TAX-EXEMPT CREDIT AGREEMENT

Exhibit 10.6

TAX-EXEMPT CREDIT AGREEMENT

Between

HYCO ALABAMA LLC

And

REGIONS BANK

Dated as of September 1, 2000

This instrument prepared by:

John F. Andrews

Capell & Howard, P.C.

150 South Perry Street

Montgomery, Alabama 36104

(334) 241-8000

 

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TABLE OF CONTENTS

 

 

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TAX-EXEMPT CREDIT AGREEMENT

THIS TAX-EXEMPT CREDIT AGREEMENT dated as of September 1, 2000, is entered into by HYCO ALABAMA LLC, a limited liability company organized and existing under the laws of the State of Delaware (the “Company”) and REGIONS BANK, an Alabama banking corporation with a principal place of business in Montgomery, Alabama.

RECITALS:

The Company has requested that The Industrial Development Board of the City of Arab (the “Board”) issue its $1,000,000 aggregate principal amount of Industrial Development Revenue Bonds (Hyco Alabama Project) Series 2000 (the “Bonds”) in order to provide long-term financing for a portion of the cost of acquiring, constructing and equipping manufacturing facilities for the manufacture of hydraulic cylinders, industrial tubing and other products (the “Project”). The Bonds will be issued pursuant to a Trust Indenture dated as of September 1, 2000 (the “Indenture”) between the Board and Regions Bank (acting in such capacity, the “Trustee”). The Board will use the proceeds of the Bonds (i) to reimburse the Company for a portion of the sums previously expended by the Company for the Project and (ii) to pay a portion of the remaining costs of the Project. The Board will lease the Project to the Company pursuant to a Lease Agreement dated as of September 1, 2000 (the “Lease Agreement”) and the Company will pay rent to the Board sufficient to pay the debt service on the Bonds.

As security for the payment of the Bonds, the Company will cause Regions Bank (herein, in its capacity as issuer of the initial letter of credit referred to below, called the “Bank”), to issue an irrevocable letter of credit in favor of the Trustee in the amount of (i) the aggregate principal amount of the Bonds, to enable the Trustee to pay the principal amount of the Bonds when due and to pay the principal portion of the purchase price of Bonds tendered (or deemed tendered) for purchase, plus (ii) interest on the Bonds for a period of 36 days at the rate of 12% per annum, to enable the Trustee to pay interest on the Bonds when due and to pay the interest portion of the purchase price of Bonds tendered (or deemed tendered) for purchase. The initial letter of credit to be delivered to the Trustee and any substitute letter of credit delivered to the Trustee pursuant to the Indenture are herein referred to as the “Letter of Credit.”

As security for the Company’s obligations under this Agreement with respect to the Letter of Credit, the Company and the Board will execute a Mortgage and Security Agreement dated as of September 1, 2000 (the “Mortgage”) in favor of the Bank, whereby the Bank will be granted a mortgage on and security interest in the Project.

As additional security for the Company’s obligations under this Agreement with respect to the Letter of Credit, the Company will cause Hyco International, Inc., a corporation organized under the laws of the State of Delaware, to execute a Corporate Guaranty Agreement dated as of September 1, 2000 in favor of the Bank.

 

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NOW, THEREFORE, in consideration of the premises and in order to induce the Bank to issue the Letter of Credit, the Company and the Bank hereby covenant, agree, and bind themselves as follows:

ARTICLE I

DEFINITIONS AND OTHER

PROVISIONS OF GENERAL APPLICATION

Section 1.01 Definitions

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(1) The terms defined in this Article have the meanings assigned to them in this Article. Singular terms shall include the plural as well as the singular and vice versa.

(2) All accounting terms not otherwise defined herein have the meanings assigned to them, and all computations herein provided for shall be made in accordance with generally accepted accounting principles, consistently applied. All references herein to “generally accepted accounting principles” refer to such principles as they exist at the date of application thereof.

(3) All references in this instrument to a designated “Article,” “Section” or other subdivision are to the designated articles, sections, and submissions of this instrument as originally executed.

(4) The terms “herein,” “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular article, section or other subdivision.

(5) The term “person” shall include any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization and any government or any agency or political subdivision thereof.

(6) Capitalized terms not otherwise defined in this Article shall have the meaning assigned in the Indenture.

