EXHIBIT 10.15
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LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
Dated as of September 1, 2004
between
ABSORPTION CORP.
and
BRANCH BANKING AND TRUST COMPANY
relating to
$4,900,000 ▇▇▇▇▇ County Industrial Development Authority Tax-Exempt Industrial
Development Revenue Bonds (Absorption Corp. Project), Series 2004
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms............................................1
Section 1.02 Computation of Time Periods......................................5
Section 1.03 Accounting Terms.................................................5
ARTICLE II
AMOUNT AND TERMS OF THE LETTER OF CREDIT; PLEDGE OF BONDS
Section 2.01 The Letter of Credit.............................................6
Section 2.02 Issuing the Letter of Credit.....................................6
Section 2.03 Fees and Expenses................................................6
Section 2.04 Reimbursement; Bond Escrow Account...............................6
Section 2.05 Tender Advances..................................................7
Section 2.06 Interest on Tender Advances......................................7
Section 2.07 Prepayments; Reinstatement of Letter of Credit Amounts...........7
Section 2.08 Increased Costs..................................................8
Section 2.09 Payments and Computations........................................9
Section 2.10 Evidence of Debt.................................................9
Section 2.11 Obligations Absolute.............................................9
Section 2.12 Payment with Bank's Funds.......................................10
Section 2.13 Extension of the Stated Termination Date........................10
Section 2.14 Pledge of Bonds.................................................10
ARTICLE III
CONDITIONS OF ISSUANCE
Section 3.01 Conditions Precedent to Issuance of the Letter of Credit........11
Section 3.02 Additional Conditions Precedent to Issuance of the
Letter of Credit.............................................12
Section 3.03 Conditions Precedent to Each Tender Advance.....................13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Company...................13
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.01 Affirmative Covenants...........................................16
Section 5.02 Negative Covenants..............................................20
ARTICLE VI
EVENTS OF DEFAULT
Section 6.01 Events of Default...............................................22
Section 6.02 Rights Upon an Event of Default.................................23
Section 6.03 No Remedy Exclusive.............................................23
Section 6.04 Anti-Marshalling Provisions.....................................24
Section 6.05 Subrogation.....................................................24
ARTICLE VII
MISCELLANEOUS
Section 7.01 Amendments, Etc.................................................24
Section 7.02 Notices, Etc....................................................24
Section 7.03 No Waiver.......................................................25
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Section 7.04 Right of Set-off................................................25
Section 7.05 Indemnification.................................................25
Section 7.06 Liability of the Bank...........................................25
Section 7.07 Costs, Expenses and Taxes.......................................26
Section 7.08 Binding Effect..................................................26
Section 7.09 Severability....................................................26
Section 7.10 Governing Law...................................................26
Section 7.11 Headings........................................................26
Section 7.12 Notice of Controlling Acquisitions..............................26
Section 7.13 Prior Agreements Superseded.....................................26
Section 7.14 Counterparts....................................................26
Exhibits and Schedules
Exhibit A: Form of Letter of Credit
Exhibit B: Form of Company Counsel Opinion
Schedule 5.01(f): Form of Officer's Certificate
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LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of September 1,
2004, between Absorption Corp., a Nevada corporation (the "Company"), and BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation (the "Bank").
PRELIMINARY STATEMENTS:
(1) The Company has requested the ▇▇▇▇▇ County Industrial Development
Authority (the "Issuer") to issue, pursuant to an Indenture of Trust dated as of
September 1, 2004 (said Indenture of Trust and any amendments or supplements
thereto being herein referred to as the "Indenture"), between Branch Banking and
Trust Company, as trustee (the "Trustee"), and the Issuer, $4,900,000 aggregate
principal amount of the Issuer's Tax-Exempt Industrial Development Revenue Bonds
(Absorption Corp. Project), Series 2004 (the "Bonds").
(2) The Issuer proposes to undertake the acquisition of land and building,
to renovate the building, to either expand the building or construct a new
building, and to acquire and install new equipment and to pay costs of
installation of used equipment (the "Project"), as more particularly described
in the Lease Agreement. The Company and the Issuer have entered into a Lease
Agreement of even date herewith (said Lease Agreement and any amendments or
supplements thereto being herein referred to as the "Lease Agreement"), under
the terms of which the Issuer will lease the Project to the Company for the
manufacture of absorption products.
(3) In order to provide security for the payment when due of the principal
of, and interest and premium on, the Bonds, the Company has requested the Bank
to issue its irrevocable letter of credit naming the Trustee as beneficiary, in
substantially the form of Exhibit A hereto (such letter of credit and any
successor letter of credit as provided for or contemplated in such letter of
credit or this Agreement being the "Letter of Credit"), in the amount of
$4,956,384 (the "Commitment"), of which (a) $4,900,000 shall support the payment
of principal or portion of the purchase price corresponding to principal of the
Bonds and (b) $56,384 shall support the payment of up to 35 days of interest or
portion of the purchase price corresponding to interest on the Bonds, at an
assumed interest rate of 12% per annum (computed on the basis of a 365 day
year).
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing and in order to induce the Bank to issue the Letter of
Credit, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"A Drawing," "B Drawing," or "C Drawing" shall have the meaning ascribed
to such terms in the Letter of Credit.
"Affiliate" means a Person which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with the Company or a Subsidiary of the Company. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting stock, by contract or otherwise.
"Agreement" means this Letter of Credit and Reimbursement Agreement and
any amendments or supplements thereto.
"Bond Purchase Agreement" means that certain Bond Purchase Agreement dated
as of September 1, 2004 among the Issuer, the Company and ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇,
Inc., t/a BB&T Capital Markets, and any amendments and supplements thereto.
"Bonds" has the meaning assigned to that term in paragraph (1) of the
Preliminary Statements hereof.
"Business Day" means a day of the year, other than a Saturday or a Sunday,
on which banks located in the cities in which the principal corporate trust
office of the Trustee, the principal office of each Paying Agent, the
principal office of the Bank and the principal office of the Remarketing Agent
are located are not required or authorized to remain closed and on which the New
York Stock Exchange is not closed.
"Capital Leases" means all leases which have been or should be capitalized
in accordance with GAAP as in effect from time to time, including Statement No.
13 of the Financial Accounting Standards Board and any successor thereof.
"Cash Flow Coverage Ratio" means, for any fiscal year, the ratio
determined by dividing (A) net income after taxes plus interest expense,
depreciation, amortization and lease payments; by (B) the sum of the prior
fiscal year's current maturities of indebtedness (including obligations under
Capital Leases and indebtedness under the Bonds) having a final maturity of one
year or more plus lease payments, interest expense paid for the current fiscal
year, owner withdrawals and dividends and advances to stockholders and cash
expenses for taxes paid.
"Commitment" has the meaning assigned to that term in paragraph (3) of the
Preliminary Statements hereof.
"Consistent Basis" means in reference to the application of GAAP, that the
accounting principles observed in the current period are comparable in all
material respects to those applied in the preceding period, except as otherwise
permitted by this Agreement or as may be different as a result of a change in
GAAP (except there shall be no instance allowing upward revaluation of assets).
"Consolidated" shall mean, as applied to any financial or accounting term,
a determination on a consolidated basis in accordance with GAAP for the Company,
the Guarantor and any Subsidiaries.
"Date of Issuance" has the meaning assigned to that term in Section 2.02
of this Agreement.
"Deed of Trust" means the Deed to Secure Debt, Leasehold Deed to Secure
Debt, Security Agreement and Assignment of Rents and Leases of even date
herewith given by the Issuer and the Company to the Bank and concerning the real
property and improvements thereon in ▇▇▇▇▇ County, Georgia, and securing the
obligations of the Company hereunder, and any amendments or supplements thereto.
"Default Rate" means a fluctuating interest rate equal to 2% per annum
above the Prime Rate in effect from time to time.
"Environmental Laws" means and includes the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act, the Superfund Amendments and Reauthorization Act of 1986, any
other "Superfund" or "Superlien" law, or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
Hazardous Materials, as now or at any time hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"Event of Default" has the meaning assigned to that term in Section 6.01
of this Agreement.
"Generally Accepted Accounting Principles" or "GAAP" means those
principles of accounting set forth in statements of the Financial Accounting
Standards Board or which have other substantial authoritative support and are
applicable in the circumstances as of the date of a report, as such principles
are from time to time supplemented and amended.
"Guarantor" means International Absorbents, Inc. and any successor or
assign permitted under the Guaranty.
"Guaranty" means the Guaranty Agreement dated of even date herewith given
by the Guarantor to the Bank, and any amendments or supplements thereto.
"Hazardous Materials" means and includes any hazardous, toxic or dangerous
waste, substance or material (including without limitation any materials
containing asbestos) defined as such in (or for purposes of) any Environmental
Laws.
"Indebtedness" means, for any Person, all items which would, in conformity
with GAAP, be classified as liabilities on a balance sheet of such Person as of
the date such determination of indebtedness is made and in any event including
(without duplication): (a) all Indebtedness For Money Borrowed; (b) all
liabilities guaranteed or assumed, directly or indirectly, in any manner, or
endorsed (otherwise than for collection or deposit in the ordinary
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course of business) or discounted with recourse; (c) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder; (d) all indebtedness in effect
guaranteed by such Person, directly or indirectly, whether through an agreement,
contingent or otherwise, to purchase or repurchase such indebtedness or to
purchase, sell or lease (as lessee or lessor) any property or services primarily
for the purpose of enabling the debtor to make payment of such indebtedness or
to assure the owner of the indebtedness against loss, or to advance or supply
funds to or to invest in any other manner in the debtor, whether through
purchasing stock, making a loan, advance or capital contribution or by means of
agreeing to maintain or cause such debtor to maintain a minimum working capital
or net worth, or otherwise (but excluding endorsements for collection or deposit
in the ordinary course of business); (e) all liabilities secured by any lien on
any property owned by such Person, to the extent attributable to such Person's
interest in such property, even though such Person has not assumed or become
liable for the payment thereof; and (f) obligations of such Person under Capital
Leases.
"Indebtedness for Money Borrowed" means, for any Person, all Indebtedness
of such Person in respect of money borrowed, including without limitation the
deferred purchase price of any property or asset or indebtedness evidenced by a
promissory note, bond or similar written obligation for the payment of money
(including, but not limited to, conditional sales or similar title retention
agreements) and all amounts representing the capitalization of rentals in
accordance with GAAP.
"Interest Payment Date" means each date on which interest is payable on
the Bonds pursuant to the Bonds and the Indenture.
"Issuer" has the meaning assigned to that term in paragraph (1) of the
Preliminary Statements hereof.
"Lease Agreement" has the meaning assigned to that term in paragraph (2)
of the Preliminary Statements hereof.
"Letter of Credit" has the meaning assigned to that term in paragraph (3)
of the Preliminary Statements hereof.
"Letter of Credit Fee Calculation Amount" in effect at any time means the
maximum amount available to be drawn at such time under the Letter of Credit,
the determination of such maximum amount to assume compliance with all
conditions for drawing and no reduction for (i) any amount drawn by any B
Drawing or C Drawing, or (ii) any amount which has been drawn under the Letter
of Credit which is subject, in whole or in part, to reinstatement, or (iii) any
amount not available to be drawn because Bonds are held by or for the account of
the Company or Bank.
"Leverage Ratio" means, as of the date of any determination thereof, the
ratio calculated by dividing Total Liabilities by Tangible Net Worth.
"LIBOR Rate" means the average rate (rounded upward, if necessary, to the
next higher 1/100th of 1.0%) quoted in the Wall Street Journal (Credit Markets
Section) or on Bloomberg Screen MMR2 on the determination date for deposits in
U.S. Dollars offered in the London interbank market to five major European
Banks, or if the above method for determining the LIBOR Rate shall not be
available, a rate determined by a substitute method of determination agreed on
by the Borrower and Bank; provided, if such agreement is not reached within a
reasonable period of time (in Bank's judgment), a rate reasonably determined by
Bank in its sole discretion as a rate being paid, as of the determination date,
by first class banking organizations (as determined by Bank) in the London
interbank market for U.S. Dollar deposits. If the first day of any month falls
on a date when the Bank is closed, the LIBOR Rate shall be determined as of the
last preceding Business Day. The LIBOR Rate shall be adjusted for any change in
the LIBOR Reserve Percentage so that the Bank shall receive the same yield.
"LIBOR Reserve Percentage" means the maximum aggregate rate at which
reserves (including, without limitation, any marginal supplemental or emergency
reserves) are required to be maintained under Regulation D by member banks of
the Federal Reserve System with respect to dollar funding in the London
interbank market. Without limiting the effect of the foregoing, the LIBOR
Reserve Percentage shall reflect any other reserves required to be maintained by
such member banks by reason of any applicable regulatory change against (i) any
category of liability which includes deposits by reference to which the LIBOR
Rate is to be determined or (ii) any category of extension of credit or other
assets related to the LIBOR Rate.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
"Official Statement" means the Official Statement relating to the Bonds,
together with any documents incorporated therein by reference.
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"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Encumbrances" means and includes:
(i) liens for taxes, assessments and other governmental charges due
but not yet payable or being actively contested in good faith by
appropriate proceedings effectively staying any action or proceeding to
foreclose any such lien;
(ii) landlord's, warehouseman's, carrier's, worker's, vendor's,
mechanic's and materialmen's liens and similar liens incurred in the
ordinary course of business remaining undischarged for not longer than 60
days from the filing thereof or being contested in good faith by
appropriate proceedings effectively staying any action or proceeding to
foreclose any such lien;
(iii) attachments remaining undischarged for not longer than 60 days
from the making thereof or being contested in good faith by appropriate
proceedings effectively staying any action or proceeding to foreclose any
such lien;
(iv) liens in respect of judgments or awards which have become final
and unappealable and remain undischarged for not longer than 60 days from
the making thereof;
(v) liens in respect of pledges or deposits under worker's
compensation laws, 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;
(vi) the liens created by this Agreement and the Related Documents
or otherwise in favor of the Bank or its affiliate banks; and
(vii) purchase money liens securing purchase money indebtedness
provided that such liens extend only to the property financed by such
purchase money indebtedness and to the extent permitted by Section
5.02(e)(5).
"Person" means any individual, joint venture, corporation, company,
voluntary association, partnership, trust, joint stock company, unincorporated
organization, association, government, or any agency, instrumentality, or
political subdivision thereof, or any other form of entity.
"Plan" means an employee benefit plan (other than a Multiemployer Plan)
maintained for employees of the Company, or any Affiliate and covered by Title
IV of ERISA.
"Plan Termination Event" means (i) a Reportable Event described in Section
4043 of ERISA and the regulations issued thereunder (other than a Reportable
Event not subject to the provision for 30-day notice to the PBGC under such
regulations), or (ii) the withdrawal of the Company or any of its Affiliates
from a Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of
intent to terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate
a Plan by the PBGC, or (v) any other event or condition which would constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.
"Prime Rate" means the interest rate announced by the Bank from time to
time as its prime rate.
"Project" has the meaning assigned to that term in paragraph (2) of the
Preliminary Statements hereof.
"Rate Hedging Obligation" means any and all obligations of the Company or
any Guarantor, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, United States dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts, warrants and those commonly known as
interest rate "swap" agreements; and (ii) any and all cancellations, buybacks,
reversals, terminations or assignments of any of the foregoing.
"Related Documents" has the meaning assigned to that term in Section 2.11
of this Agreement.
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"Remarketing Agreement" means that certain Remarketing Agreement of even
date herewith between the Company and ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc. t/a BB&T
Capital Markets, and any amendments and supplements thereto.
"Security Agreement" means that certain Security Agreement of even date
herewith by and between the Company and the Bank, and any amendments or
supplements thereto, granting a first priority security interest in certain
existing and after acquired personal property of the Company.
"Stated Termination Date" means September 2, 2011, and, if the Letter of
Credit is extended, the date to which the term of the Letter of Credit is
extended.
"Subsidiary" of any Person means a corporation in which more than 50% of
the stock having ordinary voting power to elect a majority of the board of
directors or other managers of such corporation is owned by such Person, by such
Person and any one or more Subsidiaries of such Person, or by any one or more
Subsidiaries of such Person.
