section 6.06. Accounting; Inspection of Property, Books and Records. The
Borrower will keep, and will cause each of the Subsidiaries to keep, proper
books of record and account in which full, true and correct entries in
conformity with generally accepted accounting principles shall be made of all
dealings and transactions in relation to their respective businesses and
activities, will maintain, and will cause each of the Subsidiaries to maintain,
their respective fiscal reporting periods on the present basis and will permit,
and will cause each of their respective Subsidiaries to permit, representatives
of the Bank to visit and inspect any of their respective properties, to examine
and make copies from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their officers, employees
and independent public accountants, including field audits of Accounts
Receivable and Inventory, all at such reasonable times and as often as may
reasonably be desired, and further, if requested, Borrower and each of its
Subsidiaries shall provide equipment and real estate appraisals to the Bank for
the Collateral. The costs of all field audits, inspections and appraisals will
be borne by the Borrower; provided, however, that unless an Event of Default has
occurred and is continuing, the Borrower shall only be responsible for the
payment of one such audit, inspection or appraisal prior to December 31, 2001
and one such audit, inspection or appraisal in any twelve month period
thereafter. Notwithstanding the above, the Borrower shall be permitted to make
adjustments to its books of record and accounts as may be required or as may be
requested by an audit or outside review, so long as the purpose of such
adjustment is to bring said books or accounts into conformity with generally
accepted accounting principles.
Section 6.07. Minimum EBITDA. Beginning with the month ended September 30,
2001, Borrower, and its Subsidiaries, shall earn a minimum Consolidated EBITDA
of $25,000,000 measured on a rolling twelve-month basis, except that
Consolidated EBITDA shall not fall below (i) $22,000,000 for the twelve months
ending on each of October 31, 2001, November 30, 2001 and December 31, 2001 and
(ii) $20,000,000 for the twelve months ending on each of January 31, 2002,
February 28, 2002 and March 31, 2002.
19
Section 6.08. Financial Advisors. On or before December 31, 2001, Borrower
must hire a financial advisor acceptable to Bank in its sole but reasonable
discretion.
Section 6.09. Restriction on Indebtedness and Liens. The Borrower will
not, and will not permit any of its Subsidiaries to, without the written
permission of Bank, incur any Debt or create, incur, assume or suffer to exist
any Lien upon or with respect to any Collateral, or other accounts, or ownership
interests in its Subsidiaries, or proceeds thereof, or sell any Collateral, or
other accounts or ownership interests in its Subsidiaries, or proceeds thereof
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Collateral, or other accounts, or ownership interests in its Subsidiaries,
or proceeds thereof (including sales of accounts receivable or notes with
recourse to the Borrower or any of its Subsidiaries) or assign any right to
receive income, or file or permit the filing of any financing statement under
the Uniform Commercial Code as in effect in any applicable jurisdiction or any
other similar notice of Lien under any similar recording or notice statute,
provided that the provisions of this Section 6.09 shall not prevent the
creation, incurrence, assumption or existence of the following (with such Liens
described below being herein referred to as "Permitted Liens"):
(a) Lien in favor of Bank of America encumbering Borrower's real
property located in Lyon County, Nevada, which lien is evidenced by that
certain Deed of Trust, Assignment of Rents and Leases, Security Agreement
and Fixture Filing dated September 28, 1999 and recorded on September 30,
1999 in the Official Records of Lyon County, Nevada as Document No.
239622. Provided, that Borrower shall not be permitted to amend or modify
the loan secured by such lien.
(b) Liens created by or permitted under the Loan Documents;
(c) Liens for taxes not yet due or Liens for taxes being contested
in good faith and by appropriate proceedings for which adequate reserves
(in the good-faith judgment of the management of the Borrower) have been
established;
(d) Liens imposed by law securing the charges, claims, demands or
levies of carriers, warehousemen, mechanics and other like persons which
were incurred in the ordinary course of business which (i) do not in the
aggregate materially detract from the value of the property or assets
subject to such Lien or materially impair the use thereof in the operation
of the business of the Borrower or any Subsidiary or (ii) are being
contested in good faith by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property or assets
subject to such lien; and
(e) Liens on unearned insurance premiums held by Persons financing
the payment thereof.
Section 6.10. Limitation on Guarantees. Neither the Borrower nor any of
its Subsidiaries shall Guarantee any Debt of any Person or Persons in excess of
$250,000 in the aggregate at any time.
20
Section 6.11. Limitations on Capital Expenditures. Without the prior
written permission of the Bank, the Borrower and its Subsidiaries shall not make
capital expenditures of more than $3,000,000, in the aggregate, in the fiscal
quarter ending December 31, 2001 and will not make capital expenditures of more
than $2,000,000 plus any unspent monies from prior fiscal quarters, in the
aggregate in any fiscal quarter thereafter; provided, that in no event shall
aggregate capital expenditures exceed $10,500,000 between October 1, 2001 and
January 31, 2003.
Section 6.12. Consolidations, Mergers and Sales of Assets. Neither the
Borrower nor any Subsidiary will, without the prior written permission of the
Bank, (a) consolidate or merge with or into any other Person or (b) sell, lease
or otherwise transfer, directly or indirectly, all or substantially all of the
assets of the Borrower or such Subsidiary to any other Person or Persons,
provided that so long as no Default shall have occurred after giving effect
thereto, (i) a Subsidiary may merge into the Borrower if the Borrower is the
surviving entity, and (ii) the Borrower or any Subsidiary may merge into or
consolidate with another Person if the Borrower or such Subsidiary, as the case
may be, is the entity surviving such merger or consolidation. Notwithstanding
the foregoing, or any other provision of this Agreement or in any of the other
Loan Documents, upon thirty (30) days prior written notice to the Bank (a) TREX
Company, LLC may merge into or consolidate with Trex Company, Inc., and (b) TREX
Company, LLC or Trex Company, Inc. may create a wholly-owned Subsidiary (the "IP
Subsidiary") and transfer thereto all patents, trademarks, copyrights and other
intellectual property of the Borrower the ("IP"); provided, however, that the IP
Subsidiary shall execute and deliver to the Bank a written agreement or
agreements in form and substance satisfactory to the Bank, in its sole but
reasonable discretion, pursuant to which the IP Subsidiary shall grant to the
Bank a Lien on the IP to secure payment and performance of the Obligations.
Section 6.13. Investments; Asset Acquisitions.
(a) Investments. Neither the Borrower nor any Subsidiary will hold,
make or acquire any Investment in any Person, except:
(i) the Borrower and any Subsidiary may invest in cash and
Cash Equivalents;
(ii) the Borrower and any Subsidiary may acquire and hold
receivables owing to them, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary trade terms;
(iii) the Borrower and any Subsidiary may acquire and own
investments (including Debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with
customers and supplies arising in the ordinary course of business;
21
(iv) the Borrower and any Subsidiary may make loans and
advances to any employees, current and/or prospective customers
and/or vendors in the ordinary course of business, provided such
loans and advances do not exceed at any time, in the aggregate,
$500,000;
(v) any Acquisition permitted by Section 6.13(b);
(vi) Trex Company, Inc. may invest up to $300,000 in addition
to its existing investment in Winchester Capital, Inc.;
(vii) Trex Company, Inc. or TREX Company, LLC may invest up to
$500,000 in the aggregate, in addition to the value of the
intellectual property to be contributed thereto, in the IP
Subsidiary;
(viii) Trex Company, Inc. and TREX Company, LLC may invest in
Trex Wood Polymer Espana, S.L. and one additional to-be-formed
foreign sales subsidiary, provided that the total investment,
exclusive of Trex Company, Inc. and TREX Company, LLC's existing
investment in Trex Wood Polymer Espana, S.L., in these two
Subsidiaries shall not exceed $500,000;
(ix) any Subsidiary may invest in the Borrower;
(x) Trex Company, Inc. may invest in TREX Company, LLC (and
vice versa);
(xi) Trex Wood Polymer Espana, S.L. may maintain its existing
investment in DENPLAX, S.A.
(b) Acquisitions. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any Acquisition transaction except that
the Borrower and any Subsidiary may acquire assets in the ordinary course
of business for fair consideration;
Section 6.14. Payments, Etc. Except as permitted below, the Borrower will
not, and will not permit any of its Subsidiaries to, make any distribution,
dividend, payment or delivery of property or cash on or with respect to its
capital stock or its membership interests, or issue, redeem, retire, purchase or
otherwise acquire, directly or indirectly, for a consideration, any membership
or other interests or shares of any class of its capital stock now or hereafter
outstanding (or any warrants exercisable for, or options or stock appreciation
rights in respect of, any of such shares of capital stock or membership
interests), or set aside any funds for any of the foregoing purposes, or permit
any of its Subsidiaries to purchase or otherwise acquire for consideration any
shares of capital stock or any membership interest in the Borrower or any shares
of capital stock or other equity interest in any other Subsidiary, as the case
may be, now or hereafter outstanding (or any options or warrants exercisable for
or stock appreciation rights issued by the Borrower or any Subsidiary with
respect to its capital stock or membership interests).
The foregoing provisions of this Section 6.14 shall not limit or prohibit
any of the following transactions:
22
(a) the payment of any distribution or dividend by any Subsidiary to
Trex Company, Inc. or to TREX Company, LLC;
(b) the payment by Trex Company, Inc. of a dividend on its common
stock solely in shares of its common stock in connection with a split of
such common stock;
(c) the issuance of any Warrant and any transaction contemplated by
any Warrant, including the retirement and cancellation of any existing
Warrant and the issuance of new Warrants in exchange, replacement or
substitution therefor and payment of cash in lieu of fractional shares of
common stock of Trex Company, Inc. upon any exercise of any Warrant;
(d) the issuance by Trex Company, Inc. of shares of its common stock
and options to purchase its common stock pursuant to its employee stock
purchase plan and stock option and incentive plan for up to the number of
shares of common stock authorized by such plans as of the date hereof; or
(e) any transaction which is expressly permitted by Section 6.12 or
Section 6.13.
Section 6.15. Use of Proceeds. The proceeds of the Revolving Loans made
under this Agreement will be used by the Borrower for permanent working capital
financing of the Borrower's accounts receivable and inventory, to purchase
equipment and/or other general corporate purposes. The proceeds of Term Loan A
made under this Agreement were used by the Borrower to purchase equipment and/or
other general corporate purposes. No such use of the proceeds for general
corporate purposes will be, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
Section 6.16. Transactions With Other Persons. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement with any
Person whereby any of them shall agree to any restriction on the right of the
Borrower or any of its Subsidiaries to amend or waive any of the provisions of
this Agreement or any other Loan Document.
Section 6.17. Limitations on Debt. The Borrower will not as of the end of
any month permit the ratio of Total Consolidated Debt to Total Consolidated
Capitalization, as a percentage, to exceed 55%.
Section 6.18. Funded Debt Coverage Ratio. The Borrower will not, as of the
end of any fiscal quarter, permit the ratio of the Total Consolidated Debt to
Consolidated EBITDA for the four quarter period ended as of the end of such
fiscal quarter to exceed 4.0:1.0 through June 30, 2002 and 3.0:1.0 for all
testing periods thereafter.
Section 6.19. Location of Finished Goods Inventory. The Borrower will
store all finished goods Inventory at a location owned by Borrower or its
Subsidiaries. In the event that Borrower wishes to store any finished goods
Inventory at a location not owned by Borrower or its Subsidiaries, Borrower will
obtain a waiver from each landlord of such a location, in form and
23
substance satisfactory to the Bank in its sole but reasonable discretion, by
which such landlord waives its rights, if any, in the finished goods Inventory
stored at such location.
Section 6.20. Deposit Accounts. To facilitate the administration of the
Loans, the Borrower and its Subsidiaries shall maintain all of their operating
deposit accounts with the Bank and if requested by the Bank will establish and
maintain a lock box cash management system in an assignee account at the Bank.
Notwithstanding the foregoing, Borrower or its Subsidiaries may maintain one
general operating depository account in each of Fernley, Nevada and Almeria,
Spain; provided that, if at any time the balance in the operating depository
account in Fernley, Nevada exceeds $100,000 the Bank shall be entitled to a
first priority security interest therein and Borrower shall take such actions as
are necessary to perfect such security interest.
Section 6.21. Warrants. On or before the Closing Date, Trex Company, Inc.
shall issue to the Bank a warrant for the purchase of up to 707,557 shares of
the common stock of Trex Company, Inc. at a price per share based on the average
market price (as defined in such warrant) of the common stock for the 20
consecutive trading days beginning on October 30, 2001. Notwithstanding the
foregoing, and as provided for in the warrant, if the Obligations, exclusive of
the ISDA Master Agreement and Real Estate Term Loans 1, 2 & 3, are paid in full
on or before June 30, 2002, such warrant shall be exercisable for a maximum of
353,779 shares of common stock of Trex Company, Inc. Trex Company, Inc. shall
also agree in the Registration Agreement to provide the Bank with registration
rights with respect to Bank's resale of any common stock issued upon exercise of
such warrant. This agreement shall be further evidenced by the Warrant and
Registration Agreement to be delivered on the Closing Date. By its acceptance of
the Warrant, the Bank shall be deemed to have made the representations and
warranties contained in Section 3 thereof.
Section 6.22. Commitment Fee. Borrower hereby agrees to pay the Commitment
Fee to the Bank.
Section 6.23. Independence of Covenants. All covenants contained herein
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that such action or condition
would be permitted by an exception to, or otherwise be within the limitations
of, another covenant shall not avoid the occurrence of a Default if such action
is taken or condition exists.
ARTICLE VII
DEFAULTS
Section 7.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay, within five days after the date
when due, any principal, interest, fee or any other amount payable
hereunder or under the Notes, the ISDA Master Agreement or the Letters of
Credit;
(b) the Borrower shall fail to pay the Commitment Fee or the Unused
Commitment Fee when due;
24
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement, except those covenants or
agreements contained in Sections 6.01, 6.02, 6.03, 6.05, 6.13, 6.16 and
6.20 hereof;
(d) the Borrower shall fail, after fifteen (15) days written notice
thereof from Bank to observe or perform the covenants and agreements
contained in Sections 6.01, 6.02, 6.03, 6.05, 6.13, 6.16 and 6.20 hereof;
(e) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, financial statement
or other document delivered pursuant hereto or thereto shall prove to have
been incorrect in any material respect when made;
(f) the Borrower or any Subsidiary shall fail to make any payment or
perform any collateralization obligation in respect of any Material
Financial Obligations when due or within any applicable grace period;
(g) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt of the Borrower or any
Subsidiary or enables (or, with the giving of notice or lapse of time or
both, would enable) the holder of such Material Debt or any Person acting
on such holder's behalf to accelerate the maturity thereof;
(h) the Borrower or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 90 days; or an order for relief shall be entered against
the Borrower or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(j) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $25,000 which it shall have
become liable to pay under Title IV of ERISA or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of
the foregoing; or the PBGC shall institute proceedings under Title IV of
ERISA to terminate, to impose liability (other than for premiums under
Section 4007 of
25
ERISA) in respect of, or to cause a trustee to be appointed to administer
any Material Plan; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material Plan
must be terminated; or there shall occur a complete or partial withdrawal
from, or default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to one or more Multiemployer Plans which could reasonably be
expected to cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $25,000;
(k) one or more judgments or orders for the payment of money in
excess of $25,000 in the aggregate shall be rendered against the Borrower
or any Subsidiary of the Borrower and such judgments or orders shall
continue unsatisfied and unstayed for a period of 30 days; or
(l) a Change of Control shall have occurred;
then, and in every such event, while such event is continuing, the Bank may (i)
by notice to the Borrower terminate the Commitment and it shall thereupon
terminate, and (ii) by notice to the Borrower declare the Obligations (together
with accrued interest thereon) to be, and the Obligations shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind (except as set forth in clause (i) above), all of which
are hereby waived by the Borrower, provided that in the case of any Default or
any Event of Default specified in Section 7.01(h) or (i) above with respect to
the Borrower, without any notice to the Borrower or any other act by the Bank,
the commitment to make Revolving Loans and Term Loans shall thereupon terminate
and the Obligations (together with accrued interest and accrued and unpaid fees
thereon) shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower. In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, the Bank is authorized at any time and from
time to time, without presentment, demand, protest or other notice of any kind
(all of which rights being hereby expressly waived), to set off and to
appropriate and apply any and all deposits and any other indebtedness at any
time held or owing by the Bank to or for the credit or the account of the
Borrower against obligations and liabilities of the Borrower to the Bank
hereunder, under the Notes, or the other Loan Documents.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Section 8.01. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency, shall make it
unlawful or impossible for the Bank to make, maintain or fund Loans and the Bank
shall so notify the Borrower, until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, each Loan then
outstanding which bears interest at LIBOR or the LIBOR Market Index-Based
26
Rate shall be converted immediately to a Base Rate Loan and all new Loans shall
be Base Rate Loans.
Section 8.02. Base Rate Loans Substituted for Affected LIBOR Market
Index-Based Loans. Upon the occurrence of any event or condition set forth in
Section 8.01, each Loan then outstanding which bears interest at LIBOR or the
LIBOR Market Index-Based Rate shall be converted immediately to a Base Rate Loan
and all new Loans shall be Base Rate Loans. If the Bank notifies the Borrower
that the circumstances giving rise to such change in interest rate no longer
apply, the principal amount of each such Base Rate Loan shall cease immediately
to constitute a Base Rate Loan and shall thereafter bear interest in accordance
with Section 2.06.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. Unless otherwise specified herein, all notices,
requests and other communications to a party hereunder shall be in writing
(including bank wire, facsimile transmission or similar writing) and shall be
given to such party: (a) at its address or facsimile number set forth on the
signature pages hereof, or (b) at such other address, facsimile number or telex
number as such party may hereafter specify for the purpose of communication
hereunder by notice to the other party hereto. Each such notice, request or
other communication shall be effective (i) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails, certified mail, return receipt
requested, with appropriate first-class postage prepaid, addressed as specified
in this Section, or (iii) if given by any other means, when delivered at the
address specified in this Section 9.01. Rejection or refusal to accept or the
inability to deliver because of a changed address of which no notice was given
shall not affect the validity of notice given in accordance with this Section.
Section 9.02. Release and Waiver. Borrower hereby releases the Bank and
its officers, employees and agents from any and all liability, claims, known or
unknown related to this Agreement or otherwise. In the event any Borrower is the
subject of any insolvency, bankruptcy, receivership, dissolution, reorganization
or similar proceeding, Federal or State, voluntary or involuntary, under any
present or future law or act, Borrower hereby agrees that in consideration for
the restructuring of the Loan Documents being made herein, Bank shall be and
hereby is entitled to the automatic and absolute lifting of any automatic stay
or other form of injunction so as to allow for the immediate enforcement of its
remedies under the Loan Documents and any applicable law, including without
limitation, the automatic and absolute lifting of the automatic stay imposed by
ss. 362 of the United States Bankruptcy Code.
Section 9.03. No Waivers. No failure by either party to exercise, no
course of dealing with respect to, and no delay in exercising any right, power
or privilege hereunder or under the Notes shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided herein shall be cumulative and not exclusive of any
rights or remedies provided by law.
27
Section 9.04. Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Bank, including reasonable fees and disbursements
of special and local counsel for the Bank, in connection with the preparation
and administration of this Agreement and the other Loan Documents, any waiver or
consent thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Bank, including (without duplication) the reasonable
fees and disbursements of outside counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
Section 9.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Borrower and the Bank.
Section 9.06. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of the Bank, except as may be permitted pursuant to Section 6.12
hereof. The Bank shall have the right to assign or otherwise transfer any of its
rights under this Agreement or the Loan Documents; provided, however, that
transfer of any of Bank's rights with respect to the Revolving Loans shall
require the prior written consent of Borrower which consent shall not be
unreasonably withheld or delayed.
Section 9.07. Governing Law. This Agreement and the Notes shall be
governed by and construed in accordance with the laws of the Commonwealth of
Virginia.
Section 9.08. Arbitration; Submission to Jurisdiction.
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising
out of or relating to the Loan Documents between the parties hereto (a
"Dispute") shall be resolved by binding arbitration conducted under and
governed by the Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association (the "AAA")
and the Federal Arbitration Act. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, or claims arising from
documents executed in the future. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to swap
agreements.
(b) All arbitration hearings shall be conducted in the city in which
the office of the Bank set forth on the signature page hereof is located.
A hearing shall begin within 90 days of demand for arbitration and all
hearings shall be concluded within 120 days of demand for arbitration.
These time limitations may not be extended unless a party shows cause for
extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. Arbitrators shall be
licensed attorneys selected from the
28
Commercial Financial Dispute Arbitration Panel of the AAA. The parties do
not waive applicable federal or state substantive law except as provided
herein.
(c) Notwithstanding the preceding binding arbitration provisions,
the parties agree to preserve, without diminution, certain remedies that
any party may exercise before or after an arbitration proceeding is
brought. The parties shall have the right to proceed in any court of
proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure, including a proceeding to confirm
the sale; (ii) all rights of self-help, including peaceful occupation of
real property and collection of rents, setoff and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies,
including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy proceeding;
and (iv) when applicable, a judgment by confession of judgment. Any claim
or controversy with regard to the parties' entitlement to such remedies is
a Dispute.
(d) Each party agrees that it shall not have a remedy of punitive or
exemplary damages against the other in any Dispute and hereby waives any
right or claim to punitive or exemplary damages it may have now or which
may arise in the future in connection with any Dispute, whether the
Dispute is resolved by arbitration or judicially.
(e) The parties acknowledge that by agreeing to binding arbitration
they have irrevocably waived any right they may have to a jury trial with
regard to a Dispute.
Section 9.09. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. Each of this Agreement, the Notes and the other Loan Documents shall
be deemed to incorporate the other of said documents by reference and all of
said documents shall constitute the entire agreement and understanding among the
parties hereto and supersede any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof. This Agreement shall
become effective upon receipt by the Bank of counterparts hereof signed by each
of the parties hereto.
Section 9.10. Confidentiality. The Bank agrees to hold all nonpublic
information obtained pursuant to the requirements of this Agreement in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking practices, provided
that nothing herein shall prevent the Bank from disclosing such information (a)
to any other Person if reasonably incidental to the administration of the Loans,
(b) upon the order of any court or administrative agency, (c) upon the request
or demand of any regulatory agency or authority, (d) which had been publicly
disclosed other than as a result of a disclosure by the Bank prohibited by this
Agreement, (e) in connection with any litigation to which the Bank or its
subsidiaries or parent may be a party, (f) to the extent necessary in connection
with the exercise of any remedy hereunder and (g) to the Bank's legal counsel
and independent auditors.
29
Section 9.11. Severability; Modification. If any provision hereof is
invalid or unenforceable in any jurisdictions, then, to the fullest extent
permitted by law, (a) the other provisions hereof shall remain in full force and
effect in such jurisdiction; and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provisions in any other jurisdiction.
[Signatures on Following Page]
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TREX COMPANY, LLC
160 Exeter Drive
Winchester, VA 22603-8605
Facsimile: (540) 542-6889
By /s/ Anthony J. Cavanna
---------------------------------------
Anthony J. Cavanna, Executive Vice
President; Chief Financial Officer;
Treasurer
TREX COMPANY, INC.
160 Exeter Drive
Winchester, VA 22603-8605
Facsimile: (540) 542-6889
By /s/ Robert G. Matheny
---------------------------------------
Robert G. Matheny, President
FIRST UNION NATIONAL BANK
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
Facsimile: (704) 374-6319 By /s/ Barbara Gell Carroll
---------------------------------------
Name/Title Barbara Gell Carroll,
------------------------------
Senior Vice President/Director
------------------------------------------
31
DEFINITIONS APPENDIX
The definitions set forth in this Definitions Appendix are incorporated by
reference into Section 1.01 of the Second Amended and Restated Credit Agreement
dated as of September 30, 2001 among TREX Company, LLC, Trex Company, Inc. and
First Union National Bank (as the same may be amended, modified or supplemented
from time to time, the "Credit Agreement"). Reference in this Definitions
Appendix to "this Agreement," "herein," "hereof," "hereunder" and to any Article
or Section shall be interpreted to mean the Credit Agreement and the referenced
Article or Section, including this Definitions Appendix.
DEFINITIONS
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Borrower, and shall also mean and include all accounts
receivable, contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to the Borrower arising from the sale, lease or exchange of
goods or other property by it and/or the performance of services by it
(including, without limitation, any such obligation which might be characterized
as an account, contract right or general intangible under the Uniform Commercial
Code in effect in any jurisdiction) and all of the Borrower's rights in, to and
under all purchase orders for goods, services or other property, and all of the
Borrower's rights to any goods, services or other property represented by any of
the foregoing (including returned or repossessed goods and unpaid seller's
rights of rescission, replevin and reclamation and rights to stoppage in
transit) and all moneys due to or to become due to the Borrower under all
contracts for the sale, lease or exchange of goods or other property and/or the
performance of services by it (whether or not yet earned by performance on the
part of the Borrower), in each case whether now in existence or hereafter
arising or acquired, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"Acquisition," by any Person (herein called the "Acquiror"), means any
transaction involving the purchase, lease or other acquisition by such Acquiror
of any or all of the capital stock or assets of another Person that, for
purposes of preparing a statement of cash flows for such Acquiror prepared in
accordance with GAAP, would be considered "investing activity."
"Affiliate" means (a) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "Controlling Person") or (b)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Agreement" means this Second Amended and Restated Credit Agreement, as it
may be amended, modified or supplemented from time to time.
"Bank" means First Union National Bank, a national banking association,
and its successors and assigns.
32
"Base Rate" means, for any day, the Prime Rate for such day plus 1% as
adjusted by the Variance.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Borrower" means TREX Company, LLC, a Delaware limited liability company,
Trex Company, Inc., a Delaware corporation and their successors.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the Commonwealth of Virginia are authorized by law to
close.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Cash Equivalents" means (a) direct obligations of the United States or
any agency thereof, or obligations guaranteed by the United States of any agency
thereof, (b) commercial paper rated in the highest grade by a nationally
recognized credit rating agency or (c) time deposits with, including
certificates of deposit issued by, any office located in the United States of
any bank or trust company which is organized under the laws of the United States
or any state thereof and has capital, surplus and undivided profits aggregating
at least $250,000,000, provided in each case that such investment matures within
one year from the date of acquisition thereof by the Borrower.
"Change of Control" means any event or condition a result of which is that
(a) Anthony J. Cavanna, Roger A. Wittenberg, Robert G. Matheny and Andrew U.
Ferrari (or any of their current or former spouses, lineal descendents, current
or former spouses of any such lineal descendents, or any trust or other Person
controlled by any of the foregoing) cease, as a group, to own beneficially at
least 25% of the voting common stock of Trex Company, Inc.; or (b) TREX Company,
Inc. ceases to own beneficially all of the membership interests in TREX Company,
LLC.
"Closing Date" means the date, not later than November 9, 2001, on which
the Bank determines that the conditions specified in or pursuant to Section 4.01
have been satisfied.
"Collateral" means the real estate, and improvements thereon, of the
Borrower as more particularly described in those certain Deeds of Trust dated as
of the date hereof and all other collateral described in the Security Agreement.
"Commitment Fee" means the $100,000 fee due upon the execution of this
Agreement and the $200,000 fee due to the Bank if the Obligations, exclusive of
the ISDA Master Agreement and Real Estate Term Loans 1, 2 & 3, are not paid in
full on or before June 30, 2002.
33
"Consolidated EBITDA" means as of the date of determination, the total
earnings before interest and taxes plus depreciation and amortization of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis as
of such date.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Net Worth" means, as of the date of determination:
(i) the total assets of the Borrower and its Subsidiaries which
would be shown as assets on a consolidated balance sheet of the Borrower
and its Subsidiaries as of such time prepared in accordance with GAAP,
after eliminating all amounts properly attributable to minority interests,
if any, in the stock and surplus of Subsidiaries; minus
(ii) the total liabilities of the Borrower and its Subsidiaries
which would be shown as liabilities on a consolidated balance sheet of the
Borrower and its Subsidiaries as of such time prepared in accordance with
GAAP.
"Consolidated Subsidiary" means with respect to any Person at any date any
Subsidiary of such Person or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements
if such statements were prepared as of such date in accordance with GAAP.
"Debt" of any Person means, at any date, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable arising in the ordinary course of
business), (d) all obligations of such Person as lessee under Capital Leases,
(e) all obligations of such Person to purchase securities or other property
which arise out of or in connection with the sale of the same or substantially
similar securities or property, (f) all noncontingent obligations (and, for
purposes of Section 6.09 and the definitions of Material Debt and Material
Financial Obligations, all contingent obligations) of such Person to reimburse
any bank or other person in respect of amounts paid under a letter of credit,
bankers' acceptance or similar instrument, (g) all obligations of others secured
by a Lien on any asset of such Person, whether or not such obligation is assumed
by such Person, and (h) all obligations of others Guaranteed by such Person;
provided, however, that Debt shall not include (i) indebtedness incurred in
connection with the financing of insurance premiums, (ii) obligations of TREX
Company, LLC as borrower and Trex Company, Inc. as guarantor with respect to the
indebtedness secured by the Permitted Lien identified in Section 6.09(a) of the
Credit Agreement, and (iii) Guarantees of obligations of TREX Company, LLC or
Trex Company, Inc.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate
34
option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions) or any combination of the
foregoing transactions.
"Dollars" and the sign "$" means lawful money of the United States of
America.
"Effective Date" means September 30, 2001.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Event of Default" has the meaning set forth in Section 7.01.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (b)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics.
35
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Inventory" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired by the Borrower, wherever located, and shall also mean and
include, without limitation, all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Investment" means any investment in any Person, whether by means of share
purchase capital contribution, loan, time deposit or otherwise.
"ISDA Master Agreement" means that certain agreement between Trex Company,
LLC and Bank dated as of March 20, 1998, and all amendments thereto and
transactions thereunder.
"Item" means any "item" as defined in Section 4-104 of the UCC and shall
also mean and include checks, drafts, money orders or other media of payment.
"Letter of Credit SM413821" means that certain irrevocable standby letter
of credit for the benefit of Treasurer, County of Frederick, Virginia with in
the amount of $108,756.
"LIBOR" has the meaning set forth in Section 2.06(c).
"LIBOR Market Index-Based Rate" has the meaning set forth in Section
2.06(b).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.
"Loan Documents" means the Credit Agreement, the Mortgage the Notes and
the Security Agreement, collectively, and "Loan Document" means any of them.
"Loans" means the Revolving Loans, Term Loan A and Real Estate Term Loans
1, 2 & 3 made or existing pursuant to Section 2.01 and Section 2.02.
"Material Adverse Effect" means (a) any material adverse effect upon the
condition (financial or otherwise), results of operations, properties, assets,
business or prospects of the Borrower or of the Borrower and its Consolidated
Subsidiaries, taken as a whole; (b) a material adverse effect on the ability of
the Borrower to consummate the transactions contemplated hereby to occur on the
Closing Date; (c) a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement and the Notes; or (d) a material
adverse effect on the rights and remedies of the Bank under this Agreement and
the Notes.
"Material Debt" means Debt (other than the Notes) of the Borrower and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $250,000.
36
"Material Financial Obligations" means a principal or face amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $250,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $25,000.
"Mortgage" means those certain Deed Of Trusts, Security Agreement, And
Absolute Assignment Of Leases to be filed in Virginia and Nevada pursuant to
Section 3 hereof.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five-year period.
"Notes" means the Revolving Note, Term Loan A Note, Real Estate Term Loan
1 Note, Real Estate Term Loan 2 Note, and Real Estate Term Loan 3 Note.
"Notice of Borrowing" means a Notice of Borrowing (as defined in Section
2.03(a)).
"Obligations" means:
(i) all principal of and interest (including, without limitation,
any interest which accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization
of the Borrower, whether or not allowed or allowable as a claim in any
such proceeding) on any Real Estate Term Loan, Term Loan A, Revolving
Loan, ISDA Master Agreement, Letter of Credit SM413821, fees payable or
reimbursement obligation under, or any note issued pursuant to, this
Agreement or any other Loan Document;
(ii) all other amounts now or hereafter payable by the Borrower and
all other obligations or liabilities now existing or hereafter arising or
incurred (including, without limitation, any amounts which accrue after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on the part of the
Borrower pursuant to this Agreement or any other Loan Document;
(iii) all Derivatives Obligations (including, without limitation,
any amounts which accrue after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of
the Borrower, whether or not allowed or allowable as a claim in any such
proceeding) of the Borrower to the Bank;
(iv) all other indebtedness, obligations and liabilities of the
Borrower to the Bank, now existing or hereafter arising or incurred,
whether or not evidenced by notes or other instruments, and whether such
indebtedness, obligations and liabilities are direct or
37
indirect, fixed or contingent, liquidated or unliquidated, due or to
become due, secured or unsecured, joint, several or joint and several,
related to the Loans;
together in each case with all renewals, modifications, consolidations or
extensions thereof.
"Operating Account" means the demand deposit account maintained with the
Bank by the Borrower on which the Borrower draws checks to pay its operating
expenses, which account is linked to the cash management services provided by
the Bank to the Borrower pursuant to the Services Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Perfection Certificate" means a certificate of the Borrower,
substantially in the form of Exhibit A to the Security Agreement, completed and
supplemented with the schedules and attachments contemplated thereby to the
satisfaction of the Bank, and duly executed by the chief executive officer,
president or chief financial officer of the Borrower.
"Permitted Liens" has the meaning set forth in Section 6.09.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate announced by the Bank from time to time, as
its Prime Rate, as such rate may change from time to time with changes to occur
on the date the Bank's Prime Rate changes. The Bank's Prime Rate is one of
several interest rate bases used by the Bank. The Bank lends at rates above and
below the Bank's Prime Rate, and the Borrower acknowledges that the Bank's Prime
Rate is not represented or intended to be the lowest or most favorable rate of
interest offered by the Bank.
"Proceeds" means all proceeds of, and all other profits, products, rents
or receipts, in whatever form, arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of or other realization
upon or payment for the use of, Collateral (as that term is defined in the
Security Agreement, including (without limitation) all claims of the Borrower
against third parties for loss of, damage to or destruction of or for proceeds
payable under, or unearned premiums with respect to, policies of insurance in
respect of, any Collateral, and any condemnation or requisition payments with
respect to any Collateral, in each case whether now existing or hereafter
arising.
38
"Quarterly Date" means the first Business Day of each January, April, July
and October.
"Real Estate Term Loan 1 " means the $3,780,000 loan made by Bank to
Borrower on June 15, 1998.
"Real Estate Term Loan 2" means the $1,035,000 loan made by Bank to
Borrower on November 20, 1998.
"Real Estate Term Loan 3" means the $5,940,000 loan made by Bank to
Borrower on August 15, 2000.
"Real Estate Term Loan 1 Note" means the amended and restated promissory
note of the Borrower evidencing the obligation of the Borrower to repay Real
Estate Term Loan 1.
"Real Estate Term Loan 2 Note" means the amended and restated promissory
note of the Borrower evidencing the obligation of the Borrower to repay Real
Estate Term Loan 2.
"Real Estate Term Loan 3 Note" means the amended and restated promissory
note of the Borrower evidencing the obligation of the Borrower to repay Real
Estate Term Loan 3.
"Registration Agreement" means the Registration Rights Agreement between
Trex Company, Inc. and the Bank dated as of November 13, 2001 requiring Trex
Company, Inc. to register the common stock acquired by the Bank pursuant to any
Warrants.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Revolving Commitment" means $17,000,000.00.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including January 31, 2003.
"Revolving Loan" means a loan made pursuant to Section 2.01(b).
"Revolving Note" means a promissory note of the Borrower substantially in
the form of Exhibit B-1 hereto, evidencing the obligation of the Borrower to
repay the Revolving Loans.
"Security Agreement" means the Security Agreement between the Borrower and
the Bank, dated as of the date hereof, as it may be amended, modified or
supplemented from time to time.
"Services Agreement" means the description of the Sweep Plus Service
provided by the Bank to the Borrower, the terms of which are hereby incorporated
in this Agreement by reference.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or
39
other persons performing similar functions are at the time directly or
indirectly owned by Trex Company, Inc.
"Term Loan A " means the $58,000,000 loan made by Bank to Borrower as of
the Effective Date.
"Term Loan A Period" means the period from and including the Closing Date
to but not including January 31, 2003.
"Term Loan A Note" means the promissory note of the Borrower evidencing
the obligation of the Borrower to repay Term Loan A.
"Termination Date" means January 31, 2003, as said date may be extended
pursuant to Section 2.07(b).
"Total Consolidated Capitalization" means, as of any date of determination
with respect to the Borrower, the sum of Total Consolidated Debt and
Consolidated Net Worth.
"Total Consolidated Debt" means, as of the date of determination, the
total of all Debt of the Borrower and its Subsidiaries outstanding on such date,
after eliminating all offsetting debits and credits between the Borrower and its
Subsidiaries and all other items required to be eliminated in the course of the
preparation of consolidated financial statements of the Borrower and its
Subsidiaries in accordance with GAAP.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the Commonwealth of Virginia, provided that if by reason of mandatory provisions
of law, for matters pertaining only to the perfection or the effect of
perfection or nonperfection of the Security Interest in any Collateral (as that
term is defined in the Security Agreement) is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than Virginia, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
nonperfection.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (a) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (b) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan but only to the extent that such excess
represents a potential liability of a member of the ERISA Group to the PBGC or
any other Person under Title IV of ERISA.
"United States" means the United States of America, including the states
and the District of Columbia, but excluding its territories and possessions.
"Variance" means a rate per annum (which may be a negative number) above
or below the Base Rate which the Bank, in its sole discretion, determines is
appropriate to adjust the Base Rate in order that the interest rate on the Loans
converted to Base Rate Loans in accordance with
40
Section 8.02 of this Agreement will be comparable to the applicable LIBOR or
LIBOR Market Index-Based Rate plus the basis points over those rates set forth
in Section 2.06.
"Warrant" means the common stock purchase warrant referred to in Section
6.21, dated as of November 13, 2001, and any common stock purchase warrant
subsequently issued in exchange, replacement or substitution therefor or any
subsequently issued warrant.
41
USAGE
The following rules of construction and usage shall be applicable to any
instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined
meanings when used in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto unless
otherwise defined therein.
(b) The words "hereof," "herein," "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and
not to any particular provision or subdivision thereof; references in any
instrument to "Article," "Section" or another subdivision or to an
attachment are, unless the context otherwise requires, to an article,
section or subdivision of or an attachment to such instrument; and the
term "including" means "including, without limitation."
(c) The definitions contained in this Appendix are equally
applicable to both the singular and plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(d) Any agreement, instrument or statute defined or referred to
below or in any agreement or instrument that is governed by this Appendix
means such agreement or instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statutes and includes (in the case of
agreements or instruments) references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns.
42
Exhibit 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of September 30, 2001, by and between
TREX COMPANY, LLC, a Delaware limited liability company, TREX COMPANY, INC., a
Delaware corporation (collectively, the "Borrower") and FIRST UNION NATIONAL
BANK, a national banking association (the "Bank"), recites and provides as
follows:
The Borrower and the Bank are parties to a Second Amended and Restated
Credit Agreement of even date herewith (as the same may be amended, supplemented
or modified from time to time and including any agreement extending the maturity
of, refinancing or otherwise restructuring all or any portion of the obligations
of the Borrower under such agreement or any successor agreement, the "Credit
Agreement"). To induce the Bank to enter into the Credit Agreement, and as a
condition precedent to the Bank's obligations thereunder, the Borrower has
agreed to grant a continuing security interest in and to the Collateral (as
hereinafter defined) to secure the obligations of the Borrower as set forth in
the Credit Agreement (the "Obligations"). Accordingly, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for in the Credit Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 2.01. Title to Collateral. The Borrower has good and marketable
title to all the Collateral, free and clear of any Liens other than Permitted
Liens. The Borrower has not performed any acts which might prevent the Bank from
enforcing any of the terms of this Agreement or which would limit the Bank in
any such enforcement. Other than financing statements or other similar or
equivalent documents or instruments with respect to the Security Interests and
Permitted Liens, no financing statement, mortgage, security agreement or similar
or equivalent document or instrument covering all or any part of the Collateral
is on file or on record in any jurisdiction in which such filing or recording
would be effective to create a Lien on such Collateral. No Collateral is in the
possession of any Person (other than Borrower) asserting any claim thereto or
security interest therein, except that the Bank or its designee may have
possession of the Collateral as contemplated hereby and by the Credit Agreement.
Section 2.02. Condition of Collateral. Borrower represents that the
Collateral is in good repair and condition and that Borrower shall use
reasonable care to prevent Collateral from being damaged or depreciating,
ordinary wear and tear excepted. Borrower shall immediately notify Bank of any
material loss or damage to Collateral. Borrower shall not permit any item of
Collateral to become a fixture to real estate or an accession to other personal
property. Borrower represents it is in compliance in all respects with all laws,
rules and regulations applicable to the Collateral and its properties,
operations, business, and finances except when noncompliance could not
reasonably be expected to have a Material Adverse Affect. In addition, Borrower
shall promptly notify Bank of any claims or alleged claims of any other person
or entity to the Collateral or the institution of any litigation, arbitration,
governmental investigation or administrative proceedings against or affecting
the Collateral.
Section 2.03. Validity, Perfection and Priority of Security Interests. The
Security Interests constitute valid security interests under the UCC securing
the Obligations. When UCC financing statements containing a description of the
Collateral in the form specified in Exhibit B hereto shall have been filed in
the offices specified in Schedule 4.01 hereto, the Security Interests shall
constitute perfected security interests in all right, title and interest of
Borrower in the Collateral to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior to all other Liens and rights of
others therein except for the Permitted Liens.
Section 2.04. Insurance. The Collateral is insured in accordance with the
requirements of the Credit Agreement.
Section 2.05. Fair Labor Standards Act. All Inventory has or will have
been produced in compliance with the applicable requirements of the Fair Labor
Standards Act, as amended from time to time, or any successor statute and
regulations promulgated thereunder.
ARTICLE III
SECURITY INTEREST
Section 3.01. Grant of Security Interest. In order to secure the full and
punctual payment of the Obligations in accordance with the terms thereof, the
Borrower hereby grants to the Bank a continuing security interest in and to all
of the Collateral, whether now owned or existing or hereafter acquired, created
or arising, whether tangible or intangible, and regardless of where located (the
"Security Interests").
