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20-APPROVE RESOLUTION ACKNOWLEDGING/APPROVAL LOAN AGREEMENT & PROMISSORY NOTE BETWEEN PEDC AND CAPITAL ONECITY COUNCIL AGENDA ITEM BRIEFING SHEET Submittal Date: Originating Depattment: Presented By: Agenda Item No.: 8-25-2011 Council Date: PEDC Steve Gilbert 20. 9-12-2011 RECOMMENDED MOTION: Motion to approve a Resolution acknowledging and approving a Loan Agreement and Promissory Note between the PEDC and Capital One for a revolving line of credit in the amount of $2,000,000.00 POLICY ISSUE(S): Economic Development BOARD/COMMISSION RECOMMENDATION: None EXHIBITS: Resolution ACTION: BUDGET INFO: ❑ Financial Report ❑ Minute Order Expense $NA ❑ Department Report ~ Resolution Budgeted Amt. $NA ❑ Presentation ❑ Ordinance Y7'D Actual $NA ❑ Public Hearing ❑ Other Acct. Name NA Acct. Number NA FISCAL NOTES: None REVIEWED AND APPROVED BY: Z Administtation Z City Clerk ❑ Community Development ❑ EMS/IT ❑ Finance ❑ Fite ❑ Municipal Court N Legal ❑ Library ❑ Police ❑ Eng./Public Wotks ❑ Utilities City of Paris Revised 2/04/08 ~ ~ 115 Draft S:attorney/reswork/current/9-12-11 RESOLUTION N0. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS, ACKNOWLEDGING AND APPROVING A LOAN AGREEMENT AND PROMISSORY NOTE BY AND BETWEEN THE PARIS ECONOMIC DEVELOPMENT CORP. "BORROWER" AND CAPITAL ONE, N.A. BANK "LENDER" FOR A REVOLVING LINE OF CREDIT IN THE AMOUNT OF ($2,000.000.00) TWO MILLION DOLLARS; MAKING OTHER FINDINGS AND PROVISIONS RELATED TO THE SUBJECT; AND DECLARING AN EFFECTIVE DATE. WHEREAS, the Paris Economic Development Corporation is a non-profit corporation established under the Development Corporation Act of 1979 (the Act) and was created for the purposes of promoting, assisting, and enhancing economic development in the City of Paris, Lamar County, Texas; and, WHEREAS, on September 1, 2011 at a regular meeting of the Paris Economic Development the PEDC Board voted unanimously to approve loan documents necessary to establish a TWO MILLION DOLLAR ($2,000,000.00) revolving line of credit with Capital One Bank, N.A. for future economic development projects; and WHEREAS, the City of Paris, Texas is not a party to the loan agreement and promissory note between Paris Economic Development Corp. "Borrower" and Capital One Bank, N.A. the "Lender" has requested the City Council of the City of Paris to acknowledge the financing agreements between the Paris Economic Development Corp. and Capital One Bank, N.A. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS, PARIS, TEXAS: Section 1. That the findings set out in the preamble of this resolution are hereby in all things approved. Section 2. That the City Council of the City of Paris, Texas acknowledges and approves of the loan agreement, promissory note and other related loan documents between the Paris Economic Development Corp. and Capital One Bank, N.A. attached hereto as Exhibit "A". Section 3. That this resolution shall be effective from and after the date of passage. 116 PASSED AND APPROVED this 12th day of September, 2011. A.J. Hashmi, M.D., Mayor ATTEST: Janice Ellis, City Clerk APPROVED AS TO FORM: W. Kent McIlyar, City Attorney ~ 1 11'7 ,a 4 THE MOORE LAW FIRM, L.L.P. ATTORNEYS AT LAW 100 NORTH MAIN STREET PARIS, TEXAS 75460-4222 Bill Payne A.W.CIem * James R. Rodgers Judy Aodgkiss Stephen Walker (Attorney - Mediator) Nikki D. Miller *Board Certified - Residential Real Estate September 1, 2011 Capital One, N.A. Attn: Mr. Erik Roddy P. O. Box 9779 2800 Lamar Avenue Paris, Texas 75460 Gentlemen: ffi DRAFT W.F. Moore (1868-1956) Hardy Moore(1906-2001) 9031784-4393 FAX 903/785-0312 EMAIL: awc1em(@moorefirm.com FAX - A W C: 903/784-8092 We have acted as special counsel to Capital One, N.A. (the "Bank") in connection with a loan (the "Loan") by the Bank to the Paris Economic Development Corporation, A Texas Non-Profit Corporation (the `Borrower"). We have either prepared or examined the documents (the "Loan Documents") executed in connection with the Loan (the "Loan Documents"). The Loan Documents are more particularly described in Exhibit "A" attached hereto and made a part hereof for all necessary purposes. Further, the opinion of Borrower's attorney has been examined and is relied upon in giving this opinion. If the Borrower, any guarantor of the Loan ("a Guarantor"), or any third party providing collateral for the Loan (a "Third Party Grantor") is a partnership, we have examined the original or certified copies of the contract or articles of partnership of such party, and all amendments and modifications to such document. If the Borrower, any Guarantor, ar any Third Party Grantor is a corporation, we have examined the charter or articles of incorporation of such party, and all amendments and modifications to such document. We have examined such other certificates, documents and instruments, have made such other inquiries with respect to the Loan, the Borrower, any Guarantor, and any Third Party Grantor and have reviewed such matters of law, public records, and corporate documents as we have deemed necessary or appropriate for purposes of this opinion. Based on the foregoing, insofar as the laws of the State of Texas are applicable, we are of the opinion that: 1. If the Borrower, any Guarantor, or any Third Party Grantor is a partnership or a corporation, each such Borrower, Guarantor, or Third Party Grantor is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its organization, and is duly qualified to do business and is in good standing in each other jurisdiction where such qualification is necessary for the legality, validity and enforceability of each of the Loan Documents. EXH I 6 I~,~~ s~~ s~'. 