"Swap Agreement" means one or more agreements between the Company or
Guarantor and the Bank or any affiliate thereof, which create Rate Hedging
Obligations.
"Tangible Net Worth" means, as of the date of any determination thereof,
the total of all assets appearing on the balance sheet of the Company, prepared
in accordance with GAAP applied on a Consistent Basis after deducting therefrom
(without duplication of deductions):
(i) the book amount of all intangible assets including, without
limitation, such items as goodwill (whether representing the cost over
book value of assets acquired or otherwise), patents, trademarks, trade
names, copyrights, franchises, licenses and rights in any thereof;
(ii) all reserves, including, without limitation, reserves for
liabilities, fixed or contingent, deferred income taxes, depreciation,
depletion, obsolescence, amortization, insurance and inventory valuation
carried by the Company and not deducted from assets;
(iii) all capitalized expenses and deferred charges and unamortized
debt discount and expense;
(iv) Total Liabilities;
(v) any minority interest in any Subsidiary or Affiliate of the
Company;
(vi) Indebtedness of, advances to or amounts due from any Affiliate,
officer or director of the Company; and
(vii) any items not included in subdivisions (i) through (vi) above
which would be treated as intangibles under GAAP.
"Tender Advance" has the meaning assigned to that term in Section 2.05 of
this Agreement.
"Total Liabilities" means the aggregate amount of all liabilities (i.e.,
claims of creditors that are to be satisfied by the disbursement or utilization
of corporate resources), including without limitation all Indebtedness, all
determined in accordance with GAAP.
"Trustee" has the meaning assigned to that term in paragraph (1) of the
Preliminary Statements hereof.
SECTION 1.02 COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03 ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP applied on a
Consistent Basis, except as otherwise stated herein.
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ARTICLE II
AMOUNT AND TERMS OF THE LETTER OF CREDIT; PLEDGE OF BONDS
SECTION 2.01 THE 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 at any time during the period from the date hereof to
September 30, 2004 in the amount of the Commitment and expiring on or before the
Stated Termination Date, unless extended pursuant to Section 2.13 hereof.
SECTION 2.02 ISSUING THE LETTER OF CREDIT. The Letter of Credit shall be
issued on at least five Business Days' notice from the Company to the Bank
specifying the proposed date of issuance. On the date specified by the Company
in such notice and upon fulfillment of the applicable conditions set forth in
Article III hereof, the Bank will issue and deliver the Letter of Credit to the
Trustee (the "Date of Issuance"). The Letter of Credit shall be issued in
substantially the form of Exhibit A hereto.
SECTION 2.03 FEES AND EXPENSES.
(a) The Company agrees to pay the Bank on or prior to the Date of
Issuance a commitment fee of $12,391.00 equal to .25% of the initial
stated amount of the Letter of Credit.
(b) The Company agrees to pay the Bank at closing an initial Letter
of Credit fee equal to $47,086.00 (representing 0.95% of the initial
stated amount of the Letter of Credit). Thereafter, beginning on September
1, 2005 and continuing on each September 1 until the Stated Termination
Date, the Company agrees to pay to the Bank an annual Letter of Credit fee
(the "Letter of Credit Fee") equal to the Letter of Credit Fee Calculation
Amount multiplied by 0.95%.
The amount of such fee shall be calculated based on the Letter of Credit
Fee Calculation Amount as of the date such fee is due, and the fee shall
be deemed earned when paid and the Company shall be entitled to no refund
or rebate of such fee in the event the Letter of Credit terminates after
such payment.
(c) The Company agrees to pay to the Bank on demand (i) for each
drawing under the Letter of Credit a drawing fee of $10; (ii) for each
amendment of the Letter of Credit an amendment fee of $500; (iii) for each
Tender Advance under the Letter of Credit a drawing fee of $100; and (iv)
for each transfer of the Letter of Credit, a transfer fee of $1,500,
together with all costs and expenses of the Bank related thereto.
(d) The Company agrees to pay the Bank's normal transaction charges,
including wire charges, and service charges on any account established
with the Bank in order to perform this Agreement.
(e) Any amount of fees or expenses payable by the Company to the
Bank which is not paid when due shall bear interest, from the date such
amount of fees was due until the date of payment in full, at the Default
Rate, payable on the first to occur of the date of payment in full of such
amount or demand by the Bank.
SECTION 2.04 REIMBURSEMENT; BOND ESCROW ACCOUNT. The Company agrees to pay
the Bank (i) any amount drawn under the Letter of Credit pursuant to any A
Drawing or B Drawing and, if the conditions contained in Section 3.03 hereof are
not fulfilled by the Company, that portion of the purchase price corresponding
to principal and that portion of the purchase price corresponding to interest
drawn under the Letter of Credit pursuant to a C Drawing, immediately after
payment by the Bank of such drawing (and before 3:30 p.m. (prevailing Eastern
Time) on the same Business Day of the Bank's payment of such drawing), plus (ii)
interest at the Default Rate payable on demand, and on the date of payment in
full, on any amount remaining unpaid by the Company to the Bank under clause (i)
above, from the date such amount becomes due and payable until payment in full.
As principal and interest payments become due on the Bonds, drawings will
be made on the Letter of Credit for such amounts by the Trustee. The Company
desires and agrees to deposit in cash into an interest bearing account of the
Bank (the "Bond Escrow Account"), commencing October 1, 2004, monthly on the
first Business Day of each month, one-twelfth (1/12th) of the principal amount
which is payable on the Bonds on each principal payment date which it will need
to reimburse the Bank hereunder for drawings under the Letter of Credit
respecting principal.
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All such funds shall be held in the Bond Escrow Account and shall not be
withdrawable by the Company except as provided herein. Provided no Default or
Event of Default has occurred hereunder, any interest which accrues on such
funds held by the Bank may be withdrawn by the Company on each Interest Payment
Date or left in such account and credited against the reimbursement obligations
due hereunder. The Company hereby assigns to and grants the Bank a security
interest in such Bond Escrow Account to secure the Company's obligations
hereunder. To the extent that the Company fails to pay when due any amount owing
hereunder, including the reimbursement payments due under this Section 2.04, the
Bank may, and is hereby authorized by the Company to, withdraw from such account
and pay to itself such amounts as are needed to satisfy such obligations of the
Company to the Bank.
THE BOND ESCROW ACCOUNT SHALL BE DEPLETED AT LEAST ONCE EACH YEAR AND THE
COMPANY SHALL BE RESPONSIBLE FOR CAUSING SUCH ACTION. ANY MONEY DEPOSITED IN THE
BOND ESCROW ACCOUNT SHALL BE SPENT WITHIN A THIRTEEN-MONTH PERIOD BEGINNING ON
THE DATE OF DEPOSIT, AND ANY AMOUNT RECEIVED FROM INVESTMENT OF MONEY HELD IN
THE BOND ESCROW ACCOUNT SHALL BE SPENT WITHIN A ONE-YEAR PERIOD BEGINNING ON THE
DATE OF RECEIPT. IN ADDITION TO THE FOREGOING, THE COMPANY AGREES THAT THE BOND
ESCROW ACCOUNT WILL BE USED AND MAINTAINED AT ALL TIMES IN SUCH A MANNER THAT
WILL NOT CAUSE THE BONDS TO BE TREATED AS "ARBITRAGE BONDS" WITHIN THE MEANING
OF SECTION 148 OF THE CODE (AS DEFINED IN THE INDENTURE).
SECTION 2.05 TENDER ADVANCES. If the Bank shall make any payment of that
portion of the purchase price corresponding to principal and interest of the
Bonds from amounts drawn under the Letter of Credit pursuant to a C Drawing and
the conditions set forth in Section 3.03 shall have been fulfilled, such payment
shall constitute a tender advance made by the Bank to the Company on the date
and in the amount of such payment, each such tender advance being a "Tender
Advance". Notwithstanding any other provision hereof, the Company 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 provided in Section 2.07(b)
hereof, (ii) the date 30 days following such Tender Advance or (iii) the Stated
Termination Date. The Company may prepay any such amounts on an earlier date as
provided in Section 2.07(a) hereof.
SECTION 2.06 INTEREST ON TENDER ADVANCES. The Company 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 (i) for the first ninety days following the date of such Tender
Advance, the then current 30-day LIBOR Rate plus 2.75%, and (ii) for all periods
after the date ninety days following such Tender Advance, the then current
30-day LIBOR Rate plus 3.25%, provided that the unpaid amount of any Tender
Advance which is not paid when due pursuant to Section 2.05 hereof shall bear
interest at the Default Rate, payable on demand and on the date such amount is
paid in full.
SECTION 2.07 PREPAYMENTS; REINSTATEMENT OF LETTER OF CREDIT AMOUNTS.
(a) The Company 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 amount prepaid. The Company shall notify the Bank
on the date of such prepayment of the amount to be prepaid, which notice
shall be given prior to such payment. In addition, the Company shall,
forthwith, prepay or cause to be prepaid pursuant to this subsection (a)
any amount owing to the Bank as a result of any Tender Advance for the
purpose of paying the purchase price of any Bond delivered to the Trustee,
if the Remarketing Agent failed, for any reason, to pay or tender payment
of the purchase price of such Bond when due to or for the account of the
person entitled thereto and such failure is continuing or any other person
shall assert that such person has a lien on or security interest in such
Bond. Upon payment to the Bank of the amount of such Tender Advance to be
prepaid pursuant to this subsection, 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, interest shall cease to accrue
on the amount prepaid and the Bank shall release or cause to be released
to the Trustee, in accordance with the terms of the Indenture, a principal
amount of Bonds, if any, then held under pledge equal to the principal
amount of such prepayment.
7
(b) Prior to or simultaneously with the resale of Bonds acquired by
the Trustee with the proceeds of one or more draws under the Letter of
Credit, the Company shall prepay 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 (i) the portion of the purchase price corresponding to the
aggregate principal amount of the Bonds being resold or to be resold, plus
(ii) the portion of the purchase price corresponding to the aggregate
amount of accrued and unpaid interest on such Bonds, plus (iii) the
aggregate amount of accrued and unpaid interest on such Tender Advances,
less the amount paid pursuant to the immediately preceding clause (ii).
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 above), and, the Company irrevocably
authorizes the Bank to reinstate the Letter of Credit in accordance
therewith. In connection with a prepayment of Tender Advances from
proceeds of the resale of Bonds, the Company or its designee shall deliver
notice to the Bank, prior to 11:00 A.M. (prevailing Eastern Time) on the
date of such proposed prepayment, directing the Bank to deliver Bonds held
by the Bank or its designee to the Remarketing Agent for sale pursuant to
the Indenture, and specifying the principal amount of Bonds to be sold,
which notice may be given by telephone (promptly confirmed in writing).
(c) The Company agrees that, pursuant to the provisions of the
Indenture, Bonds purchased with proceeds of a drawing under the Letter of
Credit shall be (i) registered by the Trustee in the name of the Bank and
held by the Bank or its designee (including the Trustee), as agent and
bailee of the Bank, expressly subject to the pledge in favor of the Bank,
and deemed held by the Trustee, as agent and bailee for the account of the
Bank and (ii) in the event Bonds shall be certificated, held by the
Trustee as agent and bailee for the account of the Bank or, at the Bank's
election, delivered by the Trustee to the Bank or its designee. All such
Bonds are to be held by the Bank or its agent, bailee or designee in
pledge as collateral securing the Company's payment obligations to the
Bank hereunder as provided for in Section 2.14 hereof. Upon payment to the
Bank of the amount of such drawings, together with accrued interest, if
required due to failure to pay such amounts on the date when due, on such
amount, calculated at the Default Rate, to the date of payment, and upon
written notice to the Trustee that the Bank has reinstated the Letter of
Credit, in an amount sufficient to cover all principal and accrued
interest on the Bonds so released for up to 35 days at 12% per annum, with
respect to Bonds purchased with proceeds of such drawings, the Bank shall
release, in accordance with the terms of the Indenture, a principal amount
of Bonds, if any, then held under the pledge equal to the amount of such
payment corresponding to the principal portion of such Bonds.
SECTION 2.08 INCREASED COSTS. If any law, regulation or change in any law
or regulation or in the interpretation thereof, or any ruling, decree, judgment,
guideline, directive or recommendation (whether or not having the force of law)
by any regulatory body, court, central bank or any administrative or
governmental authority charged or claiming to be charged with the administration
thereof (including, without limitation, a request or requirement which affects
the manner in which the Bank allocates capital resources to its commitments
including its obligations hereunder) shall either (i) impose upon, modify,
require, make or deem applicable to the Bank or any of its affiliates,
Subsidiaries or participants any reserve requirement, special deposit
requirement, insurance assessment or similar requirement against or affecting
the Letter of Credit issued hereunder, or (ii) subject the Bank or any of its
affiliates, Subsidiaries or participants to any tax, charge, fee, deduction or
withholding of any kind whatsoever in connection with the Letter of Credit or
change the basis of taxation of the Bank or any of its affiliates, Subsidiaries
or participants (other than a change in the rate of tax based on the overall net
income of the Bank or such participant), or (iii) impose any condition upon or
cause in any manner the addition of any supplement to or increase of any kind to
the Bank's or an affiliate's, Subsidiary's or participant's capital or cost base
for issuing or owning a participation in the Letter of Credit which results in
an increase in the capital requirement supporting the Letter of Credit, or (iv)
impose upon, modify, require, make or deem applicable to the Bank or any of its
affiliates, Subsidiaries or participants any capital requirement, increased
capital requirement or similar requirement, such as the deeming of the Letter of
Credit to be an asset held by the Bank or any of its affiliates, Subsidiaries or
participants for capital adequacy calculation or other purposes (including,
without limitation, a request or requirement which affects the manner in which
the Bank or any participant allocates capital resources to its commitments
including its obligations hereunder or under the Letter of Credit), and the
result of any events referred to in (i), (ii), (iii) or (iv) above shall be to
increase the costs in any way to the Bank or any affiliate, Subsidiary or
participant of issuing, maintaining or participating in the Letter of Credit or
reduce the amounts payable by the Company hereunder or reduce the rate of return
on capital, as a consequence of the issuing, maintaining or participating in the
Letter of Credit, to a level below that which the Bank, its affiliates,
Subsidiaries or participants could have achieved but for
8
such events; then and in such event the Company shall, promptly upon receipt of
written notice to the Company by the Bank of such increased costs and/or
decreased benefits, pay within 30 days of demand therefor to the Bank all such
additional amounts which, in the Bank's or participant's sole good faith
calculation as allocated to the Letter of Credit, shall be sufficient to
compensate it for all such increased costs and/or decreased benefits, all as
certified by the Bank or such participants in said written notice to the
Company. Such certification shall be accompanied by information concerning the
calculation of such increased costs and/or decreased benefits and shall be
conclusive and binding on the parties hereto, absent manifest error. In
determining such amount, the Bank or any participant may use any reasonable
averaging or attribution methods.
SECTION 2.09 PAYMENTS AND COMPUTATIONS. The Company shall make each
payment hereunder (a) representing reimbursement pursuant to Section 2.04 hereof
to the Bank immediately after payment by the Bank of drawings made under the
Letter of Credit (and before 3:30 p.m. (prevailing Eastern Time) on the same
Business Day of the Bank's payment of such drawing), and (b) not later than 2:00
p.m. (prevailing Eastern Time) for all other payments, on the day when due in
lawful money of the United States of America to the Bank at its address referred
to in Section 7.02 hereof in same day funds. The Company hereby authorizes the
Bank, if and to the extent payment is not made when due hereunder, to charge
from time to time against any of the Company's respective accounts with the
Bank, including the Bond Escrow Account, any amount so due. Computations of the
Prime Rate, the Default Rate and of any fees or commissions hereunder shall be
made by the Bank on the basis of a year of 360 days for the actual number of
days (including the first day but excluding the last day) elapsed. Whenever any
payment to be made hereunder shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the computation of
payment of interest, fee or commission, as the case may be.
SECTION 2.10 EVIDENCE OF DEBT. The Bank shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Company resulting from each drawing under the Letter of Credit and each Tender
Advance made from time to time hereunder and the amounts of principal, interest
and fees payable and paid from time to time hereunder. In any legal action or
proceeding in respect of this Agreement, the entries made in such account or
accounts shall be conclusive evidence of the existence and amounts of the
obligations of the Company therein recorded, absent manifest error.