As used in this Agreement, "Collateral" means all right, title and
interest of the Borrower in the following, whether now owned or existing or
hereafter acquired, created or arising, whether tangible or intangible, and
regardless of where located:
(a) the Cash Proceeds Account and the Insurance Account;
2
(b) all business assets of every type and description of Borrower
and its Subsidiaries, including any property and acquisitions, whether now
owned or hereafter acquired and wherever located, including, but not
limited to the following:
(i) all accounts, contract rights, leases, and any other
rights of Borrower to payment for goods sold or leased or for
services rendered; furniture; furnishings; fixtures; equipment;
machinery; accessories; moveable trade fixtures; goods held for sale
or being processed for sale in Borrower's business, including all
raw materials, supplies, and other materials used or consumed in
Borrower's business, goods in process, finished goods, and all other
items customarily classified as inventory; building improvement and
construction materials, supplies and equipment; chattel paper;
instruments; documents; letters of credit (including, but not
limited to, any written undertaking to pay money conditioned upon
the presentation of specified documents, and advices of letters of
credits); all funds on deposit with Bank and its affiliates; as well
as all parts, replacements, substitutions, profits, products and
cash and non-cash proceeds of the foregoing (including insurance and
condemnation proceeds payable by reason of condemnation of or loss
or damage thereto) in any form and wherever located.
(ii) all general intangibles (including, without limitation,
all contract rights, tax refunds and tax refund claims, choses in
action, causes of action, corporate or other business records,
inventions, designs, patents, patent applications, trademarks, trade
names, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, claims under guaranties, security interests or other
security held or granted to secure payment of contracts by account
debtors, all rights to indemnification and all other intangible
property of every kind and nature);
(iii) all instruments, documents, chattel paper, goods,
moneys, securities, drafts, and other property of Borrower now in
possession of and at any time and from time to time hereafter
delivered to Bank, its agents or affiliates, whether for
safekeeping, pledge, custody, transmission, collection, or
otherwise, and all of Borrower's deposits, balances, sums, proceeds,
and credits with, and any of its claims against Bank and affiliates
of Bank, at any time existing, together with the increases and
profits received therefrom and the proceeds thereof, including
insurance payable because of loss or damage thereto;
(iv) all of the Borrower's capital stock in its Subsidiaries,
excluding Borrower's capital stock in Trex Wood Polymer Espana,
S.L., its Spanish Subsidiary;
(c) all products and proceeds (including investment property and
security entitlements) of any of the property described above in any form,
and all proceeds of such products.
3
Notwithstanding the foregoing, until the occurrence of an Event of Default
and the election of the Bank to terminate the rights of the Borrower with
respect thereto, Borrower shall retain all right incidental to the ownership of
the capital stock of its Subsidiaries including without limitation, voting
rights with respect thereto and all rights to dividends issued thereon.
Section 3.02. Continuing Liability of the Borrower. The Security Interests
are granted as security only and shall not subject the Bank to, or transfer or
in any way affect or modify, any obligations or liability of the Borrower with
respect to any of the Collateral or any transaction in connection therewith.
Section 3.03. Insurance Account.
(a) Creation of and Deposits to Insurance Account. Promptly upon and
at all times after the receipt of any cash proceeds of insurance policies,
awards of condemnation or other compensation required to be paid to the
Bank pursuant to Section 4.07 of this Agreement (the "Insurance
Proceeds"), the Borrower shall establish and shall thereafter maintain a
cash collateral account the ("Insurance Account") at the offices of the
Bank in the name and under the exclusive control of the Bank. Forthwith
upon such establishment, the Borrower shall notify the Bank of the
location, account name and account number of such account. The Borrower
hereby agrees to cause any Insurance Proceeds received from time to time
after the establishment of the Insurance Account to be deposited therein
as set forth in this paragraph. Any Insurance Proceeds received from time
to time by the Bank in respect of which the Bank is an insured party and
loss payee shall be promptly deposited to the Insurance Account as set
forth in this paragraph. Any income received with respect to the balance
from time to time to the credit of the Insurance Account, including any
interest or capital gains on Liquid Investments, shall remain, or be
deposited in the Insurance Account. All right, title and interest in and
to the cash amounts on deposit from time to time in the Insurance Account
together with any Liquid Investments from time to time made pursuant to
Section 3.03(c) shall vest in the Bank, shall constitute part of the
Collateral and shall not constitute payment of the Obligations until
applied thereto as hereinafter provided. The Bank may in its sole and
absolute discretion, (i) apply Insurance Proceeds, or any portion thereof,
to the payment of the Obligations, or (ii) allow Insurance Proceeds to be
withdrawn in accordance with Section 3.03(b).
(b) Withdrawals from Insurance Account. The balance from time to
time standing to the credit of the Insurance Account shall be subject to
withdrawal only upon the instructions of the Bank, which instructions
shall not be unreasonably or untimely withheld or delayed. Except upon the
occurrence and continuation of an Event of Default, the Bank agrees to
give instructions to distribute such amounts to the Borrower at such times
an in such amounts as the Borrower shall request for the purpose of
repairing, reconstructing or replacing the property in respect of which
such Insurance Proceeds were received. Any such request shall be
accompanied by a certificate of the chief executive officer or treasurer
of the Borrower setting forth in detail reasonably
4
satisfactory to the Bank the repair, reconstruction or replacement for
which such funds will be expended. If immediately available cash on
deposit in the Insurance Account is not sufficient to make such
distribution to the Borrower, the Bank shall cause to be liquidated as
promptly as possible the Liquid Investments in the Insurance Account
designated by the Borrower as are required to obtain sufficient cash to
make such distribution and, notwithstanding, any other provision of this
Article III, such distribution shall not be made until such liquidation
has occurred. Upon the occurrence and continuation of an Event of Default,
the Bank (in its sole discretion) may apply or cause to be applied
(subject to collection) any or all of the balance from time to time
standing to the credit of the Insurance Account in the manner specified in
Section 5.04.
(c) Investment of Funds in Insurance Account. Amounts on deposit in
the Insurance Account shall be invested and re-invested from time to time
in such Liquid Investments as the Borrower shall determine, which Liquid
Investments shall be held in the name of and be under the control of the
Bank, provided that, if an Event of Default has occurred and is
continuing, the Bank may liquidate any such Liquid Investments and apply
or cause to be applied the proceeds thereof in the manner specified in
Section 5.04. For this purpose, "Liquid Investments" means Cash
Equivalents; provided that (i) each Liquid Investment shall mature within
30 days after it is acquired by the Bank and (ii) in order to provide the
Bank with a perfected security interest therein each Liquid Investment
shall be either:
(i) Evidenced by negotiable certificates or instruments, which
(together with any appropriate instruments of transfer) are
delivered to, and held by, Bank or an agent thereof (which shall not
be the Borrower or any of its Affiliates); or
(ii) In book entry form and issued by the United States and
subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the Bank)
appropriate measures have been taken for perfection of the Security
Interests.
Section 3.04. Cash Proceeds Account.
(a) Creation of Cash Proceeds. Upon the later of (i) occurrence and
continuation of an Event of Default, and (ii) notification of Borrower by
the Bank, Trex Company, LLC's ZBA Master Account Number 2050000189063, or
such other equivalent account as shall then exist (the "Master Account"),
shall become a cash collateral account (the "Cash Proceeds Account") under
the exclusive control of the Bank into which there shall be deposited from
time to time the cash proceeds of the Collateral required to be delivered
to the Bank pursuant to this Section or any other provision of the Loan
Documents. Any income received with respect to the balance from time to
time to the credit of the Cash Proceeds Account, including any interest,
shall remain, or be deposited in the Cash Proceeds Account. All right,
title and interest in and to the cash amounts on deposit from time to time
in the Cash Proceeds Account shall vest in the
5
Bank, shall constitute part of the Collateral and shall not constitute
payment of the Obligations until applied thereto as hereinafter provided.
(b) Deposits to Cash Proceeds Accounts. Upon the later of (i)
notification by the Bank and (ii) the occurrence and continuation of an
Event of Default, all cash proceeds of the Collateral shall be delivered
to the bank and deposited in the Cash Proceeds Account. In addition to the
foregoing, the Borrower agrees that if the proceeds of any Collateral
shall be received by it, the Borrower shall as promptly as possible
deposit such proceeds in the Cash Proceeds Account. Until so deposited,
all such proceeds shall be held in trust by the Borrower for and as the
property of the Bank and shall not be commingled with any other funds or
property of the Borrower. The Borrower hereby irrevocably authorizes and
empowers the Bank, its officers, employees, and authorized agents to
endorse and sign its name on all checks, drafts, money orders or other
media of payment so delivered and such endorsements or assignments shall,
for all purposes, be deemed to have been made by the Borrower prior to any
endorsement or assignment thereof by the Bank. The Bank may use any
convenient or customary means for the purpose of collecting such checks,
drafts, money orders or other media of payment.
(c) Withdrawals from Cash Proceeds Account Collected funds on
deposit in the Cash Proceeds Account shall be withdrawn by the Bank on the
Business Day following the day on which the Bank considers the funds
deposited therein to be collected funds and applied to repay the
Obligations which are then due and payable. Upon the conversion of the
Master Account to the Cash Proceeds Account, the Borrower will not have
the right to make withdrawals from the Cash Proceeds Account and all
automatic withdrawals from such account will terminate.
Section 3.05. Stock Dividends. If, with respect to any securities pledged
hereunder, a stock dividend is declared, any stock split made or right to
subscribe is issued, all the certificates for the shares representing such stock
dividend, stock split or right to subscribe will be immediately delivered, duly
endorsed, to the Bank as additional Collateral, and any cash or non-cash
proceeds and products thereof, including investment property and security
entitlements will be immediately delivered to Bank. Borrower acknowledges that
such grant includes all investment property and security entitlements, now
existing or hereafter arising, relating to such securities. In addition,
Borrower agrees to execute such notices and instructions to securities
intermediaries as Bank may reasonably request.
Section 3.06. Contracts, Chattel Paper, Accounts, General Intangibles.
Borrower warrants that Collateral consisting of contract rights, chattel paper,
accounts, or general intangibles is (i) genuine and enforceable in accordance
with its terms except as limited by law; (ii) not subject to any defense,
set-off, claim or counterclaim of a material nature against Borrower except as
to which Borrower has notified Bank in writing; and (iii) not subject to any
other circumstances that would impair the validity, enforceability, value, or
amount of such Collateral except as to which Borrower has notified Bank in
writing. Borrower shall not amend,
6
modify or supplement any lease, contract or agreement contained in Collateral or
waive any provision therein, without prior written consent of Bank.
Section 3.07. Account Information. From time to time, at Bank's request,
Borrower shall provide Bank with schedules describing all accounts and
contracts, including customers' addresses, credited or acquired by Borrower and
at Bank's request shall execute and deliver written assignments of contracts and
other documents evidencing such accounts and contracts to Bank. Together with
each schedule, Borrower shall, if requested by Bank, furnish Bank with copies of
Borrower's sales journals, invoices, customer purchase orders or the equivalent,
and original shipping or delivery receipts for all goods sold, and Borrower
warrants the genuineness thereof.
Section 3.08. Account and Contract Borrowers. If an Event of Default
should occur and be continuing, Bank shall have the right to notify the account
and contract debtors obligated on any or all of the Collateral to make payment
thereof directly to Bank and Bank may take control of all proceeds of any such
Collateral, which rights Bank may exercise at any time. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne solely by Borrower whether the same is incurred by Bank or Borrower. If an
Event of Default should occur and is continuing or upon demand of Bank, Borrower
will, upon receipt of all checks, drafts, cash and other remittances in payment
on Collateral, deposit the same in a special bank account maintained with Bank,
over which Bank also has the power of withdrawal.
If an Event of Default should occur and is continuing, no discount,
credit, or allowance shall be granted by Borrower to any account or contract
debtor and no return of merchandise shall be accepted by Borrower without Bank's
consent. Bank may, after the occurrence and continuation of an Event of Default,
settle or adjust disputes and claims directly with account contract debtors for
amounts and upon terms that Bank considers advisable, and in such cases Bank
will credit the Obligations with the net amounts received by Bank, after
deducting all of the expenses incurred by Bank. Borrower agrees to indemnify and
defend Bank and hold it harmless with respect to any claim or proceeding arising
out of any matter related to collection of Collateral unless arising out of
Bank's gross negligence or wilfull misconduct.
Section 3.09. Government Contracts. If any Collateral covered hereby
arises from obligations due to Borrower from any governmental unit or
organization, Borrower shall immediately notify Bank in writing and execute all
documents and take all actions demanded by Bank to ensure recognition by such
governmental unit or organization of the rights of Bank in the Collateral.
Section 3.10. Inventory. So long as no Event of Default has occurred and
is continuing, Borrower shall have the right in the regular course of business,
to process and sell Borrower's inventory. If an Event of Default should occur
and be continuing or upon demand of Bank, Borrower will, upon receipt of all
checks, drafts, cash and other remittances, in payment of Collateral sold,
deposit the same in a special bank account maintained with Bank, over which Bank
also has the power of withdrawal. Borrower shall comply in all respects with all
laws, regulations, rulings, and orders applicable to Borrower or its assets or
business including, without
7
limitation, the Federal Fair Labor Standards Act in the conduct of its business
and the production of inventory. Borrower shall notify Bank immediately of any
violation by Borrower of the Fair Labor Standards Act, and a failure of Borrower
to so notify Bank shall constitute a continuing representation that all
inventory then existing has been produced in compliance with the Fair Labor
Standards Act.
Section 3.11. Instruments, Chattel Paper. Any Collateral that is
instruments, chattel paper and negotiable documents will be properly assigned
to, the originals deposited with and held by Bank, unless Bank shall hereafter
otherwise direct or consent in writing. Bank may, without notice, upon the
occurrence and continuation of an Event of Default, exercise any or all rights
of collection, conversion, or exchange and other similar rights, privileges and
options pertaining to such Collateral, but shall have no duty to do so.
Section 3.12. Collateral Duties. Bank shall have no custodial or
ministerial duties to perform with respect to Collateral pledged except as set
forth herein; and by way of explanation and not by way of limitation, Bank shall
incur no liability for any of the following: (i) loss or depreciation of
Collateral (unless caused by its willful misconduct or gross negligence), or
(ii) failure to present any paper for payment or protest, to protest or give
notice of nonpayment, or any other notice with respect to any paper or
Collateral.
Section 3.13. Transfer of Collateral. Bank may assign its rights in
Collateral or any part thereof to any assignee selected by Bank in good faith
who shall thereupon become vested with all the powers and rights herein given to
Bank with respect to the property so transferred and delivered, and Bank shall
thereafter be forever relieved and fully discharged from any liability with
respect to such property so transferred, but with respect to any property not so
transferred, Bank shall retain all rights and powers hereby given.
Section 3.14. [Intentionally Deleted]
Section 3.15. Landlord Waivers. Borrower shall cause each landlord of real
property leased by Borrower on which Borrower has stored any finished goods
inventory, to execute and deliver instruments satisfactory in form and substance
to Bank by which such landlord waives its rights, if any, in the Collateral.
ARTICLE IV
COVENANTS
The Borrower covenants and agrees with the Bank that until the payment in
full of all Obligations and until there is no Commitment by the Bank to make any
further Revolving Loans, incur obligations or otherwise give value, the Borrower
will comply with the following:
Section 4.01. Delivery of Perfection Certificate; Filing of Financing
Statements and Delivery of Search Reports. On or prior to the Closing Date, the
Borrower shall deliver the Perfection Certificates and all filings other actions
specified in Section 4.01 hereto to have been
8
delivered to the Bank for recordation. The information set forth in the
Perfection Certificates shall be correct and complete. Not later than 60 days
after the Closing Date, the Borrower shall furnish to the Bank file search
reports from each UCC filing office set forth in Schedule 4.01 confirming the
filing information set forth in such Schedule and confirming that the Bank has a
first priority security interest in the Collateral, except for the Permitted
Liens.
Section 4.02. Change of Name, Identity or Structure; Locations of State of
Organization. The Borrower will not change its name, identity or structure
(corporate or limited liability company, as applicable) in any manner unless it
shall have given the Bank not less than 30 days prior written notice thereof.
The Borrower will not reorganize in such a way that its state of organization
shall change which change would cause the Security Interests in the Collateral
to lapse or case to be perfected unless it shall have given Bank not less than
30 days prior written notice and taken such steps as are necessary to maintain
Bank's Security Interests.
Section 4.03. Further Assurances. The Borrower will, from time to time, at
its expense, execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any action (including,
without limitation, any filings of financing or continuation statements under
the UCC) that from time to time may be necessary or reasonably desirable, or
that the Bank may reasonably request, in order to create, preserve, perfect,
confirm or validate the Security Interests or to enable the Bank to obtain the
full benefit of this Agreement, or to enable the Bank to exercise and enforce
any of its rights, powers and remedies created hereunder or under applicable law
with respect to any of the Collateral. The Borrower agrees that a carbon,
photographic or photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. The Borrower shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral. Bank is authorized to file
financing statements relating to Collateral without Borrower's signature where
authorized by law. Borrower hereby constitutes and appoints Bank the true and
lawful attorney of Borrower with full power of substitution to take any and all
appropriate action and to execute any and all documents or instruments that may
be necessary or desirable to accomplish the purpose and carry out the terms of
this Security Agreement. The foregoing power of attorney is coupled with an
interest and shall be irrevocable until all of the Obligations have been paid in
full. Neither Bank nor anyone acting on its behalf shall be liable for acts,
omissions, errors in judgment, or mistakes in fact in such capacity as
attorney-in-fact. Borrower ratifies all acts of Bank as attorney-in-fact.
Borrower agrees to take such other actions as might be requested for the
perfection, continuation and assignment, in whole or in part, of the security
interests granted herein. If certificates, passbooks, or other documentation or
evidence is/are issued or outstanding as to any of the Collateral, Borrower will
cause the security interests of Bank to be properly protected, including
perfection by notation thereon or delivery thereof to Bank.
Section 4.04. Collateral in Possession of Other Persons. If any Collateral
is at any time in the possession or control of any warehouseman, bailee, or any
of the Borrower's agents or processors, the Borrower shall notify such
warehouseman, bailee, agent or processor of the
9
Security Interests created hereby and to hold all such Collateral for the Bank's
account subject to the Bank's instructions.
Section 4.05. Books and Records. The Borrower shall keep full and accurate
books and records relating to the Collateral, including without limitation the
originals of all documentation with respect thereto, records of all payments
received, all credits granted thereon, all merchandise returned and all other
dealings therewith, and the Borrower will make the same available for the Bank's
inspection, at the Borrower's own cost and expense, at any and all reasonable
times upon demand. Upon direction by the Bank, the Borrower shall stamp or
otherwise mark such books and records in such manner as the Bank may reasonably
require to reflect the Security Interests.
Section 4.06. Disposition of Collateral. Without the prior written
permission of the Bank (which consent shall not be unreasonably withheld or
untimely withheld, conditioned or delayed), the Borrower will not sell, lease,
exchange, assign or otherwise dispose of, or grant any option or security
interest with respect to the Collateral, except that, subject to the rights of
the Bank hereunder if an Event of Default shall have occurred and be continuing,
the Borrower may sell, lease or exchange Inventory in the ordinary course of
business and may sell or dispose of equipment no longer used or useful in the
conduct of the Borrower's business, whereupon, in the case of such a sale or
exchange, the Security Interests created hereby in such item (but not in any
Proceeds arising from such sale or exchange) shall cease immediately without any
further action on the part of the Bank.
Section 4.07. Insurance. Borrower shall bear all risk of loss with respect
to the Collateral. The injury to or loss of Collateral, either partial or total,
shall not release Borrower from payment or other performance hereof. Borrower
agrees to obtain and keep in force casualty and hazard insurance on Collateral
naming Bank as loss payee. Such insurance is to be in form and amounts and
issued by such companies as are satisfactory to Bank. Borrower shall furnish to
Bank such policies, or other evidence of such policies satisfactory to Bank.
Each such insurance policy shall include effective waivers by the insurer of all
claims for insurance premiums against the Bank unless Bank elects to continue
coverage, provide for coverage to the Bank regardless of the breach by the
Borrower of any warranty or representation made therein, not be subject to
co-insurance, provide that all insurance proceeds in excess of $50,000 per claim
shall be adjusted with and payable to the Bank and provide that no cancellation,
termination or material modifications (i.e. reductions in coverage limits)
thereof shall be effective until at least 10 days after receipt by the Bank of
notice thereof. Bank is authorized, but not obligated, from and after (and
during the continuation of) any Event of Default, to purchase any or all
insurance or "Single Interest Insurance" protecting such interest as Bank deems
appropriate against such risks and for such coverage and for such amounts,
including either the loan amount or value of the Collateral, all at its
discretion, and at Borrower's expense. In such event, Borrower agrees to
reimburse Bank for the cost of such insurance and Bank may add such cost to the
Obligations. Borrower shall bear the risk of loss to the extent of any
deficiency in the effective insurance coverage with respect to loss or damage to
any of the Collateral. Borrower hereby assigns to Bank the proceeds of all such
insurance and directs any insurer to make payments directly to Bank. Borrower
hereby appoints Bank its attorney-in-fact, which appointment shall be
irrevocable and coupled
10
with an interest for so long as Obligations are unpaid, to file proof of loss
and/or any other forms required to collect from any insurer any amount due from
any damage or destruction of Collateral, to agree to and bind Borrower as to the
amount of said recovery, to designate payee(s) of such recovery, to grant
releases to insurer, to grant subrogation rights to any insurer, and to endorse
any settlement check or draft. Borrower agrees not to exercise any of the
foregoing powers granted to Bank without Bank's prior written consent.
Section 4.08. Information Regarding Collateral. The Borrower will,
promptly upon request, provide to the Bank all information and evidence which it
may reasonably request concerning the Collateral to enable the Bank to enforce
the provisions of this Agreement.
ARTICLE V
REMEDIES, RIGHTS UPON DEFAULT
Section 5.01. General Authority. The Borrower hereby irrevocably appoints
the Bank its true and lawful attorney, with full power of substitution, in the
name of the Borrower, the Bank or otherwise, for the sole use and benefit of the
Bank, but at the Borrower's expense to the extent permitted by law to exercise
at any time and from time to time while an Event of Default has occurred and is
continuing, all or any of the following powers with respect to all or any of the
Collateral, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, irrevocable until the Obligations are
paid in full and until there is no commitment by the Bank to make any further
Revolving Loans, incur obligations or otherwise give value:
(a) To demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due thereon or by virtue thereof;
(b) To settle, compromise, compound, prosecute or defend any action
or proceeding with respect thereto;
(c) To sell transfer, assign or otherwise deal in or with the same
or the proceeds or avails thereof, as fully and effectually asif the Bank
were the absolute owner thereof; and
(d) To extend the time of payment of any or all thereof and to make
any allowance and other adjustments with reference thereto;
Provided, that the Bank shall give the Borrower not less than ten days
prior notice of the time and place of any sale or other intended disposition of
any of the Collateral, except any Collateral which is perishable or threatens to
decline speedily in value or is of the type customarily sold on a recognized
market. The Bank and Borrower agree that such notice constitutes "reasonable
notification" within the meaning of Section 9-504(3) of the UCC.
11
Section 5.02. Remedies upon Event of Default.
(a) If any Event of Default has occurred and is continuing, the Bank
may exercise all rights of a secured party under the UCC, and in addition,
the Bank may, without being required to give any notice, except as herein
provided or as may be required by mandatory provisions of law; (i)
withdraw all cash and Liquid Investments in the Insurance Account and Cash
Proceedings Account (collectively the "Collateral Accounts") and apply
such cash and Liquid Investments and other cash, if any, then held by it
as Collateral as specified in Section 5.04 and (ii) if there shall be no
such cash or Liquid Investments or if such cash and Liquid Investments
shall be insufficient to pay all of the Obligations in full or cannot be
so applied for any reason, sell the Collateral or any part thereof at a
public or private sale, for cash, upon credit or for future delivery, and
at such price or prices as the Bank may deem satisfactory. The Bank may be
the purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type that customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard
price quotations, at any private sale). The Borrower will execute and
deliver such documents and take such other action as the Bank deems
necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale, the bank shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the Collateral so sold to
it absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Borrower which may be
waived, and the Borrower, to the extent permitted by law, hereby
specifically waives all rights of redemption, stay or appraisal which it
has or may have under any law now existing or hereafter adopted. The
notice (if any) of such sale required by Section 5.01 shall (i) in the
case of a public sale, state the time and place for such sale, and (ii) in
the case of a private sale, state the day after which the sale may be
consummated. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Bank may
fix in the notice of such sale. At any such sale the Collateral may be
sold in one lot as an entirety or in separate parcels, as the Bank may
determine. The Bank shall not be obligated to make any such sale pursuant
to any such notice. The Bank may, without notice or publication, adjourn
any public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and such
sale may be made at any time or place to which the same may be so
adjourned without further notice. In the case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Bank until the selling price is paid by the
purchaser thereof, but the Bank shall not incur any liability in the case
of the failure of such purchaser to take up and pay for the collateral so
sold and in, the case of any such failure, such Collateral may again be
sold upon like notice. The Bank, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Collateral, or any
portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction.
12
(b) For the purpose of enforcing any and all rights and remedies
under this Agreement the Bank may (i) require the Borrower to, and the
Borrower agrees that it will, at its expense and upon request of the Bank,
forthwith assemble all or any part of the Collateral as directed by the
Bank and make it available at a reasonable place designated by the Bank
which is, in the Bank's opinion, reasonably convenient to the Bank and the
Borrower, whether at the premises of the Borrower or otherwise, it being
understood that the Borrower's obligation so to deliver the Collateral is
of the essence of this Agreement and that, accordingly, upon application
to a court of equity having jurisdiction, the Bank shall be entitled to a
decree requiring specific performance by the Borrower of such obligations;
(ii) to the extent permitted by applicable law, enter, with or without
process of law and without breach of the peace, any premise where any of
the Collateral is or may be located, and without charge or liability to
the Bank seize and remove such Collateral from such premises; (iii) have
access to and use the Borrower's books and records relating to the
Collateral; and (iv) prior to the disposition of the Collateral, store or
transfer it without charge in or by means of any storage or transportation
facility owned or leased by the Borrower, process, repair or recondition
it or otherwise prepare it for disposition in any manner and to the extent
the Bank reasonably deems appropriate. The Bank may also dispose of such
Collateral on such premises without liability for rent or costs.
Section 5.03. Limitation on Duty of the Bank in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Bank shall
have no duty to exercise any rights or take any steps to preserve the rights of
the Borrower in the Collateral in its or the Borrower's possession or control or
in the possession or control of any agent or bailee or any income thereon or as
to the preservation of rights against prior parties or any other rights
pertaining thereto, nor shall the Bank be liable to the Borrower or any other
Person for failure to meet any obligation imposed by Section 9-207 of the UCC or
any successor provision. The Bank shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that existing at the
time in the Borrower's industry, and shall not be liable or responsible for any
loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the Bank in
good faith.
Section 5.04. Application of Proceeds. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral and any cash held in
the Collateral Accounts shall be applied by the Bank in the following order of
priorities:
(a) to payment of the reasonable expenses of such sale or other
realization, including reasonable compensation to agents and counsel for
the Bank, and all expenses, liabilities and advances incurred or made by
the Bank in connection therewith, and any other Obligations owing to the
Bank in respect of sums advanced by the Bank to preserve the Collateral or
to preserve its security interest in the Collateral;
13
(b) an amount equal to (A) the unpaid principal of and accrued but
unpaid interest on all Revolving Loans and all other Obligations which
arise or are incurred in connection with the Loan Documents; plus (B) all
unpaid fees owing to the Bank under the Credit Agreement relating to the
Obligations; plus (C) to the extent not covered by paragraph (i) above,
all unreimbursed expenses for which the Bank is to be reimbursed pursuant
to Section 9.03 of the Credit Agreement or Section 6.03 hereof shall be
applied to payment of the Obligations;
(c) to the payment of all other Obligations, until all Obligations
shall have been paid in full; and
(d) to payment to the Borrower or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
Section 5.05. [Intentionally Deleted]
ARTICLE VI
MISCELLANEOUS
Section 6.01. Notices. Unless otherwise specified herein, all notices,
requests or other communications to any party hereunder shall be in writing
(including bank wire, facsimile transmission or similar writing) and shall be
given to such party (i) at its address set forth on the signature pages hereto
or (ii) other address or facsimile number as such party shall hereafter specify
for the purpose of communications hereunder by notice to the other parties
hereto. Each such notice, request or other communication shall be effective (i)
if given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if given
by mail, 72 hours after such communication is deposited, certified mail, return
receipt requested, in the mails with appropriate first class postage prepaid,
addressed as aforesaid or (iii) if given by other means, when delivered at the
address specified in this Section 6.01. Rejection or refusal to accept, or the
inability to deliver because of a changed address of which no notice was given
shall not affect the validity of notice given in accordance with this Section.
Section 6.02. No Waivers: Non-Exclusive Remedies. No failure or delay on
the part of either party to exercise, no course of dealing with respect to, and
no delay in exercising any right, power or privilege under this Agreement or any
other Loan Document or any other document or agreement contemplated hereby or
thereby shall operate as a waiver thereof nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided herein and in the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law. Without
limiting the foregoing, nothing in this Agreement shall impair the right of the
Bank to exercise any right of set-off or counterclaim it may have and to apply
the amount subject to such exercise to the payment of indebtedness of the
Borrower other
14
than its indebtedness under the Credit Agreement and the other Loan Documents
only relating to the Term Note and Term Loan.
Section 6.03. Compensation and Expenses of the Bank; Indemnification.
(a) Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Bank, including fees and disbursements of
special and local counsel for the Bank, in connection with the preparation
and administration of this Agreement or any document or agreement
contemplated hereby, any consent or waiver hereunder or any amendment
hereof or any Default or alleged Default and (ii) if an Event of Default
occurs, all reasonable out-of-pocket expenses incurred by the Bank,
including (without duplication) the fees and disbursements of outside
counsel in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) Protection of Collateral. If the Borrower fails to comply with
the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the material value of any Collateral or the validity,
perfection, rank or material value of any Security Interest is thereby
diminished or potentially diminished or put at risk, the Bank may, but
shall not be required to, effect such compliance on behalf of the
Borrower, and the Borrower shall reimburse the Bank for the costs hereof
on demand. All commercially customary insurance expenses and all
commercially customary expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining and shipping the Collateral,
any and all excise, property, sales and use taxes imposed by any state,
federal or local authority on any of the Collateral, or in respect of
periodic appraisals and inspections of the Collateral to the extent the
same may be reasonably requested by the Bank from time to time, or in
respect of the sale or other disposition thereof shall be borne and paid
by the Borrower. If the Borrower fails to promptly pay any portion thereof
when due, the Bank may, at its option, but shall not be required to, pay
the same and charge the Borrower's account therefor, and the Borrower
agrees to reimburse the Bank therefor on demand. All sums so paid or
incurred by the Bank for any of the foregoing and any and all other sums
for which the Borrower may become liable hereunder and all costs and
expenses (including reasonable attorneys' fees, legal expenses and court
costs) reasonably incurred by the Bank in enforcing or protecting the
Security Interests or any of its rights or remedies under this Agreement,
shall, together with interest thereon until paid at the rate applicable to
the Loans plus 2%, be additional Obligations hereunder.
(c) [Intentionally Deleted]
(d) [Intentionally Deleted]
15
Section 6.04. Amendments and Waivers. Any provision of this Agreement may
be amended, changed, discharged, terminated or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Bank.
Section 6.05. Successors and Assigns. This Agreement shall be binding upon
each of the parties hereto and inure to the benefit of the Borrower and of the
Bank and its successors and assigns. The Borrower shall not assign or delegate
any of its rights and duties hereunder without the prior written consent of the
Bank, which consent shall not be unreasonably withheld.
Section 6.06. Limitation of Law; Severability.
(a) All rights, remedies and powers provided in this Agreement may
be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions of this Agreement
are intended to be subject to all applicable mandatory provisions of law
which may be controlling and be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in whole or in
part, or not entitled to be recorded, registered or filed under the
provisions of any applicable law.
(b) If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction; and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability
of such provisions in any other jurisdiction.
Section 6.07. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia except as
otherwise required by mandatory provisions of law and except to the extent that
remedies provided by the laws of any jurisdiction other than the Commonwealth of
Virginia are governed by the laws of such jurisdictions.
Section 6.08. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when the Bank shall receive counterparts
hereof executed by itself and the Borrower.
Section 6.09. Termination. Upon full, final and irrevocable payment and
performance of all Obligations and the termination of the commitment under the
Credit Agreement to make Revolving Loans, the Security Interests shall terminate
and all rights to the Collateral shall revert to the Borrower. In addition, at
any time and from time to time prior to such termination of the Security
Interests, the Bank may release any of the Collateral. Upon any such termination
of the Security Interests or release of Collateral, the Bank will, upon request
by and at the expense of the Borrower, execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence the termination
of the Security Interests or the release of such
16
Collateral, as the case may be. Any such documents shall be without recourse to
or warranty by the Bank.
Section 6.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, and any contemporaneous oral agreements and understandings relating to
the subject matter hereof and thereof.
Section 6.11. Waivers. Borrower waives presentment, demand, protest,
notice of dishonor, notice of default, demand for payment, notice of intention
to accelerate, and notice of acceleration of maturity. Borrower further agrees
not to assert against Bank as a defense (legal or equitable), as a set-off, as a
counterclaim, or otherwise, any claims Borrower may have against any seller or
lessor that provided personal property or services relating to any part of the
Collateral. Borrower waives all exemptions and homestead rights with regard to
the Collateral. Borrower waives any and all rights to notice or to hearing prior
to Bank's taking immediate possession or control of any Collateral, and to any
bond or security which might be required by applicable law prior to the exercise
of any of Bank's remedies against any Collateral. All rights of Bank and
security interests hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional, not discharged or impaired irrespective of (and
regardless of whether Borrower receives any notice of): (i) any lack of validity
or enforceability of any Loan Document; (ii) any change in the time, manner or
place of payment or performance, or in any term, of all or any of the
Obligations or the Loan Documents or any other amendment or waiver of or any
consent to any departure from any Loan Document; (iii) any exchange, release or
non-perfection of any collateral, or any release of or modifications of the
obligations of any guarantor or other obligor; (iv) any amendment or waiver of
or consent to departure from any Loan Document or other agreement. To the extent
permitted by law, Borrower hereby waives any rights under any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist and which, but for this provision, might be applicable to any sale or
disposition of the Collateral by Bank; and any other circumstance which might
otherwise constitute a defense available to, or a discharge of any party with
respect to the Obligations.
Section 6.12. Jurisdiction. Borrower irrevocably agrees to non-exclusive
personal jurisdiction in the Commonwealth of Virginia.
Section 6.13. Captions. The captions contained herein are inserted for
convenience only and shall not affect the meaning or interpretation of this
Security Agreement or any provision hereof. The use of the plural shall also
mean the singular, and vice versa.
Section 6.14. Joint and Several Liability. If more than one party has
signed this Security Agreement, such parties are jointly and severally obligated
hereunder.
Section 6.15. Binding Contract. Borrower by execution and Bank by
acceptance of this Security Agreement, agree that each party is bound by all
terms and provisions of this Security Agreement.
17
[SIGNATURES BEGIN ON NEXT PAGE]
18
WITNESS the following signatures and seals:
TREX COMPANY, LLC
160 Exeter Drive
Winchester, VA 22603-8605
Facsimile: (540) 542-6889
By: /s/ Anthony J. Cavanna
--------------------------------------
Anthony J. Cavanna, Executive Vice
President; Chief Financial Officer;
Treasurer
TREX COMPANY, INC.
160 Exeter Drive
Winchester, VA 22603-8605
Facsimile: (540) 542-6889
By: /s/ Robert G. Matheny
--------------------------------------
Robert G. Matheny, President
FIRST UNION NATIONAL BANK
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
Facsimile: (704) 374-6319
By: /s/ Barbara Gell Carroll
--------------------------------------
Name/Title Barbara Gell Carroll,
------------------------------
Senior Vice President/Director
------------------------------------------
19
Exhibit 10.3
Assessors Parcel # 21-241-08
Mail Tax Bills To:
TREX Company, LLC
160 Exeter Road
Winchester, VA 22603-8605
DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
Granted By
TREX COMPANY, LLC
-----------------
a Delaware limited liability company
(for purposes of recording, the "Trustor")
To
WESTERN TITLE COMPANY, INC.
(for purposes of recording, the "Trustee")
Trustee
Securing
FIRST UNION NATIONAL BANK,
-------------------------
A National Banking Association
(for purposes of recording, the "Grantee")
This Document was Prepared By: Dated September 30, 2001
Fiona M. Tower
Kutak Rock LLP
1111 East Main Street, Suite 800
Richmond, Virginia 23219
TO FILING OFFICER, AFTER RECORDATION RETURN TO:
Fiona M. Tower
KUTAK ROCK LLP
1111 East Main Street, Suite 800
Richmond, Virginia 23219
To Be Recorded In the Land
Records Offices of the City
Of Lyon County, Nevada.
DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
Granted By
TREX COMPANY, llc
A DELAWARE LIMITED LIABILITY COMPANY
To
WESTERN TITLE COMPANY, INC.
A NEVADA CORPORATION
Trustee
DEFINITIONS
As used throughout this Deed of Trust, the following terms shall have the
following meanings:
"Act" shall have the meaning as set forth in Section 1.16 of this Deed of
Trust;
"Beneficiary" shall mean First Union National Bank, a National Banking
Association, its successors and assigns;
"Clerk's Office" shall mean collectively the land records of Lyon County,
Nevada.
"Code" shall mean the Nevada Revised Statutes, as amended and now enacted;
"Credit Agreement" shall mean that certain Second Amended and Restated
Credit Agreement between Trustor, Trex Company, Inc. and Beneficiary dated as of
the date hereof;
"Deed of Trust" shall mean this deed of trust, security agreement and
assignment of leases and rents granted by the Trustor to the Trustees;
"Easement" shall have the meaning as set forth in Section 7.1 of this Deed
of Trust;
"Event of Default" shall mean, individually, and "Events of Default" shall
mean, collectively, those items as listed in Article III of this Deed of Trust,
which shall entitle the Trustees or the Beneficiary to exercise all rights and
remedies provided in Article IV of this Deed of Trust;
"Hazard" shall have the meaning as set forth in Section 1.16 of this Deed
of Trust;
"Improvements" shall mean all buildings, structures, improvements and
replacements, now or hereafter existing on or to be erected upon the Land and
any and all landscaping and related amenities and facilities;
"Land" shall mean all that parcel of land situated in Lyon County, Nevada,
as more particularly described on Exhibit "A" attached to this Deed of Trust and
made a part thereof;
"Leases" shall have the meaning as set forth in Section 6.1 of this Deed
of Trust;
"Loan" shall mean the financing extended by the Beneficiary to the Trustor
and Trex Company, Inc. as more particularly described in the Credit Agreement
and evidenced by the Promissory Note;
"Loan Documents" shall mean the Promissory Note, the Deed of Trust, the
Credit Agreement and such other documents and writings executed and delivered by
Trustor and such other signatory parties to the Beneficiary, evidencing,
securing or otherwise documenting the terms and conditions of the Loan, as the
Promissory Note, the Deed of Trust, and such other documents may be amended,
modified, replaced or amended and restated in their entirety in the future;
"Obligations" shall have the meaning as set forth in the granting clause
of this Deed of Trust;
"Personalty" shall have the meaning as set forth in the granting clause of
this Deed of Trust;
"Promissory Note" shall mean collectively, the term note in the original
principal amount of $3,780,000, the term note in the original principal amount
of $1,035,000, the term note in the original principal amount of $5,940,000; the
term note in the original principal amount of $58,000,000 and the revolving note
in the maximum principal amount of $17,000,000 between Trustor and Trex Company,
Inc., as Borrower, and Beneficiary, all dated as of the date hereof;
"Real Property" shall mean the Land and the Improvements;
"Rent" shall have the meaning as set forth in Section 6.1 of this Deed of
Trust;
"Secured Property" shall have the meaning as set forth in the granting
clause of this Deed of Trust;
"Trustees" shall mean Western Title Company, Inc..
2
DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
THIS DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS
(the "Deed of Trust") is made and granted as of the 30th day of September, 2001,
by TREX COMPANY, LLC, a Delaware limited liability company, with an address of
160 Exeter Drive, Winchester, Virginia 22603-8605 (the "Trustor"), to Western
Title Company, Inc. (Trustee"), for the benefit of Beneficiary.
RECITALS
A. The Trustor holds fee simple title to the Land and conveys its fee
simple interest in the Land and other Secured Property, as provided further
herein as security for the payment and performance of all obligations of the
Trustor secured by this Deed of Trust
B. In addition to the Promissory Note and this Deed of Trust, the Loan is
further evidenced by the other Loan Documents, as such Loan Documents may be
amended, modified, replaced or amended and restated in their entirety in the
future.
