<PAGE> 1
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------- -------------
Commission File No. 0-7770
MCCLAIN INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
STATE OF MICHIGAN 38-1867649
State of Incorporation I.R.S. Employer I.D. No.
6200 ELMRIDGE ROAD
STERLING HEIGHTS, MICHIGAN 48310
(810) 264-3611
(Address of principal executive offices and telephone number)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ X ]
As of December 11, 1997, the aggregate market value of the Registrant's
voting stock held by nonaffiliates of the Registrant was $8,509,392 determined
in accordance with the highest price at which the stock was sold on such date
as reported by the Nasdaq National Market.
As of December 11, 1997, there were 4,751,373 shares of the Registrant's
common stock issued and outstanding.
Exhibit Index is on Page 53
Page 1 of 208 Pages
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PART I
ITEM 1. BUSINESS
GENERAL
McClain Industries, Inc., a Michigan corporation ("McClain-Michigan"),
together with its subsidiaries (the "Company"), is one of the nation's leading
manufacturers of a diversified line of dump truck bodies and solid waste
handling equipment. Dump truck bodies are assemblies attached to truck frames
and used to carry and dump solid materials such as dirt or gravel. Solid waste
handling equipment is used for the temporary storage, transportation and
compaction of residential, commercial and industrial waste and recycling
materials. In addition, the Company operates a steel tube mill to manufacture
some of its steel tubing needs. The Company also provides coiled steel cutting
and warehousing services for its own manufacturing operations and, on a limited
basis, for sale to third-party customers.
BACKGROUND
McClain-Michigan was incorporated in 1968 and became a publicly-traded
company in 1973. It currently has: (i) seven wholly-owned operating
subsidiaries: McClain of Alabama, Inc. ("McClain-Alabama"); McClain of Georgia,
Inc. ("McClain-Georgia"); McClain of Ohio, Inc. ("McClain-Ohio"); McClain of
Oklahoma, Inc. ("Oklahoma"); McClain EPCO, Inc. ("EPCO"); Shelby Steel
Processing Co. ("Shelby Steel"); and McClain Tube Company (d/b/a Quality
Tubing) ("Tube"); (ii) one wholly-owned lease financing subsidiary: McClain
Group Leasing, Inc. ("Leasing"); (iii) one wholly-owned holding company
subsidiary: Galion Holding Company ("Galion Holding"); and (iv) an
international sales corporation, McClain International FSC, Inc. ("FSC").
Galion Holding is the sole shareholder of two additional operating
subsidiaries, McClain E-Z Pack, Inc. ("E-Z Pack") and Galion Dump Bodies, Inc.
("Galion Dump Bodies"). McClain-Michigan, E-Z Pack and Galion Dump Bodies
collectively own all of the issued and outstanding stock of McClain Group
Sales, Inc. ("Sales"), which is the exclusive sales representative of
McClain-Michigan, McClain-Alabama, McClain-Georgia, McClain-Ohio,
McClain-Oklahoma, E-Z Pack and Galion Dump Bodies. Sales owns all of the
issued and outstanding stock of McClain Group Sales of Florida, Inc., a
distributor of the Company's products in Florida. All of these companies are
Michigan corporations, except for McClain-Georgia, which is a Georgia
corporation, EPCO, which is a New York corporation, and FSC, which is a Virgin
Islands corporation.
McClain-Michigan, McClain-Alabama, McClain-Georgia, McClain-Ohio,
McClain-Oklahoma and EPCO are sometimes collectively referred to as "McClain";
Galion Holding, E-Z Pack and Galion Dump Bodies are sometimes collectively
referred to as "Galion"; and, unless the context otherwise requires, all
references to the Company mean McClain-Michigan and all of the entities owned
or controlled by McClain-Michigan.
The Company's executive offices are located at 6200 Elmridge Road,
Sterling Heights, Michigan 48310 and its telephone number is (810) 264-3611.
PRODUCTS
The Company manufactures and markets dump truck bodies and four solid
waste handling equipment product lines: (1) containers; (2) compactors and
baling equipment; (3) garbage and recycling truck bodies; and (4) transfer
trailers. Sales of dump truck bodies accounted for approximately 23%, and
sales of solid waste handling
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equipment accounted for approximately 75%, of the Company's consolidated net
sales for the fiscal year ended September 30, 1997.
Dump Truck Bodies and Hoists
Galion Dump Bodies manufactures steel dump truck bodies varying in
capacity from two to twenty-five cubic yards at its Winesburg, Ohio facility.
McClain-Georgia and McClain-Oklahoma, under license from Galion Dump Bodies,
also manufacture dump truck bodies at their Macon, Georgia and Oklahoma City,
Oklahoma facilities, respectively. Dump truck bodies are assemblies which are
attached to a truck's frame or chassis, to allow the truck to carry and dump
solid materials such as dirt, gravel or waste materials. Hoists are the
hydraulic lift mechanisms used to tilt the dump body. Trucks with a dump body
and hoist are commonly seen in use as "dump trucks". The products manufactured
by Galion Dump Bodies are sold under the registered trademark "Galion". The
trademark registration, if not renewed, will expire in the year 2001
Containers
Detachable Roll-Off Containers and Roll-Off Hoists. McClain-Michigan,
McClain-Alabama, McClain-Georgia, McClain-Ohio and McClain-Oklahoma manufacture
several types of detachable roll-off containers and roll-off hoists at the
Company's facilities in Sterling Heights, Michigan, Macon, Georgia, Demopolis,
Alabama, Oklahoma City, Oklahoma, and Galion, Ohio. Detachable roll-off
containers vary in capacity from ten to forty-five cubic yards and are
transported with their contents to recycling centers, incinerators or landfill
sites. Roll-off hoists consist of frames mounted on truck chassis which are
hydraulically operated to load, transport and dump roll-off containers.
Roll-off hoists are advertised and sold under the trade name "MAGNA-HOIST.
Intermodal, Water-Tight and Sludge Containers. The Company manufactures
various types of intermodal, water-tight and sludge containers at the Company's
facilities in Sterling Heights, Michigan, Macon, Georgia, Demopolis, Alabama,
Oklahoma City, Oklahoma, and Galion, Ohio. Intermodal containers vary in
capacity from nineteen cubic yards to thirty-five cubic yards and are designed
for highway, railroad and marine movement of waste products. Water-tight
containers vary in capacity from ten to forty cubic yards and are designed for
highway movement of wet waste. Sludge containers vary in capacity from ten to
thirty-five cubic yards and are designed for highway movement of slurry type
waste products.
Compactors and Baling Equipment
The Company manufactures compactors at its Sterling Heights, Michigan
facility. Compactors consist of a compaction unit and separate power source.
Compaction units force deposited refuse through an opening at one end of the
unit into a roll-off body coupled to the compaction unit. When the roll-off
body is filled, the compactor is detached and the roll-off body is removed for
dumping. The Company also manufactures unitized compaction systems consisting
of a compactor and roll-off container manufactured as a single unit.
Compactors are sold under the trade name "MAGNUM" and unitized compactor
systems are sold under the trade name "OCTAMAG". EPCO manufactures at its
Buffalo, New York facility 24 models of balers which compact plastic and paper
products, primarily cardboard. Balers are either vertical downstroke or closed
door horizontal balers.
Garbage and Recycling Truck Bodies
E-Z Pack manufactures at its Galion, Ohio facility traditional garbage
truck bodies comprised of front, rear and side loading truck bodies and a
recycling truck body used in solid waste handling and disposal. The front
loading truck bodies vary in
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capacity from thirty-two cubic yards to forty-three cubic yards, the rear
loading truck bodies vary in capacity from eighteen cubic yards to thirty-one
cubic yards, and the side loading truck bodies vary in capacity from
twenty-nine cubic yards to thirty-nine cubic yards. The recycling truck bodies
vary in capacity from thirty cubic yards to forty cubic yards. The products
manufactured by E-Z Pack are sold under the registered trademark "E-Z Pack".
Within this line, E-Z Pack sells its rear loading truck bodies under the
trademarks "Goliath", "Goliath II", and "Apollo", and its front loading truck
bodies under the trademark "Hercules". The side loading truck bodies and the
recycling truck bodies are principally identified by the E-Z Pack name only.
These trademarks will expire in the year 2001, unless renewed. The Company has
several patents covering its recycling truck.
Transfer Trailers
McClain-Ohio manufactures at its Galion, Ohio facility, various types of
steel and aluminum transfer trailers, including open-top walking floor
trailers, closed-top walking floor trailers, ejection trailers and open-top
tipper trailers, varying in capacity from thirty cubic yards to 124 cubic
yards. Transfer trailers are used to transport compacted solid waste from
transfer stations to landfills or incinerators.
CUSTOMERS AND DISTRIBUTION
For the fiscal year ended September 30, 1997, the Company's consolidated
net sales were divided approximately 47% to distributors, 46% to solid waste
handling companies, and 7% to other entities.
During the fiscal year ended September 30, 1997, approximately 14.1% of
the Company's total sales were made to Waste Management, Inc. No other single
customer accounted for more than 10% of the Company's net sales for the fiscal
years ended September 30, 1996 or 1995. The Company has no contracts with any
of its customers and, accordingly, sells its products pursuant to purchase
orders placed from time to time in the ordinary course of business. The
Company delivers its products to its customers through the use of its own
trucks or common carriers.
The Company obtains its municipal as well as certain private contracts
through the process of competitive bidding. There can be no assurance that
municipalities or others will continue to solicit bids, or if they do, that the
Company will continue to be successful in having its bids accepted.
Additionally, inherent in the competitive bidding process is the risk that if a
bid is submitted and a contract is subsequently awarded, actual performance
costs may exceed the projected costs upon which the submitted bid or contract
price was based.
Although historically foreign sales have not accounted for a significant
portion of the Company's revenues, the Company anticipates that a greater
portion of its future net sales will be derived from sales of its products in
foreign markets.
SALES AND MARKETING
Historically, the Company's products have been marketed by the Company's
executive officers and sales personnel who have worked closely with customers
to solicit orders and to render technical assistance and advice. The Company's
executive officers will continue to devote a significant amount of time to
developing and maintaining continuing relations with the Company's customers.
The Company operates Sales, a separate wholly-owned corporation, to act as the
Company's exclusive sales representative for its solid waste handling equipment
product lines.
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The Company also engages independent distributors and dealers in various
regions throughout the United States and certain foreign countries, for
marketing its products to customers. The Company's dealers are generally
responsible in their respective geographic markets for identifying customers
and soliciting customer orders. As of December 1, 1997, there were
approximately 277 authorized Company dealers located in numerous states and 19
authorized Company dealers, licensees and commissioned district managers in 10
foreign countries, each of which is independently owned. The Company is
dependent on such dealers for a significant portion of its revenues. These
dealers typically specialize in specific products and areas and, accordingly,
have specific knowledge of and contacts in particular markets. The Company
believes that its dealers have enhanced and will continue to enhance the scope
of the Company's marketing and sales efforts and have, to a certain extent,
also enabled the Company to avoid certain significant costs associated with
creating a more extensive direct sales network.
The Company advertises its products under trade names and under its name
in trade journals and brochures. Other marketing efforts include articles in
trade publications, attendance at trade shows and presentations by the
Company's personnel at industry trade conferences.
The Company, through Leasing, also provides both sales-type financing and
operating leases. At September 30, 1997, Leasing held net lease receivables of
approximately $8.2 million.
RAW MATERIALS
The Company is dependent on third-party suppliers and manufacturers for
the raw materials and a significant portion of the parts it uses in the
manufacture of its products. The major raw materials used by the Company are
steel in sheet, plate, structural and tubular form and aluminum in sheet and
extruded form. The Company purchases its steel, principally in coils, and its
sheet and extruded aluminum from domestic mills and warehouses. Coiled steel
is received by the Company at various manufacturing facilities where it is then
cut, bent, sheared and formed for assembly by welding. Electric and hydraulic
components incorporated into the power units of compactors, balers and hoists
used with dump bodies manufactured by the Company are brand name items
purchased from various sources and assembled by the Company or to their
specifications by outside sources. The assembled products are then painted to
customers' specifications.
While the Company attempts to maintain alternative sources for the
Company's raw materials and believes that multiple sources are currently
available for all of the raw materials (other than aluminum extrusions) that it
uses, the Company's business is generally subject to periodic shortages of raw
materials which could have an adverse effect on the Company. The Company
currently purchases all of its extruded aluminum from one source. The Company
is unaware of other potential providers of extruded aluminum which meets the
Company's requirements and, therefore, the failure of the Company's extruded
aluminum supplier to continue to supply the Company could have a material
adverse effect on the Company. Although to date the Company has been able to
obtain sufficient quantities of extruded aluminum to satisfy its manufacturing
needs, a prolonged shortage of such raw material could adversely affect the
Company. In addition, the Company currently purchases all of its hydraulic
cylinders from only a few major suppliers. The failure by any of such
suppliers to continue to supply the Company with cylinders on commercially
reasonable terms, or at all, could also have a material adverse effect on the
Company.
The Company generally has no supply agreements with any of its suppliers
and, accordingly, generally purchases raw materials pursuant to purchase orders
placed
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from time to time in the ordinary course of business. Failure or delay by
suppliers in supplying necessary raw materials to the Company could adversely
affect the Company's ability to obtain and deliver its products on a timely and
competitive basis. In addition, the Company has experienced price fluctuations
for the raw materials that it purchases, particularly with respect to steel and
aluminum. Any significant price fluctuations in the future could also have an
adverse effect on the Company.
The Company uses a forecasting and purchasing system to monitor the
quantity and cost of necessary raw materials. Such cost controls allow the
Company to minimize its operating costs by purchasing from the lowest priced
suppliers the appropriate amount of raw materials in light of the Company's
needs. The Company often orders raw materials in amounts in excess of its
anticipated short-term needs in order to take advantage of price discounts
available on large volume purchases of raw materials.
To reduce its cost of raw materials, the Company has been processing
coiled steel and manufacturing some of its own tubing, rather than purchasing
tubing and processed sheet steel from third parties. The Company believes that
it is the only manufacturer of dump truck bodies and solid waste handling
equipment to process coiled steel and to operate a steel tube mill.
Steel Processing
Shelby Steel, a wholly-owned subsidiary of the Company, receives coiled
steel and either warehouses or cuts and processes the steel at its River Rouge,
Michigan facility to prescribed specifications. In addition to processing
coiled steel for use by the Company, Shelby Steel also offers steel processing
and warehousing services to third parties. Shelby Steel's ability to warehouse
customers' steel attracts customers such as steel brokers who do not maintain
facilities of their own to warehouse steel. Its steel processing and
warehousing sales are generally limited to customers in the Detroit
metropolitan area. Sales to third parties represented 91.8%, 89%, and 78.6% of
Shelby Steel's business and 1.9%, 1.2%, and 2.0% of the Company's consolidated
net sales for the fiscal years ended September 30, 1997, 1996 and 1995,
respectively.
Tube Manufacturing
Tube, a wholly-owned subsidiary of the Company, began operating its tube
manufacturing line in the Company's Kalamazoo facility in mid-1994. The
facility receives coiled steel, slits the coil to proper width and forms it
into square and rectangular tubing. The tubing produced by this facility
provides the Company with approximately 90% of its steel tubing requirements.
COMPETITION
The Company faces intense competition in the solid waste handling
equipment and dump truck bodies industries. Certain of the Company's
competitors offer as wide a range of products, have greater market share and
financial, marketing, manufacturing and other resources than the Company. At
present, the Company's order backlogs are approximately two to four weeks. In
addition, the Company believes that several of its competitors have added or
are in the process of adding additional manufacturing capacity, which could
reduce order backlogs and price levels, and consequently adversely affect the
Company. Moreover, the absence of highly sophisticated technology results in a
number of small regional companies entering the container product business
periodically and competing with the Company.
Although the Company believes that its products are superior to those of
most of its competitors because of the quality and amount of steel used in its
products,
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consumers generally find the products relatively interchangeable.
Consequently, price, product availability and delivery, design and
manufacturing quality and service are the principal means of competition. The
Company believes that it can continue to compete and further strengthen its
competitive position through proper pricing, marketing and cost-effective
distribution of the Company's products.
The steel processing industry is also highly competitive, with quality,
price and delivery the principal means of competition. The Company believes
that it will generally continue to maintain its competitive position in the
marketplace with respect to steel processing. Shelby Steel's ability to
warehouse customers' steel attracts customers such as steel brokers who do not
maintain facilities of their own to warehouse steel.
BACKLOG AND INVENTORY
The Company generally produces solid waste handling equipment and dump
truck bodies pursuant to customer purchase orders. The Company includes in its
backlog only firm product orders, which are subject to termination at will and
rescheduling, without penalty. The Company's backlog was approximately $16.7
million and $11.5 million at September 30, 1997 and 1996, respectively.
Substantially all of the Company's backlog is delivered within four weeks of
the Company's receipt of purchase orders. Due to numerous factors, including
termination of orders, rescheduling, possible change orders and delays, which
affect production and delivery of the Company's products, there can be no
assurance as to if or when cash receipts will be recognized from the Company's
backlog. In addition, year to year comparisons of backlog are not necessarily
indicative of future operating results. Although most of the Company's sales
are based on orders for goods to be manufactured, the Company nevertheless
carries certain amounts of finished goods inventory in order to meet customer
delivery dates. In addition, from time to time, the Company manufactures units
in excess of ordered units to "round out" production runs or to maintain base
stock levels. At September 30, 1997, 1996 and 1995, the Company had inventory
of $31.0 million, $25.6 million and $31.2 million, respectively.
EMPLOYEES
The Company had approximately 740 employees as of December 12, 1997.
Sixty of the Company's hourly employees are represented by the McClain Hourly
Employees' Union pursuant to a collective bargaining agreement which expires
September 16, 1999. The 130 hourly employees of E-Z Pack are represented by
the International Association of Machinists and Aerospace Workers Union
pursuant to a collective bargaining agreement which expires June 12, 2000. The
46 hourly employees of McClain-Ohio are represented by the International
Association of Machinists and Aerospace Workers Union pursuant to a collective
bargaining agreement which expires November 1, 1999. On February 23, 1995 the
National Labor Relations Board (the "NLRB") conducted an election in response
to a petition filed by the Shopmen's Local Union No. 616 of the International
Association of Bridge, Structural and Ornamental Iron Workers (AFL-CIO) (the
"Union") to represent the hourly employees at the McClain-Georgia facility in
Macon, Georgia. The ballots of 11 employees were challenged as ineligible. The
Union filed charges against the Company asserting that it committed various
unfair labor practices which affected the election results and that the
challenged ballots should be counted. On October 17, 1996, the NLRB issued a
Decision, Order and Direction upholding the unfair labor practice charges, and
on November 5, 1996, the NLRB determined that the results of the election were
in favor of the Union. The Company continues to vigorously defend against the
unfair labor practice allegations. The Company does not believe a final
decision upholding the Union certification or the unfair labor practice charges
would have a material adverse affect on the Company. The Company believes that
relations
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with the hourly employees at McClain of Georgia are generally satisfactory.
There have been no work stoppages due to labor difficulties.
ENVIRONMENTAL
The Company's operations are subject to extensive federal, state and local
regulation under environmental laws and regulations concerning, among other
things, emissions into the air, discharges into the waters and the generation,
handling, storage, transportation, treatment and disposal of waste and other
materials. Inherent in manufacturing operations and in owning real estate is
the risk of environmental liabilities as a result of both current and past
operations, which cannot be predicted with certainty. The Company has incurred
and will continue to incur costs, on an ongoing basis, associated with
environmental regulatory compliance in its business.
State and local agencies have become increasingly active in the
environmental area. The increased regulation by multiple agencies can be
expected to increase the Company's future environmental costs. In particular,
properties under federal and state scrutiny frequently result in significant
clean-up costs and litigation expenses related to a party's clean-up
obligation. However, the Company believes that the ever-increasing waste
stream and the continuing initiatives of government authorities relating to
environmental and waste disposal problems, including restrictions on landfill
locations and operations and extensive regulation relating to the disposal of
waste, create significant opportunities for companies in the solid waste
handling equipment industry.
ITEM 2. PROPERTIES
In the aggregate, the Company owns or leases approximately 968,500 square
feet of real property located in Michigan, Ohio, Georgia, Oklahoma, Alabama and
New York. The Company owns three facilities in Michigan, three facilities in
Ohio, one facility in Georgia, one facility in Oklahoma and one facility in
Alabama. The properties that the Company owns or leases consist of the
following:
<TABLE>
<CAPTION>
OWNED SQUARE
LOCATION OR LEASED FOOTAGE
- -------------------------- --------- -------
<S> <C> <C>
Sterling Heights, Michigan Owned 37,000
Sterling Heights, Michigan Leased 18,000
Kalamazoo, Michigan Owned 55,000
River Rouge, Michigan Owned 50,000
Galion, Ohio Owned 365,000
Winesburg, Ohio Owned 67,500
Winesburg, Ohio Owned 16,000
Winesburg, Ohio Owned 15,200
Macon, Georgia Owned 114,500
Oklahoma City, Oklahoma Owned 100,000
Demopolis, Alabama Owned 102,000
Buffalo, New York Leased 28,300
</TABLE>
The Company's main office and manufacturing facilities are located in a
37,000 square foot facility situated on 8 2/3 acres in Sterling Heights,
Michigan owned by McClain-Michigan. This facility is used to manufacture
roll-off containers, roll-off hoists and compactors. McClain-Michigan also
owns a 55,000 square foot facility located in Kalamazoo, Michigan which is home
to the Company's tube mill. Shelby Steel owns a 50,000 square foot steel
processing facility on six acres of land in River Rouge, Michigan, where all of
its operations are conducted. McClain-Michigan leases, under a verbal
month-to-month lease, an 18,000 square foot manufacturing facility also located
in Sterling Heights, Michigan from the mother of Messrs. Kenneth and Robert
McClain.
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This facility is used by the Company as a fabrication facility. The monthly
rental for this facility is $3,500, with the lessor responsible for the payment
of real estate taxes, assessments, insurance premiums and replacement in case
of damage by fire, and the Company responsible for maintenance of the building.
The Company believes that the terms and conditions of this lease are
comparable to the terms and conditions which would be available from an
unrelated party with respect to similar facilities, although other similarly
situated unrelated parties would, in all likelihood, require a long-term
written lease.
E-Z Pack owns three buildings comprising approximately 365,000 square feet
situated on approximately 38 acres of land in Galion, Ohio. This
three-building facility is the sole location for its manufacturing operations.
This facility manufactures front, side and rear loading garbage truck bodies
and recycling trucks. Sales's executive offices are located in one of the
Galion, Ohio buildings under a lease arrangement and McClain-Ohio leases one of
the other buildings at this location. Galion Dump Bodies owns three
manufacturing facilities (67,500, 15,200 and 16,000 square feet) situated on 20
acres of land in Winesburg, Ohio where it manufactures dump bodies and hoists.
The Company's Georgia facility is an approximately 114,500 square foot
manufacturing facility on 13.2 acres in Macon, Georgia. This facility was
reorganized, during Fiscal 1997 to manufacture dump bodies, and roll-off hoists
to sell principally in the Southeast.
The Company's Oklahoma facility consists of three buildings in Oklahoma
City, aggregating 100,000 square feet. This facility is used to fabricate and
process steel for its own use and to manufacture roll-off containers.
McClain-Alabama owns an approximately 102,000 square foot manufacturing
facility in Demopolis, Alabama on approximately 84 acres of land. This
facility is used to fabricate and process steel for its own use and to
manufacture roll-off containers.
EPCO leases an approximately 28,300 square foot facility outside Buffalo,
New York, where it manufacturers balers.
McClain-Michigan's Sterling Heights, Michigan facility and McClain-Ohio's
Ohio facility are currently operating at approximately 80% of capacity. The
Oklahoma facility is currently operating at 65% of capacity. The Georgia
facility is currently operating at 30% of capacity. The Alabama facility is
currently operating at 60% capacity. The E-Z Pack portion of the Galion, Ohio
facility is currently operating at 75% of capacity. The Winesburg, Ohio
facility is currently operating at 90% of capacity. The Kalamazoo, Michigan
facility is currently operating at 60% of capacity. The EPCO facility is
currently operating at 60% capacity. The determination of the productive
capacity on each facility actually used by the Company is a function of the mix
of products being produced at such facility and the pricing of such products.
The production capacity figures set forth in this paragraph reflect the mix of
products presently produced by each facility and the present pricing of such
products. The Company enjoys expandable capacity at most of these facilities
depending on double-shifting and other performance enhancing activities.
The facilities owned and leased by the Company are well maintained and in
good operating condition. Its plants and equipment are subject to various
liens and encumbrances which collateralize certain obligations. See Notes 8
and 9 of Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
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The Company is from time to time subject to various claims from existing
or former employees alleging gender, age or racial discrimination and
anti-union activity, none of which are expected to have a material adverse
affect on the Company. See ITEM 1. BUSINESS. Employees. In addition, as a
manufacturer of industrial products, the Company is, from time to time,
subjected to various product liability claims. Such claims typically involve
personal injury or wrongful death associated with the use or misuse of the
Company's products. While such claims have not been material to the Company in
any year and the Company believes that it maintains adequate product liability
insurance, there can be no assurance that such insurance will continue to be
available on terms acceptable to the Company. Any product liability claim not
fully covered by insurance, as well as any adverse publicity from a product
liability claim, could have a material adverse effect on the Company. The
Company is currently defending a few legal proceedings involving product
liability claims relating to McClain, Galion Dump Bodies and E-Z Pack brand
products. Galion Holding purchased the business now conducted by Galion Dump
Bodies and E-Z Pack from the Peabody Galion Division of Peabody International
Corporation ("Peabody"). Pursuant to an indemnification Galion Holding
provided Peabody in connection with the acquisition, it is currently defending
a number of legal proceedings involving product liability claims arising out of
products manufactured by Peabody prior to the date of the acquisition. These
claims are also covered by insurance. Although the Company has already settled
many of these cases and the Company believes that it can continue to
successfully resolve these product liability claims, there can be no assurance
that the Company can continue to do so. The Company is not presently a party to
any material legal proceedings except as described above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded and quoted on the Nasdaq National
Market ("Nasdaq/NMS") under the trading symbol "MCCL." The following table
sets forth, for the periods indicated, the high and low sales prices for the
Common Stock as reported by Nasdaq/NMS. These per share quotations represent
inter-dealer prices on the Nasdaq/NMS, and do not include retail mark-ups or
commissions.
<TABLE>
<CAPTION>
SALES PRICE
OF
COMMON STOCK
--------------
HIGH LOW
------ ------
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter 7.00 3.375
Second Quarter 5.00 3.50
Third Quarter 6.125 3.875
Fourth Quarter 6.5 4.875
</TABLE>
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<TABLE>
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1997
First Quarter 7.25 4.75
Second Quarter 6.75 4.625
Third Quarter 5.50 4.25
Fourth Quarter 5.0 4.25
</TABLE>
On December 11, 1997, the last reported sales price for the Common Stock
as reported by Nasdaq/NMS was $4.25. As of such date there were approximately
241 holders of record of the Common Stock. The Company believes there are a
substantial number of beneficial owners of the Company's Common Stock whose
shares are held in street name. The Company has never paid any cash dividends.
The payment of dividends by the Company is within the discretion of the Board
of Directors and will depend on the Company's earnings, its capital
requirements and financial condition, as well as other relevant factors. The
Board of Directors does not intend to declare any dividends in the foreseeable
future, but instead intends to retain earnings for use in the Company's
operations.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for each of the Company's last five fiscal years
ended September 30 are as follows:
<TABLE>
<CAPTION>
================================================================================================
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross Sales $91,329,737 $84,680,797 $82,263,202 $79,166,990 $61,794,822
Sales Net of
Customer Discounts $90,061,170 $84,221,810 $81,569,427 $78,540,233 $61,536,111
Net Income $(1,703,780) $2,384,957 $2,462,755 $3,250,996 $2,110,838
Net Earnings Per
Common and Common
Equivalent Share,(1), (2) $(.36) $.50 $.53 $.71 $.51
<CAPTION>
AS OF SEPTEMBER 30,
Working Capital ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total Assets $33,520,003 $32,371,639 $33,868,556 $21,997,601 $10,664,115
Long-Term Debt $87,185,567 $79,425,255 $73,899,197 $58,189,747 $49,562,268
Stockholders' $38,513,490 $34,217,149 $31,170,287 $18,039,869 $7,022,215
Investment $23,804,091 $25,457,255 $22,841,274 $19,359,709 $15,794,210
Weighted Average
Number of Common
Equivalent Shares
Outstanding(1), (2) 4,729,281 4,752,050 4,657,476 4,608,137 4,104,076
Current Ratio 2.63:1 3.18:1 3.37:1 2.49:1 1.55:1
Long Term Debt to
Equity 1.62:1 1.34:1 1.36:1 0.93:1 0.44:1
================================================================================================
</TABLE>
(1) Average number of shares outstanding includes, as appropriate,
adjustments for the effect of common stock equivalents.
(2) Adjusted to reflect a 4-for-3 stock split effective February 28, 1995.
11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
consolidated financial statements, including the notes to them, appearing
elsewhere in this report.
The following table presents, as a percentage of net sales, certain
selected financial data for the Company for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Sales 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales 82.74 79.65 78.35 78.12 78.13
------ ------ ------ ------ ------
Gross Profit 17.26 20.35 21.65 21.88 21.87
Selling, General &
Administrative
Expenses 15.15 13.60 14.52 13.48 15.00
Restructuring and
Impairment Charge 1.95 -- -- -- --
------ ------ ------ ------ ------
Operating Profit .16 6.75 7.13 8.40 6.87
Other Expense 2.37 2.48 2.59 2.19 2.18
------ ------ ------ ------ ------
Income (Loss) Before
Income Taxes (2.21) 4.27 4.54 6.21 4.69
Income Taxes (Benefit) (.32) 1.45 1.55 2.09 1.27
------ ------ ------ ------ ------
Net Income (Loss) (1.89)% 2.82% 2.99% 4.12% 3.42%
====== ====== ====== ====== ======
</TABLE>
The Company manufactures dump truck bodies and a variety of solid waste
handling products including: (i) detachable roll-off waste containers
("roll-off containers") and hydraulically operated roll-off hoist tilt truck
frames used to load, transport and dump roll-off containers ("roll-off
hoists"); (ii) intermodal waste containers designed for interchangeable use on
trucks, trains and ships ("intermodals"); (iii) water-tight and sludge
detachable roll-off waste containers designed to handle wet waste and slurry
type waste, respectively; (iv) compactors, unitized compactor/roll-off
container systems ("unitized compaction systems"), and balers; (v) an
assortment of front, rear and side loading garbage truck bodies; (vi) recycling
truck bodies; and (vii) transfer trailers used to transport compacted solid
waste from transfer stations to landfills or incinerators.
RESULTS OF OPERATIONS
Comparison of year ended September 30, 1997 to year ended September 30, 1996
Net sales for the fiscal year ended September 30, 1997 increased 6.93% to
$90.1 million compared to $84.2 million for the fiscal year ended September 30,
1996. This increase was primarily due to the acquisition of the Alabama
facility in late fiscal 1996 which resulted in an increase in container sales
of approximately $10.0 million. Sales of the Company's other products, with
the exception of balers which declined approximately $1.8 million, remained
essentially stable during Fiscal 1997.
Gross profit as a percentage of sales declined to 17.26% for fiscal 1997
from 20.35% for Fiscal 1996, and a net loss from operations of approximately
$1.7 million was generated. The decline in gross profit and the net loss from
operations were due in large part to a change in the products produced at the
Company's Georgia facility, the decision to close the Epco facility as a result
of slumping baler sales, certain errors in the Company's pricing models which
resulted in the Company setting inadequate prices for its products, and a
slowdown in the capital expenditures of many of the national and regional
hauling companies.
12
<PAGE> 13
In Fiscal 1997, the Company transferred the production of its roll off
containers from Georgia to Alabama and the production of its roll-off hoists
from Michigan to Georgia. In addition, the Company completely redesigned its
roll-off hoists. The time spent by the Company in implementing these changes
combined to create a significant loss in production time at Georgia, causing a
pretax loss of approximately $1.7 million at that facility. These shifts in
production also created certain temporary losses in production time at both the
Alabama and Michigan facilities further reducing margins.
The recycled paper market remained soft throughout the year causing baler
sales to slump. As a result, the Company had a pretax operating loss of
approximately $0.6 million. Because of this slump in baler sales and
management's projection of continued depressed future baler sales, management
determined that it would be unable to profitably produce balers at the Epco
facility. The Company has decided to close the Epco facility and move the baler
production to one of its Ohio facilities which has excess capacity, thereby
eliminating the overhead expenses related to the Epco facility. As a result of
this decision, the Company recognized in Fiscal 1997 a pretax restructuring and
impairment charge of approximately $1.75 million, which consisted of goodwill of
$1.15 million, the write-down of leasehold improvements and other assets of $0.3
million, and costs associated with the closing of the leased facility of $0.3
million.
In Fiscal 1993, Company-wide accounting and manufacturing software was
installed. Initially, the Company focused on utilizing the accounting modules
of the software. It was not until Fiscal 1995 that the Company began to
incorporate the manufacturing modules of the software. During the phase-in of
these manufacturing modules, certain cost factors related primarily to scrap and
other safety margins which the Company historically used in its pricing models
were overlooked causing the Company to set the prices of its goods too low.
This error went undetected until the end of Fiscal 1997, at which time
management performed a detailed evaluation of all pricing models and product
costs, which prompted an increase in the selling prices of most of the
Company's products in the range of 2% to 4%, effective December 1, 1997.
The solid waste hauling industry is currently going through a period of
consolidations and reorganizations. Certain regional companies have merged or
acquired smaller local haulers, and the two largest hauling companies in the
United States are currently undergoing reorganizations after years of rapid
growth. Because of these consolidations and reorganizations, many of the
national and larger regional hauling companies have reduced their capital
expenditures, creating significant downward pressure on the Company's selling
prices and lower margins.
The Company's inventory levels increased to $31.0 million at the end of
Fiscal 1997 from $25.6 million at the end of Fiscal 1996. This increase was
primarily due to the Company's inability to adequately adjust its purchasing
plan in response to the slowdown in capital purchases by certain national
hauling companies discussed above.
Selling, general and administrative expenses increased to 15.15% as a
percentage of net sales during Fiscal 1997 compared to 13.60% for Fiscal 1996.
This increase was attributed primarily to increased selling expenses, increased
bad debt write-offs, and a more conservative product liability accrual. To
strengthen its position in the market as a provider of a complete line of solid
waste hauling equipment, the Company decided to increase its advertising,
expand its trade show activity and hire additional sales people. The Company
believes that this approach will have positive long term effects on the
Company's sales as the consolidations in the solid waste hauling industry
continue. The Company suffered a significant bad debt write-off related to the
failure of a national trailer manufacturer and experienced certain collection
problems with some of the companies involved in the consolidations in the solid
waste hauling industry. The Company does not anticipate further collection
problems related to these consolidations.
Comparison of year ended September 30, 1996 to year ended September 30, 1995
Net sales for the fiscal year ended September 30, 1996 amounted to $84.2
million compared to sales of $81.7 million for the fiscal year ended September
30, 1995, an increase of 2.93%. This increase in Fiscal 1996 sales was due
primarily to an increase of $4.0 million in baler sales resulting from the EPCO
acquisition in late Fiscal 1995. Sales of the Company's other products
remained essentially stable during Fiscal 1996.