SECTION 2.11 OBLIGATIONS ABSOLUTE. The payment obligations of the Company
under this Agreement shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the Letter of Credit,
the Bonds, the Indenture, the Lease Agreement, the Bond Guaranty (as
defined in the Indenture), the Deed of Trust, the Security Agreement, the
Guaranty, any Swap Agreement or any other agreement or instrument relating
thereto (collectively, the "Related Documents");
(b) any amendment or waiver of or any consent to departure from all
or any of the Related Documents;
(c) the existence of any claim, set-off, defense or other right
which the Company may have at any time against the Trustee or any other
beneficiary, or any transferee, of the Letter of Credit (or any persons or
entities for whom the Trustee, any such beneficiary or any such transferee
may be acting), the Bank or any other person or entity, whether in
connection with this Agreement, the transactions contemplated herein or in
the Related Documents, or any unrelated transaction;
(d) any statement or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(e) 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; and
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
9
SECTION 2.12 PAYMENT WITH BANK'S FUNDS. The Bank agrees that any and all
payments made under the Letter of Credit will be made with the Bank's own funds.
SECTION 2.13 EXTENSION OF THE STATED TERMINATION DATE. Not earlier than
one hundred fifty (150) days before the Stated Termination Date, the Company may
request the Bank in writing to extend the Stated Termination Date for purposes
of this Agreement and the Letter of Credit. If the Company shall make such a
request, the Bank shall, on or before the date sixty (60) days preceding the
Stated Termination Date, notify the Company in writing whether or not the Bank
will extend the Stated Termination Date and, if the Bank does so elect, the
conditions of such extension (including conditions relating to legal
documentation and pricing, such as fees for renewal and drawings). If the Bank
shall not so notify the Company, the Bank shall be deemed to have not consented
to such request. All requests and notices made pursuant to this Section 2.13
shall also be delivered to the Trustee.
SECTION 2.14 PLEDGE OF BONDS. The Company hereby pledges, assigns,
hypothecates, transfers and delivers to the Bank all its right, title and
interest to, and hereby grants to the Bank a first lien on, and security
interest in, all right, title and interest of the Company in and to the
following (the "Collateral"):
(a) all Bonds which may from time to time have been purchased with
proceeds of C Drawings under the Letter of Credit (the "Pledged Bonds");
(b) all income, earnings, profits, interest, premium or other
payments in whatever form in respect of the Pledged Bonds; and
(c) all proceeds (cash and non-cash) arising out of the sale,
exchange, collection, enforcement or other disposition of all or any
portion of the Pledged Bonds;
as collateral security for the prompt and complete payment when due of all
amounts due in respect of the reimbursement obligations of the Company set forth
herein with respect to such Pledged Bonds (the "Obligations").
Pledged Bonds shall be held by the Trustee pursuant to the provisions of
Section 12.03 of the Indenture or as otherwise directed by the Bank.
In the event that the Company shall fail to pay any amount when due
hereunder with respect to the Pledged Bonds, the Bank, without demand of
performance or other demand, advertisement or notice of any kind (except the
notice specified below of time and place of public or private sale or except as
may be required by applicable law) to or upon the Company or any other Person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral, or any part thereof, in one or more parcels at public
or private sale or sales, at any exchange, broker's board or at any of the
Bank's offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk, with the right of the
Bank upon any such sale or sales, public or private, to purchase the whole or
any part of said Collateral so sold, free of any right or equity of redemption
in the Company, which right or equity of redemption is hereby expressly waived
or released. The Bank shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any and all of the Collateral or in any
way relating to the rights of the Bank hereunder, including reasonable
attorneys' fees and legal expenses, to the payment in whole or in part of the
Obligations in such order as the Bank may elect, the Company remaining liable
for any deficiency remaining unpaid after such application, and only after so
applying such net proceeds and after the payment by the Bank of any other amount
required by any provision of law, need the Bank account for the surplus, if any,
to the Company. The Company agrees that the Bank need not give more than ten
days' notice of the time and place of any public sale or of the time after which
a private sale or other intended disposition is to take place and that such
notice is reasonable notification of such matters. No notification need be given
to the Company if it has signed after default a statement renouncing or
modifying any right to notification of sale or other intended disposition. In
addition to the rights and remedies granted to it in this Agreement and in any
other instrument or agreement securing, evidencing or relating to any of the
Obligations, the Bank shall have all the rights and remedies of a secured party
under the Uniform Commercial Code of the State of North Carolina, except to the
extent the remedial provisions of some other state laws are applicable.
10
The Company covenants that the pledge, assignment and delivery of the
Collateral hereunder will create a valid, perfected, first priority security
interest in all right, title or interest of the Company in or to such
Collateral, and the proceeds thereof, subject to no prior pledge, lien,
mortgage, hypothecation, security interest, charge, option or encumbrance or to
any agreement purporting to grant to any third party a security interest in the
property or assets of the Company which would include the Collateral. The
Company covenants and agrees that it will defend the Bank's right, title and
security interest in and to the Collateral and the proceeds thereof against the
claims and demands of all persons whomsoever.
Pledged Bonds shall be released from the security interest created
hereunder upon satisfaction of the Obligations with respect to such Pledged
Bonds, and restoration of the Letter of Credit in the amount of any drawing
thereunder to satisfy the Obligations.
ARTICLE III
CONDITIONS OF ISSUANCE
SECTION 3.01 CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF CREDIT. The
obligation of the Bank to issue the Letter of Credit is subject to the
conditions precedent that, unless otherwise agreed to by Bank, the Bank shall
have received on or before the Date of Issuance the following, each dated such
date, in form and substance satisfactory to the Bank:
(a) Corporate Documents: (i) For each of the Company and the
Guarantor, a copy of its Articles of Incorporation certified as of a date
no earlier than 30 days prior to the Date of Issuance by the Secretary of
State of its state of incorporation and a certificate of existence
respecting the Company and Guarantor issued by the Secretary of State of
its state of incorporation no earlier than 30 days prior to the Date of
Issuance; (ii) a certificate of authority to transact business in Georgia
for the Company; and (iii) a Certificate of the Secretary of the Company
and Guarantor stating that attached thereto is (x) a true and correct copy
of its bylaws currently in full force and effect; and (y) copies of the
resolutions of the its Board of Directors (or other governing body)
evidencing authorization and approval of this Agreement and any Related
Documents to which it is a party and the transactions contemplated
thereby, including the obligations of the Company or Guarantor thereunder,
as applicable.
(b) Governmental Approvals: Originals (or copies satisfactory to the
Bank) of all governmental and regulatory approvals (including, without
limitation, approvals, validations, resolutions or orders of the Issuer)
necessary for the Company with respect to this Agreement, the issuance of
the Bonds and the transactions contemplated hereby and thereby.
(c) Incumbency Certificate: Certificate of the Secretary of the
Company certifying the names and true signatures of the officers
authorized to sign this Agreement, the Related Documents and the other
documents contemplated hereby and thereby.
(d) Company and Guarantor Counsel Opinion: An opinion of counsel to
the Company and Guarantor in form and substance satisfactory to the Bank
and its counsel, and as to such other matters as the Bank may reasonably
request.
(e) Bond Counsel Opinion; Issuer Counsel Opinion: An opinion of
Seyfarth ▇▇▇▇ LLP, Bond Counsel, substantially in the form of the opinion
attached as Appendix D to the Official Statement, and an opinion of
counsel to the Issuer in form and substance reasonably acceptable to the
Bank.
(f) Operative Documents: An executed copy of the Lease Agreement,
Indenture, Remarketing Agreement, Bond Purchase Agreement and the other
Related Documents.
(g) Authentication Order: A certificate from the Issuer or other
evidence satisfactory to the Bank that the Issuer has duly executed and
delivered the Bonds.
(h) Fees Payable: Payment by the Company to (i) the Bank of the fees
set forth in Section 2.03 hereof and such other costs and expenses
pursuant to Section 7.07 hereof, and (ii) counsel to the Bank, of their
reasonable fees and disbursements incurred in connection with this
transaction.
11
(i) Bank Amortization Schedule; Investment of Bonds Proceeds: The
Bank shall have approved the principal amortization schedule for the
Bonds. The Bank shall have been provided the opportunity to provide
investment services for monies held by the Trustee in the Project Fund or
Bond Fund, subject to Section 7.01 of the Indenture.
(j) Title Insurance: From a title insurance company acceptable to
the Bank, in respect of the Bank, a mortgagee's title insurance policy or
marked-up unconditional binder for such insurance, dated the Date of
Issuance. Such policy shall (i) be in an amount equal to the Commitment;
(ii) insure that the Deed of Trust insured thereby creates a valid first
lien on the property covered by the Deed of Trust free and clear of all
defects and encumbrances (except those acceptable to the Bank); (iii) name
the Bank as the insured party thereunder; (iv) be in the form of ALTA Loan
Policy-1970 (amended 10-17-70) or other form approved by the Bank; and (v)
contain such endorsements and effective coverage as the Bank may
reasonably request (including but not limited to a Letter of Credit
endorsement, a Survey endorsement, a Variable Rate Mortgage endorsement,
an Access endorsement, a "Doing Business" endorsement, and a Comprehensive
endorsement). The Bank shall also have received evidence that all premiums
in respect of such policy have been paid.
(k) Evidence of Recordation, Filings and Payments of Fees: Evidence
satisfactory to the Bank that any documents (including, without
limitation, the Deed of Trust and financing statements) required to be
recorded or filed in order to create, in favor of the Bank, a perfected
lien on and security interest in all real and personal property covered by
the Deed of Trust and the Security Agreement have been properly recorded
and/or filed in each office in each jurisdiction required in order to
create, in favor of the Bank, a perfected lien on and security interest in
the respective collateral described therein. The Bank shall have received
evidence of all such recordation and acknowledgement copies of all such
filings (or, in lieu thereof, the Bank shall have received other evidence
satisfactory to the Bank that all such filings have been made), and the
Bank shall have received evidence that all necessary recordation and
filing fees and all documentary taxes or other expenses related to such
filings or recordations have been paid in full.
(l) Insurance: At least ten (10) days prior to the Date of Issuance,
copies of certificates of insurance evidencing the insurance coverage
required hereunder or in the Deed of Trust, issued by insurance companies
or associations licensed in Georgia and acceptable to the Bank and in
amounts acceptable to the Bank, providing (i) a mortgagee clause listing
the Bank as mortgagee and (ii) that such policy may not be amended or
cancelled without at least thirty (30) days prior written notice to the
Bank, together with evidence satisfactory to the Bank that all premiums
necessary to be paid for the effectiveness of such insurance have been
paid by the Company. If any part of the Project or the property covered by
the Deed of Trust is located in a "special flood hazard" area within the
meaning of the Federal Flood Disaster Protection Act of 1973, a flood
insurance policy satisfactory to the Bank and naming the Bank as insured
party and/or loss payee shall be delivered to the Bank.
(m) Certified Survey and Flood Plain Certification: At least ten
(10) days prior to the Date of Issuance, a physical survey by an
independent professional licensed land surveyor or other person
satisfactory to the Bank containing maps or plats of the perimeter or
boundaries of the site of the real property and improvements covered by
the Deed of Trust satisfactory to the Bank and dated a date satisfactory
to the Bank which survey shall indicate the locations on such site of all
the buildings, structures, easements, roadways and other improvements and
matters affecting said property. At least ten (10) days prior to the Date
of Issuance, the Company shall also provide a certification from an
independent professional licensed land surveyor or other person
satisfactory to the Bank as to the location of the Project or any property
covered by the Deed of Trust in any "special flood hazard" area within the
meaning of the Federal Flood Disaster Protection Act of 1973.
(n) Other Documents: Such other documents, instruments, approvals
(and, if requested by the Bank, certified duplicates of executed copies
thereof) or opinions as the Bank may reasonably request.
SECTION 3.02 ADDITIONAL CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF
CREDIT. (a) The obligation of the Bank to issue the Letter of Credit shall be
subject to the further conditions precedent that on the Date of Issuance the
following statements shall be true and the Bank shall have received a
certificate signed by an authorized officer of the Company, dated the Date of
Issuance, stating that:
12
(i) The representations and warranties contained in Section
4.01 of this Agreement and Section 2.2 of the Lease Agreement are
correct in all material respects on and as of the Date of Issuance
as though made on and as of such date; and
(ii) No event has occurred or would result from the issuance
of the Letter of Credit, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that
notice be given or lapse of time or both;
and (b) there shall have been no introduction of or change in or in the
interpretation of any law or regulation that would make it unlawful or unduly
burdensome for the Bank to issue the Letter of Credit, no outbreak or escalation
of hostilities or other calamity or crisis, no suspension of or material
limitation on trading on the New York Stock Exchange or any other national
securities exchange, no declaration of a general banking moratorium by United
States or North Carolina banking authorities, and no establishment of any new
restrictions on transactions in securities or on banks materially affecting the
free market for securities or the extension of credit by banks.
SECTION 3.03 CONDITIONS PRECEDENT TO EACH TENDER ADVANCE. Each payment
made by the Bank under the Letter of Credit pursuant to a C Drawing shall
constitute a Tender Advance hereunder only if on the date of such payment the
following statements shall be true:
(a) The representations and warranties contained in Section 4.01 of
this Agreement and Section 2.2 of the Lease Agreement, are correct in all
material respects on and as of the date of such Tender Advance as though
made on and as of such date, except those made as of a specific date and
except where the failure to be correct would not, in the opinion of the
Bank, impair the ability of the Company to repay or perform its
obligations hereunder; and
(b) No event has occurred or would result from such Tender Advance,
which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or lapse of time or
both.
The Company shall be deemed to have represented and warranted, on the date of
payment by the Bank under the Letter of Credit pursuant to a Tender Advance,
that on the date of such payment the above statements are true and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants as follows (which representations and warranties shall
survive the issuance of the Letter of Credit):
(a) Incorporation, etc. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Nevada, has the corporate power to own its properties, to carry on its
business as now being conducted, and to execute and deliver and perform
all of its obligations under this Agreement and the Related Documents to
which it is a party. The Company is duly qualified as a foreign
corporation to do business in Georgia and in every other jurisdiction in
which the nature of its business makes such qualification necessary and is
in good standing in such jurisdictions, except where the failure to
qualify would not have a materially adverse effect on its business.
(b) Power and Authority. The Company is duly authorized under all
applicable provisions of law to execute and deliver this Agreement and to
execute, deliver and perform the Related Documents to which it is a party,
and all corporate action required for the lawful execution, delivery and
performance thereof has been duly taken; and this Agreement and each of
the Related Documents to which it is a party, upon the due execution and
delivery thereof, will be the valid and enforceable instrument, obligation
or agreement of the Company, in accordance with its respective terms,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
generally the enforcement of creditor's rights and by such principles of
equity as may generally affect the availability of equitable remedies.
Neither the execution of this Agreement nor the Related Documents to which
it is a party, nor the fulfillment of or compliance with their provisions
and terms, will constitute a violation of or default under, or conflict
with or result in a breach of, the terms, conditions or provisions of any
agreement
13
or instrument to which it is now a party or its Articles of Incorporation
or Bylaws or any law, regulation, writ or decree applicable to the Company
the effect of which has a material adverse effect on the Company, or
create any lien, charge or encumbrance upon any of its property or assets
pursuant to the terms of any agreement or instrument to which it is a
party or by which it is bound except those in favor of the Bank expressly
created hereunder or under the Permitted Encumbrances.