GRANT
NOW, THEREFORE, in consideration of the premises, and to secure: (a) the
payment of the principal, interest, and other sums due on the Promissory Note,
this Deed of Trust, and any other Loan Document, and any and all other
indebtedness of the Trustor to the Beneficiary, whether now existing or
hereinafter incurred, as well as all future advances, as and when due, (b) the
observance and performance of all of the terms, conditions, agreements, and
provisions of the Promissory Note, this Deed of Trust, and all other Loan
Documents, including the repayment of all sums advanced, to be advanced, or
which may be advanced by the Beneficiary pursuant to or under authorizations
contained in this Deed of Trust, even if and to the extent such sums may exceed
the face amount of the Promissory Note, this Deed of Trust and any other Loan
Document, and (c) any and all other future indebtedness of Trustor to
Beneficiary (collectively, the "Obligations"), the Trustor grants, pledges,
assigns, transfers, and conveys to the Trustees, in trust, with power of sale,
all that lot of ground situated and lying in Lyon County, Nevada and more
particularly described on Exhibit "A" attached hereto and made a part hereof;
TOGETHER WITH any additional or other interest in the Land that the
Trustor may hereafter acquire; and
TOGETHER WITH all of the Trustor's right, title and interest in and to all
Improvements; and
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TOGETHER WITH all of the Trustor's right, title and interest in and to all
plant, equipment, apparatus, machinery, fittings, appliances, furniture,
furnishings, fixtures and other chattels and personal property and replacements
thereof, owned by the Trustor and now or at any time hereafter affixed or
attached to, incorporated in, placed upon, or in any way used in connection with
the current or future utilization, enjoyment, occupation, or operation of the
Real Property including by way of example and not by way of limitation, all
lighting, heating, ventilating, air conditioning, incinerating, sprinkling,
laundry, lifting and plumbing fixtures and equipment, water and power systems,
loading and unloading equipment, burglar alarms and security systems, fire
prevention and fire extinguishing systems and equipment, engines, boilers,
ranges, refrigerators, stoves, furnaces, oil burners or units, communication
systems and equipment, dynamos, transformers, motors, tanks, electrical
equipment, elevators, escalators, cabinets, partitions, ducts, compressors,
switchboards, storm and screen windows and doors, pictures, awnings and shades,
sign and shrubbery as well as all building and construction materials and
supplies of every kind, nature and description owned by the Trustor and located
on, at, or about the Real Property, whether or not yet incorporated into any
building, structure, or improvement, or located elsewhere and not as yet
delivered to the Real Property, which are intended to be used for the purpose of
erecting, renovating, restoring, or repairing any building, structure, or
improvement on the Real Property, including by way of example and not by way of
limitation, all steel, iron, concrete, sheet rock and plaster board, screws,
paint, plaster, plastics, insulation, fiberglass, wood and wood products, glass,
bricks, mortar, masonry, pipes, wiring, linoleum and tile and other floor and
wall coverings, roofing and roofing materials, framing and molding
(collectively, the "Personalty"), as to all of which the Trustor grants and
conveys to the Beneficiary a continuing security interest under the Nevada
Uniform Commercial Code, as amended, as well as in any and all proceeds and
products thereof and all substitutions, renewals and replacements thereof,
whether now owned or hereafter acquired, for so long as such items are or remain
personal property and not fixtures and permanent additions to the Real Property;
and
TOGETHER WITH all contracts, plans, and specifications, surveys and
surveyor's reports, engineer's reports, diagrams and drawings, all licenses,
permits and approvals and applications therefor from governmental authorities,
deposits, service contracts, books, records, reports, accounting records,
invoices, change orders, correspondence, diagrams, drawings, schematics, sales
and promotional literature and forms, advertising materials and the like,
wherever located and whenever created, compiled, or made with respect to the
construction of the Improvements upon the Land and the leasing of space in the
completed Improvements, and the Trustor hereby grants to the Beneficiary a
continuing security interest under the Nevada Uniform Commercial Code in and to
all of the same, and the proceeds, including insurance proceeds, and products
thereof, and in all substitutions, renewals, and replacements thereof, now
existing or hereafter acquired; and
TOGETHER WITH a security interest to Beneficiary, which is hereby granted
by the Trustor, in all amounts that may be owing at any time and from time to
time by the Beneficiary to the Trustor in any capacity, including, but not
limited to, any balance or share belonging to the
4
Trustor in any deposit or other account with the Beneficiary, which accounts
shall specifically include the escrow accounts that may be established in
accordance with the terms of this Deed of Trust with regard to real property
taxes, insurance payments, security deposits, and the like; and
TOGETHER WITH all easements, rights, privileges, and appurtenances
thereunto belonging or in any way appertaining, and all of the right, title,
interest, estate, or claim of the Trustor in or to the streets, ways, alleys,
and waters adjoining or adjacent to the Real Property, whether now existing or
hereafter acquired; and
TOGETHER WITH all mineral rights, and mining rights, as well as all
minerals, dirt, sand, gravel, pebbles, stones, rocks, soil and the like
(including oil and gas) which have not been extracted from the Land; and
TOGETHER WITH all rights, benefits, profits, rents, and monies payable
under, by reason of, or with respect to any restrictive covenants, easements,
agreements applicable to adjoining lands, or contracts of sale with respect
thereto with the right to collect any sums of money at any time payable to the
Trustor in consequence of such rights and benefits, including the release,
modification, or amendment thereof, for application to sums then due and owing
the Beneficiary under the Promissory Note, this Deed of Trust or any other Loan
Document and to utilize any collection or enforcement rights or remedies to
collect the same available to the Trustor under law, as to all of which, and the
proceeds and products thereof, the Trustor hereby grants a continuing security
interest therein and thereto unto the Beneficiary; and
TOGETHER WITH: (a) all of the proceeds of the voluntary or involuntary
conversion of the aforementioned property or any part of the aforementioned
property into cash or liquidated claims, whether by way of condemnation, insured
casualty, judgment or otherwise, as well as a security interest which is hereby
granted to the Beneficiary in the same; (b) all rents, profits, and benefits,
including any deposits of tenants to secure payment of the same and performance
of the terms and conditions of any oral or written lease, with respect to the
leasing of all or any portion of the Real Property, with the right to collect
such rents, profits, and benefits at any time for application to sums then due
and owing the Beneficiary under the Promissory Note, this Deed of Trust or any
other Loan Document, and to utilize any collection or enforcement rights or
remedies available to the Trustor under law or any written lease, but without
any duty or obligation to perform on behalf of the Trustor any of the Trustor's
duties or obligations to any lessee; and (c) a security interest in all revenues
and profits, accounts receivable and contract rights, including any deposits of
purchasers to secure payment of the contract price and performance of the terms
and conditions of any contract of sale for the Real Property, with the right to
collect the same at any time for application to sums then due and owing the
Beneficiary under the Promissory Note, this Deed of Trust or any other Loan
Document and to utilize any collection or enforcement rights or remedies
available to the Trustor under law or any contract of sale, but without any duty
or obligation, to perform on behalf of the Trustor any of the Trustor's duties
or obligations to any purchase of the Real Property;
5
TO HAVE AND TO HOLD all of the aforementioned property (collectively, the
"Secured Property") to the Trustees, and the Trustees' successors and assigns,
in trust with power of sale to the Trustees to secure the Obligations provided
that, so long as no Event of Default shall have occurred, the Trustor shall have
the license to possess and enjoy the Secured Property, and to receive the rents,
issues and profits therefrom, subject, however, to the provisions of the Loan
Documents; and further provided, that if all of the Obligations are fully paid
and satisfied and performed and/or observed, then the lien of this Deed of Trust
shall be released by the Beneficiary and the Trustees, and the Trustees shall
then, upon the written request of the Trustor, release, terminate, and reconvey
the Secured Property to the Trustor at the sole cost and expense of the Trustor.
ARTICLE I
COVENANTS AND AGREEMENTS OF THE TRUSTOR
1.1. Repayment. The Trustor shall pay all indebtedness secured by this
Deed of Trust, together with interest thereon and any penalty, fee, charge,
deposit, escrow or assessment, at the times and in the manner and amounts set
forth in the Promissory Note and other Loan Documents.
1.2. Performance. The Trustor shall perform and observe all duties,
obligations, and requirements and shall comply in all respects with the terms,
covenants, conditions, representations and warranties of the Promissory Note,
this Deed of Trust and all other Loan Documents.
1.3. Taxes and Expenses. The Trustor shall pay and discharge, when and as
the same come due, before penalty or premium attaches, all taxes of every kind
and nature, real and personal, all general and special assessments and levies,
all water, sewer and other utility charges, rents, and assessments and any and
all other public charges, dues, levies, impositions, or assessments of a like or
different nature, imposed upon or assessed against the Secured Property or the
rents, issues, income or profits thereof, which are or may become liens against
the same, as well as any ground rent to which the Real Property may be subject,
and the Trustor will not permit to exist any lien or security interest therefor
other than: (a) liens for taxes, assessments, levies, fees, rents, ground rents,
and public charges not yet delinquent or which are being contested in good
faith; and (b) liens and security interests which the Beneficiary has
specifically and in writing consented to the existence of and with respect to
which the Trustor has paid currently all sums secured thereby. The Trustor will,
upon the request of the Trustees or the Beneficiary, deliver to the Trustees or
the Beneficiary receipts evidencing the payment of all such taxes, assessments,
levies, fees, rents, ground rents, and public charges imposed upon or assessed
against the Secured Property (provided, however, that Trustor may withhold any
such payment if Trustor contests in good faith the validity of such payment, and
may continue to withhold such payment pending the resolution of the dispute so
long as Beneficiary is provided with adequate security, as reasonably determined
by Beneficiary, for the payment of the withheld amount and any potentially
applicable interest and penalties and such contest does not in the
6
reasonable opinion of Beneficiary put the Secured Property or any portion
thereof at risk of any tax lien foreclosure), or the revenues, rents, issues,
income, or profits thereof, as well as the payment of all superior liens and
security interests with respect to which the Beneficiary may have consented.
1.4. Insurance. The Trustor shall obtain and shall at all times during the
term hereof maintain the following insurance coverages:
1.4.1. Casualty Insurance. The Trustor shall keep any Improvements
constructed on the Land and Personalty thereon insured against loss by fire
casualty, and such other hazards and contingencies, including but not limited to
lightning, hail, windstorm, explosion, malicious mischief and vandalism, as are
covered by extended coverage policies in effect in the area where the Land is
located and such other risks as may be reasonably specified by the Beneficiary
from time to time, all for the benefit of the Beneficiary; provided that, during
any period of construction, restoration or reconstruction of the Improvements,
the Trustor shall provide in lieu of such insurance, builders' risk or a similar
type of insurance in the amount of the full replacement cost of the Improvements
and the equipment. Such insurance shall be written on policy forms and by Lloyds
of London or an insurance company lawfully operating in the jurisdiction in
which the Real Property is located with a rating of "A-" or better according to
A.M. Best Co. Insurance Guide and reasonably satisfactory to the Beneficiary,
shall be in an amount equal to the lesser of the outstanding principal balance
of the Obligations or the full insurable replacement cost of any such
Improvements and Personalty, but in any event shall be in an amount sufficient
to prevent co-insurance liability, shall name the Beneficiary as a mortgagee and
sole loss payee and shall be endorsed such that the losses thereunder shall be
payable to the Beneficiary and not to the Trustor and the Beneficiary or the
Trustees, jointly. The policy or policies of such insurance shall include a
replacement cost or restoration endorsement and a waiver of subrogation
endorsement reasonably satisfactory to the Beneficiary. Original certificates or
at Beneficiary's request, originals or certified true copies, of the policy or
policies of such insurance and all renewals thereof shall be delivered to and
retained by the Beneficiary, and the Trustor shall provide the Beneficiary with
receipts evidencing the payment of all premiums due on such policies and the
renewals thereof on or prior to the renewal or expiration date thereof. All
policies required hereby shall provide and shall bear an endorsement that the
insurer shall endeavor to notify Beneficiary not less than ten (10) days prior
to any cancellation, termination, endorsement or material amendment (i.e.
reduction in coverage). The Trustor shall give the Beneficiary prompt notice of
any loss covered by such insurance, and, the Beneficiary shall have the right to
adjust and compromise such loss, to collect, receive and receipt the proceeds of
insurance for such loss and to endorse the Trustor's name upon any check in
payment thereof and, for such purposes the Trustor hereby constitutes and
appoints the Beneficiary as its attorney in fact with the power of attorney
granted hereby deemed to be coupled with an interest and irrevocable. All monies
received as payment for a loss covered by an insurance policy shall be paid over
to the Beneficiary, as its interests may appear. The Beneficiary shall, after
deducting the reasonable expenses incurred in the collection of the proceeds of
any insurance, make the remainder of such proceeds available to the Trustor for
the payment of charges or expenses actually incurred by the Trustor in the
restoration, reconstruction, repair, renovation or
7
replacement of the affected Improvements and Personalty, provided that: (i) the
Beneficiary has approved the plans and specifications for the repair or
restoration of the damaged portion of the Improvements and Personalty, the
contract for such repair or restoration and the contractor that will perform the
same, (ii) the Trustor has deposited with the Beneficiary (or if permitted by
the Beneficiary, has made provision satisfactory to the Beneficiary for the
payment of) any amounts required for such repair or restoration which exceed the
available insurance proceeds, (iii) no Event of Default, or event that with the
passage of time would constitute an Event of Default, has occurred and is
continuing under the Loan Documents, (iv) the repair or restoration of the
Improvements and Personalty reasonably can be completed before the maturity date
of the Loan, and (v) the tenants will continue to pay rent without abatement (or
the proceeds of business interruption insurance will be adequate in the
Beneficiary's judgment to offset any such abatement of rent), otherwise, such
proceeds shall be applied in payment of the Obligations.
1.4.2. Liability and Worker's Compensation Insurance. The Trustor
shall obtain and maintain public liability and property damage insurance in such
amounts, with such insurance companies, and upon policy forms acceptable to and
reasonably approved by the Beneficiary, naming the Beneficiary as an additional
insured. Additionally, if Trustor has any employees, the Trustor shall obtain
and maintain worker's compensation insurance in such amounts, with an insurance
company, and in a form acceptable to and approved by the Beneficiary. The
Trustor shall supply to the Beneficiary a copy of the aforesaid liability
insurance policies and receipts evidencing the payment of premiums due thereon
or, alternatively, certificates from the insurance company certifying to the
existence of the policies, summarizing the terms of the policies, and indicating
the payment of premiums due thereon. Each of the policies specified herein shall
provide that the insurer shall endeavor to provide Beneficiary with ten (10)
days prior notice of any material modification (i.e. reduction in coverage) or
cancellation.
1.4.3. Rental Loss Interruption Insurance. The Trustor shall also
carry and maintain rental interruption insurance on the Trust Property in the
same manner and under the same conditions as provided in 1.4.1 covering debt
service, real estate taxes and insurance premiums for a period of at least
twelve (12) months.
1.4.4. Flood Insurance. In the event that all or any portion of the
Real Property currently or at any time in the future is determined to be located
in a specially designated flood hazard area by the Secretary of Housing and
Urban Development or the Director of the Federal Emergency Management Agency,
pursuant to the provisions of the National Flood Insurance Act of 1968, or the
Flood Disaster Protection Act of 1973, as amended, the Trustor shall obtain and
maintain flood hazard insurance in the full insurable value of the Improvements
or any portion of the Real Property located within such area, or the full amount
of flood insurance available, naming the Beneficiary as sole loss payee and
complying with all applicable provisions of Section 1.4.1. hereof. The Trustor
shall be required to provide flood hazard insurance as described, unless the
Trustor's insurance broker or surveyor certifies to the Beneficiary in writing
that the Real Property is not in a flood hazard area. The proceeds of any loss
payable under a
8
flood insurance policy shall be applied, at the option of the Beneficiary, as
set forth in Section 1.4.1. above with respect to casualty insurance proceeds.
1.4.5. Separate Insurance. The Trustor may not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained hereunder unless the Beneficiary is included thereon
as a named insured with losses payable to the Beneficiary as above provided. The
Trustor shall immediately notify the Beneficiary whenever any such separate
insurance is taken out and shall promptly deliver to the Beneficiary
certificates, or if requested by Beneficiary the policy or policies, of such
insurance.
1.5. Advancements. If the Trustor should fail to perform any of the
covenants contained in this Deed of Trust, or to protect or preserve the Secured
Property or the status and priority of the lien and security interest of this
Deed of Trust, the Beneficiary may, but shall not be obligated to, make advances
to perform the same on behalf of the Trustor or to protect or preserve the
Secured Property or the status and priority of the lien and security interest of
this Deed of Trust, and all sums so advanced shall immediately upon advancement
become a lien and security interest upon the Secured Property and shall be
secured by this Deed of Trust. For the purposes of taking any and all acts as
set forth in this Section 1.5., the Trustor hereby constitutes and appoints the
Beneficiary as its attorney in fact and the power of attorney granted hereby
shall be deemed to be coupled with an interest and irrevocable. The Trustor,
will repay on demand all sums so advanced on the Trustor's behalf, plus any
expenses or costs incurred by the Trustees or the Beneficiary, including
reasonable attorneys fees, with interest thereon at the highest rate of interest
permitted under the Promissory Note. The provisions of this Section shall not be
construed to prevent the institution of foreclosure or other rights and remedies
of the Trustees upon the occurrence of an Event of Default hereunder.
1.6. Condition and Use of Improvements. The Trustor will not commit any
waste on the Secured Property or make any change in the use of the Secured
Property which will in any way increase any ordinary fire or other hazard
insurance risk arising out of the construction of improvements on or operation
of the Secured Property or at any time abandon the Secured Property. The Trustor
will at all times maintain and keep the Secured Property in good operating order
and condition, ordinary wear and tear excepted, and will promptly make, from
time to time, all repairs, renewals, replacements, additions, and improvements
to so maintain the Secured Property. The Trustor will comply with all statutes,
ordinances, rules, regulations, or laws affecting the Secured Property or the
use thereof. The Improvements shall not be removed, demolished or substantially
altered, nor shall any material Personalty be removed therefrom, without the
prior written consent of the Trustees or the Beneficiary, which consent shall
not be unreasonably withheld, conditioned or delayed, except that no consent
shall be required where appropriate replacements, free of superior title, liens,
security interests, or claims, and of a value at least equal to the value of the
Personalty removed, are immediately made. Upon receipt of written notice the
Trustor will permit the Trustees or the Beneficiary, or their agents or
employees, at all reasonable times to enter and inspect the Secured Property.
9
1.7. Title to Real Property; Liens. The Trustor has as of the date hereof,
and shall maintain at all times during the term of this Deed of Trust, good and
marketable title to the Secured Property free and clear of any and all liens,
charges, restrictions, encumbrances, security interests and adverse claims
whatsoever, excepting any liens, charges, restrictions, encumbrances or security
interests which: (a) are set forth in the title insurance policy issued in favor
of, and approved by, the Beneficiary with respect to the Secured Property; (b)
are expressly permitted by the provisions of this Deed of Trust or any of the
other Loan Documents; (c) are granted to the Beneficiary; or (d) are consented
to in writing by the Beneficiary.
1.8. Transfer or Encumbrance; Change of Control. Except as may be
permitted under the Credit Agreement, title to all or any portion of the Secured
Property may not be acquired by any person, individual, partnership, or
corporation by voluntary or involuntary conveyance, transfer, grant or
assignment, by operation of law, or in any other manner, nor shall the Secured
Property become encumbered or charged with a lien or security interest of any
kind or variety, excepting the mortgages or deeds of trust disclosed in writing
to and approved in writing by the Beneficiary, and other "Permitted Liens" as
defined in the Credit Agreement, whether voluntary or involuntary, including any
mechanic's or materialmen's lien or judgment lien, senior, junior, or of equal
priority to the lien and security interest of this Deed of Trust, without the
prior written consent of the Trustees or the Beneficiary. A conveyance,
transfer, grant, or assignment of, or a pledge, encumbrance, or creation of a
lien or security interest in any interest in the Trustor, whether or not a
conveyance, transfer, grant, or assignment of or a pledge, encumbrance, or
creation of a lien or security interest in the membership interests in Trustor
is with respect to all or only a part of the total number of outstanding
membership interests, shall be considered to be a transfer or encumbrance of the
Secured Property and subject to the provisions of this Section. Except as
consented to by the Beneficiary in writing, control and management of the
Secured Property shall be vested as presently owned by the Trustor and may not
be transferred, assigned or conveyed to or acquired by any person. The contrary
notwithstanding, in the event the ownership of the Secured Property becomes
vested in a person, individual, partnership, or corporation or limited liability
company other than the Trustor, the Trustees or the Beneficiary may, without
notice to the Trustor, deal with such successor or successors in interest with
reference to this Deed of Trust and the indebtedness secured by it in the same
manner as with the Trustor, and any extension of the time of the indebtedness or
any other modifications of the terms of the indebtedness at the instance of the
then owner of the Secured Property shall not relieve the Trustor of the
Trustor's liability on the Promissory Note hereby secured or from the
performance of any of the covenants and agreements contained herein or any of
the covenants, terms, conditions, provisions, representations, or warranties
contained in the Loan Documents, whether the extension or modification be made
with or without the consent of the Trustor; provided Trustor shall not be bound
by modifications made without its consent.
1.9. Condemnation. The Trustor, within seven business days of obtaining
knowledge of the institution of any proceedings for the taking or condemnation
of the Secured Property or any portion thereof, or any interest therein or right
accruing thereto, will notify the Trustees and the Beneficiary of the pendency
of such proceedings, describing in detail the nature and extent of such taking
or condemnation. The Trustees or the Beneficiary may participate in any such
10
proceedings and the Trustor from time to time will deliver to the Trustees or
the Beneficiary all instruments requested by them to permit such participation.
Until the occurrence of an Event of Default, the Trustees or Beneficiary shall
not participate in any hearings without the presence of Trustor nor shall the
Trustees or the Beneficiary accept or negotiate the amount of any such award
without the Trustor's written consent. The Trustees or the Beneficiary shall be
under no obligation to question the amount of any such award or compensation and
may accept the same in the amount in which the same shall be paid. In any such
condemnation proceedings, the Trustees or the Beneficiary may be represented by
counsel selected by them and the Trustor shall pay, the reasonable attorneys'
fees incurred by them at the Trustor's sole expense. The proceeds of any award
or compensation so received shall be, and hereby are, assigned by the Trustor to
the Beneficiary, shall be payable to the Beneficiary and, if less than a
substantial portion of the Secured Property is damaged, taken or transferred in
a condemnation, or if the Beneficiary does not elect to accelerate the Loan as a
consequence of such condemnation, then the Beneficiary may require the Trustor
to repair, restore or replace the Secured Property or the affected portion
thereof as nearly as practical to its condition immediately before the
condemnation, and in such event any net proceeds of the condemnation will be
applied to the costs of such repair, restoration or replacement. The term
"substantial portion" as used above and further herein means so much of the
Secured Property as will have, in the Beneficiary's opinion, a material effect
on the use and occupancy of the Secured Property or on the ability of the
Trustor to make required payments of principal and interest on the Promissory
Note.
1.10. Future Advances. The Beneficiary may make future advances to the
Trustor and may advance or readvance funds to the Trustor and all such future
advances and readvances shall be fully secured by the lien and security interest
of this Deed of Trust.
1.11. Status. Except as otherwise permitted under the Credit Agreement,
the Trustor shall maintain in full force and effect the Trustor's status as a
validly existing limited liability companies under the laws of the State of
Delaware and the Commonwealth of Virginia and all rights and privileges incident
thereto.
1.12. Estoppel Certificate. The Trustor shall, upon written notice,
deliver within ten (10) days of the giving of such notice, a written statement,
duly acknowledged, setting forth the amount of principal, interest, penalty, and
other charges or assessments due the Beneficiary as of the notice date and
whether any offsets or defenses are known to exist against any of the same.
1.13. Compliance with Laws; Restrictive Covenants. The Trustor shall
comply with all applicable rules and regulations of the federal, state, and
local governmental authorities having jurisdiction over the Secured Property;
the Trustor shall also comply with all restrictions, covenants, easements and
other limitations on the use of the Secured Property contained in documents of
public record.
1.14. Preservation of Lien. The Trustor shall take all reasonable steps
and do all things necessary, convenient, or proper, to establish, protect,
preserve, and maintain the priority and
11
status of the lien and security interest in the Secured Property established or
intended to be established by this Deed of Trust.
1.15. Further Assurances. In addition to the acts recited herein and
contemplated to be performed, executed and/or delivered by the Trustor, the
Trustor hereby agrees at any time and from time to time to perform, execute
and/or deliver to the Beneficiary upon request, any and all such further acts,
additional instruments, or further assurances as may be reasonably necessary or
proper to: (i) promptly correct any defect, error or omission which may be
discovered in this Deed of Trust or any other Loan Document, and execute any and
all additional documents, as may be requested by the Beneficiary to correct such
defect, error or omission; (ii) assure the Beneficiary a valid second priority
lien and second priority perfected security interest in the Secured Property;
(iii) create, perfect, preserve, maintain and protect the liens and security
interests created or intended to be created hereby; and (iv) provide the rights
and remedies to Beneficiary granted or provided for herein. The Trustor shall,
upon ten (10) business days written notice from the Beneficiary, execute and
deliver such additional deeds of trust, supplemental deeds of trust, financing
statements, continuation statements or other instruments and documents which may
be reasonably required from time to time by the Beneficiary to provide the
further assurances as above set forth. If the Trustor fails, within such ten
(10) business day period to execute and deliver to the Beneficiary such required
further assurances, the Trustor shall thereupon automatically and irrevocably
have appointed and constitute and appoint the Beneficiary as the Trustor's
attorney in fact for the purpose of executing such required further assurances,
the power of attorney hereby given being a power of attorney coupled with an
interest and irrevocable.
1.16. Environmental Protection. The Trustor represents and warrants that:
(i) the Trustor has no knowledge of any discharge, spillage, uncontrolled loss,
seepage or filtration of oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous waste or hazardous substance (the "Hazard"),
as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C ss.ss.9601 et seq., as amended
by the Superfund Amendments and Reauthorization Act of 1986; the Resource
Conservation and Recovery Act of 1976. (the Solid Waste Disposal Act or RCRA),
42 U.S.C. ss.ss.6901 et seq., as amended; the Toxic Substance Control Act (TSCA)
15 U.S.C. ss.ss.2601 et seq., or in any other federal, state or local law
governing hazardous substances, as such laws may be amended from time to time,
(collectively, the "Act"), at, upon, under or within the Secured Property; and
(ii) the Trustor has not caused or permitted to occur and shall use its best
efforts not to permit to exist, any condition which may cause or constitute a
Hazard at, upon, under or within the Secured Property. The term "Hazard"
includes but is not limited to asbestos, polychlorinated biphenyl (PCBs) and
lead based paints.
1.16.1. The Trustor further represents and warrants that (i) neither
the Trustor nor, to the best of its knowledge, any other party, is or will be
involved in operations upon the Secured Property, which operations could lead to
(a) the imposition of liability on the Trustor or on any other subsequent or
former owner of the Secured Property under the Act; or (b) the creation of a
lien on the Secured Property under the Act or under any similar laws or
regulations;
12
and (ii) the Trustor has not permitted, and will not permit, any tenant or
occupant of the Secured Property to engage in any activity that could impose
liability under the Act on such tenant or occupant, on the Trustor or on any
other owner of any of the Secured Property.
1.16.2. The Trustor has complied, and shall comply, in all material
respects with the requirements of the Act and related regulations and with all
similar laws and regulations and shall notify the Beneficiary immediately in the
event of any Hazard or the discovery of any Hazard at, upon, under or within the
Secured Property. The Trustor shall promptly forward to the Beneficiary copies
of all orders, notices, permits, applications or other communications and
reports in connection with any Hazard or the presence of any Hazard or any other
matters relating to the Act or any similar laws or regulations, as they may
affect the Secured Property.
1.16.3. Promptly upon the written request of the Beneficiary from
time to time, when the Beneficiary has a reasonable basis for believing a
violation of the Act may have occurred, the Trustor shall provide to the
Beneficiary, at the Trustor's expense, an environmental site assessment or
environmental audit report, prepared by an environmental engineering firm
acceptable in the reasonable opinion of the Beneficiary, to assess with a
reasonable degree of certainty the presence or absence of any Hazard and the
potential costs in connection with abatement, cleanup or removal of any Hazard
found on, under, at or within the Secured Property.
1.16.4. The Trustor shall defend and indemnify the Beneficiary and
hold the Beneficiary harmless from and against all actual loss, liability,
damage and expense, including reasonable attorneys' fees, suffered or incurred
by the Beneficiary, whether as holder of this Deed of Trust, as mortgagee in
possession, or as successor-in-interest to Trustor by foreclosure deed or deed
in lieu of foreclosure, under or on account of the Act or any similar laws or
regulations, including the assertion of any lien thereunder: (i) with respect to
any Hazard, or the presence of any Hazard affecting the Secured Property whether
or not the same originates or emanates from the Secured Property, including any
loss of value of the Secured Property as a result of the foregoing so long as no
such loss, liability, damage and expense is attributable to any Hazard resulting
from actions on the part of the Trustees or Beneficiary; and (ii) with respect
to any other matter affecting the Secured Property within the jurisdiction of
the Environmental Protection Agency, any other federal agency, or any state or
local environmental agency. The Trustor's obligations under this Section shall
arise upon the discovery of the presence of any Hazard under the Act, whether or
not the Environmental Protection Agency, any other federal agency or any state
or local environmental agency has taken or threatened any action in connection
with the presence of any Hazard. The Trustor's obligations under this Section
shall not extend to those matters specified in (i) and (ii) above if such
matters arose subsequent to the Release Date as defined in the Credit Agreement.
1.16.5. In the event of any Hazard, or the presence of any hazardous
substance affecting the Secured Property, whether or not the same originates or
emanates from the Secured Property or any contiguous real estate, and if the
Trustor shall fail to comply with any of the requirements of the Act or related
regulations or any other environmental law or regulation within the time
established by any regulatory agency, the Beneficiary may at its election, but
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without the obligation to do so: (i) give such notices and/or cause such work to
be performed at the Secured Property; and/or (ii) take any and all other actions
as the Beneficiary shall reasonably deem necessary or advisable in order to
abate the Hazard, remove the hazardous substance or cure the Trustor's
noncompliance. Any amounts so paid by the Beneficiary pursuant to this Section,
together with interest thereon at the highest rate of interest permitted under
the Promissory Note from the date of written notice of invoice to Trustor by the
Beneficiary, shall be immediately due and payable by the Trustor to the
Beneficiary upon demand and until paid shall be added to and become a part of
the indebtedness under the Loan Documents and shall be secured by this Deed of
Trust.
1.16.6. The provisions of this Section 1.16. are for the benefit of
the Beneficiary only and cannot be assigned to any other party, whatsoever,
except by assignment of the Promissory Note and the Loan Documents by the
current Beneficiary to a successor lender.
1.17. Right of Entry. The Trustor hereby grants to the Beneficiary and the
Beneficiary's agents and representatives, the right, upon twenty-four (24) hours
prior written request, to enter into and upon all or any part of the Secured
Property, subject to the rights of tenants under the Leases, for such purposes
as the Beneficiary deems reasonably necessary to protect the value of the
Secured Property, at any time and from time to time during normal operating
hours, regardless of whether or not the Trustor is in default hereunder or under
any other Loan Document.
1.18. Management of Property. Trustor will not enter into a management
agreement with any other party, or otherwise permit any other party to manage
the operation or leasing of the Property without Beneficiary's prior written
consent.
ARTICLE II
TRUSTOR'S WARRANTIES AND REPRESENTATIONS
2.1. Authority. The Trustor has full right, power, and authority to
execute this Deed of Trust. The Trustor has and will continue to have full power
and lawful authority to encumber and convey the Secured Property as provided
herein, and this Deed of Trust is and will continue to remain a valid and
enforceable lien and security interest upon the Secured Property.
2.2. Title. The Trustor owns for its own account, and not as agent or
trustee for another, good and marketable fee simple title to the Secured
Property free and clear of any lien and security interest and any other
encumbrance, easement, or restriction whatsoever not approved by the
Beneficiary.
2.3. Permits. All permits, licenses, certificates, approvals, easements,
and agreements that are necessary for the construction of the Improvements for
the intended use and occupancy
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of the Real Property have been obtained and are in full force and effect, and
there are no violations or claimed violations thereof.
2.4. Compliance with Law. The Real Property and the intended use and
occupancy thereof do not violate any flood plain, building, zoning, or any other
laws, ordinances, rules, and regulations.
2.5. Flood Plain. Any Improvements will not be located in an area
identified by the Secretary of Housing and Urban Development or a successor
thereto as an area having special flood hazards pursuant to the terms of the
National Flood Insurance Act of 1968, or the Flood Disaster Protection Act of
1973, as amended, or any successor law; or if any improvements are located in
such an area, the Trustor will obtain and maintain the insurance for such
Improvements as specified in Section 1.4.3. of this Deed of Trust.
2.6. Validity of Loan Documents. The Trustor hereby represents and
warrants that: (a) The execution, delivery and performance by the Trustor of the
Promissory Note and the other Loan Documents: (i) are within the legal powers of
the Trustor, (ii) have been duly authorized by all requisite action, (iii) have
received all necessary governmental approval, and (iv) will not violate any
provision of law, any order of any court or other agency of government, the
articles of incorporation or bylaws of the Trustor (if the Trustor is a
corporation), the limited partnership agreement or certificate of limited
partnership of the Trustor (if the Trustor is a limited partnership), the
articles of organization, certificate of organization or operating agreement of
the Trustor (if the Trustor is a limited liability company) or any indenture,
agreement or other instrument to which the Trustor is a party or by which it or
any of its property is bound, or be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of its property or assets, except as contemplated by the provisions of the Loan
Documents; and (b) the Promissory Note and the other Loan Documents, when
executed and delivered by the Trustor, will constitute the legal, valid and
binding obligations of the Trustor and other obligors named therein, if any,
enforceable in accordance with their respective terms.
2.7. Taxes. The Trustor: (a) has filed all federal, state and local tax
returns and other reports which the Trustor is required by law to file prior to
the date hereof and which are material to the conduct of the business of the
Trustor; (b) has paid or caused to be paid all taxes, assessments and other
governmental charges that are due and payable prior to the date hereof except
those being contested in good faith; and (c) has made adequate provision for the
payment of such taxes, assessments or other charges accruing but not yet
payable.
2.8. Litigation. Except as disclosed in the Credit Agreement, there is not
now pending against or affecting the Trustor or the Secured Property, nor, to
the knowledge of the Trustor, is there threatened, any action, suit or
proceeding at law or in equity or by or before any administrative agency which
could reasonably be expected to have a Material Adverse Effect (as defined in
the Credit Agreement).
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2.9. Other Information. All other information, reports, financial
statements, papers and data given to the Beneficiary with respect to the Trustor
or the Secured Property or to others obligated under the terms of the Loan
Documents are accurate and correct in all material respects and complete insofar
as completeness may be necessary to give the Beneficiary a true and accurate
knowledge of the subject matter.
ARTICLE III
EVENTS OF DEFAULT
The following shall constitute events of default (individually an "Event
of Default" and collectively "Events of Default") under this Deed of Trust and
shall entitle the Trustees or the Beneficiary to exercise all rights and
remedies provided in Article IV:
3.1. Default under Credit Agreement. Any Event of Default under the Credit
Agreement, after the expiration of all applicable notice and cure periods as
that term is defined in the Credit Agreement.
3.2. Failure to Perform. A failure to perform or observe, or a default
under, any of the terms, covenants, conditions, agreements or provisions of this
Deed of Trust.
3.3. Failure to Perform Under Other Loan Documents. A failure to perform
or observe, or a default under any of the terms, covenants, conditions and
provisions of the Promissory Note or any other Loan Document, after the
expiration of all applicable notice and cure periods.
3.4. Failure of Warranty or Representation. The failure of any warranty or
representation set forth in this Deed of Trust to be true and accurate in all
material respects on the date hereof.
3.5. Material Adverse Change in Use of Property. A change in any rule,
statute, law or ordinance, whether at the local, state or federal level,
effecting the use of the Secured Property, which change results in a material
adverse change in the permitted use of the Secured Property.
3.6. Cross Default. The default by the Trustor under any obligation or
indebtedness to the Beneficiary, whether now existing or hereafter arising,
which default is not cured within any applicable cure or grace period.
3.7. Transfer of Property. There being, without the prior written consent
of the Beneficiary, a transfer of any of the Secured Property or an interest in
the Trustor in violation of Section 1.8 of this Deed of Trust, including but not
limited to the Trustor selling or transferring the Secured Property or any
portion thereof or granting a security interest in the Secured Property or
otherwise encumbering the same.
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3.8. Condemnation. If all or any substantial portion (as defined in
Section 1.9 above) of the Secured Property is damaged, taken or transferred
under, or in lieu of the exercise of, the power of eminent domain.
3.9. Default Under Permitted Liens. The default under any document or
instrument creating a lien or security interest in the Secured Property, whether
senior, junior, or of equal priority to the lien and security interest of this
Deed of Trust which default is not cured within any applicable cure or grace
period.
ARTICLE IV
RIGHTS AND REMEDIES
Upon the occurrence of any Event of Default, the Trustees or the
Beneficiary may, at their option and without notice or demand, accelerate and
declare immediately due and payable all sums due on or by reason of the
Promissory Note, this Deed of Trust or any other Loan Document, this Deed of
Trust being and is subject to call upon default, and the Trustees or the
Beneficiary may take possession of all or any portion of the Secured Property
and sell the same at auction as provided below and may, with or without
declaring the aforementioned sums immediately due and payable and with or
without foreclosing, exercise any other right or remedy provided for herein or
in the Promissory Note, any other Loan Document or applicable law, including,
but not at its option, limited to the following:
4.1. Foreclosure; Sale of Secured Property.
(a) Time is of the essence hereof. Upon the occurrence of an Event
of Default, Beneficiary may, at its option and in its sole and absolute
discretion, deliver to the Trustee written declaration of default and demand for
sale and of written Notice of Breach and Election to Sell (this term is
interchangeable with Notice of Default and Election to Sell) to cause the
Property to be sold to satisfy the obligations hereof, which Notice the Trustee
shall cause to be filed for record. Beneficiary also may deposit with the
Trustee, the Promissory Note and all documents evidencing expenditures secured
hereby.
(b) After the lapse of such time as may then be required by law
following the recordation of said Notice of Breach and Election to Sell, and
notice of sale having been given as then required by law, the Trustee without
demand on Trustor, shall sell the Property at the time and place fixed by it in
said notice, either as a whole or in separate parcels, and in such order as it
may determine, at public auction to the highest bidder, for cash in lawful money
of the United States payable at the time of sale. The Trustee may, for any cause
it deems expedient, postpone the sale of all or any portion of the Property
until it shall be completed and, in every case, notice of postponement shall be
given by public announcement thereof at the time and place last appointed for
the sale and from time to time thereafter the Trustee may postpone such sale by
public announcement at the time fixed by the preceding postponement. The Trustee
shall execute and deliver to the purchaser its Trustee's Deed conveying the
Property so sold but without any
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covenant or warranty, express or implied. The recitals in the Trustee's Deed of
any matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including Beneficiary, may bid at the sale.
After deducting all costs, fees and expenses of the Trustee and of this Trust,
including the cost of any evidence of title procured in connection with such
sale, the Trustee shall apply the proceeds of sale to the payment of: (1) all
sums expended under the terms hereof, not then repaid, with accrued interest at
the Default Rate; (2) all other sums then secured hereby; and (3) the remainder,
if any, to the person or persons legally entitled thereto.
(c) If an Event of Default shall have occurred, Beneficiary may,
either with or without entry or taking possession as hereinafter provided or
otherwise, and without regard to whether or not the Obligations and other sums
secured hereby shall be due and without prejudice to the right of Beneficiary
thereafter to bring an action or proceeding to foreclose or any other action for
any default existing at the time such earlier action was commenced, proceed by
any appropriate action or proceeding: (A) to enforce payment of the Promissory
Note or the performance of any term hereof or any other right; (B) to foreclose
this Deed of Trust in the manner provided by law for the foreclosure of deeds of
trusts on real property and to sell, as an entirety or in separate lots or
parcels, the Property pursuant to the laws of the State of Nevada or under the
judgment or decree of a court or courts of competent jurisdiction and
Beneficiary shall be entitled to recover in any such proceeding all costs and
expenses incident thereto, including reasonable attorneys' fees in such amount
as shall be awarded by the court; and (C) to pursue any other remedy available
to it at law or in equity. Beneficiary shall take action either by such
proceedings or by the exercise of its powers with respect to entry or taking
possession, or both, as Beneficiary may determine. Any sale of the Property
pursuant to this Section 6.5 shall be referred to as a "Foreclosure Sale".
4.2. [Intentionally deleted]
4.3. Right to Enter, Take, Possess and Operate. The Trustees, the
Beneficiary or their agents or attorneys:
(a) If an Event of Default shall have occurred, (i) Trustor upon
demand of Beneficiary, shall forthwith surrender to Beneficiary the actual
possession and, to the extent permitted by law, Beneficiary itself, or such
officers or agents as it may appoint, may enter, and take possession of all of
the Property or any part thereof, and may exclude Trustor and its agents and
employees wholly therefrom and may have joint access with Trustor to the books,
papers and accounts of Trustor; and (ii) Trustor will pay monthly in advance to
Beneficiary on Beneficiary's entry into possession, or to any receiver appointed
to collect Rents of the Property the fair and reasonable rental value for the
use and occupation of such part of the Property as may be in possession of
Trustor and upon default in any such payment will vacate and surrender
possession of such part of the Property to Beneficiary or to such receiver and,
in default thereof, Trustor may be evicted by summary proceedings or otherwise.
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(b) If Trustor shall for any reason fail to surrender or deliver the
Property or any part. thereof after Beneficiary's demand, Beneficiary may obtain
a judgment or decree conferring on Beneficiary or the Trustee the right to
immediate possession or requiring Trustor to deliver immediate possession of all
or part of the Property to Beneficiary or the Trustee and Trustor hereby
specifically consents to the entry of such judgment or decree. Trustor shall pay
to Beneficiary or the Trustee, upon demand, all costs and expenses of obtaining
such judgment or decree and reasonable compensation to Beneficiary or the
Trustee, their attorneys and agents, and all such costs, expenses and
compensation shall, until paid, be secured by the lien of this Deed of Trust.
(c) Upon every such entering upon or taking of possession, the
Beneficiary or the Trustee may hold, store, use, operate, manage and control the
Property and conduct the business thereof, and, from time to time in its sole
and absolute discretion:
(i) make all necessary and proper maintenance, repairs, renewals,
replacements, additions, betterments and Improvements thereto and thereon
and purchase or otherwise acquire additional fixtures, personality and
other property;
(ii) insure or keep the Property insured;
(iii) manage and operate the Property and exercise all the rights
and powers of Trustor in its name or otherwise with respect to the same;
(iv) Enter into agreements with others to exercise the powers herein
granted the Beneficiary or the Trustee, all as Beneficiary or the Trustee
from time to time may determine; and Beneficiary or the Trustee may
collect and receive all the Rents thereof, including those past due as
well as those accruing thereafter; enforce any and all Lease provisions,
and shall apply the monies so received by the Beneficiary or the Trustee
in such priority as Beneficiary may determine to (1) the payment of
interest and principal due and payable on the Promissory Note; (2) the
cost of insurance, taxes, assessments and other proper charges upon the
Property or any part thereof; (3) the reasonable out-of-pocket
compensation, expenses and disbursements of the agents, attorneys and
other representatives of Beneficiary or the Trustee; and (4) any other
charges or costs required to be paid by Trustor under the terms hereof.
Beneficiary or Trustee shall surrender possession of the Property to
Trustor only when all that is due upon such interest and principal, tax and
insurance deposits, and all amounts under any of the terms of this Deed of
Trust, shall have been paid and all defaults fully cured. The same right of
taking possession, however, shall exist if any subsequent Event of Default shall
occur and be continuing.
4.4 Purchase by Beneficiary. Upon any such foreclosure sale, Beneficiary
may bid for and purchase the Property and, upon compliance with the terms of
sale, may hold, retain and possess and dispose of such property in its own
absolute right without further accountability.
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4.5 Application of Obligations Towards Purchase Price. Upon any such
foreclosure sale, Beneficiary may, if permitted by law, and after allowing for
costs and expenses of the sale, compensation and other charges in paying the
purchase price, apply any portion of or all of the Obligation and other sums due
to Beneficiary under the Promissory Note, the Credit Agreement, this Deed of
Trust or any other instrument or document securing the Promissory Note or
otherwise heretofore or hereafter executed in connection with the Obligation
hereunder, in lieu of cash, the amount which shall, upon distribution of the net
proceeds of such sale, be payable thereon.