Gross profit as a percentage of sales declined to 20.93% for Fiscal 1996
from 22.32% for Fiscal 1995. This decline was due largely to the Company's
inventory reduction program, increased price competition in the solid waste
industry, and certain manufacturing inefficiencies at the Georgia and the
McClain-Ohio facilities. The union organizing efforts in the Georgia facility
(see ITEM 3. LEGAL PROCEEDINGS) caused significant manufacturing inefficiencies
during the past year at that plant, while the manufacturing inefficiencies at
the McClain-Ohio facility resulted from a failure to rapidly adjust its work
force during the first half of the year to compensate for the oversupply of
trailers which began during Fiscal 1995. Management expects that the
reorganization of the Georgia plant will result in an acceptable efficiency
level. The inventory reduction
13
<PAGE> 14
program, begun during March 1996, resulted in a $5.65 million reduction in
inventory levels at September 30, 1996. Management believes that this program
will have a positive effect on both interest expense and the normal carrying
costs associated with inventory during Fiscal 1997.
Selling, general and administrative expenses declined to 13.31% as a
percentage of net sales during Fiscal 1996 compared to 14.19% for Fiscal 1995.
Interest expense increased to 3.59% of net sales during Fiscal 1996 compared to
3.01% during Fiscal 1995. The increase in interest expense resulted from
greater borrowing to fund the Company's increased leasing activities and the
cost of carrying the inventory built up during Fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's required level of working capital during Fiscal 1997 was
consistent with that of Fiscal 1996, while long-term debt continued to increase
due primarily to the Company's increased leasing activity and its on-going
commitment to increased production efficiency by properly maintaining and
upgrading its production facilities and machinery and equipment.
The Company had working capital of approximately $33.5 million at
September 30, 1997, compared to $32.4 million at September 30, 1996. The ratio
of the Company's current assets to its current liabilities was 2.63:1 at
September 30, 1997 compared to 3.18:1 at September 30, 1996. The Company's
cash and short term investments totaled $2.4 million at September 30, 1997.
Cash flows provided by operating activities were $1.1 million during Fiscal
1997. The Company also invested approximately $4.0 million in new machinery
and equipment during Fiscal 1997. The Company's leasing subsidiary financed
approximately $2.6 million of new leases in Fiscal 1997.
The Company has begun preliminary negotiations with its primary lender to
reduce the interest rate currently charged on its borrowed funds and to
restructure the covenants in its various debt agreements. There can be no
assurance that negotiations will result in more favorable debt terms to the
Company. Additionally, the Company currently has set its budget for capital
expenditures in Fiscal 1998 to approximately $2.0 million as compared to $4.1
million in Fiscal 1997. Despite the reduction in the Company's net income
during 1997, management believes that the Company cash flow, together with the
credit available to it under existing, or revised, debt facilities, will
provide it with adequate cash for its working capital needs for the next 12
months.
The Company has several Revolving Credit Facilities with Standard Federal
Bank, a federal savings bank ("Standard"), which provide maximum availability
of $21 million for working capital needs and $1.5 million to fund demonstration
equipment. At September 30, 1997, the Company had borrowed approximately $19.4
million under the working capital line and $0.8 million under the demonstrator
line. Borrowings under the working capital line are limited to 80% of eligible
accounts receivable and 50% of qualified inventory while the demonstrator line
is limited to 85% of related equipment.
The Company also has a Revolving Credit Facility with Standard used to
finance certain of its lease receivables. The agreement calls for a maximum
availability of $10.0 million with borrowings limited to 80% of eligible lease
receivables. At September 30, 1997 approximately $6.3 million had been drawn
on this facility.
All borrowings with Standard are secured by substantially all of the
assets of the Company. In addition, the loans contain various covenants
including those requiring the Company to maintain certain current ratios,
levels of tangible net worth and debt ratios, and restricting the amount of
capital expenditures the Company may make each year. The Company has obtained
waivers from Standard for the Company's non-compliance with certain of such
covenants as of September 30, 1997. The revolving credit agreements bear
interest at prime and expire in March 1999, at which time the Company expects
to obtain renewals on the same or similar terms.
The Company has agreements with two financial institutions to provide
financing for its TRAC (Terminal Rental Adjustment Clause) Leasing Agreements.
The agreements call for maximum availability of $8 million in lease
commitments. Under these facilities, the Company may finance 100% of eligible
lease receivables over the term of the related lease at a fixed interest rate
determined at the time of the lease closing. The notes are secured by the
related lease receivable. At September 30, 1997, approximately $5.0 million
had been drawn on this facility.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are filed herewith under Item
14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
There have been no changes in the Company's independent public accountants
during the past two fiscal years and the Company does not disagree with such
accountants on any matter of accounting principles, practices or financial
statement disclosure.
15
<PAGE> 16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
DATE
SERVICE
NAME AGE OFFICE BEGAN
- --------------------- --- -------------------------------- -----
<S> <C> <C> <C>
Kenneth D. McClain(1) 56 Chairman of the Board, Chief
Executive Officer and President 3/68
Robert W. McClain(1) 61 Senior Vice President, Assistant
Secretary and Director 3/68
Raymond Elliott 63 Director 8/90
Walter J. Kirchberger 62 Director 11/95
Carl Jaworski 54 Secretary 10/72
Mark S. Mikelait 37 Treasurer 9/94
</TABLE>
(1) Kenneth D. McClain and Robert W. McClain are brothers.
KENNETH D. MCCLAIN is Chairman of the Board and President of the Company.
He has been a director and officer of the Company since its inception in March
1968. He also serves as Vice President and a director of Shelby Steel and
President and a director of McClain-Georgia. Mr. McClain is also a director
and the Chairman of the Board of Galion Holding, E-Z Pack, Galion Dump Bodies
and Sales
ROBERT W. MCCLAIN is Senior Vice President and Assistant Secretary of the
Company. He has been a director and officer of the Company since its inception
in March 1968. He also serves as President of Shelby Steel and Vice President
of McClain-Georgia.
RAYMOND ELLIOTT has been a director of the Company since August 1990. He
has been a Vice President of First of America Insurance Group since October
1996. Prior to that he was President and a director of Elliott & Sons
Insurance Agency, Inc. and Michigan Benefit Plans Insurance Agency, Inc. since
1967. Mr. Elliott also serves as a director of the Boys and Girls Club of
Troy, a charitable organization located in Troy, Michigan.
WALTER J. KIRCHBERGER was elected to the Board of Directors in November
1995. Mr. Kirchberger is First Vice President - Research of PaineWebber
Incorporated, and has served in such capacity for more than 25 years. He also
serves as a director of Simpson Industries, Inc.
CARL JAWORSKI has served as Secretary since October 1972. Mr. Jaworski
was also a director and the Treasurer of the Company from October 1972 until
April 1992. Mr. Jaworski also serves as Secretary and a director of Shelby
Steel and Secretary of McClain-Georgia. Mr. Jaworski is the Secretary of E-Z
Pack and a Vice President and Secretary of Sales.
16
<PAGE> 17
MARK S. MIKELAIT was elected Treasurer of the Company in May 1997 and
joined the company in September 1994. Prior to that time Mr. Mikelait, a CPA,
was employed as a Senior Manager by Rehmann Robson, the company's independent
auditors, beginning in November 1985.
The Company is required to identify each person who was an officer,
director or beneficial owner of more than 10% of the Company's registered
equity securities during the Company's most recent fiscal year and who failed
to file on a timely basis reports required by Section 16(a) of the Securities
Exchange Act of 1934. Based solely upon its review of copies of such reports
received by it during or with respect to the fiscal year ended September 30,
1997, the Company believes that all officers, directors and beneficial owners
of more than 10% of the Company's registered equity securities timely filed all
required reports.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth all cash compensation paid to the Chief
Executive Officer of the Company and the only other executive officers whose
total annual salary and bonus from the Company exceeded $100,000 during the
fiscal year ended September 30, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
- ---------------------------------------- ----------------------
Name and Fiscal Salary Options/
Principal Position Year Amount($) SARs(#)
- -------------------- ------- --------- ----------
<S> <C> <C> <C>
Kenneth D. McClain, 1997 $226,885 ---
President/ CEO
1996 275,000 ---
1995 219,675 13.333
Robert W. McClain, 1997 $183,335 ---
Senior Vice President
1996 246,832 ---
1995 216,582 6,666
Carl Jaworski 1997 $107,207 ---
Secretary
1996 --- ---
1995 --- ---
</TABLE>
17
<PAGE> 18
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUES TABLE
<TABLE>
<CAPTION>
Shares
Acquired No. of Unexercised Value of Unexercised
on Exercise Value Options/SARs at In-The-Money Options/SARs at
in 1997 Realized Fiscal Year-End Fiscal Year-End(2)
--------------------------- ---------------------------
Not Not
Exercisable Exercisable(1) Exercisable Exercisable
----------- -------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth D. McClain -0- -0- 26,975 8,879 $ -0- $ -0-
Robert W. McClain -0- -0- 22,824 4,444 $ -0- $ -0-
</TABLE>
(1) Stock options granted November 16, 1995 pursuant to the Company's 1989
Incentive Stock Plan (the "Incentive Plan"). Options must be exercised
by November 15, 2000. Exercise price is $7.31 per share.
(2) Value based on the average of the September 30, 1997 closing bid high and
low price which was $4.63 per share.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive compensation
for serving on the Board or on the Board's committees. Directors who are not
employees of the Company are entitled to a quarterly retainer fee of $3,250, a
$1,000 fee for each regular or special meeting of the Board and a $1,000 fee
for each committee meeting attended on a day other than a regular or special
Board meeting date (collectively, the "Fees"). A Director may elect to
receive payment of the Fees in shares of Common Stock pursuant to the
Company's 1989 Retainer Stock Plan for Non-Employee Directors (the "Retainer
Plan"). To participate in the Retainer Plan, an eligible director must elect
prior to December 31 of each year the percentage, if any, of Fees he desires
to receive in the form of shares of Common Stock. The Common Stock is issued
quarterly during the following calendar year. The number of shares of Common
Stock to be issued to an eligible director is determined by dividing the
dollar amount of the percentage of fees such director elects to receive in
Common Stock by the "fair market value" of Common Stock on the day prior to
the date of issuance of the Common Stock to such director. The term "fair
market value" means the average of the highest and lowest selling price for
the Common Stock as quoted on Nasdaq/NMS for the day prior to the date of
issuance or for the first date prior to the date of issuance for which shares
of Common Stock are quoted, if not quoted on the day prior to the date of
issuance. Any fractional share of Common Stock derived from such calculation
is paid in cash.
The aggregate fair market value of the shares of Common Stock issued to
any eligible director in a given year cannot exceed 100% of such eligible
director's fees. Fees may not be increased more often than annually.
For the fiscal year ended September 30, 1997, 5,466 shares of Common Stock
were issued under the Retainer Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 5,1996, certain information
regarding the beneficial ownership of Common Stock, of: (i) each person known
to the
18
<PAGE> 19
Company to be the beneficial owner of more than five (5%) percent of the Common
Stock; (ii) each director of the Company; (iii) each executive officer listed
in the Summary Compensation Table; and (iv) all executive officers and
directors of the Company as a group, based upon information available to the
Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP(1) SHARES(2)
- ------------------- ------------ -----------
<S> <C> <C>
Kenneth D. McClain
6200 Elmridge Road
Sterling Heights, MI 48310 1,464,339(3) 30.82%
Robert W. McClain
6200 Elmridge Road
Sterling Heights, MI 48310 1,131,246(4) 23.81%
June McClain
6200 Elmridge Road
Sterling Heights, MI 48310 337,178 7.10%
Lisa McClain Pfeil
6200 Elmridge Road
Sterling Heights, MI 48310 310,474(5) 6.53%
Raymond Elliott
290 Town Center
P.O. Box 890
Troy, Michigan 48084 13,182 0.28%
Walter Kirchberger
2301 West Big Beaver Rd., Suite 800
Troy, Michigan 48084 3,570 0.08%
All current executive officers and
directors as a group (6 persons) 2,749,163(6) 57.86%
</TABLE>
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any shares that such person has a right to acquire within 60
days.
(2) Based on 4,751,373 shares of Common Stock issued and outstanding as of
December 11, 1997. In addition, for purposes of computing the percentage
of outstanding shares held by each person or group of persons named above,
any security that such person or persons has or have the right to acquire
within 60 days is also deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person.
(3) Includes 2,430 shares of Common Stock owned by Kenneth D. McClain's wife.
Mr. McClain disclaims beneficial ownership of these shares.
(4) Includes 337,178 shares of Common Stock owned by Robert W. McClain's
wife. Mr. McClain disclaims beneficial ownership of these shares.
(5) Of the shares beneficially owned by Mrs. Pfeil, 305,098 are held of
record by an irrevocable trust for her benefit. Mrs. Pfeil is the
daughter of Kenneth D. McClain.
(6) Includes 80,465 shares which executive officers and directors have the
right to acquire pursuant to stock options exercisable within 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 2, 1993, the Company consummated the purchase of three
facilities which it had been leasing from three different entities controlled
by certain officers and directors of the Company, including its main Sterling
Heights, Michigan facility, its Kalamazoo, Michigan facility and its Macon,
Georgia facility. In each instance, the Company paid the purchase price by
issuing shares of Common Stock and assuming existing mortgages on the
facilities. The purchase prices were determined by the
19
<PAGE> 20
Company's Board of Directors on the basis of independent appraisals of the
facilities. The stock issued was valued at $5.40 per share, based on the
market price for shares of Common Stock as of March 29, 1993, the date that
definitive purchase agreements for the facilities were executed. These shares
are restricted within the meaning of Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), meaning that it cannot be
resold unless registered under the Securities Act, or in a transaction which is
exempt from such registration. The seller of each facility owned the facility
for more than two years before the sale.
In November 1994, in connection with a contemplated public offering of its
Common Stock, the Company agreed to value the shares issued in exchange for
these facilities at a price based on the market value of shares of Common Stock
as of August 2, 1993, the date these transactions were consummated. This
revision gave effect to the fact that the shares had increased in value by
$504,000 from March 29, 1993. Messrs. Kenneth and Robert McClain have agreed
to pay this amount to the Company, with interest at Standard's prime rate, in
five equal principal installments with accrued interest, commencing September
30, 1995.
The Company leases one of its facilities from the mother of Messrs.
Kenneth and Robert McClain. See "Properties." The Company believes that the
terms and conditions of this lease are comparable to those available from an
unrelated party with respect to similar facilities. See also Note 13 of Notes
to Consolidated Financial Statements.
The Company had sales of approximately $560,000 in Fiscal 1997 to McClain
Leasing Corporation, an entity controlled by certain officers and directors of
the Company.
First of America Insurance Group, Inc., an entity that employs Raymond
Elliott, a director of the Company, provided insurance to the Company during
Fiscal 1997. Sales from this entity to the Company aggregated approximately
$1.1 million during Fiscal 1997, for which this entity received fees and
commissions in the approximate amount of $120,000.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed herewith as part of this Form 10-K:
(1) A list of the financial statements required to be filed as a part of
this Form 10-K is shown in the "Index to the Consolidated Financial Statements
and Schedules" filed herewith.
(2) A list of financial statement schedules required to be filed as a part
of this Form 10-K is shown in the "Index to the Consolidated Financial
Statements and Schedules" filed herewith.
(3) A list of the exhibits required by Item 601 of Regulation S-K to be
filed as a part of this Form 10-K is shown on the "Index to Exhibits" filed
herewith.
20
<PAGE> 21
The Company filed a report on Form 8-K during September 1996 regarding
its acquisition of the Demopolis, Alabama facility.
21
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: December 29, 1997 McCLAIN INDUSTRIES, INC.
By:/s/ Kenneth D. McClain
----------------------------------
Kenneth D. McClain, President
(Principal Executive Officer)
And By:/s/ Mark S. Mikelait
------------------------------
Mark S. Mikelait, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: December 29, 1997 /s/ Kenneth D. McClain
-------------------------------
Kenneth D. McClain, Director
Dated: December 29, 1997 /s/ Robert W. McClain
-------------------------------
Robert W. McClain, Director
Dated: December 29, 1997 /s/ Raymond Elliott
-------------------------------
Raymond Elliott, Director
Dated: December 29, 1997 /s/ Walter J. Kirchberger
-------------------------------
Walter J. Kirchberger, Director
22
<PAGE> 23
SECURITIES AND EXCHANGE COMMISSION
- --------------------------------------------------------------------------------
Washington, D. C.
Form 10-K
For Corporations
ANNUAL REPORT
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 and 1995
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
(NAME OF REGISTRANT)
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 24
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report
Consolidated Balance Sheets - September 30, 1997 and 1996
Consolidated Statements of Operations for the years ended September 30, 1997,
1996 and 1995
Consolidated Statements of Stockholders' Investment for the years ended
September 30, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended September 30, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
SCHEDULES
The information required to be submitted in Schedule II - Valuation and
Qualifying Accounts is included in the consolidated financial statements and
notes thereto.
The following schedules are omitted as not required or not applicable:
I, III, IV and V
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
McClain Industries, Inc. and Subsidiaries
Sterling Heights, Michigan
We have audited the accompanying consolidated balance sheets of McClain
Industries, Inc. and Subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of operations, stockholders' investment, and
cash flows for each of the three years in the period ended September 30, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of McClain Industries,
Inc. and Subsidiaries as of September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997 in conformity with generally accepted accounting
principles.
Farmington Hills, Michigan
December 19, 1997
<PAGE> 26
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS (NOTES 8 AND 9) 1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,402,421 $ 1,065,039
Accounts receivable, net of allowance for doubtful accounts
of $500,000 ($600,000 in 1996) (NOTE 4) 16,589,263 18,502,950
Inventories (NOTE 5) 31,011,766 25,577,000
Net investment in sales-type leases, current portion 2,900,000 1,910,000
Prepaid expenses 362,029 191,645
Refundable federal and state income taxes 837,638 -
---------------- ----------------
TOTAL CURRENT ASSETS 54,103,117 47,246,634
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT, NET (NOTE 7) 25,240,624 24,247,933
---------------- ----------------
OTHER ASSETS
Net investment in sales-type leases, net of
current portion (NOTE 6) 5,348,773 3,706,350
Goodwill, net of amortization (NOTE 2) 1,704,132 3,453,772
Other 752,878 390,141
Equipment under construction 36,043 380,425
---------------- ----------------
TOTAL OTHER ASSETS 7,841,826 7,930,688
---------------- ----------------
TOTAL ASSETS $ 87,185,567 $ 79,425,255
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT 1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 14,132,646 $ 10,547,642
Current portion of long-term debt 2,800,000 2,132,201
Accrued expenses (NOTE 10) 2,790,468 2,165,869
Accrued restructuring costs (NOTE 2) 610,000 -
Deferred income (NOTE 6) 250,000 -
Federal and state income taxes - 29,283
---------------- ----------------
TOTAL CURRENT LIABILITIES 20,583,114 14,874,995
Long-term debt, net of current portion (NOTE 9) 38,513,490 34,217,149
Product liability (NOTE 16) 2,151,872 2,775,856
Deferred income taxes (NOTE 11) 2,100,000 2,100,000
---------------- ----------------
TOTAL LIABILITIES 63,348,476 53,968,000
---------------- ----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT
Common stock, no par value, authorized 10,000,000 shares;
issued and outstanding, 4,737,622 shares
(4,693,916 shares in 1996) (NOTE 15) 5,887,486 5,803,870
Retained earnings 18,453,605 20,157,385
Less amount due from officers (NOTE 13) (504,000) (504,000)
---------------- ----------------
TOTAL STOCKHOLDERS' INVESTMENT 23,837,091 25,457,255
---------------- ----------------
$ 87,185,567 $ 79,425,255
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT ================ ================
</TABLE>
<PAGE> 28
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 90,061,170 $ 84,221,810 $ 81,659,427
Cost of sales 74,517,303 67,086,240 63,982,076
------------ ------------ ------------
GROSS PROFIT 15,543,867 17,135,570 17,677,351
Selling, general and administrative expenses 13,647,757 11,450,466 11,854,579
Restructuring and impairment charges (NOTE 2) 1,755,000 - -
------------ ------------ ------------
INCOME FROM OPERATIONS 141,110 5,685,104 5,822,772
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (3,448,867) (3,044,398) (2,478,350)
Interest income 1,215,877 795,519 410,221
Other, net 101,100 178,732 (17,888)
------------ ------------ ------------
OTHER EXPENSE, NET (2,131,890) (2,070,147) (2,086,017)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (1,990,780) 3,614,957 3,736,755
Income taxes (benefit) (NOTE 11) (287,000) 1,230,000 1,274,000
------------ ------------ ------------
NET INCOME (LOSS) $ (1,703,780) $ 2,384,957 $ 2,462,755
============ ============ ============
Net income (loss) per common and
common equivalent shares ($0.36) $0.50 $0.53
============ ============ ============
Weighted average common
and common equivalent shares outstanding 4,729,281 4,752,050 4,657,476
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 29
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK AMOUNT
---------------------------- RETAINED DUE FROM
SHARES AMOUNT EARNINGS OFFICERS TOTALS
------------- ------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at October 1,
1994 4,447,160 $ 4,554,036 $ 15,309,673 $ (504,000) $ 19,359,709
Shares issued 4,981 19,899 - - 19,899
Shares repurchased (98) (1,089) - - (1,089)
Common stock issued in
connection with EPCO
acquisition 135,701 1,000,000 - - 1,000,000
Net income - - 2,462,755 - 2,462,755
------------- ------------- --------------- ---------------- ---------------
Balance at September 30,
1995 4,587,744 5,572,846 17,772,428 (504,000) 22,841,274
Shares issued 137,799 378,024 - - 378,024
Shares repurchased (31,627) (147,000) - - (147,000)
Net income - - 2,384,957 - 2,384,957
------------- ------------- --------------- ---------------- ---------------
Balance at September 30,
1996 4,693,916 5,803,870 20,157,385 (504,000) 25,457,255
Shares issued 56,971 157,695 - - 157,695
Shares repurchased (24,467) (136,968) - - (136,968)
Common stock issued in
connection with EPCO
acquisition 11,202 62,889 - - 62,889
Net loss - - (1,703,780) - (1,703,780)
------------- ------------- --------------- ---------------- ---------------
Balance at September 30,
1997 4,737,622 $ 5,887,486 $ 18,453,605 $ (504,000) $ 23,837,091
============= ============= =============== ================ ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 30
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
-------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,703,780) $ 2,384,957 $ 2,462,755
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 4,893,701 2,550,935 2,179,992
Deferred income taxes - 660,000 375,000
Provision for doubtful accounts 432,511 49,400 205,000
Loss or disposal of plant and equipment 4,032 3,981 22,067
Common stock issued to directors for services 28,494 18,613 11,510
Common stock issued in connection
with EPCO acquisition 62,889 - -
Net changes in operating assets and liabilities
which provided (used) cash, net of effects in
1996 and 1995 of business acquisitions:
Accounts receivable 1,481,176 (3,987,569) (3,067,591)
Inventories (5,434,766) 6,072,095 (7,721,234)
Net investment in sales-type leases (2,632,423) (2,055,386) (1,684,275)
Prepaid expenses and other assets (1,086,661) (300,974) (195,718)
Accounts payable 3,585,004 1,357,333 (1,909,327)
Accrued expenses 1,455,314 (735,656) 277,852
--------------- --------------- ---------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,085,491 6,017,729 (9,043,969)
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment (4,080,499) (1,991,316) (3,995,109)
Payments on liabilities assumed upon the
Galion acquisition (623,984) (1,371,214) (809,902)
Proceeds from sale of plant and equipment - 22,331 30,112
--------------- --------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (4,704,483) (3,340,199) (4,774,899)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 10,078,495 2,139,126 22,927,180
Repayments of long-term debt (5,114,354) (5,137,398) (9,639,955)
Sale of common stock under stock option plan 129,201 359,411 8,389
Repurchase of common stock (136,968) (147,000) (1,089)
--------------- --------------- ---------------
Net cash provided by (used in) financing activities 4,956,374 (2,785,861) 13,294,525
--------------- --------------- ---------------
Net increase (decrease) in cash and
cash equivalents 1,337,382 (108,331) (524,343)
Cash and cash equivalents, beginning of year 1,065,039 1,173,370 1,697,713
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,402,421 $ 1,065,039 $ 1,173,370
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 31
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
McClain Industries, Inc. and its wholly-owned subsidiaries (the
"Company") manufacture and sell a diversified line of dump truck bodies
(assemblies attached to truck frames which are used to carry and dump
solid materials such as dirt, gravel or waste materials) and solid
waste handling equipment (including containers, compactors and baling
equipment, garbage and recycling truck bodies, and transfer trailers)
used for the temporary storage, transportation and compaction of
residential, commercial and industrial waste and recycling materials.
The Company sells its dump truck bodies primarily to truck equipment
dealers and its solid waste handling equipment primarily to
distributors, solid waste handling companies, government agencies,
shopping centers and other large retail outlets principally within the
United States. In addition, the Company provides coiled steel cutting
and warehousing services for its own manufacturing operations in order
to reduce its processed steel expense (one of its major cost
components) and, on a limited basis, for sale to third-party customers.
Principles of Consolidation
The consolidated financial statements include the accounts of McClain
Industries, Inc., and its wholly-owned subsidiaries (Galion Holding
Company, Shelby Steel Processing Co., McClain of Georgia, Inc., McClain
of Ohio, Inc., McClain of Oklahoma, Inc., McClain of Alabama, Inc.,
McClain EPCO, Inc., McClain Group Leasing, Inc., McClain Tube Company,
McClain International FSC, Inc., an international sales corporation,
and McClain Group Sales, Inc., a corporation owned jointly by McClain
Industries, Inc. and the two operating subsidiaries of Galion Holding
Company). In July 1995, the Company acquired and began operating a
wholly-owned subsidiary, McClain EPCO, Inc., a business incorporated in
the State of New York (Note 2). In August 1996, McClain of Alabama,
Inc. was formed and acquired a roll-off container manufacturing
facility (Note 2). All significant intercompany accounts and
transactions have been eliminated.
Concentration Risks
The Company grants trade credit to its customers in the normal course
of business. No collateral is required. Concentrations of credit risk
with respect to trade receivables generally are limited due to the
relatively large number of customers comprising the Company's customer
base and its geographic dispersion. The Company maintains reserves for
potential credit losses and such losses have historically been
insignificant and generally within management's expectations.
Sales to a major customer aggregated $12,896,000 or approximately 14.1%
of total net sales for the year ended September 30, 1997.
The Company currently procures all of its extruded aluminum, which is
used in the manufacture of transfer trailers, from one source. The
Company is unaware of other potential providers of extruded aluminum
which meet the Company's production requirements. The loss of this
supplier could adversely affect the Company's short-term operating
results.
<PAGE> 32
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. Significant estimates
include but are not limited to product liability, goodwill amortization
and the allowance for doubtful receivables.
Income Taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the year plus or minus the change
during the year in deferred tax assets and liabilities. Deferred income
taxes arise from temporary basis differences principally related to
inventory, product liability, and plant and equipment.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents.
Cash in the amount of $1,046,193 at September 30, 1997 is restricted in
accordance with the terms of debt agreements as further discussed in
Note 9.
Sales-Type Leases
The Company, through McClain Group Leasing, Inc., offers lease
financing to certain purchasers of the Company's products. These leases
meet the criteria for classification as capitalized leases and are
accounted for as sales-type leases, whereby sales and gross profit are
recognized at the inception of the lease. Accordingly, an investment is
reflected on the accompanying balance sheets in an amount equal to the
gross minimum lease payments receivable less unearned finance income.
Unearned finance income is amortized in such a manner as to produce a
constant periodic rate of return on the net investment in the lease.
<PAGE> 33
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
Goodwill representing the purchase price in excess of the fair values
of net assets acquired is amortized on a straight line basis. The
amortization period is estimated based upon management's judgements and
generally ranges from 5 to 40 years. Accumulated amortization as of
September 30, 1997 and 1996 was $440,350 and $174,053, respectively.
A significant portion of goodwill attributable to certain business
combinations has arisen in recent years. While management believes that
these costs will be recovered from the profitable operating of these
businesses in the future, a change in the estimates of the applicable
recovery periods or the development of unfavorable business conditions
pertinent to these operations could adversely affect the Company's
operating results (see Note 2).
Earnings Per Common and Common Equivalent Shares
Earnings per common and common equivalent shares were calculated using
the weighted average number of common shares and common stock
equivalents outstanding during the year. The number of common shares
was increased by the number of shares issuable on the exercise of stock
options when the market price of the common stock exceeds the option
price granted. This increase in the number of common shares was reduced
by the number of common shares that were assumed to have been purchased
with the proceeds from the exercise of the stock options; those
purchases were assumed to have been made at the average price of the
common stock during the year.
Fair Values of Financial Instruments
The carrying amount of cash equivalents, accounts receivable and
accounts payable approximate their fair values due to the short-term
maturity of these financial instruments. The carrying amounts of
long-term debt approximate their fair values because the interest rates
are representative of, or change with, market rates.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", which established new standards for computing and
presenting earnings per share ("EPS"). SFAS No. 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods. Early adoption is not permitted, and upon
initial application, all prior period EPS data is required to be
restated. The adoption of SFAS No. 128 is not expected to have a
material effect on the Company's EPS amounts.
<PAGE> 34
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Common Stock Issued to Directors for Services
Common stock is issued from time to time in lieu of cash for services
provided to the Company by Directors of the Company and is recorded as
compensation expense generally at the fair value on the date of
issuance.
Revenue Recognition
Sales are recorded by the Company when the products are delivered to
independent distributors or other customers.
Reclassifications
Certain amounts reported in 1996 and 1995 have been reclassified to
conform to the 1997 presentation.
2. BUSINESS ACQUISITIONS
Container Manufacturing Facility
On August 29, 1996, the Company acquired the Demopolis, Alabama
roll-off container manufacturing facility and related equipment and
properties operated by Waste Management of Alabama, Inc. (Waste), in a
business combination accounted for as a purchase. The Company paid
approximately $5,700,000 in cash at the closing, which was allocated
to the assets received as follows:
Plant, including land $ 1,615,000
Machinery and equipment 1,911,250
Inventories 400,000
Goodwill 1,773,750
--------------
$ 5,700,000
==============
Goodwill resulting from this acquisition is being amortized over five
years.
In connection with this transaction, Waste agreed to use reasonable
commercial efforts to purchase annually from the Company, containers
and related other manufactured products in an amount that is not less
than $25,000,000 in sales per year during the five calendar years
following the closing. In this event, the Company has agreed to pay to
Waste up to $1,200,000 during each year. If Waste purchases less than
$25,000,000 annually, the $1,200,000 amount is to be reduced in
accordance with the terms of the acquisition agreement. The Company
accounts for such payments as sales discounts when and as earned by
Waste. For the year ended September 30, 1997 $400,480 has been
recorded as sales discounts in connection with post-acquisition sales
of $11,613,993 made to Waste pursuant to the agreement.
<PAGE> 35
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
2. BUSINESS ACQUISITIONS (CONTINUED)
McClain of Alabama, Inc. sales amounted to $9,300,000 during the year
ended September 30, 1997.
EPCO
On July 17, 1995, the Company acquired all of the issued and
outstanding common stock of EPCO Manufacturing Corporation, Inc.
("EPCO") in a business combination accounted for as a purchase. EPCO is
a manufacturer of vertical downstroke and closed door horizontal baling
equipment used for processing of cardboard, paper, plastic and
non-ferrous metals in the recycling industry. Concurrent with the
acquisition, EPCO's name was changed to McClain EPCO, Inc., an
enterprise which operates as a wholly-owned subsidiary of McClain
Industries, Inc.
The purchase price of EPCO was $1,000,000 which was paid at closing by
the issuance of 135,701 shares of unregistered common stock valued at
the market price of approximately $7.37 per share, determined for a
period immediately preceding the acquisition date. The purchase price
was significantly in excess of the fair values of the net assets
acquired and such excess was substantially allocated to goodwill,
which is being amortized over fifteen years. Additional consideration
not to exceed $500,000 is payable in additional shares of the
Company's common stock contingent upon EPCO sales exceeding specified
amounts during the three-year period ending on September 30, 1998.
Results of operations of EPCO have been included in the Company's
consolidated financial statements since the date of acquisition. EPCO
sales during the years ended September 30, 1997 and 1996 were
approximately $3,200,000 and $4,729,000, respectively.
Restructuring and Impairment Charges
In September 1997, the Company decided to restructure its baler
operations based upon an evaluation of sales levels to date,
anticipated levels of business in 1998 and beyond, and unsatisfactory
operating results. The plan involves the shift of all baler production
from the Company's facility in Buffalo, New York to its Winesburg, Ohio
plant, the abandonment of the leased premises in Buffalo, and the
transfer of moveable property and equipment to other locations. The
related restructuring and impairment charge of $1,755,000 consists
principally of a writeoff of goodwill of $1,145,000, the writedown of
leasehold improvements and other assets of $310,000, and costs
associated with the abandoned leased facilities of $300,000. After an
income tax benefit of $207,000, which excludes the writeoff of
goodwill not considered to be deductible, these actions reduced
reported operating results by $1,548,000 or $0.33 per share.
<PAGE> 36
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
3. SUPPLEMENTAL CASH FLOWS INFORMATION
Non-cash Investing and Financing Activities
During the years ended September 30, 1997, 1996 and 1995, common stock
valued at $28,494, $18,613 and $11,510, respectively, was issued to
non-employee directors in exchange for services rendered.
During the year ended September 30, 1997, common stock valued at
$62,889 was issued in accordance with the EPCO purchase agreement (Note
2).
During the year ended September 30, 1996, the Company financed
$5,700,000 of the Alabama acquisition by taking out a $5,300,000 term
loan and borrowing $400,000 pursuant to the revolving credit facilities
provided by its principal lender (Note 9).
Non-cash investing and financing transactions during the year ended
September 30, 1995 consisted of the EPCO acquisition and placing into
service certain equipment valued at approximately $426,000, which had
previously been included in other assets.
The Company issued common stock valued at $1,000,000 in connection with
the EPCO acquisition, which is summarized as follows:
Fair value of assets acquired $ 876,000
Goodwill assigned 1,203,000
Liabilities assumed (1,079,000)
--------------
Total consideration exchanged $ 1,000,000
==============
Other Cash Flows Information
Cash paid for interest amounted to $3,223,867 for 1997, $3,044,398 for
1996, and, $2,482,481 for 1995. Cash paid for federal income taxes
amounted to $350,000 for 1997, $1,198,137 for 1996, and $945,314 for
1995.