(c) Financial Condition. The combined balance sheet for the Company
as at January 31, 2004, certified by the Company's certified public
accountants, and the related statements of activities, functional expenses
and cash flows for the Company for the fiscal year then ended, copies of
all of which have been furnished to Bank, present fairly and accurately,
in all material respects, the financial condition of the Company as at the
date of said balance sheet and the results of its operations for said
period. The unaudited monthly management prepared balance sheets and
income statements of the Company, and the other internal financial
information for the most recent month for which such statements have been
delivered to the Bank, present fairly and accurately, in all material
respects, subject to normal recurring year-end adjustments, the financial
condition of the Company as at each such month end and the results of
their operation for such period. The Company has no direct or contingent
liabilities as of the date of this Agreement of a nature required by GAAP
to be reflected or provided for in audited financial statements which are
not provided for or reflected in such audited financial statements or
referred to in notes thereto, except for liabilities incurred since the
date of such financial statements in the ordinary course of business. All
such audited financial statements have been prepared in accordance with
GAAP applied on a Consistent Basis maintained throughout the period
involved. Since January 31, 2004, there has been no material adverse
change in the business, properties or condition, financial or otherwise,
of the Company or any Subsidiary and since said date the Company has not
been adversely affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of workmen,
flood, embargo, riot, activities of armed forces, war or acts of God or
the enemy, or by cancellation or loss of any major contract.
(d) Title to Assets. The Company has good and, with respect to real
property marketable, title to its properties and assets, including the
properties and assets reflected in the financial statements and notes
thereto described in Section 4.01(c), except for such assets as have been
disposed of in the ordinary course of business, and all such properties
and assets are free and clear of all liens, mortgages, pledges,
encumbrances or charges of any kind except as described in such financial
statements and notes thereto and Permitted Encumbrances.
(e) Litigation. There are no pending or, to the Company's knowledge,
threatened actions or proceedings before any court, arbitrator or
governmental or administrative body or agency which may reasonably be
expected to materially adversely affect the properties, business or
condition, financial or otherwise, of the Company, or in any way adversely
affect or call into question the power or authority of the Company to
enter into or perform this Agreement or any of the Related Documents to
which it is a party.
(f) Locations. The address of the Company's principal place of
business is ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. All records and
other information with respect to accounts, inventory, equipment and other
personal property (including computer programs and printouts) are
maintained by the Company at such address.
(g) Taxes. The Company has filed all federal, state and/or local tax
returns required to be filed by it, such filings are accurate in all
material respects and all taxes shown thereon have been paid, and the
charges, accruals, and reserves on its books in respect of taxes or other
governmental charges are adequate. No controversy in respect of additional
income taxes, state, federal or foreign, of the Company is pending, or, to
its knowledge, threatened.
(h) Contract or Restriction Affecting the Company. The Company is
not a party to or bound by any contract or agreement or subject to any
provisions of its Articles of Incorporation, Bylaws or other corporate
restrictions which materially adversely affect the business, properties or
condition, financial or otherwise, of the Company.
14
(i) Trademarks, Franchises and Licenses. The Company owns,
possesses, or has the right to use all patents, licenses, franchises,
trademarks, trademark rights, trade names, trade name rights and
copyrights necessary to conduct its business as now conducted, without
known conflict with any patent, license, franchise, trademark, trade name,
or copyright of any other Person.
(j) No Default. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party
relating to any Indebtedness for Money Borrowed, the effect of which
default may impair the ability of the Company to repay its obligations
under this Agreement.
(k) Governmental Authority. Other than previously obtained, no
written approval of any foreign, federal, state or local governmental
authorities is necessary to enter into and to carry out the terms of the
Bonds, Indenture, Lease Agreement and the other Related Documents, and, no
consents or approvals are required in connection with the making or
performance of this Agreement or the Related Documents. The Company has
received the written approval or permits from all federal, state and local
governmental authorities materially necessary to conduct its operations as
presently conducted.
(l) ERISA Requirements. The Company has not incurred any material
accumulated funding deficiency within the meaning of ERISA, or incurred
any material liability to the PBGC established under ERISA (or any
successor thereto under ERISA) in connection with any employee pension
benefit plan established or maintained by the Company and no Reportable
Event (as defined in ERISA) in connection with any such plan has occurred
or is occurring.
(m) No Untrue Statements. Neither this Agreement nor any other
agreements, reports, schedules, certificates or instruments heretofore or
simultaneously with the execution of this Agreement delivered to the Bank
by or on behalf of the Company or any Affiliate contains any
misrepresentation or untrue statement of a material fact or omits to state
any material fact necessary to make any of such agreements, reports,
schedules, certificates or instruments, in the light of the circumstances
under which they were made or delivered, not misleading.
(n) Hazardous Materials. (i) Neither the Company nor any other
Person has ever caused or permitted any Hazardous Materials to be placed,
held, located or disposed of on, under or at real property owned, leased
or otherwise used by it (the "Company Property") or any part thereof in
violation, in any material respect, of applicable law, nor has the Company
Property or any part thereof ever been used (whether by the Company or by
any Person) as a dump site or storage site (whether permanent or
temporary) for any Hazardous Materials in violation, in any material
respect, of any applicable law; (ii) the Company has fully disclosed to
Bank in writing the existence, extent and nature of any Hazardous
Materials which it is legally authorized and empowered to maintain on, in
or under the Company Property or use in connection therewith, and it has
obtained and will maintain all licenses, permits and approvals required
with respect thereto, and is in full compliance with all of the terms,
conditions and requirements of such licenses, permits and approvals; (iii)
the Company Property is now in full compliance with all Environmental Laws
in effect on the date hereof and there does not now exist and, there has
never existed any contamination of soils, surface water or groundwater on
or beneath the surface of the Company Property by Hazardous Materials;
(iv) except for Hazardous Materials maintained in accordance with
applicable Environmental Laws, neither the Company nor, any prior owner or
user of the Company Property has used any underground tanks for the
storage of petroleum products or Hazardous Materials on the Company
Property, and there are no such tanks located on the Company Property; and
(v) the Company has never been refused or had canceled liability insurance
coverage based upon the existence or alleged existence of Hazardous
Materials on the Company Property.
(o) Environmental Compliance. (i) The Company is in material
compliance with all Environmental Laws, and there is not now pending, or,
to the best knowledge of the Company, threatened, any action, suit,
investigation or proceeding against it or any of the Company Property
seeking to enforce any right or remedy under any of the Environmental
Laws; and (ii) neither the Company, nor any of the Company Property, has
ever been subject to or regulated by any judicial or administrative order,
judgment, decree or injunction as the result of violations or asserted
violations of any of the Environmental Laws.
15
(p) Official Statement. The information provided by the Company
about itself and the Project in the Official Statement (the "Company
Information") is accurate in all material respects for the purposes for
which its use is authorized; and the Company Information in the Official
Statement does not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements made therein,
in the light of the circumstances under which they are or were made, not
misleading.
(q) Regulation U. No part of the Bond proceeds will be or has been
used to purchase or carry, or to reduce or retire any loan incurred to
purchase or carry, any margin stocks (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System) or to extend
credit to others for the purpose of purchasing or carrying any such margin
stocks. The Company is not engaged as one of its important activities in
extending credit for the purpose of purchasing or carrying such margin
stocks. In addition, no part of the Bond proceeds will be used for the
purchase of commodity future contracts (or margins therefor for short
sales), or for any commodity.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01 AFFIRMATIVE COVENANTS. So long as a drawing is available
under the Letter of Credit, or the Bank shall have any Commitment hereunder, or
the Company shall have any obligation to pay any amount to the Bank hereunder,
the Company will, unless the Bank shall otherwise consent in writing:
(a) Compliance with Laws, etc. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental or
regulatory authority, non-compliance with which would materially adversely
affect its business or credit or the Project or the tax exempt nature of
the Bonds (including with respect to the use of the proceeds of the
Bonds).
(b) Performance and Compliance with Other Covenants. Perform and
comply in all material respects with each of the covenants, as in effect
on the Date of Issuance or as such covenants may thereafter be amended or
supplemented, set forth in the Lease Agreement and the other Related
Documents to which it is a party.
(c) Registration of Bonds. Cause all Bonds which it acquires, or
which it has had acquired for its account, to be registered forthwith in
accordance with the Indenture in its name or, if acquired with funds drawn
under the Letter of Credit, in the name of the Bank, or its designee, as
pledgee of the Company.
(d) Use of Proceeds of Bonds. Use the proceeds from the sale of the
Bonds solely to finance the Project and pay the expenses associated with
the Bonds.
(e) Further Assurances. Upon request of the Bank, duly execute and
deliver or cause to be duly executed and delivered to the Bank such
further instruments and do and cause to be done such further acts that may
be reasonably necessary or proper in the opinion of the Bank to carry out
more effectively the provisions and purposes of this Agreement and the
Related Documents.
(f) Reporting Requirements. Furnish to the Bank the following:
(1) as soon as possible and in any event within fifteen (15)
days after the occurrence of each Event of Default or each event
which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default continuing on the date of such
statement, a statement of an executive officer of the Company
setting forth details of such Event of Default or event and the
action which the Company proposes to take with respect thereto;
(2) within forty-five (45) days after the end of each of the
first three quarters of each fiscal year,
(X) a quarterly management-prepared balance sheet and
income statement for the Guarantor, the Company and its
Subsidiaries as at the end of such period, and related
consolidated statement of activities for such quarterly
period, and for the period from the
16
beginning of the current fiscal year to the end of such
quarterly period thereto setting forth in comparative form
figures for the corresponding period in the preceding full
year, all in reasonable detail and certified by the president
or chief financial officer of each such entity as having been
prepared in a manner reasonably acceptable to the Bank and as
providing a fair presentation of the financial condition of
such entities; and
(Y) a certificate (substantially in the form of Schedule
5.01(f) hereto) of the president or chief financial officer of
the Company to the Bank:
(i) stating that, to the best knowledge of such
Person, the Company has performed and observed each and
every agreement, covenant and obligation contained in
this Agreement;
(ii) stating that, to the best knowledge of such
Person, no Event of Default or an event which, with
notice or lapse of time or both, would constitute an
Event of Default, has occurred and is continuing, or if
an Event of Default or such an event has occurred and is
continuing, a statement as to the nature thereof and the
action which the Company proposes to take with respect
thereto; and
(iii) showing calculations indicating compliance
with the financial covenants set forth herein;
(3) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company,
(X) a copy of the audited consolidated and consolidating
balance sheet of the Guarantor, the Company and its
Subsidiaries as at the end of such period, together with
related notes, if any, thereto, and related consolidated
statements of income and retained earnings, stockholders'
equity, cash flow and changes in financial position for such
period, together with related notes thereto, if any, setting
forth in comparative form figures for the preceding full year,
all in reasonable detail and satisfactory in scope to the
Bank, prepared in accordance with GAAP applied on a Consistent
Basis and containing an unqualified opinion of an independent
certified public accounting firm satisfactory to the Bank; and
(Y) a certificate (substantially in the form of Schedule
5.01(f) hereto) of the president or chief financial officer of
the Company to the Bank:
(i) stating that, to the best knowledge of such
Person, the Company has performed and observed each and
every agreement, covenant and obligation contained in
this Agreement;
(ii) stating that, to the best knowledge of such
Person, no Event of Default or an event which, with
notice or lapse of time or both, would constitute an
Event of Default, has occurred and is continuing, or if
an Event of Default or such an event has occurred and is
continuing, a statement as to the nature thereof and the
action which the Company proposes to take with respect
thereto; and
(iii) showing calculations indicating compliance
with the financial covenants set forth herein;
(4) immediately upon any change of the Company's independent
public accountants, notification thereof and such further
information as the Bank may reasonably request concerning the
resignation, refusal to stand for reappointment after completion of
the current audit or dismissal of such accountants;
(5) promptly upon becoming aware thereof, written notice of
any material adverse change in the business or operations of the
Company;
(6) promptly upon becoming aware thereof, written notice of
the commencement or existence of any proceeding against the Company
by or before any court or governmental agency
17
that might, in the reasonable judgment of the Company, result in a
material adverse effect on the business, operations or financial
condition of the Company or the ability of the Company to perform
its obligations under this Agreement and if requested by the Bank
establish and maintain reserves with respect thereto acceptable to
the Bank;
(7) promptly upon becoming aware thereof, notice of any Plan
Termination Event or any event or action which would result in the
Company's complete withdrawal, partial withdrawal or secondary
liability for withdrawal liability payments with respect to a
Multiemployer Plan, together with a statement of the president or
chief financial officer of the Company describing the event or the
action taken and the reasons therefor; and
(8) such other information respecting the business,
properties, condition or operations, financial or otherwise, of the
Company or of the Project as the Bank may from time to time
reasonably request.
(g) Banking Relationship; Investment of Bond Proceeds. Maintain at
all times its primary Georgia depository relationship with the Bank for
all of the Company's traditional banking services, including checking,
saving and merchant services, and permit the Bank the opportunity to
provide investments for the Bond proceeds, subject to the limitations of
Section 148 of the Internal Revenue Code and Section 7.01 of the
Indenture.
(h) Inspection Rights. At any reasonable time and from time to time
during usual business hours and upon no less than twenty four (24) hours
prior notice, permit the Bank or any agents or consulting engineers or
representatives thereof, to examine and make copies of and abstracts from
the records and books of account of, and visit the properties of, the
Company and its Subsidiaries and discuss the affairs, finances and
accounts of the Company and its Subsidiaries and the Project with any of
its officers.
(i) Continued Operations. Continue at all times to maintain its
principal place of business at its facility listed in Section 4.01(f)
hereof.
(j) Environmental Indemnity. Indemnify the Bank and hold the Bank
harmless from and against any and all losses, liabilities, judgments,
damages, penalties, fines, liens, suits, injuries, costs (including
cleanup costs), expenses (including attorneys', consultants' or experts'
fees and expenses) and claims of any and every kind whatsoever paid,
incurred or suffered by or asserted against the Bank for, with respect to,
or as a direct or indirect result of (A) claims related to the Company
Property asserted or arising under any Environmental Laws, or (B) any
representation or warranty by the Company contained in Sections 4.01(n) or
(o) herein being false or untrue in any material respect.
(k) Maintain Property. Maintain its properties in good order and
repair, normal wear and tear excepted, and, from time to time, make all
needful and proper repairs, renewals, replacements, additions and
improvements thereto.
(l) Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments or other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Company, or upon any property,
real, personal or mixed, belonging to the Company, or upon any part
thereof, and also any lawful claims for labor, material and supplies
which, if unpaid, might become a lien or charge against any such property;
provided, however, the Company shall not be required to pay any such tax,
assessment, charge, levy or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings and for which the
Company has maintained adequate reserves in accordance with GAAP, or if
not in accordance with GAAP, in amounts reasonably satisfactory to the
Bank; but provided further that any such tax, assessment, charge, levy or
claim shall be paid forthwith upon the commencement of proceedings to
foreclose any lien securing the same unless a surety bond reasonably
satisfactory to the Bank is obtained and delivered to the Bank.
(m) Business and Existence. Do or cause to be done all things
necessary (i) to preserve and to keep in full force and effect its
existence; and (ii) to keep in full force and effect its rights and
franchises, trade names, patents, trademarks, permits, licenses,
copyrights and other proprietary information necessary
18
to the business of the Company; and (iii) to continue to engage
principally in such business as now conducted by the Company.
(n) Insurance. The Company shall maintain the following types of
insurance: (i) "Special Form" or an equivalent "all risk" insurance
coverage for the replacement value of the property providing collateral to
the Bank; (ii) public liability insurance; (iii) business interruption
insurance; an (iv) such other types and amounts of insurance as are
usually carried by corporations engaged in the same or a similar business
similarly situated and consistent with its past practices and otherwise in
accordance with the insurance requirements herein, the Deed of Trust and
the Security Agreement.
(o) True Books. Keep books of record and account in which full
entries will be made of all of its dealings and transactions which fairly
and accurately represent such dealings and transactions.
(p) ERISA. Comply with all requirements of ERISA applicable to it
(including the payment of all obligations and liabilities arising under
ERISA) and furnish to the Bank as soon as possible and in any event within
thirty (30) days after it or any duly appointed administrator of any
employee pension benefit plan (as defined in ERISA) knows or has reason to
know that any Reportable Event (as defined in ERISA) with respect to any
such plan has occurred, a statement of the chief financial officer of the
Company describing in reasonable detail such Reportable Event and any
action which the Company proposes to take with respect thereto, together
with a copy of the notice of such Reportable Event given to the PBGC or a
statement that said notice will be filed with the annual report to the
United States Department of Labor with respect to such plan if such filing
has been authorized.