4.6 Waiver of Appraisement, Valuation, Stay, Extension and Redemption
Laws. Trustor agrees to the full extent permitted by law that in case of a
default on its part hereunder, neither Trustor nor anyone claiming through or
under it shall or 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 or foreclosure of this Deed
of Trust or the absolute sale of the Property or the final and absolute putting
into possession thereof, immediately after such sale, of the purchasers thereof,
and Trustor, for itself and all who may at any time claim through or under it,
hereby waives, to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprising the Property
marshaled upon any foreclosure of the lien hereof and agrees that the Trustee or
any court having jurisdiction to foreclose such lien may sell the Property in
part or as an entirety.
4.7 Receiver. If an Event of Default shall have occurred, Beneficiary, to
the extent permitted by law and without regard to the value, adequacy or
occupancy of the security for the Obligations and other sums secured hereby,
shall be entitled as a matter of right, if it so elects, to the appointment of a
receiver to enter upon and take possession of the Property and to collect all
Rents, enforce any Lease provisions and other benefits thereof and apply the
same as the court may direct, and such receiver may be appointed by any court of
competent jurisdiction by ex parte application and without notice of hearing,
such notice of hearing being hereby expressly waived. The expenses, including
receiver's fees, attorneys' fees, costs and agent's compensation, incurred
pursuant to the powers herein contained, shall be secured by this Deed of Trust.
The right to enter and take possession of and to manage and operate the Property
and to collect all Rents, enforce any Lease provisions and other benefits
thereof whether by a receiver or otherwise, shall be cumulative to any other
right or remedy hereunder or afforded by law and may be exercised concurrently
therewith or independently thereof. Beneficiary shall be liable to account only
for such Rents and other benefits actually received by Beneficiary, whether
received pursuant to this paragraph or paragraph 6.6. Notwithstanding the
appointment of any receiver or other custodian, Beneficiary shall be entitled as
pledgee to the possession and control of any cash, deposits, and instruments at
the time held by, or payable or deliverable under the terms of this Deed of
Trust to Beneficiary.
4.8 Suits to Protect the Property. Beneficiary shall have the power and
authority, but shall have no obligation, to institute and maintain any suits and
proceedings as Beneficiary may deem advisable (a) to prevent any impairment of
the Property by any acts which may be unlawful or any violation of this Deed of
Trust; (b) to preserve or protect its interest in the Property; and
20
(c) to restrain the enforcement of or compliance with any legislation or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid, if the enforcement of or compliance with such enactment, rule or order
might impair the security hereunder or be otherwise prejudicial to Beneficiary's
interest.
4.9 Proofs of Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding affecting Trustor or any guarantor of any of Trustor's
obligations, its creditors or its property, Beneficiary, to the extent permitted
by law, shall be entitled to file such proofs of claim or other documents as may
be necessary or advisable in order to have its claims allowed in such
proceedings for the entire Obligation due and payable by Trustor under the
Promissory Note, the Credit Agreement, this Deed of Trust and any other
instrument or document securing the Promissory Note, or otherwise heretofore or
hereafter executed in connection with the Obligation hereunder, at the date of
the institution of such proceedings, and for any additional amounts which may
become due and payable by Trustor after such date.
(a) may, prior to or subsequent to the institution of any
foreclosure proceedings, enter into and upon all or any part of the
Secured Property, and each and every part thereof, and may exclude the
Trustor and its agents and servants therefrom and may use, operate, manage
and control the Secured Property and conduct the business thereon, either
personally or by their superintendents, managers, agents, servants,
attorneys or receivers; and
(b) may, upon every such entry, at the expense of the Trustor
and the Secured Property, maintain, repair and restore the Secured
Property and may complete the construction of any Improvements, and in the
course of such completion may make such changes in the contemplated
Improvements as it may deem desirable and may insure the same; and
likewise, from time to time, at the expense of the Trustor and the Secured
Property, the Beneficiary may make all necessary or proper repairs,
renewals and replacements and such useful alterations, additions,
betterments and improvements thereto and thereon as to it may seem
advisable; and
(c) shall in every such entry have the right to manage and
operate the Secured Property and to carry on the business thereof, take
possession of all books, records and accounts relating thereto and
exercise all rights and powers of the Trustor with respect thereto either
in the name of the Trustor or otherwise as it shall deem best without
interference from the Trustor; and the Beneficiary shall be entitled to
collect and receive all Rent pursuant to Article VI hereof, and after
deducting the costs, liabilities and expenses of conducting the business
thereof and of all maintenance, repairs, renewals, replacements,
alterations, additions, betterments and improvements and amounts necessary
to pay for taxes, assessments, insurance and prior or other proper charges
upon the Secured Property or any part thereof, as well as just and
reasonable compensation for the services of the Beneficiary and for all
attorneys, counsel, agents, clerks, servants and other employees arising
as aforesaid, first, to the payment of sums due under the
21
Promissory Note in the order of application as set forth therein, when and
as the same shall become payable in accordance with the terms thereof, and
second, to the payment of any other sums required to be paid by the
Trustor under this Deed of Trust and any other Loan Document, as the
Beneficiary may elect; and
(d) may incur costs, expenses and liabilities of every
character in managing, operating, maintaining, protecting or preserving
the Secured Property, which, if not paid out of Rents shall constitute a
demand obligation owing by Trustor and shall draw interest from the date
of expenditure until paid at the highest rate of interest permitted under
the Promissory Note, and shall constitute a portion of the obligations
secured hereby. If necessary to obtain the possession provided for above,
the Trustees or the Beneficiary, as the case may be, may invoke any and
all legal remedies to dispossess Trustor. In connection with any action
taken by the Beneficiary pursuant to this Section 4, the Beneficiary shall
not be liable for any loss sustained by Trustor resulting from any failure
to rent the Secured Property, or any part thereof, or from any other act
or omission of the Beneficiary in managing the Secured Property unless
such loss is caused by the gross negligence, willful misconduct or bad
faith of the Beneficiary in managing the Secured Property. Subject to the
foregoing the Trustor shall and does hereby agree to indemnify the
Beneficiary for, and to hold the Beneficiary harmless from, any and all
liability, loss or damage which may or might be incurred under or by
reason of this instrument or the exercise of rights or remedies hereunder
and from any and all claims and demands whatsoever which may be asserted
against the Beneficiary by reason of any alleged obligations or
undertakings on its part to perform or discharge any obligations of the
Trustor. Should the Beneficiary incur any such liability under or by
reason of this instrument or the exercise of rights or remedies hereunder
or in defense of any such claims or demands, the amount, thereof,
including costs, expenses and reasonable attorneys fees, shall be secured
hereby. This Section 4.4. shall not operate to place responsibility upon
the Beneficiary for the control, care, management or repair of the Secured
Property, nor shall it operate to make the Beneficiary responsible or
liable for any waste committed on the Secured Property by the tenants or
by any other parties or for any dangerous negligence in the management,
upkeep, repair or control of the Secured Property resulting in loss or
injury or death to any tenant, licensee, employee or person.
4.10. Waivers of the Trustor. The Trustor waives, and agrees not to at any
time insist upon, plead, or in any manner whatsoever claim or take any benefit
or advantage of, any stay or extension or moratorium law, any exemption from
execution of sale of the Secured Property or any part thereof, wherever enacted,
now or at any time hereafter in force, which may affect the covenants and terms
of performance of this Deed of Trust. The Trustor additionally waives, and
agrees not to claim, take, or insist upon any benefit or advantage of any law
now or hereafter in force providing for the valuation or appraisal of the
Secured Property, or any part thereof, prior to any sale or sales thereof which
may be made pursuant to any provisions herein, or pursuant to the decree,
judgment, or order of any court of competent jurisdiction. The Trustor also
waives any right under any statute heretofore or hereafter enacted to redeem the
property so sold or any part thereof and the Trustor hereby covenants not to
hinder, delay or impede the execution of any
22
power herein granted or delegated to the Trustees. The Trustor further waives,
to the extent that the Trustor lawfully may, all right to have the Secured
Property marshaled upon any foreclosure under this Deed of Trust.
4.11. Uniform Commercial Code. The Beneficiary, or the Trustees acting on
behalf of the Beneficiary, may exercise all rights and remedies of a secured
creditor under the Nevada Uniform Commercial Code, as amended, with respect to
any part of the Secured Property constituting personal property and subject to
the secured interest created by this Deed of Trust, including the right to take
possession of the aforementioned personal property without the use of judicial
process and the right to require the Trustor to assemble the same at the Real
Property or such other place as the Beneficiary or Trustees may notify the
Trustor. Any disposition of so much of the Secured Property as may constitute
personal property and subject to the security interest created by this Deed of
Trust shall be considered commercially reasonable if made pursuant to a public
sale which is advertised at least twice in a newspaper of local circulation in
the community where the Real Property is located. Any notice required by the
Nevada Uniform Commercial Code to be given to the Trustor shall be considered
reasonable and properly given if given by written notice at least ten (10) days
prior to the date of any scheduled public sale.
4.12. Right of Setoff. The Beneficiary may setoff any amounts or sums in
any account or represented by any certificate with the Beneficiary in the name
of the Trustor or in which the Trustor has an interest therein.
4.13. Remedies and Cumulative Rights. The rights and remedies provided in
this Article IV shall be nonexclusive and shall be in addition to all other
remedies and rights available under any other Loan Document or applicable law.
All rights and remedies available upon an Event of Default shall be cumulative
and the exercise of any one or more of the available rights and remedies shall
not be considered as or result in a waiver of any other right or remedy and any
particular right or remedy may be exercised in conjunction with any or all other
rights and remedies provided hereunder or under any other Loan Document.
ARTICLE V
SECURITY AGREEMENT
5.1 This Deed of Trust shall be effective as a financing statement filed
as a fixture filing from the date of the recording hereof in accordance with
Nevada Revised Statutes ("NRS") 104.9502. In connection therewith, the addresses
of the Trustor as debtor ("Debtor") and Beneficiary as secured party ("Secured
Party") are as set forth in 7.16 hereof. The foregoing address of Beneficiary,
as the Secured Party, is also the address from which information concerning the
security interest may be obtained by any interested party.
(a) The property subject to this fixture filing is described in the
granting clause above.
23
(b) Portions of the property subject to this fixture filing as
identified in (a) above are or are to become fixtures related to the real estate
described on Exhibit A to this Deed of Trust.
(c) Secured Party is: FIRST UNION NATIONAL BANK
(d) Debtor is: TREX COMPANY LLC
24
5.2. Financing Statements. If required by Beneficiary, the Trustor
shall execute and deliver to the Beneficiary, in form and substance
satisfactory to the Beneficiary, such financing statements and such
further assurances as the Beneficiary may, from time to time, consider
reasonably necessary to create, perfect and preserve the Beneficiary,
security interest herein granted, and the Beneficiary may cause such
statements and assurances to be recorded and filed at such times and
places as may be required or permitted by law to so create, perfect and
preserve such security interest. The addresses of the Trustor, as debtor,
and the Beneficiary, as secured party, are as set forth herein.
ARTICLE VI
ASSIGNMENT OF LEASES AND RENTS
6.1. Assignment of Leases and Rents. In the event all or any portion of
the Real Property currently or at any time hereafter is leased to any person or
persons for any period or term, independent of the duration thereof, the Trustor
hereby absolutely, irrevocably and unconditionally assigns to the Beneficiary
any and all such leases (the "Leases"), including all extensions and renewals
thereof, and all rents and other payments and benefits (the "Rent") due the
Trustor as a result of the Leases as security for the repayment of the Loan.
This assignment shall be effective immediately, and shall be subject only to the
license as set forth in Section 6.2. herein.
6.2. Collection of Rent. So long as there exists no Event of Default, the
Trustor shall have a license to collect all Rent directly. All such Rent
collected by the Trustor pursuant to this license shall be held by the Trustor
in trust for the Beneficiary, and may be used by the Trustor only for such
purposes as approved by the Beneficiary. Such license shall automatically
terminate upon the occurrence of any Event of Default. In the event of the
termination of the license, should the Beneficiary wish to collect the Rent
assigned to the Beneficiary directly, the Beneficiary shall mail to the Trustor,
and may mail to the Trustor's lessees at their addresses as reflected in the
records of the Beneficiary, a written notice of such election. Such an election
to collect the Rent directly may be made by the Beneficiary at any time and from
time to time following the occurrence and during the continuance of an Event of
Default, and may be made with one or more lessees or successor lessees of the
Trustor following the occurrence of an Event of Default so long as any of the
Obligations remain outstanding and unsatisfied.
6.3. Termination of Assignment. All rights of the Beneficiary to an
assignment of leases and rents shall cease immediately upon full satisfaction of
the Trustor's obligations under the Loan Documents. The execution and
recordation among the land records of a release of the Deed of Trust shall
automatically, and without the execution or recordation among the land records
of a specific and separate release or reassignment by the Beneficiary, be a
release and reassignment to the Trustor of this assignment of leases and rents.
6.4. Beneficiary Has All Rights of Trustor Under Leases. After an election
to collect Rent has been made by the Beneficiary as provided in Section 6.2.
hereof, the Beneficiary shall
25
have all rights and privileges of the Trustor, either as provided in any written
lease document between the Trustor and the Trustor's lessee or as provided by
law, to collect Rent due and payable by a lessee as a result of the lessee's use
of all or any portion of the Secured Property. The Beneficiary shall have no
obligation to enforce the Beneficiary's rights and remedies for the collection
of Rent in the name of or on behalf of the Trustor and may do so directly in the
Beneficiary's own name. The Beneficiary shall, however, have no obligation or
duty to enforce payment or collection of Rent and shall be chargeable only with
such Rent as may actually be received.
6.5. Beneficiary Has No Obligation to Perform Trustor's Obligations Under
Lease. The Beneficiary shall have no obligation to the Trustor or to the
Trustor's lessee to perform the Trustor's obligations under any Lease. The
Trustor agrees to indemnify and hold the Beneficiary harmless (including payment
of the Beneficiary's attorneys' fees) from any attempts by any lessee of the
Trustor to force or compel the Beneficiary to meet the Trustor's obligations to
a lessee of the Secured Property under any Lease. The Trustor further covenants
and agrees to meet and fulfill all of the Trustor's obligations to any lessee of
the Land under any Lease, even if the Beneficiary has exercised the
Beneficiary's election to collect Rent directly.
6.6. Consent of Trustor; Right to Approve Leases. The Trustor further
agrees to supply the Beneficiary the standard form of Lease and rent roll and,
on request, with copies of all written lease agreements and the names and
mailing addresses of all lessees. The Beneficiary during the term of this Deed
of Trust shall have the right to approve all Leases. Any lease of the Secured
Property not in conformance with the form of lease and rent roll approved by the
Beneficiary and not otherwise approved by the Beneficiary shall constitute an
Event of Default hereunder without notice or grace period. All Leases shall be
subordinate to the lien of the Deed of Trust and shall specifically so provide
in the lease document.
6.7. No Further Assignments; Recordation; Beneficiary Not Mortgagee in
Possession. The Trustor may not make any further rent or lease assignments
regarding the Secured Property while this Assignment is in full force and
effect. Nothing contained herein shall be deemed to constitute the Beneficiary,
or the Trustees, as mortgagee, or trustees, in possession.
6.8. No Advance Collection of Rent. Except as otherwise approved in
writing by the Beneficiary, the Trustor agrees not to collect any Rent from any
lessee more than thirty (30) days in advance of its due date under any Lease;
furthermore, the Beneficiary shall not be bound by any payment of rent in
advance of more than thirty (30) days.
6.9. No Modification of Leases. The Trustor shall not cancel, amend, or
modify the provisions of any Lease, or grant any concessions under any Lease,
without the Beneficiary's prior written consent; furthermore, the Beneficiary
shall not be bound by any such modification or amendment to any Lease without
the Beneficiary's prior written consent. The Trustor will take all steps which
may be reasonably required to preserve and maintain any lessee's liability under
the lessee's Lease and the enforceability thereof and will advise the
Beneficiary of any
26
defense or claim or alleged defense or claim of nonliability, whether in whole
or in part, by any lessee coming to the Trustor's attention.
6.10. Security Deposits. In the event the Trustor has collected any
security deposits with respect to any Leases, the Trustor assigns to the
Beneficiary such security deposits to the extent of the Trustor's rights
therein.
6.11. Assignment of Guaranties. The Trustor assigns to the Beneficiary any
and all rights which the Trustor may have to collect Rents from any person who
has guarantied the rental or other obligations under any Lease.
6.12. Trustors and Guarantors May Rely on This Assignment. The Trustor
irrevocably authorizes all lessees and guarantors to rely upon and comply with
any notice or demand by the Beneficiary for payment to the Beneficiary of any
Rents or for performance of any obligation under any Lease and the Trustor
releases and discharges all lessees and guarantors from any and all liability to
the Trustor for so complying. All lessees and guarantors shall have no duty to
inquire as to whether any default by the Trustor under this Deed of Trust or any
Loan Document has occurred or is existing.
6.13 Assignment Applies to All Leases; Right to Specific Assignment. This
assignment of leases and rents shall apply to each and every Lease of all or any
portion of the Real Property now existing or hereafter executed by the Trustor,
and any guaranties thereof. The Beneficiary may, however, if it so elects,
require a specific assignment agreement to be executed by the Trustor with
respect to any such Lease.
ARTICLE VII
EASEMENT FOR ENVIRONMENTAL INSPECTION
7.1. Grant of Easement. The Trustor hereby grants and conveys to the
Trustees and the Beneficiary an easement for the term of this Deed of Trust (the
"Easement") to enter on and upon the Real Property, upon reasonable advance
notice to the Trustor, in order to conduct audits, inspections and tests,
including subsurface exploration and testing, as the Trustees or the
Beneficiary, in their reasonable discretion, deem necessary, convenient, or
proper to determine whether the ownership, use, and operation of the Real
Property comply with federal, state, and local environmental laws and
regulations. The Trustees or the Beneficiary, or their designees, shall be
permitted to inspect and copy any or all of the Trustor's records relating to
environmental matters and to enter all buildings or facilities of the Trustor
during reasonable business hours for such purpose. In confirmation of the
Trustees' or the Beneficiary's right to inspect and copy all of the Trustor's
records relating to environmental matters and to secure the Trustor's
obligations to the Trustees or the Beneficiary in connection with the Loan and
under this Easement, the Trustor hereby grants to the Trustees or the
Beneficiary a continuing security interest in and to all of the Trustor's
existing and future records with respect to environmental matters, whether or
not located at the Real Property or elsewhere, whether or not in the
27
possession of the Trustor or some third party (including any federal, state, or
local agency or instrumentality), and whether or not written, photographic, or
computerized, and the proceeds and products hereof. To the extent that any
permission of the Trustor is required by any third party in order for such third
party to disclose any information regarding the Real Property and environmental
matters to the Trustees or the Beneficiary, the Trustor specifically grants such
permission and directs such third party to disclose such information to the
Trustees or the Beneficiary, or their designee. The Trustees or the Beneficiary,
or their designated agent, may interview any or all of the Trustor's agents and
employees regarding environmental matters, including any consultants or experts
retained by the Trustor, all of whom are directed to discuss environmental
issues fully and openly with the Trustees or the Beneficiary or their designated
agent and to provide such information as may be requested. Subject to the
provisions of Section 1.16.3 hereof, all of the costs and expenses incurred by
the Trustees or the Beneficiary with respect to the audits, inspections, and
tests, which the Trustees or the Beneficiary may conduct, including the fees of
the engineers, laboratories, and contractors, shall be paid by the Trustor. The
Trustees or the Beneficiary may, but shall not be required to, advance such
costs and expenses on behalf of the Trustor. All sums so advanced shall bear
interest at the then current rate of interest under the Promissory Note and
shall be secured by this Deed of Trust.
7.2 Duration and Defeasance. This Easement shall exist and continue until
all sums owed by the Trustor to the Beneficiary in connection with the Loan have
been repaid in full and this Deed of Trust has been released of record. Such a
release of this Deed of Trust shall terminate this Easement.
7.3. Enforcement. The Trustor acknowledges that no adequate remedy at law
exists for a violation of this Easement and agrees that the Trustees or the
Beneficiary shall have the right to enforce the Easement by equitable writ or
decree, including temporary and preliminary injunctive relief. In the event the
Trustees or the Beneficiary are required to enforce their rights regarding the
Easement, the Trustor shall pay all of their costs and expenses resulting from
such enforcement, including all attorneys' fees incurred by the Trustees or the
Beneficiary.
7.4. Assignability. This Easement shall be assignable and shall be
considered assigned to whomever holds the indebtedness secured by this Deed of
Trust.
7.5. Revocability. This Easement is irrevocable and may not be revoked by
the Trustor.
7.6. Trustees and Beneficiary Not Mortgagee in Possession. The exercise of
the rights granted under this Article shall not constitute the Trustees or the
Beneficiary as a mortgagee in possession with respect to the Real Property.
7.7. Construction and Intention. This Easement is intended to be and shall
be construed as an interest in the Real Property and as an easement in gross. It
is not intended to be a personal right of the Trustees or the Beneficiary or a
mere license. This Easement shall be eliminated automatically upon and
contemporaneously with the termination and release of this Deed of
28
Trust.
ARTICLE VIII
MISCELLANEOUS
8.1. Substitute or Successor Trustees. The irrevocable power to remove and
substitute one or more of the Trustees named herein or substituted therefor is
expressly given to the Beneficiary and may be exercised at any time, from time
to time, without notice and without specifying any reason, by filing for record
among the land records where this Deed of Trust is recorded a deed of
appointment, and upon the filing of such deed of appointment all of the title
and estate, powers, rights, and duties of the Trustee or the Trustees thus
superseded shall terminate and shall be vested in the successor Trustee or the
Trustees. The Trustor, the Beneficiary and the Trustees, their substitutes and
successors, expressly waive notice of the exercise of this power, the giving of
bond by any Trustee, and any requirement for application to any court for
removal, substitution or appointment of a Trustee hereunder. In addition, the
act of any one (1) Trustee, whether such Trustee is a sole acting Trustee or
whether there is more than one (1) acting Trustee, shall be sufficient and
effective for all purposes set forth herein and any person may rely upon any
document or instrument executed and delivered by one (1) Trustee, to the same
extent as though the document had been executed by all of the Trustees.
8.2. Warranties of Title. The Trustor warrants: (i) generally title to the
Secured Property; (ii) that it has good and marketable title to the Secured
Property except as otherwise permitted hereby; and (iii) that it will during the
term of this Deed of Trust so warrant and defend the same and the validity and
priority of the lien and security interest of this Deed of Trust to the Trustees
and the Beneficiary against the claims of any and all other persons claiming by
or through the Trustor. The Trustor further warrants that the Trustor will
execute such other and further assurances as may be required by the Trustees or
the Beneficiary from time to time.
8.3. Joint and Several Liability. If there exists more than one (1) person
described by the term "Trustor," all liabilities and obligations of all such
persons under this Deed of Trust shall be joint and several liabilities and
obligations.
8.4. Waivers. The Trustor and the Beneficiary may at any time or from time
to time waive any or all rights accruing to each of them, respectively, under
this Deed of Trust or any other Loan Document, but any waiver by the Trustor or
the Beneficiary, respectively, at any time or from time to time shall not
constitute, unless specifically so expressed by the Trustor or Beneficiary in
writing, a future waiver of performance.
8.5. No Third Party Beneficiary Rights. No person not a party to this Deed
of Trust shall have any benefit hereunder nor have third party beneficiary
rights as a result of this Deed of Trust or any other Loan Document, nor shall
any person be entitled to rely on any actions or inactions of the Beneficiary or
the Trustees, all of which are done for the sole benefit and protection of the
Beneficiary.
29
8.6. Continuing Obligation of the Trustor. The terms, conditions and
covenants set forth herein and in the other Loan Documents shall survive closing
and shall constitute the continuing joint and several obligations of the Trustor
during the term of the Loan Documents.
8.7. Binding Obligation. This Deed of Trust shall be binding upon the
parties and their successors and assigns.
8.8. Final Agreement. This Deed of Trust and the Loan Documents contain
the final and entire agreement and understanding of the parties, and any terms
and conditions not set forth in this Deed of Trust or the Loan Documents are not
a part of this Deed of Trust and the understanding of the parties hereof.
8.9. Amendment. This Deed of Trust may be amended or altered only by a
writing signed by the party to be bound by the amendment, change or alteration.
8.10. Photocopies Sufficient. A xerox, photographic, or other reproduction
of this Deed of Trust shall be sufficient as a financing statement.
8.11. Notices. Any notice required or permitted by or in connection with
this Deed of Trust shall be in writing and made by hand delivery, by wire, by
facsimile transmission, by overnight courier service for next day delivery, or
by certified mail, return receipt requested, postage prepaid, addressed to the
respective party at the appropriate address set forth below or to such other
address as may be hereafter specified by written notice by any party, and shall
be considered given as of the date of hand delivery, wire or facsimile
transmission (or on the next business day if the date of wire or facsimile
transmission is not a business day), as of the date specified for delivery if by
overnight courier service or as of two (2) days following the date of mailing,
as the case may be. Rejection or other refusal to accept or the inability to
deliver because of a changed address of which no notice was given shall not
invalidate the effectiveness of any notice, demand, request or other
communication.
30
If to the Beneficiary or to the Trustees:
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
Attn: Barbara Carroll
Fax No.: (704) 374-6319
With a Copy to:
KUTAK ROCK LLP
Suite 800
Bank of America Center
1111 East Main Street
Richmond, Virginia 23219-3500
Attn: Fiona Tower, Esquire
Fax No.: (804) 783-6192
If to the Trustor:
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Attn: President
Fax No.: (540) 542-6889
With a Copies to:
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Attn: William R. Gupp, Esquire, Vice President and General Counsel
Fax No.: (540) 542-6889
and
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, MD 21201
Attn: Kevin G. Gralley, Esquire
Fax No.: (410) 539-6981
31
8.13. Choice of Law. The laws of the State of Nevada shall govern the
rights and obligations of the parties to this Deed of Trust and the
interpretation and construction and enforceability thereof and any and all
issues relating to the transactions contemplated herein. The Trustor expressly
acknowledges the execution and delivery of this Deed of Trust within the
geographic boundaries of the State of Nevada.
8.14. Incorporation By Reference. The terms, conditions, and provisions of
the Promissory Note and all other Loan Documents are incorporated by reference
in this Deed of Trust to the same extent as if set forth in full in this Deed of
Trust. Should any of the terms, conditions, and provisions of the Promissory
Note or any other Loan Document conflict with the terms, conditions, or
provisions of this Deed of Trust, the Trustees or the Beneficiary shall select
which of the terms, covenants, and conditions shall govern and control.
8.15. Terminology. The term "Trustor" shall include the personal
representatives, successors, and assigns of the Trustor or the Trustors; the
term "Trustee" or "Trustees" shall include the successors and assigns of the
Trustee or the Trustees and any substitute or successor Trustee or Trustees; the
term "Beneficiary" shall include the successors and assigns of the individual,
individuals, partnership, limited liability company or corporation holding the
beneficial interest in the Promissory Note secured by this Deed of Trust; the
use of the singular shall include the plural, and the plural may refer only to
the singular; and the use of any gender shall be applicable to all genders.
8.16. Invalidity. If any provision or part of any provision contained in
this Deed of Trust shall be found for any reason to be illegal, invalid or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions or the remaining part of any effective
provisions of this Deed of Trust and this Deed of Trust shall be construed as if
such invalid, illegal, or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality, or
unenforceability.
8.17. WAIVER OF JURY TRIAL. THE TRUSTOR WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE LOAN OR THIS
DEED OF TRUST. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY
THE TRUSTOR AND THE TRUSTOR ACKNOWLEDGES THAT NEITHER THE BENEFICIARY NOR ANY
PERSON ACTING ON BEHALF OF THE BENEFICIARY HAS MADE ANY REPRESENTATIONS OF FACT
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. THE TRUSTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS DEED OF TRUST AND
ALL OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. THE TRUSTOR FURTHER ACKNOWLEDGES THAT IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS
32
WAIVER PROVISION AND AS EVIDENCE OF THIS FACT SIGNS THIS DEED OF TRUST BELOW.
[Balance of Page Left Intentionally Blank. Signatures to Follow]
33
IN WITNESS WHEREOF, the Trustor has executed this Deed of Trust
under seal on the date first written above with the specific intention that this
Deed of Trust constitute an instrument under seal.
TRUSTOR:
TREX COMPANY, LLC, a Delaware limited
liability company
By: /s/ Anthony J. Cavanna
-----------------------------------
Name: Anthony J. Cavanna
Title:Executive Vice President, Chief
Financial Officer, Treasurer
ACKNOWLEDGMENT
STATE OF VIRGINIA, COUNTY OF FREDERICK, TO WIT:
I HEREBY CERTIFY, that on this 9th day of November, 2001, before me, the
subscriber, a Notary Public of the State aforesaid, personally appeared Anthony
J. Cavanna known to me, or satisfactorily proven to be, the person whose name is
subscribed to the within instrument, and who acknowledged himself to be the
Executive Vice President, Chief Financial Officer and Treasurer of Trex Company,
LLC, a Delaware limited liability company, and he acknowledged that he executed
the foregoing instrument for the purposes therein contained and he acknowledged
the same to be the lawful act and deed of the aforesaid limited liability
company.
AS WITNESS my hand and Notarial Seal the day and year first above written.
/s/ Rebecca A. Carter
------------------------------------------
NOTARY PUBLIC
My Commission Expires: December 31, 2004
34
EXHIBIT A
LAND DESCRIPTION
All that certain real property situate in the County of Lyon, State of
Nevada, described as follows:
A parcel of land located within sections 7 & 8, Township 20 North, Range
25 East, M.D.B.& M., described as follows:
Beginning at the Southeast corner of Parcel 2 as shown on Record of
Survey Map File no. 193018, said point being located South 12(0) 39'
12" West a distance of 1839.06 feet from the East 1/4 corner of said
Section 7; thence North 10(0) 21' 00" West a distance of 1026.73 feet
to the Northeast corner of said Parcel 2; thence North 73(0) 18' 04"
West a distance of 1744.19 feet; thence South 43(0) 26' 07" East a
distance of 71.78 feet; thence South 46(0) 33' 53" West a distance of
300.74 feet; thence along a tangent circular curve to the left with a
radius of 500.00 feet and a central angle of 66(0) 09' 53" an arc
length of 577.40 feet; thence South 19(0) 36' 00" East a distance of
567.96 feet; thence South 70(0) 24' 00" West a distance of 92.77 feet;
thence along a tangent circular curve to the right with a radius of
828.77 feet and a central angle of 07(0) 16' 49" an arc length of
105.31 feet; thence South 77(0) 40' 50" West a distance of 100.00
feet; thence along a tangent circular curve to the right with a radius
of 2160.00 feet and a central angle of 11(0) 43' 10" an arc length of
441.81 feet; thence South 89(0) 24' 00" West a distance of 132.36
feet; thence along a tangent circular curve to the left with a radius
of 2830.00 feet and a central angle of 09(0) 45' 00" an arc length of
481.58 feet; thence South 79(0) 39' 00" West a distance of 45.45 feet
to the point of beginning.
NOTE: (NRS 111.312): The above metes and bounds description appeared previously
in that certain GRANT, BARGAIN AND SALE DEED, recorded in the Office of the
County Recorder of LYON County, Nevada on December 7, 1998, as Document No.
226990, of Official Records.
35
Exhibit 10.4
NOTICE TO CLERK: This instrument encumbers property located within and without
the Commonwealth of Virginia, and the proportion of the debt secured by Virginia
real property is 11.98% or $10,273,449.00. Recordation taxes have been paid in
connection with the deeds of trust being modified herein on debt in the
principal amount of $10,755,000.00. As a result, this instrument is exempt from
recordation taxes pursuant to Sections 58.1-803 (B), 58.1-803 (D) and 58.1-809
of the Code of Virginia (1950), as amended, and Section 630-14-803 (B) of the
Virginia Recordation Tax Regulations (September 19, 1984).
THIS IS A CREDIT LINE DEED OF TRUST within the meaning of Section 55-58.2 of the
Code of Virginia (1950), as amended. For the purposes of, and to the extent
required by, such section, (i) the name of the noteholder secured by the Deed of
Trust is First Union National Bank, (ii) the address of such noteholder is set
forth below, and (iii) the maximum aggregate amount of principal to be secured
hereunder at any one time is $85,755,000.
Tax Map Parcel #s Frederick County: 63-A-87, 63-A-110, 63-A-110A and 63-1-110C
City of Winchester: 371-01-1
MODIFIED DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
Granted By
TREX COMPANY, LLC
-----------------
a Delaware limited liability company
(for purposes of recording, the "Grantor")
To
TRSTE, INC.
A Virginia corporation
(for purposes of recording, the "Grantee")
Trustee
Securing
FIRST UNION NATIONAL BANK,
-------------------------
A National Banking Association
(for purposes of recording, the "Grantee")
This Document was Prepared By: Dated September 30, 2001
Fiona M. Tower
Kutak Rock LLP
1111 East Main Street, Suite 800
Richmond, Virginia 23219
TO FILING OFFICER, AFTER RECORDATION RETURN TO:
Fiona M. Tower
KUTAK ROCK LLP
1111 East Main Street, Suite 800
Richmond, Virginia 23219
To Be Recorded In the Land
Records Offices of the City
Of Winchester, Virginia and
Frederick County, Virginia.
MODIFIED DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
Granted By
TREX COMPANY, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
To
TRSTE, INC.
A VIRGINIA CORPORATION
Trustee
2
DEFINITIONS
As used throughout this Deed of Trust, the following terms shall have the
following meanings:
"Act" shall have the meaning as set forth in Section 1.16 of this Deed of
Trust;
"Beneficiary" shall mean First Union National Bank, a National Banking
Association, its successors and assigns;
"Clerk's Office" shall mean collectively the Office of the Clerk of the
Circuit Court for Winchester, Virginia and Frederick County, Virginia;
"Code" shall mean the Code of Virginia of 1950, as amended and now
enacted;
"Credit Agreement" shall mean that certain Second Amended and Restated
Credit Agreement between Grantor, Trex Company, Inc. and Beneficiary dated as of
the date hereof;
"Deed of Trust" shall mean this deed of trust, security agreement and
assignment of leases and rents granted by the Grantor to the Trustees;
"Easement" shall have the meaning as set forth in Section 7.1 of this Deed
of Trust;
"Event of Default" shall mean, individually, and "Events of Default" shall
mean, collectively, those items as listed in Article III of this Deed of Trust,
which shall entitle the Trustees or the Beneficiary to exercise all rights and
remedies provided in Article IV of this Deed of Trust;
"Grantor" shall mean Trex Company, LLC;
"Hazard" shall have the meaning as set forth in Section 1.16 of
this Deed of Trust;
"Improvements" shall mean all buildings, structures, improvements and
replacements, now or hereafter existing on or to be erected upon the Land and
any and all landscaping and related amenities and facilities;
"Land" shall mean all those certain parcels of land situated in the City
of Winchester, and Frederick County, Virginia, as more particularly described on
Exhibit "A" attached to this Deed of Trust and made a part thereof;
"Leases" shall have the meaning as set forth in Section 6.1 of this Deed
of Trust;
3
"Loan" shall mean the financing extended by the Beneficiary to the Grantor
and Trex Company, Inc. as more particularly described in the Credit Agreement
and evidenced by the Promissory Note;
"Loan Documents" shall mean the Promissory Note, the Deed of Trust, the
Credit Agreement and such other documents and writings executed and delivered by
Grantor and such other signatory parties to the Beneficiary, evidencing,
securing or otherwise documenting the terms and conditions of the Loan, as the
Promissory Note, the Deed of Trust, and such other documents may be amended,
modified, replaced or amended and restated in their entirety in the future;
"Obligations" shall have the meaning as set forth in the granting clause
of this Deed of Trust;
"Personalty" shall have the meaning as set forth in the granting clause of
this Deed of Trust;
"Promissory Note" shall mean collectively, the term note in the original
principal amount of $3,780,000, the term note in the original principal amount
of $1,035,000, the term note in the original principal amount of $5,940,000; the
term note in the original principal amount of $58,000,000 and the revolving note
in the maximum principal amount of $17,000,000 between Grantor and Trex Company,
Inc., as Borrower, and Beneficiary, all dated as of the date hereof;
"Real Property" shall mean the Land and the Improvements;
"Rent" shall have the meaning as set forth in Section 6.1 of this Deed of
Trust;
"Secured Property" shall have the meaning as set forth in the granting
clause of this Deed of Trust;
"Trustees" shall mean TRSTE, Inc., a Virginia corporation.
4
MODIFIED DEED OF TRUST,
SECURITY AGREEMENT
AND
ASSIGNMENT OF LEASES AND RENTS
THIS MODIFIED DEED OF TRUST, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES
AND RENTS (the "Deed of Trust") is made and granted as of the 30th day of
September, 2001, by TREX COMPANY, LLC, a Delaware limited liability company,
with an address of 160 Exeter Drive, Winchester, Virginia 22603-8605 (the
"Grantor"), to TRSTE, INC., a Virginia corporation with an address of 201 South
Jefferson Street, Roanoke, Virginia 24011 ("Trustee").
RECITALS
A. By the following Deeds of Trust (collectively, the "Original Deed of
Trust"), Grantor has granted the Land to Beneficiary:
1. Deed of Trust and Absolute Assignment of Rents dated June 15, 1998
and recorded in the Clerk's Office of the Circuit Court of Frederick
County, Virginia in Deed Book 907 Page 1044 securing debt in the
original principal amount of $3,780,000.00;
2. Deed of Trust and Absolute Assignment of Rents dated November 20,
1998 and recorded in the Circuit Court Clerk's Office of Frederick
County, Virginia, in Deed Book 921, Page 1235, securing debt in the
original principal amount of $1,035,000.00;
3. Deed of Trust and Absolute Assignment of Leases dated August 15,
2000 and recorded in the Circuit Court Clerk's Offices of the City
of Winchester, Virginia at Deed Book 305, Page 1445, and Frederick
County, Virginia at Deed Book 973, Page 477, securing debt in the
original principal amount of $5,940,000.00.
B. Grantor, Trustee and Beneficiary wish to modify the Original Deed of
Trust to secure payment and performance of the Obligations, as defined herein.
C. The Grantor holds fee simple title to the Land and conveys its fee
simple interest in the Land and other Secured Property, as provided further
herein as security for the payment and performance of all obligations of the
Grantor secured by this Deed of Trust.
D. In addition to the Notes and this Deed of Trust, the Loan is further
evidenced by the other Loan Documents, as such Loan Documents may be amended,
modified, replaced or amended and restated in their entirety in the future.