<PAGE> 37
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
The following is a summary of changes in the allowance for doubtful
accounts for each of the three years in the period ended September 30,
1997:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
------------- -------------- -------------
<S> <C> <C> <C>
Balance, beginning of year $ 600,000 $ 600,000 $ 425,800
Add provision charged
against income 432,500 49,400 205,000
Less uncollectible accounts
written off, net of recoveries (532,500) (49,400) (30,800)
------------- -------------- -------------
Balance, end of year $ 500,000 $ 600,000 $ 600,000
============= ============== =============
</TABLE>
5. INVENTORIES
Inventories
Inventories are stated at the lower of cost or market. The LIFO
(last-in, first-out) method is utilized for certain inventories, while
the FIFO (first-in, first-out) method is utilized for the remaining
inventories. The major components of inventories were as follows
at September 30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
Materials and chassis $ 17,221,766 $ 14,331,000
Work-in-process 6,664,000 6,776,000
Finished goods 7,126,000 4,470,000
---------------- ----------------
$ 31,011,766 $ 25,577,000
================ ================
</TABLE>
<PAGE> 38
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
6. LEASING OPERATIONS
Sales-Type Leases
The Company provides financing contracts for the sales of various
manufactured products to certain of its customers. Such financing is
principally structured in the form of finance leases, typically for a
five-year term, which are accounted for as sales-type leases. The net
investment in these sales-type leases is comprised of the following
amounts at September 30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
Gross minimum lease payments collectible
in monthly installments $ 10,825,166 $ 7,575,657
Less advance lease payments and
deposits received 249,737 210,705
---------------- ----------------
Subtotal 10,575,429 7,364,952
Less unearned finance income 2,326,656 1,748,602
---------------- ----------------
Total net investment in sales-type leases 8,248,773 5,616,350
Current portion 2,900,000 1,910,000
---------------- ----------------
Noncurrent portion $ 5,348,773 $ 3,706,350
================ ================
</TABLE>
Gross minimum lease payments are collectible in the following scheduled
annual amounts for the years succeeding September 30, 1997:
YEAR ENDING
SEPTEMBER 30 AMOUNT
------------ ---------------
1998 $ 3,595,645
1999 3,066,874
2000 2,009,331
2001 1,163,297
2002 740,282
---------------
GROSS MINIMUM AMOUNT COLLECTIBLE $ 10,575,429
===============
<PAGE> 39
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
6. LEASING OPERATIONS (CONTINUED)
Sale-Leaseback Transactions
The Company, through McClain Group Leasing, Inc., has TRAC (Terminal
Rental Adjustment Clause) leasing programs in place with two financial
institutions in order to assist customers in obtaining financing for
certain products delivered by guaranteeing a portion of the residual
values of such products. Distribution of the Company's products in this
manner has been accomplished by (i) selling the products to the
independent financial institution leasing company, (ii) leasing the
products back and providing a specified minimum guaranteed residual
value to the leasing company, and (iii) subleasing the product to the
user customer.
The gross profit from the sale of these products is deferred and
recognized to income in proportion to the related gross rental charged
to expense over the term of the lease arrangement. Rental expense for
the leaseback of the products was $1,212,392 and $316,486 during the
years ended September 30, 1997 and 1996, respectively. As of that date,
minimum scheduled rental payments under these operating lease
arrangements in future years are summarized as follows:
YEAR ENDING
SEPTEMBER 30 AMOUNT
------------ --------------
1998 $ 1,175,000
1999 1,175,000
2000 1,175,000
2001 1,175,000
2002 1,173,660
--------------
GROSS MINIMUM RENTAL PAYMENTS $ 5,873,660
==============
Total residual values guaranteed by the Company under these leasing
arrangements approximates $750,000 as of September 30, 1997.
<PAGE> 40
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Depreciation for
financial reporting purposes is provided primarily using the
straight-line method over the estimated useful lives of the assets.
Accelerated depreciation methods are used for income tax purposes.
Estimated useful lives range from 20 to 40 years for buildings and
improvements, and 3 to 30 years for machinery and equipment and
furniture, fixtures, and vehicles. Expenditures for maintenance and
repairs are charged to expense are incurred, and significant
betterments are capitalized.
Property, plant and equipment consisted of the following amounts as of
September 30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
Land $ 2,281,480 $ 2,233,906
Buildings and improvements 13,673,209 13,447,349
Machinery and equipment 21,584,020 18,835,127
Furniture, fixtures and vehicles 3,931,764 3,631,140
---------------- ----------------
41,470,473 38,147,522
Less accumulated depreciation 16,229,849 13,899,589
---------------- ----------------
Property, plant and equipment, net $ 25,240,624 $ 24,247,933
================ ================
</TABLE>
<PAGE> 41
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
8. LINES OF CREDIT
The Company and certain of its subsidiaries are party to the following
line of credit agreements with financial institutions as of September
30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ---------------
<S> <C> <C>
Revolving lines of credit providing for maximum
availability of up to $21,000,000. Borrowings are
limited to 80% of the eligible accounts receivable and
50% of qualified inventory and are subject to interest at
the bank's prime rate (8.50% at September 30, 1997). $ 19,372,244 $ 15,887,347
Revolving line of credit providing for maximum
availability of up to $1,500,000. Borrowings are limited
to 85% of the cost of demonstrator units and are subject
to interest at the bank's prime rate. 767,530 1,053,000
The above agreements are collateralized by substantially
all the assets of the Company and contain various
covenants requiring the Company to maintain certain
financial ratios. The agreements also prohibit the
Company from incurring additional indebtedness other
than subordinated indebtedness and limit plant and
equipment acquisitions to $4.5 million per fiscal year.
These agreements expire in March 1999, at which time
the Company expects to obtain renewals upon the same
or similar terms.
Line of credit providing for maximum availability
of up to $10,000,000 and $7,500,000 in 1997 and 1996,
respectively. Borrowings are limited to 80% of eligible
lease receivables and are subject to interest at the
bank's prime rate. The agreement is collateralized by
certain equipment leases held by the Company's leasing
subsidiary. This agreement expires in March 1999, at which
time the Company expects to obtain a renewal upon the
same or similar terms. 6,249,290 5,149,620
---------------- ---------------
Total lines of credit borrowings (NOTE 9) $ 26,389,064 $ 22,089,967
================ ===============
</TABLE>
<PAGE> 42
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
9. LONG-TERM DEBT
Long-term debt consisted of the following obligations as of September
30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
--------------- ---------------
<S> <C> <C>
Promissory notes to a bank, collateralized by certain
assets as disclosed in Note 8. The notes are payable in
monthly installments of $160,000 plus interest at rates
ranging from prime to prime plus 1/8% as published
in the Wall Street Journal (effective rates of 8.50% to
8.625% at September 30, 1997), maturing at various
dates through May 2002. $ 7,348,253 $ 11,425,953
Promissory notes to banks, collateralized by
commercial mortgages on certain real estate, payable
in monthly installments of $28,300 plus interest
ranging from the bank prime rate to prime plus 1/4%
(effective rates of 8.50% to 8.75% at September 30,
1997), maturing at various dates through January
2000. 2,351,173 2,833,430
</TABLE>
<PAGE> 43
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
9. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Industrial Revenue Bonds, collateralized by a bank
letter of credit. The bonds are payable in
annual installments of $525,000 through April 2007.
The bonds bear interest, payable monthly, at either
a fixed term, or a variable rate (effective rate of
4.2% at September 30, 1997) as determined by the
bond holder. $ 5,225,000 $ -
Lines of credit borrowings (Note 8) 26,389,064 22,089,967
--------------- ---------------
Total debt 41,313,490 36,349,350
Less current portion 2,800,000 2,132,201
--------------- ---------------
Long-term portion $ 38,513,490 $ 34,217,149
=============== ===============
</TABLE>
Scheduled aggregate principal maturities of long-term debt for years
succeeding September 30, 1997 are presented below:
YEAR ENDING
SEPTEMBER 30 AMOUNT
------------ ----------------
1998 $ 2,800,000
1999 29,328,243
2000 3,769,419
2001 1,853,330
2002 908,853
Thereafter 2,653,645
----------------
TOTAL $ 41,313,490
================
As of September 30, 1997, the Company was in violation of certain
financial covenants contained in the debt agreements. In December 1997
the Company obtained from its principal lender a written waiver of the
lender's rights to accelerate repayment of the debt arising from these
instances of covenant noncompliance and intends to negotiate revised
covenants which are considered more compatible with current operations.
Accordingly, these obligations are classified on the accompanying
consolidated balance sheets based on their terms.
<PAGE> 44
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
10. ACCRUED EXPENSES
Accrued expenses included on the accompanying consolidated balance
sheets consist of the following amounts at September 30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
Compensation $ 577,772 $ 374,385
Vacation and holiday pay 534,953 495,097
Taxes - 221,902
Insurance 514,040 307,822
Commission 622,685 159,755
Other 541,018 606,908
---------------- ----------------
TOTAL $ 2,790,468 $ 2,165,869
================ ================
</TABLE>
11. INCOME TAXES
The provision (benefit) for income taxes for each of the three years in
the period ended September 30, 1997 consists of the following
components:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
------------- --------------- --------------
<S> <C> <C> <C>
Current federal provision (benefit) $ (287,000) $ 570,000 $ 899,000
Deferred provision - 660,000 375,000
------------- --------------- --------------
TOTAL INCOME TAXES (BENEFIT) $ (287,000) $ 1,230,000 $ 1,274,000
============= =============== ==============
</TABLE>
The effective income tax rate on consolidated pre-tax income differs
from the federal statutory rate for the following reasons:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
------------------- -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
------------ ----- ------------- ----- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Provision (benefit) computed
at statutory rate $ (677,000) (34) $ 1,229,000 34 $ 1,270,000 34
Nondeductible expenses 389,000 19 31,000 1 26,000 1
Other 1,000 - (30,000) (1) (22,000) (1)
------------ ----- ------------- ----- -------------- -----
$ (287,000) (15) $ 1,230,000 34 $ 1,274,000 34
============ ===== ============= ===== ============== =====
</TABLE>
<PAGE> 45
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
11. INCOME TAXES (Continued)
The balance of the net deferred income tax liability consists of
temporary basis differences related to the following assets and
liabilities as of September 30:
<TABLE>
<CAPTION>
1 9 9 7 1 9 9 6
---------------- ----------------
<S> <C> <C>
Taxable differences:
Property and equipment $ 2,651,000 $ 2,081,000
Inventory 1,226,000 1,562,000
---------------- ----------------
Gross deferred tax liabilities 3,877,000 3,643,000
---------------- ----------------
Deductible differences:
Product liability 740,000 944,000
Accounts receivable 171,000 204,000
Accrued expenses 727,000 389,000
Goodwill 82,000 -
Alternative minimum tax credit 50,000 -
Other 7,000 6,000
---------------- ----------------
Gross deferred tax assets 1,777,000 1,543,000
---------------- ----------------
NET DEFERRED INCOME TAX LIABILITY $ 2,100,000 $ 2,100,000
================ ================
</TABLE>
The components which comprise gross deferred taxes are predominantly
noncurrent; as such, the entire related net liability is classified as
noncurrent.
12. EMPLOYEE PENSION AND PROFIT SHARING PLANS
The Company and certain subsidiaries have qualified pension and profit
sharing plans covering substantially all union employees. Contributions
to the plans were calculated at an hourly rate as defined in the
various union contracts. The Company also maintains a defined
contribution pension plan qualified pursuant to Section 401(k) of the
Internal Revenue Code for certain union employees and all eligible
non-union employees. The Company makes matching contributions of
specified percentages of participants' compensation. The cost of all of
these plans was $407,739 in 1997, $334,924 in 1996, and $346,368 in
1995.
The Company has an employee stock bonus plan for full time, salaried
and non-union employees. Company contributions are discretionary each
year and are generally limited to 15% of participants' compensation. No
contributions were made for the years ended September 30, 1997, 1996
and 1995.
<PAGE> 46
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
13. RELATED PARTY TRANSACTIONS
Leases
The Company leases an operating facility from the mother of the
President of McClain Industries, Inc. on a month-to-month basis with
annual rentals totaling $42,000 in each of the years ended September
30, 1997, 1996 and 1995.
Waste Stream Programs
In connection with its acquisition of EPCO in July 1995, the Company
entered into a consulting and commission agreement with Waste Stream
Associates ("Waste Stream"), a partnership consisting of certain
stockholders of the Company, to compensate Waste Stream in an amount
equal to 50% of the pre-tax profit derived by EPCO from Waste Stream
Programs, as defined. Such compensation was not significant for the
years ended September 30, 1997, 1996 and 1995.
Note Receivable
The Company's office and operating facility, the Georgia facility and
the Kalamazoo facility were leased from related party partnerships
comprised of officers, directors and employees of McClain Industries,
Inc. On August 2, 1993, the Company acquired these facilities in
exchange for 360,000 shares of common stock. In November 1994, in
connection with an aborted securities offering, the Company agreed to
value these shares at a price based on the market value of such shares
as of August 2, 1993, the date the transactions were consummated. This
revaluation gave effect to the fact that the shares increased in value
by $504,000 from March 29, 1993, the date the definitive agreements for
the transactions were executed by the parties, to August 2, 1993. The
Company's principal shareholders have agreed to reimburse that amount
to the Company. A letter agreement was executed calling for equal
annual principal payments to be received by the Company over a
five-year period beginning on September 30, 1995, plus interest at the
Company's cost of funds, which approximates the prime rate.
Other
Raymond Elliott, a director of the Company, serves as a Vice-President
of First of America Insurance Group, Inc. This entity provided
insurance at a cost of approximately $1,093,000, $1,200,000 and
$1,300,000 to the Company during the years ended September 30, 1997,
1996 and 1995, respectively. These entities received fees and
commissions in connection with these transactions of approximately
$117,000, $120,000 and $129,000, respectively.
<PAGE> 47
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
13. RELATED PARTY TRANSACTIONS (Continued)
Product Sales
The Company had product sales of approximately $560,000, $660,000 and
$239,000, during the years ended September 30, 1997, 1996 and 1995,
respectively, to a business controlled by the President of McClain
Industries, Inc.
14. STOCK BASED COMPENSATION PLANS
The Company maintains the 1989 Retainer Stock Plan for Non-employee
Directors and the McClain 1989 Incentive Stock Plan.
Retainer Stock Plan
The Retainer Stock Plan as adopted calls for reserving 133,333 shares
of the Company's no par common stock and allows non-employee directors
the option to receive payment of all or a portion of their directors
fees in the form of shares of common stock at the fair market value of
such shares on the date of issuance. For the years ended September 30,
1997, 1996 and 1995 the Company issued 5,466, 3,555 and 1,565, shares,
respectively, of its common stock to such directors in exchange for
services rendered.
Incentive Stock Plan
The Incentive Stock Plan as adopted calls for reserving 1,333,333
shares of the Company's no par common stock for the granting of stock
awards to officers and key management personnel. The awards consist of
incentive stock option (ISO) or non-qualified options, stock
appreciation rights (SARs) and restricted share rights, and may be
granted at the following prices at the date of grant: incentive stock
options must be equal to or greater than the fair market value of
common stock; stock appreciation rights and restricted share rights may
be issued at a price which may not be less than 50% of the price of the
common stock. Shares which have been issued under this plan vest in
annual installments from the date of grant, over a three year period,
and expire within 5 years from the date of grant.
<PAGE> 48
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
14. STOCK BASED COMPENSATION PLANS (Continued)
The following table presents a summary of stock option activity for
each of the years in the three year period ended September 30, 1997:
<TABLE>
<CAPTION>
SHARES UNDER OPTION
----------------------------------------------
1 9 9 7 1 9 9 6 1 9 9 5
------------- ------------ ------------
<S> <C> <C> <C>
Outstanding, beginning of year 227,896 373,251 326,000
Weighted average excercise price $ 3.67 $ 4.06 $ 3.72
Granted during the year 15,000 - 50,667
Weighted average excercise price $ 5.75 - $ 7.33
Canceled during the year - (11,111) -
Weighted average excercise price - $ 2.69 -
Exercised during the year (51,505) (134,244) (3,416)
Weighted average excercise price $ 2.63 $ 2.68 $ 2.54
Outstanding, end of year 191,391 227,896 373,251
Weighted average excercise price $ 5.59 $ 3.67 $ 4.06
Eligible, end of year 69,915 172,117 252,166
Weighted average excercise price $ 3.24 $ 3.33 $ 2.92
</TABLE>
The Company has elected to continue to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its
employee stock options issued pursuant to the 1989 Incentive Stock
Plan. Under APB 25, because the exercise price of employee stock
options equals the market price of the underlying common stock on the
date of grant, no compensation expense is recorded in the accompanying
consolidated statements of operations. Had stock option compensation
expense been determined pursuant to the methodology provided in
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", the proforma effect on results of
operations for the year ended September 30, 1997 would have been an
increase in the Company's loss per share of less than one cent per
share.
15. COMMON STOCK REPURCHASES
In December 1995, the Board of Directors authorized the Company to
repurchase from time to time on the open market up to 100,000 shares of
the Company's common stock. During the year ended September 30, 1997,
the Company repurchased 24,467 shares at prices ranging from $5.32 to
$5.75 per share. During the year ended September 30, 1996, the Company
repurchased 31,627 shares at prices ranging from $4.24 to $4.75 per
share.
<PAGE> 49
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
16. COMMITMENTS AND CONTINGENCIES
Product Liability
As a manufacturer of industrial products, the Company is occasionally
subjected to various product liability claims. Such claims typically
involve personal injury or wrongful death associated with the use or
misuse of the Company's products. The Company is currently defending
certain legal proceedings involving allegations of product liability
relating to products manufactured and sold by the Company.
Historically, such claims have not resulted in material losses to the
Company in any one year, and the Company maintains product liability
insurance in amounts believed by management to be adequate.
Galion Holding Company (GHC), pursuant to an indemnification it
provided to the seller in connection with GHC's July 1992 acquisition
of the Galion operations, is currently defending a number of legal
proceedings involving product liability claims arising out of products
manufactured and sold prior to the acquisition. These claims are
covered by insurance and many of these cases have been settled.
A liability to provide for these product claims was established at the
acquisition date. Since many of the cases have been settled and
insurance coverage exists, management believes that the ongoing costs
to defend these claims will not exceed the amount accrued on the
accompanying consolidated balance sheet at September 30, 1997.
Environmental Matters
The Company's operations are subject to extensive federal, state and
local regulation under environmental laws and regulations concerning,
among other things, emissions into the air, discharges into the waters
and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials. Inherent in manufacturing
operations and in owning real estate is the risk of environmental
liabilities as a result of both current and past operations, which
cannot be predicted with certainty. The Company has incurred and will
continue to incur costs, on an ongoing basis, associated with
environmental regulatory compliance in its business.
Labor Union Matters
Certain of the Company's hourly employees are represented by various
labor unions pursuant to collective bargaining agreements which expire
between September 1999 and June 2000.
<PAGE> 50
MCCLAIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
16. COMMITMENTS AND CONTINGENCIES (Continued)
On February 23, 1995, the National Labor Relations Board (NLRB)
conducted an election in response to a petition filed by a local union
(Union) to represent the hourly employees at the Company's Macon,
Georgia plant. The ballots of certain employees were challenged as
ineligible. The Union filed charges asserting that the Company
committed various unfair labor practices which affected the election
results and that the challenged ballots should be counted. On October
17, 1996 the NLRB upheld the unfair labor practice charges and on
November 5, 1996 the NLRB determined that the results of the election
were in favor of the Union. Management, based upon the opinion of
counsel, does not believe a final decision upholding the Union
certification or the unfair labor practice charges would have a
material adverse effect on the Company.
Other Legal Matters
The Company is also involved in routine litigation incidental to its
business. Management believes that the resolution of these matters will
not materially affect the consolidated financial statements.
Employment Agreement
In connection with the EPCO acquisition on July 17, 1995, the Company
entered into a three-year employment agreement with the president of
EPCO, which provides for a base salary of $100,000 annually. As an
inducement for the Company to enter into the employment agreement, the
officer agreed to not compete with the Company's business for a period
of three years after employment is terminated, or five years from the
date of the agreement, whichever is longer.
17. FOURTH QUARTER ADJUSTMENTS
During the quarter ended September 30, 1997, the Company recorded
various adjustments of approximately $2,500,000 principally related to
the valuation of inventories and lease accounting. The aggregate effect
of such adjustments was to decrease net income for the fourth quarter
by approximately $1,650,000 ($0.35 per share). During the quarter ended
September 30, 1995, the Company recorded various adjustments of
approximately $1,100,000 principally related to the valuation of
inventories and carrying values of certain liabilities. The aggregate
effect of such adjustments was to decrease net income for the fourth
quarter by approximately $720,000 ($0.15 per share).
* * * * * *
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
3.1 Articles of Incorporation of McClain Industries, Inc. (7)
3.2 Bylaws of McClain Industries, Inc. (1)
10.1 McClain Industries, Inc. 1989 Incentive Stock Plan (2)
10.2 McClain Industries, Inc. 1989 Retainer Stock Plan for Non-
Employee Directors (2)
10.3 Land Contract dated November 12, 1991 between Robert and Helen J. Warzyniak
and Violet and Walter H. Urban, as Seller, and the Company, as Purchaser (3)
10.4 Agreement of Purchase and Sale dated July 20, 1992 by and between Peabody
International Corporation, as Seller, and Galion Holding Company, as Buyer (4)
10.5 Manufacture and License Agreement dated as of November 2, 1992,
between Galion Dump Bodies, as Licensor, and the Company, as Licensee (6)
10.6 Loan documents dated as of March 1, 1993, between the Company and Galion Dump Bodies and
E-Z Pack (6)
10.7 Guaranty Fee Agreement dated as of March 2, 1993, between Galion Holding and the Company (6)
10.8 Loan documents dated June 29, 1993, between Standard Federal Bank and Galion
Holding, E-Z Pack and Galion Dump Bodies (6)
10.9 Term Note dated January 18, 1994 between Trust Company Bank of Middle Georgia, N.A. and
the Company (7)
10.10 Loan Agreement, dated September 15, 1994, between Standard Federal
Bank and the Company, McClain-Georgia, Shelby Steel, Quality Tube and McClain-Ohio (7)
10.11 Loan Agreement, dated September 15, 1994, between Standard Federal Bank and
Galion Holding, E-Z Pack and Galion Dump Bodies (7)
10.12 Promissory Note (Term Loan), dated September 15, 1994, between Standard Federal Bank,
Galion Holding, E-Z Pack and Galion Dump Bodies (7)
10.13 Promissory Note (Line of Credit), dated September 15, 1994, between Standard Federal
Bank, Galion Holding, E-Z Pack and Galion Dump Bodies (7)
</TABLE>
50
<PAGE> 52
<TABLE>
<S> <C> <C>
10.14 Purchase Agreement, dated as of March 30, 1993, between the Company and Group
Properties III (7)
10.15 Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties (7)
10.16 Purchase Agreement, dated as of March 30, 1993, between the Company and Group Properties
of Georgia (7)
10.17 Letter Agreement, dated November 17, 1994, among the Company, Kenneth D. McClain and
Robert W. McClain (7)
10.18 Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and Financing
Statement Dated February 6, 1995, between Standard Federal Bank and the Company (8)
10.19 Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and Financing
Statement Dated February 6, 1995, between Standard Federal Bank and the Company (8)
10.20 Loan Agreement Between Standard Federal Bank and the Company, McClain-Georgia,
Shelby Steel, Quality Tubing and McClain-Ohio dated February 6, 1995 (8)
10.21 Loan Agreement between Standard Federal Bank and Galion Holding, E-Z Pack and
Galion Dump Bodies dated February 6, 1995 (8)
10.22 Promissory Note (Line of Credit with Term Provisions) (First Line of Credit) dated
February 6, 1995 between Standard Federal Bank, Galion Holding, E-Z Pack and
Galion Dump Bodies (8)
10.23 Promissory Note (Line of Credit with Term Provisions) (Second Line of Credit) dated
February 6, 1995, between Standard Federal Bank, Galion Holding, E-Z Pack and Galion
Dump Bodies (8)
10.24 Second Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals
(Secures Future Advances) dated February 6, 1995, between Standard Federal Bank and
E-Z Pack (8)
10.25 Second Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals
(Secures Future Advances) dated February 6, 1995, between Standard Federal Bank and
Galion Dump Bodies (8)
10.26 First Amendment to Loan Agreement Between Standard Federal Bank, the Company,
McClain-Georgia, Shelby Steel, Quality Tubing and McClain-Ohio Dated February 16, 1995 (8)
10.27 Amended and Restated Promissory Note (Line of Credit) dated February 16, 1995,
between Standard Federal Bank, Galion Holding, E-Z Pack and Galion Dump Bodies (8)
</TABLE>
51
<PAGE> 53
<TABLE>
<S> <C> <C>
10.28 First Amendment to Loan Agreement between Standard Federal Bank, Galion Holding, E-Z
Pack and Galion Dump Bodies dated February 16, 1995. (8)
10.29 Amended and Restated Promissory Note (Line of Credit) dated May 5, 1995, between
Standard Federal Bank, Galion Holding, E-Z Pack and Galion Dump Bodies (8)
10.30 Second Amendment to Loan Agreement between Standard Federal Bank, Galion Holding,
E-Z Pack and Galion Dump Bodies dated May 5, 1995 (8)
10.31 Second Amendment to Loan Agreement between Standard Federal Bank, the Company,
McClain-Georgia, Shelby Steel, Quality Tubing, McClain-Ohio and EPCO dated June 22, 1995 (8)
10.32 Fifth Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals
(Secures Future Advances) between Standard Federal Bank and Galion Dump Bodies dated
June 22, 1995. (8)
10.33 Third Amendment to Loan Agreement between Standard Federal Bank, Galion Holding,
E-Z Pack, Galion Dump Bodies and McClain Group Sales of Florida dated June 22, 1995. (8)
10.34 Third Amended and Restated Promissory Note (Line of Credit) dated June 22, 1995,
between Standard Federal Bank, Galion Holding, E-Z Pack, Galion Dump Bodies and McClain
Group Sales of Florida (8)
10.35 Security Agreement dated June 22, 1995, between Standard Federal Bank and McClain
Group Sales of Florida (8)
10.36 Fifth Amendment to Open-End Commercial Mortgage and Assignment of Lease and Rentals
(Secures Future Advances) dated June 22, 1995, between Standard Federal Bank and E-Z Pack (8)
10.37 Certification of Resolution of Corporation Authority to Borrow and Pledge Collateral
dated June 22, 1995, between Standard Federal Bank and McClain Group Sales of Florida (8)
10.39 Certification of Resolution of Corporation Authority to Borrow and Pledge Collateral
dated July 18, 1995, between Standard Federal Bank and EPCO (8)
10.40 Security Agreement dated July 18, 1995, between Standard Federal Bank and EPCO (8)
10.41 Amendment Agreement Promissory Note (Line of Credit) dated September 25, 1995,
between Standard Federal Bank, Galion Holding, E-Z Pack, Galion Dump Bodies and McClain
Group Sales of Florida (8)
</TABLE>
52
<PAGE> 54
<TABLE>
<S> <C> <C>
10.42 Second Amendment Agreement Promissory Note (Line of Credit with Term Provisions)
(First Line of Credit) dated September 25, 1995, between Standard Federal Bank,
Galion Holding, E-Z Pack, and Galion Dump Bodies (8)
10.43 Third Amendment Agreement Promissory Note (Line of Credit with Term Provisions)
(Second Line of Credit) dated September 25, 1995, between Standard Federal Bank, Galion
Holding, E-Z Pack, and Galion Dump Bodies (8)
10.44 Amendment Agreement Promissory Note (Term Loan) dated September 25, 1995, between
Standard Federal Bank, Galion Holding, E-Z Pack, Galion Dump Bodies and McClain Group
Sales of Florida (8)
10.45 First Amended and Restated Loan Agreement Between Standard Federal Bank, Galion Holding,
E-Z Pack, Galion Dump Bodies and McClain Group Sales of Florida dated October 2, 1995 (8)
10.46 Amended and Restated Loan Agreement dated July 17, 1996, between Standard Federal
Bank and the Company, McClain-Georgia, Shelby Steel, Tube, McClain-Ohio and EPCO. (9)
10.47 Promissory Note (Line of Credit) dated July 17, 1996, between Standard Federal Bank and
the Company, McClain-Georgia, Shelby Steel, Tubing, McClain-Ohio and EPCO. (9)
10.48 Promissory Note (Term Loan) dated July 17, 1996, between Standard Federal Bank and
the Company, McClain-Georgia, Shelby Steel, Tubing, McClain-Ohio and EPCO. (9)
10.49 Promissory Note (Line of Credit with Term Provisions) dated July 17, 1996, between
Standard Federal Bank and the Company, McClain-Georgia, Shelby Steel, Tubing,
McClain-Ohio and EPCO. (9)
10.50 Third Amended and Restated Promissory Note (Line of Credit) between Standard
Federal Bank, Galion Holding, E-Z Pack, Galion Dump Bodies and McClain Group
Sales of Florida. (9)
10.51 Promissory Note (Line of Credit) between Standard Federal Bank, Galion Holding,
E-Z Pack, Galion Dump Bodies and McClain Group Sales of Florida. (9)
10.52 Loan Agreement dated July 17, 1996, between Standard Federal Bank and Leasing (9)
10.53 Promissory Note (Line of Credit) dated July 17, 1996, between Standard Federal Bank
and Leasing (9)
10.54 Loan Agreement dated August 29, 1996, between Standard Federal Bank and the Company,
McClain-Georgia, Shelby Steel, Tubing, McClain-Ohio, EPCO and McClain-Alabama. (9)
</TABLE>
53
<PAGE> 55
<TABLE>
<S> <C> <C>
10.55 Promissory Note (Term Loan) dated July 17, 1996, between Standard Federal Bank
and the Company, McClain-Georgia, Shelby Steel, Tubing, McClain-Ohio and EPCO. (9)
10.56 Commercial Mortgage, Assignment of Leases and Rents, Security Agreement and
Financing Statement dated August 29, 1996, between Standard Federal Bank and
McClain-Alabama. (9)
10.57 Security Agreement dated August 29, 1996, between Standard Federal Bank and McClain-Alabama. (9)
10.58 Master Lease Agreement dated July 15, 1995 between Fifth Third Leasing Company and Leasing. (9)
10.59 Master Lease Agreement dated May 17, 1996 between NBD Bank and Leasing. (9)
10.60 Term Note dated January 17, 1997 between Trust Company Bank of Middle Georgia and the
Company 56
10.61 Amended Loan Agreement dated April 28, 1997 between Standard Federal Bank and
the Company, McClain-Georgia, Shelby Steel, Tube, McClain-Ohio, Epco and Alabama 57
10.62 Promissory Note (Line of Credit) dated April 28, 1997 between Standard Federal Bank
and the Company, McClain-Georgia, Shelby Steel, Tube, McClain-Ohio, Epco and Alabama 63
10.63 Promissory Note (Line of Credit with Term Provisions, Second Equipment Line of Credit)
dated April 28, 1997 between Standard Federal Bank and the Company, McClain-Georgia,
Shelby Steel, Tube, McClain-Ohio, Epco and Alabama 69
10.64 Third Amended and Restated Promissory Note (Line of Credit) dated April 28, 1997
between Standard Federal Bank and Galion Holding, E-Z Pack, Galion Dump Bodies and McClain Group
Sales of Florida 76
10.65 Promissory Note (Line of Credit) dated April 28, 1997 between Standard Federal Bank and Galion
Holding, E-Z Pack, Galion Dump Bodies and McClain Group Sales of Florida 83
10.66 Preliminary Placement Memorandum dated April 17, 1997 - The Industrial Development Board of
the City of Demopolis Industrial Development Revenue Bonds Series 1997 (McClain of Alabama,
Inc. Project) 90
10.67 Lease Agreement dated April 1, 1997 between the Industrial Development Board of the City
of Demopolis and McClain of Alabama 139
10.68 Trust Indenture Agreement dated April 1, 1997 between the Industrial Development Board of
the City of Demopolis and LaSalle National Bank 190
</TABLE>
54
<PAGE> 56
<TABLE>
<S> <C> <C>
10.69 Bond Guaranty Agreement dated April 1, 1997 between LaSalle National Bank and
McClain-Alabama 291
10.70 Mortgage, Assignment of Leases and Security Agreement dated April 1, 1997
from the Industrial Development Board of the City of Demopolis and McClain-Alabama to
Standard Federal Bank 302
10.71 Standard Federal Bank Irrevocable Letter of Credit dated April 23, 1997 345
10.72 Placement Agency Agreement dated April 23, 1997 - The Industrial Development Board of
the City of Demopolis Industrial Development Revenue Bond Series 1997 (McClain of Alabama,
Inc. Project) 394
10.73 Remarketing Agreement dated April 23, 1997 among LaSalle National Bank, The Industrial
Development Board of the City of Demopolis and McClain of Alabama, Inc. 427
21 List of Subsidiaries (9)
27 Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/89
(2) Incorporated by reference to the Company's Registration Statement
(33-29613)
(3) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/91
(4) Incorporated by reference to the Company's Form 8-K dated 7/27/92
(5) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/92
(6) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/93
(7) Incorporated by reference to the Company's Registration Statement on
Form S-2 (33-84562)
(8) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/95
(9) Incorporated by reference to the Company's Form 10-K f/y/e 9/30/96
55
<PAGE> 1
EXHIBIT 10.60
[SUNTRUST LOGO] TERM NOTE
SunTrust Bank, Middle Georgia, N.A. P.O. Box 4248 Macon, Georgia 31208
Date JANUARY 17, 1997
The "Bank" referred to in this Note is SunTrust Bank, Middle Georgia, N.A.,
P.O. Box 4248, Macon, Georgia 31208.
The obligor promises to pay to the order of Bank the principal sum of
$**580,000.00**. The obligor will also pay interest from date until maturity at
the Note Rate specified below. Should the obligor fail for any reason to pay
this note in full on the maturity date or on the date of acceleration of
payment, the obligor further promises to pay interest on the unpaid amount from
such date until the date of final payment at a Default Rate equal to the Note
Rate plus 4%. Should legal action or an attorney at law be utilized to collect
any amount due hereunder, the obligor further promises to pay all costs of
collection, including 15% of such unpaid amount as attorneys' fees. All amounts
due hereunder may be paid at any office of the Bank.
The Note Rate hereon shall be THE PRIME RATE OF BANK FROM TIME TO TIME
IN EFFECT, PLUS .25% THE NOTE RATE SHALL CHANGE ON EACH DAY BANK CHANGES ITS
PRIME RATE. If not stated above, the Note Rate in effect on the date this note
is executed is 8.50%.
The amount of interest accruing and payable hereunder shall be calculated by
multiplying the principal balance outstanding each day by 1/360th of the Note
Rate on such day and adding together the daily interest amounts.
The principal and interest hereunder shall be payable as follows:
THE PRINCIPAL SHALL BE PAYABLE IN 35 CONSECUTIVE MONTHLY PAYMENTS OF
FOUR THOUSAND DOLLARS AND NO/100** ($4,000.00**) EACH ON THE 18TH DAY OF
EACH MONTH WITH THE FIRST SUCH PAYMENT BEING DUE AND PAYABLE ON FEBRUARY
18, 1997 ACCRUED BUT UNPAID INTEREST ON THE UNPAID PRINCIPAL BALANCE
SHALL BE PAYABLE MONTHLY ON THE SAME DAY AS THE PRINCIPAL PAYMENTS, WITH
THE ENTIRE BALANCE OF PRINCIPAL AND INTEREST BEING DUE AND PAYABLE ON
JANUARY 17, 2000. ALL PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE
APPLIED FIRST TO ACCRUED BUT UNPAID INTEREST WITH THE REMAINDER, IF ANY,
TO PRINCIPAL.
If any payment of principal or interest provided for herein remains
wholly or partially unpaid for more than fifteen (15) days after such payment
was due and payable, then obligor agrees to pay a late fee of five percent (5%)
of such payment, not to exceed the sum of fifty dollars ($50.00).