(q) Payment of Obligations. Pay when due all its obligations and
liabilities, except where the same may be contested in good faith and
appropriate reserves for the accrual of same in amounts satisfactory to
the Bank are maintained.
(r) Covenants Extended to Subsidiaries. Cause each Subsidiary, if
any, to do with respect to itself, its business and its assets, each of
the things required by the Company in Sections 5.01(k) through 5.01(q)
inclusive.
(s) Signage. During the construction period of the Project, permit
the Bank to install commercially reasonable signage at the Project site
indicating that the Bank is providing financing in connection with the
Project.
(t) Redemption of Bonds. The Company will cause the Bonds to be
optionally redeemed pursuant to the provisions of Section 3.01(a) of the
Indenture on September 1 of each of the following years in the following
minimum amounts:
Year Amount Year Amount
---- -------- ---- --------
2005 $200,000 2012 $200,000
2006 $400,000 2013 $200,000
2007 $500,000 2014 $200,000
2008 $500,000 2015 $200,000
2009 $500,000 2016 $200,000
2010 $500,000 2017 $200,000
2011 $500,000 2018 $300,000
2019* $300,000
-------------------
* Final Maturity
19
(u) Financial Covenants.
(1) Consolidated Leverage Ratio. The Company shall maintain at
each fiscal year end a Consolidated Leverage Ratio of no greater
than 1.50 to 1.00.
(2) Consolidated Cash Flow Coverage Ratio. Beginning with the
fiscal year ending January 31, 2005 and for each fiscal year
thereafter, the Company shall maintain a Consolidated Cash Flow
Coverage Ratio of at least 1.40 to 1.00.
(3) Consolidated Tangible Net Worth. The Company shall
maintain at all times a Consolidated Tangible Net Worth of not less
than $8,700,000.
SECTION 5.02 NEGATIVE COVENANTS. So long as a drawing is available under
the Letter of Credit, or the Bank shall have any Commitment hereunder, or the
Company shall have any obligation to pay any amount to the Bank hereunder, the
Company will not and will not permit any Subsidiary to, without the prior
written consent of the Bank:
(a) Amendment of Any Related Document. Enter into or consent to any
amendment or modification of the Indenture, the Lease Agreement, or any
other Related Document.
(b) Change in Business or Use of Project. Enter into any business
which is materially different from and/or not connected with the business
in which it is engaged on the Date of Issuance or operate the Project in a
manner other than as permitted under the Lease Agreement.
(c) Tax Status. Take any action or suffer any action to be taken by
others that will impair the tax-exempt status of the Bonds.
(d) Optional Redemption of Bonds. Take any action, or permit the
Trustee's taking of any action, which would result in the optional
redemption or prepayment of all or any portion of the Bonds with funds
drawn under the Letter of Credit; provided however, that if the Bonds are
redeemed pursuant to and in accordance with Sections 3.01(a) or (b) of the
Indenture, the principal amount of Bonds so redeemed may, at the option of
the Company, with the consent of the Bank, be applied as a credit against
any mandatory optional redemption payment required pursuant to Section
5.01(t) hereof (each a "Mandatory Optional Redemption Payment"); provided,
that the Company shall have delivered to the Trustee not less than
forty-five (45) days prior to the date of such required Mandatory Optional
Redemption Payment a certificate of an Authorized Lessee Representative
(as defined in the Indenture), approved by the Bank, stating the Company's
election to apply the principal amount of such Bonds as such a credit.
Unless the Trustee receives a certificate of an Authorized Lessee
Representative electing to apply the principal amount of Bonds so redeemed
as a credit against a particular Mandatory Optional Redemption Payment,
the principal amount of Bonds so redeemed shall be applied to the
Mandatory Optional Redemption Payments in reverse chronological order.
(e) Indebtedness. Incur, create, guarantee, assume or permit to
exist any Indebtedness (including guaranties or contingent obligations),
however evidenced, except
(1) Indebtedness existing on the date hereof and described in
the financial statements delivered to the Bank pursuant to Section
4.01(c) hereof or the notes thereto, which Indebtedness shall be
repaid in accordance with the terms relating thereto existing as of
the date hereof (including the terms thereof permitting prepayment);
(2) Indebtedness to the Bank arising under this Agreement;
(3) other Indebtedness to the Bank or its affiliate banks;
(4) Indebtedness for Money Borrowed in an amount which,
immediately after giving effect thereto, would not create an Event
of Default hereunder; and
20
(5) purchase money indebtedness in an amount which,
immediately after giving effect thereto, would not create an Event
of Default hereunder.
(f) Loans and Investments. Lend or advance money, credit or property
to any Person, or invest in (by capital contribution or otherwise), or
purchase or repurchase the stock or indebtedness, or all or a substantial
part of the assets or properties of any Person, or agree to do any of the
foregoing, except for:
(1) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United
States of America and which mature within one year from the date of
acquisition thereof;
(2) investments in commercial paper of any corporation with a
maturity not in excess of thirty days from the date of acquisition
thereof and rated P-1 or better by ▇▇▇▇▇'▇ Investors Services Inc.,
or A-1 or better by Standard & Poor's Corporation;
(3) travel expense advances to employees in an amount not to
exceed $1,500;
(4) the existing loan from the Company to the Guarantor in the
amount of $2,500,000; and
(5) investments in certificates of deposit with a maturity not
in excess of ninety days from the date of acquisition thereof,
issued by (a) the Bank or (b) any commercial bank organized and
existing under the laws of the United States of America or under any
state of the United States of America and having a combined capital
and undivided surplus of not less than $50,000,000, provided,
however, that certificates of deposit at any one bank shall at no
time exceed twelve percent (12%) of the undivided capital and
surplus of such bank.
(g) Limitations on Liens. Incur, create, assume or permit to exist
any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind upon any of its property now owned or hereafter acquired or
assets of any character, including those arising under conditional sales
or other title retention agreements, except Permitted Encumbrances.
(h) Consolidation or Merger. Enter into any transaction of merger or
consolidation or any transaction of dissolution or liquidation, except
that any Person may consolidate with or merge into the Company, provided
that the Company shall be the surviving entity and after giving effect to
such consolidation or merger no Event of Default shall exist hereunder.
(i) Sale of Assets, Dissolution, etc. (a) Sell, assign, lease,
transfer or otherwise dispose of its assets except in the ordinary and
usual course of its business; or (b) agree to do any of the foregoing.
(j) Insider Transactions. Directly or indirectly purchase, acquire
or lease any property or asset from, or purchase, sell, dispose of,
exchange or lease any property or assets to, or render service to, or
otherwise deal with, in the ordinary course of business or otherwise, any
Affiliate, except pursuant to reasonable requirements and upon fair and
reasonable terms and conditions not less favorable to the Company than if
it were a comparable arm's length transaction and no such relationship
existed.
(k) Change in Control. Become a party to or the subject of any
agreement, transaction or related series of transactions pursuant to or as
a result of which any Person or group of Persons acting in concert
acquires control, directly or indirectly, of the Company.
(l) Dividends or Distributions; Acquisition of Capital Stock or
Other Ownership Interests. Declare or pay any dividends or distributions
of any kind, or purchase or redeem, retire, or otherwise acquire any of
Company's capital stock or other ownership interests, now or hereafter
outstanding, in an amount which, immediately after giving effect thereto,
would create an Event of Default hereunder.
(m) Guarantee. Guarantee, assume, endorse or otherwise become or
remain liable in connection with the obligations of any other Person
(including obligations of such Persons arising from working capital
maintenance agreements), other than:
21
(1) the endorsement of negotiable instruments in the ordinary
course of business for deposit or collection;
(2) such guaranties and other contingent liabilities currently
existing as disclosed in the financial statements and notes thereto
described in Section 4.01(c) hereof;
(3) guaranties given to the Bank or its affiliate banks; and
(4) the guaranty given in connection with the Bonds.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01 EVENTS OF DEFAULT. The occurrence of any of the following
events shall be an "Event of Default" hereunder:
(a) If the Company or any Guarantor defaults in the payment of any
amount payable hereunder or under any of the Related Documents, on the
date when due; or
(b) If the Company or any Guarantor shall default in the payment to
the Bank or any of its affiliate banks of any amount payable under any
other agreement, whether now existing or hereafter arising, on the date
when due; or
(c) If the Company defaults (after the expiration of any applicable
grace or cure periods) (i) in the payment of principal of, by acceleration
or otherwise, or interest on any Indebtedness (including guaranties or
contingent obligations), or (ii) in the performance of any other
agreement, term or condition contained in any agreement under which any
such obligation is created, if the effect of such default is to cause, or
permit the holder or holders of such obligation (or a trustee in behalf of
such holder or holders) to cause, such obligation to become due prior to
its stated maturity; or
(d) If a default or an event of default shall occur under any
agreements between the Company or any Guarantor and the Bank or any of its
affiliate banks; or
(e) If any representation or warranty made by the Company herein, or
in any writing furnished in connection with or pursuant to this Agreement
or any of the Related Documents, or if any report, certificate, financial
statement or other instrument or document delivered to the Bank by or on
behalf of the Company, shall be false or misleading in any material
respect on the date as of which made; or
(f) If the Company or any Subsidiary defaults in the performance or
observance of any agreement or covenant contained in Sections 5.01(f) or
(u) or Section 5.02 of this Agreement; or
(g) If the Company or any Subsidiary defaults in the performance or
observance of any other agreement, covenant, term or condition binding on
it contained herein (other than those referred to in subsections (a)
through (f) above) and such default shall not have been remedied within
thirty (30) days after written notice thereof shall have been received by
the Company from the Bank; or
(h) If there shall occur any "Event of Default" as specified in the
Lease Agreement, the Indenture, or any of the other Related Documents; or
(i) Liquidation or dissolution of the Company, or any Subsidiary or
Guarantor, or suspension of the business of the Company or any Subsidiary
or filing by the Company or any Subsidiary of a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing, or any other
action of the Company or any Subsidiary indicating its consent to,
approval of, or acquiescence in any petition or proceedings; the
application by the Company or any Subsidiary for, or the appointment by
consent or acquiescence of, a receiver, a trustee or a custodian of the
Company or any Subsidiary, or an assignment for
22
the benefit of creditors, the inability of the Company or any Subsidiary
or the admission by the Company or any Subsidiary in writing of its
inability to pay its debts as they mature; or
(j) Filing of an involuntary petition against the Company, or any
Subsidiary or Guarantor in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts or for any other relief under the
United States Bankruptcy Code, as amended, or under any other insolvency
act or law, state or federal, now or hereafter existing; or the
involuntary appointment of a receiver, a trustee or a custodian of the
Company or any Subsidiary or for all or a substantial part of its
property; the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of the Company or any
Subsidiary and the continuance of any of the events referred to in this
subsection (j) for sixty (60) days undismissed or undischarged; or
(k) If a judgment, which with other outstanding judgments against
the Company, or any Subsidiary or Guarantor exceeds an aggregate of
$100,000, shall be rendered against the Company or any Subsidiary or
Guarantor and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment or (ii) within thirty (30) days
after entry thereof such judgment shall not have been discharged or
stayed; or
(l) The Bonds for any reason shall be determined to be invalid or
any Related Document shall for any reason cease to be in full force and
effect; or
(m) Any Plan Termination Event with respect to a Plan which the Bank
determines in good faith might constitute grounds for the termination of
any Plan or for the appointment of a trustee to administer any Plan shall
have occurred, and, after the expiration of no less than 30 days after
notice thereof shall have been given to the Company by the Bank, (i) such
Plan Termination Event (if correctable) shall not have been corrected, and
(ii) the then present value of such Plan's vested benefits exceeds the
then current value of assets accumulated in such Plan and the Company
shall not have remedied any such deficiency.
SECTION 6.02 RIGHTS UPON AN EVENT OF DEFAULT. Upon the occurrence of an
Event of Default, and at any time thereafter unless and until such Event of
Default has been waived by the Bank or cured to the satisfaction of the Bank,
the Bank shall be entitled to take any of the following actions without
prejudice to the rights of the Bank to enforce its claims against the Company,
except as otherwise specifically provided for herein:
(a) Acceleration of Obligations. Declare all unreimbursed drawings
in respect of the Letter of Credit and any and all other indebtedness or
obligations of any and every kind owing by the Company to the Bank to be
due, whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company; or
(b) Enforcement of Rights. Enforce any and all rights and interests
created and existing hereunder or under any of the other Related Documents
and all rights of set-off; or
(c) Draw on Letter of Credit. The Bank may, at its option, direct
the Trustee (i) to accelerate the principal and interest due on the Bonds
and to draw on the Letter of Credit, in accordance with Section 9.02 of
the Indenture; or (ii) to cause a mandatory purchase of the Bonds in
accordance with Section 2.14(b) of the Indenture. If the Bonds are
purchased rather than redeemed with the proceeds of such a drawing under
the Letter of Credit, such Bonds shall be held as Pledged Bonds for the
benefit of the Bank in accordance with the terms hereof and of the terms
of the Indenture.
Notwithstanding the foregoing, if a default under Sections 6.01(i) or (j)
shall occur, then all obligations, all accrued interest in respect thereof, all
accrued and unpaid fees and other indebtedness or obligations owing to the Bank
hereunder shall immediately become due and payable without the giving of any
notice or other action by the Bank.
SECTION 6.03 NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder, under the Lease Agreement, the
Indenture or the other Related Documents, or now or hereafter existing at law or
in equity or by statute.
23
SECTION 6.04 ANTI-MARSHALLING PROVISIONS. The right is hereby given by the
Company to the Bank to make releases (whether in whole or in part) of all or any
part of the Bank's security without notice to, or the consent, approval or
agreement of other parties and interests, including junior lienors, which
releases shall not impair in any manner the validity of or priority of the liens
and security interest in the remaining collateral conferred under such
documents, nor release the Company from liability for the obligations hereby
secured. Notwithstanding the existence of any other security interest in the
collateral held by the Bank, the Bank shall have the right to determine the
order in which any or all of the collateral shall be subjected to the remedies
provided herein or in the Indenture. The Company hereby waives any and all right
to require the marshalling of assets in connection with the exercise of any of
the remedies permitted by applicable law or provided herein or therein.
SECTION 6.05 SUBROGATION. If an Event of Default shall have occurred and
be continuing and there shall be outstanding all or any part of any unreimbursed
Letter of Credit payment(s) or any other obligation hereunder, the Company
agrees that the Bank shall be subrogated to any and all rights of the Company
against the beneficiary of the Letter of Credit, and the Company agrees that,
upon request of the Bank, the Company will promptly do such further acts and
execute, acknowledge and deliver such documents as the Bank may reasonably
request in order to implement the assignment to the Bank of such rights of the
Company against the beneficiary of the Letter of Credit.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Company therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Bank and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.02 NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing (including required copies) and sent by
receipted hand delivery (including Federal Express or other receipted courier
service), facsimile or regular mail, at the following address for the following
parties:
Company: Absorption Corp.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Bank: Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to other party. All such notices and communications shall,
when hand delivered, be effective upon delivery, when faxed, be effective when
confirmation of receipt is received, respectively, and, when made by regular
mail, shall not be effective until three (3) Business Days after the day on
which mailed, addressed as aforesaid, except that notices to the Bank pursuant
to the provisions of Article II shall not be effective until received by the
Bank.
24
SECTION 7.03 NO WAIVER. No failure on the part of the Bank to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 7.04 RIGHT OF SET-OFF.
(a) Upon the occurrence of any Event of Default, the Bank is hereby
authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Bank to or for the credit or the
account of the Company against any and all of the obligations of the
Company now and hereafter existing under this Agreement, irrespective of
whether or not the Bank shall have made any demand hereunder and although
such obligations may be contingent or unmatured.
(b) The Bank agrees promptly to notify the Company after any such
set-off and application referred to in subsection (a) above, provided that
the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without limitation,
other rights of set-off) which the Bank may have.