118 a 2. The Borrower is executing the Collateral Pledge, Security Agreement, Financing Statements and Loan Agreement listed in Exhibit "A", and has the full power and authority to own the property described therein. The Borrower has full power and authority to execute and deliver to the Bank, and to perform the obligations under, all Loan Documents executed by such party and all other documents and instruments executed by such party that were required by the Bank in connection with the Loan. 3. The Loan Documents and all other documents and instruments required b the Bank in connection with the Loan have been duly authorized, executed and delivered by or on behalf of all parties executing such documents. 4. The Loan Documents constitute the legal, valid and binding obligations of the parties hereto enforceable by the Bank in accordance with the respective terms of the Loan Documents, except that such Loan Documents and any note listed in Exhibit "A" (the "Note") are enforceable only to the extent of the Borrower's actual indebtedness secured by the security interest in the Note granted to the Bank. The enforceability of the Loan Documents is subject to applicable bankruptcy, insolvency, or other similar laws affecting generally the enforcement of creditor's rights, including but not limited to Chapter 51 of the Texas Property Code. Such laws, however, shall not, in our opinion, materially interfere with the practical realization of the benefits or security afforded by the Loan Documents. 5. The Loan Documents are all in proper form, and have been duly filed and recorded in all necessary public records in the State of Texas as required by law to give notice of, establish, perfect, preserve, and protect the lien and privilege thereof and the rights of the Bank thereunder. Without any further action, the Loan Documents create a valid first priority security interest in the property and assets described therein. No additional filing or recordation is necessary to protect and maintain the validity, priority, effectiveness or enforceability of the Loan Documents, except that the Loan Documents should be reinscribed as follows: The Financing Statements are valid for a period of five (5) years from date of filing, and should be thereafter continued to insure their validity. 6. All applicable State and Federal laws and all regulations promulgated under such laws have been complied with in connection with the Loan. Very truly yours, THE MOORE LAW FIRM, L.L.P. BY: A. W. CLEM, Partner AWC:cb Encs. 119 EXHIBIT "A" 1. Promissory Note dated September 1, 2011 in the original principal sum of $2,000,000.00 (revolving credit note). 2. Loan Agreement dated September 1, 2011. 3. Security Agreement dated September 1, 2011. 4. Collateral Pledge Agreement dated September 1, 2011. 5. UCC-1, Financing Statement. 6. Assignment of Lien dated September l, 2011. 120 E DRAFT LOAN AGREEMENT OF EVEN DATE HEREWITH PARIS ECONOMIC DEVELOPMENT CORPORATION, A Texas Non- Stock, Non-ProTit Industrial Development Corporation ("Bonower") is executing in favor ofCAPITAL ONE, N.A. ("Lender") a Note in the original principal sum of Two million and no/100 ($2,000,000.00) Dollars (herein called "the Loan"), payable under the terms and provisions set out therein, and secured by Security Agreement, Financing Statements, and Collateral Pledge covering certain collateral hereinafter referred to; and in order to establish the full terms and conditions of the agreements between the parties, this Loan Agreement is entered into by and between Borrower and Lender and incorporates therein the following terms and conditions: Borrower represents that it is a non-profit corporation organized and duly existing under and by virtue of the laws of the State of Texas, and was certified as a valid corporation on July 19, 1993. It is governed by the applicable statutes and provisions set out in its Articles of Incorporation. Its By-Laws were created on the day of , 19 , and the applicable statutes, By-Laws and Articles of Incorporation are incorporated herein by reference and made a part hereof for all necessary purposes. 2. Borrower receives its income from a portion of the State sales tax revenues, same being a one-quarter of One percent (1.00%) sales and use tax collected by the City of Paris, Texas, a Home-Rule City. The Comptroller of Public Accounts far the State of Texas makes payment of these funds to the City of Paris, who thereafter deposits into the Borrower's account the funds due to Borrower. In 2010 Bonower sold $4,200,000.00 oftaxable sales tax revenue bonds, Series 2010; which bond obligations are due and payable from the tax funds received by Borrower. This encumbrance constitutes a valid, binding first lien on Borrower's income, and Lender aclrnowledges that it is making this Loan SUBJECT TO the outstanding bond issue; which terms and conditions are incorporated herein by reference and made a part hereof for all necessary purposes. Further, it is contemplated in the existing bond issue that Borrower may issue additional bonds of parity with the Series 2010 bonds, and Lender agrees that same may be issued, as weli as other obligations which are a part of the contemplated purposes of Borrower so long as Bonower is not in violation of Paragraph 8 of this Loan Agreement. 