As security for the payment of this and any other liability of any
obligor to the holder, direct or contingent, irrespective of the nature of such
liability or the time it arises, each obligor hereby grants a security interest
to the holder in all property of such obligor in or coming into the possession,
control or custody of the holder, or in which the holder has or hereafter
acquires a lien, security interest, or other right. Upon default, holder may,
without notice, immediately take possession of and then sell or otherwise
dispose of the collateral, signing any necessary documents as obligor's
attorney in fact, and apply the proceeds against any liability of obligor to
holder. Upon demand, each obligor will furnish such additional collateral, and
execute any appropriate documents related thereto, deemed necessary by the
holder for its security. Each obligor further authorizes the holder, without
notice, to set-off any deposit or account and apply any indebtedness due or to
become due from the holder to the obligor in satisfaction of any liability
described in this paragraph, whether or not matured. The holder may, without
notice, transfer or register any property constituting security for this note
into its or its nominee name with or without any indication of its security
interest therein.
This note shall immediately mature and become due and payable, without
notice or demand, upon the filing of any petition or the commencement of any
proceeding by any Debtor for relief under bankruptcy or insolvency laws, or any
law relating to the relief of debtors, readjustment of indebtedness, debtor
reorganization, or composition or extension of debt. Furthermore, this note
shall, at the option of the holder, immediately mature and become due and
payable, without notice or demand, upon the happening of any one or more of the
following events: (1) nonpayment on the due date of any amount due hereunder;
(2) failure of any Debtor to perform any other obligation to the holder; (3)
failure of any Debtor to pay when due any amount owed another creditor under a
written agreement calling for the payment of money; (4) the death or
declaration of incompetence of any Debtor; (5) a reasonable belief on the part
of the holder that any Debtor is unable to pay his obligations when due or is
otherwise insolvent; (6) the filing of any petition or the commencement of any
proceeding against any Debtor for relief under bankruptcy or insolvency laws,
or any law relating to the relief of debtors, readjustment of indebtedness,
debtor reorganization, or composition or extension of debt which petition or
proceeding is not dismissed within 60 days of the date of filing thereof; (7)
the suspension of the transaction of the usual business of any Debtor, or the
dissolution, liquidation or transfer to another party of a significant portion
of the assets of any Debtor; (8) a reasonable belief on the part of the holder
that any Debtor has made a false representation or warranty in connection with
any loan by or other transaction with any lender, lessor or other creditor; (9)
the issuance or filing of any levy, attachment, garnishment, or lien against
the property of any Debtor which is not discharged within 15 days; (10) the
failure of any Debtor to satisfy immediately any final judgment, penalty or
fine imposed by a court or administrative agency of any government; (11)
failure of any Debtor, after demand, to furnish financial information or to
permit inspection of any books or records; (12) any other act or circumstance
leading the holder to deem itself insecure.
The failure or forebearance of the holder to exercise any right
hereunder, or otherwise granted by law or another agreement, shall not affect
or release the liability of any obligor, and shall not constitute a waiver of
such right unless so stated by the holder in writing. The holder may enforce
its rights against any Debtor or any property securing this note without
enforcing its rights against any other Debtor, property, or indebtedness due or
to become due to any Debtor. Each obligor agrees that the holder shall have no
responsibility for the collection or protection of any property securing this
note, and expressly consents that the holder may from time to time, without
notice, extend the time for payment of this note, or any part thereof, waive
its rights with respect to any property or indebtedness, and release any other
Debtor from liability, without releasing such obligor from any liability to the
holder. This note is governed by Georgia law.
The term "obligor" means any party or other person signing this note,
whether as maker, endorser or otherwise. the term "Prime Rate", if used herein,
shall mean that rate of interest designated by Bank from time to time as its
"Prime Rate", which rate is not necessarily the Bank's best rate. Each obligor
agrees to be both jointly and severally liable hereon. The term "holder" means
Bank and any subsequent transferee or endorsee hereof. The term "Debtor" means
any obligor or any guarantor of this note.
PRESENTMENT AND NOTICE OF DISHONOR ARE HEREBY WAIVED BY EACH OBLIGOR
ADDRESS NAME: MCCLAIN INDUSTRIES, INC.
6200 ELMRIDGE ROAD BY: /s/ Kenneth D. McClain
- ---------------------------- ----------------------------------
STERLING HEIGHTS, MI 48313 Kenneth D. McClain, President
- ---------------------------- ----------------------------------
- ----------------------------
- ---------------------------- NAME:
- ---------------------------- ----------------------------------
- ----------------------------
- ---------------------------- ---------------------- ----------
Credit To Treasurer Check Number Center Code
5783526081 18 $ $ C. FREYERMUTH 253
- -------------- ------- -------- --------- ------------- --------------
Account Number Renewal Increase Reduction Officer Name Officer Number
White - Bank Copy Yellow - Customer Copy Pink - File Copy
<PAGE> 1
EXHIBIT 10.61
Loan No. ____________
AMENDMENT AGREEMENT
(Loan Agreement)
THIS AMENDMENT AGREEMENT is made and delivered this 28th day of
April, 1997, by and between McClain Industries, Inc., a Michigan
corporation, McClain of Georgia, Inc., a Georgia corporation, Shelby Steel
Processing Company, a Michigan corporation, McClain Tube Company d/b/a Quality
Tube, a Michigan corporation, McClain Industries of Ohio, Inc., a Michigan
corporation, McClain Epco, Inc., a New York corporation, and McClain of
Alabama, Inc., a Michigan corporation (collectively, "Borrowers"), whose
address/principal office is 6200 Elmridge, Sterling Heights, Michigan 48310;
Galion Holding Company, a Michigan corporation, McClain E-Z Pack, Inc., a
Michigan corporation, Galion Dump Bodies, Inc., a Michigan corporation, and
McClain Group Sales of Florida, Inc., a Florida corporation (collectively,
"Guarantors"), whose address is 6200 Elmridge, Sterling Heights, Michigan
48310, and Standard Federal Bank, a federal savings bank ("Standard Federal"),
whose address is 2600 West Big Beaver Road, Troy, Michigan 48084.
RECITALS:
A. The Borrowers entered into an Amended and Restated Loan
Agreement, dated July 17, 1996, as modified August 29, 1996 (the "Loan
Agreement"), with Standard Federal, pursuant to which Standard Federal has made
available to the Borrowers a line of credit, as evidenced by a Promissory Note
(Line of Credit), dated July 17, 1996, as amended and renewed (the "Line of
Credit Note"), and made a term loan to the Borrowers, as evidenced by a
Promissory Note (Term Loan), dated July 17, 1996 (the "Term Note"), and a line
of credit with term provisions, as evidenced by a Promissory Note (Line of
Credit with Term Provisions), dated July 17, 1996 (the "Line of Credit with
Term Note").
B. The Loan Agreement, Line of Credit Note, Term Note and Line of
Credit with Term Note (together with all other documents executed in
conjunction therewith being herein referred to as the "Loan Documents") are
secured by a Security Agreement, dated September 15, 1994, and a Security
Agreement, dated July 19, 1995 (the "Security Agreements") and an Assignment of
Policy as Collateral Security, dated July 15, 1996 (the "Life Policy
Assignment"), and are supported by a Guaranty, dated July 17, 1996 (the
"Guaranty"), executed by the Guarantors.
C. The Borrowers have requested that an additional equipment
purchase line of credit be extended under the provisions of the Loan Agreement
and Standard Federal and the Guarantors are agreeable thereto on the terms and
conditions herein contained.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements herein contained and other good and valuable
consideration, the Borrowers and Standard Federal hereby agree as follows:
1. The Borrowers are corporations in good standing under the laws
of their state of incorporation. All corporate resolutions heretofore
delivered to Standard Federal relative to borrowing money and granting security
interests remain in full force and effect. Borrowers have duly authorized and
validly executed and delivered this Amendment Agreement and such Agreement and
the Loan Documents (as hereby amended) are valid and enforceable according to
their terms and do not conflict with or violate Borrowers' corporate charters
or by-laws or any agreements or covenants to which Borrowers are a party.
2. The Security Agreements and Life Policy Assignment are valid
and enforceable in accordance with their terms. Standard Federal's security
interests in the collateral described in the Security Agreements and Life
Policy Assignment are valid and perfected and Borrowers are aware of no claims
or interests in such collateral prior or paramount to Standard Federal's.
3. The Guaranty is valid and enforceable in accordance with its
terms and the Guarantors presently have no valid and existing defense to
liability thereunder.
4. The Loan Agreement is hereby modified by adding a new Section
1C thereto as follows:
SECTION 1C. SECOND EQUIPMENT PURCHASE LINE OF CREDIT
1C.1 Standard Federal hereby extends to the Borrower a
revolving line of credit (the "Second Equipment Line of Credit") which
shall not exceed at any one time outstanding the principal amount of
One Million and 00/100 Dollars ($1,000,000.00) (the "Second Equipment
Credit Limit").
1C.2 The Second Equipment Line of Credit herein extended
shall be subject to the terms and conditions of a Promissory Note
(Line of Credit with Term Provisions) (Second Equipment Line of
Credit), in the principal amount of One Million and 00/100 Dollars
($1,000,000.00), of even date herewith and all renewals and amendments
thereof (the "Second Equipment Line of Credit Note"). The Second
Equipment Line of Credit shall be payable and shall bear interest as
set forth in the Second Equipment Line of Credit Note. This Loan
Agreement and the Second Equipment Line of Credit Note are of equal
materiality and shall each be construed in such manner as to give full
force and effect to all provisions of both documents.
2
<PAGE> 3
1C.3 If at any time the amount outstanding under the
Second Equipment Line of Credit shall exceed the Second Equipment
Credit Limit, Borrower shall, on demand, forthwith pay to Standard
Federal such sums as are necessary to reduce the amount outstanding to
an amount not greater than the Second Equipment Credit Limit.
1C.4 Each advance under the Second Equipment Line of
Credit shall be used solely for the purchase of equipment. Each
advance shall be in an amount not in excess of Eighty Five percent
(85.0%) of the cost to the Borrower of the equipment to be purchased
with such advance. Standard Federal shall make advances under the
Second Equipment Line of Credit only upon receipt by it in a form
satisfactory to it of a true and authentic copy of the dealer invoice
for the equipment purchased or to be purchased with the advance.
5. Except as herein amended, the Loan Agreement, Guaranty and
other Loan Documents shall remain in full force and effect.
6. Guarantors acknowledge and consent to the amendment to the
Loan Agreement herein provided and agree that the Guaranty shall continue and
remain in full force and effect with respect to the Loan Documents as herein
amended, and to the Second Equipment Line of Credit Note.
IN WITNESS WHEREOF, the Borrowers and Standard Federal have caused this
Modification Agreement to be executed as of the day and year first written
above.
BORROWERS:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Secretary
-------------------------------
38-1867649
------------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Secretary
-------------------------------
3
<PAGE> 4
58-1738825
------------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Secretary
-------------------------------
38-2205216
------------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Secretary
-------------------------------
------------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Treasurer
-------------------------------
------------------------------------
Taxpayer Identification Number
MCCLAIN EPCO, INC., a New York
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Treasurer
-------------------------------
38-
------------------------------------
Taxpayer Identification Number
4
<PAGE> 5
MCCLAIN OF ALABAMA, INC., a Michigan
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl L. Jaworski
Its: Treasurer
-------------------------------
------------------------------------
Taxpayer Identification Number
GUARANTORS:
GALION HOLDING COMPANY, a Michigan
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
38-3060196
McCLAIN E-Z PACK, INC., a Michigan
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
------------------------------------
GALION DUMP BODIES, INC., a Michigan
corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
------------------------------------
5
<PAGE> 6
McCLAIN GROUP SALES OF FLORIDA, INC.,
a Florida corporation
By: /s/ Carl L. Jaworski
---------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
59-3241829
STANDARD FEDERAL:
STANDARD FEDERAL BANK, a federal
savings bank
By:
---------------------------------
Its:
-------------------------------
6
<PAGE> 1
EXHIBIT 10.62
Note No. 0250006199
------------------
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit) [X] Renewal
$11,000,000.00 Troy , Michigan
- ------------------------------ ------------------
Due Date: March 1, 1999 Dated: April 28, 1997
--------------------- ----------------------
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Eleven Million
and 00/100 Dollars ($11,000,000.00) or such lesser amount as may from time to
time be outstanding by reason of having been advanced hereunder, plus interest
as hereinafter provided on all amounts from time to time outstanding hereunder,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower
<PAGE> 2
or borrowers and shall automatically increase or decrease when and to the
extent that the Wall Street Journal Prime Rate shall have been increased or
decreased.
Accrued interest shall be payable on the first day of each month
beginning on May 1, 1997.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of an Amended and Restated Loan Agreement, dated July 17, 1996, as
modified August 29, 1996, by and between Standard Federal and the Borrower (the
"Loan Agreement"). Any and all indebtedness may be repaid by the Borrower in
whole or in part from time to time prior to the Due Date. Standard Federal
shall, from time to time prior to the Due Date, make advances to Borrower
hereunder upon request therefor by Borrower, provided that, upon giving effect
to such advance: (a) no Event of Default (as hereinafter defined) and no event
which with notice and/or the passage of time would become an Event of Default
shall exist at the time the advance is to be made; (b) all representations and
warranties of Borrower theretofore made are true and correct; (c) Standard
Federal shall not have previously or concurrently declared all amounts owing
hereunder to be immediately due and payable; (d) the amount requested shall not
cause the total amount outstanding hereunder to exceed the Credit Limit, as
defined in the Loan Agreement; and (e) all other requirements for the making of
advances provided for in the Loan Agreement have been satisfied. The principal
amount of indebtedness owing pursuant to this Note shall change from time to
time, decreasing in an amount equal to any and all payments of principal made
by the Borrower and increasing by an amount equal to any and all advances made
by Standard Federal to the Borrower pursuant to the terms hereof, and the books
and records of Standard Federal shall be conclusive evidence of the amount of
principal and interest owing hereunder at any time. All payments made
hereunder shall be applied first against costs and expenses required to be paid
hereunder, then against accrued interest to the extent thereof and the balance
shall be applied against the outstanding principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard
-2-
<PAGE> 3
Federal shall reasonably determine that the Effective Interest Rate (together
with all other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other
-3-
<PAGE> 4
liabilities of Borrower to Standard Federal and enforcement of rights
hereunder, including reasonable attorney fees and legal expenses including
participation in Bankruptcy proceedings. During any period(s) this Note is in
default, or after the Due Date, or after acceleration of maturity, the
outstanding principal amount hereof shall bear interest at a rate equal to two
percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement and is secured by
a Security Agreement, dated September 15, 1994, and by a Security Agreement,
dated July 19, 1995, and by an Assignment of Policy as Collateral Security,
dated July 15, 1996, and is supported by a Guaranty, dated July 17, 1996,
executed by Galion Holding Company, a Michigan corporation, McClain E-Z Pack,
Inc., a Michigan corporation, Galion Dump Bodies, Inc., a Michigan
-4-
<PAGE> 5
corporation, and McClain Group Sales of Florida, Inc., a Florida corporation.
The termination date of the Line of Credit evidenced hereby, provided for in
Section 1.6 of the Loan Agreement, is hereby amended and extended from the date
stated in Section 1.6 of the Loan Agreement to the Due Date of this Note.
Reference is hereby made to such documents for additional terms relating to the
transaction giving rise to this Note, the security given for this Note and
additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
---------------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
---------------------------
58-1738825
--------------------------------
Taxpayer Identification Number
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
---------------------------
38-2205216
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
---------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
---------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN EPCO, INC., a New York
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
---------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN OF ALABAMA, INC., a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
---------------------------
63-1176560
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-6-
<PAGE> 1
EXHIBIT 10.63
Note No. 025-0025206
-------------------
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit with Term Provisions)
(Second Equipment Line of Credit) [X] New
[ ] Renewal
$1,000,000.00 Troy , Michigan
- ---------------------------- ------------------
Due Date: May 1, 2002 Dated: April 28, 1997
------------------- ----------------------
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of One Million and
00/100 Dollars ($1,000,000.00) or such lesser amount as may from time to time
be outstanding by reason of having been advanced hereunder in accordance with
the provisions of an Amended and Restated Loan Agreement, dated July 17, 1996,
as amended August 29, 1996 and of even date herewith (the "Loan Agreement"),
plus interest as hereinafter provided on all amounts from time to time
outstanding hereunder, all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
<PAGE> 2
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower or borrowers and shall automatically increase
or decrease when and to the extent that the Wall Street Journal Prime Rate
shall have been increased or decreased.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other
credit which may be made under this Note from time to time to and until May 1,
1998 (the "Term Date"). Any and all indebtedness may be repaid by the Borrower
in whole or in part from time to time prior to the Term Date. Standard Federal
shall, from time to time prior to the Term Date, make advances to Borrower
hereunder upon request therefor by Borrower, made in accordance with the
requirements of the Loan Agreement, provided that upon giving effect to such
advance no Event of Default (as hereinafter defined) and no event which with
notice and/or the passage of time would become an Event of Default shall exist
at the time the advance is to be made and that all representations and
warranties of Borrower theretofore made are true and correct and that Standard
Federal shall not have previously or concurrently declared all amounts owing
hereunder to be immediately due and payable and that the amount requested shall
not cause the total amount outstanding hereunder to exceed the Second Equipment
Credit Limit as defined in the Loan Agreement. The principal amount of
indebtedness owing pursuant to this Note shall change from time to time,
decreasing in an amount equal to any and all payments of principal made by the
Borrower prior to the Due Date and increasing by an amount equal to any and all
advances made by Standard Federal to the Borrower pursuant to the terms hereof,
and the books and records of Standard Federal shall be conclusive evidence of
the amount of principal and interest owing hereunder at any time. All payments
made hereunder shall be applied first against costs and expenses required to be
paid hereunder, then against accrued interest to the extent thereof and the
balance shall be applied against the outstanding principal amount hereof.
Accrued interest shall be payable on the 1st day of each month
beginning on June 1, 1997 through and including the Term Date. From
and after the Term Date, Standard Federal shall make no further advances
hereunder and the outstanding principal balance hereunder as of the Term Date,
with interest, shall be repaid in consecutive monthly payments of principal,
each in the amount determined by dividing the outstanding principal balance
hereunder as of the Term Date by 48, plus interest accrued to the due date of
each such payment, commencing on June 1, 1998 and continuing on the same day of
each consecutive month thereafter and a final payment on the Due Date in an
amount equal to the then unpaid principal and accrued interest.
-2-
<PAGE> 3
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against and in reduction of the principal due under this
Note. If Standard Federal shall reasonably determine that the Effective
Interest Rate (together with all other charges or payments related hereto that
may be deemed interest) stipulated under this Note is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note, with accrued
interest at the highest rate permitted to be charged by stipulation in writing
between Standard Federal and Borrower, at the option of Standard Federal, shall
immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
-3-
<PAGE> 4
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of Standard Federal for collection of the
Note and all other liabilities of Borrower to Standard Federal and enforcement
of rights hereunder, including reasonable attorney fees and legal expenses
including participation in Bankruptcy proceedings. During any period(s) this
Note is in default, or after the Due Date, or after acceleration of maturity,
the outstanding principal amount hereof shall bear interest at a rate equal to
two percent (2.0%) per annum greater than the interest rate otherwise charged
hereunder. If any required payment is not made within ten (10) days after the
date it is due, then, at the option of Standard Federal, a late charge of not
more than four cents ($.04) for each dollar of the payment so overdue may be
charged. In addition to any other security interests granted to Standard
Federal, Borrower hereby grants Standard Federal a security interest in all of
Borrower's bank deposits, instruments, negotiable documents, and chattel paper
which at any time are in the possession or control of Standard Federal. After
the occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or
-4-
<PAGE> 5
any other provisions of this Note, and to the release of any collateral or any
part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement and is secured by
a Security Agreement, dated September 15, 1994, and by a Security Agreement,
dated July 19, 1995, and by an Assignment of Policy as Collateral Security,
dated July 15, 1996, and is supported by a Guaranty, dated July 17, 1996,
executed by Galion Holding Company, a Michigan corporation, McClain E-Z Pack,
Inc., a Michigan corporation, Galion Dump Bodies, Inc., a Michigan corporation,
and McClain Group Sales of Florida, Inc., a Florida corporation. Reference is
hereby made to such documents for additional terms relating to the transaction
giving rise to this Note, the security given for this Note and additional terms
and conditions under which this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
BORROWER:
MCCLAIN INDUSTRIES, INC., a Michigan
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------------
38-1867649
--------------------------------
Taxpayer Identification Number
MCCLAIN OF GEORGIA, INC., a Georgia
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------------
58-1738825
--------------------------------
Taxpayer Identification Number
-5-
<PAGE> 6
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------------
38-2205216
--------------------------------
Taxpayer Identification Number
MCCLAIN TUBE COMPANY d/b/a QUALITY
TUBE, a Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Secretary
----------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN INDUSTRIES OF OHIO, INC., a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
----------------------------
--------------------------------
Taxpayer Identification Number
MCCLAIN EPCO, INC., a New York
corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
----------------------------
--------------------------------
Taxpayer Identification Number
-6-
<PAGE> 7
MCCLAIN OF ALABAMA, INC., a
Michigan corporation
April 28, 1997 By: /s/ Carl L. Jaworski
- -------------------------- -----------------------------
Carl L. Jaworski
Its: Treasurer
----------------------------
63-1176560
--------------------------------
Taxpayer Identification Number
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.64
Note No. 0250012691
---------------
STANDARD FEDERAL BANK
THIRD AMENDED AND RESTATED
PROMISSORY NOTE
(Line of Credit) [X] Renewal
$10,000,000.00 Troy , Michigan
- ------------------------------ ------------------
Due Date: March 1, 1999 Dated: April 28, 1997
-------------------- ----------------------
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of Ten Million and
00/100 Dollars ($10,000,000.00) or such lesser amount as may from time to time
be outstanding by reason of having been advanced hereunder, plus interest as
hereinafter provided on all amounts from time to time outstanding hereunder,
all in lawful money of the United States of America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street
<PAGE> 2
Journal Prime Rate" and not by reference to the actual rate of interest charged
by any particular bank to any particular borrower or borrowers and shall
automatically increase or decrease when and to the extent that the Wall Street
Journal Prime Rate shall have been increased or decreased.
Accrued interest shall be payable on the first day of each month
beginning on May 1, 1997.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a First Amended and Restated Loan Agreement, dated October 2,
1995, as modified August 29, 1996, by and between Standard Federal and the
Borrower (the "Loan Agreement"). Any and all indebtedness may be repaid by the
Borrower in whole or in part from time to time prior to the Due Date. Standard
Federal shall, from time to time prior to the Due Date, make advances to
Borrower hereunder upon request therefor by Borrower, provided that, upon
giving effect to such advance: (a) no Event of Default (as hereinafter defined)
and no event which with notice and/or the passage of time would become an Event
of Default shall exist at the time the advance is to be made; (b) all
representations and warranties of Borrower theretofore made are true and
correct; (c) Standard Federal shall not have previously or concurrently
declared all amounts owing hereunder to be immediately due and payable; (d) the
amount requested shall not cause the total amount outstanding hereunder to
exceed the Credit Limit, as defined in the Loan Agreement; and (e) all other
requirements for the making of advances provided for in the Loan Agreement have
been satisfied. The principal amount of indebtedness owing pursuant to this
Note shall change from time to time, decreasing in an amount equal to any and
all payments of principal made by the Borrower and increasing by an amount
equal to any and all advances made by Standard Federal to the Borrower pursuant
to the terms hereof, and the books and records of Standard Federal shall be
conclusive evidence of the amount of principal and interest owing hereunder at
any time. All payments made hereunder shall be applied first against costs and
expenses required to be paid hereunder, then against accrued interest to the
extent thereof and the balance shall be applied against the outstanding
principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any
-2-
<PAGE> 3
and all such excess paid shall be automatically credited against and in
reduction of the principal due under this Note. If Standard Federal shall
reasonably determine that the Effective Interest Rate (together with all other
charges or payments related hereto that may be deemed interest) stipulated
under this Note is, or may be, usurious or otherwise limited by law, the unpaid
balance of this Note, with accrued interest at the highest rate permitted to be
charged by stipulation in writing between Standard Federal and Borrower, at the
option of Standard Federal, shall immediately become due and payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other
-3-
<PAGE> 4
agreement executed in connection herewith, to pay all costs of Standard Federal
for collection of the Note and all other liabilities of Borrower to Standard
Federal and enforcement of rights hereunder, including reasonable attorney fees
and legal expenses including participation in Bankruptcy proceedings. During
any period(s) this Note is in default, or after the Due Date, or after
acceleration of maturity, the outstanding principal amount hereof shall bear
interest at a rate equal to two percent (2.0%) per annum greater than the
interest rate otherwise charged hereunder. If any required payment is not made
within ten (10) days after the date it is due, then, at the option of Standard
Federal, a late charge of not more than four cents ($.04) for each dollar of
the payment so overdue may be charged. In addition to any other security
interests granted to Standard Federal, Borrower hereby grants Standard Federal
a security interest in all of Borrower's bank deposits, instruments, negotiable
documents, and chattel paper which at any time are in the possession or control
of Standard Federal. After the occurrence of an Event of Default hereunder,
Standard Federal may hold and apply at any time its own indebtedness or
liability to Borrower in payment of any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement, is secured by a
Security Agreement, dated September 15, 1994, by a Security Agreement, dated
June 22, 1995, and by two Open-End Commercial Mortgages and Assignments of
Lease and Rentals, dated June 29, 1993, as amended September 15, 1994, February
6, 1995,
-4-
<PAGE> 5
February 16, 1995, May 5, 1995 and June 22, 1995, and is supported by a
Guaranty executed by McClain Industries, Inc., a Michigan corporation, dated
May 5, 1995, and secured by an Assignment of Policy as Collateral Security,
dated July 15, 1996. The termination date of the Revolving Line of Credit
evidenced hereby, provided for in Section 1.6 of the Loan Agreement, is hereby
amended and extended from the date stated in Section 1.6 of the Loan Agreement
to the Due Date of this Note. Reference is hereby made to such documents for
additional terms relating to the transaction giving rise to this Note, the
security given for this Note and additional terms and conditions under which
this Note matures, may be accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION
OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT
OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
The undersigned has executed this Note in Galion, Ohio, as of the date
and year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
-5-
<PAGE> 6
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY
AGREEMENT WITH THE BORROWER, OR ANY OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree
that they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
38-3060196
MCCLAIN E-Z PACK, INC., formerly known
as Galion Solid Waste Equipment, Inc.,
a Michigan corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-----------------------------------
-6-
<PAGE> 7
GALION DUMP BODIES, INC., a Michigan
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
-----------------------------------
MCCLAIN GROUP SALES OF FLORIDA, INC.,
formerly known as M.E.G. Equipment
Sales of Florida, Inc., a Florida
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
59-3241829
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.65
Note No. 0250194514
---------------
STANDARD FEDERAL BANK
PROMISSORY NOTE
(Line of Credit) [X] Renewal
$1,500,000.00 Troy , Michigan
- --------------------------- ------------------
Due Date: March 1, 1999 Dated: April 28, 1997
------------------ ----------------------
FOR VALUE RECEIVED, on the Due Date unless accelerated earlier as provided
herein, the undersigned, jointly and severally (collectively, "Borrower"),
promise to pay to the order of Standard Federal Bank, a federal savings bank
("Standard Federal"), at its office set forth below, or at such other place as
Standard Federal may designate in writing, the principal sum of One Million
Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) or such lesser amount
as may from time to time be outstanding by reason of having been advanced
hereunder, plus interest as hereinafter provided on all amounts from time to
time outstanding hereunder, all in lawful money of the United States of
America.
The principal outstanding under this Note from time to time shall bear
interest ("Effective Interest Rate"), on a basis of a year of 360 days for the
actual number of days amounts are outstanding hereunder, at a rate per annum
equal to the Wall Street Journal Prime Rate. As used herein the phrase "Wall
Street Journal Prime Rate" shall mean the "Prime Rate" published by the Wall
Street Journal as the base rate on corporate loans posted by at least 75% of
the nation's 30 largest banks as the same may be changed from time to time. If
more than one Prime Rate is published, the highest rate published shall be
deemed the Wall Street Journal Prime Rate. If the publishing of the Wall
Street Journal Prime Rate is discontinued during the term hereof, then the
Effective Interest Rate shall be based upon the index which is published by The
Wall Street Journal in replacement thereof based on similar base rates on
corporate loans or, if no such replacement index is published, the index which,
in Standard Federal's sole determination, most nearly corresponds to the Wall
Street Journal Prime Rate. If, in such event, Standard Federal selects an
index which, in the Borrower's opinion, does not correspond to the Wall Street
Journal Prime Rate, Borrower's sole remedy shall be to prepay this Note in full
without penalty or premium. Until such prepayment has been received by
Standard Federal, the index selected by Standard Federal shall apply for all
purposes of this Note.
It is understood and agreed by Borrower that the Effective Interest
Rate shall be determined by reference to the "Wall Street Journal Prime Rate"
and not by reference to the actual rate of interest charged by any particular
bank to any particular borrower
<PAGE> 2
or borrowers and shall automatically increase or decrease when and to the
extent that the Wall Street Journal Prime Rate shall have been increased or
decreased.
Accrued interest shall be payable on the first day of each month
beginning on May 1, 1997.
This Note is given as evidence of any and all indebtedness of the
Borrower to Standard Federal arising as a result of advances or other credit
which may be made under this Note from time to time in accordance with the
provisions of a First Amended and Restated Loan Agreement, dated October 2,
1995, as modified August 29, 1996, by and between Standard Federal and the
Borrower (the "Loan Agreement"). Any and all indebtedness may be repaid by the
Borrower in whole or in part from time to time prior to the Due Date. Standard
Federal shall, from time to time prior to the Due Date, make advances to
Borrower hereunder upon request therefor by Borrower, provided that, upon
giving effect to such advance: (a) no Event of Default (as hereinafter defined)
and no event which with notice and/or the passage of time would become an Event
of Default shall exist at the time the advance is to be made; (b) all
representations and warranties of Borrower theretofore made are true and
correct; (c) Standard Federal shall not have previously or concurrently
declared all amounts owing hereunder to be immediately due and payable; (d) the
amount requested shall not cause the total amount outstanding hereunder to
exceed the Demonstrator Credit Limit, as defined in the Loan Agreement; and (e)
all other requirements for the making of advances provided for in the Loan
Agreement have been satisfied. The principal amount of indebtedness owing
pursuant to this Note shall change from time to time, decreasing in an amount
equal to any and all payments of principal made by the Borrower and increasing
by an amount equal to any and all advances made by Standard Federal to the
Borrower pursuant to the terms hereof, and the books and records of Standard
Federal shall be conclusive evidence of the amount of principal and interest
owing hereunder at any time. All payments made hereunder shall be applied
first against costs and expenses required to be paid hereunder, then against
accrued interest to the extent thereof and the balance shall be applied against
the outstanding principal amount hereof.
Nothing herein contained, nor any transaction relating thereto, or
hereto, shall be construed or so operate as to require the Borrower to pay, or
charge, interest at a greater rate than the maximum allowed by the applicable
law relating to this Note. Should any interest, or other charges, charged,
paid or payable by the Borrower in connection with this Note, or any other
document delivered in connection herewith, result in the charging,
compensation, payment or earning of interest in excess of the maximum allowed
by applicable law, then any and all such excess shall be and the same is hereby
waived by Standard Federal, and any and all such excess paid shall be
automatically credited against
-2-
<PAGE> 3
and in reduction of the principal due under this Note. If Standard Federal
shall reasonably determine that the Effective Interest Rate (together with all
other charges or payments related hereto that may be deemed interest)
stipulated under this Note is, or may be, usurious or otherwise limited by law,
the unpaid balance of this Note, with accrued interest at the highest rate
permitted to be charged by stipulation in writing between Standard Federal and
Borrower, at the option of Standard Federal, shall immediately become due and
payable.
The Borrower represents and warrants that it is duly organized,
validly existing and in good standing and is duly authorized to make and
perform this Note, which constitutes its valid and binding legal obligation
enforceable in accordance with its terms. All financial data furnished to
Standard Federal in connection with this Note fairly present the financial
condition of the Borrower and its subsidiaries, if any, as of the dates thereof
and there has been no material adverse change in the condition (financial or
otherwise) of the Borrower since such dates.
An Event of Default shall be deemed to have occurred hereunder if any
indebtedness of the Borrower to Standard Federal hereunder is not paid when
due, regardless of whether such indebtedness has arisen pursuant to the terms
of this Note, the Loan Agreement or any mortgage, security agreement, guaranty,
instrument or other agreement executed in conjunction herewith, or if an Event
of Default shall otherwise occur under the Loan Agreement.
Upon the occurrence of any Event of Default, after the giving of any
notice and the expiration of any grace, cure or notice period provided for in
the Loan Agreement, if any, and if no such notice or grace, cure or notice
period is so provided for in the Loan Agreement, then immediately, Standard
Federal may declare the entire unpaid and outstanding principal balance
hereunder and all accrued interest to be due and payable in full forthwith,
without presentment, demand or notice of any kind and may exercise any one or
more of the rights and remedies provided herein or in the Loan Agreement or in
any mortgage, guaranty, security agreement or other document relating hereto or
by applicable law. The remedies provided for hereunder are cumulative to the
remedies for collection of the amounts owing hereunder as provided by law or by
the Loan Agreement, or by any mortgage, guaranty, security agreement or other
document relating hereto. Nothing herein is intended, nor should it be
construed, to preclude Standard Federal from pursuing any other remedy for the
recovery of any other sum to which Standard Federal may be or become entitled
for breach of the terms of this Note or the Loan Agreement, or any mortgage,
guaranty, security agreement or other instrument relating hereto.
Borrower agrees, in case of an Event of Default under the terms of
this Note or under any loan agreement, security or other agreement executed in
connection herewith, to pay all costs of
-3-
<PAGE> 4
Standard Federal for collection of the Note and all other liabilities of
Borrower to Standard Federal and enforcement of rights hereunder, including
reasonable attorney fees and legal expenses including participation in
Bankruptcy proceedings. During any period(s) this Note is in default, or after
the Due Date, or after acceleration of maturity, the outstanding principal
amount hereof shall bear interest at a rate equal to two percent (2.0%) per
annum greater than the interest rate otherwise charged hereunder. If any
required payment is not made within ten (10) days after the date it is due,
then, at the option of Standard Federal, a late charge of not more than four
cents ($.04) for each dollar of the payment so overdue may be charged. In
addition to any other security interests granted to Standard Federal, Borrower
hereby grants Standard Federal a security interest in all of Borrower's bank
deposits, instruments, negotiable documents, and chattel paper which at any
time are in the possession or control of Standard Federal. After the
occurrence of an Event of Default hereunder, Standard Federal may hold and
apply at any time its own indebtedness or liability to Borrower in payment of
any indebtedness hereunder.
Acceptance by Standard Federal of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event
of Default. Upon any Event of Default, neither the failure of Standard Federal
promptly to exercise its right to declare the outstanding principal and accrued
unpaid interest hereunder to be immediately due and payable, nor the failure of
Standard Federal to demand strict performance of any other obligation of the
Borrower or any other person who may be liable hereunder shall constitute a
waiver of any such rights, nor a waiver of such rights in connection with any
future default on the part of the Borrower or any other person who may be
liable hereunder.