(7) As used in this Agreement, the following terms shall have the following meanings unless the context hereof shall otherwise indicate:

“A Drawing” shall mean a drawing under the Letter of Credit to pay interest on the Bonds.

“B Drawing” shall mean a drawing under the Letter of Credit to pay the principal of the Bonds due to maturity, redemption, or acceleration.

“Bank” shall mean Regions Bank, an Alabama banking corporation with a principal place of business in Montgomery, Alabama, in its capacity as the issuer of the Letter of Credit, and its successors and assigns.

“Board” shall mean The Industrial Development Board of the City of Arab, a public corporation organized and existing under the laws of the State of Alabama, and its successors and assigns.

“Bonds” shall mean the $1,000,000 aggregate principal amount of its Industrial Development Revenue Bonds (Hyco Alabama Project) Series 2000 issued by the Board pursuant to the Indenture.

“Business Day” shall mean any day other than (i) a Saturday or Sunday; (ii) a day on which banking institutions are required or authorized to remain closed in (A) the city in which the principal office of the Trustee

 

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is located, (B) the city in which the principal office of the Remarketing Agent is located, or (C) the city in which the office of the Bank where drawings under the Letter of Credit are to be made is located; or (iii) a day on which the payment system of the Federal Reserve System is not operational.

“C Drawing” shall mean a drawing under the Letter of Credit to pay the purchase price of Tendered Bonds.

“Collateral” shall mean all property and rights mortgaged, assigned, pledged, or otherwise subject to the lien of the Mortgage, the Credit Guaranty and all other collateral from time to time securing the Obligations.

“Commercial Base Rate” shall mean the variable rate of interest designated by the Bank periodically as the Bank’s Commercial Base Rate. The Commercial Base Rate is not necessarily the lowest rate charged by the Bank. The Commercial Base Rate on the date of this Agreement is 9.5%.

“Company” shall mean Hyco Alabama LLC, a limited liability company organized and existing under the laws of the State of Delaware, and its successors and assigns as permitted herein.

“Corporate Guarantor” shall mean Hyco International, Inc., a Delaware corporation, its successors and permitted assigns under the Credit Guaranty.

“Credit Agreement” or “Agreement” shall mean this instrument as originally executed or as it may from time to time be supplemented, modified or amended by one or more instruments entered into pursuant to the applicable provisions hereof.

“Credit Amount” shall mean the maximum amount available to be drawn under the Letter of Credit, as reduced from time to time and reinstated from time to time pursuant to the terms and conditions thereof.

“Credit Guaranty” shall mean the Corporate Guaranty Agreement dated as of September 1, 2000 from the Corporate Guarantor in favor of the Bank relative to the Letter of Credit.

“Event of Default” shall have the meanings stated in Section 5.01 hereof. An Event of Default shall “exist” if an Event of Default shall have occurred and be continuing.

“Financing Documents” shall mean the Indenture, the Lease Agreement, this Agreement, the Mortgage and the Credit Guaranty.

“Financing Participants” shall mean the Company, the Board, the Bank, the Trustee, the Corporate Guarantor, the Remarketing Agent and the holders of the Bonds.

“Indenture” shall mean that certain Trust Indenture dated as of September 1, 2000, between the Board and the Trustee relating to the Bonds, including any amendments or supplements to such instrument from time to time entered into pursuant to the applicable provisions thereof.

“Lease Agreement” shall mean the Lease Agreement dated as of September 1, 2000 between the Board, as lessor and the Company, as lessee relating to the Project, including any amendments or supplements to such instrument from time to time entered into pursuant to the applicable provisions thereof.

 

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“Letter of Credit” shall mean the letter of credit with respect to the Bonds to be issued by the Bank in favor of the Trustee pursuant to this Agreement substantially in the form of Exhibit A.

“Mortgage” shall mean that certain Mortgage and Security Agreement dated as of September 1, 2000, executed by the Company and the Board in favor of the Bank, securing the obligations of the Company under this Agreement, including any amendments, modifications, restatements, consolidations or supplements to such instrument from time to time entered into pursuant to the applicable provisions thereof.

“Obligations” shall mean all indebtedness or obligations of the Company to the Bank under this Agreement or secured by the Mortgage, including without limitation (i) the Company’s obligation to reimburse the Bank for draws made under the Letter of Credit and (ii) the Company’s obligation to pay fees and charges to the Bank for the issuance and continuation of the Letter of Credit.