4. The City Council of the City of Paris, by Resolution No. 2011- , has approved the financing from Lender to Borrower, and Borrower, by Resolution No. 2011- , has authorized its President, M. PIKE BURKHART, SR., to execute any and all documents necessary to consummate the Loan being made by Borrower for its benefit. Both the Resolution of the City of Paris and Borrower's Resolution are incorporated herein by reference and made a part hereof for all necessary purposes, as well as Borrower's financial statement dated , 2011; Borrower hereby verifying to Lender that same is true and correct, and aclrnowledging that Lender is relying upon the representations made in such financial statement as an inducement for the making of the Loan by Lender. Borrower ab ees that, during the term of the Loan, (i) its annual audited fmancial statements will be delivered to Lender within 180 days after its fiscal year end; (ii) its quarterly financial statements will be delivered to Lender within 45 days of the end of each fiscal quarter; and (iii) its annual budget will be delivered to Lender within 60 days after its date of adoption. 6. Borrower has verified through its bonding attorneys, McCall, Parkhurst & Horton, L.L.P., Dallas, Texas, that the sales tax revenues of Borrower cannot be pledged to Lender on a"pari passu" basis with the existing bond issue. Borrower shall not, without prior written consent from Capital One, issue any debt instrument or incur any obligation on a parity basis with the Series 2010 Bonds with respect to the pledge and lien on the receipts of the Sales Tax. Further, Borrower agrees that it will maintain minimum liquidity of $400,000.00 at all times during the term of this Loan, of which $97,000.00 will be maintained at Capital One, N.A.; and that if Borrower is in default on its Series 2010 bonds, then Borrower shall also be deemed to be in default under the terms of this Loan. -1- 121 8. Borrower acknowledges that it is a Texas non-stock, non-profit industrial development corporation organized exclusively for the purpose of providing and accomplishing public purposes by promoting, assisting and enhancing economic development activities. Borrower is, of even date herewith, executing one Note, a Security Agreement, Financing Statements, a Collateral Pledge Ab eement, and this Loan Agreement; all of which it acknowledges and afFirms it has full power and authority to execute. 10. Borrower represents to Lender that all the information and facts set out in the Preliminary Official Statement dated 2010 given by Bonower as part of the issuance of $4,200,000.00 revenue bonds were true and correct. 11. If Borrower pays all the indebtedness due under the terms of the Loan, Lender ab ees to execute releases of any encumbrances created upon its collateral by the Loan. 12. Any notices pertaining to the Loan and the loan documents being executed of even date herewith shall be in writing and be effective when deposited in the United States Mail, First Class, Certified or Registered Mail, postage prepaid, directed to the addresses set forth below; and Bonower agrees to keep Lender informed at all times of Borrower's most current address and the names of its duly authorized Executive Director and/or President. Address of Borrower: Paris Economic Development Corporation 1125 Bonham Street Paris, Texas 75460 13. This agreement constitutes the full understanding of the parties hereto; may not be modified except in writing; and shall be binding upon the successors and assigns of Borrower and Lender, with time being made of the essence as to the provisions of same and all other documents and ab eements related to the Loan made by Lender to Borrower. Should any provision be unenforceable, the remaining portions shall be deemed to be modified to be within the limits of enforceability and/or validity. IN WITNESS WHEREOF, this agreement is executed in multiple counterparts this 15` day of September, 2011. LENDER: CAPITAL ONE, N.A. BY: Its Duly Authorized BORROWER: PARIS ECONOMIC DEVELOPMENT CORPORATION BY: M. PIKE BURKHART, SR., President Duly Authorized -2- 12'2- E DRAFT PROMISSORY NOTE Borrower: PARIS ECONOMIC DEVELOPMENT CORPORATION A Texas Non-Stock, Non-Profit Industrial Development Corporation 1125 Bonham Street, Paris, Texas 75460 Lender: CAPITAL ONE, N.A. 1680 Capital One Drive McLean, Virginia 22102 Principal Amount: $2,000,000.00 Initial Rate: 1.290% Date of Note: September 1, 2011 PROMISE TO PAY. PARIS ECONOMIC DEVELOPMENT CORPORATION, A Texas Non-Stock, Non-Profit Industrial Development Corporation ("Borrower"), by and through its duly authorized President, M. PIKE BURKHART, SR., promises to pay to the order of CAPITAL ONE, N.A. ("Lender"), in lawful money of the United States of America, the principal amount of Two million and no/100 ($2,000,000.00) Dollars, or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of such advance. CHOICE OF USURY CEILING AND INTEREST RATE. The interest rate on this Note has been implemented under the "Weekly Ceiling" as referred to in Sections 303.002 and 303.003 of the Texas Finance Code. The terms, including the rate, or index, formula, or provision of law used to compute the rate on the Note, will be subject to revision as to current and future balances, from time to time by notice from Lender in compliance with Section 303.103 of the Texas Finance Code. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on September 1, 2012. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning October 1, 2011, with all subsequent interest payments to be made on the same day of each month thereafter. Borrower's first payment is due October 1, 2011, and all subsequent payments are due on the same day of each month thereafter. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Notwithstanding any other provision of this Note, Lender will not charge interest on any undisbursed loan proceeds. No scheduled payment, whether of principal or interest or both, will be due unless sufficient loan funds have been disbursed by the scheduled payment date to justify the payment. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the WALL STREET JOURNAL PRIME RATE (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notice to Borrower. Lender will tell Borrower the current index upon Borrower's request. The interest rate change will not occur more often than each DAY. Borrower understands that Lender may make loans based on other rates as well. The Index is currently 3.250% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph below, using a rate of 1.96 percentage points under the Index, resulting in an initial rate of 1.29% per annum based on a year of 3 60 days. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate - 123 allowed by applicable law. INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Capital One, N.A., P. O. Box 152407, Irving, Texas 75015. LATE CHARGE. If a payment is ten (10) days late, Borrower will be charged 5.000% of the regularly scheduled payment or $39.00, whichever is greater. POST MATURITY RATE. The Post Maturity Rate on this Note is the lesser of the maximum rate allowed by applicable law or 18.000% per annum. Borrower will pay interest on all sums due after final maturity, whether by acceleration or otherwise, at that rate. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant, or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any ofBorrower's accounts, including deposit accounts, with Lender. However, this - - 124 Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Insecurity. Lender in good faith believes itself insecure. NOTICE OF DEFALTI.T. If Borrower fails to make any payment on the Note when due, Lender shall deliver to Borrower written notice of such default describing the amount past due, and if Borrower fails to bring the payment current within ten (10) days after delivery of such notice, this failure shall be an Event of Default as provided above. Further, if Borrower fails to comply with any of the other terms and conditions of this Note and the instruments securing same within thirty (30) days from date of written notice from Lender, this, too, shall constitute an Event of Default under the terms of this Note. LENDER'S RIGHTS. Upon default, Lender may declare the entire indebtedness, including the unpaid principal balance on this Note, all accrued unpaid interest, and all other amounts, costs and expenses for which Borrower is responsible under this Note or any other agreement with Lender pertaining to this loan, immediately due, without notice, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES. Lender may hire an attorney to help collect this Note if Borrower does not pay, and Borrower will pay Lender's reasonable attorneys' fees. Borrower also will pay Lender all other amounts Lender actually incurs as court costs, lawful fees for filing, recording, or releasing to any public office any instrument securing this Note; and the reasonable cost actually expended for repossessing, storing, preparing for sale, and selling any security. JURY WANER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Note will be governed by, construed and enforced in accordance with Federal Law and the laws of the State of Texas. This Note has been accepted by Lender in the State of Texas. CHOICE OF VENUE. If there is a lawsuit, and if the transactions evidenced by this Note occurred in Lamar County, Borrower agrees upon Lender's request to submit to the jurisdiction of the Courts of Lamar County, State of Texas. DISHONORED CHECK CHARGE. Borrower will pay a processing fee of $25.00 if any check given by Borrower to Lender as a payment on this loan is dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be 125 prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as well as directions for payment from Borrower's accounts, may be requested orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. Borrower agrees to be liable for all sums: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer printouts. Lender will have no obligation to advance funds under this Note if: (a) Borrower is in default under the terms of this Note or any agreement that Borrower has with Lender, including any agreement made in connection with the signing of this Note; (b) Borrower ceases doing business or is insolvent; (c) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (d) Lender in good faith believes itself insecure. This revolving line of credit shall not be subject to Section 346 of the Texas Finance Code. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's successors and assigns, and shall inure to the benefit of Lender, its successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: Capital One, N.A., P. O. Box 152407, Irving, Texas 75015.. GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Borrower does not agree or intend to pay, and Lender does not agree or intend to contract for, charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or in the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to charge or collect by Federal law or the law of the State of Texas (as applicable). Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to Borrower. The right to accelerate maturity of sums due under this Note does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Lender does not intend to charge or collect any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the loan evidenced by this Note until payment in full so that the rate or amount of interest on account of the loan evidenced hereby does not exceed the applicable usury ceiling. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, notice of dishonor, notice of intent to accelerate the maturity of this Note, and notice of acceleration of the maturity of this Note. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endarser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan only with the consent of and notice to Borrower. The obligations under this Note are joint and several. 