Borrower and all endorsers and guarantors hereof, hereby jointly and
severally waive presentment for payment, demand, notice of non- payment, notice
of protest or protest of this Note, diligence in collection or bringing suit,
and hereby consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Standard Federal with respect to payment
or any other provisions of this Note, and to the release of any collateral or
any part thereof, with or without substitution. The liability of the Borrower
shall be absolute and unconditional, without regard to the liability of any
other party hereto.
This Note is executed pursuant to the Loan Agreement, is secured by a
Security Agreement, dated September 15, 1994, and by a Security Agreement,
dated June 22, 1995, and is supported by a Guaranty executed by McClain
Industries, Inc., a Michigan corporation, dated May 5, 1995, and secured by an
Assignment of Policy as Collateral Security, dated July 15, 1996. The
-4-
<PAGE> 5
termination date of the Demonstrator Line of Credit evidenced hereby, provided
for in Section 1A.6 of the Loan Agreement, is hereby amended and extended from
the date stated in Section 1.6 of the Loan Agreement to the Due Date of this
Note. Reference is hereby made to such documents for additional terms relating
to the transaction giving rise to this Note, the security given for this Note
and additional terms and conditions under which this Note matures, may be
accelerated or prepaid.
Advances hereunder may be requested by telephone, in writing or in any
other manner acceptable to Standard Federal. Borrower understands and agrees
that any telephone conversation with Standard Federal may be recorded for
accuracy.
WAIVER OF JURY TRIAL. THE BORROWER AND STANDARD FEDERAL, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR ANY
RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREBY, OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF EITHER OF THEM. THIS WAIVER SHALL NOT IN ANY WAY
AFFECT STANDARD FEDERAL'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION
OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY RELATED INSTRUMENT
OR AGREEMENT. NEITHER THE BORROWER NOR STANDARD FEDERAL SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY EITHER THE BORROWER OR STANDARD FEDERAL EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
Confession of Judgment: The Borrower irrevocably authorizes any
attorney-at-law to appear for the Borrower in any court of record in Crawford
County, Ohio (which the Borrower acknowledges to be the place where this note
was made), or any other state or jurisdiction wherein the Borrower may then
reside, to (i) waive the issuing and service of process, (ii) confess judgment
against the Borrower in favor of the holder of this Note for the amount then
due, together with costs of suit, (iii) release all errors, and (iv) waive all
rights of appeal. The Borrower consents to the jurisdiction and venue of that
court.
The undersigned has executed this Note in Galion, Ohio, as of the date
and year first above written. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY
-5-
<PAGE> 6
GOODS, FAILURE ON THE CREDITOR'S PART TO COMPLY WITH ANY AGREEMENT WITH THE
BORROWER, OR ANY OTHER CAUSE.
Each of the undersigned Borrowers acknowledge, represent and agree
that they will all be using the funds representing the proceeds of the loan
evidenced hereby and that they will all be receiving a substantial portion of
such funds. At the request of the undersigned Borrowers, Standard Federal has
structured the credit facility evidenced by this Note in order to allow all of
the undersigned Borrowers access to the facility, and each will derive a
substantial benefit therefrom. The Borrowers hereby appoint Galion Holding
Company as the disbursing agent for all of them to make requests for
disbursements hereunder, to receive the proceeds of all advances hereunder and
to disburse those proceeds to each of the undersigned as the undersigned may
deem necessary or convenient.
Witnesses: BORROWER:
GALION HOLDING COMPANY, a Michigan
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
38-3060196
MCCLAIN E-Z PACK, INC., formerly known
as Galion Solid Waste Equipment, Inc.,
a Michigan corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-----------------------------------
-6-
<PAGE> 7
GALION DUMP BODIES, INC., a Michigan
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Treasurer
Taxpayer Identification Number:
-----------------------------------
MCCLAIN GROUP SALES OF FLORIDA, INC.,
formerly known as M.E.G. Equipment
Sales of Florida, Inc., a Florida
corporation
April 28, 1997 By: /s/ Carl Jaworski
- --------------------------- --------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
59-3241829
Address: 6200 Elmridge
Sterling Heights, MI 48318
Standard Federal Bank, a
federal savings bank
2600 West Big Beaver Road
Troy, Michigan 48084
-7-
<PAGE> 1
EXHIBIT 10.66
NEW ISSUE-- BOOK-ENTRY ONLY RATING: STANDARD & POOR'S: AA-/A-1+
In the opinion of Bond Counsel, assuming continuing compliance by
McClain of Alabama, Inc. herein referred with certain conditions imposed by the
Internal Revenue Code of 1986, as amended (the "Code"), interest income on the
Bonds is excludable from the gross income of the recipients thereof for federal
income tax purposes, except under certain conditions as set forth herein under
the caption "TAX MATTERS." The Bonds are "private activity bonds", the interest
on which is an item of tax preference for purposes of the Alternative Minimum
Tax on individuals and corporations under the Code. Ownership of the Bonds by
certain classes of taxpayers may have certain other federal tax consequences. In
the opinion of Bond Counsel, interest income on the bonds will be exempt, under
existing statutes, from Alabama income taxation. See "TAX MATTERS" herein for
a more complete discussion.
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE CITY OF DEMOPOLIS
INDUSTRIAL DEVELOPMENT REVENUE BONDS, SERIES 1997
(MCCLAIN OF ALABAMA, INC. PROJECT)
DATED: DATE OF DELIVERY PRICE: 100% DUE: APRIL 1, 2007
The Bonds are limited obligations of the Board payable solely from the
revenues and receipts derived by the Board from the leasing or sale of the
Project described herein, including payments to be made under a Lease Agreement
and Bond Guaranty by McClain of Alabama, Inc., a Michigan corporation (the
"Company"). All Bonds other than Obligor Bonds, as defined herein, are
additionally secured by an irrevocable, direct-pay letter of credit issued by
Standard Federal Bank, a federal savings bank (the "Credit Obligor"). The Letter
of Credit will be confirmed by
LASALLE NATIONAL BANK
a national banking association (the "Confirming Bank").
The Bonds shall never constitute an indebtedness of the State of
Alabama or any political subdivision thereof, including the City of Demopolis,
within the meaning of any constitutional provision or statutory limitation and
shall never constitute nor give rise to a pecuniary liability of the State of
Alabama or any political subdivision thereof, including the City of Demopolis,
or a charge against the general credit or taxing powers of any of the foregoing.
The letter of credit will permit the Trustee to draw thereunder for the
payment when due of the principal of the Bonds other than Obligor Bonds (whether
due at maturity or upon acceleration or redemption), the maximum amount of
interest payable on the Bonds other than Obligor Bonds for a period of 45 days
at the rate then in effect, not to exceed 12% per annum and the purchase price
of Bonds other than Obligor Bonds tendered (or deemed tendered) for purchase
pursuant to the optional and mandatory tender provisions with respect to the
Bonds. The letter of credit will expire on May 15, 1998 (except upon the earlier
occurrence of certain events). The Trust Indenture pursuant to which the Bonds
are being issued provides that a substitute letter of credit may be delivered to
the Trustee under certain conditions, as described herein.
The Bonds are subject to redemption, mandatory tender and purchase, and
optional tender and purchase, all as described herein.
The Bonds will initially bear interest at the Variable Rate (as defined
herein). Interest at the Variable Rate will be payable on the first business day
of each month, commencing May 1, 1997, and on the day immediately following any
Variable Rate Period (as defined herein). The interest rate on the Bonds may,
upon request of the Company, be converted to a Term Rate (as defined herein) for
a Term Rate Period (as defined herein) of 30 days, 6 months, 1 year or any
multiple of 1 year. See "THE BONDS - Variable Rate" and " - Term Rate." Interest
with respect to any Term Rate Period of less than 6 months shall be payable on
the day immediately following the Term Rate Period. Interest with respect to any
Term Rate Period of 6 months or more shall be payable semiannually (beginning 6
months after the first day of the calendar month in which such Term Rate Period
began) and on the day immediately following such Term Rate Period.
The Bonds will be initially issued as fully registered Bonds, in
book-entry form, registered in the name of Cede & Co., as registered owner and
nominee of The Depository Trust Company, New York, New York ("DTC"), which will
act as securities depository for the Bonds. Individual purchases of beneficial
interests in the Bonds will be made through DTC's Book-Entry System. Purchasers
of beneficial interests in the Bonds will not receive certificates representing
their interests in the Bonds. See "BOOK-ENTRY ONLY SYSTEM" herein. So long as
Cede & Co. is the registered owner of the Bonds, payments of principal of and
interest on the Bonds will be paid through the facilities of DTC. Disbursement
of such payments to DTC Participants is the responsibility of DTC and
disbursement of such payments to the purchasers of beneficial interests in the
Bonds is the responsibility of DTC Participants, as more fully described herein.
The Bonds are offered when, as and if issued, subject to the approval
of legality by Bradley Arant Rose & White LLP, Birmingham, Alabama, Bond
Counsel. Certain legal matters will be passed upon for the Company by its
counsel, Jaffe, Raitt, Heuer & Weiss, Professional Corporation, Detroit,
Michigan, for the Credit Obligor by its counsel, Bodman, Longley & Dahling LLP,
Detroit, Michigan, and for the Confirming Bank by Janet M. Knutel, Assistant
Counsel, ABN AMRO North America, Inc., the holding company of LaSalle National
Bank. Delivery of the Bonds is expected to be made on or about April 23, 1997.
LASALLE NATIONAL BANK
PLACEMENT AGENT AND REMARKETING AGENT
- --------------------------------------------------------------------------------
The date of this Placement Memorandum is April 23, 1997.
<PAGE> 2
No broker, dealer, salesperson or any other person has been authorized
by the Issuer, the Company or LaSalle National Bank to give any information or
to make any representation other than as contained in this Placement Memorandum
in connection with the offering described herein, and if given or made, such
other information or representation must not be relied upon as having been
authorized by any of the foregoing.
The information set forth herein under the captions "THE ISSUER"and
"LITIGATION," as the latter section relates to the Issuer, has been furnished by
the Issuer, and all other information set forth herein has been obtained from
the Company, Standard Federal Bank, The Depository Trust Company, and other
sources (other than the Issuer) that are believed to be reliable, but the
accuracy or completeness of such information is not guaranteed by, and is to not
be construed as a representation by, any of them.
The information and expression of opinions herein are subject to change
without notice, and neither the delivery of this Placement Memorandum, nor any
sale made hereunder, shall under any circumstances create any implication that
there has been no change in the affairs of the Issuer, Standard Federal Bank,
LaSalle National Bank or the Company since the date hereof.
This Placement Memorandum does not constitute an offer of any
securities, other than those described on the cover page, or an offer to sell or
a solicitation of any offer to buy in any jurisdiction in which it is unlawful
for such person to make such offer, solicitation or sale,
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS.
<PAGE> 3
TABLE OF CONTENTS
INTRODUCTION..............................................................1
DEFINITIONS...............................................................2
THE BOARD.................................................................7
THE COMPANY...............................................................7
THE PROJECT...............................................................7
PROPOSED USES OF FUNDS....................................................7
THE BONDS.................................................................7
BOOK-ENTRY ONLY SYSTEM...................................................14
THE LEASE................................................................16
THE INDENTURE............................................................21
THE BOND GUARANTY........................................................26
THE LETTER OF CREDIT AND THE CONFIRMATION................................26
THE REIMBURSEMENT AGREEMENT..............................................30
THE MORTGAGE.............................................................31
TRUSTEE..................................................................32
REMARKETING AGENT........................................................32
RATING...................................................................32
CONTINUING INFORMATION...................................................32
TAX MATTERS..............................................................33
LEGAL MATTERS............................................................33
PLACEMENT OF THE BONDS...................................................34
LITIGATION...............................................................34
MISCELLANEOUS............................................................34
<PAGE> 4
AUTHORIZATION............................................................36
APPENDIX A-- FORM OF APPROVING OPINION OF BOND COUNSEL..................A-1
APPENDIX B-- STANDARD FEDERAL BANK......................................B-1
APPENDIX C-- LASALLE NATIONAL BANK......................................C-1
<PAGE> 5
PLACEMENT MEMORANDUM
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
INDUSTRIAL DEVELOPMENT REVENUE BONDS, SERIES 1997
(MCCLAIN OF ALABAMA, INC. PROJECT)
INTRODUCTION
This Placement Memorandum is being furnished in connection with the issuance
of the bonds referred to above (the "Bonds") by The Industrial Development Board
of the City of Demopolis (the "Board"). The Board is a public corporation under
the laws of the State of Alabama. The Bonds will be issued pursuant to Article
4, Chapter 54, Title 11 (Section 11-54-80 et seq.) of the Code of Alabama 1975
(the "Enabling Law"). The Bonds will be issued under a Trust Indenture dated as
of April 1, 1997 (the "Indenture") between the Board and LaSalle National Bank,
a national banking association (the "Trustee").
The Bonds will be issued for the purpose of financing the acquisition of a
manufacturing plant (the "Plant"), certain real property, owned by the Board, on
which the Plant is located (the "Project Site") and the acquisition and
installation in the Plant and elsewhere on the Project Site of certain items of
machinery, equipment and other personal property (the "Equipment"). The Project
Site, the Plant and the Equipment (together, the "Project") will be leased by
the Board to McClain of Alabama, Inc., a Michigan corporation (the "Company"),
pursuant to a Lease Agreement dated as of April 1, 1997 (the "Lease") providing,
among other things, for rental payments at times and in amounts sufficient to
pay when due debt service on and the purchase price of the Bonds.
Payment of debt service on the Bonds will be guaranteed by the Company
pursuant to a Bond Guaranty Agreement dated as of April 1, 1997 (the "Bond
Guaranty") in favor of the Trustee.
As additional security for the payment of the debt service on and the purchase
price of the Bonds other than Obligor Bonds, the Company will cause Standard
Federal Bank, a federal savings bank (the "Credit Obligor"), to issue its
irrevocable, direct-pay letter of credit (the "Letter of Credit") in favor of
the Trustee. The Letter of Credit will be confirmed by LaSalle National Bank, a
national banking association (the "Confirming Bank").
The Letter of Credit will be issued pursuant to a Reimbursement Agreement
dated as of April 1, 1997 (the "Reimbursement Agreement") between the Company
and the Credit Obligor. The Reimbursement Agreement will provide, among other
things, for reimbursement to the Credit Obligor by the Company of all amounts
drawn under the Letter of Credit. The Company's obligations under the
Reimbursement Agreement will be secured by a Mortgage, Assignment of Leases and
Security Agreement dated as of April 1, 1997 (the "Mortgage") executed by the
Board and the Company in favor of the Credit Obligor.
THE BONDS ARE LIMITED OBLIGATIONS OF THE BOARD PAYABLE SOLELY FROM THE
REVENUES AND RECEIPTS DERIVED FROM THE LEASING OR SALE OF THE PROJECT.
PURCHASERS OF THE BONDS SHOULD MAKE THEIR DECISION TO INVEST IN THE BONDS
SOLELY UPON THEIR ASSESSMENT OF THE CREDITWORTHINESS OF THE CREDIT OBLIGOR. NO
ATTEMPT IS MADE IN THIS PLACEMENT MEMORANDUM TO DESCRIBE THE COMPANY OR ITS
OPERATIONS WITH RESPECT TO THE PROJECT IN A MANNER THAT
<PAGE> 6
WOULD ENABLE PURCHASERS OF THE BONDS TO ASSESS THE CREDITWORTHINESS OF THE
COMPANY. ACCORDINGLY, IN DECIDING WHETHER TO PURCHASE THE BONDS, POTENTIAL
INVESTORS SHOULD NOT RELY UPON THE ABILITY OF THE COMPANY TO MAKE THE REQUIRED
PAYMENTS UNDER THE LEASE AGREEMENT OR BOND GUARANTY.
ALTHOUGH THE BOARD WILL, IN THE INDENTURE, PLEDGE AND ASSIGN TO THE TRUSTEE,
FOR THE BENEFIT OF THE BONDHOLDERS, THE LEASE AND THE REVENUES AND RECEIPTS TO
BE DERIVED FROM THE LEASING AND SALE OF THE PROJECT, SUCH PLEDGE AND ASSIGNMENT
IS SUBORDINATE TO THE RIGHTS OF THE CREDIT OBLIGOR UNDER THE MORTGAGE EXCEPT
WITH RESPECT TO MONEY AND INVESTMENTS ON DEPOSIT IN THE SPECIAL FUNDS CREATED
UNDER THE INDENTURE.
The form of the approving opinion of bond counsel is attached hereto as
Appendix A. Appendix B sets forth certain information pertaining to the Credit
Obligor and Appendix C sets forth certain information pertaining to the
Confirming Bank. Summary descriptions of the Indenture, the Lease, the Bond
Guaranty, the Letter of Credit, the Confirmation, the Reimbursement Agreement
and the Mortgage are included in this Placement Memorandum. The descriptions
herein do not purport to be complete and are qualified in their entirety by
reference to each specific document being described, forms of which may be
obtained at the principal offices of the placement agent, LaSalle National Bank,
181 West Madison, Suite 3200, Chicago, Illinois 60602, Attention: Capital
Markets Group. All such descriptions are further qualified in their entirety by
reference to bankruptcy, insolvency and other similar laws and principles of
equity relating to or affecting generally the enforcement of creditors' rights.
Capitalized terms which are not otherwise defined herein shall be given the same
meaning as set forth in the respective documents.
DEFINITIONS
Certain capitalized terms used frequently in this Placement Memorandum are
defined in this section of the Placement Memorandum.
Act of Bankruptcy means the filing of a petition in bankruptcy (or the
commencement of a bankruptcy or similar proceeding) by or against the designated
entity under any applicable bankruptcy, insolvency, reorganization, or similar
law, now or hereafter in effect.
Basic Rent means the moneys payable by the Company pursuant to the Lease to
provide for the payment of the principal of and the interest and premium (if
any) on, or purchase price of, the Bonds.
Board means The Industrial Development Board of the City of Demopolis, an
Alabama public corporation.
Bond Counsel means independent counsel whose experience in matters relating to
the issuance of obligations by states and their political subdivisions is
nationally recognized.
Bond Guaranty means the Bond Guaranty Agreement dated as of April 1, 1997,
executed by the Company in favor of the Trustee.
Bond Purchase Fund means the fund by that name established under the
Indenture.
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Bonds means the Board's $5,225,000 Industrial Development Revenue Bonds,
Series 1997 (McClain of Alabama, Inc. Project) issued pursuant to the Indenture.
Business Day means any day other than a Saturday, a Sunday or a day on which
banking institutions are closed in any of the following locations: (i) the city
in which the principal office of the Trustee is located, (ii) the city in which
the principal office of the Remarketing Agent is located, (iii) the city in
which the office of the Credit Obligor where drawings under the Letter of Credit
are to be made is located, (iv) the City of New York, New York, or (v) the City
of Chicago, Illinois.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Company means McClain of Alabama, Inc., a Michigan corporation.
Confirmation means the irrevocable confirmation issued by LaSalle National
Bank, confirming the initial Letter of Credit issued by Standard Federal Bank
and delivered to the Trustee on the Issue Date, and any substitute Confirmation
issued in accordance with the provisions of the Indenture.
Confirming Bank means LaSalle National Bank, a national banking association,
in its capacity as issuer of the Confirmation.
Construction Fund means the fund by that name established under the Indenture.
Conversion Date means the first day of any Term Rate Period.
Credit Obligor means Standard Federal Bank, a federal savings bank, in its
capacity as issuer of the Letter of Credit.
Debt Service Fund means the fund by that name established under the Indenture.
Determination of Taxability means a determination that the interest income on
any of the Bonds is Taxable, which determination shall be deemed to have been
made upon the occurrence of the first to occur of the following:
(a) the date on which the Company determines that the interest
income on any of the Bonds is Taxable by filing with the Trustee a statement
to that effect; or
(b) the date on which the Company shall be advised by private
ruling, technical advice or any other written communication from an authorized
official of the Internal Revenue Service that, based upon any filings of the
Company, or upon any review or audit of the Company, or upon any other grounds
whatsoever, the interest income on any of the Bonds is Taxable; or
(c) the date on which the Company shall receive notice from
the Trustee in writing that the Trustee has been advised (i) by any Holder of
any Bonds that the Internal Revenue Service has determined that the interest
income on the Bonds is Taxable or (ii) by any authorized official of the
Internal Revenue Service that the interest income on any of the Bonds is
Taxable;
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<PAGE> 8
provided that no Determination of Taxability shall be deemed to have occurred:
(1) as a result of a determination by the Company pursuant to the preceding
clause (a) unless supported by a written opinion of Bond Counsel acceptable to
the Trustee and the Board that the interest income on the Bonds is Taxable; or
(2) as a result of the event described in the preceding clauses (b) or (c)
unless and until (1) the Company has been afforded a reasonable opportunity, at
its expense, to contest such determination either through its own action (if
permitted by law) or by or on behalf of one or more of the holders of the Bonds
and (2) such contest, if made, has been abandoned by the Company or has been
finally determined by a court of competent jurisdiction from which no further
appeal exists, but if such contest has not been abandoned or finally determined
within three years of the event described in either of said clauses (b) and (c)
which forms the basis of the Determination of Taxability in question, then such
Determination of Taxability shall be deemed to have occurred three years after
the date of such event.
Enabling Law means Article 4, Chapter 54, Title 11 (Section 11-54-80 et seq.)
of the Code of Alabama 1975.
Equipment means the machinery, equipment and other personal property to be
acquired and installed in the Plant and elsewhere on the Project Site which is
being financed out of the proceeds of the Bonds.
Federal Securities means direct obligations of, or obligations the full and
timely payment of which is guaranteed by, the United States of America.
Financing Documents means the Indenture, the Lease, the Bond Guaranty, the
Credit Agreement and the Mortgage.
Improvements means the improvements to the Plant required by the Lease to be
constructed by the Company.
Indenture means the Trust Indenture dated as of April 1, 1997, between the
Board and the Trustee.
Interest Payment Date, when used with respect to any installment of interest
on the Bonds, means the date specified in the Bonds as the fixed date on which
such installment of interest is due and payable.
Interest Portion, when used with respect to the Letter of Credit, means the
amount that may be drawn with respect to payment of accrued but unpaid interest
on the Bonds, or payment of the interest portion of the purchase price of
Tendered Bonds.
Interim Agreement means the Interim Agreement dated as of August 1, 1996,
between the Board and the Company.
Lease means the Lease Agreement dated as of April 1, 1997, between the Board
and the Company.
Letter of Credit means the initial letter of credit issued by the Credit
Obligor and delivered to the Trustee on the date of delivery of the Bonds, and,
unless the context or use indicates another or different meaning or intent,
includes (a) any substitute letter of credit accepted by the Trustee pursuant to
the terms of the Indenture and (b) any Confirmation.
Mandatory Tender means a tender of Bonds for purchase that is required by the
Indenture (as described below under "THE BONDS - Mandatory Tenders").
Mandatory Tender Date means a date on which any Mandatory Tender of Bonds is
required.
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<PAGE> 9
Maximum Rate means the maximum rate per annum, specified in the Letter of
Credit, upon which there has been calculated the amount available to be drawn on
such Letter of Credit to pay interest on the Bonds.
Mortgage means the Mortgage, Assignment of Leases and Security Agreement dated
as of April 1, 1997, executed by the Company and the Board in favor of the
Credit Obligor.
Obligor Bond means (i) any Pledged Bond and (ii) any Bond registered in the
name of the Company.
Optional Tender means a tender of Bonds for purchase at the option of the
holder thereof, as permitted by the Indenture (as described below under "THE
BONDS - Optional Tenders").
Optional Tender Date means any date on which Bonds are to be purchased
pursuant to an Optional Tender.
Plant means the manufacturing plant located on the Project Site.
Pledged Bonds means Bonds purchased pursuant to the Optional or Mandatory
Tender provisions of the Indenture with money drawn under the Letter of Credit
and held by the Tender Agent or Trustee for the benefit of, or registered in the
name of, the Credit Obligor, as pledgee.
Principal Portion when used with respect to the Letter of Credit, means the
amount that may be drawn under the Letter of Credit with respect to payment of
the unpaid principal amount of the Bonds or payment of the principal portion of
the purchase price of Tendered Bonds.
Project means the Project Site, the Plant and the Equipment.
Project Development Costs means the costs of acquiring the Project Site and
the improvements located thereon, constructing the Improvements and acquiring
and installing the Equipment, the expenses incurred by the Board in connection
with the issuance and sale of the Bonds (including the initial charge of the
Trustee, the fee for the issuance of the initial Letter of Credit and the
fiscal, legal, printing, advertising, recording and other similar fees and
expenses relating thereto), interest on the Bonds to the extent such interest
constitutes a Qualified Project Cost, and all costs and expenses incurred by the
Board in connection with and directly related to the planning, development and
design of the Plant and the Equipment, including, without limiting the
generality of the foregoing, any such costs or expenses paid by the Company or
by the Board with funds advanced by the Company and for which the Company is
entitled to be reimbursed under the provisions of the Interim Agreement.
Project Site means the real property described in the Lease and the Indenture
on which the Plant is to be constructed.
Qualified Project Costs means Project Development Costs paid or reimbursed
pursuant to the provisions of the Indenture to the extent that such costs (i)
constitute expenditures for the acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance for
depreciation within the meaning of Section 144(a)(1) of the Internal Revenue
Code of 1986, as amended, and (ii) were paid or incurred subsequent to the date
that was 60 days prior to the effective date of the Interim Agreement.
Rating Agency means any nationally recognized securities rating agency.
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<PAGE> 10
Reimbursement Agreement means the Reimbursement Agreement dated as of April 1,
1997, between the Credit Obligor and the Company.
Remarketing Agent means the person appointed as such pursuant to the
Indenture.
Special Funds means the Debt Service Fund, the Bond Purchase Fund, the
Construction Fund and any other fund or account established under the Indenture.
Stated Amount means the maximum amount available to be drawn under the Letter
of Credit, as such amount may be reduced and reinstated from time to time
pursuant to the provisions of the Letter of Credit.
Stated Expiration Date means the date on which the Letter of Credit will, by
its terms, expire unless the Letter of Credit is terminated on an earlier date
in accordance with its terms.
Substitute Letter of Credit means a letter of credit delivered to the Trustee
in substitution for the letter of credit then held by the Trustee.
Taxable, when applied to the interest income on any of the Bonds, means that,
under federal tax laws and regulations issued thereunder, as such laws and
regulations exist on the date of initial delivery of the Bonds or as they may
thereafter be amended, the interest income on such Bond is includable in gross
income of the recipient thereof for Federal income tax purposes for any reason
other than the fact (and for the period) that such Bond is held by a person who
is a "substantial user" of the Project or a "related person" within the meaning
of Section 147(a) of the Code or any successor provision.
Tender Agent means the person (if any) appointed as such pursuant to the
Indenture. Unless and until a Tender Agent is appointed, the Trustee shall
perform all duties of the Tender Agent under the Indenture.
Tender Date means any date on which Bonds are to be purchased pursuant to the
Optional or Mandatory Tender provisions of the Indenture.
Tendered Bonds means Bonds tendered (or deemed tendered) for purchase pursuant
to the Optional or Mandatory Tender provisions of the Indenture.
Term Rate means the fixed interest rate borne by the Bonds during a Term Rate
Period.
Term Rate Interest Payment Date means a date on which interest calculated
according to the Term Rate is payable on the Bonds.
Term Rate Period means a period specified by the Company during which the
Bonds shall bear interest at a Term Rate.
Trustee means LaSalle National Bank, a national banking association, in its
capacity as trustee under the Indenture.
Unsurrendered Bond means Bonds (or portions thereof) which are deemed
purchased pursuant to the Optional or Mandatory Tender provisions of the
Indenture, but which have not been presented to the Trustee by the holders
thereof.
Variable Rate means the variable interest rate borne by the Bonds during a
Variable Rate Period.
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<PAGE> 11
Variable Rate Interest Payment Date means a date on which interest calculated
at the Variable Rate is payable on the Bonds.
Variable Rate Period means a period during which the Bonds bear interest at
the Variable Rate.
THE BOARD
The Board is a public corporation under the laws of the State of Alabama
created pursuant to the Enabling Law. The Board is authorized by the Enabling
Law to issue its bonds for the purposes of providing funds to pay the costs of
constructing the Plant and acquiring and installing the Equipment, and to lease
the Project to the Company. The Board has no taxing power.
THE COMPANY
The Company is a Michigan corporation with its principal offices located in
the City of Demopolis, Alabama. The Company was created to acquire and operate
the Project.
THE PROJECT
The Project consists of the financing of the acquisition, renovation and
equipping of a manufacturing facility located in the City of Demopolis, Alabama,
which manufactures and sells containers. The Project consists of a manufacturing
facility containing approximately 103,000 square feet and related office space
located on approximately 84 acres of land, and machinery and equipment used in
the Company's business.
PROPOSED USES OF FUNDS
The Board will receive funds from the sale of the Bonds and such funds will be
deposited under the Indenture and applied as described below:
<TABLE>
<S> <C>
Acquisition of Project Site and existing plant and equipment.................... $ 3,539,750
Construction of the Improvements................................................ 78,297
Acquisition and installation of new Equipment................................... 1,502,453
Issuance expenses............................................................... 104,500
----------------
Total uses of funds............................................................. $ 5,225,000
================
</TABLE>
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<PAGE> 12
THE BONDS
The Bonds are secured by a pledge of payments derived by the Issuer
pursuant to the Lease. All Bonds will initially bear interest at the Variable
Rate. The Bonds are additionally secured by the Letter of Credit, which is
backed by the Confirmation. The Bonds may be secured by a Substitute Letter of
Credit pursuant to the terms of the Indenture.
General Description of Bonds
The Bonds will be dated as of the date of original issuance and will
mature on the date set forth on the cover page of this Placement Memorandum. The
Bonds will be issuable only as fully registered Bonds without coupons in
denominations of $100,000 and integral multiples of $5,000 in excess thereof.
The Bonds will initially bear interest at the Variable Rate. The
Company may elect to have the Bonds bear interest for a Term Rate Period of 30
days, 6 months, 1 year or any multiple of 1 year at the Term Rate. No Term Rate
Period designated by the Company may extend beyond the last day prior to the
final maturity of the Bonds. In no event will the interest rate borne by the
Bonds exceed the Maximum Rate.
Interest on the Bonds at the Variable Rate will be payable on the first
Business Day of each calendar month, commencing May 1, 1997, with respect to
interest accrued through the last day of the immediately preceding month and on
the day immediately following any Variable Rate Period with respect to interest
accrued through the last day of such Variable Rate Period and will be calculated
on the basis of a 365 or 366-day year, as the case may be, for the actual number
of days elapsed. Interest on the Bonds with respect to any Term Rate Period of
less than 6 months will be payable on the day immediately following such Term
Rate Period with respect to interest accrued through the last day of such Term
Rate Period and will be calculated on the basis of a 365 or 366-day year, as the
case may be, for the actual number of days elapsed. Interest with respect to any
Term Rate Period of 6 months or more will be payable (i) with respect to the
interest accrued through the last day of the immediate preceding month (a) on
the first day of the calendar month that is 6 months after the first day of the
calendar month in which such Term Rate Period began and (b) semiannually
thereafter, and (ii) with respect to interest accrued through the last day of
such Term Rate Period on the day immediately following such Term Rate Period,
and will be calculated on the basis of a 360-day year with 12 months of 30 days
each.
Payment of interest due on each interest payment date will be made by
check or draft mailed on such interest payment date to the persons who are
registered holders of the Bonds on the regular record date for such interest
payment date, which will be (i) the day next preceding any Variable Rate
Interest Payment Date or any Term Rate Interest Payment Date with respect to a
Term Rate Period of less than 6 months, or (ii) the 15th day (whether or not a
Business Day) next preceding any Term Rate Interest Payment Date with respect to
a Term Rate Period of 6 months or more. Payment of principal (and premium, if
any) on the Bonds and payment of accrued interest on the Bonds due upon
redemption on any date other than an interest payment date will be made only
upon surrender of the Bonds at the principal corporate trust office of the
Trustee in Chicago, Illinois. The holder of any Bond in a principal amount of
$100,000 or more may, upon the terms and conditions of the Indenture, request
payment of debt service by wire transfer to an account of such holder maintained
at a bank in the continental United States or by any other method providing for
payment in same-day funds that is acceptable to the Trustee. SEE, HOWEVER,
"BOOK-ENTRY ONLY SYSTEM" BELOW.
LaSalle National Bank will be the Trustee under the Indenture. The
Trustee is also bond registrar and paying agent. Its principal corporate trust
office is located in Chicago, Illinois.
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<PAGE> 13
The Trustee may, but is not required to, appoint a Tender Agent for the
purpose of accepting delivery of Bonds to be purchased pursuant to the Optional
or Mandatory Tender provisions of the Indenture and authenticating and
delivering Bonds pursuant to the transfer and exchange provisions of the
Indenture. A Tender Agent will not be appointed at the time of delivery of the
Bonds to the original purchasers and will not be appointed later unless and
until the Trustee elects to do so.
The Board and the Company will appoint LaSalle National Bank, Chicago,
Illinois, as remarketing agent (the "Remarketing Agent") under the Indenture.
Source of Payment of Bonds
THE BONDS ARE LIMITED OBLIGATIONS OF THE BOARD, PAYABLE SOLELY FROM THE
REVENUES AND RECEIPTS DERIVED FROM THE LEASING OR SALE OF THE PROJECT. Payment
of the Bonds is secured by the lien of the Indenture on the trust estate created
thereunder, which consists generally of (i) an assignment of the Lease and (ii)
a pledge of said revenues and receipts and money and investments held in the
Special Funds. The Indenture provides in effect that all payments of debt
service on and, to the extent remarketing proceeds are insufficient, the
purchase price of Bonds other than Obligor Bonds will be made with money drawn
under the Letter of Credit and that amounts so drawn will be credited against
the Company's obligation to make rental payments with respect to debt service on
and the purchase price of Bonds. THE LIEN OF THE INDENTURE ON THE TRUST ESTATE
IS, EXCEPT WITH RESPECT TO MONEY AND INVESTMENTS IN THE SPECIAL FUNDS,
SUBORDINATE TO THE LIEN AND SECURITY INTERESTS CREATED BY THE MORTGAGE, WHICH IS
FOR THE SOLE BENEFIT AND SECURITY OF THE CREDIT OBLIGOR.
The Bonds shall never constitute an indebtedness of the City of
Demopolis, Alabama within the meaning of any constitutional provision or
statutory limitation and shall never constitute or give rise to a pecuniary
liability of said municipality or a charge against its general credit or taxing
powers.
Variable Rate
The Bonds shall initially bear interest at the Variable Rate. The
Variable Rate shall be a fluctuating rate per annum determined by the
Remarketing Agent periodically during a Variable Rate Period as follows. The
initial Variable Rate Period shall commence on the date of delivery of the Bonds
and shall end on the following Wednesday. Thereafter, the Variable Rate shall be
determined on the last Business Day immediately prior to the commencement of
each Variable Rate Period and on Wednesday of each calendar week, or if any such
Wednesday is not a Business Day, on the next succeeding Business Day. The
Variable Rate so determined shall become effective on the day following each
date of determination, and once effective shall remain in effect until and
including the next determination date or, if sooner, the end of such Variable
Rate Period; provided, however, that if the Remarketing Agent fails to determine
the Variable Rate on any such determination date, the Variable Rate for each
weekly period shall, until a determination is thereafter made by the Remarketing
Agent, be determined on each determination date by the Trustee as the rate per
annum equal to the J. J. Kenny index rate for high grade tax-exempt obligations
having maturities of 30 days.