“Pledged Bonds” shall mean the Bonds purchased pursuant to the optional or mandatory tender provisions of the Indenture with moneys drawn under the Letter of Credit.

“Project” shall mean the Project Site, the Project Building and the Project Equipment, as they may at any time exist.

“Project Building” shall mean those certain buildings and structures now located on the Project Site or hereafter acquired or constructed on the Project Site.

“Project Equipment” shall mean the machinery, equipment, furnishings, fixtures and other personal property described on Exhibit B and all other machinery, equipment, furnishings, fixtures and other personal property of the Company now or hereafter located on the Project Site and used in the operation of the Project.

“Project Site” shall mean the real property described in Exhibit C hereto.

“Remarketing Agent” shall mean Merchant Capital, L.L.C. or its successor or successors under the Remarketing Agreement.

“Remarketing Agreement” shall mean that certain Remarketing Agreement dated as of September 1, 2000 among the Company, the Trustee, the Board and Merchant Capital, L.L.C., as remarketing agent.

“Security Documents” shall mean the Mortgage and the Credit Guaranty.

“Stated Expiration Date” shall mean the date on which the Letter of Credit will, by its terms, expire unless the Letter of Credit is terminated on an earlier date in accordance with its terms.

“Subsidiary” shall mean any corporation, limited liability company, partnership, or other business association of which the Company and/or one or more subsidiaries owns directly or indirectly, 50% or more of capital stock or equity interest.

“Taxable Credit Agreement” shall mean that certain Taxable Credit Agreement dated as of September 1, 2000 between the Company and the Bank relating to $3,000,000 in aggregate principal amount of Revenue Bonds, Series 2000 issued by the Company.

“Tendered Bonds” shall mean Bonds tendered (or deemed tendered) for purchase pursuant to the optional or mandatory tender provisions of the Indenture.

 

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“Termination Date” shall mean the Stated Expiration Date, or such earlier date on which the Letter of Credit terminates in accordance with its terms.

“Trustee” shall mean Regions Bank, an Alabama banking corporation with a principal place of business in Montgomery, Alabama, in its capacity as trustee under the Indenture, and its successors and assigns.

Section 1.02 Effect of Headings and Table of Contents

The article and section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 1.03 Date of Credit Agreement

The date of this Agreement is intended as and for a date for the convenient identification of this Credit Agreement and is not intended to indicate that this Agreement was executed and delivered on said date.

Section 1.04 Separability Clause

If any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 1.05 Counterparts

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.

ARTICLE 2

ISSUANCE OF LETTER OF

CREDIT; REIMBURSEMENT AND FEES

Section 2.01 Issuance of the Letter of Credit

(a) The Company hereby requests and instructs the Bank to issue the Letter of Credit substantially in the form provided in Exhibit A hereto. The Bank hereby agrees to issue the Letter of Credit, subject to the terms and conditions of this Agreement.

(b) The Letter of Credit shall be issued on the date of delivery of the Bonds to the original purchaser or purchasers thereof from the Board.

Section 2.02 Reimbursement

(a) On each date that the Bank honors any A Drawing or B Drawing under the Letter of Credit, the Company shall immediately reimburse the Bank for the amount of such draw.

(b) The Company shall reimburse the Bank for the amount of any C Drawing within 90 days after the date such C Drawing is honored (or, if sooner, on the Termination Date). In addition, the Company shall pay to the Bank interest on the unreimbursed amount of each C Drawing at a variable per annum rate equal to the Commercial Base Rate from the date such C Drawing is paid by the Bank until the amount of such C Drawing is reimbursed in full to the Bank. Such interest shall be payable in arrears on the first day of each month following such C Drawing and on the date that such C Drawing is reimbursed in full to the Bank. Any C Drawing remaining unreimbursed after 90 days from date of advance shall bear interest at a variable per annum rate equal to the Commercial Base Rate plus 2% until reimbursed in full to the Bank.

 

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(c) No interest shall be payable with respect to a C Drawing if the Bank is reimbursed in full for such C Drawing by 12:00 noon (Montgomery, Alabama time) on the same date that such C Drawing is paid by the Bank.

(d) All amounts received by the Bank in respect of principal, premium or interest on Pledged Bonds shall be credited first against interest payable on the unreimbursed amount of the C Drawing with respect to such Pledged Bonds and the balance, if any, shall be credited against the amount of such C Drawing.

