LETTER OF CREDIT, REIMBURSEMENT AND GUARANTY AGREEMENT

Exhibit 10.31

 

LETTER OF CREDIT, REIMBURSEMENT AND

GUARANTY AGREEMENT

 

Dated as of March 1, 2004

TABLE OF CONTENTS

 

 

 

ii

 

iii

LETTER OF CREDIT, REIMBURSEMENT and

GUARANTY AGREEMENT

 

THIS AGREEMENT, dated as of March 1, 2004, by and among LESLIE CONTROLS, INC., a New Jersey corporation (the “Borrower”), CIRCOR INTERNATIONAL, INC., a Delaware corporation (the “Guarantor”), and SUNTRUST BANK, a state banking association organized and existing under the laws of the state of Georgia with its principal offices located in Atlanta, Georgia (the “Bank”);

 

W I T N E S S E T H:

 

WHEREAS , the Hillsborough County Industrial Development Authority (the “ Issuer ”), has previously issued its Industrial Development Revenue Refunding Bonds (Leslie Controls, Inc. Project), Series 1994, in the original aggregate principal amount of $4,765,000, and currently outstanding in the aggregate principal amount of $4,760,000 (the “ Bonds ”), pursuant to a Trust Indenture, dated as July 1, 1994 (as the same may be supplemented pursuant to its terms, the “ Indenture ”), between the Issuer and U.S. Bank National Association, as successor in interest to The First National Bank of Boston, as trustee (together with any successors in trust, the “ Trustee ”); and

 

WHEREAS , pursuant to a Loan Agreement, dated as July 1, 1994 (as the same may be amended pursuant to its terms and the terms of the Indenture, the “ Loan Agreement ”), between the Issuer and the Borrower, the Issuer loaned the proceeds of the Bonds to the Borrower (i) to finance the acquisition, construction and equipping of certain facilities more fully described in the Loan Agreement (the “ Project ”), and (ii) to pay certain costs of issuing the Bonds; and

 

WHEREAS , Wachovia Bank, National Association issued an irrevocable, direct-pay letter of credit (as the same has been or may be amended from time to time, the “ Wachovia Letter of Credit ”) to serve as additional security for payment of the Bonds; and

 

WHEREAS , under the terms of the Indenture and upon the meeting of certain requirements therein, the Borrower may substitute the Wachovia Letter of Credit with an Alternate Credit Facility (as defined in the Indenture); and

 

WHEREAS , the Bank is willing to issue a Letter of Credit to replace the Wachovia Letter of Credit subject to the following terms and conditions (the “ Letter of Credit ”);

 

WHEREAS, the Letter of Credit will qualify as an Alternate Credit Facility under the Indenture;

 

NOW, THEREFORE , in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

All words and terms defined in Article I of the Loan Agreement shall have the same meanings in this Agreement, unless other-wise specifically defined herein. The terms defined in this Article I have, for all purposes of this Agreement, the meanings specified hereinabove or in this Article, unless defined elsewhere herein or the context clearly requires otherwise.

 

“Affiliate” means any person, corporation, association or other business entity which directly or indirectly controls, or is controlled by, or is under common control with the Borrower or the Guarantor.

 

“Agreement” shall mean this Letter of Credit, Reimbursement and Guaranty Agreement, as the same may from time to time be amended, modified or supplemented in accordance with the terms hereof.

 

“Alternate Credit Facility” means any irrevocable direct pay letter of credit, insurance policy or similar credit enhancement or support facility for the benefit of the Trustee, the terms of which Alternate Credit Facility shall in all respects material to the registered owners of the Bonds be the same (except for the term set forth in such Alternate Credit Facility) as those of the Letter of Credit.

 

“Bankruptcy Code” means 11 U.S.C. § 101 et seq ., as amended.

 

“Bondholder” or “Bondholders” means the initial and any future registered owners of the Bond or Bonds as registered on the books and records of the Bond Registrar pursuant to Section 204 of the Indenture.

 

“Bond Documents” means, collectively, the Loan Agreement, the Note, the Remarketing Agreement, the Tender Agency Agreement, the Indenture, the Security Instruments and the Bonds, as the same may be amended, modified or supplemented from time to time in accordance with their respective terms.

 

“Borrower” means Leslie Controls, Inc., a New Jersey corporation.

 

“Capital Expenditures” means, for any period, expenditures (including, without limitation, the aggregate amount of Capital Lease Obligations incurred during such period) made by the Guarantor, the Borrower or any of their Subsidiaries to acquire or construct fixed assets, plant and equipment (including renewals, improvements and replacements, but excluding repairs) during such period computed in accordance with GAAP

 

“Capital Lease Obligations” of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) Property, to the extent such obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

 

2

“Cash and Cash Equivalents” means as to any Person at a particular date, the aggregate amount of all items categorized as cash and cash equivalents on the balance sheet of such Person, as determined in accordance with GAAP.

 

“Consistent Basis” means, in reference to the application of GAAP, that the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preceding period, except as to any changes consented to by the Bank.