SECTION 7.05 INDEMNIFICATION. The Company hereby indemnifies and holds the
Bank harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses which the Bank may incur or which may be claimed against the
Bank by any person or entity:
(a) by reason of any inaccuracy or alleged inaccuracy in any
material respect, or any untrue statement or alleged untrue statement of
any material fact contained in the Official Statement (other than the
statements contained in Appendix C, Appendix E and under the captions "The
Letter of Credit", "Summary of Certain Terms of the Credit Agreement") or
any amendment or supplement thereto, or by reason of the omission or
alleged omission to state therein a material fact necessary to make such
statements, in light of the circumstances under which they were made, not
misleading; or
(b) by reason of or in connection with the execution, delivery or
performance by the Company of this Agreement, the Bonds, the Lease
Agreement, or any Related Document, or any transaction contemplated
thereby; or
(c) by reason of or in connection with the execution and delivery or
transfer of, or payment or failure to make payment under, the Letter of
Credit by the Company; provided, however, that the Company shall not be
required to indemnify the Bank pursuant to this Section 7.05(c) for any
claims, damages, losses, liabilities, costs or expenses to the extent
caused by the Bank's gross negligence or willful misconduct or the Bank's
failing to make lawful payment under the Letter of Credit after the
presentation to it by the Trustee of a draft and certificate strictly
complying with the terms and conditions of the Letter of Credit.
Nothing in this Section 7.05 is intended to limit the Company's
obligations contained in Article II. Without prejudice to the survival of any
other obligation of the Company hereunder, the indemnities and obligations of
the Company contained in this Section 7.05 shall survive the payment in full of
amounts payable pursuant to Article II and the termination of the Letter of
Credit for the period ending on the last day of the applicable statute of
limitations period.
SECTION 7.06 LIABILITY OF THE BANK. The Company assumes all risks of the
acts or omissions of the Trustee and any other beneficiary or transferee of the
Letter of Credit with respect to its use of the Letter of Credit. Neither the
Bank nor any of its officers or directors, in its or their capacity as letter of
credit bank, shall be liable or responsible for: (a) the use which may be made
of the Letter of Credit or any acts or omissions of the Trustee and any other
beneficiary or transferee in connection therewith; (b) the validity, sufficiency
or genuineness of documents, or of any endorsement thereon, even if such
document should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by the Bank against presentation of documents
which do not comply with the terms of the Letter of Credit, including failure of
any documents to bear any reference or adequate reference to the Letter of
Credit; or (d) any other circumstances whatsoever in making or failing to make
payment under the Letter of Credit, except that the Company shall have a claim
against the Bank, and the Bank shall be liable to the Company, to the extent of
any direct, as opposed to consequential, damages, suffered by the Company which
the
25
Company proves were caused by the Bank's (i) gross negligence or willful
misconduct in determining whether documents presented under the Letter of Credit
complied with the terms of the Letter of Credit or (ii) wrongful failure to make
lawful payment under the Letter of Credit after the presentation to it by the
Trustee of a draft and certificate strictly complying with the terms and
conditions of the Letter of Credit. In furtherance and not in limitation of the
foregoing, the Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary.
SECTION 7.07 COSTS, EXPENSES AND TAXES. The Company agrees to pay
immediately when due all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and enforcement of this Agreement and
the Related Documents and any other documents which may be delivered in
connection with this Agreement and the Related Documents or the transactions
contemplated hereby or thereby, including, without limitation, the reasonable
fees and out-of-pocket expenses of the Bank and of counsel and any agents or
consultants for the Bank, with respect thereto and in connection with (i) the
preparation and enforcement of this Agreement, the Related Documents and such
other documents which may be delivered in connection herewith or therewith or
(ii) any action or proceeding relating to a court order, injunction, or other
process or decree restraining or seeking to restrain the Bank from paying any
amount under the Letter of Credit. In addition, the Company shall pay any and
all stamps and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of this Agreement,
the Related Documents and such other documents, and agrees to save the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
SECTION 7.08 BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by the Company and the Bank and thereafter shall be
binding upon and inure to the benefit of the Company and the Bank and their
respective successors and assigns, except that the Company shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Bank. The Bank may, without cost or expense to the
Company, assign or sell a participation in all or any part of, or any interest
(undivided or divided) in, the Bank's rights and benefits under this Agreement
to any financial institution and agrees to give the Company written notice
thereof; provided that, with respect to a participation, after giving effect to
any such sale of a participation, the Bank shall remain obligated to honor draws
on the Letter of Credit with its own funds. To the extent of any assignment by
the Bank, the assignee shall have the same rights and benefits against the
Company hereunder as it would have had if such assignee were the Bank issuing or
paying under the Letter of Credit hereunder.
SECTION 7.09 SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
Georgia. SECTION 7.11
HEADINGS. Section headings in this Agreement are included herein for convenience
of reference only and shall not constitute a part of this Agreement for any
other purpose.
SECTION 7.12 NOTICE OF CONTROLLING ACQUISITIONS. The Bank shall provide or
cause to be provided written notice to the Trustee and the Remarketing Agent
thirty (30) days prior, where reasonable, and not more than thirty (30) days
subsequent to the consummation of any transaction that would result in the
Company controlling or being controlled by the Bank. The Bank acknowledges that
the foregoing sentence supersedes any exemptions from the continuing disclosure
requirement pursuant to Rule 15c2-12(b)(5) of the Securities Exchange Act of
1934.
SECTION 7.13 PRIOR AGREEMENTS SUPERSEDED. This Agreement shall completely
and fully supersede all prior undertakings or agreements, both written and oral,
between the Company and the Bank relating to the issuance of the Letter of
Credit, including those contained in any commitment letter between the Bank and
the Company executed in anticipation of the issuance of the Letter of Credit,
except for any provisions in such commitment letter which by their express terms
survive issuance of the Letter of Credit.
SECTION 7.14 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
26
IN WITNESS WHEREOF, the parties hereto have caused this
Letter of Credit
and Reimbursement Agreement to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first above
written.
ABSORPTION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
BRANCH BANKING AND TRUST COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President
27
EXHIBIT A
IRREVOCABLE LETTER OF CREDIT
LETTER OF CREDIT NO. 9540018690-00003
September 2, 2004
Branch Banking and Trust Company
Corporate Trust Services
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Ladies and Gentlemen:
At the request of Absorption Corp. (the "Company"), we hereby establish
this Irrevocable Letter of Credit in your favor as Trustee under an Indenture of
Trust dated as of September 1, 2004, between the ▇▇▇▇▇ County Industrial
Development Authority (the "Issuer") and Branch Banking and Trust Company, as
trustee (the "Indenture") pursuant to which $4,900,000 principal amount of the
Issuer's Tax-Exempt Industrial Development Revenue Bonds (Absorption Corp.
Project) Series 2004 (the "Bonds") have been issued. We hereby authorize you to
draw on us an amount not exceeding $4,956,384 (the "Initial Stated Amount" and,
as the same may from time to time be reduced and thereafter reinstated as
hereinafter provided, the "Stated Amount") of which (i) subject to the
provisions below reducing amounts available hereunder, an aggregate amount not
exceeding $4,900,000 may be drawn on in respect of principal or the portion of
the purchase price corresponding to principal of the Bonds (the "Principal
Component"); and (ii) subject to the provisions below reducing amounts available
hereunder, an aggregate amount not exceeding $56,384 may be drawn on in respect
of the payment of up to 35 days' interest or the portion of the purchase price
corresponding to interest on the Bonds at an assumed per annum interest rate of
12% based on a 365-day year (the "Interest Component") effective immediately and
expiring at 3:00 P.M. (prevailing Eastern Time) at our Presentation Office (as
hereinafter defined) on September 2, 2011 (the "Expiration Date") or as
hereinafter provided.
Multiple and partial drawings may be made under this Letter of Credit, but
no single drawing under this Letter of Credit shall be honored in an amount
exceeding the Stated Amount. Any and all payments made under this Letter of
Credit will be made with our own funds.
Funds under this Letter of Credit are available to you against a sight
draft drawn on us, stating on its face "Drawn under Branch Banking and Trust
Company Irrevocable Letter of Credit No. 9540018690-00003", presented for
payment on a Business Day (as defined in the Indenture), and accompanied by a
written certificate:
(a) in the form of Annex A attached hereto (an "A Drawing") if the
drawing is made with respect to payment of principal of the Bonds upon the
acceleration, redemption or stated maturity thereof;
(b) in the form of Annex B attached hereto (a "B Drawing") if the
drawing is made with respect to payment of interest on the Bonds on or
prior to their stated maturity date or upon the acceleration or redemption
thereof; and
(c) in the form of Annex C attached hereto (a "C Drawing") if the
drawing is made with respect to payment of the purchase price of Bonds
tendered, or deemed tendered, for purchase pursuant to Section 2.14 of the
Indenture.
The demand for payment hereunder shall not exceed the Stated Amount. The
Stated Amount shall be reduced by delivery to us of your certificate in the form
of Annex D in the amount specified in such certificate.
The Principal Component of the Stated Amount shall be further
automatically and permanently reduced by the amount of each A Drawing. The
Stated Amount shall also be reduced by the amount of any drawing hereunder,
except that (i) the amount of each B Drawing honored in respect of interest
shall immediately and automatically be reinstated following the honoring of such
drawing (except as provided in the next following sentence); and (ii) the amount
of each C Drawing shall be restored upon receipt by you of notice from us
confirming that the Company has reimbursed us for such drawing. In the case of a
B Drawing delivered in connection with a redemption, acceleration or stated
maturity (but not purchase) of Bonds as indicated on Annex B, there shall be a
pro rata permanent reduction of the Interest Component as provided in such Annex
B.
The Letter of Credit shall terminate, effective immediately, on the
earliest to occur of any of the following: (i) 3:00 p.m. (prevailing Eastern
Time) on the Expiration Date, (ii) the close of business on the 15th day
following a
A-1
conversion of the interest rate on the Bonds to a Long-Term Rate (as defined in
the Indenture) extending to the final maturity of the Bonds, (iii) the date on
which we honor a draft drawn hereunder pursuant to Section 9.02 of the Indenture
following the occurrence of an Event of Default thereunder and an acceleration,
(iv) the date this Letter of Credit is surrendered to us by you for cancellation
following acceptance by you of a Substitute Letter of Credit (as defined in the
Indenture), (v) the date on which we honor a draft drawn hereunder to purchase
the Bonds following your receipt of written notice from us that an Event of
Default under the
Letter of Credit and Reimbursement Agreement dated as of
September 1, 2004 (the "Reimbursement Agreement") between the Company and us has
occurred and is continuing and a written notice from us directing a mandatory
purchase of the Bonds pursuant to Section 2.14 of the Indenture, and (vi) the
date on which we receive from you a certificate in the form of Annex E hereto.
This Letter of Credit shall be promptly surrendered to us by you upon such
termination. The Expiration Date may be extended by us at our discretion at any
time or from time to time, by our giving written notice of such extension to you
specifying a new Expiration Date.
The aforesaid certificates, which form an integral part of this Letter of
Credit, shall have all blanks appropriately filled in and shall be signed by
your authorized officer, and any sight draft and the aforesaid certificates
shall be in the form of a letter on your letterhead either delivered to us at
our office located at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Corporate
Banker (the "Presentation Office") on a Business Day or delivered to us by
facsimile (at telecopier number (▇▇▇) ▇▇▇-▇▇▇▇ on a Business Day (or at such
other address or telecopier number as we may designate in a written notice
delivered to you). The originals of all documents telecopied to us pursuant to
which a drawing is made hereunder shall be delivered to us immediately following
such facsimile. If demand for payment is made hereunder not later than 11:00
A.M. (prevailing Eastern Time) on any Business Day, and provided that such
demand for payment and the documents presented in connection therewith conform
to the terms and conditions hereof, payment of the amount demanded shall be made
in immediately available funds not later than 2:00 P.M. (prevailing Eastern
Time) on the same Business Day. If demand for payment is made hereunder after
11:00 A.M. (prevailing Eastern Time) on any Business Day, and provided that such
demand for payment and the documents presented in connection therewith conform
to the terms and conditions hereof, payment of the amount demanded shall be made
in immediately available funds, not later than 10:00 A.M. (prevailing Eastern
Time) on the next succeeding Business Day.
This Letter of Credit is transferable in its entirety (but not in part) to
any transferee whom you certify to us has succeeded you as Trustee under the
Indenture. Transfer of the available balance of this Letter of Credit to a
successor transferee shall be effected by the presentation to us of this Letter
of Credit accompanied by a written certificate in the form of Annex F attached
hereto.
Only you (or a transferee as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit. Upon payment to you or
your account of the amount demanded hereunder, we shall be fully discharged of
our obligation under this Letter of Credit with respect to the respective demand
for payment and we shall not thereafter be obligated to make any further
payments under this Letter of Credit in respect of such demand for payment. By
paying to you an amount demanded in accordance herewith we make no
representation as to the correctness of the amount demanded. Bonds that are
registered in the name of, or held by or for the account of the Company, the
Issuer or are held or required to be held for our benefit pursuant to the
Indenture ("Pledged Bonds") shall not be entitled to any benefit of this Letter
of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and
shall not in any way be amended, amplified or limited by reference to any
document, instrument or agreement referred to herein or in which this Letter of
Credit is referred to or to which this Letter of Credit is related, except for
the certificates referred to herein; and any such reference shall not be deemed
to incorporate herein by reference any document, instrument or agreement except
for such certificates.
This Letter of Credit, except as otherwise expressly stated herein, is
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision) International Chamber of Commerce Publication No. 500, and to the
extent not inconsistent therewith, the laws of the State of North Carolina.
BRANCH BANKING AND TRUST COMPANY
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------------
Title: Senior Vice President
----------------------------------
A-2
Annex A
DRAWING CERTIFICATE
(Principal)
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the
"Trustee"), hereby certifies to Branch Banking and Trust Company, in its
capacity as issuer of the Letter of Credit (the "Bank"), with reference to
Irrevocable Letter of Credit No. ________ (the "Letter of Credit"; the terms
"Bonds", "Stated Amount", "Principal Component" and "Indenture" as used herein
having their respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee is making a demand for payment under the Letter of Credit
with respect to $________ to be used for the payment of principal of the Bonds.
3. The amount of principal of the Bonds which is due and payable is
$________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying
this Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with the Indenture and does not
exceed the Principal Component of the Stated Amount of the Letter of Credit.
5. Upon receipt by the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the
principal of the Bonds pursuant to the Indenture, (b) no portion of said amount
shall be applied by the undersigned for any other purpose, and (c) no portion of
said amount shall be commingled with any other funds held by the Trustee.
[6.] [Only if applicable] [This drawing is being made on account of an
Event of Default under the Indenture and an acceleration of the Bonds in
accordance with Section 9.02 thereof. The Letter of Credit is attached hereto
and is being surrendered to you herewith.]
The undersigned acknowledges that upon the Bank's honoring the sight draft
accompanying this Certificate, the Principal Component of the Stated Amount of
the Letter of Credit shall be permanently reduced by the aggregate amount of
such sight draft.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY,
as Trustee
By:
------------------------------------
A-3
Annex B
DRAWING CERTIFICATE
(Interest)
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the
"Trustee") hereby certifies to Branch Banking and Trust Company, in its capacity
as issuer of the Letter of Credit (the "Bank"), with reference to Irrevocable
Letter of Credit No. ____ (the "Letter of Credit"; the terms "Bonds", "Stated
Amount", "Interest Component" and "Indenture" as used herein having their
respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee is making a demand for payment under the Letter of Credit
with respect to $________ to be used for the payment of interest on the Bonds on
or prior to their stated maturity date.
3. The amount of interest on the Bonds which is due and payable is
$________ and is the amount of the sight draft accompanying this Certificate.
4. The amount of this demand for payment and the sight draft accompanying
this Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with the Indenture, and does not
exceed the Interest Component of the Stated Amount of the Letter of Credit.
5. Upon receipt by the undersigned of the amount demanded hereby (a) the
undersigned will apply the same directly to the payment when due of the interest
on the Bonds pursuant to the Indenture, (b) no portion of said amount shall be
applied by the undersigned for any other purpose, and (c) no portion of said
amount shall be commingled with any other funds held by the Trustee.
[6.] [Only if applicable] [The amount drawn hereby is to be used to pay
interest on Bonds redeemed and not purchased. The undersigned acknowledges that
upon the Bank's honoring the sight draft accompanying this Certificate, the
Interest Component of the Stated Amount of the Letter of Credit shall be
permanently reduced by an amount equal to 35 days interest on the principal
amount of the Bonds being redeemed computed at the rate of 12% per annum.]