(e) Anything herein to the contrary notwithstanding, the Company will not reimburse the Bank for any A Drawing, B Drawing or C Drawing until the same has been honored in full by the Bank, and no such reimbursement shall be prepaid.

Section 2.03 Collateral Security

As security for the performance of its obligations under this Agreement, the Company and the Board shall execute the Mortgage and deliver the same to the Bank simultaneously with the delivery of this Agreement. In addition the Company shall cause the Corporate Guarantor to execute the Credit Guaranty and deliver the same to the Bank simultaneously with the delivery of this Agreement.

An “Event of Default” under the Taxable Credit Agreement (as defined therein) shall be an Event of Default hereunder and an Event of Default hereunder shall be an “Event of Default” under the Taxable Credit Agreement. In the event of an Event of Default under either the Taxable Credit Agreement or this Agreement the Bank may enforce all rights, remedies and powers granted the Bank therein or herein as a result of an Event of Default therein or herein. All Collateral securing the Obligations under this Agreement shall also secure the “Obligations” of the Company under the Taxable Credit Agreement (as defined therein) and all “Collateral” under the Taxable Credit Agreement (as defined therein) shall secure all Obligations hereunder.

Section 2.04 Fees

(a) The Company agrees to pay to the Bank an annual fee calculated at the rate of 1.25% per annum on the daily average of the Credit Amount available during the next succeeding year under the Letter of Credit. The annual fee shall be payable in advance on the date of issuance of the Letter of Credit, for the period beginning on such date and ending on September 15, 2001, and thereafter on each September 16 for the annual period beginning on September 16 and ending on the next September 15 (or, if sooner, the Termination Date). Fees payable for the first and the last annual payment shall be prorated based on the number of days in the period and the number of days in the period during which the Letter of Credit is outstanding.

(b) The fees payable for each annual period specified in subsection (a) above shall be calculated on the assumption that the Credit Amount available under the Letter of Credit on such due date will be available for the entire annual period for which such commission is payable. At the end of such annual period, the fee shall be recalculated based on the actual daily average of the Credit Amount for such period and the difference, if any, shall be added to or subtracted from, as the case may be, the next quarterly payment or, if no fee is payable for the ensuing quarter, shall be paid to the party entitled thereto within ten days of the end of such last period; provided, however, no adjustment shall be made for reductions in the Credit Amount made during the last 15 days (September 1 through September 15) of the annual period. If a Substitute Letter of Credit is obtained by the Company, no refund of fees already paid shall be allowed for any period after the cancellation of the Letter of Credit unless the Bank notified the Company after such commission was paid that increased costs will be payable pursuant to Section 2.05.

 

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(c) Fees payable for the first annual period with respect to the Letter of Credit shall be fully earned and shall be nonrefundable in the event the Letter of Credit terminates during or at the end of such period. For each annual period thereafter, if the Letter of Credit expires or terminates, the Company shall be entitled to a rebate of the annual fee paid with respect to the expired or terminated Letter of Credit based upon the number of days remaining in the annual period during which such termination occurs.

(d) In addition to the fees payable under subsection (a) above, the Company shall pay to the Bank such amount as shall at the time of a transfer of the Letter of Credit then be the charge which the Bank is customarily making for transfers of similar letters of credit. Such charges shall be paid within ten days of receipt by the Company of a written statement therefor.

(e) For each draw on the Letter of Credit, the Company shall pay a processing fee in the amount of $75. The processing fee shall be due on the date such draw is made.

Section 2.05 Increased Costs

(a) If, after the date of delivery of this Agreement, any change in any law or regulation or in the interpretation, administration or enforcement thereof by any court or governmental authority charged with the administration thereof or any action by any governmental authority (whether or not constituting or resulting from such change) shall either

(1) impose, modify or deem applicable any reserve, assessment, special deposit or similar requirement against letters of credit issued by the Bank, or

(2) impose on the Bank any other condition regarding this Agreement or the Letter of Credit,

and the result of any such event shall be to increase the cost 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 resulting from such events and shall be calculated without giving effect to any participation granted in the Letter of Credit), then, upon demand by the Bank, the Company shall pay to the Bank from time to time, within 30 days of the Company’s receipt of the certificate referred to in paragraph 2.05(b) below, as specified by the Bank in writing, such additional amounts which shall be sufficient to compensate the Bank for the portion of such increased costs that are allocable to the Letter of Credit.