 

“Consolidated Net Income” means the consolidated gross revenues of the Guarantor and the Borrower and the Subsidiaries of each for such period less all expenses and other proper charges for such period (including taxes on or measured by income) determined in accordance with GAAP.

 

“Consolidated Net Worth” of the Guarantor and the Borrower and the Subsidiaries of each shall mean at any time as of which the amount thereof is to be determined, the sum of the Net Worth of such Persons.

 

“Consolidated Subsidiaries” means the Subsidiaries of the Guarantor included in the audited consolidated financial statements of the Guarantor from time to time. For purposes of the representation contained in Subsection 2.3 hereof.

 

“Consultant” means any third-party architect or engineer satisfactory to the Bank.

 

“Credit Agreement” means the Credit Agreement, dated as of October 18, 1999, among CIRCOR International, Inc., ING (U.S.) LLC as Agent, Bank Boston, N.A. as Syndication Agent and the Bank as Documentation Agent, as now or hereafter amended.

 

“Current Assets” means Cash and Cash Equivalents and all other assets or resources of a Person which are expected to be realized in cash, sold in the ordinary course of business, or consumed within one year, all determined in accordance with GAAP.

 

“Current Liabilities” means the amount of all liabilities of a Person which by their terms are payable within one year (including all indebtedness payable on demand or maturing not more than one year from the date of computation and the current portion of long-term debt), all determined in accordance with GAAP.

 

“Debt Service” means, for any period, the sum, for the Guarantor, the Borrower and their Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all payments of principal of Indebtedness (including, without limitation, the principal component of any payments in respect of Capital Lease Obligations) scheduled to be made during such period plus (b) all Interest Expense for such period.

 

“Default” means an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default.

 

3

“Distribution” in respect of any corporation, means and includes: (i) the payment of any dividends or other distributions on capital stock of the corporation (except distributions in such stock) and (ii) the redemption or acquisition of its Securities unless made contemporaneously from the net proceeds of the sale of its Securities.

 

“EBITDA” shall mean, for any period, the sum, for the Guarantor, the Borrower and their Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following:

 

(a) Net Income (calculated before taxes, Interest Expense, Specified Restructuring Charges, extraordinary or unusual items and income or loss attributable to the equity in Affiliates) for such period, plus

 

(b) depreciation and amortization (to the extent deducted in determining Net Income) for such period.

 

“Environmental Laws” means all federal, state and local laws, rules, regulations, ordinances, programs, permits, guidances, orders and consent decrees relating to health, safety and environmental matters, including, but not limited to, the Resource Conservation and Recovery Act; the Comprehensive Environmental Response, Compensation and Liability Act of 1980; the Toxic Substances Control Act, as amended; the Clean Water Act; the River and Harbor Act; the Water Pollution Control Act; the Marine Protection Research and Sanctuaries Act; the Deep Water Port Act; the Safe Drinking Water Act; the Superfund Amendments and Reauthorization Act of 1986; the Federal Insecticide, Fungicide and Rodenticide Act; the Mineral Lands and Leasing Act; the Surface Mining Control and Reclamation Act; state and federal superlien and environmental cleanup programs and laws; and U.S. Department of Transportation regulations.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, including any rules and regulations promulgated thereunder.

 

“ERISA Affiliate” means a Person under common control with the Guarantor within the meaning of Section 414(c) of the Internal Revenue Code of 1986, as amended, or Section 4001(b) of ERISA.

 

“Event of Default” means an Event of Default as defined in Section 9.1 hereof.

 

“Expiration Date” means March 1, 2005, the stated expiration date of the Letter of Credit, as such date has been and may be extended in accordance with the terms of Section 4.10 hereof.

 

“Fixed Charges Coverage Ratio” means, as at any date, the ratio of (a) (x) EBITDA for the period of four consecutive fiscal quarters ending on or most recently ended prior to such date minus (y) Capital Expenditures made during such period to (b) Debt Service for such period.

 

“GAAP” means those principles of accounting set forth in pronouncements of the Financial Accounting Standards Board and its predecessors or pronouncements of the American Institute of Certified Public Accountants or those principles of accounting which have other

 

4

substantial authoritative support and are applicable in the circumstances as of the date of application, as such principles are from time to time supplemented or amended. As to the provisions of this Agreement, the applicable GAAP shall be determined as set forth in the Credit Agreement.

 

“Guarantor” means CIRCOR International, Inc., a Delaware corporation.

 

“Hedging Agreements” shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values or commodity values, in each case to which any Person is a party.