The Variable Rate shall be determined by the Remarketing Agent and
shall be the interest rate that would, in the opinion of the Remarketing Agent,
result in the market value of the Bonds equal to 100% of the principal amount
thereof on the date of such determination, taking into account relevant market
conditions and credit rating factors as they exist on such date; provided,
however, that the Variable Rate may never exceed the Maximum Rate. Upon the
request of any Bondholder, the Trustee shall confirm (by telephone and in
writing, if so requested) the Variable Rate then in effect.
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<PAGE> 14
Term Rate
The Bonds shall bear interest at a Term Rate during each Term Rate
Period of 30 days, 6 months, 1 year or any multiple of 1 year as provided below.
The Term Rate shall be a fixed rate per annum which shall be applicable during
the entire Term Rate Period and shall be determined by the Remarketing Agent as
provided below. The first day of any such Term Rate Period is referred to in the
Indenture as a "Conversion Date".
The Company may elect that the Bonds bear interest at a Term Rate by
delivery of written notice of such election to the Trustee not less than 40 days
prior to the proposed Conversion Date. Such notice shall specify the first day
and the last day of the Term Rate Period elected; provided, however, that (i) as
a condition to the establishment of such Term Rate Period, the Company shall
cause to be delivered to the Board and the Trustee an opinion of Bond Counsel
stating that the establishment of such Term Rate will not cause the interest
income on the Bonds to become subject to gross income for federal income tax
purposes, (ii) if such election is made during a Term Rate Period, the specified
Conversion Date may not be sooner than the first day immediately following the
Term Rate Period then in effect, (iii) either (A) the Letter of Credit then in
effect must have a Stated Expiration Date that is not earlier than the 15th day
following the expiration of such Term Rate Period, provide coverage of interest
on the Bonds at the Maximum Rate for a number of days not less than the sum of
15 days plus the maximum number of days between Interest Payment Dates with
respect to such Term Rate Period and provide coverage of the maximum premium
payable upon redemption of the Bonds, or, (B) as a condition to the
establishment of such Term Rate Period, the Company shall be required to deliver
to the Trustee a Substitute Letter of Credit in accordance with the provisions
of the Indenture and (iv) the Term Rate Period may not extend beyond the day
immediately prior to the final maturity of the Bonds. Any such election by the
Company shall be irrevocable after 3:00 p.m. (Detroit, Michigan time) on the
last Business Day immediately prior to the proposed Conversion Date. A notice
given by the Company may specify that successive Term Rate Periods of specified
lengths shall be established with respect to the Bonds. If such notice is
provided to the Trustee and the other requirements of the Indenture are met as
of each Conversion Date, no additional notice shall be required from the Company
to establish a new Term Rate on each such Conversion Date. Any such notice may
be revoked prior to 3:00 p.m. (Detroit, Michigan time) on the last Business Day
immediately prior to each proposed Conversion Date, but such revocation shall be
applicable only with respect to proposed Term Rate Periods commencing after the
date of the notice of revocation.
Not less than 20 days prior to the proposed Conversion Date, the
Remarketing Agent shall determine the preliminary Term Rate for such Term Rate
Period, and not less than 7 days prior to the proposed Conversion Date, the
Remarketing Agent shall fix the final Term Rate, provided that the final Term
Rate shall be no lower than the preliminary Term Rate previously determined. The
Term Rate shall be the interest rate that would, in the opinion of the
Remarketing Agent, result in the market value of the Bonds being 100% of the
principal amount thereof on the date of such determination, taking into account
relevant market conditions and credit rating factors as they exist on such date,
and assuming that the Term Rate Period began on such date; provided, however,
that the Term Rate may not exceed the Maximum Rate.
Notwithstanding the foregoing, a Term Rate shall not be established if
(1) the Company delivers to the Trustee written notice of
revocation of its election to establish the Term Rate before 3:00 p.m.
(Detroit, Michigan time) on the last Business Day immediately prior to
the proposed Conversion Date or
(2) prior to 10:00 a.m. (Detroit, Michigan time) on the
Conversion Date the Trustee does not receive (a) the Substitute Letter
of Credit that was to be effective on such Conversion Date
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<PAGE> 15
together with the Related Documentation required under the Indenture
for the delivery of a Substitute Letter of Credit and (b) the opinion
of Bond Counsel required under the Indenture.
If all conditions to the establishment of a Term Rate are not satisfied, the
Bonds shall continue (or, if a Term Rate Period ended on the preceding day,
shall begin) to bear interest at the Variable Rate from the proposed Conversion
Date.
Optional Tenders
The holder of any Bond shall have the right to tender such Bond to the
Trustee or to the Tender Agent for purchase in whole or in part (if in part,
only in an authorized denomination) on any Business Day, at a purchase price
equal to 100% of the principal amount of Bonds (or portions thereof) tendered
plus accrued interest to the specified purchase date (herein referred to as an
"Optional Tender Date"). In order to exercise such option with respect to any
Bond, the holder thereof must deliver notice thereof to the Trustee, as provided
below, at its principal office at least 7 days prior to the proposed Optional
Tender Date.
Any such notice of Optional Tender must be duly executed by the
Bondholder and must specify (i) the name of the registered holder of the Bond to
be tendered for purchase, (ii) the Optional Tender Date, (iii) the certificate
number and principal amount of such Bond, and (iv) the principal amount of such
Bond to be purchased (if such amount is less than the entire principal amount,
the amount to be purchased must be in an authorized denomination). Such notice
may be given to the Trustee in writing or by telephone, but no such telephonic
notice shall be effective unless confirmed in writing delivered to the Trustee
not more than 2 Business Days after such telephonic notice.
Unless a notice of Optional Tender indicates that less than the entire
principal amount of the Bond is being tendered for purchase, the holder will be
deemed to have tendered the Bond in its entire principal amount for purchase.
Upon delivery of a written notice of Optional Tender by any Bondholder,
the election to tender shall be irrevocable and binding upon such holder and may
not be withdrawn.
If a written notice of Optional Tender shall have been duly given with
respect to any Bond, the holder of such Bond shall deliver such Bond to the
Trustee at its principal office or to the Tender Agent at its principal office
at or before 12:00 noon (Detroit, Michigan time) on the Optional Tender Date,
together with an instrument of assignment or transfer duly executed in blank.
Any Bond for which a notice of Optional Tender has been given but which is not
so delivered to the Trustee or Tender Agent (herein referred to as an
"Unsurrendered Bond"), shall nevertheless be deemed to have been tendered by the
holder thereof on the Optional Tender Date.
If there has been irrevocably deposited in the Bond Purchase Fund an
amount sufficient to pay the purchase price of all Bonds tendered or deemed to
be tendered for purchase on an Optional Tender Date, any Unsurrendered Bond
shall be deemed to have been tendered for purchase and purchased from the holder
thereof on such Optional Tender Date and the holder of any Unsurrendered Bond
shall not be entitled to receive interest on such Unsurrendered Bond for any
period on and after the Optional Tender Date.
No Optional Tender of Bonds shall be permitted (i) for Pledged Bonds,
or (ii) for any Bond which is deemed fully paid within the meaning of the
Indenture.
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<PAGE> 16
Mandatory Tenders
The holder of each Bond shall be required to tender such Bond to the
Trustee or Tender Agent for purchase on the following dates (each such date
being referred to in the Indenture as a "Mandatory Tender Date"): (i) each
proposed Conversion Date, (ii) the date immediately following the expiration of
a Term Rate Period, (iii) 20 days after the Trustee receives written notice from
the Credit Obligor (a) stating that an event of default, as therein defined, has
occurred and is continuing under the Reimbursement Agreement, and (b) directing
the Trustee to effect a Mandatory Tender of all the Bonds, (iv) on any date
proposed by the Company for delivery of a Substitute Letter of Credit; provided,
however, that the holder of any Bond may waive the requirement for such tender
and may retain such Bond notwithstanding the substitution of the Letter of
Credit by delivering written notice of such waiver and retention to the Trustee
and the Remarketing Agent not less than 7 days prior to the Mandatory Tender
Date, and (v) 15 days prior to the Stated Expiration Date of the Letter of
Credit. If any of such dates is not a Business Day, the Mandatory Tender Date
shall be deemed to be the next succeeding Business Day.
Notice of a Mandatory Tender shall be given by the Trustee by
registered or certified mail, mailed to the holders of all Bonds at their
addresses appearing on the Bond register not less than 30 days prior to the
Mandatory Tender Date in the case of a Mandatory Tender pursuant to clauses (i),
(ii) and (v) of the preceding paragraph, and not less than 15 days prior to the
Mandatory Tender Date in the case of a Mandatory Tender pursuant to clauses
(iii) and (iv) of the preceding paragraph. Such notice of Mandatory Tender
shall, among other things, specify the Mandatory Tender Date and the reason for
such Mandatory Tender.
All Bonds shall be tendered by the holders thereof for purchase at or
before 11:00 a.m. (Detroit, Michigan time) on the Mandatory Tender Date, by
delivering such Bonds to the Trustee at its principal office or to the Tender
Agent at its principal office, together with an instrument of assignment or
transfer in such form as shall be acceptable to the Trustee or Tender Agent duly
executed in blank. All Bonds so to be purchased that are not delivered to the
Trustee or Tender Agent on the Mandatory Tender Date ("Unsurrendered Bonds")
shall nevertheless be deemed to have been tendered for purchase by the holders
thereof on the Mandatory Tender Date.
If there has been irrevocably deposited in the Bond Purchase Fund an
amount sufficient to pay the purchase price of all Bonds tendered or deemed
tendered for purchase on the Mandatory Tender Date, any Unsurrendered Bond shall
be deemed to be tendered for purchase and purchased from the holder thereof on
such Mandatory Tender Date and the holder of any Unsurrendered Bond shall not be
entitled to receive interest on such Unsurrendered Bond for any period on and
after the relevant Mandatory Tender Date.
After notice of a Mandatory Tender has been given by the Trustee, the
Bonds shall be subject to Mandatory Tender notwithstanding the fact that the
reasons for giving such notice cease to exist or are no longer applicable.
Redemption Prior to Maturity
The Bonds are subject to redemption prior to maturity as follows:
Mandatory Redemption of Bonds Upon Occurrence of Determination
of Taxability. The Bonds are subject to mandatory redemption in whole
on any date prior to maturity in the event of a Determination of
Taxability at and for a Redemption price with respect to each such Bond
redeemed equal to 100% of the principal amount thereof plus accrued
interest to the redemption date. If called for redemption prior to
maturity upon such
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<PAGE> 17
occurrence, the Bonds must be redeemed within 10 days following the
Determination of Taxability.
Optional Redemption of Variable Rate Bonds. The Bonds, if
bearing interest at the Variable Rate, are subject to optional
redemption by the Board, upon the direction of the Company, in whole or
in part (but if in part, only in multiples of $100,000 or any larger
amount that is an integral multiple of $5,000), on any date at and for
a redemption price equal to the principal amount redeemed plus accrued
interest to the redemption date.
Extraordinary Optional Redemption of Term Rate Bonds. The
Bonds, if bearing interest at the Term Rate, are subject to redemption
on any date in whole at and for a redemption price with respect to each
such Bond redeemed equal to the principal amount thereof plus accrued
interest thereon to the date fixed for redemption, but only upon
receipt by the Trustee of a written certificate from the Company
stating that within 120 days prior to the date of such certificate (i)
the Project has been damaged or destroyed to such extent that, in the
opinion of an independent engineer (as defined in the Indenture), it
cannot be reasonably restored within a period of six (6) consecutive
months or the Company is thereby prevented from carrying on its normal
operations therein for a period of not less than twelve (12)
consecutive months or the cost of restoration thereof would exceed the
net insurance proceeds referable to such damage or destruction plus
certain self-insurance, or (ii) title to, or the temporary use of, any
part of the Project has been taken by eminent domain, and such taking
or takings results or, in the opinion of an independent engineer, are
likely to result in the Company being thereby prevented from carrying
on its normal operations therein for a period of not less than six (6)
consecutive months, or (iii) there has occurred a change in the
economic availability of raw materials, operating supplies or
facilities necessary for the operation of the Project or such
technological or other change which in the good faith judgment of the
Company renders the Project uneconomic and the Company has determined
(as evidenced by a resolution of its board of directors) to discontinue
the operation thereof, or (iv) as a result of changes in the
Constitution of the United States of America or the Constitution of
Alabama or of legislative or administrative action (whether state or
federal) or by final decree or judgment or order of any court or
administrative body (whether state or federal), entered after the
contest thereof by the Company in good faith, the Lease has become void
or unenforceable or impossible of performance in accordance with the
intent and purposes of the parties thereto as expressed therein or
unreasonable burdens or excessive liabilities have been imposed on the
Board or the Company. In the event that the redemption of the Bonds is
to be made pursuant to clauses (i), (ii) or (iii) of this subparagraph
(c), such certificate of the Company shall state that as a result of
such event, the Company has discontinued its operation of the Project.
Optional Redemption of Term Rate Bonds. The Bonds, if bearing
interest at the Term Rate, are subject to redemption by the Board, upon
the direction of the Company, in whole or in part (but if in part, only
in multiples of $5,000), on any date during the redemption periods and
at the redemption prices (expressed as a percentage of the principal
amount to be redeemed) set forth below, plus interest accrued to the
redemption date:
Length of Currently Applicable Dates after which Redemption
Term Rate Period is Allowed and
(Expressed in Whole Years) Redemption Prices
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<PAGE> 18
<TABLE>
<S> <C>
greater than 7.......................................... after 5 years at 102%, declining by 0.5%
semiannually to 100%
less than or equal to 7 and after 3 years at 102%, declining by 0.5%
greater than 4.......................................... semiannually to 100%
less than or equal to 4................................. not callable
</TABLE>
Notice of Redemption
Any notice of call for redemption will be given by mailing a copy of
the redemption notice not less than 30 nor more than 60 days prior to the date
fixed for redemption by registered or certified mail, postage prepaid, to each
registered owner of each Bond (or portion thereof) to be redeemed at his address
shown on the registration books.
No further interest shall accrue on any Bond or portion thereof called
for redemption from and after the date fixed for redemption if moneys sufficient
for such redemption have been deposited with the Trustee.
Registration and Exchange
The Bonds are transferable only on the bond register maintained at the
principal corporate trust office of the Trustee. Upon surrender of a Bond to be
transferred, properly endorsed, a new Bond will be issued to the designated
transferee. The Bonds will be issued in denominations of $100,000 and integral
multiples of $5,000 in excess thereof and, subject to the provisions of the
Indenture, may be exchanged for other Bonds of any authorized denominations and
of a like aggregate principal amount, as requested by the holder surrendering
the same. SEE, HOWEVER, "BOOK-ENTRY ONLY SYSTEM" below.
BOOK-ENTRY ONLY SYSTEM
The information in this section, "Book-Entry Only System", has been
furnished by the Depository Trust Company. No representation is made by the
Issuer, the Company or the Placement Agent as to the completeness or accuracy of
such information or as to the absence of material adverse changes in such
information subsequent to the date hereof. No attempt has been made by the
Issuer, the Company or the Placement Agent to determine whether DTC is or will
be financially or otherwise capable of fulfilling its obligations. Neither the
Issuer, the Company nor the Trustee will have any responsibility or obligation
to DTC Participants, Indirect Participants or the persons for which they act as
nominees with respect to the Bonds, or for any principal, premium, if any, or
interest payment thereof.
DTC will act as securities depository for the Bonds. The Bonds will be
issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully-registered certificate will be issued for
each maturity of each series of the Bonds, each in the aggregate principal
amount of such maturity, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC
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<PAGE> 19
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of the Bonds under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Bonds on DTC's records.
The ownership interest of each actual purchaser of each Bond ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interest in the Bonds are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Bonds, except
in the event that use of the book-entry-only system for the Bonds is
discontinued.
To facilitate subsequent transfers, all Bonds deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of the Bonds with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Bonds; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Bonds are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Bonds within an issue are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each Direct Participant in such issue to be
redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Bonds are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Bonds will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Trustee, the Company, or
the Issuer, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest
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<PAGE> 20
to DTC is the responsibility of the Issuer or the Trustee, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository
with respect to the Bonds at any time by giving reasonable notice to the Issuer
or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, the Bond certificates are required to be
printed and delivered.
The Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event, the
Bond certificates will be printed and delivered.
The information in this section concerning DTC and DTC's
book-entry-only system has been obtained from sources that the Issuer, the
Company, and the Placement Agent believe to be reliable, but the Issuer, the
Company, and the Placement Agent take no responsibility for the accuracy
thereof.
THE LEASE
This summary is not a complete recital of the terms of the Lease and
reference is made to the Lease in its entirety.
Lease Term. The term of the Lease will begin on the date of delivery of
the Bonds and will continue until midnight of April 1, 2007.
Basic Rent. The Lease requires the Company to make rental payments at
times and in amounts sufficient to pay debt service on the Bonds when due and to
pay the purchase price of Bonds tendered for purchase on any Tender Date. The
Company will receive a credit against such rental payments for any amounts drawn
under the Letter of Credit for such purposes.
Mandatory Prepayment of Basic Rent Upon Determination of Taxability. In
the event of a Determination of Taxability, the Company will promptly pay to the
Trustee, as additional Basic Rent, an amount sufficient to redeem the Bonds in
whole at the applicable redemption price specified under "THE BONDS - Redemption
Prior to Maturity -- Mandatory Redemption of Bonds Upon Determination of
Taxability".
Optional Prepayment of Basic Rent. The Company may prepay such amount
of Basic Rent as shall be sufficient to enable the Board to redeem the Bonds in
whole or in part, in accordance with their terms, and in the event of such
prepayment, the Board will cause the Basic Rent so prepaid to be applied to the
redemption and retirement of Bonds, in accordance with the provisions of the
Indenture, on the earliest practicable date after receipt of such prepayment.
Additional Rental Payments. The Company will also pay, as additional
rental, the reasonable fees, charges and disbursements of the Trustee, the
Remarketing Agent and the Board.
Taxes and Governmental Charges. The Company will further pay all taxes
and governmental charges of any kind whatsoever that may be lawfully assessed or
levied against or with respect to the Project, including, without limitation,
any taxes levied upon or with respect to any part of the receipts, income or
profits of the Board from the Project and any other taxes levied upon or with
respect to the Project which,
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<PAGE> 21
if not paid, would become a lien on the Project prior to or on a parity with the
lien of the Indenture or the Mortgage, all utility and similar charges, and all
assessments and charges lawfully made by any governmental body for public
improvements that may be secured by a lien on the Project.
Unconditional Obligation. The obligations of the Company to make the
payments required and to perform and observe the other agreements on its part
contained in the Lease shall be absolute and unconditional irrespective of any
defense or any rights of set-off, recoupment or counterclaim it may have against
the Board. The Company will not suspend or discontinue any payments provided
for, will perform and observe all of its other agreements contained in the Lease
and, except as provided therein, will not terminate the Lease for any cause,
including any acts or circumstances that may constitute an eviction or
constructive eviction, failure of consideration or commercial frustration of
purpose, destruction of or damage to the Project, or the taking by eminent
domain of title to or the right to temporary use of all or any part of the
Project, any change in the tax or other laws of the United States of America,
the State of Alabama or any political or taxing subdivision of either thereof or
any failure of the Board to perform and observe any agreement, whether express
or implied, or any duty, liability or obligation arising out of or connected
with the Lease.
Concerning the Tax-Exempt Nature of the Interest Income on the Bonds.
Pursuant to the provisions of the Internal Revenue Code of 1986 (the "Code"),
the exemption of the interest income on the Bonds from gross income for federal
income tax purposes is dependent upon compliance with certain provisions of the
Code subsequent to the issuance of the Bonds. Among the requirements of the Code
to the continued exemption of the interest income on the Bonds from gross income
for federal income tax purposes are certain requirements relating to the use and
expenditure of proceeds from the Bonds, restrictions on the investment of
proceeds earned prior to expenditure, and the requirement that certain earnings
be rebated to the United States of America. In the Lease, the Company has made
certain covenants (the "Compliance Covenants") to the effect that it will comply
with all conditions to and requirements for the exemption from gross income for
federal income tax purposes of the interest income on the Bonds imposed by the
Code. Failure to comply with the Compliance Covenants may result in the interest
income on the Bonds being subject to gross income for federal income tax
purposes from the date of issuance of the Bonds.
Agreement to Maintain Corporate Existence. The Company will maintain
its corporate existence, will not dissolve or otherwise dispose of all or
substantially all its assets (either in a single transaction or in a series of
related transactions) and will not consolidate with or merge into another
corporation or permit one or more corporations to consolidate with or merge into
it; provided that the Company may, without violating the agreements contained in
the Lease, do or perform any of the following:
(a) It may consolidate with or merge into another corporation
or permit one or more corporations to consolidate with or merge into it
if the corporation surviving such merger or resulting from such
consolidation, if it shall be one other than the Company, expressly
assumed in writing all the obligations of the Company contained in the
Lease and the Guaranty;
(b) It may transfer to another corporation all or
substantially all its assets as an entirety, and (if it so elects)
thereafter dissolve, if the corporation to which such transfer shall be
made expressly assumes in writing all the obligations of the Company
contained in the Lease and the Guaranty.
If, after a transfer by the Company of all or substantially all its assets to
another corporation under the circumstances described in the preceding clause
(b), the Company does not thereafter dissolve, it shall not have any further
rights or obligations hereunder.
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<PAGE> 22
Maintenance of the Project. The Company will, at its own expense, keep
the Project in as reasonably safe condition as its operations permit, and keep
the Plant and the other improvements located on the Project Site in reasonable
repair and operating condition (reasonable wear and tear excepted), making from
time to time all necessary and proper renewals thereof and repairs and
replacements thereto.
Improvements and Alterations. The Company may also, at its own expense,
make additions, alterations, or improvements to the Project it may deem
desirable for its business purposes that do not adversely affect the structural
integrity of the Project and that will not impair the operating unity of the
Project or substantially reduce its value. All such alterations, additions,
improvements and modifications made by the Company shall become a part of the
Project, provided that any personal property installed by the Company as part of
the Project without expense to the Board and not constituting a part of the
Equipment covered by the Lease may be removed by the Company at any time and
from time to time.
Removal of Equipment. In any instance where the Company determines that
any item of the Equipment has become inadequate, obsolete, worn out, unsuitable,
undesirable or unnecessary in the operation of the Project, the Company may
remove, with the consent of the Credit Obligor, such item of Equipment from the
Project and sell, trade in, exchange or otherwise dispose of it, without
responsibility or accountability to the Board or the Trustee therefor, provided
that
(a) the Company substitutes and installs on the Project Site
other furniture, equipment or other personal property having equal or
greater utility (but not necessarily the same value or function) in the
operation of the Project, which substituted furniture, equipment or
other personal property shall be free of all liens and encumbrances
(other than Permitted Encumbrances as defined in the Indenture), shall
be the sole property of the Board and shall be and become a part of the
Equipment; or
(b) in the event the item of Equipment so removed is sold,
traded in, exchanged or otherwise disposed of, the Company pays into
the Debt Service Fund (a) the proceeds from such sale or the scrap
value thereof, (b) an amount equal to the credit received on any
trade-in, or (c) in the case of a disposition to itself or any of its
affiliates, an amount equal to the original cost less depreciation;
provided, however, that there may be credited one time on any such
payment into the Debt Service Fund an amount equal to the original cost
of any equipment then installed on the Project Site that does not then
constitute part of the Equipment and that is owned by the Company free
and clear of all liens and encumbrances (other than Permitted
Encumbrances as defined in the Indenture), less depreciation thereon in
accordance with generally accepted accounting practices, but only if
from and after any such credit such other equipment becomes the sole
property of the Board and a part of the Equipment.
No payments required to be made into the Debt Service Fund need be made until
the aggregate of such payments due but not theretofore made is $500,000 or more.
If at the time of the removal of any item of Equipment from the Project Site,
there is then installed on the Project Site other furniture, equipment or other
personal property not then constituting a part of the Equipment and if such
equipment has utility in the operation of the Project equal to or greater than
that of the item of Equipment removed, the Company may elect to substitute such
other equipment for the item of Equipment removed without making any payment
into the Debt Service Fund provided that from and after such removal such other
property becomes the sole property of the Board and part of the Equipment. Any
such removal and disposal shall be free and clear of the demise of the Lease and
the lien of the Indenture.
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<PAGE> 23
Insurance. The Company will keep the Project insured against such risks
and liabilities as are customarily insured against by businesses of like size
and type, including, but not limited to
(a) Insurance against loss or damage to the Plant and the
Equipment by fire and lightning, with uniform standard extended
coverage endorsement limited only as may be provided in the standard
form of extended coverage endorsement at the time in use in Alabama, to
the extent of the full replacement value thereof; and
(b) Insurance against liability for bodily injury to or death
of persons and for damage to or loss of property occurring on or about
the Project Site or in any way related to the operation of the Project,
in the minimum amounts of $1,000,000 for death of or bodily injury to
any one person, $3,000,000 for total death and bodily injury claims
resulting from any one accident, and $500,000 for property damage.
Damage to or Destruction of Project. If the Project is destroyed, in
whole or in part, or is damaged, by fire or other casualty, and the Company does
not elect to apply the insurance proceeds to the redemption of Bonds, the
Company will promptly repair, rebuild or restore the property damaged or
destroyed to substantially the same condition as prior to the event causing such
damage or destruction. All net insurance proceeds resulting from claims for
losses in excess of $500,000 shall be paid to the Trustee, provided that all
losses (including those in excess of $500,000) may be adjusted by the Company.
In the event the net insurance proceeds are not sufficient to pay in full the
costs of such repair, rebuilding or restoration, the Company will nevertheless
complete the work and pay the portion of the costs in excess of available
insurance proceeds. Insurance proceeds in excess of the cost of restoration
shall be paid to the Company.
Condemnation. If the Project or any part thereof is taken by eminent
domain proceedings, and if in the Company's opinion the efficient utilization of
the Project is not impaired by such taking, the net condemnation award shall be
paid to the Company. If, however, in the Company's opinion, the efficient
utilization of the Project is impaired by such taking and if the Company does
not elect to apply the condemnation proceeds to the redemption of Bonds, any
part of the Plant taken or damaged shall be repaired, rebuilt, restored or
rearranged by the Board so as to make it suitable for the Company's uses and the
net condemnation award referable to such taking shall be applied thereto. If
such net condemnation award is insufficient to pay all the costs of such repair,
rebuilding, restoration or rearrangement, the Company will pay the deficiency.
Any excess net condemnation award will be paid to the Company. The Company shall
be entitled to any condemnation award or portion thereof made for damages to or
takings of its own property, as well as other sums awarded as compensation for
the interest of the Company in the Project.
Assignment and Subletting. The Company may assign the Lease, and may
sublet the Project or any part thereof, without the necessity of obtaining the
consent of the Board, the Trustee or any bondholder, but the Company shall in
any event continue primarily liable for payment of all rentals provided for in
the Lease and for performance and observance of all other agreements on its part
contained therein.
Events of Default and Remedies. Under the Lease, an "event of default"
or "default" shall mean any one or more of the following events:
(a) The failure by the Company to pay Basic Rent when due;
(b) The failure by the Company to perform and observe any
other agreement on its part to be observed and performed for a period
of sixty (60) days after written notice, specifying, in reasonable
detail, the nature of such failure and requiring the Company to
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<PAGE> 24
perform or observe the agreement or covenant with respect to which it
is delinquent shall have been given to the Company by the Board or the
Trustee, unless (i) the Board and the Trustee shall agree in writing to
an extension of such period prior to its expiration or (ii) during such
sixty (60) day period or any extension thereof the Company has
commenced and is diligently pursuing corrective action, or (iii) the
Company is by reason of force majeure (as defined in the Lease) at the
time prevented from performing or observing the agreement or covenant
with respect to which it is delinquent;
(c) The dissolution or liquidation of the Company or the
filing of a petition in bankruptcy (or the commencement of a bankruptcy
or similar proceedings) by or against the Company under any applicable
bankruptcy, insolvency, reorganization, or similar law, now or
hereafter in effect, or the failure to lift or to bond (in a manner
satisfactory to the Trustee), within ninety (90) days, any execution,
garnishment or attachment of a size as seriously to impair its ability
to carry on its operations;
(d) Any warranty, representation or other statement by or on
behalf of the Company contained in the Lease or in the Guaranty or in
any instrument or certificate furnished in compliance with or in
reference to the Lease shall have been false or misleading in any
material respect when made;
(e) Receipt by the Trustee of notice from the Credit Obligor
that an event of default has occurred under the Reimbursement
Agreement; or
(f) The occurrence of an event of default under the Indenture.
Whenever any event of default shall have happened and be continuing,
the Board and the Trustee (or the Trustee on behalf of the Board) may take any
one or more of the following remedial steps:
(1) They or it may re-enter and take possession of the
Project, exclude the Company from possession thereof and lease the same
for the account of the Company, holding the Company liable for the rent
and other payments due thereunder up to the effective date of such
leasing and for the excess, if any, of the rent and other amounts
payable thereunder over the rents and other amounts which are payable
by the lessee under such new lease;
(2) They or it may terminate the Lease, exclude the Company
from possession of the Project and hold the Company liable for the
balance due thereunder, in which event the rights of the Company in the
Project and the use and possession thereof shall terminate;
(3) They or it may declare immediately due and payable all
installments of rent thereafter coming due under the Lease, provided,
however, that the total amount of such rent that may be so declared
immediately due and payable shall be an amount which, when added to the
total of the amounts then on deposit in the Debt Service Fund, will be
sufficient to pay, redeem and retire all the outstanding Bonds on the
earliest practicable date thereafter on which, under their terms, they
may be redeemed, including, without limitation, principal, premium,
interest to mature until and on such date, expenses of redemption and
Trustee's fees and charges;
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(4) They or it may have access to, and inspect, examine and
make copies of, the books, records and accounts of the Company, but if
and only if any of the Bonds are then outstanding; and
(5) They or it may take whatever other action at law or in
equity may appear to be desirable to collect the rent then due, or to
enforce any obligation of the Company under the Lease.
Purchase Options. The Company is granted the option by the Board to
purchase the Project from the Board at any time during the Lease Term after or
simultaneously with payment (or provision for payment in accordance with the
Indenture) in full of the principal of and the interest and premium, if any, on
the Bonds and all reasonable fees, charges and disbursements of the Trustee,
accrued and to accrue until the date of such full payment, at and for a purchase
price of $100 plus the reasonable costs and expenses (including reasonable
attorney's fees) incurred by the Board in connection with the Company's exercise
of such option. The Company is also granted the option by the Board to purchase
any part of the Project Site at any time and from time to time while it is not
in default under the Lease provided that the Company furnishes to the Board and
the Trustee:
(i) a notice in writing containing an adequate legal
description of that portion of the Project Site with respect to which
such option is to be exercised, a statement that the Company intends to
exercise its option to purchase such portion of the Project Site on a
date stated, which shall not be less than 30 nor more than 90 days from
the date of such notice and a statement that the use to which the
Company proposes to devote such portion of the Project Site will
promote the continued industrial development of the State of Alabama,
and
(ii) a certificate signed by an Independent Engineer (as
defined in the Lease) stating (a) that no part of the Plant or the
Equipment, no other improvement (except for roads, walkways, sewer,
water, oil, coal oil, gas, electric and communication lines, pipelines
and other energy source conveyors and the like, which shall be
specified in such certificate) and no facility designed for the control
of air or water pollution or for the disposal of solid waste and
necessary in the operation of the Plant are located on the portion of
the Project Site with respect to which such option is exercised, and
(b) that the severance of such portion of the Project Site from the
Project will not impair the operating unity of the Plant or unduly
restrict ingress or egress to and from the Plant.
THE INDENTURE
This summary is not a complete recital of the terms of the Indenture
and reference is made to the Indenture in its entirety.
Debt Service Fund. The Indenture establishes a Debt Service Fund, which
will be held by the Trustee. The Indenture provides that the Trustee will
deposit in the Debt Service Fund (i) all money drawn under the Letter of Credit
for the purpose of paying debt service on the Bonds other than Obligor Bonds,
(ii) all rental payments under the Lease with respect to debt service on the
Bonds, (iii) all other money required to be deposited therein by the Lease or
the Indenture, and (iv) any other money received by the Trustee with
instructions to deposit the same in the Debt Service Fund. Money in the Debt
Service Fund is to be used to pay debt service on the Bonds as the same shall
become due and payable. The Trustee is instructed to draw on the Letter of
Credit in order to make the payment of debt service on Bonds other than Obligor
Bonds
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without making any prior claim or demand upon the Company for payment of the
related rental payment, and any money that is, at the time of such draw, on
deposit in the Debt Service Fund and available for payment of such debt service,
shall be paid to the Credit Obligor to the extent of the amount drawn under the
Letter of Credit, and any excess shall be applied to the payment of Debt Service
on Obligor Bonds.
Bond Purchase Fund. The Indenture establishes a Bond Purchase Fund,
which will be held by the Trustee. The Indenture provides that the Trustee will
deposit in the Bond Purchase Fund (i) all money drawn by the Trustee under the
Letter of Credit for the purpose of paying the purchase price of Bonds other
than Obligor Bonds due on any Tender Date, (ii) all rental payments under the
Lease with respect to the purchase price of tendered Bonds, (iii) the proceeds
of any remarketing of Bonds by the Remarketing Agent, (iv) all other money
required to be deposited in the Bond Purchase Fund pursuant to the Lease or the
Indenture, and (v) any other money received by the Trustee with instructions to
deposit the same in the Bond Purchase Fund. Money in the Bond Purchase Fund
shall be used to pay the purchase price of Bonds due on any Tender Date. The
Trustee is instructed to draw on the Letter of Credit in order to pay the
purchase price of any Bonds other than Obligor Bonds due on any Tender Date to
the extent that remarketing proceeds are insufficient therefor without making
any prior claim or demand upon the Company for payment of the related rental
payment, and any money in the Bond Purchase Fund that is, at the time of such
draw, available for the payment of such purchase price shall be paid to the
Credit Obligor to the extent of the amount so drawn against the Letter of
Credit, and any excess shall be applied to the payment of the purchase price of
Obligor Bonds.
Construction Fund. The Indenture establishes a Construction Fund, which
will be held by the Trustee. The Indenture provides that all proceeds derived by
the Issue from the sale of the Bonds will be deposited into the Construction
Fund and applied to the payment of Project Development Costs. Moneys on deposit
in the Construction Fund will be disbursed by the Trustee for the payment of
Project Development Costs upon requisitions submitted by the Company and
approved by the Credit Obligor.
Investment of Special Funds. Money in the Construction Fund may be
invested or reinvested in a broad range of investments by the Trustee in
accordance with the instructions of the Company. Money in the Debt Service Fund
and Bond Purchase Fund may be invested only in Federal Securities with a
maturity not later than the earlier of (i) 30 days after the date of such
investment, or (ii) the date such money will be needed for the payment of debt
service on, or the purchase price of, Bonds.