(b) The Bank shall deliver to the Company a certificate as to such increased costs incurred by the Bank as a result of any event referred to in subsection (a) of this Section, and such certificate shall be conclusive, absent manifest error, as to the amount thereof. In making the determination contemplated by such certificate, the Bank may make such reasonable, estimates, assumptions, allocations, and the like that the Bank deems to be appropriate.

(c) The Bank shall make a good faith effort to notify the Company when the Bank becomes aware of circumstances that may in the future require the imposition of increased costs pursuant to this Section, but the failure to give such notice shall not preclude the imposition of such increased costs.

(d) If, after the date of this Agreement, the Bank shall have determined that the adoption or implementation of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the

 

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rate of return on the Bank’s capital, on this credit facility or otherwise, as a consequence of its obligations hereunder and under the Letter of Credit to a level below that which the Bank could have achieved but for such adoption, change or compliance (taking into consideration the Bank’s policies with respect to capital adequacy) by an amount deemed by the Bank to be material, then from time to time, promptly upon demand by the Bank, the Company hereby agrees to pay the Bank such additional amount or amounts as will compensate the Bank for such reduction. A certificate of the Bank claiming compensation under this subsection and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. In determining any such amount, the Bank may use any reasonable averaging and attribution methods.

(e) Upon the occurrence of any of the events described in paragraphs 2.05(a) or (d) above, the Company may, at its option, provide a substitute letter of credit for the Letter of Credit, in which event the Bank will refund any prepaid Letter of Credit fees provided all Obligations have been paid in full.

Section 2.06. Place and Time of Payments

(a) All payments by the Company to the Bank hereunder shall be made in lawful currency of the United States and in immediately available funds to the Bank at its address set forth in Section 6.05 hereof or at such other address within the continental United States as shall be specified by the Bank by notice to the Company.

(b) All amounts payable by the Company to the Bank hereunder for which a payment date is expressly set forth herein (including without limitation payments due pursuant to Sections 2.02 and 2.04) shall be payable without notice or written demand by the Bank. All amounts payable by the Company to the Bank hereunder for which no payment date is expressly set forth herein shall be payable on written demand by the Bank to the Company within 15 days of receipt thereof.

(c) The Bank may, at its option, send written notice to the Company of amounts payable pursuant to Sections 2.02 and 2.04, but the failure to send such notice shall not affect or excuse the Company’s obligation to make payment of the amounts required by such Sections on, the due date specified in such Sections.

(d) Payments which are due on a day which is not a Business Day shall be payable on the next succeeding Business Day, and any interest payable thereon shall be payable for such extended time at the specified rate.

Section 2.07 Late Payments

With respect to all amounts payable to the Bank by the Company pursuant to this Article (i) which are not paid on the due date, in the case of amounts payable on a specified date, or (ii) which are not paid within 15 days of written notice to the Company, in the case of amounts payable on demand, the Company agrees to pay to the Bank on demand interest at a variable per annum rate equal to 2% in excess of the Commercial Base Rate for each day from the specified date of payment, or the date of written demand for payment, as the case may be, to the date payment is made.

Section 2.08 Computation of Charges

The interest and charges provided for in this Agreement payable in arrears based upon annual rates shall be computed on the basis of a 365-day year, for actual days elapsed. All interest rates based upon the Commercial Base Rate shall change when and as the Commercial Base Rate shall change, effective on the opening of business on the date of any such change, unless such change is announced after the close of regular banking hours, in which case such change shall be effective on the following day.

 

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Section 2.09 Statements of Account

The Bank will deliver to the Company within a reasonable time after request a statement of charges and payments made pursuant to this Agreement.