 

“Immaterial Subsidiary” means, as at any date, any Subsidiary of the Guarantor that the Guarantor shall theretofore have designated as an “Immaterial Subsidiary” in a notice to the Bank, provided that:

 

(a) the following shall be true:

 

(x) the aggregate assets of all such Subsidiaries (calculated both on a book value basis and a fair market value basis) does not exceed 10% of the aggregate assets (calculated on such respective bases) of the Guarantor and its Subsidiaries as of the most recent fiscal quarter-end of the Guarantor; and

 

(y) the aggregate EBITDA of all such Subsidiaries for the period of four consecutive fiscal quarters most recently ended prior to such date does not exceed 10% of the consolidated EBITDA of the Guarantor and its Subsidiaries for such period; and

 

(b) the Guarantor may from time to time, by notice to the Bank, cause any Subsidiary that it had theretofore designated as an “Immaterial Subsidiary” to be no longer treated as an “Immaterial Subsidiary”

 

“Indebtedness” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by lenders and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; and (f) Indebtedness of others Guaranteed by such Person.

 

5

“Interest Coverage Ratio” means, as at any date, the ratio of (a) EBITDA for the period of four consecutive fiscal quarters ending on or most recently ended prior to such date to (b) Interest Expense for such period.

 

“Interest Expense” means, for any period, the sum, for the Guarantor, the Borrower and their Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness (including, without limitation, the interest component of any payments in respect of Capital Lease Obligations) accrued or capitalized during such period (whether or not actually paid during such period) plus (b) the net amount payable (or minus the net amount receivable) under Interest Rate Protection Agreements during such period (whether or not actually paid or received during such period).

 

“Interest Rate Protection Agreement” means, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer of mitigation of interest risks either generally or under specific contingencies.

 

“Leverage Ratio” shall mean, as at any date, the ratio of the following: (a) the aggregate amount of Indebtedness of the Guarantor and its Subsidiaries outstanding on such date, to (b) EBITDA for the four consecutive fiscal quarters ended on or most recently prior to such date.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including, but not limited to, the security interest, security title or lien arising from a security agreement, mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purpose of this Agreement, the Borrower or the Guarantor, respectively, shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

 

“Material Adverse Effect” means a material adverse effect on the business, operations or financial condition of the Guarantor and its Subsidiaries or if applicable, such other Person, taken as a whole.

 

“Money Borrowed” as applied to Indebtedness, means (i) Indebtedness for borrowed money; (ii) Indebtedness, whether or not in any such case the same was for borrowed money, (A) which is represented by notes payable or drafts accepted that evidence extensions of credit, (B) which constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (C) upon which interest charges are customarily paid (other than accounts payable) or that was issued or assumed as full or partial payment for Property; (iii) Indebtedness that constitutes a Capitalized Lease obligation; and (iv) Indebtedness under any guaranty of obligations that would constitute Indebtedness for Money Borrowed under clauses (i) through (iii) hereof.

 

“Net Income” means for any period, the net operating income of the Borrower, the Guarantor and their Subsidiaries for such period (determined on a consolidated basis in accordance with GAAP).

 

6

“Obligations” means all loans and all other advances, debts, liabilities, obligations, covenants and duties owing,, arising, due or payable from the Borrower to the Bank of any kind or nature, present or future, whether or not evidenced by any note, guaranty or other instrument, whether arising under this Agreement or any of the other Bond Documents or Security Instruments or otherwise, whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorney’s fees and any other sums chargeable to the Borrower under any of the Bond Documents or Security Instruments.

 

“Officer’s Certificate” means the Certificate of the Chief Financial Officer or the Controller of the Borrower or the Guarantor, as the case shall be, as approved by the Bank.

 

“Other Agreements” means any and all agreements, instruments and documents (other than this Agreement and the Security Instruments), heretofore, now or hereafter executed by the Borrower or the Guarantor or the Subsidiaries of either or any of them and delivered to the Bank in respect to the transactions contemplated by this Agreement.

 

“Permitted Encumbrances” means and includes:

 

(a) liens for taxes and assessments not delinquent or which are being contested in good faith by appropriate proceedings and against which adequate reserves have been provided for on the books of the Guarantor or the Borrower, as applicable;

 

(b) worker’s, mechanic’s and materialmen’s liens and similar liens incurred in the ordinary course of business remaining undischarged or unstayed for not longer than 60 days following Borrower’s notice of the attachment thereof;

 

(c) attachments remaining undischarged or unstayed for not longer than 60 days from the making thereof;

 

(d) liens in respect of final judgments or awards remaining undischarged or unstayed for not longer than 60 days from the making thereof;

 

(e) liens in respect of pledges or deposits under worker’s compensation laws, liens to secure customs bonds, unemployment insurance or similar legislation and in respect of pledges or deposits to secure bids, tenders, contracts (other than contracts for the payment of money), leases or statutory obligations, or in connection with surety, appeal and similar bonds incidental to the conduct of litigation;

 

“Person” means an individual, partnership, corporation, trust, joint venture, unincorporated organization, association, or a government, or agency or political subdivision or instrumentality thereof.

 

“Plan” means a pension plan (other than a multiemployer pension plan as defined in Section 3(37) of ERISA) that is subject to Title IV of ERISA.

 

7

“Pledge Agreement” means the Pledge Agreement of even date herewith from the Borrower to the Bank.

 

“Prime Rate” means the interest rate publicly announced from time to time by the Bank to be its prime rate, which may not necessarily be its best lending rate. In the event the Bank shall abolish or abandon the practice of announcing its Prime Rate or should the same be unascertainable, the Bank shall designate a comparable reference rate which shall be deemed to be the Prime Rate under this Agreement.