5
NOW THEREFORE, the parties hereto do hereby agree that the Original Deed
of Trust is hereby modified to read in its entirety as follows:
GRANT
NOW, THEREFORE, in consideration of the premises, and to secure: (a) the
payment of the principal, interest, and other sums due on the Promissory Note,
this Deed of Trust, and any other Loan Document, and any and all other
indebtedness of the Grantor to the Beneficiary, whether now existing or
hereinafter incurred, as well as all future advances, as and when due, (b) the
observance and performance of all of the terms, conditions, agreements, and
provisions of the Promissory Note, this Deed of Trust, and all other Loan
Documents, including the repayment of all sums advanced, to be advanced, or
which may be advanced by the Beneficiary pursuant to or under authorizations
contained in this Deed of Trust, even if and to the extent such sums may exceed
the face amount of the Promissory Note, this Deed of Trust and any other Loan
Document, and (c) any and all other future indebtedness of Grantor to
Beneficiary (collectively, the "Obligations"), the Grantor grants, pledges,
assigns, transfers, and conveys to the Trustees, in fee simple, all that lot of
ground situated and lying in the City of Winchester and Frederick County,
Virginia and more particularly described on Exhibit "A" attached hereto and made
a part hereof;
TOGETHER WITH any additional or other interest in the Land that the
Grantor may hereafter acquire; and
TOGETHER WITH all of the Grantor's right, title and interest in and to all
Improvements; and
TOGETHER WITH all of the Grantor's right, title and interest in and to all
plant, equipment, apparatus, machinery, fittings, appliances, furniture,
furnishings, fixtures and other chattels and personal property and replacements
thereof, owned by the Grantor and now or at any time hereafter affixed or
attached to, incorporated in, placed upon, or in any way used in connection with
the current or future utilization, enjoyment, occupation, or operation of the
Real Property including by way of example and not by way of limitation, all
lighting, heating, ventilating, air conditioning, incinerating, sprinkling,
laundry, lifting and plumbing fixtures and equipment, water and power systems,
loading and unloading equipment, burglar alarms and security systems, fire
prevention and fire extinguishing systems and equipment, engines, boilers,
ranges, refrigerators, stoves, furnaces, oil burners or units, communication
systems and equipment, dynamos, transformers, motors, tanks, electrical
equipment, elevators, escalators, cabinets, partitions, ducts, compressors,
switchboards, storm and screen windows and doors, pictures, awnings and shades,
sign and shrubbery as well as all building and construction materials and
supplies of every kind, nature and description owned by the Grantor and located
on, at, or about the Real Property, whether or not yet incorporated into any
building, structure, or improvement, or located elsewhere and not as yet
delivered to the Real Property, which are intended to be used for the purpose of
erecting, renovating, restoring, or repairing any building, structure, or
improvement on the Real Property, including by way of example and not by way of
6
limitation, all steel, iron, concrete, sheet rock and plaster board, screws,
paint, plaster, plastics, insulation, fiberglass, wood and wood products, glass,
bricks, mortar, masonry, pipes, wiring, linoleum and tile and other floor and
wall coverings, roofing and roofing materials, framing and molding
(collectively, the "Personalty"), as to all of which the Grantor grants and
conveys to the Beneficiary a continuing security interest under the Virginia
Uniform Commercial Code, as amended, as well as in any and all proceeds and
products thereof and all substitutions, renewals and replacements thereof,
whether now owned or hereafter acquired, for so long as such items are or remain
personal property and not fixtures and permanent additions to the Real Property;
and
TOGETHER WITH all contracts, plans, and specifications, surveys and
surveyor's reports, engineer's reports, diagrams and drawings, all licenses,
permits and approvals and applications therefor from governmental authorities,
deposits, service contracts, books, records, reports, accounting records,
invoices, change orders, correspondence, diagrams, drawings, schematics, sales
and promotional literature and forms, advertising materials and the like,
wherever located and whenever created, compiled, or made with respect to the
construction of the Improvements upon the Land and the leasing of space in the
completed Improvements, and the Grantor hereby grants to the Beneficiary a
continuing security interest under the Virginia Uniform Commercial Code in and
to all of the same, and the proceeds, including insurance proceeds, and products
thereof, and in all substitutions, renewals, and replacements thereof, now
existing or hereafter acquired; and
TOGETHER WITH a security interest, which is hereby granted by the Grantor,
in all amounts that may be owing at any time and from time to time by the
Beneficiary to the Grantor in any capacity, including, but not limited to, any
balance or share belonging to the Grantor in any deposit or other account with
the Beneficiary, which accounts shall specifically include the escrow accounts
that may be established in accordance with the terms of this Deed of Trust with
regard to real property taxes, insurance payments, security deposits, and the
like; and
TOGETHER WITH all easements, rights, privileges, and appurtenances
thereunto belonging or in any way appertaining, and all of the right, title,
interest, estate, or claim of the Grantor in or to the streets, ways, alleys,
and waters adjoining or adjacent to the Real Property, whether now existing or
hereafter acquired; and
TOGETHER WITH all mineral rights, and mining rights, as well as all
minerals, dirt, sand, gravel, pebbles, stones, rocks, soil and the like
(including oil and gas) which have not been extracted from the Land; and
TOGETHER WITH all rights, benefits, profits, rents, and monies payable
under, by reason of, or with respect to any restrictive covenants, easements,
agreements applicable to adjoining lands, or contracts of sale with respect
thereto with the right to collect any sums of money at any time payable to the
Grantor in consequence of such rights and benefits, including the release,
modification, or amendment thereof, for application to sums then due and owing
the Beneficiary under the Promissory Note, this Deed of Trust or any other Loan
Document and to utilize any collection or enforcement rights or remedies to
collect the same available to the
7
Grantor under law, as to all of which, and the proceeds and products thereof,
the Grantor hereby grants a continuing security interest therein and thereto
unto the Beneficiary; and
TOGETHER WITH: (a) all of the proceeds of the voluntary or involuntary
conversion of the aforementioned property or any part of the aforementioned
property into cash or liquidated claims, whether by way of condemnation, insured
casualty, judgment or otherwise, as well as a security interest which is hereby
granted to the Beneficiary in the same; (b) all rents, profits, and benefits,
including any deposits of tenants to secure payment of the same and performance
of the terms and conditions of any oral or written lease, with respect to the
leasing of all or any portion of the Real Property, with the right to collect
such rents, profits, and benefits at any time for application to sums then due
and owing the Beneficiary under the Promissory Note, this Deed of Trust or any
other Loan Document, and to utilize any collection or enforcement rights or
remedies available to the Grantor under law or any written lease, but without
any duty or obligation to perform on behalf of the Grantor any of the Grantor's
duties or obligations to any lessee; and (c) a security interest in all revenues
and profits, accounts receivable and contract rights, including any deposits of
purchasers to secure payment of the contract price and performance of the terms
and conditions of any contract of sale for the Real Property, with the right to
collect the same at any time for application to sums then due and owing the
Beneficiary under the Promissory Note, this Deed of Trust or any other Loan
Document and to utilize any collection or enforcement rights or remedies
available to the Grantor under law or any contract of sale, but without any duty
or obligation, to perform on behalf of the Grantor any of the Grantor's duties
or obligations to any purchase of the Real Property;
TO HAVE AND TO HOLD all of the aforementioned property (collectively, the
"Secured Property") to the Trustees, and the Trustees' successors and assigns,
in fee simple, in trust to the Trustees to secure the Obligations provided that,
so long as no Event of Default shall have occurred, the Grantor shall have the
license to possess and enjoy the Secured Property, and to receive the rents,
issues and profits therefrom, subject, however, to the provisions of the Loan
Documents; and further provided, that if all of the Obligations are fully paid
and satisfied and performed and/or observed, then the lien of this Deed of Trust
shall be released by the Beneficiary and the Trustees, and the Trustees shall
then, upon the written request of the Grantor, release, terminate, and reconvey
the Secured Property to the Grantor at the sole cost and expense of the Grantor.
EXCEPT as otherwise specifically provided herein, this Deed of Trust is
expressly made, executed and delivered pursuant and subject to, and shall be
construed in accordance with the provisions of Sections 55-59, 55-59.1, 55-59.2,
55-59.3, 55-59.4, 55-60 and 55-63 of the Code of Virginia of 1950, as amended
and now enacted. All obligations and duties imposed upon Grantor and the
Trustees by such Code provisions and all rights and remedies conferred upon the
Beneficiary thereby are hereby expressly affirmed. All of the terms, covenants,
agreements and conditions hereinafter contained, to the extent the same may
differ from or supplement the Code provisions, shall be construed as providing
the Beneficiary with rights and remedies additional and cumulative to those
specified in the Code provisions and shall not be construed in any way as
excluding the Code provisions or depriving the Beneficiary of any of its rights,
privileges or remedies thereunder.
8
ARTICLE I
COVENANTS AND AGREEMENTS OF THE GRANTOR
1.1. Repayment. The Grantor shall pay all indebtedness secured by this
Deed of Trust, together with interest thereon and any penalty, fee, charge,
deposit, escrow or assessment, at the times and in the manner and amounts set
forth in the Promissory Note and other Loan Documents.
1.2. Performance. The Grantor shall perform and observe all duties,
obligations, and requirements and shall comply in all respects with the terms,
covenants, conditions, representations and warranties of the Promissory Note,
this Deed of Trust and all other Loan Documents.
1.3. Taxes and Expenses. The Grantor shall pay and discharge, when and as
the same come due, before penalty or premium attaches, all taxes of every kind
and nature, real and personal, all general and special assessments and levies,
all water, sewer and other utility charges, rents, and assessments and any and
all other public charges, dues, levies, impositions, or assessments of a like or
different nature, imposed upon or assessed against the Secured Property or the
rents, issues, income or profits thereof, which are or may become liens against
the same, as well as any ground rent to which the Real Property may be subject,
and the Grantor will not permit to exist any lien or security interest therefor
other than: (a) liens for taxes, assessments, levies, fees, rents, ground rents,
and public charges not yet delinquent or which are being contested in good
faith; and (b) liens and security interests which the Beneficiary has
specifically and in writing consented to the existence of and with respect to
which the Grantor has paid currently all sums secured thereby. The Grantor will,
upon the request of the Trustees or the Beneficiary, deliver to the Trustees or
the Beneficiary receipts evidencing the payment of all such taxes, assessments,
levies, fees, rents, ground rents, and public charges imposed upon or assessed
against the Secured Property (provided, however, that Grantor may withhold any
such payment if Grantor contests in good faith the validity of such payment, and
may continue to withhold such payment pending the resolution of the dispute so
long as Beneficiary is provided with adequate security, as reasonably determined
by Beneficiary, for the payment of the withheld amount and any potentially
applicable interest and penalties and such contest does not in the reasonable
opinion of Beneficiary put the Secured Property or any portion thereof at risk
of any tax lien foreclosure), or the revenues, rents, issues, income, or profits
thereof, as well as the payment of all superior liens and security interests
with respect to which the Beneficiary may have consented.
1.4. Insurance. The Grantor shall obtain and shall at all times during the
term hereof maintain the following insurance coverages:
1.4.1. Casualty Insurance. The Grantor shall keep any Improvements
constructed on the Land and Personalty thereon insured against loss by fire
casualty, and such other hazards and contingencies, including but not limited to
lightning, hail, windstorm, explosion, malicious
9
mischief and vandalism, as are covered by extended coverage policies in effect
in the area where the Land is located and such other risks as may be reasonably
specified by the Beneficiary from time to time, all for the benefit of the
Beneficiary; provided that, during any period of construction, restoration or
reconstruction of the Improvements, the Grantor shall provide in lieu of such
insurance, builders' risk or a similar type of insurance in the amount of the
full replacement cost of the Improvements and the equipment. Such insurance
shall be written on policy forms and by Lloyds of London or an insurance company
lawfully operating in the jurisdiction in which the Real Property is located
with a rating of "A-" or better according to A.M. Best Co. Insurance Guide and
reasonably satisfactory to the Beneficiary, shall be in an amount equal to the
lesser of the outstanding principal balance of the Obligations or the full
insurable replacement cost of any such Improvements and Personalty, but in any
event shall be in an amount sufficient to prevent co-insurance liability, shall
name the Beneficiary as a mortgagee and sole loss payee and shall be endorsed
such that the losses thereunder shall be payable to the Beneficiary and not to
the Grantor and the Beneficiary or the Trustees, jointly. The policy or policies
of such insurance shall include a replacement cost or restoration endorsement
and a waiver of subrogation endorsement reasonably satisfactory to the
Beneficiary. Original certificates or at Beneficiary's request, originals or
certified true copies, of the policy or policies of such insurance and all
renewals thereof shall be delivered to and retained by the Beneficiary, and the
Grantor shall provide the Beneficiary with receipts evidencing the payment of
all premiums due on such policies and the renewals thereof on or prior to the
renewal or expiration date thereof. All policies required hereby shall provide
and shall bear an endorsement that the insurer shall endeavor to notify
Beneficiary not less than ten (10) days prior to any cancellation, termination,
endorsement or material amendment (i.e. reduction in coverage). The Grantor
shall give the Beneficiary prompt notice of any loss covered by such insurance,
and, the Beneficiary shall have the right to adjust and compromise such loss, to
collect, receive and receipt the proceeds of insurance for such loss and to
endorse the Grantor's name upon any check in payment thereof and, for such
purposes the Grantor hereby constitutes and appoints the Beneficiary as its
attorney in fact with the power of attorney granted hereby deemed to be coupled
with an interest and irrevocable. All monies received as payment for a loss
covered by an insurance policy shall be paid over to the Beneficiary, as its
interests may appear. The Beneficiary shall, after deducting the reasonable
expenses incurred in the collection of the proceeds of any insurance, make the
remainder of such proceeds available to the Grantor for the payment of charges
or expenses actually incurred by the Grantor in the restoration, reconstruction,
repair, renovation or replacement of the affected Improvements and Personalty,
provided that: (i) the Beneficiary has approved the plans and specifications for
the repair or restoration of the damaged portion of the Improvements and
Personalty, the contract for such repair or restoration and the contractor that
will perform the same, (ii) the Grantor has deposited with the Beneficiary (or
if permitted by the Beneficiary, has made provision satisfactory to the
Beneficiary for the payment of) any amounts required for such repair or
restoration which exceed the available insurance proceeds, (iii) no Event of
Default, or event that with the passage of time would constitute an Event of
Default, has occurred and is continuing under the Loan Documents, (iv) the
repair or restoration of the Improvements and Personalty reasonably can be
completed before the maturity date of the Loan, and (v) the tenants will
continue to pay rent without abatement (or the proceeds of business interruption
insurance will be adequate in the Beneficiary's judgment to offset any such
abatement of rent), otherwise, such proceeds shall be applied in payment of the
Obligations.
10
1.4.2. Liability and Worker's Compensation Insurance. The Grantor
shall obtain and maintain public liability and property damage insurance in such
amounts, with such insurance companies, and upon policy forms acceptable to and
reasonably approved by the Beneficiary, naming the Beneficiary as an additional
insured. Additionally, if Grantor has any employees, the Grantor shall obtain
and maintain worker's compensation insurance in such amounts, with an insurance
company, and in a form acceptable to and approved by the Beneficiary. The
Grantor shall supply to the Beneficiary a copy of the aforesaid liability
insurance policies and receipts evidencing the payment of premiums due thereon
or, alternatively, certificates from the insurance company certifying to the
existence of the policies, summarizing the terms of the policies, and indicating
the payment of premiums due thereon. Each of the policies specified herein shall
provide that the insurer shall endeavor to provide Beneficiary with ten (10)
days prior notice of any material modification (i.e. reduction in coverage) or
cancellation.
1.4.3. Rental Loss Interruption Insurance. The Grantor shall also
carry and maintain rental interruption insurance on the Trust Property in the
same manner and under the same conditions as provided in 1.4.1 covering debt
service, real estate taxes and insurance premiums for a period of at least
twelve (12) months.
1.4.4. Flood Insurance. In the event that all or any portion of the
Real Property currently or at any time in the future is determined to be located
in a specially designated flood hazard area by the Secretary of Housing and
Urban Development or the Director of the Federal Emergency Management Agency,
pursuant to the provisions of the National Flood Insurance Act of 1968, or the
Flood Disaster Protection Act of 1973, as amended, the Grantor shall obtain and
maintain flood hazard insurance in the full insurable value of the Improvements
or any portion of the Real Property located within such area, or the full amount
of flood insurance available, naming the Beneficiary as sole loss payee and
complying with all applicable provisions of Section 1.4.1. hereof. The Grantor
shall be required to provide flood hazard insurance as described, unless the
Grantor's insurance broker or surveyor certifies to the Beneficiary in writing
that the Real Property is not in a flood hazard area. The proceeds of any loss
payable under a flood insurance policy shall be applied, at the option of the
Beneficiary, as set forth in Section 1.4.1. above with respect to casualty
insurance proceeds.
1.4.5. Separate Insurance. The Grantor may not take out separate
insurance concurrent in form or contributing in the event of loss with that
required to be maintained hereunder unless the Beneficiary is included thereon
as a named insured with losses payable to the Beneficiary as above provided. The
Grantor shall immediately notify the Beneficiary whenever any such separate
insurance is taken out and shall promptly deliver to the Beneficiary
certificates, or if requested by Beneficiary the policy or policies, of such
insurance.
1.5. Advancements. If the Grantor should fail to perform any of the
covenants contained in this Deed of Trust, or to protect or preserve the Secured
Property or the status and priority of the lien and security interest of this
Deed of Trust, the Beneficiary may, but shall not be obligated to, make advances
to perform the same on behalf of the Grantor or to protect or
11
preserve the Secured Property or the status and priority of the lien and
security interest of this Deed of Trust, and all sums so advanced shall
immediately upon advancement become a lien and security interest upon the
Secured Property and shall be secured by this Deed of Trust. For the purposes of
taking any and all acts as set forth in this Section 1.5., the Grantor hereby
constitutes and appoints the Beneficiary as its attorney in fact and the power
of attorney granted hereby shall be deemed to be coupled with an interest and
irrevocable. The Grantor, will repay on demand all sums so advanced on the
Grantor's behalf, plus any expenses or costs incurred by the Trustees or the
Beneficiary, including reasonable attorneys fees, with interest thereon at the
highest rate of interest permitted under the Promissory Note. The provisions of
this Section shall not be construed to prevent the institution of foreclosure or
other rights and remedies of the Trustees upon the occurrence of an Event of
Default hereunder.
1.6. Condition and Use of Improvements. The Grantor will not commit any
waste on the Secured Property or make any change in the use of the Secured
Property which will in any way increase any ordinary fire or other hazard
insurance risk arising out of the construction of improvements on or operation
of the Secured Property or at any time abandon the Secured Property. The Grantor
will at all times maintain and keep the Secured Property in good operating order
and condition, ordinary wear and tear excepted, and will promptly make, from
time to time, all repairs, renewals, replacements, additions, and improvements
to so maintain the Secured Property. The Grantor will comply with all statutes,
ordinances, rules, regulations, or laws affecting the Secured Property or the
use thereof. The Improvements shall not be removed, demolished or substantially
altered, nor shall any material Personalty be removed therefrom, without the
prior written consent of the Trustees or the Beneficiary, which consent shall
not be unreasonably withheld, conditioned or delayed, except that no consent
shall be required where appropriate replacements, free of superior title, liens,
security interests, or claims, and of a value at least equal to the value of the
Personalty removed, are immediately made. Upon receipt of written notice the
Grantor will permit the Trustees or the Beneficiary, or their agents or
employees, at all reasonable times to enter and inspect the Secured Property.
1.7. Title to Real Property; Liens. The Grantor has as of the date hereof,
and shall maintain at all times during the term of this Deed of Trust, good and
marketable title to the Secured Property free and clear of any and all liens,
charges, restrictions, encumbrances, security interests and adverse claims
whatsoever, excepting any liens, charges, restrictions, encumbrances or security
interests which: (a) are set forth in the title insurance policy issued in favor
of, and approved by, the Beneficiary with respect to the Secured Property; (b)
are expressly permitted by the provisions of this Deed of Trust or any of the
other Loan Documents; (c) are granted to the Beneficiary; or (d) are consented
to in writing by the Beneficiary.
1.8. Transfer or Encumbrance; Change of Control. Except as may be
permitted under the Credit Agreement, title to all or any portion of the Secured
Property may not be acquired by any person, individual, partnership, or
corporation by voluntary or involuntary conveyance, transfer, grant or
assignment, by operation of law, or in any other manner, nor shall the Secured
Property become encumbered or charged with a lien or security interest of any
kind or variety, excepting the mortgages or deeds of trust disclosed in writing
to and approved in writing by the Beneficiary, and other "Permitted Liens" as
defined in the Credit Agreement, whether voluntary
12
or involuntary, including any mechanic's or materialmen's lien or judgment lien,
senior, junior, or of equal priority to the lien and security interest of this
Deed of Trust, without the prior written consent of the Trustees or the
Beneficiary. A conveyance, transfer, grant, or assignment of, or a pledge,
encumbrance, or creation of a lien or security interest in any interest in the
Grantor, whether or not a conveyance, transfer, grant, or assignment of or a
pledge, encumbrance, or creation of a lien or security interest in the
membership interests in Grantor is with respect to all or only a part of the
total number of outstanding membership interests, shall be considered to be a
transfer or encumbrance of the Secured Property and subject to the provisions of
this Section. Except as consented to by the Beneficiary in writing, control and
management of the Secured Property shall be vested as presently owned by the
Grantor and may not be transferred, assigned or conveyed to or acquired by any
person. The contrary notwithstanding, in the event the ownership of the Secured
Property becomes vested in a person, individual, partnership, or corporation or
limited liability company other than the Grantor, the Trustees or the
Beneficiary may, without notice to the Grantor, deal with such successor or
successors in interest with reference to this Deed of Trust and the indebtedness
secured by it in the same manner as with the Grantor, and any extension of the
time of the indebtedness or any other modifications of the terms of the
indebtedness at the instance of the then owner of the Secured Property shall not
relieve the Grantor of the Grantor's liability on the Promissory Note hereby
secured or from the performance of any of the covenants and agreements contained
herein or any of the covenants, terms, conditions, provisions, representations,
or warranties contained in the Loan Documents, whether the extension or
modification be made with or without the consent of the Grantor; provided
Grantor shall not be bound by modifications made without its consent.
1.9. Condemnation. The Grantor, within seven business days of obtaining
knowledge of the institution of any proceedings for the taking or condemnation
of the Secured Property or any portion thereof, or any interest therein or right
accruing thereto, will notify the Trustees and the Beneficiary of the pendency
of such proceedings, describing in detail the nature and extent of such taking
or condemnation. The Trustees or the Beneficiary may participate in any such
proceedings and the Grantor from time to time will deliver to the Trustees or
the Beneficiary all instruments requested by them to permit such participation.
Until the occurrence of an Event of Default, the Trustees or Beneficiary shall
not participate in any hearings without the presence of Grantor nor shall the
Trustees or the Beneficiary accept or negotiate the amount of any such award
without the Grantor's written consent. The Trustees or the Beneficiary shall be
under no obligation to question the amount of any such award or compensation and
may accept the same in the amount in which the same shall be paid. In any such
condemnation proceedings, the Trustees or the Beneficiary may be represented by
counsel selected by them and the Grantor shall pay, the reasonable attorneys'
fees incurred by them at the Grantor's sole expense. The proceeds of any award
or compensation so received shall be, and hereby are, assigned by the Grantor to
the Beneficiary, shall be payable to the Beneficiary and, if less than a
substantial portion of the Secured Property is damaged, taken or transferred in
a condemnation, or if the Beneficiary does not elect to accelerate the Loan as a
consequence of such condemnation, then the Beneficiary may require the Grantor
to repair, restore or replace the Secured Property or the affected portion
thereof as nearly as practical to its condition immediately before the
condemnation, and in such event any net proceeds of the condemnation will be
applied to the costs of such repair, restoration or replacement. The term
"substantial portion" as used above
13
and further herein means so much of the Secured Property as will have, in the
Beneficiary's opinion, a material effect on the use and occupancy of the Secured
Property or on the ability of the Grantor to make required payments of principal
and interest on the Note.
1.10. Future Advances. The Beneficiary may make future advances to the
Grantor and may advance or readvance funds to the Grantor and all such future
advances and readvances shall be fully secured by the lien and security interest
of this Deed of Trust.
1.11. Status. Except as otherwise permitted under the Credit Agreement,
the Grantor shall maintain in full force and effect the Grantor's status as a
validly existing limited liability companies under the laws of the State of
Delaware and the Commonwealth of Virginia and all rights and privileges incident
thereto.
1.12. Estoppel Certificate. The Grantor shall, upon written notice,
deliver within ten (10) days of the giving of such notice, a written statement,
duly acknowledged, setting forth the amount of principal, interest, penalty, and
other charges or assessments due the Beneficiary as of the notice date and
whether any offsets or defenses are known to exist against any of the same.
1.13. Compliance with Laws; Restrictive Covenants. The Grantor shall
comply with all applicable rules and regulations of the federal, state, and
local governmental authorities having jurisdiction over the Secured Property;
the Grantor shall also comply with all restrictions, covenants, easements and
other limitations on the use of the Secured Property contained in documents of
public record.
1.14. Preservation of Lien. The Grantor shall take all reasonable steps
and do all things necessary, convenient, or proper, to establish, protect,
preserve, and maintain the priority and status of the lien and security interest
in the Secured Property established or intended to be established by this Deed
of Trust.
1.15. Further Assurances. In addition to the acts recited herein and
contemplated to be performed, executed and/or delivered by the Grantor, the
Grantor hereby agrees at any time and from time to time to perform, execute
and/or deliver to the Beneficiary upon request, any and all such further acts,
additional instruments, or further assurances as may be reasonably necessary or
proper to: (i) promptly correct any defect, error or omission which may be
discovered in this Deed of Trust or any other Loan Document, and execute any and
all additional documents, as may be requested by the Beneficiary to correct such
defect, error or omission; (ii) assure the Beneficiary a valid first priority
lien and first priority perfected security interest in the Secured Property;
(iii) create, perfect, preserve, maintain and protect the liens and security
interests created or intended to be created hereby; and (iv) provide the rights
and remedies to Beneficiary granted or provided for herein. The Grantor shall,
upon ten (10) business days written notice from the Beneficiary, execute and
deliver such additional deeds of trust, supplemental deeds of trust, financing
statements, continuation statements or other instruments and documents which may
be reasonably required from time to time by the Beneficiary to provide the
further assurances as above set forth. If the Grantor fails, within such ten
(10) business day period to execute and deliver to the Beneficiary such required
further assurances, the Grantor shall
14
thereupon automatically and irrevocably have appointed and constitute and
appoint the Beneficiary as the Grantor's attorney in fact for the purpose of
executing such required further assurances, the power of attorney hereby given
being a power of attorney coupled with an interest and irrevocable.
1.16. Environmental Protection. The Grantor represents and warrants that:
(i) the Grantor has no knowledge of any discharge, spillage, uncontrolled loss,
seepage or filtration of oil, petroleum or chemical liquids or solids, liquid or
gaseous products or any hazardous waste or hazardous substance (the "Hazard"),
as those terms are used in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C ss.ss.9601 et seq., as amended
by the Superfund Amendments and Reauthorization Act of 1986; the Resource
Conservation and Recovery Act of 1976. (the Solid Waste Disposal Act or RCRA),
42 U.S.C. ss.ss.6901 et seq., as amended; the Toxic Substance Control Act (TSCA)
15 U.S.C. ss.ss.2601 et seq., or in any other federal, state or local law
governing hazardous substances, as such laws may be amended from time to time,
(collectively, the "Act"), at, upon, under or within the Secured Property; and
(ii) the Grantor has not caused or permitted to occur and shall use its best
efforts not to permit to exist, any condition which may cause or constitute a
Hazard at, upon, under or within the Secured Property. The term "Hazard"
includes but is not limited to asbestos, polychlorinated biphenyl (PCBs) and
lead based paints.
1.16.1. The Grantor further represents and warrants that (i) neither
the Grantor nor, to the best of its knowledge, any other party, is or will be
involved in operations upon the Secured Property, which operations could lead to
(a) the imposition of liability on the Grantor or on any other subsequent or
former owner of the Secured Property under the Act; or (b) the creation of a
lien on the Secured Property under the Act or under any similar laws or
regulations; and (ii) the Grantor has not permitted, and will not permit, any
tenant or occupant of the Secured Property to engage in any activity that could
impose liability under the Act on such tenant or occupant, on the Grantor or on
any other owner of any of the Secured Property.
1.16.2. The Grantor has complied, and shall comply, in all material
respects with the requirements of the Act and related regulations and with all
similar laws and regulations and shall notify the Beneficiary immediately in the
event of any Hazard or the discovery of any Hazard at, upon, under or within the
Secured Property. The Grantor shall promptly forward to the Beneficiary copies
of all orders, notices, permits, applications or other communications and
reports in connection with any Hazard or the presence of any Hazard or any other
matters relating to the Act or any similar laws or regulations, as they may
affect the Secured Property.
1.16.3. Promptly upon the written request of the Beneficiary from
time to time, when the Beneficiary has a reasonable basis for believing a
violation of the Act may have occurred, the Grantor shall provide to the
Beneficiary, at the Grantor's expense, an environmental site assessment or
environmental audit report, prepared by an environmental engineering firm
acceptable in the reasonable opinion of the Beneficiary, to assess with a
reasonable degree of certainty the presence or absence of any Hazard and the
potential costs in connection with abatement, cleanup or removal of any Hazard
found on, under, at or within the Secured Property.
15
1.16.4. The Grantor shall defend and indemnify the Beneficiary and
hold the Beneficiary harmless from and against all actual loss, liability,
damage and expense, including reasonable attorneys' fees, suffered or incurred
by the Beneficiary, whether as holder of this Deed of Trust, as mortgagee in
possession, or as successor-in-interest to Grantor by foreclosure deed or deed
in lieu of foreclosure, under or on account of the Act or any similar laws or
regulations, including the assertion of any lien thereunder: (i) with respect to
any Hazard, or the presence of any Hazard affecting the Secured Property whether
or not the same originates or emanates from the Secured Property, including any
loss of value of the Secured Property as a result of the foregoing so long as no
such loss, liability, damage and expense is attributable to any Hazard resulting
from actions on the part of the Trustees or Beneficiary; and (ii) with respect
to any other matter affecting the Secured Property within the jurisdiction of
the Environmental Protection Agency, any other federal agency, or any state or
local environmental agency. The Grantor's obligations under this Section shall
arise upon the discovery of the presence of any Hazard under the Act, whether or
not the Environmental Protection Agency, any other federal agency or any state
or local environmental agency has taken or threatened any action in connection
with the presence of any Hazard. The Grantor's obligations under this Section
shall not extend to those matters specified in (i) and (ii) above if such
matters arose subsequent to the Release Date as defined in the Loan Agreement.
1.16.5. In the event of any Hazard, or the presence of any hazardous
substance affecting the Secured Property, whether or not the same originates or
emanates from the Secured Property or any contiguous real estate, and if the
Grantor shall fail to comply with any of the requirements of the Act or related
regulations or any other environmental law or regulation within the time
established by any regulatory agency, the Beneficiary may at its election, but
without the obligation to do so: (i) give such notices and/or cause such work to
be performed at the Secured Property; and/or (ii) take any and all other actions
as the Beneficiary shall reasonably deem necessary or advisable in order to
abate the Hazard, remove the hazardous substance or cure the Grantor's
noncompliance. Any amounts so paid by the Beneficiary pursuant to this Section,
together with interest thereon at the highest rate of interest permitted under
the Promissory Note from the date of written notice of invoice to Grantor by the
Beneficiary, shall be immediately due and payable by the Grantor to the
Beneficiary upon demand and until paid shall be added to and become a part of
the indebtedness under the Loan Documents and shall be secured by this Deed of
Trust.
1.16.6. The provisions of this Section 1.16. are for the benefit of
the Beneficiary only and cannot be assigned to any other party, whatsoever,
except by assignment of the Promissory Note and the Loan Documents by the
current Beneficiary to a successor lender.
1.17. Right of Entry. The Grantor hereby grants to the Beneficiary and the
Beneficiary's agents and representatives, the right, upon twenty-four (24) hours
prior written request, to enter into and upon all or any part of the Secured
Property, subject to the rights of tenants under the Leases, for such purposes
as the Beneficiary deems reasonably necessary to protect the value of the
Secured Property, at any time and from time to time during normal operating
hours, regardless of whether or not the Grantor is in default hereunder or under
any other Loan Document.
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1.18. Management of Property. Grantor will not enter into a management
agreement with any other party, or otherwise permit any other party to manage
the operation or leasing of the Property without Beneficiary's prior written
consent.
ARTICLE II
GRANTOR'S WARRANTIES AND REPRESENTATIONS
2.1. Authority. The Grantor has full right, power, and authority to
execute this Deed of Trust. The Grantor has and will continue to have full power
and lawful authority to encumber and convey the Secured Property as provided
herein, and this Deed of Trust is and will continue to remain a valid and
enforceable lien and security interest upon the Secured Property.
2.2. Title. The Grantor owns for its own account, and not as agent or
trustee for another, good and marketable fee simple title to the Secured
Property free and clear of any lien and security interest and any other
encumbrance, easement, or restriction whatsoever not approved by the
Beneficiary.
2.3. Permits. All permits, licenses, certificates, approvals, easements,
and agreements that are necessary for the construction of the Improvements for
the intended use and occupancy of the Real Property have been obtained and are
in full force and effect, and there are no violations or claimed violations
thereof.
2.4. Compliance with Law. The Real Property and the intended use and
occupancy thereof do not violate any flood plain, building, zoning, or any other
laws, ordinances, rules, and regulations.
2.5. Flood Plain. Any Improvements will not be located in an area
identified by the Secretary of Housing and Urban Development or a successor
thereto as an area having special flood hazards pursuant to the terms of the
National Flood Insurance Act of 1968, or the Flood Disaster Protection Act of
1973, as amended, or any successor law; or if any improvements are located in
such an area, the Grantor will obtain and maintain the insurance for such
Improvements as specified in Section 1.4.3. of this Deed of Trust.
2.6. Validity of Loan Documents. The Grantor hereby represents and
warrants that: (a) The execution, delivery and performance by the Grantor of the
Promissory Note and the other Loan Documents: (i) are within the legal powers of
the Grantor, (ii) have been duly authorized by all requisite action, (iii) have
received all necessary governmental approval, and (iv) will not violate any
provision of law, any order of any court or other agency of government, the
articles of incorporation or bylaws of the Grantor (if the Grantor is a
corporation), the limited partnership agreement or certificate of limited
partnership of the Grantor (if the Grantor is a limited partnership), the
articles of organization, certificate of organization or operating agreement of
the Grantor (if the Grantor is a limited liability company) or any indenture,
agreement or other
17
instrument to which the Grantor is a party or by which it or any of its property
is bound, or be in conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument, or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of its property or assets,
except as contemplated by the provisions of the Loan Documents; and (b) the
Promissory Note and the other Loan Documents, when executed and delivered by the
Grantor, will constitute the legal, valid and binding obligations of the Grantor
and other obligors named therein, if any, enforceable in accordance with their
respective terms.
2.7. Taxes. The Grantor: (a) has filed all federal, state and local tax
returns and other reports which the Grantor is required by law to file prior to
the date hereof and which are material to the conduct of the business of the
Grantor; (b) has paid or caused to be paid all taxes except those being
contested in good faith, assessments and other governmental charges that are due
and payable prior to the date hereof; and (c) has made adequate provision for
the payment of such taxes, assessments or other charges accruing but not yet
payable.
2.8. Litigation. Except as disclosed in the Credit Agreement, there is not
now pending against or affecting the Grantor or the Secured Property, nor, to
the knowledge of the Grantor, is there threatened, any action, suit or
proceeding at law or in equity or by or before any administrative agency which
could reasonably be expected to have a Material Adverse Effect (as defined in
the Credit Agreement).
2.9. Other Information. All other information, reports, financial
statements, papers and data given to the Beneficiary with respect to the Grantor
or the Secured Property or to others obligated under the terms of the Loan
Documents are accurate and correct in all material respects and complete insofar
as completeness may be necessary to give the Beneficiary a true and accurate
knowledge of the subject matter.
ARTICLE III
EVENTS OF DEFAULT
The following shall constitute events of default (individually an "Event
of Default" and collectively "Events of Default") under this Deed of Trust and
shall entitle the Trustees or the Beneficiary to exercise all rights and
remedies provided in Article IV:
3.1. Default under Credit Agreement. Any Event of Default under the Credit
Agreement after the expiration of all applicable notice and cure periods as that
term is defined in the Credit Agreement.
3.2. Failure to Perform. A failure to perform or observe, or a default
under, any of the terms, covenants, conditions, agreements or provisions of this
Deed of Trust.
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3.3. Failure to Perform Under Other Loan Documents. A failure to perform
or observe, or a default under any of the terms, covenants, conditions and
provisions of the Promissory Note or any other Loan Document, after the
expiration of all applicable notice and cure periods.
3.4. Failure of Warranty or Representation. The failure of any warranty or
representation set forth in this Deed of Trust to be true and accurate in all
material respects on the date hereof.
3.5. Material Adverse Change in Use of Property. A change in any rule,
statute, law or ordinance, whether at the local, state or federal level,
effecting the use of the Secured Property, which change results in a material
adverse change in the permitted use of the Secured Property.
3.6. Cross Default. The default by the Grantor under any obligation or
indebtedness to the Beneficiary, whether now existing or hereafter arising,
which default is not cured within any applicable cure or grace period.
3.7. Transfer of Property. There being, without the prior written consent
of the Beneficiary, a transfer of any of the Secured Property or an interest in
the Grantor in violation of Section 1.8 of this Deed of Trust, including but not
limited to the Grantor selling or transferring the Secured Property or any
portion thereof or granting a security interest in the Secured Property or
otherwise encumbering the same.
3.8. Condemnation. If all or any substantial portion (as defined in
Section 1.9 above) of the Secured Property is damaged, taken or transferred
under, or in lieu of the exercise of, the power of eminent domain.
ARTICLE IV
RIGHTS AND REMEDIES
Upon the occurrence of any Event of Default, the Trustees or the
Beneficiary may, at their option and without notice or demand, accelerate and
declare immediately due and payable all sums due on or by reason of the
Promissory Note, this Deed of Trust or any other Loan Document, this Deed of
Trust being and is "subject to all upon default" as that phrase is construed
under Section 55-60(4) of the Code of Virginia as amended, and the Trustees or
the Beneficiary may take possession of all or any portion of the Secured
Property and sell the same at auction as provided below and may, with or without
declaring the aforementioned sums immediately due and payable and with or
without foreclosing, exercise any other right or remedy provided for herein or
in the Promissory Note, any other Loan Document or applicable law, including,
but not at its option, limited to the following:
4.1. Foreclosure; Sale of Secured Property. Except as otherwise
specifically provided herein, any sale of the Secured Property shall be made in
accordance with the provisions of Section 55-59, 55-59.1, 55-59.2, 55-59.3,
55-59.4 and 55-63 of the Code of Virginia, as amended, or other applicable
general local laws of the Commonwealth of Virginia and/or judicial
19
rules of procedure relating to the foreclosure of deeds of trust, either by
strict foreclosure or foreclosure by sale, or in part by each such method. Any
sale of the Secured Property may be made after advertising the time, terms and
place of sale either (i) once a week for two (2) consecutive weeks, or (ii) once
a day for three (3) consecutive days, in a weekly or daily newspaper, as the
case may be, which is published in, or has a general circulation in, the county
or city wherein the Secured Property is situated, at the discretion of the
Trustees. Any such sale may be made by the payment of cash upon settlement of
the sale or upon such terms, including payment terms, as the Trustees may deem
necessary, proper or advisable, except as specifically limited by applicable law
or court rule. Any such sale may be of the entire Secured Property or any
portion of the Secured Property as the Trustees, in their sole and absolute
discretion, deem necessary, proper, or convenient including the Leasehold
Interest independent of the fee simple interest in the Land (without releasing
any liens with respect to the balance of the Secured Property and the rights
attendant thereto). The Secured Property conveyed hereby shall constitute
security for the Loan to the full extent of the value of the Secured Property
without limitation and without regard to the value upon which any state, city,
or county recordation taxes have been computed and/or paid.
4.2. Rights Incident to Sale. The Grantor agrees that the Beneficiary or
the Trustees may, incident to any sale of the Secured Property under this Deed
of Trust, exercise the powers and rights as herein set forth:
4.2.1. Application of Proceeds. Upon the sale of the Secured
Property, the proceeds shall be applied in accordance with Section 55.59.4(3)
of the Code of Virginia, as amended.
4.2.2. Payment Before Sale. In the event the amount due on the
principal debt hereby secured and the interest thereon shall be paid after the
filing of any foreclosure proceeding, including any proceeding in connection
with an assent to decree or power of sale, but before sale of the Secured
Property, the Grantor shall be required to pay all costs and expenses incident
to or resulting from any such foreclosure proceeding, including, but not limited
to the expenses of any advertisement or notice, all court costs, the counsel
fees incurred by the Beneficiary and the Trustees, and a trustees' fee equal to
one-half (1/2) of the trustees' fee that would have been payable upon the sale
of the Secured Property.
4.2.3. Beneficiary May Bid. At any sale made under this Deed of
Trust, whether made under the power of sale herein granted or under or by virtue
of judicial proceedings, by assent to decree or power of sale, the Beneficiary,
or any wholly-owned subsidiary of the Beneficiary, may bid for and acquire the
Secured Property or any part thereof and in lieu of paying cash therefor may
make settlement for the purchase price by crediting upon the indebtedness of the
Grantor secured by this Deed of Trust the net sales price after deducting
therefrom the expenses and costs of the sale and any other sums which the
Beneficiary is authorized to deduct under this Deed of Trust. Furthermore, in
the event the Beneficiary, or any wholly-owned subsidiary of the Beneficiary, is
the successful bidder at any sale made under this Deed of Trust, the
Beneficiary, or any wholly-owned subsidiary of the Beneficiary, shall not be
required to pay either an initial deposit or any interest in connection with
such sale.
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4.3. [Intentionally deleted]
4.4. Right to Enter, Take, Possess and Operate. The Trustees, the
Beneficiary or their agents or attorneys:
(a) may, prior to or subsequent to the institution of any foreclosure
proceedings, enter into and upon all or any part of the Secured Property, and
each and every part thereof, and may exclude the Grantor and its agents and
servants therefrom and may use, operate, manage and control the Secured Property
and conduct the business thereon, either personally or by their superintendents,
managers, agents, servants, attorneys or receivers; and
(b) may, upon every such entry, at the expense of the Grantor and the
Secured Property, maintain, repair and restore the Secured Property and may
complete the construction of any Improvements, and in the course of such
completion may make such changes in the contemplated Improvements as it may deem
desirable and may insure the same; and likewise, from time to time, at the
expense of the Grantor and the Secured Property, the Beneficiary may make all
necessary or proper repairs, renewals and replacements and such useful
alterations, additions, betterments and improvements thereto and thereon as to
it may seem advisable; and
(c) shall in every such entry have the right to manage and operate the
Secured Property and to carry on the business thereof, take possession of all
books, records and accounts relating thereto and exercise all rights and powers
of the Grantor with respect thereto either in the name of the Grantor or
otherwise as it shall deem best without interference from the Grantor; and the
Beneficiary shall be entitled to collect and receive all Rent pursuant to
Article VI hereof, and after deducting the costs, liabilities and expenses of
conducting the business thereof and of all maintenance, repairs, renewals,
replacements, alterations, additions, betterments and improvements and amounts
necessary to pay for taxes, assessments, insurance and prior or other proper
charges upon the Secured Property or any part thereof, as well as just and
reasonable compensation for the services of the Beneficiary and for all
attorneys, counsel, agents, clerks, servants and other employees arising as
aforesaid, first, to the payment of sums due under the Note in the order of
application as set forth therein, when and as the same shall become payable in
accordance with the terms thereof, and second, to the payment of any other sums
required to be paid by the Grantor under this Deed of Trust and any other Loan
Document, as the Beneficiary may elect; and
(d) may incur costs, expenses and liabilities of every character in
managing, operating, maintaining, protecting or preserving the Secured Property,
which, if not paid out of Rents shall constitute a demand obligation owing by
Grantor and shall draw interest from the date of expenditure until paid at the
highest rate of interest permitted under the Promissory Note, and shall
constitute a portion of the obligations secured hereby. If necessary to obtain
the possession provided for above, the Trustees or the Beneficiary, as the case
may be, may invoke any and all legal remedies to dispossess Grantor. In
connection with any action taken by the Beneficiary pursuant to this Section
4.4., the Beneficiary shall not be liable for any loss sustained by Grantor
resulting from any failure to rent the Secured Property, or any part thereof, or
from any other act
21
or omission of the Beneficiary in managing the Secured Property unless such loss
is caused by the gross negligence, willful misconduct or bad faith of the
Beneficiary in managing the Secured Property. Subject to the foregoing the
Grantor shall and does hereby agree to indemnify the Beneficiary for, and to
hold the Beneficiary harmless from, any and all liability, loss or damage which
may or might be incurred under or by reason of this instrument or the exercise
of rights or remedies hereunder and from any and all claims and demands
whatsoever which may be asserted against the Beneficiary by reason of any
alleged obligations or undertakings on its part to perform or discharge any
obligations of the Grantor. Should the Beneficiary incur any such liability
under or by reason of this instrument or the exercise of rights or remedies
hereunder or in defense of any such claims or demands, the amount, thereof,
including costs, expenses and reasonable attorneys fees, shall be secured
hereby. This Section 4.4. shall not operate to place responsibility upon the
Beneficiary for the control, care, management or repair of the Secured Property,
nor shall it operate to make the Beneficiary responsible or liable for any waste
committed on the Secured Property by the tenants or by any other parties or for
any dangerous negligence in the management, upkeep, repair or control of the
Secured Property resulting in loss or injury or death to any tenant, licensee,
employee or person.
4.5. Appointment of Receiver. Upon the occurrence of an Event of Default,
the Trustees, without regard for any other action or actions the Trustees may or
may not be taking, shall be entitled, without regard to the adequacy or
inadequacy of any security for the debt hereby secured, to the appointment of a
receiver to collect the Rent and account therefor as the court may direct and to
take possession of the Secured Property and operate the same.