Section 2.10 Obligations of the Company Absolute

The obligations of the Company under this Agreement shall be absolute, unconditional, and irrevocable and shall be paid strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including, without limitation, the following:

(1) any lack of validity or enforceability of all or any of the Letter of Credit, the Bonds, or any Financing Document:

(2) any amendment or waiver of or any consent to departure from all or any of the Letter of Credit, the Bonds, or any Financing Document unless consented to in writing by the Bank and the Company;

(3) the existence of any claim, setoff, defense or other rights which the Company may have at any time against any Financing Participant, or any other person or entity, whether in connection with this Agreement, the Letter of Credit, the Bonds, or any Financing Document, or any unrelated transaction;

(4) any statement or any other document presented under the Letter of Credit proves to be forged, fraudulent, invalid or insufficient in any respect or any statement therein proves to be untrue or inaccurate in any respect whatsoever;

(5) payment by the Bank under the Letter of Credit against presentation of a draft or certificate which does not comply with the terms of the Letter of Credit, provided such payment shall not have constituted gross negligence or willful misconduct by the Bank; and

(6) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, provided the same shall not have constituted gross negligence or willful misconduct by the Bank.

No act of commission or omission of any kind at any time on the part of the Bank in respect of any matter whatsoever, except for the gross negligence or willful misconduct of the Bank, shall in any way affect or impair any right, power or benefit of the Bank under this Agreement and, to the extent permitted by applicable law, no setoff, claim, reduction, diminution of any obligation, or any defense of any kind or nature which the Company may have against the Bank, except for the gross negligence or willful misconduct of the Bank, shall be available against the Bank in any suit or action brought by the Bank to enforce any right, power or benefit under this Agreement.

Section 2.11 Pledged Bonds

(a) As additional security for the performance of its obligations under this Agreement, the Company hereby pledges, assigns, hypothecates and transfers to the Bank all of its right, title and interest in and to the Pledged Bonds, and does hereby grant to the Bank a security interest in the Pledged Bonds and all amounts payable thereon and the proceeds thereof.

(b) If the Bank is reimbursed for the purchase price of Pledged Bonds with respect to which a C Drawing has been made, such Pledged Bonds shall be released from the pledge and assignment made hereby and shall be delivered to or upon the order of the Company.

 

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(c) All payments of principal and interest on Pledged Bonds shall be made directly to the Bank. If, while the Bank or its designated agent holds Pledged Bonds, the Company shall receive any interest or principal payment in respect of such Pledged Bonds, the Company agrees to accept the same as agent for the Bank and to hold the same in trust on behalf of the Bank and to deliver the same forthwith to the Bank. All sums of money so paid in respect of principal, premium or interest on such Pledged Bonds which are received by the Company and paid to the Bank, or which shall be received directly by the Bank from the Trustee, shall be credited against the reimbursement obligation of the Company as provided in Section 2.02(d).

(d) If an Event of Default exists, the Bank may, without notice, exercise all rights, privileges or options pertaining to any Pledged Bonds as if it were the absolute owner thereof, upon such terms and conditions as it may determine, all without liability except to account to the Company for property actually received by it. In addition to the rights and remedies granted to it in this Agreement, the Bank or its designated agent shall have the authority to exercise all rights and remedies of a secured party under the Alabama Uniform Commercial Code. The Company shall be liable for the deficiency if the proceeds of any sale or other disposition of the Pledged Bonds and the Collateral are insufficient to pay all amounts to which the Bank is entitled. The Bank shall have no duty to exercise any of such rights, privileges or options and shall not be responsible for any failure to do so or any delay in so doing.

(e) Except as contemplated herein, without the prior written consent of the Bank, the Company agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Bonds, nor will it create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Pledged Bonds, or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Agreement.

(f) The Company further agrees to do or cause to be done all such other reasonable acts and things as may be necessary to make any disposition or sale of any portion or all of the Pledged Bonds permitted by this Agreement valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts or governmental authorities having jurisdiction over any such disposition or sales, all at the Company’s expense.

ARTICLE 3

CONDITIONS PRECEDENT TO

ISSUANCE OF LETTER OF CREDIT

Section 3.01 Conditions Precedent to Issuance of Letter of Credit

The obligation of the Bank to issue the Letter of Credit is subject to the receipt by the Bank of the following documents, each of which shall be satisfactory to the Bank in form and substance:

(1) Financing Documents. An executed counterpart of each of the Financing Documents.

(2) Issuance of Bonds. Evidence that the Bonds shall have been executed, issued, authenticated, and delivered by the Board to the purchaser thereof.

(3) Official Statement. A copy of the Official Statement distributed in connection with the offering and sale of the Bonds, executed or certified on behalf of the Company.

 

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(4) Opinion of Bond Counsel. An opinion of bond counsel (Roy S. Goldfinger, P.C., Montgomery, Alabama) in form and substance satisfactory to the Bank.