 

“Prohibited Transaction” means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time.

 

“Project” means the manufacturing facility acquired, constructed and installed with the proceeds of the Prior Bonds, owned and operated by the Borrower in Hillsborough County, Florida.

 

“Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

“Reportable Event” means any of the events set forth in Section 4043(b) of ERISA other than those events for which the obligation to notify the Pension Benefit Guaranty Corporation (“PBGC”) has been waived under 29 C.F.R. Part 2615.

 

“Security” means shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended.

 

“Security Instruments” means, collectively, the Pledge Agreement and any and all Other Agreements.

 

“Solvent” means as to any Person, such Person (i) owns Property whose fair saleable value is greater than the amount required to pay all of such Person’s Indebtedness (including contingent debts), (ii) is able to pay all of its Indebtedness as such Indebtedness matures and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage.

 

“Spin-off” means the Spin-off, effective October 18, 1999, by Watts Industries, Inc. of certain oil and gas related subsidiaries, including the Borrower, to the Guarantor.

 

“Subsidiary” or “Subsidiaries” means, as to any Person, any corporation whether organized and existing under the laws of any state of the United States, including the District of Columbia and Puerto Rico, or under the laws of any foreign country, of which more than 50% of voting stock at any time is owned or controlled directly or indirectly by the Borrower or the Guarantor, as applicable.

 

“Tangible Net Worth” shall mean, as at any date for any Person, the sum for such Person and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following:

 

(a) the amount of capital stock, plus

 

8

(b) the amount of surplus and retained earnings (or, in the case of a surplus or retained earnings deficit, minus the amount of such deficit), minus

 

(c) the sum of the following (without duplication of deductions in respect of items already deducted in arriving at surplus and retained earnings): cost of treasury shares and the book value of all assets which should be classified as intangibles but in any event including goodwill, minority interests, research and development costs, trademarks, trade names, copyrights, patents and franchises, unamortized debt discount and expense, all reserves and any write-up in the book value of assets (other than a Permitted Write-up (as defined in the Credit Agreement)) resulting from a revaluation thereof subsequent to June 30, 2003.

 

“Tender Advance” has the meaning assigned to that term in Section 4.3 of this Agreement.

 

“Tender Draft” has the meaning assigned to that term in the Letter of Credit.

 

“Termination Date” means the last day a drawing is available under the Letter of Credit.

 

“Trustee” means any Person or group of Persons at the time serving as corporate fiduciary under the Indenture.

 

“Uniform Customs and Practice” shall mean the Uniform Customs and Practice for Documentary Credits, 1994 Revision, ICC Publication No. 500.

 

9

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR

 

The Guarantor represents and warrants to the Bank (which representations and warranties shall survive the delivery of the documents mentioned herein and the issuance of the Letter of Credit) that:

 

Section 2.1. Incorporation . Each of the Guarantor and its Consolidated Subsidiaries is a corporation, partnership or joint venture, respectively, duly organized, existing and in good standing under the laws of its respective jurisdiction, except where the failure to be in good standing would not have a Material Adverse Effect and has the corporate or other power to own its respective properties and to carry on its respective business as now or at such future time being conducted, and is duly qualified as a foreign corporation or otherwise to do business in every jurisdiction in which the failure to be so qualified would have a Material Adverse Effect. On the date of the execution and delivery of this Agreement, the Guarantor has the respective Consolidated Subsidiaries shown on Exhibit B hereto, and no other Subsidiaries.

 

Section 2.2. Power and Authority; No Conflicts; Enforceability . It is duly authorized under all applicable provisions of law to execute, deliver and perform this Agreement and the Other Agreements to which it is a party, and all corporate action on its part required for the lawful execution, delivery and performance hereof and thereof has been duly taken; and this Agreement and the Other Agreements to which it is a party, upon the due execution and delivery hereof, will be the valid, binding and legal obligation of the Guarantor enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and to general principles of equity. Neither the execution of this Agreement, nor the fulfillment of or compliance with the respective provisions and terms hereof, will (A) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a violation of or default under any applicable law, regulation, judgment, writ, order or decree to which the Guarantor or any Consolidated Subsidiary or any of their respective properties are subject, or the charter or bylaws of the Guarantor or any Consolidated Subsidiary, or any agreement or instrument to which the Guarantor or any Consolidated Subsidiary is now a party and (B) create any lien, charge or encumbrance upon any of the property or assets of the Guarantor or any Consolidated Subsidiary pursuant to the terms of any agreement or instrument to which the Guarantor or any Subsidiary is a party or by which they, or any of them, or any of their respective properties, are bound except pursuant to the Security Instruments.