4.6. Right to Maintain Separate Actions. In the event of any default under
the Promissory Note, this Deed of Trust or any other Loan Document, which
default is not cured within any applicable grace period, the Beneficiary shall
be entitled or empowered to institute such action or actions or other
proceedings at law or in equity as may be advised by its counsel for the
collection of the sums so due and unpaid, and may prosecute any such action or
proceedings to judgment or final decree, and may enforce any such judgments or
final decree against the Grantor and collect, out of the property of the Grantor
wherever situated, as well as out of the Secured Property, in any manner
provided by law, monies adjudged or decreed to be payable. The Beneficiary shall
be entitled to recover judgment as aforesaid before or after or during the
pendency of any proceedings for the enforcement of the provisions of this Deed
of Trust, or the foreclosure of the lien hereof. In the event of a sale of the
Secured Property, and of the application of the proceeds of sale as provided in
this Deed of Trust, the Beneficiary shall be entitled to institute and maintain
separate actions or proceedings as aforesaid to recover any and all amounts then
remaining due and unpaid upon the Promissory Note, and to enforce payment of all
other charges, payments, and costs due under this Deed of Trust or any other
Loan Document, and shall be entitled to recover judgment upon any other property
of the Grantor; the institution of any separate action or proceeding as
permitted hereby shall not affect in any manner or to any extent the lien of
this Deed of Trust upon the Secured Property or any part thereof, or any liens,
rights, powers, or remedies of the Trustees or of the Beneficiary hereunder, but
such liens, rights, powers, and remedies shall continue unimpaired as before.
Any monies collected by the Beneficiary under this Section shall be applied by
the Beneficiary in accordance with the provisions of Section 4.2.1.
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4.7. Waivers of the Grantor. The Grantor waives, and agrees not to at any
time insist upon, plead, or in any manner whatsoever claim or take any benefit
or advantage of, any stay or extension or moratorium law, any exemption from
execution of sale of the Secured Property or any part thereof, wherever enacted,
now or at any time hereafter in force, which may affect the covenants and terms
of performance of this Deed of Trust. The Grantor additionally waives, and
agrees not to claim, take, or insist upon any benefit or advantage of any law
now or hereafter in force providing for the valuation or appraisal of the
Secured Property, or any part thereof, prior to any sale or sales thereof which
may be made pursuant to any provisions herein, or pursuant to the decree,
judgment, or order of any court of competent jurisdiction. The Grantor also
waives any right under any statute heretofore or hereafter enacted to redeem the
property so sold or any part thereof and the Grantor hereby covenants not to
hinder, delay or impede the execution of any power herein granted or delegated
to the Trustees. The Grantor further waives, to the extent that the Grantor
lawfully may, all right to have the Secured Property marshaled upon any
foreclosure under this Deed of Trust.
4.8. Uniform Commercial Code. The Beneficiary, or the Trustees acting on
behalf of the Beneficiary, may exercise all rights and remedies of a secured
creditor under the Virginia Uniform Commercial Code, as amended, with respect to
any part of the Secured Property constituting personal property and subject to
the secured interest created by this Deed of Trust, including the right to take
possession of the aforementioned personal property without the use of judicial
process and the right to require the Grantor to assemble the same at the Real
Property or such other place as the Beneficiary or Trustees may notify the
Grantor. Any disposition of so much of the Secured Property as may constitute
personal property and subject to the security interest created by this Deed of
Trust shall be considered commercially reasonable if made pursuant to a public
sale which is advertised at least twice in a newspaper of local circulation in
the community where the Real Property is located. Any notice required by the
Virginia Uniform Commercial Code to be given to the Grantor shall be considered
reasonable and properly given if given by written notice at least ten (10) days
prior to the date of any scheduled public sale.
4.9. Right of Setoff. The Beneficiary may setoff any amounts or sums in
any account or represented by any certificate with the Beneficiary in the name
of the Grantor or in which the Grantor has an interest therein.
4.10. Remedies and Cumulative Rights. The rights and remedies provided in
this Article IV shall be nonexclusive and shall be in addition to all other
remedies and rights available under any other Loan Document or applicable law.
All rights and remedies available upon an Event of Default shall be cumulative
and the exercise of any one or more of the available rights and remedies shall
not be considered as or result in a waiver of any other right or remedy and any
particular right or remedy may be exercised in conjunction with any or all other
rights and remedies provided hereunder or under any other Loan Document.
ARTICLE V
SECURITY AGREEMENT
23
5.1. Security Interest. This Deed of Trust shall constitute and serve as a
security agreement on personal property as to the Personalty within the meaning
of the Virginia Uniform Commercial Code and shall constitute, until the grant of
this Deed of Trust shall terminate, a security interest under the Virginia
Uniform Commercial Code with respect to the Personalty. The Grantor does hereby
grant a security interest and does assign unto the Beneficiary under the terms
hereof, all of the Grantor's right, title and interest in, to and under the
Personalty to secure the full and timely payment of the Promissory Note and the
full and timely performance and discharge of the Promissory Note, this Deed of
Trust and the other Loan Documents.
5.2. Financing Statements. The Grantor shall execute and deliver to the
Beneficiary, in form and substance satisfactory to the Beneficiary, such
financing statements and such further assurances as the Beneficiary may, from
time to time, consider reasonably necessary to create, perfect and preserve the
Beneficiary, security interest herein granted, and the Beneficiary may cause
such statements and assurances to be recorded and filed at such times and places
as may be required or permitted by law to so create, perfect and preserve such
security interest. The addresses of the Grantor, as debtor, and the Beneficiary,
as secured party, are as set forth herein.
ARTICLE VI
ASSIGNMENT OF LEASES AND RENTS
6.1. Assignment of Leases and Rents. In the event all or any portion of
the Real Property currently or at any time hereafter is leased to any person or
persons for any period or term, independent of the duration thereof, the Grantor
hereby absolutely, irrevocably and unconditionally assigns to the Beneficiary
any and all such leases (the "Leases"), including all extensions and renewals
thereof, and all rents and other payments and benefits (the "Rent") due the
Grantor as a result of the Leases as security for the repayment of the Loan.
This assignment shall be effective immediately, and shall be subject only to the
license as set forth in Section 6.2. herein.
6.2. Collection of Rent. So long as there exists no Event of Default, the
Grantor shall have a license to collect all Rent directly. All such Rent
collected by the Grantor pursuant to this license shall be held by the Grantor
in trust for the Beneficiary, and may be used by the Grantor only for such
purposes as approved by the Beneficiary. Such license shall automatically
terminate upon the occurrence of any Event of Default. In the event of the
termination of the license, should the Beneficiary wish to collect the Rent
assigned to the Beneficiary directly, the Beneficiary shall mail to the Grantor,
and may mail to the Grantor's lessees at their addresses as reflected in the
records of the Beneficiary, a written notice of such election. Such an election
to collect the Rent directly may be made by the Beneficiary at any time and from
time to time following the occurrence and during the continuance of an Event of
Default, and may be made with one or more lessees or successor lessees of the
Grantor following the occurrence of an Event of Default so long as any of the
Obligations remain outstanding and unsatisfied.
24
6.3. Termination of Assignment. All rights of the Beneficiary to an
assignment of leases and rents shall cease immediately upon full satisfaction of
the Grantor's obligations under the Loan Documents. The execution and
recordation among the land records of a release of the Deed of Trust shall
automatically, and without the execution or recordation among the land records
of a specific and separate release or reassignment by the Beneficiary, be a
release and reassignment to the Grantor of this assignment of leases and rents.
6.4. Beneficiary Has All Rights of Grantor Under Leases. After an election
to collect Rent has been made by the Beneficiary as provided in Section 6.2.
hereof, the Beneficiary shall have all rights and privileges of the Grantor,
either as provided in any written lease document between the Grantor and the
Grantor's lessee or as provided by law, to collect Rent due and payable by a
lessee as a result of the lessee's use of all or any portion of the Secured
Property. The Beneficiary shall have no obligation to enforce the Beneficiary's
rights and remedies for the collection of Rent in the name of or on behalf of
the Grantor and may do so directly in the Beneficiary's own name. The
Beneficiary shall, however, have no obligation or duty to enforce payment or
collection of Rent and shall be chargeable only with such Rent as may actually
be received.
6.5. Beneficiary Has No Obligation to Perform Grantor's Obligations Under
Lease. The Beneficiary shall have no obligation to the Grantor or to the
Grantor's lessee to perform the Grantor's obligations under any Lease. The
Grantor agrees to indemnify and hold the Beneficiary harmless (including payment
of the Beneficiary's attorneys' fees) from any attempts by any lessee of the
Grantor to force or compel the Beneficiary to meet the Grantor's obligations to
a lessee of the Secured Property under any Lease. The Grantor further covenants
and agrees to meet and fulfill all of the Grantor's obligations to any lessee of
the Land under any Lease, even if the Beneficiary has exercised the
Beneficiary's election to collect Rent directly.
6.6. Consent of Grantor; Right to Approve Leases. The Grantor further
agrees to supply the Beneficiary the standard form of Lease and rent roll and,
on request, with copies of all written lease agreements and the names and
mailing addresses of all lessees. The Beneficiary during the term of this Deed
of Trust shall have the right to approve all Leases. Any lease of the Secured
Property not in conformance with the form of lease and rent roll approved by the
Beneficiary and not otherwise approved by the Beneficiary shall constitute an
Event of Default hereunder without notice or grace period. All Leases shall be
subordinate to the lien of the Deed of Trust and shall specifically so provide
in the lease document.
6.7. No Further Assignments; Recordation; Beneficiary Not Mortgagee in
Possession. The Grantor may not make any further rent or lease assignments
regarding the Secured Property while this Assignment is in full force and
effect. Nothing contained herein shall be deemed to constitute the Beneficiary,
or the Trustees, as mortgagee, or trustees, in possession.
6.8. No Advance Collection of Rent. Except as otherwise approved in
writing by the Beneficiary, the Grantor agrees not to collect any Rent from any
lessee more than thirty (30) days in advance of its due date under any Lease;
furthermore, the Beneficiary shall not be bound by any payment of rent in
advance of more than thirty (30) days.
25
6.9. No Modification of Leases. The Grantor shall not cancel, amend, or
modify the provisions of any Lease, or grant any concessions under any Lease,
without the Beneficiary's prior written consent; furthermore, the Beneficiary
shall not be bound by any such modification or amendment to any Lease without
the Beneficiary's prior written consent. The Grantor will take all steps which
may be reasonably required to preserve and maintain any lessee's liability under
the lessee's Lease and the enforceability thereof and will advise the
Beneficiary of any defense or claim or alleged defense or claim of nonliability,
whether in whole or in part, by any lessee coming to the Grantor's attention.
6.10. Security Deposits. In the event the Grantor has collected any
security deposits with respect to any Leases, the Grantor assigns to the
Beneficiary such security deposits to the extent of the Grantor's rights
therein.
6.11. Assignment of Guaranties. The Grantor assigns to the Beneficiary any
and all rights which the Grantor may have to collect Rents from any person who
has guarantied the rental or other obligations under any Lease.
6.12. Grantors and Guarantors May Rely on This Assignment. The Grantor
irrevocably authorizes all lessees and guarantors to rely upon and comply with
any notice or demand by the Beneficiary for payment to the Beneficiary of any
Rents or for performance of any obligation under any Lease and the Grantor
releases and discharges all lessees and guarantors from any and all liability to
the Grantor for so complying. All lessees and guarantors shall have no duty to
inquire as to whether any default by the Grantor under this Deed of Trust or any
Loan Document has occurred or is existing.
6.13 Assignment Applies to All Leases; Right to Specific Assignment. This
assignment of leases and rents shall apply to each and every Lease of all or any
portion of the Real Property now existing or hereafter executed by the Grantor,
and any guaranties thereof. The Beneficiary may, however, if it so elects,
require a specific assignment agreement to be executed by the Grantor with
respect to any such Lease.
ARTICLE VII
EASEMENT FOR ENVIRONMENTAL INSPECTION
7.1. Grant of Easement. The Grantor hereby grants and conveys to the
Trustees and the Beneficiary an easement for the term of this Deed of Trust (the
"Easement") to enter on and upon the Real Property, upon reasonable advance
notice to the Grantor, in order to conduct audits, inspections and tests,
including subsurface exploration and testing, as the Trustees or the
Beneficiary, in their reasonable discretion, deem necessary, convenient, or
proper to determine whether the ownership, use, and operation of the Real
Property comply with federal, state, and local environmental laws and
regulations. The Trustees or the Beneficiary, or their designees, shall be
permitted to inspect and copy any or all of the Grantor's records relating to
environmental matters and to enter all buildings or facilities of the Grantor
during reasonable
26
business hours for such purpose. In confirmation of the Trustees' or the
Beneficiary's right to inspect and copy all of the Grantor's records relating to
environmental matters and to secure the Grantor's obligations to the Trustees or
the Beneficiary in connection with the Loan and under this Easement, the Grantor
hereby grants to the Trustees or the Beneficiary a continuing security interest
in and to all of the Grantor's existing and future records with respect to
environmental matters, whether or not located at the Real Property or elsewhere,
whether or not in the possession of the Grantor or some third party (including
any federal, state, or local agency or instrumentality), and whether or not
written, photographic, or computerized, and the proceeds and products hereof. To
the extent that any permission of the Grantor is required by any third party in
order for such third party to disclose any information regarding the Real
Property and environmental matters to the Trustees or the Beneficiary, the
Grantor specifically grants such permission and directs such third party to
disclose such information to the Trustees or the Beneficiary, or their designee.
The Trustees or the Beneficiary, or their designated agent, may interview any or
all of the Grantor's agents and employees regarding environmental matters,
including any consultants or experts retained by the Grantor, all of whom are
directed to discuss environmental issues fully and openly with the Trustees or
the Beneficiary or their designated agent and to provide such information as may
be requested. Subject to the provisions of Section 1.16.3 hereof, all of the
costs and expenses incurred by the Trustees or the Beneficiary with respect to
the audits, inspections, and tests, which the Trustees or the Beneficiary may
conduct, including the fees of the engineers, laboratories, and contractors,
shall be paid by the Grantor. The Trustees or the Beneficiary may, but shall not
be required to, advance such costs and expenses on behalf of the Grantor. All
sums so advanced shall bear interest at the then current rate of interest under
the Promissory Note and shall be secured by this Deed of Trust.
7.2 Duration and Defeasance. This Easement shall exist and continue until
all sums owed by the Grantor to the Beneficiary in connection with the Loan have
been repaid in full and this Deed of Trust has been released of record. Such a
release of this Deed of Trust shall terminate this Easement.
7.3. Enforcement. The Grantor acknowledges that no adequate remedy at law
exists for a violation of this Easement and agrees that the Trustees or the
Beneficiary shall have the right to enforce the Easement by equitable writ or
decree, including temporary and preliminary injunctive relief. In the event the
Trustees or the Beneficiary are required to enforce their rights regarding the
Easement, the Grantor shall pay all of their costs and expenses resulting from
such enforcement, including all attorneys' fees incurred by the Trustees or the
Beneficiary.
7.4. Assignability. This Easement shall be assignable and shall be
considered assigned to whomever holds the indebtedness secured by this Deed of
Trust.
7.5. Revocability. This Easement is irrevocable and may not be revoked by
the Grantor.
7.6. Trustees and Beneficiary Not Mortgagee in Possession. The exercise of
the rights granted under this Article shall not constitute the Trustees or the
Beneficiary as a mortgagee in possession with respect to the Real Property.
27
7.7. Construction and Intention. This Easement is intended to be and shall
be construed as an interest in the Real Property and as an easement in gross. It
is not intended to be a personal right of the Trustees or the Beneficiary or a
mere license. This Easement shall be eliminated automatically upon and
contemporaneously with the termination and release of this Deed of Trust.
ARTICLE VIII
MISCELLANEOUS
8.1. Substitute or Successor Trustees. The irrevocable power to remove and
substitute one or more of the Trustees named herein or substituted therefor is
expressly given to the Beneficiary and may be exercised at any time, from time
to time, without notice and without specifying any reason, by filing for record
among the land records where this Deed of Trust is recorded a deed of
appointment, and upon the filing of such deed of appointment all of the title
and estate, powers, rights, and duties of the Trustee or the Trustees thus
superseded shall terminate and shall be vested in the successor Trustee or the
Trustees. The Grantor, the Beneficiary and the Trustees, their substitutes and
successors, expressly waive notice of the exercise of this power, the giving of
bond by any Trustee, and any requirement for application to any court for
removal, substitution or appointment of a Trustee hereunder. In addition, the
act of any one (1) Trustee, whether such Trustee is a sole acting Trustee or
whether there is more than one (1) acting Trustee, shall be sufficient and
effective for all purposes set forth herein and any person may rely upon any
document or instrument executed and delivered by one (1) Trustee, to the same
extent as though the document had been executed by all of the Trustees.
8.2. Commercial Loan/Construction Loan. The Grantor warrants and
represents that the loan made by the Beneficiary to the Grantor in accordance
with the Promissory Note, this Deed of Trust and the other Loan Documents is
made for the acquisition or conduct of a business or investment within the
meaning ascribed to those terms under 6.1-330.75 of the Code of Virginia, as
amended.
8.3. Warranties of Title. The Grantor warrants: (i) generally title to the
Secured Property; (ii) that it has good and marketable title to the Secured
Property except as otherwise permitted hereby; and (iii) that it will during the
term of this Deed of Trust so warrant and defend the same and the validity and
priority of the lien and security interest of this Deed of Trust to the Trustees
and the Beneficiary against the claims of any and all other persons claiming by
or through the Grantor. The Grantor further warrants that the Grantor will
execute such other and further assurances as may be required by the Trustees or
the Beneficiary from time to time.
8.4. Joint and Several Liability. If there exists more than one (1) person
described by the term "Grantor," all liabilities and obligations of all such
persons under this Deed of Trust shall be joint and several liabilities and
obligations.
8.5. Waivers. The Grantor and the Beneficiary may at any time or from time
to time waive any or all rights accruing to each of them, respectively, under
this Deed of Trust or any
28
other Loan Document, but any waiver by the Grantor or the Beneficiary,
respectively, at any time or from time to time shall not constitute, unless
specifically so expressed by the Grantor or Beneficiary in writing, a future
waiver of performance.
8.6. No Third Party Beneficiary Rights. No person not a party to this Deed
of Trust shall have any benefit hereunder nor have third party beneficiary
rights as a result of this Deed of Trust or any other Loan Document, nor shall
any person be entitled to rely on any actions or inactions of the Beneficiary or
the Trustees, all of which are done for the sole benefit and protection of the
Beneficiary.
8.7. Continuing Obligation of the Grantor. The terms, conditions and
covenants set forth herein and in the other Loan Documents shall survive closing
and shall constitute the continuing joint and several obligations of the Grantor
during the term of the Loan Documents.
8.8. Binding Obligation. This Deed of Trust shall be binding upon the
parties and their successors and assigns.
8.9. Final Agreement. This Deed of Trust and the Loan Documents contain
the final and entire agreement and understanding of the parties, and any terms
and conditions not set forth in this Deed of Trust or the Loan Documents are not
a part of this Deed of Trust and the understanding of the parties hereof.
8.10. Amendment. This Deed of Trust may be amended or altered only by a
writing signed by the party to be bound by the amendment, change or alteration.
8.11. Photocopies Sufficient. A xerox, photographic, or other reproduction
of this Deed of Trust shall be sufficient as a financing statement.
8.12. Notices. Any notice required or permitted by or in connection with
this Deed of Trust shall be in writing and made by hand delivery, by wire, by
facsimile transmission, by overnight courier service for next day delivery, or
by certified mail, return receipt requested, postage prepaid, addressed to the
respective party at the appropriate address set forth below or to such other
address as may be hereafter specified by written notice by any party, and shall
be considered given as of the date of hand delivery, wire or facsimile
transmission (or on the next business day if the date of wire or facsimile
transmission is not a business day), as of the date specified for delivery if by
overnight courier service or as of two (2) days following the date of mailing,
as the case may be. Rejection or other refusal to accept or the inability to
deliver because of a changed address of which no notice was given shall not
invalidate the effectiveness of any notice, demand, request or other
communication.
If to the Beneficiary or to the Trustees:
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
29
Charlotte, NC 28288-0760
Attn: Barbara Carroll
Fax No.: (704) 374-6319
With a Copy to:
KUTAK ROCK LLP
Suite 800
Bank of America Center
1111 East Main Street
Richmond, Virginia 23219-3500
Attn: Fiona Tower, Esquire
Fax No.: (804) 783-6192
If to the Grantor:
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Attn: President
Fax No.: (540) 542-6889
With Copies to:
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Attn: William R. Gupp, Esquire, Vice President and General Counsel
Fax No.: (540) 542-6889
and
Hogan & Hartson L.L.P.
111 South Calvert Street
Baltimore, MD 21201
Attn: Kevin G. Gralley, Esquire
Fax No.: (410) 539-6981
8.13. Choice of Law. The laws of the Commonwealth of Virginia shall govern
the rights and obligations of the parties to this Deed of Trust and the
interpretation and construction and enforceability thereof and any and all
issues relating to the transactions contemplated herein. The Grantor expressly
acknowledges the execution and delivery of this Deed of Trust within the
geographic boundaries of the Commonwealth of Virginia.
30
8.14. Incorporation By Reference. The terms, conditions, and provisions of
the Promissory Note and all other Loan Documents are incorporated by reference
in this Deed of Trust to the same extent as if set forth in full in this Deed of
Trust. Should any of the terms, conditions, and provisions of the Promissory
Note or any other Loan Document conflict with the terms, conditions, or
provisions of this Deed of Trust, the Trustees or the Beneficiary shall select
which of the terms, covenants, and conditions shall govern and control.
8.15. Terminology. The term "Grantor" shall include the personal
representatives, successors, and assigns of the Grantor or the Grantors; the
term "Trustee" or "Trustees" shall include the successors and assigns of the
Trustee or the Trustees and any substitute or successor Trustee or Trustees; the
term "Beneficiary" shall include the successors and assigns of the individual,
individuals, partnership, limited liability company or corporation holding the
beneficial interest in the Promissory Note secured by this Deed of Trust; the
use of the singular shall include the plural, and the plural may refer only to
the singular; and the use of any gender shall be applicable to all genders.
8.16. Invalidity. If any provision or part of any provision contained in
this Deed of Trust shall be found for any reason to be illegal, invalid or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions or the remaining part of any effective
provisions of this Deed of Trust and this Deed of Trust shall be construed as if
such invalid, illegal, or unenforceable provision or part thereof had never been
contained herein, but only to the extent of its invalidity, illegality, or
unenforceability.
8.17. WAIVER OF JURY TRIAL. THE GRANTOR WAIVES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE LOAN OR THIS
DEED OF TRUST. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY
THE GRANTOR AND THE GRANTOR ACKNOWLEDGES THAT NEITHER THE BENEFICIARY NOR ANY
PERSON ACTING ON BEHALF OF THE BENEFICIARY HAS MADE ANY REPRESENTATIONS OF FACT
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. THE GRANTOR FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS DEED OF TRUST AND
ALL OTHER LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. THE GRANTOR FURTHER ACKNOWLEDGES THAT IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND
AS EVIDENCE OF THIS FACT SIGNS THIS DEED OF TRUST BELOW.
[Balance of Page Left Intentionally Blank. Signatures to Follow]
31
IN WITNESS WHEREOF, the Grantor has executed this Deed of Trust
under seal on the date first written above with the specific intention that this
Deed of Trust constitute an instrument under seal.
GRANTOR:
TREX COMPANY, LLC, a Delaware limited
liability company
By: /s/ Anthony J. Cavanna
-----------------------------------
Name: Anthony J. Cavanna
Title:Executive Vice President, Chief
Financial Officer, Treasurer
ACKNOWLEDGMENT
STATE OF VIRGINIA, COUNTY OF FREDERICK, TO WIT:
I HEREBY CERTIFY, that on this 9th day of November, 2001, before me, the
subscriber, a Notary Public of the State aforesaid, personally appeared Anthony
J. Cavanna known to me, or satisfactorily proven to be, the person whose name is
subscribed to the within instrument, and who acknowledged himself to be the
Executive Vice President, Chief Financial Officer and Treasurer of Trex Company,
LLC, a Delaware limited liability company, and he acknowledged that he executed
the foregoing instrument for the purposes therein contained and he acknowledged
the same to be the lawful act and deed of the aforesaid limited liability
company.
AS WITNESS my hand and Notarial Seal the day and year first above written.
/s/ Rebecca A. Carter
------------------------------------
NOTARY PUBLIC
32
EXHIBIT A
LAND DESCRIPTION
That certain parcel of land containing 65.7901 acres and shown on that certain
plat dated September 8, 2000 and entitled "Final Plat for Lot Consolidation of
the land of TREX Company, LLC, City of Winchester and Back Creek District,
Frederick County, VA", and recorded in the Land Records of Frederick County,
Virginia in Deed Book 976 at page 405 and in the Land Records of the City of
Winchester, Virginia as Instrument Number 000002334.
TOGETHER WITH that certain twenty (20) foot drainage easement granted TREX
Company, LLC by Deed of Easement dated November 16, 2000 and recorded November
27, 2000 in the Land Records of Frederick County, Virginia as Instrument Number
000012444.
Frederick County Tax Map Numbers 63-A-87, 63-A-110, 63-A-110A and 63-1-110C
City of Winchester Tax Map Number 371-01-1
33
Exhibit 10.5
[FIRST UNION LOGO]
AMENDED AND RESTATED
PROMISSORY NOTE
$5,940,000.00
September 30, 2001
Trex Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Trex Company, Inc.
160 Exeter Drive
Winchester, Virginia 22603-8605
(Individually and collectively "Borrower")
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Five Million, Nine Hundred Forty Thousand and No/100 Dollars
($5,940,000.00) or such sum as may be advanced and outstanding as shown on the
attached Schedule A hereof under the Original Promissory Note (as hereinafter
defined), with interest on the unpaid principal balance at the rate and on the
terms provided in this Promissory Note (including all renewals, extensions or
modifications hereof, this "Note").
RENEWAL/MODIFICATION. This Note renews, extends and/or modifies that certain
Promissory Note dated August 15, 2000 (the "Original Promissory Note"),
evidencing an original principal amount of $5,940,000.00. This Note is not a
novation.
LOAN AGREEMENT. This Note is subject to the provisions of that certain Second
Amended and Restated Credit Agreement of even date herewith between Bank and
Borrower as modified from time to time (the "Credit Agreement"). Borrower
represents and warrants that the provisions of Article V of the Credit Agreement
are true and correct as of the date of the Note; and at all times, Borrower
shall comply with all of the provisions of the Credit Agreement. Borrower's
obligation to comply with the provisions of the Credit Agreement shall continue
notwithstanding the satisfaction in full of all Obligations referred to in the
Credit Agreement.
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, real property
collateral described in that certain Modified Deed of Trust of even date
herewith for certain real property in the City of Winchester and Frederick
County, Virginia; Deed of Trust of even date herewith for certain real property
in Lyon County, Nevada; and personal property collateral described in that
certain Security Agreement of even date herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from (i) the date hereof through June 30, 2002 at 1-month LIBOR plus 3.00%;
and (ii) from and after July 1, 2002 at 1-month LIBOR plus 4.00% (collectively,
the "Interest Rate"), as determined by Bank prior to the commencement of each
consecutive interest period of 1 month (each, an "Interest Period") during the
term of the Note; provided, the first Interest Period shall commence on the date
of this Note and end on the first date thereafter that interest is due. Each
Interest Rate shall remain in effect for the entire Interest
Period until redetermined for the next successive Interest Period. "LIBOR" is
the rate for U.S. dollar deposits with a maturity equal to the number of months
specified above, as reported on Telerate page 3750 as of 11:00 a.m., London
time, on the second London business day before the relevant Interest Period
begins (or if not so reported, then as determined by the Bank from another
recognized source or interbank quotation).
INDEMNIFICATION. Borrower shall indemnify Bank against Bank's loss or expense in
employing deposits as a consequence of (a) Borrower's failure to make any
payment when due under this Note, or (b) any payment, prepayment or conversion
of any loan on a date other than the last day of the Interest Period
("Indemnified Loss or Expense"). The amount of such Indemnified Loss or Expense
shall be determined by Bank based upon the assumption that Bank funded 100% of
that portion of the loan in the London interbank market.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 2%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable as set forth in Schedule A
attached hereto and made a part hereof. All remaining principal and interest
shall be due and payable January 31, 2005.
Scheduled Payment Adjustment. At Bank's option and with notice to Borrower, the
scheduled payment amount will increase as is necessary (i) to pay all accruals
of interest for the period and previous periods and (ii) to maintain principal
repayment according to the amortization that would have occurred if the Interest
Rate in effect on the date of this Note had remained constant. The increased
payment amount shall remain in effect for as long as the original scheduled
payment amount is insufficient to pay accrued interest and principal and shall
be further adjusted upward or downward to reflect changes in the variable
interest rate. The scheduled payment amount will not be reduced below the
original scheduled payment amount.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with or
related to the loan evidenced by this Note and any prior notes which evidence
all or any portion of the loan evidenced by this Note, and any letters of credit
issued pursuant to any loan agreement to which this Note is subject, any
applications for such letters of credit and any other documents executed in
connection therewith or related thereto, and may include, without limitation, a
commitment letter that survives closing, a loan agreement, this Note, the Credit
Agreement, guaranty agreements, security agreements, security instruments,
financing statements, mortgage instruments, any renewals or modifications,
whenever any of the foregoing are executed (as defined in 11 U.S.C. ss. 101).
Obligations. The term "Obligations" used in this Note refers to any and all
indebtedness and other obligations under this Note, all other obligations under
any other
Page 2
Loan Document(s), and all obligations under any swap agreements (as defined in
11 U.S.C. ss. 101) between Borrower and Bank whenever executed. Certain Other
Terms. All terms that are used but not otherwise defined in any of the Loan
Documents shall have the definitions provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 8 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If an Event of Default exists under the Credit Agreement, a default
shall exist under this Note ("Default").
REMEDIES UPON DEFAULT. If a Default occurs under this Note, the Credit Agreement
or any Loan Documents, Bank may at any time thereafter, take the following
actions: Bank Lien. Foreclose its security interest or lien against Borrower's
accounts without notice. Acceleration Upon Default. Accelerate the maturity of
this Note and, at Bank's option, any or all other Obligations, whereupon this
Note and the accelerated Obligations shall be immediately due and payable.
Cumulative. Exercise any rights and remedies as provided under the Note, the
Credit Agreement and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
Page 3
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the Commonwealth of Virginia without regard to
that state's conflict of laws principles. If the terms of this Note should
conflict with the terms of the Credit Agreement or any commitment letter that
survives closing, the terms of this Note shall control. Borrower's Accounts.
Except as prohibited by law, Borrower grants Bank a security interest in all of
Borrower's accounts with Bank and any of its affiliates. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the Commonwealth of
Virginia. Severability. If any provision of this Note or of the other Loan
Documents shall be prohibited or invalid under applicable law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note or other such document. Notices. Any notices to Borrower shall be
sufficiently given, if in writing and mailed or delivered to the Borrower's
address shown above or such other address as provided hereunder, and to Bank, if
in writing and mailed or delivered to Bank's office address shown above or such
other address as Bank may specify in writing from time to time. In the event
that Borrower changes Borrower's address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid. Plural; Captions. All references in the Loan
Documents to Borrower, guarantor, person, document or other nouns of reference
mean both the singular and plural form, as the case may be, and the term
"person" shall mean any individual, person or entity. The captions contained in
the Loan Documents are inserted for convenience only and shall not affect the
meaning or interpretation of the Loan Documents. Advances. Bank may, in its sole
discretion, make other advances which shall be deemed to be advances under this
Note, even though the stated principal amount of this Note may be exceeded as a
result thereof. Posting of Payments. All payments received during normal banking
hours after 2:00 p.m. local time at the office of Bank first shown above shall
be deemed received at the opening of the next banking day. Joint and Several
Obligations. Each person who signs this Note as a Borrower (as defined herein)
is jointly and severally obligated. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. The parties do not waive applicable Federal or
state substantive law except as provided herein. Preservation and Limitation of
Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to
Page 4
exercise or prosecute the following remedies, as applicable: (i) all rights to
foreclose against any real or personal property or other security by exercising
a power of sale or under applicable law by judicial foreclosure including a
proceeding to confirm the sale; (ii) all rights of self-help including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; and (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy proceeding. Any
claim or controversy with regard to any party's entitlement to such remedies is
a Dispute. Waiver of Exemplary Damages. The parties agree that they shall not
have a remedy of punitive or exemplary damages against other parties in any
Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially. Waiver of Jury
Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Note, the
Credit Agreement and the other Loan Documents were executed in the Commonwealth
of Virginia and delivered to Bank in the Commonwealth of Virginia.
[SIGNATURES ON FOLLOWING PAGE]
Page 5
Trex Company, LLC
Taxpayer Identification Number:
54-1810859
By /s/ Anthony J. Cavanna (SEAL)
---------------------------------------
Anthony J. Cavanna, Executive Vice President;
Chief Financial Officer; Treasurer
Trex Company, Inc.
Taxpayer Identification Number:
54-1910453
By: /s/ Robert G. Matheny (SEAL)
--------------------------------------
Robert G. Matheny, President
Page 6
Exhibit 10.6
[FIRST UNION LOGO]
AMENDED AND RESTATED
PROMISSORY NOTE
$1,035,000.00
September 30, 2001
Trex Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Trex Company, Inc.
160 Exeter Drive
Winchester, Virginia 22603-8605
(Individually and collectively "Borrower")
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of One Million, Thirty-Five Thousand and No/100 Dollars
($1,035,000.00) or such sum as may be advanced and outstanding as shown on the
attached Schedule A under the Original Promissory Note (as hereinafter defined),
with interest on the unpaid principal balance at the rate and on the terms
provided in this Promissory Note (including all renewals, extensions or
modifications hereof, this "Note").
LOAN AGREEMENT. This Note is subject to the provisions of that certain Second
Amended and Restated Credit Agreement of even date herewith between Bank and
Borrower as modified from time to time (the "Credit Agreement"). Borrower
represents and warrants that the provisions of Article V of the Credit Agreement
are true and correct as of the date of the Note; and at all times, Borrower
shall comply with all of the provisions of the Credit Agreement. Borrower's
obligation to comply with the provisions of the Credit Agreement shall continue
notwithstanding the satisfaction in full of all Obligations referred to in the
Credit Agreement.
RENEWAL/MODIFICATION. This Note renews, extends and/or modifies that certain
Promissory Note dated November 20, 1998 (the "Original Promissory Note"),
evidencing an original principal amount of $1,035,000.00. This Note is not a
novation.
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, real property
collateral described in that certain Modified Deed of Trust of even date
herewith for certain real property in the City of Winchester and Frederick
County, Virginia; Deed of Trust of even date herewith for certain real property
in Lyon County, Nevada; and personal property collateral described in that
certain Security Agreement of even date herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from (i) the date hereof through June 30, 2002 at 1-month LIBOR plus 3.00%;
and (ii) from and after July 1, 2002 at 1-month LIBOR plus 4.00% (collectively,
the "Interest Rate"), as determined by Bank prior to the commencement of each
consecutive interest period of 1 month (each, an "Interest Period") during the
term of the Note; provided, the first Interest Period shall commence on the date
of this Note and end on the first date thereafter that interest is due. Each
Interest Rate shall remain in effect for the entire Interest
Period until redetermined for the next successive Interest Period. "LIBOR" is
the rate for U.S. dollar deposits with a maturity equal to the number of months
specified above, as reported on Telerate page 3750 as of 11:00 a.m., London
time, on the second London business day before the relevant Interest Period
begins (or if not so reported, then as determined by the Bank from another
recognized source or interbank quotation).
INDEMNIFICATION. Borrower shall indemnify Bank against Bank's loss or expense in
employing deposits as a consequence of (a) Borrower's failure to make any
payment when due under this Note, or (b) any payment, prepayment or conversion
of any loan on a date other than the last day of the Interest Period
("Indemnified Loss or Expense"). The amount of such Indemnified Loss or Expense
shall be determined by Bank based upon the assumption that Bank funded 100% of
that portion of the loan in the London interbank market.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 2%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable as set forth in the
Repayment Schedule attached hereto and made a part hereof. All remaining
principal and interest shall be due and payable January 31, 2005.
Scheduled Payment Adjustment. At Bank's option and with notice to Borrower, the
scheduled payment amount will increase as is necessary (i) to pay all accruals
of interest for the period and previous periods and (ii) to maintain principal
repayment according to the amortization that would have occurred if the Interest
Rate in effect on the date of this Note had remained constant. The increased
payment amount shall remain in effect for as long as the original scheduled
payment amount is insufficient to pay accrued interest and principal and shall
be further adjusted upward or downward to reflect changes in the variable
interest rate. The scheduled payment amount will not be reduced below the
original scheduled payment amount.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with or
related to the loan evidenced by this Note and any prior notes which evidence
all or any portion of the loan evidenced by this Note, and any letters of credit
issued pursuant to any loan agreement to which this Note is subject, any
applications for such letters of credit and any other documents executed in
connection therewith or related thereto, and may include, without limitation, a
commitment letter that survives closing, a loan agreement, this Note, the Credit
Agreement, guaranty agreements, security agreements, security instruments,
financing statements, mortgage instruments, any renewals or modifications,
whenever any of the foregoing are executed (as defined in 11 U.S.C. ss. 101).
Obligations. The term "Obligations" used in this Note refers
Page 2
to any and all indebtedness and other obligations under this Note, all other
obligations under any other Loan Document(s), and all obligations under any swap
agreements (as defined in 11 U.S.C. ss. 101) between Borrower and Bank whenever
executed including the ISDA Master Agreement dated March 20, 1998 between
Borrower and Bank. Certain Other Terms. All terms that are used but not
otherwise defined in any of the Loan Documents shall have the definitions
provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 8 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If an Event of Default exists under the Credit Agreement, a default
shall exist under this Note ("Default").
REMEDIES UPON DEFAULT. If a Default occurs under this Note, the Credit Agreement
or any Loan Documents, Bank may at any time thereafter, take the following
actions: Bank Lien. Foreclose its security interest or lien against Borrower's
accounts without notice. Acceleration Upon Default. Accelerate the maturity of
this Note and, at Bank's option, any or all other Obligations, whereupon this
Note and the accelerated Obligations shall be immediately due and payable.
Cumulative. Exercise any rights and remedies as provided under the Note, the
Credit Agreement and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
Page 3
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the Commonwealth of Virginia without regard to
that state's conflict of laws principles. If the terms of this Note should
conflict with the terms of the Credit Agreement or any commitment letter that
survives closing, the terms of this Note shall control. Borrower's Accounts.
Except as prohibited by law, Borrower grants Bank a security interest in all of
Borrower's accounts with Bank and any of its affiliates. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the Commonwealth of
Virginia. Severability. If any provision of this Note or of the other Loan
Documents shall be prohibited or invalid under applicable law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note or other such document. Notices. Any notices to Borrower shall be
sufficiently given, if in writing and mailed or delivered to the Borrower's
address shown above or such other address as provided hereunder, and to Bank, if
in writing and mailed or delivered to Bank's office address shown above or such
other address as Bank may specify in writing from time to time. In the event
that Borrower changes Borrower's address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid. Plural; Captions. All references in the Loan
Documents to Borrower, guarantor, person, document or other nouns of reference
mean both the singular and plural form, as the case may be, and the term
"person" shall mean any individual, person or entity. The captions contained in
the Loan Documents are inserted for convenience only and shall not affect the
meaning or interpretation of the Loan Documents. Advances. Bank may, in its sole
discretion, make other advances which shall be deemed to be advances under this
Note, even though the stated principal amount of this Note may be exceeded as a
result thereof. Posting of Payments. All payments received during normal banking
hours after 2:00 p.m. local time at the office of Bank first shown above shall
be deemed received at the opening of the next banking day. Joint and Several
Obligations. Each person who signs this Note as a Borrower (as defined herein)
is jointly and severally obligated. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. The parties do not waive applicable Federal or
state substantive law except as provided herein. Preservation and Limitation of
Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding
Page 4
is brought. The parties shall have the right to proceed in any court of proper
jurisdiction or by self-help to exercise or prosecute the following remedies, as
applicable: (i) all rights to foreclose against any real or personal property or
other security by exercising a power of sale or under applicable law by judicial
foreclosure including a proceeding to confirm the sale; (ii) all rights of
self-help including peaceful occupation of real property and collection of
rents, set-off, and peaceful possession of personal property; and (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an
involuntary bankruptcy proceeding. Any claim or controversy with regard to any
party's entitlement to such remedies is a Dispute. Waiver of Exemplary Damages.
The parties agree that they shall not have a remedy of punitive or exemplary
damages against other parties in any Dispute and hereby waive any right or claim
to punitive or exemplary damages they have now or which may arise in the future
in connection with any Dispute whether the Dispute is resolved by arbitration or
judicially. Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO
BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY
TRIAL WITH REGARD TO A DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Note, the
Credit Agreement and the other Loan Documents were executed in the Commonwealth
of Virginia and delivered to Bank in the Commonwealth of Virginia.
[SIGNATURES ON FOLLOWING PAGE]
Page 5
TREX Company, LLC
Taxpayer Identification Number:
54-1810859
By /s/ Anthony J. Cavanna (SEAL)
---------------------------------------
Anthony J. Cavanna, Executive Vice President;
Chief Financial Officer; Treasurer
Trex Company, Inc.
Taxpayer Identification Number:
54-1910453
By: /s/ Robert G. Matheny (SEAL)
--------------------------------------
Robert G. Matheny, President
Page 6
Exhibit 10.7
[FIRST UNION LOGO]
AMENDED AND RESTATED
PROMISSORY NOTE
$3,780,000.00
September 30, 2001
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Trex Company, Inc.
160 Exeter Drive
Winchester, Virginia 22603-8605
(Individually and collectively "Borrower")
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Three Million, Seven Hundred Eighty Thousand and No/100
Dollars ($3,780,000.00) or such sum as may be advanced and outstanding as shown
on the attached Schedule A under the Original Promissory Note (as hereinafter
defined). with interest on the unpaid principal balance at the rate and on the
terms provided in this Promissory Note (including all renewals, extensions or
modifications hereof, this "Note").
RENEWAL/MODIFICATION. This Note renews, extends and/or modifies that certain
Promissory Note dated June 15, 1998 (the "Original Promissory Note"), evidencing
an original principal amount of $3,780,000.00. This Note is not a novation.
LOAN AGREEMENT. This Note is subject to the provisions of that certain Second
Amended and Restated Credit Agreement of even date herewith between Bank and
Borrower as modified from time to time (the "Credit Agreement"). Borrower
represents and warrants that the provisions of Article V of the Credit Agreement
are true and correct as of the date of the Note; and at all times, Borrower
shall comply with all of the provisions of the Credit Agreement. Borrower's
obligation to comply with the provisions of the Credit Agreement shall continue
notwithstanding the satisfaction in full of all Obligations referred to in the
Credit Agreement.