(5) Opinion of Counsel for the Company. An opinion of counsel for the Company (Gullahorn & Hare, P.C., Albertville, Alabama) in form and substance satisfactory to the Bank.

(6) Opinion of Counsel for Corporate Guarantor. An opinion of counsel for the Corporate Guarantor (Lawrence M. Gold, P.C., Atlanta, Georgia) in form and substance satisfactory to the Bank.

(7) Opinion of Counsel for the Board. An opinion of counsel for the Board (Burke & Beuoy, Arab, Alabama) in form and substance satisfactory to the Bank.

(8) Approvals of Company. A certified copy of proceedings of the Company with respect to action taken by the Company approving the Financing Documents and the consummation of the transactions contemplated thereby.

(9) Approvals of Corporate Guarantor. A certified copy of proceedings of the Corporate Guarantor with respect to action taken by the Corporate Guarantor approving the Credit Guaranty and the consummation of the transactions contemplated thereby.

(10) Certificate of the Company. A certificate by the Company to the effect that, as of the date of delivery of the Letter of Credit and after giving effect thereto: (i) no Event of Default shall have occurred and be continuing; (ii) no event shall have occurred and be continuing which, with notice or lapse of time or both, would constitute an Event of Default under this Agreement, and (iii) the representations and warranties made by the Company in Section 4.01 hereof shall be true on and as of such date with the same force and effect as if made on and as of such date.

(11) Insurance. Copies of all insurance policies required hereby.

(12) Title Policy. A title insurance policy or policies issued by Chicago Title Insurance Company, or other title insurance company acceptable to the Bank, in the amount of $1,400,000, insuring the mortgage lien created by the Mortgage and the Mortgage and Security Agreement dated as of September 1, 2000 from the Board and the Company to the Bank securing the Taxable Credit Agreement referred to in Section 5.01(13) hereof. Such policy or policies must affirmatively insure against mechanics’ and materialmen’s liens and must not contain any “pending disbursement clause” or any exception for defects, encumbrances, or rights of parties in possession that would be disclosed by an inspection or accurate survey of the real property constituting a part of the Collateral. The policy may contain only the permitted exceptions and encumbrances, as shall be acceptable to the Bank and shall otherwise be in form and content satisfactory to the Bank.

(13) UCC Report. A report from the offices where Uniform Commercial Code financing statements would be properly filed with respect to property and interests of the Company located in the State of Alabama indicating that there are no liens against that portion of the Collateral constituting personal property except for liens as shall be acceptable to the Bank.

(14) Survey. A survey of the real property constituting a part of the Collateral prepared by a registered land surveyor, dated not earlier than 90 days prior to the date of delivery of the Letter of Credit, showing the relation of such real property to public roads for access purposes, the location of all structures then situated on such real property, and all easements, rights-of-way, encroachments, setback lines and other encumbrances visible or listed in the title insurance policy delivered to

 

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the Bank, and certifying that no part of such real property is located within a flood plain.

(15) Credit Guaranty. The Credit Guaranty of the Corporate Guarantor in favor of the Bank guaranteeing all of the Obligations of the Company hereunder.

(16) Additional Evidence. Such additional legal opinions, certificates, proceedings, instruments, and other documents as the Bank or its counsel may reasonably request to evidence (i) compliance by the Company with legal requirements, (ii) the truth and accuracy, as of the date of delivery of the Letter of Credit, of the representations of Company contained in the Financing Documents, and (iii) the due performance or satisfaction by the Company, at or prior to the date of delivery of the Letter of Credit, of all agreements then required to be performed and all conditions then required to be satisfied by the Company pursuant to the Financing Documents.

ARTICLE 4

REPRESENTATIONS AND COVENANTS

Section 4.01 General Representations of the Company

The Company makes the following representations and warranties as the basis for the undertakings on its part herein contained:

(1) It is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Delaware, and is authorized to do business in the State of Alabama and in all other jurisdictions in which the character of its properties or the nature of its business requires such qualifications or authorization.

(2) It has the power and authority to own its properties and assets and to carry, on its business as now being conducted and as now proposed to be conducted.

(3) Its financial statements that have been furnished to the Bank are complete and correct in all material respects and fairly present its financial condition as of the date or dates indicated and for the periods involved. There has been no materially adverse change in its financial condition or operations since the date of its most recent financial statements furnished to the Bank.