 

Section 2.3. Financial Condition . The consolidated balance sheet of the Guarantor and its Consolidated Subsidiaries for the fiscal year ended as of December 31, 2002, and the fiscal quarters ended September 30, 2003, and December 31, 2003, and the related consolidated (pro forma) statements of operations, consolidated statements of cash flows and consolidated statements of changes in shareholders’ equity for the period, copies of which have been furnished to the Bank, are correct, complete and fairly present the financial condition of the Guarantor and its Consolidated Subsidiaries in all material respects as at the respective date of said balance sheets, and the results of its respective operations for each such period. The

 

10

Guarantor and its Consolidated Subsidiaries do not have any material direct or contingent liabilities as of the date of this Agreement which are not provided for or reflected in the balance sheets, dated January 31, 2004, or referred to in notes thereto, or set forth in Exhibit B hereto. There has been no material adverse change in the business, properties or condition, financial or otherwise, of the Guarantor and its Consolidated Subsidiaries since January 31, 2004.

 

Section 2.4. Title to Property and Assets . It has good and marketable title to its Property, including the properties and assets reflected in the financial statements and notes thereto described in Section 2.3 hereof, except for such assets as have been disposed of since the date of said financial statements in the ordinary course of business or as are no longer useful in the conduct of its business, and all such properties and assets are free and clear of all material Liens, mortgages, pledges, encumbrances or charges of any kind except Liens reflected in the financial statements or Exhibit B hereto or permitted under Section 7.2 hereof.

 

Section 2.5. Litigation . There are no pending or, to the best of its knowledge, threatened material actions, suits or proceedings before any court, arbitrator or governmental or administrative body or agency which may materially adversely affect the properties, business or condition, financial or otherwise, of the Guarantor and its Consolidated Subsidiaries on a consolidated basis, except as disclosed in the financial statements and notes thereto described in Section 2.3 hereof or Exhibit B hereto.

 

Section 2.6. Taxes . It has filed all material tax returns required to be filed by it and all material taxes due with respect thereto have been paid, and except as described in Exhibit B hereto, no controversy in respect of a material amount of additional taxes, state, federal or foreign, of the Guarantor is pending, or, to the knowledge of the Guarantor, threatened. No federal taxes have been due or are currently due to be paid by the Guarantor as of the date hereof, and adequate reserves have been established for the payment of all taxes (other than federal) for periods ended subsequent to June 30, 2000.

 

Section 2.7. Trademarks, Franchises and Licenses . It owns, possesses, or has the right to use all necessary material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights and copyrights to conduct business as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, or copyright of any other Persons.

 

Section 2.8. No Default . It is not in default in the performance, observance or fulfillment of any of its material obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which it may be bound, the effect of which default would allow any Person to cause such obligation under the agreement or instrument to become due prior to its stated maturity.

 

Section 2.9. Governmental Authority . It has received the written approval of all federal, state, local and foreign governmental authorities, if any, necessary to carry out the terms of this Agreement, and no further governmental consents or approvals are required in the making or performance of this Agreement by it.

 

11

Section 2.10. ERISA . It has not incurred any material liability to the PBGC established under ERISA (or any successor thereto under ERISA) in connection with any Plan established or maintained by it or by any Person under common control with it (within the meaning of Section 414(c) of the Internal Revenue Code of 1986, as amended (the “Code”), or of Section 4001(b) of ERISA), or in which its employees are entitled to participate. No such Plan has incurred any material accumulated funding deficiency within the meaning of ERISA. No Reportable Event in connection with any such Plan has occurred or is continuing.

 

Section 2.11. Pollution and Environmental Control: Hazardous Substances . It has obtained all permits, licenses and other authorizations which are required under any Environmental Law, except to the extent that failure to have obtained any such permit, license or authorization will not have a Material Adverse Effect, and is in material compliance with, all federal, state, and local Environmental Laws and regulations relating, without limitation, to pollution, reclamation or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic materials or wastes into air, water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic substances, materials or wastes the failure to comply with which would have a Material Adverse Effect. Neither any Guarantor, nor to Guarantor’s knowledge any previous owner of the Project Site, has disposed of any hazardous substances on any portion of the Project Site. As used in this subparagraph, “hazardous substances” shall have the meaning set forth in the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 6901, et. seq., and the regulations adopted pursuant to such act.

 

Section 2.12. Capital Structure . Exhibit B attached hereto and made a part hereof states the correct name of each of the Consolidated Subsidiaries of the Guarantor, the jurisdiction of organization or incorporation and the percentage of its voting stock owned by the Guarantor. The Guarantor has good title to all of the shares it purports to own of the stock of each Consolidated Subsidiary, free and clear in each case of any Lien other than Permitted Liens. All such shares have been duly issued and are fully paid and non-assessable.

 

Section 2.13. Solvent Financial Condition . It is now, and after giving effect to the transactions contemplated hereby, will be Solvent.

 

Section 2.14. Restrictions . It is not a party or subject to any contract, agreement, or charter or other corporate restriction, which Guarantor believes materially and adversely affects its business or the use or ownership of any of its Properties. The Guarantor is not a party or subject to any contract or agreement which restricts its right or ability to incur Indebtedness, other than as set forth on Exhibit B attached hereto, none of which prohibit the execution of or compliance with this Agreement by the Guarantor.