126 SECURITY FOR NOTE. This Note is secured by Security Agreement, Financing Statements, Collateral Pledge Agreement and Loan Agreement (all the terms and conditions of which are incorporated herein by reference and made a part of this Note) covering all of Borrower's interest in income received by it from sales tax revenues, as well as other income - including investment income and interest income - received by Borrower, except that portion of same currently obligated or subsequent bonds issued as contemplated by the Series 2010 bonds; "income received" being defined as a one-quarter of 1.00% sales and use tax collected by the City of Paris and as defined by Statute. ADDITIONAL PROVISIONS. This Note is SECOND AND INFERIOR to the obligations created under the terms and provisions of a Bond Issue issued by Borrower in the amount of $4,200,000.00, styled "Taxable Sales Tax Revenue Bonds, Series 2010", more specifically referred to in the Loan Agreement executed by Borrower and Lender of even date herewith. THIS WRITTEN PROMISSORY NOTE, TOGETHER WITH THE SECURITY INSTRUMENTS AND OTHER DOCUMENTS EXECUTED CONTEMPORANEOUSLY HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN MAKER AND PAYEE, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE OTHER. PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTANDS ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. PARIS ECONOMIC DEVELOPMENT CORPORATION, A Texas Non-Stock, Non-Profit Industrial Development Corporation BY: M. PIKE BURKHART, SR. President, Duly Authorized - - 12'7 R DRAFT THE STATE OF TEXAS COUNTY OF LAMAR COLLATERAL PLEDGE (Security Agreement) KNOW ALL MEN BY THESE PRESENTS: THAT PARIS ECONOMIC DEVELOPMENT CORPORATION, A Texas Non-Stock, Non-Profit Industrial Development Corporation, whose mailing address is 1125 Bonham Street, Paris, Texas 75460 (herein called "Debtor", whether one or more), for a valuable and sufficient consideration paid, the receipt of which is hereby aclrnowledged, does hereby TRANSFER, ASSIGN AND CONVEY unto CAPITAL ONE, N.A.,1680 Capital One Drive, McLean, Virginia 22102 (herein called "Secured Party", whether one or more), the following described property (herein called "CollateraP" and in which Debtar b ants to Secured Party a security interest) and all liens, rights, titles, equities and interests securing the same, described as follows, to-wit: All of Debtor's interest in income received by it from sales tax revenues, and other income - including investment income and interest income -received by Debtor EXCEPT that portion of same currently obligated or subsequent bonds issued as contemplated by the Series 2010 bonds; "income received" being defined as a one-quarter of One percent (1.00%) sales and use tax collected by the City of Paris payable to Debtor upon receipt of same from the Comptroller of Public Accounts of the State of Texas, and deposited in Debtor's sales tax receipts account in its official depository bank. THIS PLEDGE is made to secure the payment of one (1) certain promissory note in the original principal sum of Two million and no/100 ($2,000,000.00) Dollars, dated September 1, 2011, executed by Debtor, payable to Secured Party as therein provided (herein called "the Note"), and all renewals and extensions of same, partial or otherwise; and upon full payment of which this transfer shall be null and void and the Collateral, together with the liens securing same, shall - at the expense of Debtar - be retransferred without warranty or recourse to Debtor by Secured Party. IN THE EVENT of default in the payment of any installment, principal or interest, of the Note hereby secured in accordance with the terms thereof, Secured Party may elect - Debtor hereby expressly waiving notice, demand and presentment - to declare the entire indebtedness hereby immediately due and payable. IN THE EVENT of default in the payment of such indebtedness when due or declared due, Secured Party shall have the right, upon written notice to Debtor, to take such legal action as necessary for the collection of funds hereby secured except for the proceeds paid to the sales tax fund for the collection of funds for payment of the revenue bonds established in the "Taxable Sales Tax Revenue Bonds - Series 2010"; and as more particularly set out in the "Official Notice of Sale, Bid Forms, and Preliminary Official StatemenY". The notice herein given shall be by Certified Mail, Return Receipt Requested, to Debtor. Such notice shall constitute prima facie evidence of the matters stated therein, and all such prerequisites of action to be taken by Secured Party. SECURED PARTY, in addition to the rights and remedies provided for in the preceding parab aph, shall have all the rights and remedies of a Secured Party under the Uniform Commercial Code of Texas, and Secured Party shall be entitled to avail itself of all such other rights and remedies as may now or hereafter exist at law or in equity for the collection of said indebtedness and the foreclosure of the Security Interest created hereby and the resort to any remedy provided hereunder or provided by the Uniform Commercial Code of Texas, or by any other law of Texas, shall not prevent the concurrent employment of any other appropriate remedy or remedies. SECURED PARTY may remedy any default, without waiving same, or may waive any default without waiving any prior or subsequent default. THE SECURTTY INTEREST herein created shall not be affected by or affect any other security taken for the indebtedness hereby secured, or any part thereof, and any extensions may be made of the indebtedness without affecting the priority of this Security Interest or the validity thereof with reference to any third pariy, and the holder of said -1- 128 indebtedness