(4) It has good and marketable title to all its properties and assets reflected on its most recent balance sheet furnished to the Bank, except for such properties and assets as have been disposed of since the date of such balance sheet as no longer used or useful in the conduct of its business or as have been disposed of in the ordinary course of its business. All such properties and assets are free and clear of liens of any nature, except as disclosed in such financial statements.

(5) It has filed or caused to be filed all federal, state and local tax returns which are required to be filed by it as of the date hereof, and has paid or caused to be paid all taxes as shown on such returns or on any assessments received by it to the extent that such taxes have become due and payable, except such taxes or returns the failure to pay or file would not have a material adverse affect on the business or operations of the Company.

(6) It has not used, and does not intend to use, any part of the proceeds of the Bonds, and has not incurred any indebtedness to be reduced, retired, or purchased by it out of such proceeds, for the purpose of

 

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purchasing or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, and it does not own and has no intention of acquiring any such margin stock.

(7) The execution and delivery of the Financing Documents to which it is a party does not involve any prohibited transaction within the meaning of the Employee Retirement Income Security Act of 1974, as amended (ERISA), of the Internal Revenue Code. It has fulfilled its obligations, if any, under minimum funding standards of ERISA and is in compliance in all material respects with the applicable provisions of ERISA.

(8) It has full legal power to consummate the transactions contemplated by the Financing Documents to which it is a party.

(9) By proper action of its members it has duly authorized the execution and delivery of the Financing Documents to which it is a party and the consummation of the transactions contemplated therein.

(10) It has obtained all consents, approvals, authorizations, and orders of governmental authorities that are required to be obtained by it as a condition to the execution and delivery, of the Financing Documents to which it is a party.

(11) The execution and delivery by it of the Financing Documents to which it is a party and the consummation by it of the transactions contemplated therein do not and will not (i) conflict with, be in violation of, or constitute (upon notice or lapse of time or both) a default under its articles of organization or operating agreement or any indenture, mortgage, deed of trust or other contract, agreement or instrument to which it is a party or is subject, or any resolution, order, rule, regulation, writ, injunction, decree or judgment of any governmental authority or court having jurisdiction over it which would result in a material adverse effect on the business or operations of the Company or (ii) result in or require the creation or imposition of any lien of any nature upon or with respect to any of its properties now owned or hereafter acquired, except as contemplated by the Financing Documents.

(12) The Financing Documents to which it is a party constitute legal, valid, and binding obligations of the Company and are enforceable against it in accordance with the terms of such instruments, except as enforcement thereof may be limited by (i) bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights and (ii) general principles of equity, regardless of whether such enforceability is considered in a proceeding at equity or at law.

(13) Except as described in the Official Statement relating to the Bonds, there is no action, suit, proceeding, inquiry or investigation pending before any court or governmental authority, or, to the best of the Company’s knowledge, threatened against it or affecting it or its properties, that (i) involves the consummation of the transactions contemplated by, or the validity or enforceability of, any of the Financing Documents or (ii) could have a materially adverse impact upon its financial condition or operations.

(14) All utility and sanitary, sewage services necessary, for the use of the Project are available to the Project.

(15) Neither the Company nor any of the Collateral is in violation of any easements, covenants or restrictions affecting any the Collateral, the violation of which could have a material adverse effect on the business or operations of the Company.

 

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(16) It has obtained all necessary licenses, franchises, permits, certificates of need and other authorizations necessary for the operation of the Collateral under applicable laws, ordinances, and regulations, except where the failure to do so would not have a material adverse affect on the business or operations of the Company.

(17) Neither the Collateral nor the Company is in material violation of, or subject to, any existing, pending, or to the Company’s knowledge, threatened investigation or inquiry by any governmental authority or any remedial obligations under any applicable laws, rules or regulations pertaining to health or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”) or the Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), and there are no facts, conditions or circumstances known to it which are likely to result in any such investigation or inquiry if such facts, conditions and circumstances, if any, were fully disclosed to the applicable governmental authority, and the Company will promptly notify the Bank if the Company becomes aware of any such facts, conditions or circumstances or any such investigation or inquiry; the Company has obtained all material permits, licenses, or similar authorizations to construct, occupy, operate or use any buildings, improvements, fixtures or equipment in connection with the Collate