 

Section 2.15. Full Disclosure . The Financial Statements referred to in Section 2.3 above, do not, nor does this Agreement or the Bond Documents or any Other Agreement or written statement of the Guarantor to the Bank (including, without limitation, the Guarantor’s filings, if any, with the Securities and Exchange Commission), taken as a whole, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. There is no fact which the Guarantor has failed to

 

12

disclose to the Bank in writing which materially affects adversely or, so far as the Guarantor can now foresee, will materially affect adversely the Properties, business, prospects, profits, or condition (financial or otherwise) of the Guarantor or any of its Consolidated Subsidiaries or the ability of the Guarantor or the Borrower to perform this Agreement or the Bond Documents.

 

Section 2.16. Labor Relations . Except as described on Exhibit B attached hereto and made a part hereof, there are no material grievances, disputes or controversies with any union or any other organization of the Guarantor’s employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization which could have a Material Adverse Effect.

 

Section 2.17. Compliance With Laws . It has duly complied in all material respects with, and its Properties, business operations and leaseholds are in compliance in all material respects with, the provisions of all federal; state and local laws, rules and regulations applicable to the Guarantor, its Properties or the conduct of its business, including, without limitation, OSHA and all Environmental Laws, the failure to comply with which would have a Material Adverse Effect.

 

Section 2.18. Brokers . There are no claims for brokerage commissions, finder’s fees or investment banking fees in connection with the transactions contemplated by this Agreement, except for fees owed to the Bank and its affiliates.

 

Section 2.19. Trade Relations . There exists no actual or threatened termination, cancellation or limitation of, or any modification or change in, the business relationship between the Guarantor and any customer or any group of customers whose purchases individually or in the aggregate are material to the business of the Guarantor, or with any material supplier, and there exists no present condition or state of facts or circumstances which would materially affect adversely the Guarantor or prevent the Guarantor from conducting such business after the consummation of the transaction contemplated by this Agreement in substantially the same manner in which it has heretofore been conducted.

 

Section 2.20. Investment Company Act . The Guarantor is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

 

Section 2.21. Survival of Representations and Warranties . It covenants, warrants and represents to the Bank that all representations and warranties of the Guarantor contained in this Agreement or any of the Bond Documents or Other Agreements shall be true at the time of its execution of this Agreement and, the Bond Documents or Other Agreements, and shall survive the execution, delivery and acceptance thereof by the Bank and the parties thereto and the closing of the transactions described therein or related thereto.

 

13

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

 

The Borrower represents and warrants to the Bank (which representations and warranties shall survive the delivery of the documents mentioned herein and the issuance of the Letter of Credit) as of the date of the issuance of the Letter of Credit that:

 

Section 3.1. Incorporation . It is a corporation duly incorporated, existing and in good standing under the laws of the State of its incorporation, and has the corporate or other power to own its Property and to carry on its business as now being conducted.

 

Section 3.2. Power and Authority . It is duly authorized under all applicable provisions of law to execute, deliver and perform this Agreement and the Bond Documents, and all action, corporate or otherwise, as applicable, on its part required for the lawful execution, delivery and performance hereof has been duly taken; and this Agreement and the Bond Documents, upon the due execution and delivery hereof, will be its valid and binding obligation enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally and to general principles of equity. Neither the execution of this Agreement nor the Bond Documents, nor the fulfillment of or compliance with their respective provisions and terms, will (a) conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a violation of or default under any applicable law, regulation, judgment, writ, order or decree to which it or any of its properties is subject, or its charter or by-laws, or any agreement or instrument to which it or any of its Subsidiaries is now a party or by which it or any of its Subsidiaries or any of their respective properties is bound or affected, or (b) create any lien, charge or encumbrance upon any of its or any of its Subsidiaries’ property or assets pursuant to the terms of any agreement or instrument to which it or any of its Subsidiaries is a party or by which it or any of its Subsidiaries or any of their respective properties is bound except pursuant to the Security Instruments.

 

Section 3.3. Governmental Authority . It has received the written approval of all federal, state, local and foreign governmental authorities, if any, necessary to carry out the terms of this Agreement, and no further governmental consents or approvals are required in the making or performance of this Agreement and the Bond Documents.

 

Section 3.4. Project Site . The operation of the Project complies in all material respects with presently existing zoning and other land use restrictions affecting the Project Site, including without limitation, any restrictive covenants.

 

Section 3.5. Survival of Representations and Warranties. It covenants, warrants and represents to the Bank that all representations and warranties contained in this Agreement are true at the time of its execution of this Agreement and the representations contained in the Bond Documents or Other Agreements were true at the time made and are true at the time of execution of this Agreement except to the extent of changes resulting from transactions contemplated or permitted by this Agreement (including the Spin-Off) and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse and to the extent that such representations and warranties relate expressly to an earlier date, and all of such representations and warranties shall survive the execution, delivery and acceptance thereof by the Bank and the parties thereto and the closing of the transactions described therein or related thereto.