shall not be limited by any election of remedies if he chooses to foreclose this Security Interest by suit. The right to take possession of the Collateral under the terms herein shall also exist cumulative with said suit and one method shall not bar the other, but both may be exercised at the same or different times, nor shall one be a defense to the other. IN THE EVENT OF DEFAULT Debtor authorizes Secured Party, at Secured Party's option, to collect and receipt for any and all sums becoming due upon the Collateral, such sums to be held by Secured Party without liability for interest thereon and applied toward the payment of the Note hereby secured as and when same becomes payable. Secured Party, at its option, shall have the full control ofthe Collateral and the liens securing same until the Note hereby secured is fully paid, and shall have the further right to release the lien or liens securing the Collateral upon full and fmal payment thereof to Secured Party; but Secured Party is under no obligation to make or enforce the collection of the Collateral and the failure of Secured Party from any cause to make or enforce the collection thereof shall not in any way prejudice the right of Secured Party to thereafter make or enforce collection thereof or in any way affect the indebtedness to Secured Pariy hereby secwed; PROVIDED HOWEVER: This provision shall not preclude the payment of funds for payment of the "Taxable Sales Tax Revenue Bonds - Series 2010", and subsequent bonds issued as contemplated herein. Shouid the sales tax funds be withheld by the Comptroller of Public Accounts of the State of Texas or the City of Paris, Debtor shall have the duty to proceed to collect same, and upon receipt of such funds to immediately pay Secured Party the indebtedness then due and owing to Secured Party. THE LAW governing this secured transaction shall be the Uniform Commercial Code as adopted in Texas, and other applicable laws of the State of Texas. All terms used herein which are defined in the Uniform Commercial Code of Texas shall have the same meaning herein as in such Code. EXECUTED this 1 st day of September, 2011. PARIS ECONOMIC DEVELOPMENT CORPORATION A Texas Non-Stock, Non-Profit Industrial Development Corporation BY: M. PIKE BURKHART, SR., President Duly Authorized THE STATE OF TEXAS COUNTY OF LAMAR THIS instrument was acknowledged before me on the day of September, 2011, by M. PIKE BURKHART, SR., in the capacity therein stated. Notary Public, State of Texas -2- - - 129 x,'AFT SECURITY AGREEMENT Date: September 1, 2011 Debtor: PARIS ECONOMIC DEVELOPMENT FOUNDATION A Texas Non-Stock, Non-Profit Industrial Development Corporation Debtor's Mailing Address: 1125 Bonham Street Paris (Lamar County) Texas 75460 Secured Party: CAPITAL ONE, N.A. Secured Party's Mailing Address: 1680 Capital One Drive McLean, Virginia 22102 Classification of Collateral: General Intangibles Collateral: All of Debtor's interest in income received by it from sales tax revenues, and other income - including investment income and interest income - received by Debtor, EXCEPT that portion of same currently obligated or subsequent bonds issued as contemplated by the Series 2010 bonds; "income received" being defined as a one-quarter of One percent (1.00%) sales and use tax collected by the City of Paris payable to Debtor upon receipt of same from the Comptroller of Public Accounts of the State of Texas, and deposited in Debtor's sales tax receipts account in its official depository bank. Obligation: Note: Date: Original Principal Amount: Borrower (Debtor): Lender (Secured Party): Maturity Date: Terms of Payment: Other Debt/Future Advances: September 1, 2011 $2,000,000.00 Paris Economic Development Corporation Capital One, N.A. September 1, 2012 As set out in the Note. The security interest also secures all other present and future debts and liabilities of Debtor to Secured Party, including future advances. Debtor's Representations Concerning Debtor and Locations: Debtor's state of organization is Texas; Debtor's name, as shown in its organizational documents, as amended, is exactly as set forth above; and Debtor's organizational identification number is 01278651-01. Debtor's Federal tax identification number is 75-2533942. Debtor's records concerning the Collateral are located at 1125 Bonham Street, Paris, Lamar County, Texas 75460. Debtor ;rants to Secured Party a security interest in the Collateral and all its proceeds to secure the Obligation, and all renewals of the Obligation. Debtor authorizes Secured Party to file a Financing Statement describing the Collateral. 130 A. Debtor Represents and Warrants the following: 1. No Financing Statement covering the Collateral is filed in any public office. Debtor owns the Collateral and has the authority to grant this security interest. All information about Debtor's financial condition is or will be accurate when provided to Secured Party. B. Debtor agrees to: 1. Defend the Collateral against all claims adverse to Secured Party's interest. Pay all Secured Pariy's expenses, including reasonable attorney's fees, incurred to obtain, preserve, perfect, defend and enforce this ab eement or the Collateral, and to collect or enforce the obligation. These expenses will bear interest from the date of advance at the rate stated in the Note for matured, unpaid amounts, and are payable on demand at the place where the Obligation is payable. These expenses and interest are part of the Obligation and are secured by this ab eement. Sign and deliver to Secured Party any documents or instruments that Secured Party considers necessary to obtain, maintain and perfect this security interest in the Collateral. 