Encumbrances on Trust Estate. The Board covenants in the Indenture that
it will not create or permit any mortgage, pledge, lien, charge or encumbrance
of any kind on the trust estate prior to or on a parity of lien with the
Indenture.
Corporate Existence. The Indenture permits the Board to consolidate
with or merge into any municipal or public corporation, or transfer its property
substantially as an entirety to any municipal or public corporation, if payment
of the Bonds and the performance and observance of the agreements and covenants
of the Indenture are expressly assumed in writing by the surviving or successor
corporation, and if such action will not result in the interest income on the
Bonds becoming subject to Federal or Alabama income taxation.
Supplemental Indentures without Bondholders' Consent. The Board and the
Trustee may, at any time and from time to time and without the consent of the
holders of any of the Bonds, enter into such Supplemental Indentures as shall
not be inconsistent with the terms and provisions of the Indenture, for any one
or more of the following purposes:
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(a) To add to the covenants and agreements of the Board
therein contained other covenants and agreements thereafter to be
observed and performed by the Board, provided that such other covenants
and agreements shall not either expressly or impliedly limit or
restrict any of the obligations of the Board contained in the
Indenture;
(b) To cure any ambiguity or to cure, correct or supplement
any defect or inconsistent provision contained in the Indenture or in
any Supplemental Indenture or to make any provisions with respect to
matters arising under the Indenture or any Supplemental Indenture for
any other purpose if such provisions are necessary or desirable and are
not inconsistent with the provisions of the Indenture or any
Supplemental Indenture and do not adversely affect the interests of the
holders of the Bonds; or
(c) To subject to the lien of the Indenture and the pledge
therein contained additional property and the revenues therefrom.
Supplemental Indentures Requiring Bondholders' Consent. The Board and
the Trustee may, at any time and from time to time, with the written consent of
the holders of a majority in principal amount of the outstanding Bonds, enter
into such Supplemental Indentures as shall be deemed necessary or desirable by
the Board and the Trustee for the purposes of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions
contained in the Indenture or in any Supplemental Indenture; provided that,
without the written consent of the holder of each Bond affected, no reduction in
the principal amount, rate of interest on, or the premium payable upon the
redemption, any Bond shall be made; and provided further that without the
written consent of the holders of all the Bonds, none of the following shall be
permitted:
(a) An extension of the maturity of any installment of
principal of or interest on any Bond;
(b) The creation of a lien or charge on the Project or the
rentals or other receipts from the Project ranking prior to or on a
parity with the pledge and assignment thereof and the lien or charge
thereon contained in the Indenture;
(c) The establishment of preferences or priorities as between
the Bonds; or
(d) A reduction in the aggregate principal amount of Bonds the
holders of which are required to consent to such Supplemental
Indenture.
Amendment of the Lease and the Bond Guaranty. The Indenture permits the
Board, with the written consent of the Trustee but without the consent of or any
notice to any holder of any Bond, to amend the Lease for the purpose of (a)
identifying more precisely the Equipment, and (b) curing ambiguities, defects or
inconsistent provisions or making any provision with respect to matters arising
under the Lease for any other purpose if such provisions are necessary and
desirable, are not inconsistent with the provisions of the Lease or the
Indenture and do not, in the sole judgment of the Trustee, adversely affect the
interest of the holders of the Bonds. The Indenture also permits the Board or
(in the case of the Bond Guaranty) the Trustee, with the written consent of the
holders of a majority in principal amount of the Bonds and the Trustee, to amend
the Lease to such extent as shall be deemed necessary or desirable by the Board
and the Trustee, except that, without the written consent of holders of all the
Bonds, no amendment shall, until the Bonds are fully paid, permit a reduction of
Basic Rent or amounts guaranteed under the Bond Guaranty or any change in the
due dates of Basic Rent or such amounts.
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<PAGE> 28
Credit Obligor Deemed Holder of Bonds for Certain Purposes. So long as
the Letter of Credit shall be in effect, and there is no default by the Credit
Obligor thereunder or all of the Bonds constitute Pledged Bonds, the Credit
Obligor shall be deemed to be the Holder of all the Bonds for the purpose of
giving any consent to any amendment, waiver, change or modification of the
Indenture or the Lease or the Bond Guaranty; provided, however, that any such
amendment, change or modification of the type described in the provisos to the
sentence titled "Supplemental Indentures Requiring Bondholder Consent" shall
also require the consent of the actual Holders of the Bonds as therein
specified.
Default and Remedies. The following constitute events of default
hereunder under the Indenture:
(a) Failure by the Board to pay the principal of or the
interest or premium, if any, on any Bond as and when the same become
due as therein or in the Indenture (whether such shall become due by
maturity or otherwise);
(b) A default by the Company under the Lease or the Bond
Guaranty and the continuance thereof after the grace period, if any,
provided therein;
(c) The failure by the Board to perform and observe any of the
agreements and covenants on its part herein contained other than (i)
its agreement to pay the principal of and the interest and premium, if
any, on the Bonds, and (ii) any other agreement with respect to which
its failure to perform is the result of an "event of default" by the
Company under the Lease after sixty (60) days' written notice to it of
such failure made by the Trustee or by the Holders of not less than
twenty-five per cent (25%) in principal amount of the Bonds then
outstanding and secured hereby, unless during such period or any
extension thereof the Board has commenced and is diligently pursuing
appropriate corrective action;
(d) A failure to pay the purchase price of any Bond required
to be purchased as and when the same has become due and payable;
(e) Receipt by the Trustee of notice from the Credit Obligor
or the Confirming Bank of the occurrence of an "Event of Default" under
the Reimbursement Agreement accompanied by a demand that the principal
of and the interest accrued on the Bonds be declared immediately due
and payable;
(f) An Act of Bankruptcy with respect to the Company or
the Board; or
(g) An Act of Bankruptcy with respect to the Credit Obligor or
the Confirming Bank, or the wrongful dishonor or repudiation of the
Letter of Credit by the Credit Obligor.
Upon any default in any one of the ways defined above, the
Trustee shall have the following rights and remedies:
(A) Acceleration. Subject to (D) below and the provisions for
waiver summarized elsewhere, upon the occurrence of (i) any event of
default under subsections (b), (c) or (f) above, the Trustee may, and
at the written request of the Holders of not less than twenty-five per
cent (25%) in Outstanding principal amount of Bonds shall, or (ii) any
event of default under subsections (a), (d), (e) or (g) above, the
Trustee shall, by notice in writing delivered to the Board, the
Company, the Credit Obligor, the Remarketing Agent, the Tender Agent
and the Paying Agent declare the principal of all Bonds and the
interest accrued thereon to the date of declaration of such
acceleration immediately due and payable.
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Upon any acceleration hereunder, the Trustee shall immediately declare
the payments required to be made by the Company under the Lease to be
immediately due and payable in accordance with the Lease and if the
Letter of Credit is in effect, shall draw moneys under the Letter of
Credit for the payment of the Bonds to the fullest extent permitted by
the Letter of Credit. Upon the payment by the Credit Obligor of the
amount so drawn under the Letter of Credit and the payment in full of
the principal of and the interest and premium, if any, on the
Outstanding Bonds, the Trustee shall at the request of the Credit
Obligor and after deducting all proper costs, expenses and liabilities
incurred and disbursements made by the Trustee under the Indenture, pay
to the Credit Obligor any amounts on deposit in the Debt Service Fund
which are not required to pay the principal of and the interest and
premium, if any, on the Bonds.
(B) Possession of Project. The Trustee shall have the power to
require the Board to surrender possession of the Project to it, and the
Board shall, upon demand so to do by the Trustee, forthwith surrender
to the Trustee actual possession of the Project or such part or parts
thereof as the Trustee may designate, and the Trustee shall take
possession thereof and may wholly exclude the Board and its agents and
servants therefrom. The Trustee shall thereafter operate and manage the
same by its chosen representatives with power to make, at the expense
of the trust estate, such repairs, replacements, alterations, additions
or improvements thereto as it may consider advisable, to collect the
income therefrom and to pay all proper charges and maintenance expenses
thereof, including all proper disbursements by the Trustee.
(C) Other Remedies. The Trustee shall have the power to
proceed with any other right or remedy independent of or in aid of the
foregoing powers, as it may deem best, including the right to secure
specific performance by the Board of any agreement on its part herein
contained.
(D) Rights of Credit Obligor. Anything in (A), (B), or (C)
above to the contrary notwithstanding, so long as the Letter of Credit
is in effect and the Credit Obligor has honored all proper drawings
under the Letter of Credit or all Bonds constitute Pledged Bonds,
without the prior written consent of the Credit Obligor, the Trustee
shall not have the right to declare, either on its own or with the
consent of Holders of Bonds, the principal of all Bonds or to pursue
any remedy available to it under (B) or (C) above and the interest
accrued thereon to become immediately due and payable as a result of
the occurrence of an Event of Default under (b), (c) or (f) above, and
any remedy so pursued by the Trustee where such consent is necessary
shall be at the direction of the Credit Obligor.
Remedies Vested in Trustee; Limitation on Bondholders' Suits. All
remedies under the Indenture are vested exclusively in the Trustee for the equal
and pro rata benefit of all the holders of the Bonds and (to the extent therein
provided) for the benefit of the Credit Obligor, unless the Trustee refuses or
neglects to act within a reasonable time after written request so to act
addressed to the Trustee by the holders of at least 25% in principal amount of
the outstanding Bonds, accompanied by indemnity satisfactory to the Trustee, in
which event, subject to the rights of the Credit Obligor, the holder of any of
the Bonds may thereupon so act in the name and behalf of the Trustee or may so
act in his own name in lieu of action by or in the name and behalf of the
Trustee. Except as above provided, no holder of any of the Bonds shall have the
right to enforce any remedy under the Indenture, and then only for the equal and
pro rata benefit of the holders of all the Bonds. Notwithstanding any other
provision of the Indenture, the right of the holder of any Bond, which is
absolute and unconditional, to receive payment of the principal of and the
interest on such Bond on or after the due date thereof, but solely from the
rentals and other receipts as therein expressed, or
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to institute suit for the enforcement of such payment on or after such due date,
or the obligation of the Board, which is also absolute and unconditional, to
pay, but solely from said rentals or receipts, the principal of and interest on
the Bonds to the respective holders thereof at the time and place in said Bonds
expressed, shall not be impaired or affected without the consent of such holder.
Waivers of Default. The Trustee may, with the consent of the Credit
Obligor, waive any default and its consequences and rescind any declaration of
maturity of principal and shall do so upon the written request of the Credit
Obligor or (if no Letter of Credit is in effect and less than all the Bonds
constitute Pledged Bonds) the holders of a majority in principal amount of the
outstanding Bonds, subject to certain limitations in the case of a default
pertaining to the payment of maturing principal or interest or the purchase
price of any Bond required to be purchased.
Defeasance; Satisfaction of Indenture. The Indenture provides that
whenever the entire indebtedness secured by the Indenture shall have been fully
paid, the Trustee shall cancel and discharge the lien of the Indenture. For
purposes of the Indenture, any Bond shall be deemed to have been paid if, during
any Term Rate Period, a trust for the payment of all remaining debt service on
such Bond shall have been established with the Trustee and all Bonds to be
retired with funds from such trust either mature or will be called for
redemption on or before the day immediately following such Term Rate Period.
Such trust may consist of any combination of cash and/or Federal Securities, and
the anticipated income from such Federal Securities may be included in the
calculation of the required deposit to such trust. If a trust for payment of the
Bonds is established, the Trustee must receive an opinion of counsel experienced
in bankruptcy matters stating in effect that upon the occurrence of an Act of
Bankruptcy with respect to the Board or the Company, money and investments in
such trust will not be subject to any preference claim under the Federal
Bankruptcy Code.
Duties and Limitation on Liability of Trustee. The Indenture provides
that the Trustee shall not be liable thereunder except for its non-compliance
with the provisions thereof, its willful misconduct or its gross negligence. The
Trustee may consult Counsel on any matters connected with the Indenture and
shall not be answerable for any action taken or failure to take any action in
good faith on the advice of Counsel, provided that its action or inaction is not
contrary to any express provision of the Indenture. The Indenture contains other
broad exculpatory provisions for the benefit of the Trustee, all of which are
also available to the Tender Agent.
Trustee May File Claims. The Trustee may at any time file a claim in
its own name for the benefit of the holders of the Bonds in any court proceeding
where any such claim may be permitted or required. The holders of the Bonds are
deemed to have constituted and appointed the Trustee as their
irrevocable agent and attorney-in-fact for the purpose of filing any such claim,
but such authorization does not include the power to agree to accept new
securities of any nature in lieu of the Bonds or to alter the terms of the
Bonds.
Resignation and Discharge of Trustee. The Trustee may resign and be
discharged of the trust created in the Indenture upon written notice specifying
the effective date of such resignation, such notice to be given to the Board and
the holders of the Bonds. The effective date of such resignation shall be at
least 30 days after the notice is first given unless coincident with the
appointment by the holders of the Bonds of a successor trustee, but no
resignation shall be effective until the appointment of a successor. The Trustee
may be removed at any time by written instruments signed by the holders of a
majority in principal amount of the Bonds outstanding.
Appointment of Successor Trustee. If the Trustee resigns, is removed or
placed by governmental authority under the control of a receiver or otherwise
becomes incapable of acting, a successor may be appointed by a written
instrument signed by the Credit Obligor and the holders of a majority in
principal amount of the Bonds then outstanding and in the interim by an
instrument executed by the Board.
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Trustee Authorized to Pay Certain Claims. The Trustee may under certain
circumstances (but is not required to) pay certain charges or pay for insurance
on the Project. Any sums so expended by the Trustee shall bear interest at a per
annum rate equal to the prime rate plus 2% and shall be entitled to priority of
payment over debt service on the Bonds except with respect to moneys drawn under
the Letter of Credit.
THE BOND GUARANTY
This summary is not a complete recital of the terms of the Bond
Guaranty and reference is made to the Bond Guaranty in its entirety.
In the Bond Guaranty the Company will unconditionally guarantee to the
Trustee for the benefit of the holders from time to time of the Bonds (a) the
full and prompt payment of the principal of the Bonds and the premium, if any,
payable on redemption thereof when and as the same shall become due, whether at
the stated maturity thereof, by acceleration, call for redemption or otherwise
and (b) the full and prompt payment of the interest on the Bonds when and as the
same shall become due.
The right to enforce the Bond Guaranty is vested exclusively in the
Trustee for the equal and pro rata benefit of all holders at any time of the
Bonds, unless the Trustee refuses or neglects to act within a reasonable time
after being requested in writing so to do by the holders of 25% in aggregate
principal amount of the Bonds then outstanding and after being furnished
satisfactory indemnity, in which event the holder of any of the Bonds may
thereupon so act in the name and behalf of the Trustee.
THE LETTER OF CREDIT AND THE CONFIRMATION
This summary is not a complete recital of the terms of the Letter of
Credit and the Confirmation, to which, in their entirety, reference is made for
the complete provisions thereof.
THE LETTER OF CREDIT
General Description. The Letter of Credit will be an irrevocable
obligation of the Credit Obligor. The Letter of Credit will authorize the
Trustee to draw an amount not exceeding $5,302,302 (such amount, as reduced from
time to time and as reinstated from time to time, as described below, being
referred to in the Letter of Credit as the "Stated Amount"). Of the Stated
Amount, up to $5,225,000, which is an amount equal to the principal amount of
the Bonds (the "Principal Portion"), may be drawn with respect to payment of the
unpaid principal amount of the Bonds or payment of the principal portion of the
purchase price of Tendered Bonds and up to $77,302, which is the maximum amount
of interest payable on the Bonds at the rate of 12% per annum for a period of 45
days, computed on the basis of a 365-day year (the "Interest Portion"), may be
drawn with respect to payment of accrued but unpaid interest on the Bonds, or
payment of the interest portion of the purchase price of Tendered Bonds.
Reductions in Stated Amount and Reinstatement. Multiple drawings may be
made under the Letter of Credit, provided that drawings may not, in the
aggregate, exceed the Stated Amount. The Stated Amount will be reduced as
follows:
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(1) Payment of drawings with respect to principal due upon
maturity, redemption or acceleration of the Bonds shall reduce the
Principal Portion of the Stated Amount by a like amount, without
reinstatement.
(2) Payment of drawings with respect to interest due on the
Bonds shall reduce the Interest Portion of the Stated Amount by a like
amount, subject to reinstatement as described below.
(3) Payment of drawings with respect to the purchase price of
Tendered Bonds shall reduce the Principal Portion of the Stated Amount,
to the extent of the Principal Portion of the purchase price so drawn,
and shall reduce the Interest Portion of the Stated Amount, to the
extent of the Interest Portion of the purchase price so drawn, in each
case subject to reinstatement as described below.
(4) At any time after the principal amount of the Bonds
outstanding is reduced as a result of payment of the principal of Bonds
due upon maturity or redemption, the Interest Portion of the Stated
Amount may be reduced by delivery to the Credit Obligor of written
notice from the Trustee certifying the maximum amount of interest that
would be payable on Bonds then outstanding for a period of 45 days at
the rate of 12% per annum, computed on the basis of a 365-day year.
Upon receipt by the Credit Obligor of such notice, the Interest Portion
of the Stated Amount shall be reduced to the maximum interest coverage
so certified and shall not thereafter be increased or reinstated to an
amount in excess of such maximum interest coverage.
At the close of business on the 10th day following a draw for payment
of regularly scheduled interest due on the Bonds the Interest Portion of the
Stated Amount will automatically be reinstated by the amount of such drawing
unless prior to the close of business on such 10th day the Trustee shall receive
written notice from the Credit Obligor that an event of default, as defined in
the Reimbursement Agreement, has occurred and is continuing and directing that
the principal of all the Bonds and the interest accrued thereon be declared
immediately due and payable.
Upon payment by the Trustee to the Credit Obligor of the amount drawn
to pay the purchase price of Tendered Bonds or upon receipt by the Trustee of
written notice from the Credit Obligor that it has been reimbursed for the
amount of such drawing, (i) the Principal Portion shall be reinstated by the
amount of the principal portion of the purchase price of such Tendered Bonds and
(ii) the Interest Portion shall be reinstated by the amount of the interest
portion of the purchase price of such Tendered Bonds.
Termination. The Letter of Credit will terminate upon the earliest of
(a) the making of the final drawing available to be made under the Letter of
Credit, (b) receipt by the Credit Obligor of a certificate from the Trustee
stating that the Bonds have been fully paid, or provisions for such payment have
been made, in accordance with the terms of the Indenture, or that the conditions
precedent to the acceptance of a Substitute Letter of Credit have been
satisfied, and (c) the close of the Credit Obligor's business on May 15, 1998.
If by March 15, 1998 and by each March 15 thereafter, the Trustee has not
received notice from the Credit Obligor that the Stated Expiration Date of the
Letter of Credit will not be extended, the then effective Stated Expiration Date
shall automatically be extended by a period of one year; provided, however, that
the expiration date shall not in any event be later than May 15, 2007.
Substitute Letter of Credit. The Company may, at its option, provide
for the delivery to the Trustee of an irrevocable letter of credit (a
"Substitute Letter of Credit") in substitution for the Letter of Credit then in
effect, provided that
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(1) Such Substitute Letter of Credit must be substantially in
the same form and of the same tenor as the initial Letter of Credit,
except that such Substitute Letter of Credit must provide for the
payment of interest on the Bonds (or the interest portion of the
purchase price of Bonds tendered, or deemed tendered, for purchase) at
the Maximum Rate, for whichever of the following periods shall be
applicable: (i) if such Substitute Letter of Credit is to be effective
during a Variable Rate Period, not less than 45 days, or (ii) if such
Substitute Letter of Credit is to be effective during a Term Rate
Period, a number of days not less than the sum of 15 days plus the
maximum number of days between Interest Payment Dates with respect to
such Term Rate Period.
(2) If such Substitute Letter of Credit is being delivered in
connection with a conversion of the interest rate to a Term Rate, the
effective date shall be not later than the Conversion Date, and the
expiration date shall be no sooner than the 15th day following the
expiration of the Term Rate Period commencing on the Conversion Date.
(3) Such Substitute Letter of Credit must provide for payment
of the maximum redemption premium payable with respect to the Bonds.
(4) Such Substitute Letter of Credit must have a Stated
Expiration Date that is (i) the 15th day of a calendar month and (ii)
not sooner than one year after its effective date; provided, however,
that any Substitute Letter of Credit that is to be substituted for an
existing Letter of Credit that is effective during a Term Rate Period
must have a Stated Expiration Date not sooner than the Stated
Expiration Date of such existing Letter of Credit.
(5) If any Rating Agency maintains a rating with respect to
the Bonds at the time of delivery of such Substitute Letter of Credit
to the Trustee, the Trustee must receive written evidence from each
such Rating Agency to the effect that the substitution of the proposed
Substitute Letter of Credit will not, by itself, result in a reduction
or withdrawal of its rating then assigned to the Bonds.
(6) The Trustee must receive an opinion of counsel for the
issuer of such Substitute Letter of Credit stating in effect that such
Substitute Letter of Credit is a valid and binding obligation of the
issuer thereof.
The administrative provisions of any Substitute Letter of Credit may be
different from those summarized above with respect to the initial Letter of
Credit.
The Bonds are subject to a Mandatory Tender prior to the expiration of
any Letter of Credit then in effect. See "THE BONDS - Mandatory Tenders".
Upon the acceptance of a Substitute Letter of Credit by the Trustee,
references in the Indenture, the Lease and the Bond Guaranty to the "Credit
Obligor" shall be deemed to mean the issuer of such Substitute Letter of Credit,
references to the "Reimbursement Agreement" shall be deemed to mean the
instrument pursuant to which the Substitute Letter of Credit is issued, and
references to the "Mortgage" shall be deemed to mean the instrument (if any)
securing the Company's obligations with respect to the Substitute Letter of
Credit.
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THE CONFIRMATION
The Indenture contains the following provisions, among others, with
respect to the Confirmation:
(1) In the event that the Trustee receives a notice from the Credit
Obligor to the effect that the Credit Obligor has in effect a short-term rating
from Moody's Investors Service of not less than P-1 and a short-term rating from
S&P of not less than A-1 (which notice shall be accompanied by evidence of the
effectiveness of both such ratings and evidence to the effect that the ratings
on the Bonds will not be reduced or withdrawn as a result of the termination of
the Confirmation), and as a result thereof the Credit Obligor directs that the
Confirmation be terminated, the Trustee shall surrender the Confirmation to the
Confirming Bank 10 days after receipt of such notice.
(2) There may be substituted for any Confirmation then in effect a
confirmation having different terms or issued by another confirming bank, but
any such substitution shall be deemed to be the delivery of a Substitute Letter
of Credit.
(3) Except as otherwise provided above, the extension of the expiration
date of the Letter of Credit without a corresponding extension of any
Confirmation then in effect shall be deemed to be the delivery of a Substitute
Letter of Credit to which the provisions of the Indenture apply. The extension
of the Confirmation shall not be considered the delivery of a Substitute Letter
of Credit.
(4) So long as the Confirmation shall be effective, in the event of an
Act of Bankruptcy with respect to the Credit Obligor or in the event the Credit
Obligor repudiates the Letter of Credit or wrongfully dishonors a draw made
under the Letter of Credit, the Trustee shall immediately draw upon the
Confirmation in accordance with its terms and the provisions of the Indenture.
The Confirmation provides that it will be an irrevocable obligation of
the Confirming Bank, and will be subject to reduction and reinstatement in the
same manner as the Letter of Credit. The Confirmation will automatically expire
on the earliest of (i) May 15, 1998, (ii) the termination of the Letter of
Credit, or (iii) the surrender by the Trustee of the Confirmation; provided,
however, that on each March 15, beginning March 15, 1998 (each such date being
referred to as an "Extension Date"), the expiration date of the Confirmation
will be extended for one year unless the Confirming Bank sends to the Trustee
written notice prior to such Extension Date stating that the expiration date
shall not be so extended; and provided further than the expiration date shall
not in any event be later than May 15, 2007.
THE REIMBURSEMENT AGREEMENT
The following summarizes certain provisions of the Reimbursement
Agreement between the Company and the Bank pursuant to which the Letter of
Credit is issued. Reference is hereby made to the Reimbursement Agreement for
the detailed provisions thereof.
Reimbursement of Bank. The Reimbursement Agreement provides, among
other things, for the reimbursement to the Bank of certain amounts drawn under
the Letter of Credit. Under the Reimbursement Agreement, the Company is required
to reimburse fully the Bank for each drawing made by the Trustee with respect to
the principal, redemption or purchase price of or interest on the Bonds and
premiums, if any, and all such reimbursements are to be made in accordance with
the provisions of the Reimbursement Agreement.
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Fees, Commissions and Expenses. Pursuant to the Reimbursement
Agreement, the Company agrees to pay to the Bank, among other things, a
commission based on the amount available to be drawn under the Letter of Credit
and certain expenses incurred in maintaining the Letter of Credit and in
enforcing the Bank's right under the Reimbursement Agreement. Certain costs and
expenses (including those which would result from a change in law, regulation or
interpretation thereof) incurred by the Bank relative to the Letter of Credit or
the Reimbursement Agreement will also be paid by the Company along with taxes
and fees, if any, payable in connection with the execution, delivery, filing and
recording required by the Reimbursement Agreement, all subject to the terms and
conditions set forth in the Reimbursement Agreement.
Certain Affirmative and Negative Covenants. The Company covenants in
the Reimbursement Agreement, among other things, to submit to the Bank certain
financial and other reports and information and notices of Events of Default
under the Reimbursement Agreement; to take certain actions in connection with
the construction and operation of the Project; to cause optional redemption of
the Bonds according to the schedule set forth in the Reimbursement Agreement;
and to comply with the provision of the credit agreement between the Company,
certain related parties and the Bank, which credit agreement contains
affirmative and negative covenants requiring the Company, among other things,
not to (i) permit liens on its property; (ii) incur indebtedness except for
certain types of indebtedness; (iii) furnish the Bank with any certificate or
document that contains any untrue statement of material fact or omits to state a
material fact necessary to make such document or certificate not misleading; and
(iv) merge or consolidate or sell or dispose of certain assets, except as
permitted in the Reimbursement Agreement. The Company also covenants, among
other things, not to, without prior written consent of the Bank or as permitted
by the Reimbursement Agreement, amend the Indenture and the Lease.
The covenants are solely for the benefit of the Bank. The Bank may
waive any such covenants or certain other provisions of the Reimbursement
Agreement and may agree with the Company to amend or add other covenants or
provisions without the consent of any other party. The Bondholders will have no
right or obligations as a result of such covenants or provisions or any
amendments or waivers thereof. Failure by the Company to comply with the
covenants in the Reimbursement Agreement could result in a default under the
Reimbursement Agreement and an acceleration of the principal and interest of the
Bonds.
Events of Default. The occurrence of any of certain events (a general
summary of which follows) constitutes an Event of Default under the
Reimbursement Agreement unless waived by the Bank or amended by agreement of the
Bank and the Company:
(1) Any representation or warranty made by the Company in the
Reimbursement Agreement shall prove to have been incorrect in any
material respect when made; or
(2) The Company shall fail to pay when due any amount
specified in the Reimbursement Agreement; or
(3) The Company shall fail to perform or observe any of its
obligations or covenants under, or shall fail to comply with any of the
provisions of the Reimbursement Agreement and, in certain cases,
continuation of such failure beyond an applicable period of cure; or
(4) Any material provision of the Reimbursement Agreement
shall at any time for any reason cease to be valid and binding on the
Company or shall be declared to be null and void, or the validity or
enforceability thereof against the Company shall be contested by the
Company or any governmental agency or authority, or the Company shall
deny that it has any further liability or obligation under the
Reimbursement Agreement; or
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<PAGE> 36
(5) An Event of Default under and as defined in the Indenture
or the Credit Agreement between the Company and the Bank, regardless of
whether the Credit Agreement has terminated.
A DEFAULT UNDER THE REIMBURSEMENT AGREEMENT COULD RESULT IN THE ACCELERATION OF
ALL PRINCIPAL AND INTEREST ON THE BONDS AND THE EXERCISE OF ALL AVAILABLE
REMEDIES THEREAFTER.
Indemnification of the Bank. The Company agrees in the Reimbursement
Agreement to indemnify and hold the Bank harmless from certain claims, damages,
losses, liabilities, costs or expenses which arise by reason of certain untrue
or alleged untrue statements or omissions of certain material statements in the
Placement Memorandum and in connection with the execution and delivery or
transfer of, or payment or failure to pay under, the Letter of Credit. There
are, however, specific limitations and qualifications on the Company's duty to
indemnify and hold the Bank harmless which are set forth in the Reimbursement
Agreement.
THE MORTGAGE
This summary is not a complete recital of the terms of the Mortgage and
reference is made to the Mortgage in its entirety.
As security for the Company's obligations under the Reimbursement
Agreement, the Board and the Company will enter into the Mortgage in favor of
the Credit Obligor, whereby the Credit Obligor will be granted a lien on, and
security interest in, the Project, the rights of the Board and the Company under
the Lease (except for certain rights personal to the Board), money and
investments in the Special Funds established under the Indenture (subject to the
prior lien of the Indenture with respect to the Special Funds and provisions of
the Indenture permitting the application of money in the Special Funds for the
purposes and on the terms and conditions therein set forth in the Indenture),
all subleases and sublease rentals with respect to the Project, and certain
other property of the Company. The Mortgage secures only obligations of the
Company with respect to the initial Letter of Credit; the provisions of any
instrument securing the Company's obligations with respect to a Substitute
Letter of Credit may be different from the Mortgage.
TRUSTEE
LaSalle National Bank is the Trustee under the Indenture. A successor
trustee may be appointed in accordance with the terms of the Indenture. The
principal corporate trust office of the Trustee is located at 135 South LaSalle
Street, Suite 1825, Chicago, Illinois 60603, Attention: Corporate Trust
Department.
REMARKETING AGENT
LaSalle National Bank is the Remarketing Agent under the Remarketing
Agreement. A successor Remarketing Agent may be appointed in accordance with the
terms of the Remarketing Agreement and the Indenture. The principal office of
the Remarketing Agent is located at 181 West Madison Street, Suite 3200,
Chicago, Illinois 60602, Attention: Capital Markets Group.
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<PAGE> 37
RATING
Based on the support for payment of principal, purchase price and
interest provided by the Letter of Credit issued by the Credit Obligor and
confirmed by the Confirming Bank, the Bonds have been rated AA-/A-1+ by Standard
& Poor's ("S&P"). No application has been made to any other rating agency.
Explanation of the significance of such rating may be obtained from S&P at 25
Broadway, New York, New York 10004. Such rating expresses only the view of S&P.
There is no assurance that such rating will continue for any period of time or
that it will not be revised or withdrawn entirely if, in the judgment of S&P,
circumstances so warrant.
The rating by S&P is not a recommendation to buy, sell or hold the
Bonds, and such rating may be subject to revision or withdrawal at any time by
such rating agency. Any downward revision or withdrawal of such rating may have
an adverse effect on the market price of the Bonds.
CONTINUING INFORMATION
The Issuer is obligated to make payments on the Bonds solely and only
from moneys paid by the Company pursuant to the Lease and from payments made
pursuant to the Letter of Credit. The Issuer's own current and continuing
financial condition is not material to an investment in the Bonds.
The Company makes no representation concerning its financial condition,
the viability of the Project or any other matter relating to its credit or
operating condition. In addition, no continuing disclosure will be made relating
to the Company or the Project. Potential investors should look solely to the
credit of the Credit Obligor and the Confirming Bank in determining whether to
make an investment in the Bonds.
The Company is not obligated under the Lease or otherwise, and the
Issuer is not obligated under the Indenture or otherwise, to furnish the Trustee
or any Bondholder or Beneficial Owner with any continuing financial or other
information pertaining to the Issuer or the Company.
TAX MATTERS
Bradley Arant Rose & White LLP, bond counsel, if of the opinion that,
under the Code, as presently construed and administered, and assuming compliance
by the Company with the Compliance Covenants (see "THE LEASE - Concerning the
Tax-Exempt Nature of the Interest Income on the Bonds" above), the interest
income on the Bonds will be excludable from gross income of the recipient
thereof for federal income tax purposes pursuant to the provisions of Section
103(a) of the Code, except with respect to any Bond, for any period during which
it is held by a "substantial user" of the Project or a "related person", as
those terms are used or defined in Section 147(a) of the Code, but the interest
income on the Bonds will, under existing statutes, be includable in gross income
of the recipient thereof for federal income tax purposes (a) in the event the
limit on certain specified capital expenditures and bonds issued that is
specified in Section 144(a)(4) of the Code is hereafter exceeded, or (b) in the
event that Section 144(a) of the Code shall cease to be applicable to the Bonds
as a result of Section 144(a)(10) of the Code. Bond counsel is further of the
opinion, however, that the interest income on the Bonds will be included as an
item of tax preference in alternative minimum taxable income for the purpose of
computing the alternative minimum tax imposed by Section 55 of the Code and in
modified alternative minimum taxable income for the purpose of computing
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<PAGE> 38
the environmental tax imposed by Section 59A of the Code. Bond Counsel will
express no opinion with respect to the Federal tax consequences to the
recipients of the interest income on the Bonds under any provision of the Code
not referred to above.
Prospective purchasers of the Bonds should be aware that (i) Section
265 of the Internal Revenue Code denies a deduction for interest on indebtedness
incurred or continued to purchase or carry the Bonds or, in the case of a
financial institution, that portion of such financial institution's interest
expense allocated to interest on the Bonds, (ii) with respect to insurance
companies subject to the tax imposed by Section 831 of the Internal Revenue
Code, Section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of
the sum of certain items, including interest on the Bonds, (iii) interest on the
Bonds earned by some corporations could be subject to the environmental tax
imposed by Section 59A of the Internal Revenue Code, (iv) interest on the Bonds
earned by certain foreign corporations doing business in the United States could
be subject to a branch profits tax imposed by Section 884 of the Internal
Revenue Code, (v) passive investment income, including interest on the Bonds,
may be subject to federal income taxation under Section 1375 of the Internal
Revenue Code for Subchapter S corporations having Subchapter C earnings and
profits at the close of the taxable year if greater than 25% of the gross
receipts of such Subchapter S corporation is passive investment income, and (vi)
Section 86 of the Internal Revenue Code requires recipients of certain Social
Security and certain Railroad Retirement benefits to take into account, in
determining gross income, receipts or accruals of interest on the Bonds. Any
purchaser of the Bonds who might be affected by any of these provisions of the
Internal Revenue Code should consult his own tax advisor about the effect of
such provisions as applied to the purchaser.
Bond counsel is further of the opinion that the interest income on the
Bonds is exempt from present Alabama income taxation.
LEGAL MATTERS
Legal matters incident to the issuance of the Bonds are subject to the
approving opinion of Bradley Arant Rose & White LLP, Bond Counsel. It is
anticipated that the approving opinion of Bond Counsel will be substantially in
the form attached hereto as Appendix A. Bond Counsel will state in its approving
opinion that it expresses no opinion with respect to the accuracy or
completeness of this Placement Memorandum except for those portions hereof
entitled "DEFINITIONS," "THE BOARD," "THE BONDS," "THE LEASE," "THE
INDENTURE,""THE BOND GUARANTY,""THE LETTER OF CREDIT AND THE CONFIRMATION,"
"THE MORTGAGE," and "TAX MATTERS," which portions, in the opinion of Bond
Counsel, fairly summarize the matters therein referred to.