 

14

ARTICLE IV

 

TERMS OF LETTER OF CREDIT, REIMBURSEMENT, OTHER PAYMENTS AND GUARANTY

 

Section 4.1. Letter of Credit . The Bank agrees, on the terms and conditions hereinafter set forth, to issue and deliver the Letter of Credit in favor of the Trustee in substantially the form of Exhibit A attached hereto upon fulfillment of the applicable conditions set forth in Article VIII hereof. The Bank agrees that any and all payments under the Letter of Credit will be made with the Bank’s own funds.

 

Section 4.2. Reimbursement and Other Payments . The Borrower shall pay to the Bank:

 

(a) on or before 3:00 P.M. (Eastern time), but after the honoring of a draw by the Bank, on the date that any amount is drawn under the Letter of Credit, a sum equal to such amount so drawn under the Letter of Credit;

 

(b) on demand, interest on any and all amounts remaining unpaid by the Borrower when due hereunder from the date such amounts become due until payment thereof in full, at a fluctuating interest rate per annum equal at all times to the lesser of (i) the Prime Rate plus two percent (2%) or (ii) the highest lawful rate permitted by applicable law;

 

(c) on demand, any and all reasonable expenses incurred by the Bank in enforcing any rights under this Agreement and the Bond Documents; and

 

(d) on demand all charges, commissions, costs and expenses set forth in Sections 4.4, 4.5 and 4.9 hereof.

 

Section 4.3. Tender Advances . (a) If the Bank shall make any payment of that portion of the purchase price corresponding to principal and interest of the Bonds drawn under the Letter of Credit pursuant to a Tender Draft and the conditions set forth in Section 8.3 all have been fulfilled, such payment shall constitute a tender advance made by the Bank to the Borrower on the date and in the amount of such payment (a “Tender Advance”); provided that if the conditions of said Section 8.3 have not been fulfilled, the amount so drawn pursuant to the Tender Draft shall be payable in accordance with the terms of Section 4.2(a) above. Notwithstanding any other provision hereof, the Borrower shall repay the unpaid amount of each Tender Advance, together with all unpaid interest thereon on the earlier to occur of (i) such date as Bonds purchased pursuant to a Tender Draft are resold as provided in paragraph 4.3(d) hereof, (ii) on the date 366 days following the date of such Tender Advance, or (iii) the Termination Date.

 

The Borrower may prepay the outstanding amount of any Tender Advance in whole or in part, together with accrued interest to the date of such prepayment on the date such amount is prepaid. The Borrower shall notify the Bank, prior to 11:00 A.M. (Eastern time), on the date of such prepayment of the amount to be prepaid.

 

15

(b) The Borrower shall pay interest on the unpaid amount of each Tender Advance from the date of such Tender Advance until such amount is paid in full, payable monthly, in arrears, on the first day of each month during the term of each Tender Advance and on the date such amount is paid in full, at a fluctuating interest rate per annum in effect from time to time equal to the Prime Rate, provided that the unpaid amount of any Tender Advance,which is not paid when due shall bear interest at the lesser of the Prime Rate plus two percent (2%) or the highest rate permitted by applicable law, payable on demand and on the date such amount is paid in full.

 

(c) Pursuant to the Pledge Agreement the Borrower has agreed that, in accordance with the terms of the Indenture, Bonds purchased with proceeds of any Tender Draft shall be delivered by the Tender Agent to the Bank or its designee to be held by the Bank or its designee in pledge as collateral securing the Borrower’s payment obligations to the Bank hereunder. Bonds so delivered to the Bank or its designee shall be registered in the name of the Bank, or its designee, as pledgee of the Borrower, as provided for in Section 3 of the Pledge Agreement.

 

(d) Prior to or simultaneously with the resale of Pledged Bonds, the Borrower shall prepay or cause the Tender Agent to prepay as provided below the then outstanding Tender Advances (in the order in which they were made) by paying to the Bank an amount equal to the sum of (a) the amounts advanced by the Bank pursuant to the corresponding Tender Drafts relating to such Bonds, plus (b) the aggregate amount of accrued and unpaid interest on such Tender Advances. Such payment shall be applied by the Bank in reimbursement of such drawings (and as prepayment of Tender Advances resulting from such drawings in the manner described below), and, upon receipt by the Bank of a certificate completed and signed by the Trustee in substantially the form of Annex F to the Letter of Credit, the Borrower irrevocably authorizes the Bank to rely on such certificate and to reinstate the Letter of Credit in accordance therewith. Funds held by the Tender Agent as a result of sales of the Pledged Bonds by the Remarketing Agent shall be paid to the Bank by the Tender Agent to be applied to the amounts owing by the Borrower to the Bank pursuant to this paragraph (d). Upon payment to the Bank of the amount of such Tender Advance to be prepaid, together with accrued interest on such Tender Advance to the date of such prepayment on the amount to be prepaid, the principal amount outstanding of Tender Advances shall be reduced by the amount of such prepayment and interest shall cease to accrue on the amount prepaid.