[7.] [Only if applicable] [This drawing is being made on account of a
conversion of the interest rate on the Bonds to a Long-Term Rate (as defined in
the Indenture) extending to the final maturity of the Bonds. Such conversion
will occur on _______, _______, and the Letter of Credit will terminate on
_________, ______. The Letter of Credit will be surrendered to you promptly upon
such termination.]
[8.] [Only if applicable] [This drawing is being made on account of an
Event of Default under the Indenture and an acceleration of the Bonds in
accordance with Section 9.02 thereof. The Letter of Credit is attached hereto
and is being surrendered to you herewith.]
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY,
as Trustee
By:
------------------------------------
A-4
Annex C
DRAWING CERTIFICATE
(Purchase Price)
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Re: Drawing Certificate
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the
"Trustee") hereby certifies to Branch Banking and Trust Company, in its capacity
as issuer of the Letter of Credit (the "Bank"), with reference to Irrevocable
Letter of Credit No. ____ (the "Letter of Credit"; the terms "Bonds",
"Indenture", "Stated Amount" and "Pledged Bonds" as used herein having their
respective meanings set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee is making a demand for payment under the Letter of Credit
to be applied to the payment of the portion of the purchase price of Bonds
tendered, or deemed tendered, for purchase pursuant to Section 2.14 of the
Indenture, equal to the principal amount thereof. The amount of such portion of
the purchase price equal to the principal amount of such Bonds is $__________.
3. The Trustee is making a demand for payment under the Letter of Credit
to be applied to the payment of the portion of the purchase price of Bonds
tendered, or deemed tendered, for purchase pursuant to Section 2.14 of the
Indenture, equal to the amount of accrued and unpaid interest on such Bonds to
the date of purchase thereof. The amount of such portion of the purchase price
equal to accrued and unpaid interest on such Bonds to the date of purchase
thereof is $____________.
4. The amount of this demand for payment is $__________ (the sum of the
amounts in Paragraphs 2 and 3 above) and the sight draft accompanying this
Certificate was computed in compliance with the terms and conditions of the
Bonds and the Indenture, is made in accordance with the Indenture, and does not
exceed the Stated Amount of the Letter of Credit.
5. Upon receipt of the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the
appropriate amount owing on account of the purchase price of Bonds tendered, or
deemed tendered, pursuant to the Indenture, (b) no portion of said amount shall
be applied for any other purpose and (c) no portion of said amount shall be
commingled with any other funds held by the Trustee.
6. The Trustee agrees to hold, as the designee and agent for the Bank, the
Bonds tendered for purchase and, upon request, will deliver the Bonds with
respect to which this drawing relates and the purchase price of which demand is
made hereunder to the Bank as Pledged Bonds entitled to a security interest in
favor of the Bank.
[7.] [Only if applicable] [This drawing is being made on account of an
Event of Default under the Reimbursement Agreement and a written notice from us
directing a mandatory purchase of the Bonds in accordance with Section 2.14 of
the Indenture. The Letter of Credit is attached hereto and is being surrendered
to you herewith.]
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY,
as Trustee
By:
------------------------------------
A-5
Annex D
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the
"Trustee") hereby certifies to Branch Banking and Trust Company, in its capacity
as issuer of the Letter of Credit (the "Bank"), with reference to Irrevocable
Letter of Credit No. ____ (the "Letter of Credit"; the terms "Bonds", the
"Indenture" and "Stated Amount" as used herein having their respective meanings
set forth in the Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee hereby notifies you that on or prior to the date hereof
$_________ amount of the Bonds have been paid, redeemed or defeased pursuant to
the Indenture other than with funds drawn under the Letter of Credit.
3. Following the payment, redemption or the defeasance referred to in
paragraph (2) above, the aggregate principal amount of all the Bonds outstanding
is $___________.
4. The amount of interest (computed at a rate of twelve percent (12%) per
annum based on a 365-day year), accruing on the Bonds referred to in paragraph 3
above for a period of 35 days is $_____.
5. Upon receipt by the Bank of this Certificate, the Stated Amount of the
Letter of Credit is reduced to $_____ (such amount being equal to the amounts
specified in paragraphs 3 and 4 above).
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this _____ day of _______________, 20__.
BRANCH BANKING AND TRUST COMPANY,
as Trustee
By:
------------------------------------
A-6
Annex E
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Ladies and Gentlemen:
Branch Banking and Trust Company, in its capacity as Trustee (the
"Trustee") hereby certifies to Branch Banking and Trust Company, in its capacity
as issuer of the Letter of Credit (the "Bank"), with reference to Irrevocable
Letter of Credit No. ____ (the "Letter of Credit"; the terms "Bonds" and
"Indenture" as used herein having their respective meanings set forth in the
Letter of Credit) that:
1. The Trustee is the Trustee under the Indenture.
2. The Trustee hereby notifies you that all the Bonds have been paid,
redeemed or defeased pursuant to the Indenture.
3. The Letter of Credit is attached hereto and is being surrendered to you
herewith.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this ___ day of _____, 20__.
BRANCH BANKING AND TRUST COMPANY,
as Trustee
By:
------------------------------------
A-7
Annex F
[Date]
Branch Banking and Trust Company
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Banker
Ladies and Gentlemen:
We refer to Irrevocable Letter of Credit No. ____ (the "Letter of
Credit"), issued in favor of Branch Banking and Trust Company, in its capacity
as Trustee under the Indenture (as defined in the Letter of Credit).
For value received we hereby irrevocably transfer to ____________________,
hereinafter referred to as the transferee, all rights of the undersigned to draw
under the above Letter of Credit in its entirety.
By this transfer, all rights of the undersigned in such Letter of Credit
are transferred to the transferee and the transferee shall have the sole rights
relating to any amendments, whether increases or extensions or other amendments
and whether now existing or hereafter made. All amendments are to be advised
direct to the transferee without necessity of any consent of or notice to the
undersigned.
The Letter of Credit is returned herewith.
Please notify the transferee of this transfer and the conditions of the
Letter of Credit.
Very truly yours,
-----------------------------------------
(Signature of Transferor)
Signature Authenticated
-----------------------------------------
(Bank)
-----------------------------------------
(Authorized Signature)
A-8
EXHIBIT B
Form of Company Counsel Opinion
September 2, 2004
Branch Banking and Trust Company, as Trustee
Wilson, North Carolina
▇▇▇▇▇ County Industrial Development Authority
Jesup, ▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc. t/a BB&T Capital Markets
Richmond, Virginia
Branch Banking and Trust Company
Macon,
Georgia
Re: $4,900,000 ▇▇▇▇▇ County Industrial Development Authority Tax-Exempt
Industrial Development Revenue Bonds (Absorption Corp. Project),
Series 2004
Ladies and Gentlemen:
We have acted as counsel to Absorption Corp. (the "Company") and to
International Absorbents, Inc. (the "Guarantor"), in connection with the
authorization, issuance and sale of the referenced Bonds (the "Bonds") by the
▇▇▇▇▇ County Industrial Development Authority (the "Issuer"). This opinion
letter is being delivered pursuant to Section 8(e)(v) of the Bond Purchase
Agreement for the Bonds dated September 1, 2004 (the "Purchase Agreement"),
among the Issuer, the Company, the Guarantor, and ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc. t/a
BB&T Capital Markets, in its capacity as underwriter (in such capacity, the
"Underwriter") and pursuant to Section 3.01(d) of the
Letter of Credit and
Reimbursement Agreement dated as of September 1, 2004 (the "Reimbursement
Agreement") between the Company and Branch Banking and Trust Company (in such
capacity, the "Bank"). Capitalized terms used herein that are not defined herein
shall have the meanings given to them in the Purchase Agreement and in the
Reimbursement Agreement.
BACKGROUND
In connection with this opinion, we have examined fully-executed
originals, or copies certified to our satisfaction, of the following documents:
1. Indenture of Trust dated as of September 1, 2004 (the
"Indenture") between the Issuer and Branch Banking and Trust Company, as
trustee ( in such capacity, the "Trustee");
2. Lease Agreement dated as of September 1, 2004 (the "Lease
Agreement") between the Issuer and the Company, and the related Short Form
Lease Agreement, to be recorded in the real estate records maintained by
Office of the Clerk of Superior Court, ▇▇▇▇▇ County,
Georgia;
3. Guaranty Agreement dated as of September 1, 2004 (the "Company
Guaranty Agreement") between the Company and the Trustee;
4. The Purchase Agreement;
5. Remarketing Agreement dated as of September 1, 2004 (the
"Remarketing Agreement") between the Company, the Guarantor, and ▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇▇▇▇, Inc. t/a BB&T Capital Markets (in such capacity, the
"Remarketing Agent");
6. Official Statement dated August 25, 2004 (the "Official
Statement"), relating to the Bonds;
7. The Reimbursement Agreement;
8. Guaranty Agreement dated as of September 1, 2004 (the "Guaranty
Agreement") between the Guarantor and the Bank;
9. PILOT Agreement dated as of September 1, 2004 (the "PILOT
Agreement"), between the Issuer and the Company;
10. Deed to Secure Debt and Leasehold Deed to Secure Debt, Security
Agreement and Assignment of Rents and Leases, dated as of September 1,
2004 (the "Security Deed") from the Issuer and the Company to the Bank, to
be recorded in the real estate records maintained by Office of the Clerk
of Superior Court, ▇▇▇▇▇ County,
Georgia;
11. Security Agreement dated as of September 1, 2004 (the "Bank
Security Agreement") between the Company and the Bank;
12. Uniform Commercial Code financing statements naming the Company
as debtor and the Bank as secured party and describing the collateral
pledged to the Bank under the Security Deed and under the Bank Security
Agreement one to be filed in the office of the Secretary of State of the
State of Nevada, one to be recorded in the real estate records of the
Clerk of Superior Court, ▇▇▇▇▇ County,
Georgia (said places of filing
being herein called the "Filing Offices" for such financing statements);
13. Uniform Commercial Code financing statements naming the Issuer
as debtor and the Bank as secured party and describing the collateral
pledged to the Bank under the Security Deed one to be filed in the office
of the Clerk of Superior Court, ▇▇▇▇▇ County, Georgia for indexing in the
Uniform Commercial Code records and one for recording in the real estate
records of the Clerk of Superior Court, ▇▇▇▇▇ County, Georgia (said places
of filing being herein called the "Filing Offices" for such financing
statements);
14. Assignment of Lease and Security Agreement dated as of September
1, 2004 (the "Trustee Security Agreement") between the Issuer and the
Trustee;
15. Uniform Commercial Code financing statement naming the Issuer as
debtor and the Trustee as secured party and describing the collateral
pledged to the Trustee under the Trustee Security Agreement to be filed in
the office of the Clerk of Superior Court, ▇▇▇▇▇ County, Georgia for
indexing in the Uniform Commercial Code records (said place of filing
being herein called the "Filing Offices" for such financing statements)
16. A Limited Warranty Deed, dated as of September 1, 2004,
conveying the real property component of the Project from the Lessee to
the Issuer to be recorded in the real estate records of the Clerk of
Superior Court, ▇▇▇▇▇ County, Georgia; and
17. A ▇▇▇▇ of Sale, dated as of September 1, 2004, conveying the
personal property component of the Project from the Lessee to the Issuer.
The agreements and instruments described above are hereinafter
collectively referred to as the "Bond Documents." All of the Bond Documents,
except the Indenture, the Guaranty Agreement, the Official Statement, the
aforesaid financing statements, are hereinafter collectively referred to as the
"Company Documents." The
Guaranty Agreement, the Purchase Agreement and the Remarketing Agreement are
hereinafter collectively referred to as the "Guarantor Documents."
In connection with this opinion, we also have examined originals, or
copies identified to our satisfaction, of such other documents, instruments,
certificates and records as we have considered appropriate in order to render
our opinions contained herein. Where we have considered it appropriate, as to
certain facts we have relied, without investigation or analysis of any
underlying data contained therein, upon certificates or other comparable
documents of public officials and representatives of the Company and of the
Guarantor. We have relied on a certificate of the Company of even date herewith
as to due authorization, execution and delivery of the Company Documents and
other representations of the Company therein. We have also relied on a
certificate of the Guarantor of even date herewith as to due authorization,
execution and delivery of the Guarantor Documents and other representations of
the Guarantor therein.
We note that certain of the Bond Documents provide that they shall be
governed by the laws of the Commonwealth of Virginia. The opinions set forth
herein are limited to matters governed by the laws of the State of Georgia and
the federal laws of the United States, and no opinion is expressed herein as to
the laws of any other jurisdiction. We express no opinion concerning any matter
respecting or affected by any laws other than laws that a lawyer in the State of
Georgia exercising customary professional diligence would reasonably recognize
as being directly applicable to the Company, the Guarantor, the Bonds, the Bond
Documents or any of them.
ASSUMPTIONS
In rendering this opinion we have assumed, among other things: (i) the
legal capacity of all natural persons, (ii) the genuineness of all signatures on
all documents and instruments (as none were signed in our presence), (iii) the
authenticity of all documents submitted to us as originals, (iv) that all
documents submitted to us as copies conform with the originals thereof, (v) that
the Company Documents fully state the agreement between the Company and the
other parties thereto, (vi) that the Company Documents constitute the legal,
valid and binding obligation of the parties thereto other than the Company and
the Guarantor, enforceable against such other parties in accordance with their
respective terms, (vii) that the Guarantor Documents fully state the agreement
between the Guarantor and the parties thereto, and that the Guarantor Documents
constitute the legal, valid and binding obligation of the parties thereto other
than the Guarantor and the Company, and are enforceable against such other
parties in accordance with their respective terms, (viii) the due authorization,
execution and delivery of the Bond Documents by each of the parties thereto,
other than the Company and the Guarantor; and (ix) that there are no agreements
between any parties that would alter the agreements set forth in the Bond
Documents.
We have assumed that: (a) the Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the province of British
Columbia, (b) the Guarantor has the corporate power to conduct its business and
own its properties and to execute, deliver and perform its obligations under the
Guarantor Documents, (c) the Guarantor has authorized the execution, delivery
and performance of the Guarantor Documents by all necessary corporate action and
has duly executed and delivered each of the Guarantor Documents.
We assume that the Company is not (a) an "investment company" or a company
controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or (b) a "holding company" or a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
Whenever our opinion herein with respect to the existence or absence of
facts is qualified by the phrase "to our knowledge", "of which we have
knowledge", or the like, it is intended to indicate that during the course of
our representation of the Company and the Guarantor no information has come to
our attention which would give us actual knowledge of the existence of such
fact. Moreover, we have not undertaken any inquiry or comprehensive independent
investigation to determine the existence or absence of such facts, and any
limited inquiries made by us during the preparation of this opinion should not
be regarded as such an investigation.
Whenever we have stated that we have assumed any matter, it is intended to
indicate that we have assumed such matter without making any factual, legal or
other inquiry or investigation, and without expressing any opinion or conclusion
of any kind, concerning such matter.
OPINIONS
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. Based solely upon a Certificate of Existence with Status of Good
Standing regarding the Company from the Nevada Secretary of State dated August
16, 2004, the Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Nevada.
2. Based solely upon a Certificate of Existence regarding the Company from
the Georgia Secretary of State, dated August 25, 2004, the Company is qualified
to do business and in good standing under the laws of the State of Georgia.
3. The Company has the corporate power to conduct its business and own its
properties and to execute, deliver and perform its obligations under the Company
Documents.
4. The Company has authorized the execution, delivery and performance of
the Company Documents by all necessary corporate action and has duly executed
and delivered each of the Company Documents.
5. Each of the Company Documents constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms.
6. Each of the Guarantor Documents constitutes the legal, valid and
binding obligation of the Guarantor, enforceable in accordance with its terms.
7. The Company has duly approved the Indenture. The Company has duly
approved the Official Statement and has authorized the distribution of the
Official Statement and the use thereof by the Underwriter and the Remarketing
Agent in connection with the offering, sale and remarketing of the Bonds on
behalf of the Issuer and the Company. The Company has duly executed the Official
Statement.