4. Notify Secured Party immediately of any event of default and of any material change (a) in the Collateral, (b) in Debtor's Mailing Address, (c) in the location of any Collateral, (d) in any other representation or warranty in this agreement, and (e) that may affect this security interest, and of any change ( fl in Debtor's name. 5. Maintain accurate records of the Collateral at the address set forth above; furnish Secured Party any requested information related to the Collateral; and permit Secured Party to inspect and copy all records relating to the Collateral. 6. Preserve the liability of all obligors on the Collateral and preserve the priority of all security for the Collateral. 7. Pay Secured Party the unpaid amount of an account in the Collateral if the account is not paid when due. Secured Party may retain the account in the Collateral and may charge any deposit account of Debtor with the unpaid amount. C. Debtor Agrees Not to: Change the state in which Debtor's place of business (or chief executive office if Debtor has more than one place of business) is located, change its name, or convert to a different entity without notifying Secured Party in advance and taking action to continue the perfected status of the security interest in the Collateral. D. Default and Remedies: 1. A default exists if- (a) Debtor, Obligor or any secondary obligor fails to timely pay or perform any obligation or covenant in any written ab eement between Secured Pariy and any of Debtor, Obligor, or any secondary obligor, and, notice having been given as herein provided, Debtor, Obligor or any secondary obligor fails to correct such default within the time period specified; (b) any warranty, covenant, or representation in this agreement or in any other ab eement between Secured Party and any of Debtor, Obligor, or any secondary obligor is false when made; (c) a receiver is appointed for Debtor, Obligor, any secondary obligor, or any of the Collateral; or (d) a banla-uptcy or insolvency proceeding is commenced against or by Debtor, any partnership of which Debtor is a general partner, Obligor, or any secondary obligor. If a default exists, Secured Party may- (a) demand, collect, convert, redeem, settle, compromise, receipt for, realize on, sue for, and adjust the Collateral either in Secured Party's or Debtor's name, as Secured Party desires, ar take control of any proceeds of the Collateral and apply the proceeds against the Obligation; (b) exercise any rights and remedies granted by law or this agreement; 131 (c) notify obligars on the Collateral to pay Secured Party directly and enforce Debtor's rights against such obligors; and (d) as Debtor's agent, make any endorsements in Debtor's name and on Debtor's behalf. 3. Foreclosure ofthis security interest by suit does not limit Secured Party's remedies. Secured Party may exercise all remedies at the same or different times, and no remedy is a defense to any other. Secured Party's rights and remedies include al] those b anted by law and those specified in this agreement. 4. Secured Party's delay in exercising, partial exercise of, or failure to exercise any of its remedies or rights does not waive Secured Party's rights to subsequently exercise those remedies or rights. Secured Party's waiver of any default does not waive any other default by Debtor. Secured Party's waiver of any right in this aa eement or of any default is binding only if it is in writing. Secured Party may remedy any default without waiving it. 5. At any time Secured Party may contact obligors on the Collateral directly to verify information furnished by Debtor. 6. Secured Party has no obligation to collect any of the Collateral and is not liable far failure to collect any of the Collateral, for failure to preserve any rights pertaining to the Collateral, or for any act or omission on the part of Secured Party or Secured Pariy's officers, agents, or employees, except willful misconduct. 7. Secured Party has no obligation to satisfy the Obligation by attempting to collect the Obligation from any other person liable for it. Secured Party may release, modify, or waive any collateral provided by any other person to secure any of the Obligation. If Secured Party attempts to collect the Obligation from any other entity liable for it, or releases, modified or waives any collateral provided by any other entity, that will not affect Secured Party's rights against Debtor. Debtor waives any right Debtor may have to require Secured Party to pursue any third entity for any of the Obligation. 8. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title, or the like. This procedure will not be considered to adversely affect the commercial reasonableness of a sale of the Collateral. 9. Secured Party has no obligation to marshal any assets in favor of Debtor or against or in payment of the Note, or any other obligation owed to Secured Party by Debtor or any other person. E. General: 1. This agreement binds, benefits and may be enforced by the successors in interest of Secured Party. Assignment of any part of the Obligation and Secured Party's delivery of any part of the Collateral will fully discharge Secured Party from responsibility for that part of the Collateral. If such an ass bonment is made, Debtor will render performance under this agreement to assignee. Debtor waives and will not assert against any assignee any claims, defenses, or setoffs that Debtor could assert against Secured Party except defenses that cannot be waived. All representations, warranties and obligations are joint and several as to each Debtor. 2. This ab eement may be amended only by an instrument in writing sib ed by Secured Party and Debtor. 3. The unenforceability of any provision of this ab eement will not affect the enforceability or validity of any other provision. 