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, real property
collateral described in that certain Modified Deed of Trust of even date
herewith for certain real property in the City of Winchester and Frederick
County, Virginia; Deed of Trust of even date herewith for certain real property
in Lyon County, Nevada; and personal property collateral described in that
certain Security Agreement of even date herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from (i) the date hereof through June 30, 2002 at 1-month LIBOR plus 3.00%;
and (ii) from and after July 1, 2002 at 1-month LIBOR plus 4.00% (collectively,
the "Interest Rate"), as determined by Bank prior to the commencement of each
consecutive interest period of 1 month (each, an "Interest Period") during the
term of the Note; provided, the first Interest Period shall commence on the date
of this Note and end on the first date thereafter that interest is due. Each
Interest Rate shall remain in effect for the entire Interest
Period until redetermined for the next successive Interest Period. "LIBOR" is
the rate for U.S. dollar deposits with a maturity equal to the number of months
specified above, as reported on Telerate page 3750 as of 11:00 a.m., London
time, on the second London business day before the relevant Interest Period
begins (or if not so reported, then as determined by the Bank from another
recognized source or interbank quotation).
INDEMNIFICATION. Borrower shall indemnify Bank against Bank's loss or expense in
employing deposits as a consequence of (a) Borrower's failure to make any
payment when due under this Note, or (b) any payment, prepayment or conversion
of any loan on a date other than the last day of the Interest Period
("Indemnified Loss or Expense"). The amount of such Indemnified Loss or Expense
shall be determined by Bank based upon the assumption that Bank funded 100% of
that portion of the loan in the London interbank market.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 2%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable as set forth in the
Repayment Schedule attached hereto and made a part hereof. All remaining
principal and interest shall be due and payable January 31, 2005.
Scheduled Payment Adjustment. At Bank's option and with notice to Borrower, the
scheduled payment amount will increase as is necessary (i) to pay all accruals
of interest for the period and previous periods and (ii) to maintain principal
repayment according to the amortization that would have occurred if the Interest
Rate in effect on the date of this Note had remained constant. The increased
payment amount shall remain in effect for as long as the original scheduled
payment amount is insufficient to pay accrued interest and principal and shall
be further adjusted upward or downward to reflect changes in the variable
interest rate. The scheduled payment amount will not be reduced below the
original scheduled payment amount.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with or
related to the loan evidenced by this Note and any prior notes which evidence
all or any portion of the loan evidenced by this Note, and any letters of credit
issued pursuant to any loan agreement to which this Note is subject, any
applications for such letters of credit and any other documents executed in
connection therewith or related thereto, and may include, without limitation, a
commitment letter that survives closing, a loan agreement, this Note, the Credit
Agreement, guaranty agreements, security agreements, security instruments,
financing statements, mortgage instruments, any renewals or modifications,
whenever any of the foregoing are executed (as defined in 11 U.S.C. ss. 101).
Obligations. The term "Obligations" used in this Note refers
Page 2
to any and all indebtedness and other obligations under this Note, all other
obligations under any other Loan Document(s), and all obligations under any swap
agreements (as defined in 11 U.S.C. ss. 101) between Borrower and Bank whenever
executed. Certain Other Terms. All terms that are used but not otherwise defined
in any of the Loan Documents shall have the definitions provided in the Uniform
Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 8 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If an Event of Default exists under the Credit Agreement, then a
default shall exist under this Note ("Default").
REMEDIES UPON DEFAULT. If a Default occurs under this Note, the Credit Agreement
or any Loan Documents, Bank may at any time thereafter, take the following
actions: Bank Lien. Foreclose its security interest or lien against Borrower's
accounts without notice. Acceleration Upon Default. Accelerate the maturity of
this Note and, at Bank's option, any or all other Obligations, whereupon this
Note and the accelerated Obligations shall be immediately due and payable.
Cumulative. Exercise any rights and remedies as provided under the Note, the
Credit Agreement and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
Page 3
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the Commonwealth of Virginia without regard to
that state's conflict of laws principles. If the terms of this Note should
conflict with the terms of the Credit Agreement or any commitment letter that
survives closing, the terms of this Note shall control. Borrower's Accounts.
Except as prohibited by law, Borrower grants Bank a security interest in all of
Borrower's accounts with Bank and any of its affiliates. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the Commonwealth of
Virginia. Severability. If any provision of this Note or of the other Loan
Documents shall be prohibited or invalid under applicable law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note or other such document. Notices. Any notices to Borrower shall be
sufficiently given, if in writing and mailed or delivered to the Borrower's
address shown above or such other address as provided hereunder, and to Bank, if
in writing and mailed or delivered to Bank's office address shown above or such
other address as Bank may specify in writing from time to time. In the event
that Borrower changes Borrower's address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid. Plural; Captions. All references in the Loan
Documents to Borrower, guarantor, person, document or other nouns of reference
mean both the singular and plural form, as the case may be, and the term
"person" shall mean any individual, person or entity. The captions contained in
the Loan Documents are inserted for convenience only and shall not affect the
meaning or interpretation of the Loan Documents. Advances. Bank may, in its sole
discretion, make other advances which shall be deemed to be advances under this
Note, even though the stated principal amount of this Note may be exceeded as a
result thereof. Posting of Payments. All payments received during normal banking
hours after 2:00 p.m. local time at the office of Bank first shown above shall
be deemed received at the opening of the next banking day. Joint and Several
Obligations. Each person who signs this Note as a Borrower (as defined herein)
is jointly and severally obligated. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements. Special Rules. All arbitration hearings shall be conducted in the
city named in the address of Bank first stated above. A hearing shall begin
within 90 days of demand for arbitration and all hearings shall conclude within
120 days of demand for arbitration. These time limitations may not be extended
unless a party shows cause for extension and then for no more than a total of 60
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators
shall be licensed attorneys selected from the Commercial Financial Dispute
Arbitration Panel of the AAA. The parties do not waive applicable Federal or
state substantive law except as provided herein. Preservation and Limitation of
Remedies. Notwithstanding the preceding binding arbitration provisions, the
parties agree to preserve, without diminution, certain remedies that any party
may exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to
Page 4
exercise or prosecute the following remedies, as applicable: (i) all rights to
foreclose against any real or personal property or other security by exercising
a power of sale or under applicable law by judicial foreclosure including a
proceeding to confirm the sale; (ii) all rights of self-help including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; and (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment, attachment,
appointment of receiver and filing an involuntary bankruptcy proceeding. Any
claim or controversy with regard to any party's entitlement to such remedies is
a Dispute. Waiver of Exemplary Damages. The parties agree that they shall not
have a remedy of punitive or exemplary damages against other parties in any
Dispute and hereby waive any right or claim to punitive or exemplary damages
they have now or which may arise in the future in connection with any Dispute
whether the Dispute is resolved by arbitration or judicially. Waiver of Jury
Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Note, the
Credit Agreement, and the other Loan Documents were executed in the Commonwealth
of Virginia and delivered to Bank in the Commonwealth of Virginia.
[SIGNATURES ON FOLLOWING PAGE]
Page 5
TREX Company, LLC
Taxpayer Identification Number:
54-1810859
By /s/ Anthony J. Cavanna (SEAL)
---------------------------------------
Anthony J. Cavanna, Executive Vice President;
Chief Financial Officer; Treasurer
Trex Company, Inc.
Taxpayer Identification Number:
54-1910453
By: /s/ Robert G. Matheny (SEAL)
--------------------------------------
Robert G. Matheny, President
Page 6
Exhibit 10.8
[FIRST UNION LOGO]
PROMISSORY NOTE
$58,000,000.00
September 30, 2001
TREX Company, LLC
160 Exeter Drive
Winchester, Virginia 22603-8605
Trex Company, Inc.
160 Exeter Drive
Winchester, Virginia 22603-8605
(Individually and collectively "Borrower")
First Union National Bank
301 South College Street, DC-5
One First Union -- 5th Floor
Charlotte, NC 28288-0760
(Hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Fifty-Eight Million and No/100 Dollars ($58,000,000.00) or
such sum as may be advanced and outstanding from time to time, with interest on
the unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
LOAN AGREEMENT. This Note is subject to the provisions of that certain Second
Amended and Restated Credit Agreement of even date herewith between Bank and
Borrower as modified from time to time (the "Credit Agreement"). Borrower
represents and warrants that the provisions of Article V of the Credit Agreement
are true and correct as of the date of the Note; and at all times, Borrower
shall comply with all of the provisions of the Credit Agreement. Borrower's
obligation to comply with such provisions shall continue notwithstanding the
satisfaction in full of all Obligations referred to in the Credit Agreement.
RENEWAL/MODIFICATION. This Note modifies a portion of the debt evidenced by that
certain Revolving Note dated August 3, 1999. This Note is not a novation.
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, real property
collateral described in that certain Modified Deed of Trust of even date
herewith for certain real property in the City of Winchester and Frederick
County, Virginia; Deed of Trust of even date herewith for certain real property
in Lyon County, Nevada; and personal property collateral described in that
certain Security Agreement of even date herewith.
INTEREST RATE. Interest shall accrue (i) on the unpaid principal balance of the
first $33,000,000 of this Note (x) from the date hereof through June 30, 2002 at
LIBOR Market Index-Based Rate (as defined in the Credit Agreement) plus 3.00%;
and (y) from and after July 1, 2002 at LIBOR Market Index-Based Rate plus 4.00%;
and (ii) on the remaining unpaid principal balance of this Note from the date
hereof at LIBOR Market Index-Based Rate plus 5.00% (collectively, the "Interest
Rate").
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 2%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only, commencing the date hereof, and continuing on
the same day of each month thereafter until the principal of this Note and all
accrued interest have been fully paid. There shall be additional consecutive
monthly principal payments in the amount of $5,000,000.00 due and payable
commencing on March 1, 2002, and continuing on the same day of each month
thereafter until and including July 1, 2002 thereby reducing the outstanding
principal amount to $33,000,000.00 by July 1, 2002. In any event, all principal
and accrued interest shall be due and payable on January 31, 2003.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and the
other Loan Documents refers to all documents executed in connection with or
related to the loan evidenced by this Note and any prior notes which evidence
all or any portion of the loan evidenced by this Note, and any letters of credit
issued pursuant to any loan agreement to which this Note is subject, any
applications for such letters of credit and any other documents executed in
connection therewith or related thereto, and may include, without limitation, a
commitment letter that survives closing, a loan agreement, this Note, the Credit
Agreement, guaranty agreements, security agreements, security instruments,
financing statements, mortgage instruments, any renewals or modifications,
whenever any of the foregoing are executed (as defined in 11 U.S.C. ss. 101).
Obligations. The term "Obligations" used in this Note refers to any and all
indebtedness and other obligations under this Note, all other obligations under
any other Loan Document(s), and all obligations under any swap agreements (as
defined in 11 U.S.C. ss. 101) between Borrower and Bank whenever executed.
Certain Other Terms. All terms that are used but not otherwise defined in any of
the Loan Documents shall have the definitions provided in the Uniform Commercial
Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 8 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
Page 2
DEFAULT. If an Event of Default exists under the Credit Agreement, a default
shall exist under this Note ("Default").
REMEDIES UPON DEFAULT. If a Default occurs under this Note, the Credit Agreement
or any Loan Documents, Bank may at any time thereafter, take the following
actions: Bank Lien. Foreclose its security interest or lien against Borrower's
accounts without notice. Acceleration Upon Default. Accelerate the maturity of
this Note and, at Bank's option, any or all other Obligations, whereupon this
Note and the accelerated Obligations shall be immediately due and payable.
Cumulative. Exercise any rights and remedies as provided under the Note, the
Credit Agreement and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period,
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Applicable Law; Conflict
Between Documents. This Note and the other Loan Documents shall be governed by
and construed under the laws of the Commonwealth of Virginia without regard to
that state's conflict of laws principles. If the terms of this Note should
conflict with the terms of the Credit Agreement or any commitment letter that
survives closing, the terms of this Note shall control. Borrower's Accounts.
Except as prohibited by law, Borrower grants Bank a security interest in all of
Borrower's accounts with Bank and any of its affiliates. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the Commonwealth of
Virginia. Severability. If any provision of this Note or of the other Loan
Documents shall be prohibited or invalid under applicable law, such provision
shall be ineffective but only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note or other such document. Notices. Any notices to Borrower shall be
sufficiently given, if in writing and mailed or delivered to the Borrower's
address shown above or such other address as provided hereunder, and to Bank, if
in writing and mailed or delivered to Bank's office address shown above or such
other address as Bank may specify in writing from time to time. In the event
that Borrower changes Borrower's address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give written notice of
said change of address
Page 3
by registered or certified mail, return receipt requested, all charges prepaid.
Plural; Captions. All references in the Loan Documents to Borrower, guarantor,
person, document or other nouns of reference mean both the singular and plural
form, as the case may be, and the term "person" shall mean any individual,
person or entity. The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or interpretation of the Loan
Documents. Advances. Bank may, in its sole discretion, make other advances which
shall be deemed to be advances under this Note, even though the stated principal
amount of this Note may be exceeded as a result thereof. Posting of Payments.
All payments received during normal banking hours after 2:00 p.m. local time at
the office of Bank first shown above shall be deemed received at the opening of
the next banking day. Joint and Several Obligations. Each person who signs this
Note as a Borrower (as defined herein) is jointly and severally obligated. Fees
and Taxes. Borrower shall promptly pay all documentary, intangible recordation
and/or similar taxes on this transaction whether assessed at closing or arising
from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Special Rules. All arbitration
hearings shall be conducted in the city named in the address of Bank first
stated above. A hearing shall begin within 90 days of demand for arbitration and
all hearings shall conclude within 120 days of demand for arbitration. These
time limitations may not be extended unless a party shows cause for extension
and then for no more than a total of 60 days. The expedited procedures set forth
in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims of
less than $1,000,000.00. Arbitrators shall be licensed attorneys selected from
the Commercial Financial Dispute Arbitration Panel of the AAA. The parties do
not waive applicable Federal or state substantive law except as provided herein.
Preservation and Limitation of Remedies. Notwithstanding the preceding binding
arbitration provisions, the parties agree to preserve, without diminution,
certain remedies that any party may exercise before or after an arbitration
proceeding is brought. The parties shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under
applicable law by judicial foreclosure including a proceeding to confirm the
sale; (ii) all rights of self-help including peaceful occupation of real
property and collection of rents, set-off, and peaceful possession of personal
property; and (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding. Any claim or
controversy with regard to any party's entitlement to such remedies is a
Dispute. Waiver of Exemplary Damages. The parties agree that they shall not have
a remedy of punitive or exemplary damages against other parties in any Dispute
and hereby waive any right or claim to punitive or exemplary damages they have
now or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially. Waiver of Jury Trial. THE
PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Note, the
Credit Agreement and the other Loan Documents were executed in the Commonwealth
of Virginia and delivered to Bank in the Commonwealth of Virginia.
Page 4
TREX Company, LLC
Taxpayer Identification Number:
54-1810859
By /s/ Anthony J. Cavanna (SEAL)
---------------------------------------
Anthony J. Cavanna, Executive Vice President;
Chief Financial Officer; Treasurer
Trex Company, Inc.
Taxpayer Identification Number:
54-1910453
By: /s/ Robert G. Matheny (SEAL)
--------------------------------------
Robert G. Matheny, President
Page 5
Exhibit 10.9
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made as of
---------
November 13, 2001 among Trex Company, Inc., a Delaware corporation (the
"Company"), First Union National Bank, a national banking association (together
-------
with its successors, "First Union"), and any other Holders from time to time
-----------
hereunder.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company, Trex Company, LLC and First Union are parties to that
certain Second Amended and Restated Credit Agreement, dated as of September 30,
2001 (the "Credit Agreement"), in connection with which the Company issued to
----------------
First Union a common stock purchase warrant, dated as of the date hereof (such
common stock purchase warrant and each other common stock purchase warrant
issued by the Company in exchange, replacement or substitution therefor or for
any such subsequently issued common stock purchase warrant in accordance with
its terms, a "Warrant"), to purchase 707,557 shares of the Common Stock, par
-------
value $0.01, of the Company (the "Common Stock");
------------
WHEREAS, to induce First Union to execute and deliver the Credit Agreement,
the Company has agreed to provide the Holders (as hereinafter defined) with
certain registration rights under the Securities Act of 1933, as amended, with
respect to the shares of Common Stock issued and issuable upon exercise of any
Warrant; and
WHEREAS, unless otherwise provided in this Agreement, capitalized terms
used in this Agreement shall have the meanings set forth in Section 9;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereby
agree as follows:
1. Demand Registration.
-------------------
1.1 (a) During the Effective Period, upon the written request of
Holders of at least a majority of the Registrable Securities (the "Demand
------
Holders") that the Company effect the registration under the Securities Act of
- -------
all or part of such Demand Holders' Registrable Securities (which written
request shall specify the aggregate number of shares of Registrable Securities
requested to be registered and the proposed means of distribution), the Company
shall (i) within 30 Business Days after its receipt of such request, file with
the Securities and Exchange Commission (the "SEC") a Registration Statement with
respect to the requested registration and (ii) within five Business Days after
its receipt of such request, notify in writing any other Holders (the "Other
-----
Holders") of such request and indicate in such notice the planned initial filing
- -------
date of such Registration Statement. Such Registration Statement shall cover the
Registrable Securities requested by the Demand Holders to be registered and any
Registrable Securities that the Other Holders request, by written notice to the
Company no later than five Business Days prior to such planned initial filing
date, to be registered. Notwithstanding
the foregoing provisions of this Section 1.1(a), the Company shall not be
required to take any action pursuant to this Section 1.1(a):
(i) if the Company has previously effected one
registration pursuant to this Section 1.1(a);
(ii) if the Company shall not be eligible under the
Securities Act and the rules and regulations thereunder to effect the requested
registration on Form S-3 or any successor form ("Form S-3");
--------
(iii) if the Registrable Securities which the Company shall
have been requested by the Demand Holders to register shall have a then-current
market value of less than $5,000,000, unless such registration request is for
all remaining Registrable Securities held by all Holders (in which event such
market value condition shall not apply);
(iv) if the Company has effected a registration within the
180-day period immediately preceding such request which permitted Holders to
include Registrable Securities in such registration, and the Company has agreed
with the underwriters in connection with such prior registration not to offer
its securities publicly at any time during such 180-day period; or
(v) during the pendency of any Blackout Period;
provided, however, that the Company shall be permitted to satisfy its
obligations under this Section 1.1(a) to effect a demand registration by
amending (to the extent permitted by applicable law), within 30 Business Days
after a written request for registration, any registration statement previously
filed by the Company under the Securities Act so that such registration
statement (as amended) shall permit the disposition (in accordance with the
intended methods of disposition specified as aforesaid) of all of the
Registrable Securities for which a demand for registration has been made under
this Section 1.1(a) (including, without limitation, any Registrable Securities
requested by the Other Holders to be included in such registration). If the
Company shall so amend a previously filed registration statement, it shall be
deemed to have effected a registration for purposes of this Section 1.1.
(b) The Holders delivering a request pursuant to this
Section 1.1(a) may distribute the Registrable Securities covered by such request
by means of an Underwritten Offering or any other means, as determined by the
Demand Holders holding a majority of the Demand Holders' Registrable Securities
so requested to be registered.
(c) Subject to Section 1.1(d), a registration requested pursuant
to this Section 1.1 shall not be deemed to be effected for purposes of this
Section 1.1 if it has not been declared effective by the SEC or become effective
in accordance with the Securities Act and the rules and regulations thereunder.
(d) Holders holding a majority of the Registrable Securities to
be included in a Registration Statement pursuant to this Section 1.1 may, at any
time prior to the effective date of the Registration Statement relating to such
registration, revoke such request by providing a
2
written notice to the Company revoking such request. If a Registration Statement
is so revoked, the Demand Holders and Other Holders which requested that
Registrable Securities be included in such Registration Statement shall
reimburse the Company for all of its out-of-pocket expenses incurred in the
preparation, filing and processing of the Registration Statement, unless the
Registration Statement is revoked at the request of such Holders because there
has occurred after the date of the initial request for registration by the
Demand Holders a material adverse change in the condition, business or prospects
of the Company or because such Holders learn after the date of such initial
request that such a material adverse change had occurred prior to such date. In
the case of any such revocation other than the first such revocation, the
Company shall be deemed to have effected a registration pursuant to this
Section 1.1.
(e) In the event the Company wishes, or any holder of Common
Stock has the right, to include shares of Common Stock in a Registration
Statement pursuant to this Section 1.1, there shall be included in such
Registration Statement only that number of shares of Common Stock, if any, that
the lead managing underwriter (if the offering covered by such Registration
Statement is an Underwritten Offering) or the Company (if the offering covered
by such Registration Statement is not an Underwritten Offering) reasonably
believes will not adversely affect the offering of all of the Registrable
Securities that the Holders desire to sell for their own account. In such event,
the shares of Common Stock to be included in such offering shall consist of (i)
first, the Registrable Securities that the Holders propose to sell, (ii) second,
the shares of Common Stock the Company proposes to sell for its own account and
(iii) third, the number, if any, of other shares of Common Stock requested to be
included in such registration that, in the reasonable opinion of such lead
managing underwriter or the Company, as applicable, can be sold without
jeopardizing the success of the offering of all the shares of Common Stock that
each Holder or the Company, as the case may be, desires to sell for its own
account, such shares to be allocated among the holders thereof who have
requested that their shares be so included in accordance with the piggyback
registration provisions of their agreements with the Company.
1.2 In connection with any Underwritten Offering pursuant to Section
1.1, the Company shall have the right to select a lead managing underwriter or
underwriters to administer the offering, which lead managing underwriter or
underwriters shall be reasonably satisfactory to the Demand Holders holding a
majority of the Demand Holders' Registrable Securities to be included in the
Registration Statement; provided, however, that the Demand Holders holding a
majority of the Demand Holders' Registrable Securities to be included in the
Registration Statement shall have the right to select a co-managing underwriter
or underwriters for the offering, which co-managing underwriter or underwriters
shall be reasonably satisfactory to the Company.
1.3 (a) If the Company determines in good faith that the
registration and distribution of Registrable Securities (i) would materially
impede, delay, interfere with or otherwise materially adversely affect any
pending financing, registration of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or (ii)
would require disclosure of non-public material information that the Company has
a bona fide business purpose for preserving as confidential, as determined by
its Board of Directors in good faith, the Company shall promptly give the
Holders notice of such determination and shall be entitled to postpone the
filing or effectiveness of a Registration Statement for the shortest
3
period of time reasonably required, but in any event not to exceed 120 days with
respect to matters covered by clause (i) above, and not to exceed 90 days with
respect to matters covered by clause (ii) above (a "Blackout Period"); provided,
---------------
that a Blackout Period pursuant to clause (i) above with respect to an
Underwritten Offering proposed by the Company may, at the election of the
Company, commence on the date that is 30 days prior to the date the Company in
good faith estimates will be the date of filing of the Registration Statement
with respect to such Underwritten Offering and end no later than the date,
following the effective date of such Registration Statement, specified in the
form of underwriting agreement relating to such Underwritten Offering during
which the Company shall be prohibited from selling, offering or otherwise
disposing of Common Stock, but in no event to exceed 90 days; provided, further,
that the Company shall not obtain any deferrals under this Section 1.3(a)
aggregating in excess of 180 days in any twelve-month period. The Company shall
promptly notify each Holder of the expiration or earlier termination of a
Blackout Period.
(b) If requested by the managing underwriter of an Underwritten
Offering, each Holder shall not, and shall use its reasonable best efforts to
ensure that its Affiliates do not, directly or indirectly, sell, offer, pledge,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, warrant or right to purchase, or
otherwise dispose of or transfer, or enter into any swap or other agreement or
any arrangement that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership in, any Registrable Securities or Related
Securities held by the Holder or its Affiliates during the 180 days following
the effective date of a registration statement of the Company filed under the
Securities Act in connection with such Underwritten Offering, except for
Registrable Securities included in such registration, provided, however, that,
in each case, substantially all executive officers and directors of the Company
and substantially all holders of 5% or more of the outstanding shares of Common
Stock are similarly obligated. If so requested, each Holder shall enter, and
shall use its reasonable best efforts to ensure that all of its Affiliates
holding Related Securities enter, into a lock-up agreement with the applicable
underwriters that is consistent with the agreement in the preceding sentence.
2. Piggyback Registration Rights.
-----------------------------
(a) If, during the Effective Period, the Company shall propose to file
a registration statement under the Securities Act relating to the public
offering of Common Stock (other than in connection with an Excluded
Registration) for the Company's own account or for the account of any holder or
holders of Common Stock (the "Initiating Holder") and on a form and in a manner
-----------------
that would permit the registration of Registrable Securities for sale to the
public under the Securities Act, the Company shall (i) give written notice at
least 15 Business Days prior to the filing thereof to each Holder, specifying
the approximate date on which the Company proposes to file such registration
statement and advising such Holder of its right to have any or all of the
Registrable Securities included among the securities to be covered thereby, and
(ii) at the written request of any such Holder given to the Company within 15
days after the Holder's receipt of written notice from the Company, include
among the securities covered by such registration statement the number of
Registrable Securities which such Holder (a "Requesting Holder") shall have
-----------------
requested be so included (subject, however, to reduction in accordance with
Section 2(b)).
4
(b) Each Holder wishing to participate in an offering pursuant to
Section 2(a) may include Registrable Securities in any Registration Statement
relating to an offering pursuant to Section 2(a) only to the extent that the
inclusion of such Registrable Securities shall not reduce (i) the number of
shares of Common Stock to be offered and sold by the Company or any Initiating
Holder pursuant thereto or (ii) the number of shares of Common Stock that any
Institutional Investor or Management Holder elects to offer and sell pursuant
thereto in accordance with the Existing Registration Rights Agreement. If the
lead managing underwriter for an Underwritten Offering pursuant to Section 2(a)
determines that marketing factors require a limitation on the number of
Registrable Securities to be offered and sold by Requesting Holders in such
offering, there shall be included in such offering only that number of
Registrable Securities, if any, that such lead managing underwriter reasonably
believes will not adversely affect the offering of all of the shares of Common
Stock that the Company wishes to sell for its own account, that any Initiating
Holder wishes to sell for its own account, or that any Institutional Investor or
Management Holder wishes to sell for its own account in accordance with the
Existing Registration Rights Agreement. In such event, or otherwise in
connection with any offering other than an Underwritten Offering in which the
inclusion of Registrable Securities could adversely affect the offering of all
of the shares of Common Stock that the Company or the Initiating Holder wishes
to sell for its own account or that the Institutional Investors or Management
Holders wish to sell for their own account in accordance with the Existing
Registration Rights Agreement, as reasonably determined by the Company, the
securities to be included in such offering shall consist of (i) first, the
securities the Company or the Initiating Holder, as the case may be, proposes to
sell, (ii) second, the number, if any, of securities that are proposed to be
sold pursuant to the Existing Registration Rights Agreement, (iii) third, the
number, if any, of Registrable Securities that are requested to be included in
such registration that, (a) in an Underwritten Offering, in the opinion of the
lead managing underwriter of such Underwritten Offering, can be sold without
adversely affecting the offering of all of the securities that the Company and
any Initiating Holder wish to sell for their own account and that any
Institutional Investors and Management Holders wish to sell for their own
account in accordance with the Existing Registration Rights Agreement, or (b) in
an offering other than an Underwritten Offering, can be sold without adversely
affecting the offering of all of the securities that the Company and any
Initiating Holder wish to sell for their own account and that any Institutional
Investors and Management Holders wish to sell for their own account in
accordance with the Existing Registration Rights Agreement, as reasonably
determined by the Company, such amount of Registrable Securities to be allocated
on a pro rata basis among the Holders of Registrable Securities who have
requested that their securities be so included based on the number of
Registrable Securities that each Holder thereof has requested to be so included,
and (iv) fourth, any other securities which, after the date hereof, become
subject to registration rights with respect to such registration.
(c) Nothing in this Section 2 shall create any liability on the part
of the Company to any Holder if for any reason the Company shall decide not to
file a registration statement proposed to be filed under Section 2(a) or to
withdraw such registration statement subsequent to its filing, regardless of any
action whatsoever that a Holder may have taken, whether as a result of the
issuance by the Company of any notice hereunder or otherwise.
5
3. Procedures. In connection with the registration obligations of the
----------
Company under Sections 1 and 2, the Company shall:
(a) (i) prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities on Form S-3 in the event of a
registration pursuant to Section 1 (if the Company shall then be eligible to
effect the requested registration on Form S-3) or on Form S-3 or such other form
which counsel to the Company shall deem appropriate in the event of a
registration pursuant to Section 2 and (ii) use its reasonable best efforts to
cause such Registration Statement to become effective and to remain effective
for the applicable period specified in Section 3(b);
(b) prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement and such amendments and supplements to
the Prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration or as may be required by the rules,
regulations or instructions applicable to the registration form utilized by the
Company or by the Securities Act or rules and regulations thereunder necessary
to keep such Registration Statement effective (i) in the case of an Underwritten
Offering, until each underwriter has completed the distribution of all
securities purchased by it and (ii) in the case of any other registration, for
up to 120 days (or longer period in the event of a Section 3(e) Period or a
Section 3(f) Period during such offering, as specified in Section 3(e) or 3(f))
and cause the Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and otherwise to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement until the earlier of (A) such 120th day (or such longer
period) and (B) such time as all Registrable Securities covered by such
Registration Statement have ceased to be Registrable Securities;
(c) furnish to each Holder of such Registrable Securities such number
of copies of such Registration Statement and of each amendment and post-
effective amendment thereto, any Prospectus or Prospectus supplement and such
other documents as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities by such Holder (the Company hereby
consenting to the use (subject to the limitations set forth in Section 4(b)) of
the Prospectus or any amendment or supplement thereto in connection with such
disposition);
(d) use its reasonable best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request, and to do any and all other acts and things which may be
reasonably necessary to enable such Holder to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Holder, except that
the Company shall not be required for any such purpose to qualify generally to
do business as a foreign corporation in any jurisdiction where, but for the
requirements of this Section 3(d), it would not be obligated to be so qualified,
to subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) notify each Holder of any such Registrable Securities covered by
such Registration Statement, at any time when a Prospectus relating to such
Registration Statement is required to be delivered under the Securities Act
within the applicable period referred to in
6
Section 3(b), that the Company has become aware that the Prospectus included in
such Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing (the period during which the Holders are required in
such case pursuant to Section 4(b) to refrain from effecting public sales or
distributions of Registrable Securities being referred to as a "Section 3(e)
------------
Period"), and prepare and furnish to such Holder, as soon as reasonably
- ------
practicable, a reasonable number of copies of an amendment to such Registration
Statement or supplement to such related Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and the period for which such Registration Statement shall be kept
effective shall be extended by the number of days in the Section 3(e) Period;
(f) in the event of the issuance of any stop order of which the
Company is aware suspending the effectiveness of such Registration Statement, or
of any order suspending or preventing the use of any related Prospectus or
suspending the qualification of any Registrable Securities included in such
Registration Statement for sale in any jurisdiction, notify each Holder of any
Registrable Securities covered by such Registration Statement of such issuance
and use its reasonable best efforts promptly to obtain the withdrawal of such
stop order or other order, and the period for which such Registration Statement
shall be kept effective shall be extended by a number of days equal to the
number of days between the issuance of any stop order or other order and such
Holder's receipt of notice from the Company of the withdrawal thereof (a
"Section 3(f) Period"); and
- --------------------
(g) use its reasonable best efforts to comply, and to cause its
Affiliates to comply, with Regulation M under the Exchange Act in connection
with any distribution of Registrable Securities by any Holder pursuant to such
Registration Statement.
4. Conditions of Obligation to Register Shares. The obligations of
-------------------------------------------
the Company under this Agreement are subject to the conditions set forth in this
Section 4.
(a) As a condition to the Company's obligation under this Agreement to
cause Registrable Securities of any Holder to be included in a Registration
Statement, such Holder shall timely provide the Company with all of the
information required to be provided in the Registration Statement with respect
to such Holder pursuant to Items 507 and 508 of Regulation S-K under the
Securities Act (or any successor Items) or as otherwise may reasonably be
required by the Company in connection with the Registration Statement.
(b) Each Holder shall comply with the prospectus delivery requirements
of the Securities Act in connection with the offer and sale of Registrable
Securities made by such Holder pursuant to any Registration Statement. Upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 3(e) or Section 3(f), each Holder shall forthwith
discontinue the disposition of Registrable Securities pursuant to the Prospectus
or Registration Statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) or such
7
Holder's receipt of notice from the Company of the withdrawal of any stop order
or other order referred to in Section 3(f), and, if so directed by the Company,
shall deliver to the Company all copies, other than permanent files copies then
in such Holder's possession, of the Prospectus covering such Registrable
Securities at the time of receipt of such notice.
(c) To the extent required by the Securities Act or the rules or
regulations thereunder, as reasonably determined by the Company, a Holder shall
consent to disclosure in any Registration Statement to the effect that such
Holder is or may be deemed to be an underwriter for purposes of the Securities
Act in connection with the offering of Registrable Securities included in such
Registration Statement.
(d) Each Holder shall comply, and shall cause its Affiliates to
comply, with Regulation M under the Exchange Act in connection with the offer
and sale of Registrable Securities made by such Holder pursuant to any
Registration Statement. Each Holder shall use its reasonable best efforts to
provide the Company with such information about such Holder's offer and sale of
Registrable Securities pursuant to any Registration Statement as the Company
shall reasonably require to enable the Company and its Affiliates to comply with
Regulation M under the Exchange Act in connection with any such offer and sale.
5. Non-Subordination. From and after the date of this Agreement, the
-----------------
Company shall not grant any piggyback registration rights to any other Person
which are superior to the piggyback registration rights granted to the Holders
pursuant to Section 2.
6. Registration Expenses. Except as otherwise provided in this
---------------------
Agreement, the Company shall bear all expenses incident to the Company's
performance of or compliance with this Agreement, including, without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses
of the Company, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (if any) (excluding
discounts and commissions) and other Persons retained by the Company. Each
Holder shall pay all underwriting discounts and commissions, if any, all
transfer taxes, if any, and all documentary stamp taxes, if any, relating to the
sale or disposition of such Holder's Registrable Securities pursuant to a
Registration Statement, and all fees and expenses of counsel to such Holder.
7. Indemnification; Contribution.
-----------------------------
(a) The Company shall indemnify and hold harmless each Holder and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) against all losses,
claims, damages, liabilities and expenses (including reasonable attorneys' fees,
disbursements and expenses, as incurred) (collectively, "Losses") incurred by
------
such party pursuant to any actual or threatened action, suit, proceeding or
investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in, or any omission or alleged omission
of a material fact required to be stated in, the Registration Statement,
Prospectus or preliminary Prospectus or any amendment or supplement to any of
the foregoing or necessary to make the statements therein (in the case of a
Prospectus or a preliminary Prospectus, in the light of the circumstances then
existing) not
8
misleading, except in each case insofar as such statements or omissions arise
out of or are based upon (i) any such untrue statement or alleged untrue
statement or omission or alleged omission made in reliance on and in conformity
with information with respect to such Holder furnished in writing to the Company
by such Holder or its counsel expressly for use therein, (ii) the use of any
Prospectus after such time as the obligation of the Company to keep effective
the Registration Statement of which such Prospectus forms a part has expired or
(iii) the use of any Prospectus after such time as the Company has advised such
Holder that the filing of an amendment or supplement thereto is required, except
such Prospectus as so amended or supplemented. Notwithstanding the foregoing
provisions of this Section 7(a), the Company shall not be liable to any Holder
or to any Person who controls such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) under the indemnity
agreement in this Section 7(a) for any Losses that arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Prospectus if either (i) (A) such Holder failed to send or
deliver a copy of the Prospectus with or prior to the delivery of written
confirmation of the sale of Registrable Securities by such Holder to the Person
asserting the claim from which such Losses arise and (B) the Prospectus would
have corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, or (ii) (x) such untrue statement or alleged
untrue statement or omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and (y) having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus, as so
amended or supplemented, with or prior to the delivery of written confirmation
of the sale of Registrable Securities by such Holder to the Person asserting the
claim from which such Losses arise.
(b) In connection with any Registration Statement filed pursuant
hereto, each Holder of Registrable Securities to be covered thereby shall
indemnify and hold harmless the Company, its directors and officers, and each
Person, if any, who controls the Company (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and all other Holders
against all Losses incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in, or any
omission or alleged omission of a material fact required to be stated in, the
Registration Statement, Prospectus or preliminary Prospectus or any amendment or
supplement to any of the foregoing or necessary to make the statements therein
(in case of a Prospectus or preliminary Prospectus, in the light of the
circumstances then existing) not misleading, but only to the extent that any
such untrue statement or omission is made in reliance on and in conformity with
information with respect to such Holder furnished in writing to the Company by
such Holder or its counsel specifically for use therein; provided, however, that
the liability of each Holder hereunder shall be limited to the proportion of any
such Losses that is equal to the proportion that the net proceeds from the sale
of Registrable Securities sold by such Holder under such Registration Statement
bears to the total net proceeds from the sale of all securities sold thereunder,
but not in any event to exceed the net proceeds received by such Holder from the
sale of Registrable Securities covered by such Registration Statement.
(c) Any Person entitled to indemnification hereunder agrees to give
prompt written notice to the indemnifying party after the receipt by such
indemnified party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat
9
thereof made in writing for which such indemnified party may claim
indemnification or contribution pursuant to this Agreement, provided that
failure to give such notification shall not affect the obligations of the
indemnifying party pursuant to this Section 7 except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation, unless in the reasonable judgment of any
indemnified party, based on the written opinion of counsel, a conflict of
interest is likely to exist between the indemnifying party and such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall not be liable for the fees and expenses
of (i) more than one counsel for all Holders of Registrable Securities who are
indemnified parties, selected by the Holders of a majority of the Registrable
Securities who are indemnified parties (which selection shall be reasonably
satisfactory to the Company), (ii) more than one counsel for the underwriters in
an Underwritten Offering or (iii) more than one counsel for the Company, in each
case in connection with any one action or separate but similar or related
actions. An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim shall not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party, based on the written opinion of counsel, a conflict of interest is likely
to exist between an indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel, provided that
the indemnifying party shall not be liable for the fees and expenses of (i) more
than one counsel for all Holders of Registrable Securities who are indemnified
parties, selected by the Holders of a majority of the Registrable Securities who
are indemnified parties (which selection shall be reasonably satisfactory to the
Company), (ii) more than one counsel for the underwriters in an Underwritten
Offering or (iii) more than one counsel for the Company, in each case in
connection with any one action or separate but similar or related actions. No
indemnifying party, in defense of any such action, suit, proceeding or
investigation, shall, except with the consent of each indemnified party, consent
to the entry of any judgment or entry into any settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such action,
suit, proceeding or investigation to the extent such liability is covered by the
indemnity obligations set forth in this Section 7. No indemnified party shall
consent to entry of any judgment or entry into any settlement without the
consent of each indemnifying party.
(d) If the indemnification from the indemnifying party provided for in
this Section 7 is unavailable to an indemnified party hereunder in respect to
any Losses, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Losses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified party in
10
connection with the actions which resulted in such Losses, as well as any other
relevant equitable considerations; provided, however, that the liability of each
Holder hereunder shall be limited to the proportion of any such Losses that is
equal to the proportion that the net proceeds from the sale of Registrable
Securities sold by such Holder under a Registration Statement bears to the total
net proceeds from the sale of all securities sold thereunder, but not in any
event to exceed the net proceeds received by such Holder from the sale of
Registrable Securities covered by such Registration Statement. The relative
fault of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question, including any
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7(c), any legal or other fees and expenses
reasonably incurred by such indemnified party in connection with any
investigation or proceeding. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the consideration referred to in this Section 7(d). If indemnification is
available under this Section 7, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in Section 7(a) or 7(b), as the
case may be, without regard to the relative fault of such indemnifying parties
or indemnified party or any other equitable consideration provided for in this
Section 7(d).
(e) The provisions of this Section 7 shall be in addition to any
liability which any indemnifying party may have to any indemnified party and
shall survive the termination of this Agreement.
8. Participation in Underwritten Offerings. No Holder may participate in
---------------------------------------
any Underwritten Offering pursuant to this Agreement unless such Holder (i)
agrees to sell Registrable Securities on the basis provided in any underwriting
arrangements approved by the Company and (ii) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
9. Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following meanings:
"Affiliate" means, with respect to any Person, at any time, any other
----------
Person that, alone or together with any other Person, directly or indirectly
controls, or is controlled by, or is under common control with such Person,
provided that no stockholder of the Company shall be deemed an Affiliate of any
other stockholder solely by reason of any investment in the Company. For
purposes of this definition, the term "control" (including with correlative
-------
meanings, the terms "controlling," "controlled by" and "under common control
----------- ------------- --------------------
with"), as used with respect to any Person, shall mean the possession, directly
- ----
or indirectly, of the power to direct or cause the
11
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" means a day on which the principal offices of the SEC
------------
in Washington, D.C. are open to accept filings or, in the case of determining a
date on which any payment is due, any day which shall not be a legal holiday or
a day on which banking institutions in New York City, New York or the
Commonwealth of Virginia generally are authorized or required by law or other
governmental actions to close.
"Effective Period" means the period commencing (i) on April 1, 2002
----------------
and (ii) ending on January 31, 2005.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
or any successor federal statute, as the same shall be in effect from time to
time. Reference to a particular section of the Securities Exchange Act of 1934,
as amended, shall include reference to the comparable section, if any, of any
such successor federal statute.
"Excluded Registration" means a registration of Common Stock under the
---------------------
Securities Act pursuant to a registration statement filed (i) on Form S-4 or
Form S-8 or any successor forms, (ii) in connection with an exchange offer or an
offering of securities solely to existing stockholders of the Company or
employees of the Company or its subsidiaries or (iii) in connection with an
offering of Common Stock issuable upon the conversion or exercise of other
securities.
"Existing Registration Rights Agreement" mean that certain Registration
--------------------------------------
Rights Agreement, dated as of April 7, 1999, as amended from time to time, among
the Company, each of the Institutional Investors named on Schedule A thereto and
each of the Management Holders named on Schedule B thereto.
"Holder" means First Union and, subject to Section 10(b), any wholly
------
owned subsidiary of First Union to which First Union has transferred any Warrant
or Registrable Securities and which has agreed to become bound by the provisions
of this Agreement in accordance with Section 10(b), but only so long as First
Union or such other wholly owned subsidiary of First Union holds Registrable
Securities.