8. The Security Deed is in appropriate form for recordation. The legal
description of the land contained in Exhibit A to the Security Deed (the "Land")
is sufficient to enable the Security Deed to be recorded, and such legal
description is the same as that shown in Schedule A of the commitment for the
policy of title insurance issued by Chicago Title Insurance Company delivered to
the Bank as required by the Reimbursement Agreement.
9. The recording of the Security Deed and the filing of the financing
statements naming the Company as debtor and the Bank as secured party in the
Filing Offices in Georgia and Nevada are the only filings necessary to give
constructive notice under Georgia law to third persons of the lien of the
Security Deed on the real property component of the Project and to perfect a
security interest in the other collateral described in those financing
statements. No re-recording is necessary with respect to the Security Deed to
preserve the lien created thereby.
10. The financing statements that are to be filed in Georgia are in proper
form for filing with the Filing Offices in Georgia. Upon the issuance of the
Bonds and the proper filing of those financing statements in the Filing Offices
in ▇▇▇▇▇ County, Georgia, the Bank will have a perfected security interest in
the Company's (except to the extent of the need also to file a financing
statement in Nevada) and the Issuer's interest in the collateral described in
such financing statements, but only to the extent that a security interest in
such collateral may be perfected by the filing of a financing statement pursuant
to Article 9 of the UCC as adopted in Georgia.
11. No state or local mortgage recording tax, stamp tax, or other fees,
taxes or governmental charges, other than statutory filing and recording fees to
be paid upon filing of the financing statements and recording of the Security
Deed, are required to be paid in Georgia in connection with any of the
transactions referred to in this opinion.
12. The execution and delivery by the Company of the Company Documents and
the performance by the Company of its obligations thereunder (i) do not and will
not conflict with or violate the Company's articles of incorporation or bylaws,
(ii) to our knowledge, do not and will not conflict with or violate any order,
injunction, ruling or decree by which the Company or its property is bound,
(iii) to our knowledge, do not and will not constitute a breach of or default
under any agreement, indenture, mortgage, lease, note or other obligation,
instrument or arrangement to which the Company is a party or by which the
Company or any of its property is bound, and (iv) do not and will not contravene
or constitute a violation of any federal or Georgia constitutional or statutory
provision, rule or regulation to which the Company or any of its property is
subject.
13. No consent, approval, authorization or order of any governmental body
or agency is required for the approval, execution and delivery by the Company of
the Company Documents which has not been obtained.
14. To our knowledge, the execution and delivery by the Guarantor of the
Guarantor Documents and the performance by the Guarantor of its obligations
thereunder (i) do not and will not conflict with or violate the Guarantor's
articles of incorporation or bylaws, (ii) do not and will not conflict with or
violate any order, injunction, ruling or decree by which the Guarantor or its
property is bound, (iii) do not and will not constitute a breach of or default
under any agreement, indenture, mortgage, lease, note or other obligation,
instrument or arrangement to which the Guarantor is a party or by which the
Guarantor or any of its property is bound, and (iv) do not and will not
contravene or constitute a violation of any law, rule or regulation to which the
Guarantor or any of its property is subject.
15. No consent, approval, authorization or order of any federal or Georgia
state or local governmental body or agency is required for the approval,
execution and delivery by the Guarantor of the Guarantor Documents which has not
been obtained.
The opinions expressed above are subject to the following qualifications
and limitations:
(a) As to the binding effect and enforceability of the Company Documents
against the Company and as to the binding effect and enforceability of Guarantor
Documents against the Guarantor, our opinions are limited by (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of landlords and creditors generally,
including, without limitation, laws relating to fraudulent transfers or
conveyances, preferences and equitable subordination; (ii) equitable limitations
upon the enforcement (whether by an action for specific performance, injunctive
relief or otherwise and whether at law or in equity) of remedies; (iii) the
exercise of judicial discretion in accordance with the general principles of
equity. The enforceability opinions set forth in paragraphs 5 and 6, above, are
subject to the qualification that certain provisions of the Company Documents or
Guarantor Documents may not be enforceable; nevertheless, such unenforceability
will not render any of the Company Documents or any of the Guarantor Documents
invalid in their entirety, or render them legally inadequate for the practical
realization of the principal benefits intended to be provided to the Bank, the
Underwriter, the Trustee and/or the Issuer by such Bond Documents, taken as a
whole, upon a material breach by the Company or the Guarantor under any of such
Bond Documents, or preclude (i) the judicial enforcement of the obligation of
the Company to make payments to repay the principal of amounts draw under the
Letter of Credit together with interest, if any, thereon, as provided in the
Reimbursement Agreement, as limited by any applicable usury laws and subject to
the obligation to confirm an exercise of power of sale pursuant to O.C.G.A.
Section ▇▇-▇▇-▇▇▇ as a prerequisite to the collection of any deficiency judgment
with respect to the related debt, (ii) the acceleration of the obligation of
Guarantor to repay such principal, together with such interest, upon a material
default by Company in the payment of such principal or interest, and (iii) the
non-judicial foreclosure of the security title to the real property by exercise
of power of sale pursuant to the Security Deed in accordance with Georgia law.
(b) The opinions set forth herein are subject to the qualifications,
limitations and exceptions set forth below as follows:
(1) The opinion as to the enforceability of any of the Bond
Documents is further subject to the effect of other statutes or judicial
decisions rendering ineffective or limiting certain provisions contained
in the Bond Documents. However, in our opinion, such other statutes and
decisions do not invalidate any of the Bond Documents in their entirety,
or render them legally inadequate for the practical realization of the
principal benefits intended to be provided to the Bank, the Underwriter,
the Trustee
and/or the Issuer by the Bond Documents, taken as a whole, upon a material
breach by the Company or the Guarantor of any of the Bond Documents.
Provisions referred to in this paragraph (b)(1) that may be so limited or
rendered ineffective include, without limitation: (i) those that purport
to waive statutory or common law rights; (ii) those that provide for the
exercise of setoff or similar rights; (iii) those pursuant to which a
party purports to waive, limit or define rights (including, without
limitation, rights to a trial by jury and rights to contest jurisdiction
or venue in any legal proceeding) in a manner or to a degree that may
contravene public policy or constitutional or statutory prohibitions
against such waivers; (iv) those that purport to give a party the right to
recover damages or losses that the party could have avoided with
reasonable efforts to mitigate its damages or losses; (v) any provision
purporting to appoint a party as an attorney-in-fact for another party,
except in connection with a power-of-sale in a deed to secure debt; (vi)
those requiring indemnification for, or providing exculpation, release or
exemption from liability for, action or inaction, to the extent such
action or inaction involves negligence or willful misconduct or to the
extent otherwise contrary to public policy; and (vii) the waiver of
procedural, substantive or constitutional rights or other legal or
equitable rights, including, without limitation, the marshalling of
assets; the right of statutory or equitable redemption; the confession or
consent to any judgment; the consent by Company or Guarantor to the
jurisdiction of any court or to service of process in any particular
manner; forum selection clauses; disclaimers or limitations of
liabilities; discharges of defenses; the exercise of self-help or other
remedies without judicial process; or the appointment of a receiver to the
extent that the appointment of a receiver is governed by applicable
statutory requirements and is otherwise within the discretion of the
court. Without limitation, with respect to the validity, enforceability
and binding effect of any environmental indemnity and hold harmless
agreements by any party that may be included in the Bond Documents, we
have relied upon a number of federal court decisions. However, we note
that some cases arising under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") support the proposition that
such private indemnity agreements are not enforceable. Therefore, the
enforceability of these provisions cannot be said to be free from doubt,
and, notwithstanding anything contained herein which may appear to be to
the contrary, our opinions in this letter are so qualified. In addition,
we note that CERCLA and other environmental laws have sometimes been
interpreted to impose independent liability on lenders in a manner that
may, under certain circumstances, override the provisions of the Bond
Documents.
(2) We express no opinion as to the enforceability of any provisions
of any of the Bond Documents which impose liquidated damages, penalties or
forfeitures.
(3) Georgia Code Annotated Section 13-1-11 sets forth the procedures
and limitations applicable to the collection of attorneys' fees pursuant
to the Bond Documents. Accordingly, any provisions in the Bond Documents
relating to the ability of a party to any of the Bond Documents to collect
attorneys' fees are subject to those limitations.
In connection with the opinions set forth above, we call your attention to
the following:
1. Our opinion set forth herein regarding security interests in personal
property and fixtures and the perfection of any such security interests is
limited to Article 9 of the UCC, and therefore does not address (i) laws of
jurisdictions other than the State of Georgia, (ii) collateral of a type not
subject to Article 9 of the UCC, or (iii) what law governs perfection of the
security interests granted in any collateral. We assume that all information
appearing on the financing statements is correct. We also assume that the
description of the collateral in the Bond Documents reasonably identifies it,
and is legally adequate. No opinion is given that a deed to secure debt or a
security agreement is sufficient or effective as a financing statement.
2. Section 552 of the U.S. Bankruptcy Code limits the extent to which
property acquired after the commencement of a proceeding may be subject to a
security interest arising from a security agreement entered into by the debtor
prior to the commencement of such proceeding.
3. We express no opinion with respect to the perfection of any security
interest in any collateral consisting of goods that are or are to become
fixtures, standing timber to be cut, farm products, consumer goods, as-extracted
collateral, or goods covered by certificates of title;
4. We note that a record communicated to the filing office with tender of
the appropriate filing fee, but which the filing office refuses to accept for a
reason other than one set forth in O.C.G.A. Section 11-9-516(b), is not
effective against a purchaser of collateral who gives value in reasonable
reliance upon the absence of the record from the files.
5. Under certain circumstances described in O.C.G.A. Section 11-9-31-5,
the perfected security interest in proceeds of the collateral may cease to
continue or become unperfected.
6. Under certain circumstances respectively described in O.C.G.A. Sections
11-9-317, 11-9-320 and 11 9-321, buyers, lessees and licensees of the collateral
may take the same free and clear of a perfected security interest.
7. Pursuant to O.C.G.A. Section 11-9-507(c), perfection of a security
interest in the collateral will terminate as to any property acquired by the
Company more than four months after the date the Company so changes its name as
to make the filed financing statement seriously misleading unless an amendment
to the financing statement which renders the financing statement not seriously
misleading is filed within four months after the change.
8. Pursuant to O.C.G.A. Section 11-9-316, perfection of a security
interest in the collateral will terminate as provided therein in connection with
either a change of the debtor's location to another jurisdiction or the transfer
of collateral to a person that thereby becomes a debtor and is located in
another jurisdiction.
9. We express no opinion with respect to the priority of any security
interest granted in the collateral.
10. We express no opinion regarding the enforceability of any provisions
of the Bank Security Agreement or the Trustee Security Agreement, to the extent
that they purport to waive or vary the rules stated in the Sections of the UCC
enumerated in O.C.G.A. Section 11-9-602.
11. We express no opinion regarding the enforceability of provisions of
the Bond Documents that purport to render void and of no effect any transfers of
the Company's rights in the collateral in violation of the terms of the Bond
Documents.
12. As to due recordation and validity of the Security Deed, the Bank is
relying solely upon a title insurance commitment for a lender's policy issued by
a title insurance company.
13. Enforceability of the Bond Documents may be limited by any
unconscionable or inequitable conduct of the parties thereto, defenses arising
from the parties' failure to act in accordance with the terms and conditions of
the Bond Documents, defenses arising as a consequence of the passage of time, or
defenses arising as a result of the parties' failure to act reasonably or in
good faith.
14. We express no opinion on the enforceability of any provisions
permitting modifications of the Bond Documents only if in writing.
15. The following matters, including their effects and the effects of
non-compliance, are not covered by implication or otherwise in this letter: (i)
antitrust and unfair competition law; (ii) federal and state securities laws;
(iii) fiduciary obligations; (iv) pension and employee benefit law, e.g., ERISA;
(v) Regulations T, U and X of the Board of Governors of the Federal Reserve
System; (vi) fraudulent transfer law; (vii) environmental law (except as
expressly stated above); (ix) zoning, land use, subdivision and other
development laws; (ix) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇, Exon-▇▇▇▇▇▇ and other laws related to
filing requirements, other than charter-related filing requirements, such as
requirements for filing articles of merger; (x) Bulk transfer law; (xi) tax law;
(xii) patent, copyright, trademark and other intellectual property law; (xiii)
Racketeering law, e.g., RICO; (xiv) criminal Statutes of general application,
e.g., mail fraud and wire fraud; (xvi health and safety law, e.g., OSHA; (xvii)
labor law; (xviii) law concerning national or local emergency; and (xvii) law
concerning access by the disabled and building codes.
16. Our opinion as to the validity, enforceability and binding effect of
any assignment of leases or rents contained in any of the Bond Documents is
further qualified by the effect, if any, of the holding in the case styled
Financial Security Assurance, Inc. ▇. ▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. 165 B.R. 698
(Bankr. ▇.▇.▇▇. 1994), in which the District Court held, in part, that: "In
Georgia, a mortgagee with a security interest in rents is not entitled to
receive the rents until it takes possession of and has complete control over the
land or rents. Matter of ▇▇▇▇▇▇, 150 B.R. 835 (Bankr.N.D.Ga.1993); In re Polo
Club Apartment Associates Ltd., 150 B.R. 840 (Bankr.N.D.Ga.1993) * * *. Thus, in
or out of bankruptcy, under Georgia law, [the secured party is] not entitled to
the rents prior to the time it foreclose[s] on the land."
Aside from advising you of the requirements of O.C.G.A. Section ▇▇-▇▇-▇▇▇,
no opinion is given herein as to any requirement for the Bank to make an
election of remedies, or as to the order in which the Bank should or is
permitted to proceed against any part or type of the collateral, or as to
related procedural matters.
* * *
We advise you that the information contained in the Official Statement
under the headings "THE COMPANY," "THE PROJECT," and "LITIGATION" (to the extent
that litigation affecting the Company is described under that heading) does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Except
with respect to the items set forth in the preceding sentence, we did not
participate in the preparation of the Official Statement and have not undertaken
to verify the accuracy of the information contained therein; therefore, we
express no opinion as to the accuracy or completeness thereof; however, nothing
has come to our attention which would lead us to believe that the Official
Statement contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading (except that we express no view about the information concerning the
validity or tax-exempt status of the Bonds, The Depository Trust Company and the
book-entry system for the Bonds or the Bank or about the financial and
statistical data contained in the Official Statement).
In addition, we advise you that, to our knowledge, there is no action,
suit, proceeding, inquiry or investigation at law or in equity or before or by
any court, public board or body pending or threatened against or affecting the
Company or the Guarantor, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the condition (financial or otherwise)
of the Company or the Guarantor or would adversely affect (i) the transactions
contemplated by, or the validity or enforceability of, the Bond Documents or
(ii) the tax-exempt status of interest on the Bonds.
* * *
This opinion is given as of the date hereof and we assume no obligation to
update, revise or supplement this opinion to reflect any facts or circumstances
that may hereafter come to our attention or any changes in law that may
hereafter occur
This opinion letter is delivered solely for your benefit in connection
with the issuance of the Bonds and consummation of transactions contemplated
thereby and may not be used or relied upon by any other person or for any other
purpose without our prior written consent in each instance. Our opinions
expressed herein are as of the date hereof, and we undertake no obligation to
advise you of any changes of applicable law or any other matters that may come
to our attention after the date hereof that may affect our opinions expressed
herein.
Very truly yours,
SEYFARTH ▇▇▇▇ LLP
/s/ ▇▇▇▇▇▇▇▇ Pitcher
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Schedule 5.01(f)
Form of Officer's Certificate
The undersigned __________________________, the __________ of Absorption
Corp. (the "Company") and chief financial officer of the Company, hereby
certifies to Branch Banking and Trust Company (the "Bank") pursuant to Section
5.01(f) of the
Letter of Credit and Reimbursement Agreement dated as of
September 1, 2004 between the Company and the Bank (the "Agreement") that,
(i) to the best of his knowledge, the Company has performed and observed
each and every agreement contained in the Agreement;
(ii) attached hereto are calculations evidencing compliance with the
financial covenants of the Agreement; and
(ii) no Event of Default (as defined in the Agreement) has occurred.
This ______ day of ________________, 20__.
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Chief Financial Officer