 

Section 4.4. Commission and Fee . (a) The Borrower hereby agrees to pay to the Bank a non-refundable letter of credit fee for the period from and including the date of issuance until the Termination Date, computed at the rate of one and one-eighth percent (1.125%) per annum, calculated as a percentage of the stated amount of the Letter of Credit (as the same may be reduced from time to time but including, in any event, the principal amount of any Pledged Bonds) on the date of payment of such letter of credit fee. Amounts payable under this section shall be payable in advance, based on a 360-day year, actual number of days elapsed, in immediately available funds, on the date of issuance and quarterly thereafter on the first day of each March 1, June 1, September 1, and December 1.

 

(b) The Borrower shall pay to the Bank, upon each drawing under the Letter of Credit in accordance with its terms, a fee of $150 per drawing.

 

16

(c) The Borrower shall pay to the Bank, upon transfer of the Letter of Credit in accordance with its terms, a transfer fee of $1,000.

 

Section 4.5. Increased Costs . In the event of any change in any existing or future law, regulation, ruling or interpretation thereof affecting the Bank which shall either (a) impose, modify or make applicable any reserve, special deposit, capital requirement, assessment or similar requirement against the Letter of Credit or (b) impose on the Bank any other condition regarding the Letter of Credit, and the result of any event referred to in clause (a) or (b) above shall be to increase the cost (including a reasonable allocation of resources) or decrease the yield to the Bank of issuing or maintaining the Letter of Credit (which increase in cost shall be the result of the Bank’s reasonable allocation of the aggregate of such cost increases or yield decreases resulting from such events), then, upon demand by the Bank, the Borrower shall immediately pay to the Bank, from time to time as specified by the Bank, additional amounts which shall be sufficient to compensate the Bank for such increased cost or decreased yield. A statement of charges submitted by the Bank, shall be conclusive, absent manifest error, as to the amount owed.

 

Section 4.6. Computation . All payments of interest, commission and other charges under this Agreement shall be computed on the per annum basis, based upon a year of 365 (or 366, as the case may be) days, and calculated for the actual number of days elapsed.

 

Section 4.7. Parent Procedure . All payments made by the Borrower under this Agreement shall be made to the Bank in lawful currency of the United States of America and in immediately available funds at the Bank’s offices described at the beginning of this Agreement before 12:00 Noon, EST on the date when due, except for payments made in accordance with the terms of Section 4.2(a).

 

Section 4.8. Business Days . If the date for any payment hereunder falls on a day which is not a Business Day, then for all purposes of this Agreement the same shall be deemed to have fallen on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payments of interest or commission, as the case may be.

 

Section 4.9. Reimbursement of Expenses . The Borrower will pay all reasonable legal fees (computed without regard to any statutory presumption) incurred by the Bank in connection with the preparation, execution and delivery of this Agreement, the Letter of Credit, the Bond Documents, and all transactions contemplated hereby and thereby (including any amendments hereto or thereto or consents or waivers hereunder or thereunder) and will also pay all fees, charges or taxes for the recording or filing of Security Instruments. The Borrower will also pay for all reasonable legal expenses of the Bank in connection with the administration of the Letter of Credit, this Agreement and the Bond Documents. The Borrower will, upon request, promptly reimburse the Bank for all amounts expended, advanced or incurred by the Bank to collect or satisfy any obligation of the Borrower under this Agreement or any of the Bond Documents, or to enforce the rights of the Bank under this Agreement or any of the Bond Documents, which amounts will include, without limitation, all court costs, reasonable attorneys’ fees, fees of auditors and accountants and investigation expenses incurred by the Bank in connection with any such matters.

 

17

Section 4.10. Expiration Date . The Letter of Credit will expire on its stated Expiration Date, unless the Bank notifies the Borrower in writing at least 120 days prior to the Expiration Date that the Bank will extend such applicable Expiration Date for an additional one-year period from the then applicable Expiration Date.

 

Section 4.11. Guaranty . (a) the Guarantor hereby absolutely and unconditionally guarantees, the full and timely payment when due, whether at stated maturity, by acceleration or otherwise, of all obligations of the Borrower now or hereafter existing under this Agreement or any of the Security Instruments, whether for principal, interest, fees, expenses or otherwise. The Guarantor further agrees to pay any and all expenses (including without limitation reasonable attorneys ‘ fees and expenses) incurred by the Bank in enforcing or protecting its rights against the Guarantor under this Agreement or any of the Security Instruments.

 

(b) This is a guaranty of payment and not of collection, and the Guarantor expressly waives any right to require that any action be brought against the Borrower or any other guarantor or to require that resort be had to any security, whether held by or available to the Bank or to any other guaranty. If the Borrower shall default in payment of the principal, interest, or fees on or any other amount payable hereunder when and as the same shall become due, whether by acceleration, call for prepayment, or otherwise, or upon the occurrence of any other Event of Default hereunder, the Guarantor, upon demand by the Bank or its successors or assigns, will promptly and fully make such payments. All payments by the Guarantor shall be made in immediately available coin or currency of the United