"Institutional Investor" means each of the Institutional Investors
----------------------
named on Schedule A to the Existing Registration Rights Agreement that is
entitled to registration rights thereunder.
"Management Holder" each of the Management Holders named on Schedule B
-----------------
to the Existing Registration Rights Agreement that is entitled to registration
rights thereunder.
"Person" means any individual, corporation, partnership, limited
------
liability company, limited liability partnership, firm, joint venture,
association, joint-stock company, trust or unincorporated organization.
12
"Prospectus" means the prospectus included in any Registration
----------
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by any Registration Statement, and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Registrable Securities" means (i) any shares of Common Stock issued
----------------------
or issuable upon exercise of any Warrant and (ii) any shares of Common Stock
issued or issuable with respect to the shares of Common Stock referred to in
clause (i) above by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. For the purposes of this Agreement, any particular Registrable
Securities shall cease to be Registrable Securities on the date and to the
extent that (i) a Registration Statement covering such Registrable Securities
has been declared effective under the Securities Act and such Registrable
Securities have been disposed of pursuant to such effective Registration
Statement, (ii) such Registrable Securities have been distributed to the public
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, (iii) such Registrable Securities have been otherwise issued,
transferred or disposed of, certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company and, at
such time, subsequent transfer or disposition of such securities shall not
require registration of such securities under the Securities Act, (iv) all such
Registrable Securities held by any Holder may be sold by such Holder without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act or (v) such Registrable
Securities have ceased to be outstanding.
"Registration Statement" means any registration statement of the
----------------------
Company referred to in Section 1 or 2, including any Prospectus, amendments and
supplements to any such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in any
such registration statement.
"Related Securities" means any securities of the Company similar or
------------------
identical to any of the Registrable Securities, including, without limitation,
Common Stock and all options, warrants, rights and other securities convertible
into, or exchangeable or exercisable for, Common Stock.
"Securities Act" means the Securities Act of 1933, as amended, or any
--------------
successor federal statute, as the same shall be in effect from time to time.
Reference to a particular section of the Securities Act of 1933, as amended,
shall include reference to the comparable section, if any, of any such successor
federal statute.
"Underwritten Offering" shall mean an underwritten offering in which
---------------------
securities of the Company are sold to an underwriter for reoffering to the
public.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or
13
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent thereto of Holders of a majority of the
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
departure from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose securities are requested to be
registered pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by Holders of at
least a majority of the Registrable Securities requested to be registered by
such Holders pursuant to such Registration Statement; provided that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence. Each
Holder of Registrable Securities outstanding at the time of any such amendment,
modification, supplement, waiver or consent or thereafter shall be bound by any
such amendment, modification, supplement, waiver or consent effected pursuant to
this Section 10(a), whether or not any notice, writing or marking indicating
such amendment, modification, supplement, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(b) Successors and Assigns; Binding Effect. The right to have
--------------------------------------
Registrable Securities registered pursuant to Sections 1 and 2 may be only
assigned (but only with all related obligations hereunder) by First Union in
connection with a transfer of any Warrant or any Registrable Securities to a
wholly owned subsidiary of First Union which, after such transfer, holds at
least 20% of the Registrable Securities, provided that such assignment of rights
under this Agreement shall be effective only if (i) immediately thereafter the
further disposition of such securities by such transferee is restricted under
the Securities Act and (ii) such transferee agrees in writing to become a Holder
under this Agreement and to be bound by the provisions hereof. Except as set
forth above, this Agreement and the respective rights and obligations hereunder
shall not be assigned by any party except with the prior written consent of the
non-assigning party, which consent shall be subject to the sole discretion of
the non-assigning party. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and any successor and permitted assign thereof.
Except to the extent provided in Section 7, nothing in this Agreement, expressed
or implied, is intended to confer on any Person other than the parties hereto
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
(c) Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(d) Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
(e) Descriptive Headings. The descriptive headings of this Agreement
--------------------
are inserted for convenience only and do not constitute a part of this
Agreement.
14
(f) Notices. All notices and other communications given or made
-------
pursuant hereto, unless otherwise specified, shall be in writing and shall be
deemed to be effectively given as follows: (i) upon personal delivery to the
party to be notified; (ii) when delivered by facsimile, if delivered on or
before 5:00 p.m., New York City time, and, if not, then on the next Business Day
(with hard copy (which shall not constitute notice) sent for next Business Day
delivery by a nationally recognized overnight courier); (iii) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one Business Day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices and communications shall be sent to the
parties hereto at the respective addresses set forth below, or as notified by
such party from time to time at least ten days prior to the effectiveness of
such notice:
If to the Company:
Trex Company, Inc.
160 Exeter Drive
Winchester, Virginia 22603-8605
Attn: General Counsel
Facsimile: (540) 542-6887
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
8300 Greensboro Drive
Suite 1100
McLean, Virginia 22102
Attn: Richard J. Parrino, Esquire
Facsimile: (703) 610-6200
If to the Holder:
First Union National Bank
301 South College Street, DC-5
One First Union - 5th Floor
Charlotte, North Carolina 28288-0760
Attn: Barbara Carroll
Facsimile: (704) 374-6319
with a copy (which shall not constitute notice) to:
Kutak Rock LLP
Suite 800
Bank of America Center
1111 East Main Street
Richmond, Virginia 23219-3500
Attn: Fiona Tower, Esquire
Facsimile: (804) 783-6192
15
Any Person other than First Union that becomes a Holder hereunder
shall provide its address and facsimile transmission number to the Company,
which shall promptly provide such information to each other Holder.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT GIVING
EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
(h) Termination. This Agreement shall terminate when there are no
-----------
Registrable Securities remaining, except that any liabilities or obligations
under Sections 6 and 7 shall remain in effect in accordance with their terms.
No termination of any provision of this Agreement shall relieve any party of any
liability for any breach of such provision occurring prior to such termination.
(i) Entire Agreement. This Agreement is intended by the parties to
----------------
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and the
registration rights granted by the Company with respect to the Registrable
Securities. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein, with respect to the
registration rights granted by the Company with respect to the Registrable
Securities. This Agreement supersedes all prior agreements and undertakings
among the parties with respect to such registration rights. No party hereto
shall have any rights, duties or obligations other than those specifically set
forth in this Agreement.
[signature page follows]
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
First Union National Bank, Trex Company, Inc.
a national banking association
By: /s/ Barbara Gell Carroll By: /s/ Robert Matheny
------------------------------------ -------------------------------
Name: Barbara Gell Carroll Name: Robert Matheny
---------------------------------- -----------------------------
Title: Senior Vice President/Director Title: President
--------------------------------- ----------------------------
17
Exhibit 10.10
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS.
EXCEPT AS OTHERWISE SET FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF SUCH
SHARES MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
(A) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL TO THE HOLDER
THEREOF, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO TREX
COMPANY, INC., THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OR SUCH LAWS, OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT,
AND (B) EXCEPT IN ACCORDANCE WITH THE OTHER REQUIREMENTS SET FORTH IN THIS
WARRANT.
TREX COMPANY, INC.
Common Stock Purchase Warrant
Expiring January 31, 2005
No. W-1 November 13, 2001
This certifies that, for value received, First Union National Bank, a
national banking association (together with its successors and registered
assigns hereunder, the "Holder"), is entitled to purchase from Trex Company,
Inc., a Delaware corporation (together with its successors and assigns, the
"Company"), Seven Hundred and Seven Thousand Five Hundred and Fifty-Seven
(707,557) fully paid and nonassessable shares (the "Number of Shares") of the
common stock, par value $.01 per share, of the Company (the "Common Stock"),
subject to the terms and conditions set forth below in this Warrant. The
purchase price per share of Common Stock issuable under this Warrant (the
"Purchase Price") shall be the average of the Market Price (as hereinafter
defined) of the Common Stock for the twenty (20) consecutive trading days
beginning on October 30, 2001, rounded down to the nearest cent ($.01). The
Number of Shares and the Purchase Price are subject to adjustment from time to
time as set forth below in this Warrant.
The term "Warrant" as used herein means this Warrant and all other Common
Stock Purchase Warrants issued by the Company in exchange, replacement or
substitution therefor. Certain other capitalized terms used in this Warrant are
defined in Section 8.
1. Exercise.
--------
1.1. Time for Exercise. Subject to the terms and conditions of this
-----------------
Warrant, this Warrant may be exercised to purchase from the Company Three
Hundred and Fifty-Three Thousand Seven Hundred and Seventy-Nine (353,779)
shares of Common Stock at any time and from time to time during the period
commencing on the date that the Purchase Price is
determined in accordance with the first paragraph of this Warrant and expiring
at 5:00 p.m., New York City time, on January 31, 2005 (the "Expiration Date").
Subject to the following sentence and the other terms and conditions of this
Warrant, this Warrant may be exercised to purchase from the Company Three
Hundred and Fifty-Three Thousand Seven Hundred and Seventy-Eight (353,778)
additional shares of Common Stock (the "Remaining Number of Shares") at any time
and from time to time during the period commencing on July 1, 2002 and expiring
on the Expiration Date, but only if the Company Repayment Event shall not have
occurred. If the Company Repayment Event shall have occurred, this Warrant shall
not at any time become or be exercisable for the Remaining Number of Shares and,
effective as of the date and time of the Company Repayment Event, the
conditional right of the Holder hereunder to purchase the Remaining Number of
Shares shall terminate and be of no further force or effect.
1.2. Manner of Exercise. Subject to Section 1.1 and the other terms and
------------------
conditions of this Warrant, this Warrant may be exercised by the Holder, in
whole or in part, on any date (i) by surrender of this Warrant to the Company at
its principal executive offices during normal business hours together with the
exercise form, in the form attached hereto as Exhibit A, duly completed and
---------
signed, (a) setting forth, among other information, the number of shares of
Common Stock for which this Warrant is then being exercised (the "Exercise
Number") and the aggregate purchase price therefor and (b) containing the
representations and warranties set forth in such exercise form, and (ii) by
delivery of payment for the Exercise Number, in cash or by certified or official
bank check payable to the order of the Company, in an amount equal to the
Exercise Number multiplied by the Purchase Price.
1.3. Effect of Exercise. Within five (5) Business Days after any valid
------------------
exercise of this Warrant, in whole or in part, the Company shall cause to be
issued in the name of, and delivered to, the Holder or, subject to Section 2,
such other Person (upon payment by the Holder of any applicable transfer taxes
or other charges pursuant to Section 2.9) as the Holder may direct in writing to
the Company, (i) a certificate or certificates representing the number of shares
of Common Stock to which the Holder shall be entitled upon such exercise
(subject to Section 1.4) and (ii) if this Warrant is exercised only in part, a
new Warrant of like tenor representing the Number of Shares not purchased in
such partial exercise. Such shares of Common Stock issuable upon such exercise
of this Warrant shall be deemed to have been issued, and the Person receiving
such shares of Common Stock shall be deemed to be the holder of record thereof,
immediately prior to the close of business on the date the actions required
pursuant to Section 1.2 shall have been completed or, if on such date the stock
transfer books of the Company are closed, immediately prior to the close of
business on the next Business Day. Notwithstanding the foregoing provisions of
this Section 1.3, the Company shall not be required to deliver (or cause to be
delivered) certificates representing shares of Common Stock issued upon any
exercise of this Warrant if, as of the date of such exercise, transfers of the
Common Stock shall be effectuated in book-entry form.
1.4. No Fractional Shares. No fractional shares of Common Stock shall be
--------------------
issued upon any exercise of this Warrant. If any exercise of this Warrant would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be disregarded and, in the sole discretion of the Company, (i) the
number of shares of Common Stock issuable upon such exercise of this Warrant
shall be rounded up to the next higher number of whole shares of Common Stock or
(ii) the Company shall pay to the Holder, in lieu of such fractional share, cash
2
in an amount equal to the product of (x) such fraction multiplied by (y) the
Market Price on the date of such exercise.
1.5. No De Minimis Exercises. This Warrant shall not be exercised unless
-----------------------
the Exercise Number is (i) equal to or greater than one thousand (1,000) shares
of Common Stock (which number shall be adjusted proportionately to any
adjustment to the Number of Shares pursuant to Section 5) or (ii) if less than
one thousand (1,000) shares of Common Stock (subject to adjustment as
aforesaid), all of the shares of Common Stock for which this Warrant shall then
be exercisable.
2. Restrictions on Transfer of Warrants and Common Stock.
-----------------------------------------------------
2.1. Restrictive Legends. Except as otherwise permitted by this Section
-------------------
2, each Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS.
EXCEPT AS OTHERWISE SET FORTH HEREIN, NEITHER THIS WARRANT NOR ANY OF SUCH
SHARES MAY BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
(A) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL TO THE HOLDER
THEREOF, IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO TREX
COMPANY, INC., THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OR SUCH LAWS, OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT,
AND (B) EXCEPT IN ACCORDANCE WITH THE OTHER REQUIREMENTS SET FORTH IN THIS
WARRANT."
Except as otherwise permitted by this Section 2, each certificate
representing Common Stock issued upon the exercise of a Warrant and each stock
certificate issued upon the transfer of any such Common Stock shall be stamped
or otherwise imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS. THE SHARES MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT
OR AN OPINION OF COUNSEL TO THE HOLDER THEREOF, IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO TREX COMPANY, INC., THAT REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OR SUCH LAWS, OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER THE SECURITIES ACT."
3
In addition to the foregoing legends, each Warrant and each certificate
representing Common Stock issued upon the exercise of a Warrant shall have such
marks of identification or designation and such legends or endorsements thereon
as the Company deems appropriate, so long as such marks, legends or endorsements
are not inconsistent with the provisions of this Warrant, or as are required to
comply with any applicable law, rule or regulation or with any rule or
regulation of any stock exchange or automated quotation system on which the
Common Stock may be listed or quoted from time to time.
2.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any sale,
------------------------------------------------
pledge, transfer, assignment or other disposition (any such transaction, a
"Transfer") of any Restricted Securities which is not registered under an
effective registration statement under the Securities Act, the holder thereof
shall give written notice to the Company of such holder's intention to
effectuate such Transfer and shall comply in all other respects with this
Section 2. Each such notice, which shall be given to the Company at least ten
(10) Business Days prior to the date of the Proposed Transfer, shall (i)
describe the manner and circumstances of the proposed Transfer and (ii) unless
such proposed Transfer shall be effectuated in accordance with Rule 144 under
the Securities Act, be accompanied by an opinion of counsel to such holder, in
form, substance and scope reasonably acceptable to the Company, to the effect
that registration of such Transfer is not required under the Securities Act or
applicable state securities laws.
2.3. Termination of Securities Law Restrictions. The restrictions on
------------------------------------------
Transfers of Restricted Securities imposed by Section 2.2 shall cease and
terminate as to any particular Restricted Securities (i) when the Transfer of
such Restricted Securities shall have been registered and effectuated under the
Securities Act or (ii) when, in the opinion of counsel to the holder thereof
(which opinion shall be in form, substance and scope reasonably acceptable to
the Company), such restrictions are no longer required in order to ensure
compliance with the Securities Act and applicable state securities laws.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes or other charges, if any,
pursuant to Section 2.9), new Warrants of like tenor or certificates
representing the Common Stock, as the case may be, not bearing the applicable
legends required by Section 2.1.
2.4. Restrictions on Transfers Prior to July 1, 2002. Prior to July 1,
-----------------------------------------------
2002, the Holder shall not Transfer any portion of this Warrant pursuant to
which any of the Remaining Number of Shares may become issuable. On and after
July 1, 2002, in the event the Company Repayment Event shall not have occurred,
the Holder shall have the right to make any such Transfer in compliance with the
other provisions of this Section 2.
2.5. No Transfers to Non-Affiliates. No holder of a Warrant shall
------------------------------
Transfer any portion of such Warrant to any Person other than (i) First Union
National Bank, a national banking association ("First Union"), or any successor
thereto, or (ii) a wholly owned subsidiary of First Union.
2.6. No Transfers to Competitors. Notwithstanding any other provision of
---------------------------
this Section 2, the Holder shall not Transfer all or any portion of this Warrant
or the shares of Common Stock issuable upon exercise hereof to any Competitor of
the Company. For the purposes of this Warrant, the term "Competitor" means any
Person (other than the Company or
4
any subsidiary thereof) which is engaged as its principal line of business in
the Company's Business. For the purposes of this Warrant, the term "Company's
Business" means the manufacture and sale of decking products for residential and
commercial decking and for non-decking product applications, including, without
limitation, applications for parks and recreational areas, floating and fixed
docks and other marine applications, and landscape edging.
2.7. Manner of Transfer of Warrant. Within ten (10) Business Days after
-----------------------------
any surrender of this Warrant to the Company in connection with a Transfer that
complies with this Section 2, together with (i) an assignment form, in the form
of Exhibit B attached hereto, duly completed and signed, and (ii) any other
---------
applicable documentation required as a condition to such Transfer pursuant to
this Section 2 (which shall include an investment letter, executed by the
proposed transferee of this Warrant, containing representations and warranties
by such transferee to the same effect as the representations and warranties set
forth in Section 3 and a certification by the Holder that such Transfer complies
with Sections 2.5 and 2.6), the Company shall execute and deliver to such
transferee and, if applicable, the Holder, Warrants of like tenor evidencing the
rights of (i) such transferee to purchase the number of shares of Common Stock
specified in such assignment form and (ii) the Holder to purchase the number of
shares of Common Stock for which any untransferred portion of this Warrant is
then exercisable, which in the aggregate shall equal the Number of Shares which
may be purchased under this Warrant as of the date this Warrant is surrendered
to the Company for Transfer. Notwithstanding any other provision of this
Section 2, the Company shall not be required to effectuate any partial Transfer
of this Warrant if any new Warrant issued in exchange, replacement or
substitution therefor would represent the right to purchase fewer than one
thousand (1,000) shares of Common Stock, which number shall be adjusted
proportionately to any adjustment to the Number of Shares pursuant to Section 5.
2.8. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt from
-------------------------------------------------
the Holder of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and, in the case of any such
loss, theft or destruction of this Warrant, an indemnity agreement or security
reasonably satisfactory to the Company or, in the case of any mutilation of this
Warrant, upon surrender of this Warrant for cancellation, the Company shall,
within ten (10) Business Days thereafter, execute and deliver to the Holder a
replacement Warrant of like tenor representing the right to purchase the same
Number of Shares as this Warrant. An indemnity agreement provided by First
Union shall be satisfactory to the Company for purposes of this Section 2.8.
2.9. Transfer Taxes and Other Charges. The Company shall pay when due and
--------------------------------
payable all transfer taxes and other charges (other than any applicable income
taxes) that may be payable in connection with the preparation, issuance and
delivery of stock certificates representing shares of Common Stock issued upon
exercise of this Warrant or in connection with any transfer of this Warrant;
provided, however, that the Company shall not be required to pay any transfer
tax or other charge imposed as a result of any issuance and delivery of any such
stock certificate or Warrant registered in any name other than the name of the
initial Holder of this Warrant. The Company shall not be required to issue or
deliver any such stock certificate or Warrant until it receives evidence
satisfactory to it that any such transfer tax or other charge has been paid by
such Holder.
5
3. Representations and Warranties of the Holder. By its acceptance of this
--------------------------------------------
Warrant, the Holder shall be deemed to have represented and warranted to the
Company as follows:
3.1. Acquisition for Investment. The Holder is acquiring this Warrant and
--------------------------
the shares of Common Stock issuable upon exercise of this Warrant for its own
account, for investment and not with a view to, or for sale in connection with,
the distribution thereof within the meaning of the Securities Act.
3.2. Accredited Investor Status. The Holder is an institutional
--------------------------
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act. The Holder has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in this Warrant and the Common Stock and
is capable of bearing the economic risks of such investment. The Holder
understands that its investment in this Warrant and the Common Stock involves a
significant degree of risk.
3.3. Information. The Holder and its advisers, if any, have been
-----------
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of this Warrant and
the shares of Common Stock issuable upon exercise of this Warrant which have
been requested by the Holder or such advisers. The Holder and such advisers
have been afforded the opportunity to ask questions of the Company's management
concerning the Company, this Warrant and the shares of Common Stock issuable
upon exercise of this Warrant.
3.4. No Governmental Review. The Holder understands that no governmental
----------------------
entity has passed upon or made any recommendation or endorsement of this Warrant
or the shares of Common Stock issuable upon exercise of this Warrant.
3.5. Sale or Transfer. The Holder understands that the offering and sale
----------------
of this Warrant and the shares of Common Stock issuable upon exercise of this
Warrant have not been, and will not be, registered under the Securities Act or
any applicable state securities laws, and that such securities may not be
Transferred by the Holder unless such securities are Transferred in accordance
with Section 2 of this Warrant.
3.6. Residency. The principal offices of the Holder and the offices of
---------
the Holder in which it made its decision to purchase this Warrant and the shares
of Common Stock issuable upon exercise of this Warrant are located in Charlotte,
North Carolina.
3.7. No Consents or Approvals. The performance and exercise of this
------------------------
Warrant by the Holder shall not require any consent, order, approval or
authorization of, notification or submission to, filing with, license or permit
from, or exemption or waiver by, any governmental entity on the part of the
Holder.
4. Ownership and Exchange of Warrants.
----------------------------------
4.1. Ownership of Warrants. The Company may treat the Person in whose
---------------------
name this Warrant is registered on the register kept at the principal executive
offices of the Company as the owner and holder of this Warrant for all purposes,
notwithstanding any notice to the contrary, except that, if and when this
Warrant is properly assigned in blank, the Company may,
6
but shall not be obligated to, treat the holder thereof as the owner of this
Warrant for all purposes, notwithstanding any notice to the contrary. This
Warrant, if properly Transferred in accordance with Section 2, may be exercised
by a new holder without a new Warrant first having been issued.
4.2. Exchange of Warrants. This Warrant is exchangeable, upon the
--------------------
surrender hereof by the Holder at the principal executive offices of the Company
during normal business hours, for two or more new Warrants of like tenor
representing in the aggregate the right to purchase the number of shares of
Common Stock which may then be purchased upon exercise of this Warrant;
provided, however, that the Company shall not be required pursuant to this
Section 4.2 to issue any new Warrant that would represent the right to purchase
fewer than twenty-five thousand (25,000) shares of Common Stock, which number
shall be adjusted proportionately to any adjustment to the Number of Shares
pursuant to Section 5. Subject to the preceding sentence, each such new Warrant
shall represent the right to purchase such number of shares of Common Stock as
shall be designated by the Holder at the time of such surrender.
4.3. Terms and Conditions of New Warrants. Any reference in this Warrant
------------------------------------
to the issuance by the Company of a new Warrant "of like tenor" in exchange,
replacement or substitution for this Warrant shall mean the issuance of a new
Warrant containing the same terms and conditions as this Warrant, except that
each new Warrant shall state, in lieu of the corresponding provisions of this
Warrant, (i) the dates on which such new Warrant is issued and shall be
initially exercisable, (ii) the Number of Shares for which, and the Purchase
Price at which, such new Warrant is initially exercisable and (iii) such other
terms and conditions as shall be consistent with the provisions of this Warrant.
Any reference in this Warrant to the Remaining Number of Shares and the Company
Repayment Event, including this sentence, may be deleted from any new Warrant in
which such references are not applicable.
5. Adjustment Provisions. If any of the following events shall occur at any
---------------------
time after the date of this Warrant and prior to the Expiration Date, the
following adjustments shall be made:
5.1. Stock Splits and Reverse Stock Splits. If the outstanding shares of
-------------------------------------
Common Stock are subdivided (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) into a greater
number of shares of Common Stock, then, as of the record date for effecting such
subdivision, the Purchase Price in effect immediately prior to such subdivision
shall be reduced proportionately and the Number of Shares in effect immediately
prior to such subdivision shall be increased proportionately. If the
outstanding shares of Common Stock are combined (by any reverse stock split,
recapitalization, reorganization, reclassification or otherwise) into a smaller
number of shares of Common Stock, then, as of the record date for effecting such
combination, the Purchase Price in effect immediately prior to such combination
shall be increased proportionately and the Number of Shares in effect
immediately prior to such combination shall be reduced proportionately.
5.2. Dividends. If the Company shall declare a dividend on the Common
---------
Stock in cash, property or other securities, other than a dividend for which an
adjustment is required pursuant to Section 5.1, the Company shall, at the time
of any exercise of this Warrant after the date of record for determining the
stockholders entitled to such dividend, deliver to the Holder, in addition to
the Exercise Number for which exercise is thereby made, the amount of such
7
dividend in cash, property or other securities that would have been received by
the Holder if the Holder had exercised this Warrant for such Exercise Number
immediately prior to the close of business on the record date for the
determination of stockholders entitled to receive such dividend.
5.3. Reorganizations and Asset Sales. If the Company (i) consummates any
-------------------------------
reorganization or reclassification of the Common Stock, other than a subdivision
or combination of the Common Stock for which an adjustment is required pursuant
to Section 5.1 or a dividend for which an adjustment is required pursuant to
Section 5.2, (ii) consolidates with or merges into any other Person and is not
the continuing or surviving corporation of such consolidation or merger, (iii)
permits any other Person to consolidate with or merge into the Company in a
transaction in which the Company shall be the continuing or surviving Person,
but in connection with which the Common Stock shall be changed into or exchanged
for other securities of any other Person or any other property, or (iv) sells or
otherwise disposes of all or substantially all of its assets to any other Person
and thereafter is dissolved (any event referred to in clause (i), (ii), (iii) or
(iv) above, an "Event"), so that, as a result of any such Event, holders of the
Common Stock are entitled to receive securities or other property by reason of
their ownership of the Common Stock, then, upon any exercise of this Warrant
after the consummation of such Event, the Holder shall have the right to receive
the amount and kind of securities or other property which the Holder would have
received upon the consummation of such Event if such exercise had been effective
immediately prior to the consummation of such Event. The Company shall not
consummate any Event unless, prior to or simultaneously with the consummation of
such Event, the successor Person resulting from any such consolidation or merger
(if other than the Company), or the Person purchasing all or substantially all
of the Company's assets, assumes by a binding written instrument (i) the
performance of the Company's obligations under this Warrant, as adjusted, as
nearly as reasonably practicable, to reflect such Event, and (ii) the obligation
to deliver to the Holder such securities or other property as, in accordance
with the foregoing provisions of this Section 5.3, the Holder may be entitled to
receive.
5.4. Other Securities Adjustments. If, as a result of the operation of
----------------------------
this Section 5, the Holder is entitled to receive any securities other than
Common Stock upon any exercise of this Warrant, the number and purchase price of
such securities shall thereafter be adjusted from time to time in the same
manner as provided pursuant to this Section 5 with respect to the Common Stock.
5.5. Minimum Adjustment of Purchase Price. No adjustment of the Purchase
------------------------------------
Price shall be made in an amount of less than 1% of the Purchase Price in effect
at the time such adjustment is otherwise required to be made pursuant to this
Section 5, but any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any and all adjustments so carried forward, shall amount to at
least 1% of such Purchase Price; provided, however, that upon any exercise of
this Warrant, the Company shall make all necessary adjustments not theretofore
made to the Purchase Price by reason of the foregoing provision of this Section
5.5, up to and including the date of such exercise.
8
5.6. Notices.
-------
5.6.1. Notice of Adjustments. When any adjustment is required to be
---------------------
made pursuant to this Section 5, the Company shall (i) determine such
adjustment, (ii) prepare and retain on file a statement describing in reasonable
detail the method used in computing such adjustment and (iii) cause a copy of
such statement, together with any agreement required by Section 5.3, to be
mailed to the Holder within twenty (20) Business Days after the date on which
the circumstances giving rise to such adjustment occurred.
5.6.2. Notice of Certain Events. If at any time (i) the Company
------------------------
shall declare any dividend on the Common Stock, other than a dividend payable in
Common Stock in connection with any stock split, (ii) an Event shall occur or
(iii) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company shall give the Holder written notice
thereof at least twenty (20) Business Days prior to the date on which the books
of the Company shall be closed or before the record date shall be fixed with
respect to such event. Such notice shall also specify the date as of which the
holders of the Common Stock shall participate in any such dividend or shall be
entitled to exchange their Common Stock for securities or other property with
respect to such event. Such notice may state that any of the foregoing events
or dates is subject to the effectiveness of a registration statement under the
Securities Act, to a favorable vote or determination of stockholders, to action
by any governmental entity, or to other conditions. Failure to give any such
notice or any defect therein shall not affect the validity of any of the events
referred to in clause (i), (ii) or (iii) above.
5.7. Computations and Adjustments. Upon each computation of an adjustment
----------------------------
pursuant to this Section 5, the Purchase Price shall be rounded down to the
nearest cent ($.01) and the Number of Shares shall be rounded up to the nearest
whole share of Common Stock. Notwithstanding any changes in the Purchase Price
or the Number of Shares provided herein, this Warrant may continue to state the
initial Purchase Price and the initial Number of Shares. Alternatively, the
Company may elect to issue a new Warrant or Warrants of like tenor for any
additional shares of Common Stock issuable under this Warrant or, upon the
surrender of this Warrant, to issue a replacement Warrant evidencing the
aggregate Number of Shares and the Purchase Price to which the Holder is
entitled after any adjustment pursuant to this Section 5.
5.8. Exercise Before Payment Date. In the event that this Warrant is
----------------------------
exercised after the record date for any event requiring an adjustment pursuant
to this Section 5, but prior to the consummation of such event, the Company may
elect, but shall not be obligated, to defer issuing to the Holder any payment or
additional securities required by such adjustment until such event is
consummated; provided, however, that in any such event the Company shall deliver
a "due bill" or other appropriate instrument to the Holder transferable to the
same extent as the Common Stock issuable upon exercise of this Warrant which
shall evidence the Holder's right to receive such additional payment or
securities upon the consummation of the event requiring such adjustment.
6. Covenants.
---------
6.1. Reservation of Common Stock and Other Securities. During the period
------------------------------------------------
in which this Warrant may be exercised, the Company shall reserve and keep
available, solely for
9
issuance and delivery upon exercise of this Warrant, the number of shares of
Common Stock and, if applicable, other securities issuable from time to time
upon exercise of this Warrant, and shall take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock and, if
applicable, other securities to be sufficient for such purpose.
6.2. Valid Issuance. All securities issuable upon exercise of this Warrant
--------------
shall be duly authorized and, when issued upon such exercise, shall be validly
issued and, in the case of shares of Common Stock, fully paid and nonassessable.
6.3. Listing. The Company shall use its reasonable best efforts to cause
-------
the shares of Common Stock and, if applicable, other securities issuable upon
exercise of this Warrant to be (i) listed on any national securities exchange on
which the Common Stock or such other class of securities is then listed or (ii)
authorized for trading and quoted on the Nasdaq National Market if the Common
Stock or such other class of securities is then authorized for trading and
quoted on the Nasdaq National Market.
6.4. Delivery of Information. Within fifteen (15) Business Days after the
-----------------------
date on which the Company first sends such information to its stockholders, the
Company shall deliver to the Holder copies of all financial statements, annual
reports, proxy statements and other information which the Company shall have
sent to its stockholders generally.
7. Status of Holder.
----------------
7.1. Holder Not Deemed a Stockholder. The Holder shall not, as a holder of
-------------------------------
this Warrant, be deemed for any purpose to be the holder of the shares of Common
Stock or other securities which at any time may be issuable upon exercise of
this Warrant. Unless the Holder exercises this Warrant in accordance with its
terms, the Holder shall not have any rights of a stockholder of the Company,
including, without limitation, any right to vote for the election of directors
of the Company or upon any other matters submitted to the stockholders of the
Company at any meeting thereof, to give or withhold consent to any corporate
action by the Company or, except as expressly provided in this Warrant, to
receive any notice of any meetings or other actions affecting stockholders of
the Company.
7.2. Limitation of Liability. Unless the Holder exercises this Warrant in
-----------------------
accordance with its terms, the Holder's rights and privileges hereunder shall
not give rise to any liability of the Holder for payment of the Purchase Price
or as a stockholder of the Company, whether to the Company or to the creditors
of the Company.
8. Definitions. As used in this Warrant, the following terms shall have the
-----------
meanings set forth below:
"Business Day" means any day except Saturday, Sunday and any legal holiday
------------
or a day on which banking institutions in New York City, New York or the
Commonwealth of Virginia generally are authorized or required by law or other
governmental actions to close.
"Company Repayment Event" means the payment in full by the Company of all
-----------------------
amounts outstanding under, and the termination or retirement of, the Secured
Revolver, Term Loan A and the Letter of Credit, in each case on or before
June 30, 2002.
10
"Letter of Credit" means Letter of Credit SM413821 issued by First Union for
----------------
the account of TREX Company, LLC.
"Market Price" means, with respect to any date specified in this Warrant,
------------
the price per share of Common Stock that is equal to (i) the last sale price of
such Common Stock, regular way, on such date or, if no such sale takes place on
such date, the average of the closing bid and asked prices thereof on such date,
in each case as officially reported on the New York Stock Exchange or, if
applicable, other principal national securities exchange on which the Common
Stock is then listed or admitted to trading, (ii) if such Common Stock is not
then listed or admitted for trading on any national securities exchange but is
quoted on the Nasdaq National Market or the Nasdaq SmallCap Market System
(collectively, "Nasdaq"), the last sale price of the Common Stock on such date
as reported by Nasdaq, or if there shall have been no sales on such date, the
average of the closing bid and asked prices of the Common Stock on such date as
reported by the Nasdaq, (iii) if such Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted on Nasdaq, the
average of the closing bid and asked prices of the Common Stock on such date as
quoted on the over-the-counter market or (iv) in the event none of the foregoing
applies, the fair value thereof determined in good faith by the Board of
Directors of the Company as of the last day of the most recently completed
fiscal quarter of the Company.
"Person" means any corporation, limited liability company, partnership,
------
trust, organization, association, other entity or individual.
"Restricted Securities" means all of the following (i) any Warrant bearing
---------------------
the applicable legend or legends referred to in Section 2.1, (ii) any shares of
Common Stock which have been issued upon exercise of a Warrant and which are
evidenced by a certificate or certificates bearing the applicable legend or
legends referred to in Section 2.1 and (iii) any shares of Common Stock which
are at the time issuable upon the exercise of any Warrant and which, when so
issued, shall be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in Section 2.1.
"Secured Revolver" means the $17,000,000 "Revolving Loan" as defined in and
----------------
made pursuant to that certain Second Amended and Restated Credit Agreement dated
as of September 30, 2001, among the Company, TREX Company, LLC and First Union.
"Term Loan A" means the loan evidenced by that certain promissory note in
-----------
the principal amount of $58,000,000 dated September 30, 2001, made by the
Company and TREX Company, LLC to the order of First Union.
"Securities Act" means the Securities Act of 1933, as amended, and the rules
--------------
and regulations of the Securities and Exchange Commission thereunder, all as the
same shall be in effect at the time.
9. General Provisions.
------------------
9.1. Complete Agreement; Amendments and Waivers. This Warrant and any
------------------------------------------
documents referred to herein constitute the entire agreement of the Company and
the Holder with respect to the subject matter hereof and supersede all
agreements, representations, warranties,
11
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof. Except as provided in the last sentence of this
Section 9.1, the provisions of this Warrant or any other Warrant, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of Warrants
representing a majority of the aggregate number of shares of Common Stock
issuable under all Warrants outstanding as of such date of such consent.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions of any Warrant with respect to a matter that relates exclusively to
the rights of the holder of such Warrant and that does not affect the rights of
holders of other Warrants may be given by the holder of such Warrant; provided
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Each holder of a Warrant outstanding at the time of any such
amendment, modification, supplement, waiver or consent or thereafter shall be
bound by any such amendment, modification, supplement, waiver or consent
effected pursuant to this Section 9.1, whether or not any notice, writing or
marking indicating such amendment, modification, supplement, waiver or consent
appears on such Warrant or is delivered to such holder. The Company may amend or
supplement any Warrant without the consent of the holder of such Warrant to cure
any ambiguity or to correct any defective or inconsistent provision or clerical
omission or mistake or manifest error contained in such Warrant; provided, that
any amendment or supplement referred to in the preceding clause does not, and
shall not, in the good faith opinion of the Board of Directors of the Company,
adversely affect, adversely alter or adversely change the rights, privileges or
immunities of such holder; and provided, further, that the Company shall provide
such holder with written notice of each such amendment or supplement.
9.2. Additional Documents. The Company and the Holder agree to execute
--------------------
any and all further documents and writings and to perform such other actions
which may be or become necessary or expedient to effectuate and carry out the
provisions of this Warrant.
9.3. Notices. All notices, demands, requests, consents or other
-------
communications to be given or delivered under or by reason of the provisions of
this Warrant shall be in writing and shall be deemed to have been given when
(i) delivered personally to the recipient, (ii) telecopied to the recipient
(with hard copy (which shall not constitute notice) sent to the recipient by
reputable overnight courier service (charges prepaid) that same day), if
telecopied before 5:00 p.m. New York City time, on a Business Day, and otherwise
on the next Business Day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iv) one (1) Business Day after being sent to the recipient by reputable
overnight courier service, specifying next day delivery, with written
verification of receipt. Such notices, demands, requests, consents and other
communications shall be sent to the following Persons at the following
addresses: if to the Holder, at the address shown for such Holder on the books
of the Company, or at such other address as shall have been furnished to the
Company by notice from the Holder at least ten (10) days prior to the
effectiveness of such notice; and if to the Company, to Trex Company, Inc.,
160 Exeter Drive, Winchester, Virginia 22603-8605, Attention: General Counsel,
Facsimile No.: (540) 542-6887, or at such other address as shall have been
furnished to the Holder by notice from the Company at least ten (10) days prior
to the effectiveness of such notice.
12
9.4. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN THE COMMONWEALTH OF VIRGINIA (WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF).
9.5. No Third-Party Benefits; Successors and Assigns. None of the
-----------------------------------------------
provisions of this Warrant shall be for the benefit of, or enforceable by, any
third party. Except as provided herein to the contrary, this Warrant shall be
binding upon and inure to the benefit of the parties, their respective
successors and permitted assigns. The Holder may assign its rights and
obligations under this Warrant if such assignment complies with the requirements
of Section 2. The Company may assign its rights and obligations under this
Warrant only in connection with a merger, consolidation or sale of substantially
all of the Company's operating assets to the extent expressly permitted by, and
in compliance with all the requirements of, Section 5.3.
9.6. Severability. The validity, legality or enforceability of the
------------
remainder of this Warrant shall not be affected even if one or more of its
provisions shall be held to be invalid, illegal or unenforceable in any respect.
9.7. Descriptive Headings. The descriptive headings of the several
--------------------
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
[signature page follows]
13
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
effective as of November 13, 2001.
TREX COMPANY, INC.
By: /s/ Robert Matheny
----------------------------------
Name: Robert Matheny
--------------------------------
Title: President
-------------------------------
Attest:
By: /s/ Lynn E. MacDonald
---------------------------
Name: Lynn E. MacDonald
--------------------------
Its: Secretary
14
EXHIBIT A
---------
EXERCISE FORM
(To Be Executed Upon Exercise of Warrant)
The undersigned registered holder of the within Warrant, pursuant to the
provisions set forth therein, hereby irrevocably exercises the within Warrant
and agrees to purchase ________ shares of Common Stock of Trex Company, Inc.
(the "Company") covered by such Warrant (the "Warrant Shares"), and makes
payment herewith in full therefor at the price per share provided by such
Warrant in cash or by certified or official bank check in the aggregate amount
of $__________. The undersigned requests the Company to issue a certificate or
certificates for such _____________ Warrant Shares in the name of ____________,
whose address is __________________________________________________________,
and, if such number of Warrant Shares shall not be all of the shares of Common
Stock of the Company purchasable under the within Warrant, to issue a new
Warrant in the name of the undersigned covering the balance of the shares of
Common Stock of the Company purchasable thereunder.
Pursuant to the within Warrant, the undersigned hereby makes the following
representations and warranties in connection with the exercise of such Warrant:
1. The undersigned is acquiring the Warrant Shares for its own
account, for investment and not with a view to, or for sale in connection with,
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
2. The undersigned is an institutional "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act. The undersigned has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Warrant Shares and is capable of bearing the economic risks of
such investment. The undersigned understands that its investment in the Warrant
Shares involves a significant degree of risk.
3. The undersigned and its advisers have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the Warrant Shares which have been requested by the
undersigned or its advisers. The undersigned and its advisers have been
afforded the opportunity to ask questions of the Company's management concerning
the Company and the Warrant Shares.
4. The undersigned understands that the sale of the Warrant Shares
has not been, and will not be, registered under the Securities Act or any
applicable state securities laws, and that the Warrant Shares may not be sold or
otherwise transferred unless the Warrant Shares are sold or transferred in
accordance with Section 2 of the within Warrant.
5. The principal offices of the undersigned and the offices of the
undersigned in which it made its decision to exercise this Warrant are located
in __________________________________.
6. The undersigned, (ii) if the undersigned is an insurance company,
is not acquiring the Warrant Shares or any interest therein with assets
allocated to any separate account maintained by the undersigned in which any
employee benefit plan (or its related trust) has any interest or (ii) if the
undersigned is a bank, no part of the funds used to acquire the Warrant Shares
will be drawn from any trust fund or other account held by the undersigned in
which any employee benefit plan has any interest. As used herein, the terms
"employee benefit plan" and "separate account" shall have the respective
meanings assigned thereto in Section 3 of the Employee Retirement Income
Security Act of 1974, as amended.
7. The undersigned is not a Competitor of the Company, as such term
is defined in Section 2.6 of the within Warrant.
[NAME OF HOLDER]
Dated: __________________ By: _______________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
within Warrant)
Name: _____________________________________________
(Please Print)
Title: ____________________________________________
Address: __________________________________________
__________________________________________
__________________________________________
Employer Identification Number,
Social Security Number or other
identifying number: _______________________________
2
EXHIBIT B
---------
ASSIGNMENT FORM
(To Be Executed Upon Transfer of Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers all the rights of the undersigned under the
within Warrant to purchase the number of shares of Common Stock of Trex Company,
Inc. covered thereby as set forth hereinbelow to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ______________________________
______________________________ as agent and attorney-in-fact to transfer such
Warrant on the books of Trex Company, Inc., with full power of substitution in
the premises.
[NAME OF HOLDER]
Dated: __________________ By: _______________________________________________
(Signature must conform in all respects to name
of holder as specified on the face of the
within Warrant)
In the presence of:
___________________________ Name: _____________________________________________
(Please Print)
Title: ____________________________________________
Address: __________________________________________
__________________________________________
__________________________________________
Employer Identification Number,
Social Security Number or other
identifying number: _______________________________
TRANSFEREE:
Name: __________________________________
(Please Print)
Address: _______________________________
_______________________________
_______________________________
Employer Identification Number,
Social Security Number or other
identifying number: ____________________