4. This ab eement will be construed according to Texas law, without regard to choice-of-law rules of any jurisdiction. This ab eement is to be performed in Lamar County, Texas; and has been sib ed by Debtor in the County of Secured Party's mailing address. 5. Interest on the Obligation secured by this ab eement will not exceed the maxunum amount of nonusurious interest that may be contracted for, taken, reserved, charged or received under law. Any interest in excess of that maximum amount will be credited on the principal of the Obligation or, if that has been paid, refunded. On any acceleration or required or permitted prepayment, any such excess will be cancelled automatically as 132 of the date of acceleration or prepayment or, if already paid, credited on the principal of the Obligation or, if the principal of the Obligation has been paid, refunded. This provision overrides any conflicting provisions in this and all other instruments concerning the Obligation. In no event may this agreement secure payment of any debt subject to Title IV of the Texas Finance Code or create a lien otherwise prohibited by law. The Term "Note" includes all renewals and extensions of the Notes and all amounts secured by the Notes. Any term defined in Section 1.101 to 11.108 of the Texas Business and Commerce Code and not defined in this agoreement has the meaning given to the term in the Code. PARIS ECONOMIC DEVELOPMENT CORPORATION A Texas Non-Stock, Non-Profit Industrial Development Corporation BY: M. PIKE BURKHART, SR., President Duly Authorized 133 bE DRAFT UCC FINANCING STATEMENT FOLLOW INSTRUCTIONS front and back CAREFULLY A. NAME & PHONE OF CONTACT AT FILER [optional] B. SEND ACKNOWLEDGMENT TO: (Name and Address) I CAPITAL ONE, N.A. 1680 Capital One Drive McLean, Virginia 22102 ~ THE ABOVE SPACE IS FOR FILING OFFICE USE ONLY 1.DEBTOR'$EXACTFULLLEGALNAME insertonlyonedebtorname('laorlb)-donotabbreviateorcombinenames 1 a. ORGANIZATION'S NAME - PARIS ECONOMIC DEVELOPMENT CORPORATION OR 1 b. INDIVIDUAL'S LAST NAME FIRSTNAME tc. MAILING ADDRESS 1125 Bonham Street CITY Paris STATE TX POSTAL CODE 75460 Y C USA td. SEE INSTRUCTIONS I ADD'L INFO RE te. TYPE OF ORGANIZATION 1f. JURISDICTION OF ORGANIZATION 1g. ORGANIZATIONAL ID if any ORGANIZATION Non-Proft Co Texas #01278651-01 DEBTOR rP• NONE 2. ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - insert only gPg debtor name (2a or 2b) do not abbreviate or combine names 2a. ORGANIZATION'S NAME OR Zb. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX 2c. MAILING ADDRESS CITY STATE P COUNTRY 2d. SEE INSTRUCTIONS ADD'L INFO RE 2e. TYPE OF ORGANIZATION 2f. JURISDICTION OF ORGANIZATION 2g. ORGANIZATIONAL ID if any ORGANIZATION DNONE 3.SECUREDPARTY'$NAME(orNAMEofTOTALASSIGNEEofASSIGNORS/P) insertonryonesecuredpartyname(3aor3b) 3a. ORGANIZATION'S NAME CAPITAL ONE, N.A. UH 3b. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX 3c. MAILINGADDRESS 1680 Capital One Drive CITY McLean STATE VA P 22102 COUNTRY USA 4. This FINANCING STATEMENT covers the following collaterat: All of Debtor's interest in income received by it from sales tax revenues, and other income - including investment income and interest income - received by Debtor, EXCEPT that portion of same currently obligated or subsequent bonds issued as contemplated by the Series 2010 bonds; "income received" being defined as a one-quarter of One percent (1.00%) sales and use tax collected by the City of Paris payable to Debtor upon receipt of same from the Comptroller of Public Accounts of the State of Texas, and deposited in Debtor's sales tax receipts account in its official depository bank. 5. ALTERNATIVE DESIGNATION [if applicable]: LESSEE/LESSOR CONSIGNEE/CONSIGNOR BAILEE/BAILOR SELLERlBUYER AG. LIEN NON-UCC FILING 6, This FINANCING STATEMENT is to be filed [for record] (or recorded) in the REAL 7. Check to REQUEST SEARCH REPORT(S) on Debtor(s) ~..r.~.,.-,.......~ r...,....i....,ue~ rennnnn~ei rcc~ r-i_n AIIDebtors Debtorl Debtor2 OPTIONAL FILER REFERENCE DATA FILING OFFICE COPY - UCC FINANCING STATEMENT (FORM UCC1) (REV. 05122/02) Intemational Association of Commercial Administrators (IACA) ~1 134 E DRAPr ASSIGNMENT OF LIEN THE STATE OF TEXAS ) ) KNOW ALL MEN BY THESE PRESENTS: COUNTY OF LAMAR ) THAT PARIS ECONOMIC DEVELOPMENT CORPORATION, A Texas Non-Profit Corporation, by and through its duly authorized President, M. PIKE BURKHART, SR. (herein called "Borrower"), for and in consideration of the sum of Ten ($10.00) and more Dollars cash to it in hand paid by CAPITAL ONE, N.A., A Banking Corporation (herein called "Lender"), the receipt of which is hereby acknowledged, has Sold, Transferred, and Conveyed, and by these presents does Sell, Transfer and Convey, unto CAPITAL ONE, N.A., whose mailing address is 1680 Capital One Drive, McLean, Virginia 22102, all of Borrower's interest in income received by it from sales tax revenues, as well as other income - including investment income and interest income - received by Borrower, except that portion of same currently obligated; "income received" being defined as receipts of one-fourth (1/4) of 1.00% of the sales and use tax levied by the City of Paris and payable to Borrower. TO HAVE AND TO HOLD the same unto CAPITAL ONE, N.A., A Banking Corporation, its successors or assigns forever. WITNESS this lst day of September, 2011. PARIS ECONOMIC DEVELOPMENT CORPORATION A Texas Non-Profit Corporation BY: M. PIKE BURKHART, SR. President Duly Authorized -1- 135 THE STATE OF TEXAS COUNTY OF LAMAR THIS instrument was acknowledged before me on the day of September, 2011, by M. PIKE BURKHART, SR., in the capacity therein stated. Notary Public, State of Texas AFTER RECORDING RETURN TO: -2- 136