Certain legal matters will be passed upon for the Company by Jaffe,
Raitt, Heuer & Weiss, Professional Corporation, Detroit, Michigan, for the
Credit Obligor by Bodman, Longley & Dahling LLP, Detroit, Michigan, and for the
Confirming Bank by Janet M. Knutel, Assistant Counsel, ABN AMRO North America,
Inc., the holding company of LaSalle National Bank.
PLACEMENT OF THE BONDS
The Bonds are intended to be exempt securities under the Securities Act
of 1933, as amended (the "1933 Act"), and the offer, sale and delivery of the
Bonds will not require registration under the 1933 Act or qualification of the
Indenture under the Trust Indenture Act of 1939, as amended.
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<PAGE> 39
LaSalle National Bank, the Placement Agent, has agreed to use its best
efforts to place the Bonds at a price of 100% of the aggregate principal amount
thereof, subject to various conditions. The nature of the Placement Agent's
obligation is such that the Placement Agent is obligated to place all of the
Bonds if any are placed. The Company will pay the Placement Agent $30,000 as a
placement fee in connection with the issuance and placement of the Bonds.
LITIGATION
There is no litigation pending in any court or, to the best knowledge
of the Issuer or the Company, threatened, questioning the existence of the
Issuer or the Company, respectively, or which would restrain or enjoin the
issuance or delivery of the Bonds, or which materially and adversely affects the
Company or the proceedings of the Issuer taken in connection with the Bonds or
the pledge or application of the revenues or other funds to be derived under the
Lease or which contests the powers or authority of the Issuer with respect to
the foregoing.
MISCELLANEOUS
Summaries of documents contained herein do not purport to be complete
and are expressly made subject to the exact provisions of the complete
documents. For details of all terms and conditions, prospective purchasers of
the Bonds are referred to the complete documents which may be reviewed during
regular business hours at the office of the Placement Agent or, after the
issuance of the Bonds, the Trustee.
The delivery of this Placement Memorandum or any sale of the Bonds
described herein shall not, under any circumstances, create an implication that
there has been no change in the business affairs or financial condition of the
Company, the Credit Obligor or the Confirming Bank since the date hereof.
It is anticipated that a CUSIP identification number will be printed on
the Bond certificate delivered to DTC, but neither the failure to print such a
number on the Bond certificate (or any other Bonds if the Bonds are not then in
a Book Entry System) nor any defect in printing of such numbers shall constitute
cause for a failure or refusal by the purchaser thereof to accept delivery of
and pay for any Bonds.
The attached appendices are integral parts of this Placement Memorandum
and must be read together with all foregoing statements.
AUTHORIZATION
The delivery of this Placement Memorandum has been duly authorized by
the Issuer and the Company.
Dated: April 23, 1997
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
By: /s/ John E. Northcutt
--------------------------------------
Chairman of the Board of Directors
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<PAGE> 40
APPENDIX A
FORM OF APPROVING OPINION OF BOND COUNSEL
BRADLEY ARANT ROSE & WHITE LLP
2001 Park Place, Suite 1400
Birmingham, Alabama 35203-2736
April 23, 1997
The Industrial Development Board
of the City of Demopolis
Demopolis, Alabama
Ladies and Gentlemen:
We have examined certified copies of proceedings and other
documents showing the organization under the laws of Alabama of THE INDUSTRIAL
DEVELOPMENT BOARD OF THE CITY OF DEMOPOLIS (herein called the "Board"), together
with copies of proceedings of the Board and other documents submitted to us
pertaining to the issuance and validity of
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
Industrial Development Revenue Bonds, Series 1997
(McClain of Alabama, Inc. Project)
(herein called the "Bonds"). In rendering the opinion hereinafter expressed with
respect to the exclusion of the interest income on the Bonds from gross income
of the recipients thereof for federal income tax purposes, and the
inapplicability of (i) the registration requirements of the Securities Act of
1933, as amended, to the Bonds, and (ii) the qualification requirements of the
Trust Indenture Act of 1939, as amended, to the Indenture hereinafter referred
to, we have relied, in part, upon certain representations made by McClain of
Alabama, Inc. hereinafter referred to. The statements hereinafter made and the
opinions hereinafter expressed are based upon our examination of said
proceedings and documents and upon said representations.
The documents submitted to us show as follows:
(a) That the Bonds have been issued under the provisions of a
Trust Indenture dated as of April 1, 1997 (herein called the
"Indenture") from the Board to LaSalle National
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<PAGE> 41
The Industrial Development Board
of the City of Demopolis
April 23, 1997
Page 2
Bank, a national banking association, as trustee (in said capacity
herein called the "Trustee") with respect to the Project hereinafter
referred to;
(b) That the Board and McClain of Alabama, Inc., a corporation
organized under the laws of the State of Michigan (herein called the
"Company") have entered into a Lease Agreement dated as of April 1,
1997 (herein called the "Lease"), wherein the Board has agreed to lease
to the Company certain real property, including the manufacturing plant
located thereon and the machinery, equipment and other personal
property to be acquired and installed on the said real property (said
real property, said plant and said machinery, equipment and other
personal property being herein together called the "Project") for a
term extending until April 1, 2007;
(c) That in the Lease, the Company has made certain covenants
(herein called the "Compliance Covenants") to the effect that it will
comply with certain conditions to and requirements for the continued
exclusion from gross income of the recipients thereof of the interest
income on the Bonds;
(d) That the Company and the Trustee have entered into a Bond
Guaranty Agreement dated as of April 1, 1997 (herein called the "Bond
Guaranty"), under which the Company has unconditionally guaranteed to
the Trustee for the benefit of the holders from time to time of the
Bonds the full and prompt payment of the principal of and the interest
and premium (if any) on the Bonds;
(e) That Standard Federal Bank (herein called the "Credit
Obligor") has issued to the Trustee an Irrevocable Letter of Credit
(herein called "the Letter of Credit") with respect to the Bonds;
(f) That LaSalle National Bank (herein called the "Confirming
Bank") has issued to the Trustee an irrevocable confirmation of the
Letter of Credit (herein called the "Confirmation") with respect to the
Bonds;
(g) That the Company and Credit Obligor have entered into a
Reimbursement Agreement dated as of April 1, 1997 (herein called the
"Reimbursement Agreement"),
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<PAGE> 42
The Industrial Development Board
of the City of Demopolis
April 23, 1997
Page 3
pursuant to which the Company has agreed to reimburse the Credit
Obligor for amounts drawn under the Letter of Credit; and
(h) That the Board, the Company and the Credit Obligor have
entered into a Mortgage, Assignment of Leases and Security Agreement
dated as of April 1, 1997 (herein called the "Mortgage"), pursuant to
which the Board and the Company have mortgaged their interests in the
Project and the Lease to the Credit Obligor as security for the amounts
drawn under the Letter of Credit and the performance by the Company of
the other obligations to the Credit Obligor under the Reimbursement
Agreement.
We are of the following opinion:
(1) That the Board has been duly organized and is validly
existing as a public corporation pursuant to the Constitution and laws of the
State of Alabama and has corporate power under the laws of the State of Alabama,
including particularly the provisions of Article 4 of Chapter 54 of Title 11 of
the Code of Alabama 1975, as amended (herein called the "Authorizing Act") to
issue the Bonds, to execute and deliver the Bonds, the Lease, the Indenture and
the Mortgage and to perform its obligations under each thereof;
(2) That the Authorizing Act is valid under the Constitution
and laws of the State of Alabama and the Bonds have been issued in conformity
with the provisions of the Authorizing Act;
(3) That the Lease, the Indenture and the Mortgage have been
duly authorized, executed and delivered by the Board and are valid and binding
upon it and enforceable in accordance with their terms except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by usual equity principles which may limit the
specific enforcement under state law of certain remedies, but which do not
affect the validity of such documents and do not make inadequate other remedies
available to the holders of the Bonds for the enforcement of such obligations;
(4) That the Bonds have been duly authorized, sold, executed
and issued, in the manner provided by the applicable provisions of the
Constitution and laws of Alabama, are in due and legal form and evidence valid
and binding special obligations of the Board, enforceable in accordance with
their terms,
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<PAGE> 43
The Industrial Development Board
of the City of Demopolis
April 23, 1997
Page 4
payable, as to both principal and interest, solely out of the revenues and
receipts derived from the leasing or sale of the Project, as it may at any time
exist;
(5) That the Bonds are secured, pro rata and without
preference or priority of one over another by a valid pledge of the revenues and
receipts to be derived by the Board from the leasing or sale of theProject
(including specifically the rentals payable to the Board by the Company under
the Lease) and by the provisions of the Indenture;
(6) That the Bonds are exempt from registration under the
Securities Act of 1933 by virtue of the exemption afforded by Section 3(a)(2) of
the said Act, and the Indenture is exempt from qualification under the Trust
Indenture Act of 1939;
(7) That under presently existing law, the interest on the
Bonds is exempt from income taxation by the State of Alabama; and
(8) That under the Internal Revenue Code of 1986, as amended
(herein called "the Code"), as presently construed and administered, and
assuming continuing compliance by the Company with the Compliance Covenants, the
interest income on the Bonds will be excludable from gross income of the
recipients thereof for federal income tax purposes pursuant to the provisions of
Section 103(a) of the Code, except, with respect to any Bond, for any period
during which it is held by a "substantial user" of the Project or a "related
person", as those terms are used or defined in Section 147(a) of the Code, but
the interest income on the Bonds will, under existing statutes, be includable in
gross income of the recipients thereof for federal income tax purposes (i) in
the event the limit on certain specified capital expenditures and bonds issued
that is specified in Section 144(a)(4) of the Code is hereafter exceeded, or
(ii) in the event that Section 144(a) of the Code shall cease to be applicable
to the Bonds as a result of provisions of Section 144(a)(10) of the Code. We
call to your attention, however, that the interest income on the Bonds will be
included as an item of tax preference in alternative minimum taxable income for
the purpose of computing the alternative minimum tax imposed by Section 55 of
the Code. We express no opinion with respect to the federal tax consequences of
ownership of the Bonds under any other provision of the Code.
We have been engaged primarily for the purpose of preparing
certain documents and supporting certificates, reviewing the transcript of
proceedings pursuant to which the Bonds have been authorized to be issued and
rendering this opinion. Although we have assisted in the preparation of certain
portions of the Official Statement prepared with respect to the Bonds and are of
the opinion that the statements made under the captions "The Board", "The
Bonds", "The Lease", "The Indenture", "The Bond
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<PAGE> 44
The Industrial Development Board
of the City of Demopolis
April 23, 1997
Page 5
Guaranty", "The Letter of Credit and the Confirmation", "The Mortgage" and "Tax
Matters" summarize the matters therein referred to, we have not been requested
to check or verify, have not checked or verified and express no opinion with
respect to the adequacy, accuracy, completeness or fairness of any other
information contained in the Official Statement.
We have been furnished with and have relied upon an opinion of
Jaffe, Raitt, Heuer & Weiss, Professional Corporation, Detroit, Michigan, to the
effect that the Lease has been duly authorized, executed and delivered on behalf
of the Company and is valid and binding upon it.
We have been furnished with and have relied upon opinions of
Bodman, Longley & Dahling LLP, Detroit, Michigan, and Janet M. Knutel, Assistant
Counsel, ABN AMRO North America, Inc., the holding company of LaSalle National
Bank, to the effect that the Letter of Credit and the Confirmation have been
duly authorized, executed and delivered on behalf of the Credit Obligor and the
Confirming Bank, respectively, and are valid and binding upon them,
respectively.
We have not examined the title of the Board to the Project,
and therefore express no opinion thereon.
Yours very truly,
A-5
<PAGE> 45
APPENDIX B
STANDARD FEDERAL BANK
Standard Federal Bank (the "Bank") is a federally chartered savings
bank founded in 1893. Standard Federal Bancorporation, Inc., a Michigan
corporation ("Standard Federal") is the holding company for Standard Federal
Bank. The Bank's executive offices are located in Troy, Michigan. The Bank has
full-service Banking Centers and retail Home Lending Centers located in
Michigan, Indiana, Illinois and Ohio.
Standard Federal had consolidated assets of $15.7 billion at December
31, 1996. Based on total consolidated assets at December 31, 1996, Standard
Federal is the sixth largest publicly traded savings institution in the United
States and the largest savings institution headquartered in Michigan. With
deposits of $11.0 billion at December 31, 1996, Standard Federal has the largest
deposit base of all savings institutions headquartered in the Midwest.
On November 22, 1996, ABN AMRO North America, Inc. ("ABN AMRO") and
Standard Federal announced the execution of a definitive merger agreement,
whereby ABN AMRO will purchase all of the outstanding shares of Standard Federal
for $59.00 per share in cash.
Standard Federal's net income totaled $54.2 million for the year ended
December 31, 1996, compared to $119.5 million in 1995 and $119.0 million in
1994. The 1996 earnings reflect the after-tax cost of a one-time assessment,
mandated by federal law, of $43.8 million, for the recapitalization of the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.
Also reflected in the 1996 annual earnings is the effect of a change in
accounting for goodwill which resulted in a reduction of earnings and
unamortized goodwill of $43.0 million.
Standard Federal Bank's Annual Report on Form 10-K, as of the close of
business on December 31, 1996, as filed with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, is incorporated by reference in this Placement Memorandum and shall be
deemed a part hereof.
Standard Federal Bank will provide, without charge to any person to
whom a copy of this Placement Memorandum has been delivered, upon written
request of any such person, a copy of its Annual Report on Form 10-K. Written
requests for such copies should be delivered to Standard Federal Bank, 2600 West
Big Beaver Road, Troy, Michigan 48084, Attention: Commercial Banking Department.
B-1
<PAGE> 46
APPENDIX C
LASALLE NATIONAL BANK
LaSalle National Bank, with executive offices in Chicago, Illinois, is
a wholly owned subsidiary and a principal asset of LaSalle National Corporation,
a Delaware corporation ("LNC"). LNC is a wholly-owned subsidiary of ABN AMRO
North America, Inc., a Delaware corporation, which is a wholly-owned subsidiary
of ABN AMRO Holdings NV. LaSalle National Bank is a commercial bank offering a
wide range of banking and trust services to its customers in the Chicago
metropolitan area, throughout the United States and around the world. As of
December 31, 1996, LaSalle National Bank had total assets of $13.386 billion,
total deposits of $8.975 billion, total loans and lease finance assets, net of
the reserve for possible credit losses, of $8.276 billion, and total equity
capital of $843.589 million. LaSalle National Bank had net income for the year
ended December 31, 1996, of $126.605 and for the year December 31, 1995, of
$111.070 million.
LaSalle National Bank's Consolidated Reports of Condition and Income
for a Bank with Domestic and Foreign offices -- Office 031, as of the close of
business on December 31, 1996, as submitted to the Office of Comptroller of
Currency, are incorporated by reference in this Placement Memorandum and shall
be deemed a part hereof. In addition, all reports filed by LaSalle National Bank
pursuant to 12 U.S.C. ss. 324 after the date of this Placement Memorandum shall
be deemed to be incorporated in this Placement Memorandum by reference and shall
be deemed to be a part hereof from date of filing of any such report.
LaSalle National Bank will provide, without charge to any person to
whom a copy of this Placement Memorandum has been delivered, upon the written
request of any such person, a copy of any or all of the documents referred to
above which may have been or may be included in the Placement Memorandum by
reference, other than exhibits to such documents. Written requests for such
copies should be delivered to LaSalle National Bank, 135 South LaSalle Street,
Chicago, Illinois 60674, Attention: Commercial Lending.
C-1
<PAGE> 1
EXHIBIT 10.67
================================================================================
LEASE AGREEMENT
between
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
and
MCCLAIN OF ALABAMA, INC.
DATED AS OF APRIL 1, 1997
================================================================================
Pertaining to
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
Industrial Development Revenue Bonds
Series 1997
(McClain of Alabama, Inc. Project)
<PAGE> 2
LEASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
-----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Use of Phrases. . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations by the Board . . . . . . . . . . . . . . . . 9
Section 2.2 Representations and Warranties by the Company . . . . . . . 9
ARTICLE III
DEMISING CLAUSES
Section 3.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS AND
ACQUISITION OF EQUIPMENT
Section 4.1 Agreement to Construct Improvements and Acquire and
Install Equipment . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2 Agreement to Issue the Bonds . . . . . . . . . . . . . . . . 14
Section 4.3 No Warranty of Suitability by Issuer. Company Required to
Bear Certain Costs in Certain Events . . . . . . . . . . . . 14
Section 4.4 Company to Pursue Rights against Contractors, etc. . . . . . 15
ARTICLE V
DURATION OF TERM AND
RENTAL PROVISIONS
Section 5.1 Duration of Term . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.2 Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.3 Additional Rent - Fees and Expenses of Trustee
and Remarketing Agent . . . . . . . . . . . . . . . . . . . 16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.4 Additional Rent - Board's Expenses . . . . . . . . . . . . . 17
Section 5.5 Options to Prepay Basic Rent . . . . . . . . . . . . . . . . 17
Section 5.6 Mandatory Prepayment of Basic Rent in the
Event of a Determination of Taxability . . . . . . . . . . . 17
Section 5.7 Notice of Prepayment . . . . . . . . . . . . . . . . . . . . 18
Section 5.8 Redemption of Bonds With Prepayment Moneys . . . . . . . . . 18
Section 5.9 Obligation of Company Unconditional . . . . . . . . . . . . 18
ARTICLE VI
MAINTENANCE, TAXES AND INSURANCE
Section 6.1 Maintenance, Additions, Alterations and Improvements . . . . 19
Section 6.2 Removal of Equipment. . . . . . . . . . . . . . . . . . . . 20
Section 6.3 Taxes, Other Governmental Charges and Utility Charges . . . 23
Section 6.4 Insurance Required . . . . . . . . . . . . . . . . . . . . . 23
Section 6.5 Advances by Board or Trustee . . . . . . . . . . . . . . . . 24
ARTICLE VII
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
Section 7.1 Damage and Destruction Provisions . . . . . . . . . . . . . 25
Section 7.2 Condemnation Provisions . . . . . . . . . . . . . . . . . . 26
Section 7.3 Condemnation of Right to Use of Project for Limited
Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 7.4 Condemnation of Company-Owned Property . . . . . . . . . . . 27
Section 7.5 Provisions Relating to the Incurring of Certain
Expenses after Bonds Paid . . . . . . . . . . . . . . . . . 27
Section 7.6 Optional Application of Net Insurance Proceeds or Net
Condemnation Award . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII
PARTICULAR COVENANTS OF THE COMPANY
Section 8.1 General Covenants . . . . . . . . . . . . . . . . . . . . . 28
Section 8.2 Release and Indemnification Covenants . . . . . . . . . . . 28
Section 8.3 Inspection of Project . . . . . . . . . . . . . . . . . . . 30
Section 8.4 Agreement to Maintain Corporate Existence . . . . . . . . . 30
Section 8.5 Qualification in Alabama . . . . . . . . . . . . . . . . . . 31
Section 8.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . 31
Section 8.7 Concerning the Tax-Exempt Nature of the Interest
Income on the Bonds . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
ii
<PAGE> 4
ARTICLE IX
CERTAIN PROVISIONS RELATING
TO ASSIGNMENT, SUBLEASING AND TO THE BONDS
<TABLE>
<S> <C> <C>
Section 9.1 Provisions Relating to Assignment and Subleasing by
Company . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.2 Assignment of Lease by Board; Required Consents to
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 9.3 References to Bonds Ineffective After Bonds Paid . . . . . . 33
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default Defined . . . . . . . . . . . . . . . . . 34
Section 10.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . 35
Section 10.3 No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . 36
Section 10.4 Agreement to Pay Attorneys' Fees . . . . . . . . . . . . . . 36
Section 10.5 No Additional Waiver Implied by One Waiver . . . . . . . . . 37
ARTICLE XI
OPTIONS
Section 11.1 Option to Purchase After Payment of Bonds . . . . . . . . . 37
Section 11.2 Option to Terminate . . . . . . . . . . . . . . . . . . . . 37
Section 11.3 Option to Purchase Portions of Project Site . . . . . . . . 38
ARTICLE XII
MISCELLANEOUS
Section 12.1 Covenant of Quiet Enjoyment. Surrender of Project . . . . . 39
Section 12.2 Retention of Title to Project by Board. Grant of
Utility Easements. Connecting Utilities . . . . . . . . . . 39
Section 12.3 Interest Rate Limitation . . . . . . . . . . . . . . . . . . 39
Section 12.4 This Lease a Net Lease . . . . . . . . . . . . . . . . . . . 39
Section 12.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.6 Certain Prior and Contemporaneous Agreements Cancelled . . . 41
Section 12.7 Limited Liability of Board . . . . . . . . . . . . . . . . . 41
Section 12.8 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.10 Article and Section Captions . . . . . . . . . . . . . . . . 41
Section 12.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
Exhibit A - Description of Project Site
Exhibit B - Description of the Equipment
iii
<PAGE> 5
LEASE AGREEMENT between THE INDUSTRIAL DEVELOPMENT BOARD OF THE
CITY OF DEMOPOLIS, a public corporation organized under the laws of the State
of Alabama (the "Board") and MCCLAIN OF ALABAMA, INC., a corporation organized
under the laws of the State of Michigan (the "Company"),
R E C I T A L S:
Acting pursuant to an Interim Agreement hereinafter referred to,
the Board has heretofore acquired the real property hereinafter described and
the Company has commenced the construction of improvements to a manufacturing
plant located thereon and the acquisition and installation in said plant and
elsewhere on the said real property of certain items of machinery, equipment
and other personal property for use in the operation thereof. To finance the
cost of acquiring said real property, constructing said improvements and
acquiring and installing said machinery, equipment and other personal property,
the Board proposes to issue, at the request of the Company, $5,225,000
principal amount of its Industrial Development Revenue Bonds, Series 1997
(McClain of Alabama, Inc. Project). The Bonds will be issued under a Trust
Indenture dated as of April 1, 1997, from the Board to LaSalle National Bank, a
national banking association the principal corporate trust office of which is
located in the City of Chicago, Illinois. The said Trust Indenture is being
executed and delivered simultaneously with the delivery hereof, and the terms
and conditions thereof, including particularly and without limitation those
relating to the maturity date of the Bonds, the interest rates thereon and the
provisions for prepayment thereof prior to their final maturity, are hereby
made a part of this Lease Agreement as fully and completely as if set out
herein. To achieve certain of the objectives hereinabove outlined, the Board
and the Company have entered into this Lease Agreement.
NOW, THEREFORE, THIS AGREEMENT
W I T N E S S E T H:
That in consideration of the respective representations and
agreements herein contained, the parties hereto agree as follows:
1
<PAGE> 6
ARTICLE I
DEFINITIONS AND USE OF PHRASES
SECTION 1.1 DEFINITIONS. The following words and phrases and
others evidently intended as the equivalent thereof shall, in the absence of
clear implication herein otherwise, be given the following respective
interpretations herein:
"AFFILIATE" means any person, firm or corporation controlled by,
or under common control with, the Company and any person, firm or corporation
controlling the Company.
"AUTHORIZED BOARD REPRESENTATIVE" means the person or persons at
the time designated as such by written certificate furnished to the Company and
the Trustee, containing the specimen signature or signatures of such person or
persons and signed on behalf of the Board by the Chairman or the Vice Chairman
of the Directors.
"AUTHORIZED COMPANY REPRESENTATIVE" means the person or persons
at the time designated as such by written certificate furnished to the Board
and the Trustee, containing the specimen signature or signatures of such person
or persons and signed on behalf of the Company by the Chairman of its Board of
Directors, by its President, by any Vice President, by its Secretary or by its
Treasurer.
"AUTHORIZING ACT" means Article 4 of Chapter 54 of Title 11
(Sections 11-54-80 to 11-54-101, inclusive) of the Code of Alabama of 1975, as
amended.
"BASIC RENT" means (i) the moneys payable by the Company pursuant
to the provisions of Section 5.2 hereof, (ii) any other moneys payable by the
Company pursuant to this Lease to provide for the payment of the principal of
and the interest and premium (if any) on, or purchase price of, the Bonds
(other than the aforesaid moneys payable pursuant to Section 5.2 hereof), and
(iii) any other moneys payable by the Company pursuant to this Lease that are
herein referred to as Basic Rent.
"BOARD" means (i) The Industrial Development Board of the City of
Demopolis and its successors and assigns, and (ii) any public corporation
resulting from or surviving any consolidation or merger to which it or its
successors may be a party as provided in Section 8.6 of the Indenture.
2
<PAGE> 7
"BOND COUNSEL" means Independent Counsel whose experience in
matters relating to the issuance of obligations of states and their political
subdivisions is nationally recognized.
"BOND PAYMENT DATE" means each date (including any date fixed for
redemption of Bonds) on which Debt Service is payable on the Bonds.
"BOND PURCHASE FUND" means the Bond Purchase Fund created in
Section 7.2 of the Indenture.
"BONDS" means the Board's Industrial Development Revenue Bonds,
Series 1997 (McClain of Alabama, Inc. Project), authorized in Article III of
the Indenture to be issued in the aggregate principal amount of $5,225,000.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which banking institutions are closed in any of the following locations:
(i) the city in which the principal office of the Trustee is located, (ii) the
city in which the principal office of the Remarketing Agent is located, (iii)
the city in which the office of the Credit Obligor where drawings under the
Letter of Credit are to be made is located, (iv) the City of New York, New
York, or (v) the City of Chicago, Illinois.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
"COMPANY" means the party of the second part hereto and, subject
to the provisions of Section 7.4 hereof, includes its successors and assigns
and any corporation resulting from or surviving any consolidation or merger to
which it or its successors may be a party.
"COUNSEL" means any attorney or firm of attorneys duly admitted
to practice before the highest court of one or more states of the United States
of America or of the District of Columbia.
"CREDIT OBLIGOR" means Standard Federal Bank, a federal savings
bank and its successors and assigns, until a Substitute Letter of Credit shall
have been accepted by the Trustee, and thereafter "Credit Obligor" means the
issuer of the Substitute Letter of Credit.
"DEBT SERVICE FUND" means the Bond Principal and Interest Fund
created in Section 7.1 of the Indenture.
3
<PAGE> 8
"DEFAULT" or "DEFAULT" means an event or condition the occurrence
of which would, with the lapse of time or the giving of notice or both, become
an Event of Default.
"DETERMINATION OF TAXABILITY" means a determination that the
interest income on any of the Bonds is Taxable, which determination shall be
deemed to have been made upon the occurrence of the first to occur of the
following:
(a) the date on which the Company determines that the interest
income on any of the Bonds is Taxable by filing with the Trustee a
statement to that effect; or
(b) the date on which the Company shall be advised by private
ruling, technical advice or any other written communication from an
authorized official of the Internal Revenue Service that, based upon any
filings of the Company, or upon any review or audit of the Company, or
upon any other grounds whatsoever, the interest income on any of the
Bonds is Taxable; or
(c) the date on which the Company shall receive notice from
the Trustee in writing that the Trustee has been advised (i) by any
Holder of any Bonds that the Internal Revenue Service has determined
that the interest income on the Bonds is Taxable or (ii) by any
authorized official of the Internal Revenue Service that the interest
income on any of the Bonds is Taxable;
provided that no Determination of Taxability shall be deemed to have occurred:
(1) as a result of a determination by the Company pursuant to the preceding
clause (a) unless supported by a written opinion of Bond Counsel acceptable to
the Trustee and the Board that the interest income on the Bonds is Taxable; or
(2) as a result of the event described in the preceding clauses (b) or (c)
unless and until (1) the Company has been afforded a reasonable opportunity, at
its expense, to contest such determination either through its own action (if
permitted by law) or by or on behalf of one or more of the Holders of the Bonds
and (2) such contest, if made, has been abandoned by the Company or has been
finally determined by a court of competent jurisdiction from which no further
appeal exists, but if such contest has not been abandoned or finally determined
within three years of the event described in either of said clauses (b) and (c)
which forms the basis of the Determination of Taxability in question, then such
Determination of Taxability shall be deemed to have occurred three years after
the date of such event.
"BOND COUNSEL" means Independent Counsel whose experience in
matters relating to the issuance of obligations by states and their political
subdivisions is nationally recognized.
4
<PAGE> 9
"EQUIPMENT" means those items of machinery, equipment and other
personal property that are generally described on, and are referred to as
"Equipment" in, Exhibit B attached hereto and made a part hereof, and any other
items of machinery, equipment and other personal property that, under the
provisions hereof, are to constitute part of the Equipment.
"EVENT OF DEFAULT" means any of the events described in Section
10.1 hereof.
"IMPROVEMENTS" means the improvements to the Plant required by
the provisions of Section 4.1 hereof to be constructed by the Company.
"INDENTURE" means the Trust Indenture between the Board and
LaSalle National Bank, dated as of April 1, 1997, under which (i) the Bonds are
authorized to be issued, and (ii) the Board's interest in this Lease Agreement
and the revenues and receipts to be derived by the Board from any leasing or
sale of the Project are to be assigned as security for payment of the principal
of and the interest and premium (if any) on the Bonds, as said Trust Indenture
now exists and as it may hereafter be supplemented and amended.
"INDEPENDENT COUNSEL" means an attorney or firm of attorneys duly
admitted to practice before the highest court of one or more states of the
United States of America or the District of Columbia and not employed full time
by the Board, the Company, an Affiliate or the Trustee.
"INDEPENDENT ENGINEER" means an independent engineer or
engineering firm not employed full time by the Board, the Company or an
affiliate.
"INTERIM AGREEMENT" means that certain Interim Agreement dated as
of August 1, 1996, between the Board and the Company.
"ISSUE DATE" means the date of the initial authentication and
delivery of the Bonds.
"LEASE TERM" means the period beginning on the date of delivery
of these presents and, subject to the provisions of this Lease Agreement,
continuing until 11:59 o'clock, p.m., on April 1, 2007.
5
<PAGE> 10
"LETTER OF CREDIT" means the initial letter of credit delivered
to the Trustee on the Issue Date and, unless the context indicates otherwise,
any Substitute Letter of Credit accepted by the Trustee.
"LOCAL FACILITIES" means facilities of which the Company or a
related person or persons (as the terms "related person" and "facilities" are
used in Section 144(a)(3) of the Code) is, was or will be the principal user
and which are located in Marengo County, Alabama, but outside the corporate
limits of any municipality, as such limits exist on the Issue Date.
"MORTGAGE" means that certain Mortgage, Assignment of Leases and
Security Agreement dated as of April 1, 1997, executed by the Company and the
Board in favor of the Credit Obligor, including any amendments or supplements
thereto, until a Substitute Letter of Credit shall have been accepted by the
Trustee, and thereafter "Mortgage" means the instrument (if any) securing the
Company's obligations with respect to such Substitute Letter of Credit.
"MUNICIPALITY" means the City of Demopolis, Alabama, and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party.
"NET CONDEMNATION AWARD" means the total amount awarded as
compensation for any part of the Project taken under the exercise of the power
of eminent domain plus damages to any part not taken, less and except (i) any
portion thereof to which the Company is entitled under the provisions of
Section 7.4 hereof, and (ii) all attorneys' fees and other costs and expenses
incurred in the condemnation proceeding with respect to which such award was
made (other than those paid directly by the Company or deducted, pursuant to
the provisions of said Section 7.4, from that portion of the award to which it
is entitled under the provisions thereof).
"NET INSURANCE PROCEEDS" means the total insurance proceeds
recovered by the Board, the Company and the Trustee on account of any damage to
or destruction of the Project or any part thereof less all expenses (including
reasonable attorneys' fees and any extraordinary expenses of the Trustee)
incurred in the collection of such proceeds.
"OUTSTANDING," when used with reference to any of the Bonds,
means, at any date as of which the amount of such Bonds outstanding is to be
determined, all such Bonds which have been theretofore authenticated and
delivered by the Trustee under the Indenture, except (i) those of such Bonds
cancelled by the Trustee because of payment at or after their respective
maturities or redemption prior to their respective maturities, (ii) those of
such Bonds for the payment or redemption of which provisions shall have been
made with the Trustee as provided in Article XIII of the Indenture and (iii)
those of such Bonds in exchange for which, or in lieu
6
<PAGE> 11
of which, other Bonds have been authenticated and delivered under the
Indenture. In determining whether the Holders of a requisite aggregate
principal amount of outstanding Bonds have concurred in any request, demand,
authorization, direction, notice, consent or waiver under the provisions of the
Indenture, Bonds which are owned by the Company or any Affiliate shall be
disregarded and deemed not to be outstanding hereunder for the purpose of any
such determination.
"PERMITTED ENCUMBRANCES" means, as of any particular time, (a)
liens for ad valorem taxes and special assessments not then delinquent, (b)
this Lease Agreement and the Indenture, (c) inchoate mechanics' and
materialmen's liens, (d) utility, access, drainage and other easements and
rights of way, restrictions and exceptions that a licensed engineer (who may,
but need not be, an employee of the Company) certifies will not materially
interfere with or impair the operations being conducted in or about the Project
(or, if no operations are being conducted in or about the Project, the
operations for which the Project was designed or last modified), (e) such minor
defects, irregularities, encumbrances, easements, rights-of-way and clouds on
title (including zoning and other similar restrictions and regulations) as
customarily exist with respect to properties similar in character to the
Project and as do not, in the opinion of Counsel, in the aggregate materially
impair the use of the property affected thereby for the purpose for which it
was acquired or is held by the Board, (f) with respect to the Project Site, any
easements, restrictions or other exceptions referred to in Exhibit A hereto and
(g) the Mortgage.
"PLANT" means that certain manufacturing plant located on the
Project Site, as said plant may at any time exist.
"PROJECT" means the Project Site, the Plant and the Equipment as
they may at any time exist, and all other property and rights referred to or
intended so to be in the demising clauses hereof or in any way subject to the
demise hereof.
"PROJECT DEVELOPMENT COSTS" means the costs of acquiring the
Project Site and the improvements located thereon, constructing the
Improvements and acquiring and installing the Equipment, the expenses incurred
by the Board in connection with the issuance and sale of the Bonds (including
the initial charge of the Trustee, the fee for the issuance of the initial
Letter of Credit and the fiscal, legal, printing, advertising, recording and
other similar fees and expenses relating thereto), interest on the Bonds to the
extent such interest constitutes a Qualified Project Cost, and all costs and
expenses incurred by the Issuer in connection with and directly related to the
planning, development and design of the Improvements and the Equipment,
including, without limiting the generality of the foregoing, any such costs or
expenses paid by the Company or by the Board with funds advanced by the Company
and for which the Company is entitled to be reimbursed under the provisions of
the Interim Agreement.
7
<PAGE> 12
"PROJECT SITE" means the real property specifically described in
Exhibit A attached hereto and made a part hereof (to the extent that at the
time it is subject to the demise hereof) and any other real property that under
the terms hereof constitutes a part of the Project Site.
"REMARKETING AGENT" means LaSalle National Bank or any successor
appointed pursuant to the provisions of Section 11.7 of the Indenture.
"TAXABILITY DATE" means the date that, according to a
Determination of Taxability, the interest income on any of the Bonds became
Taxable.
"TAXABLE," when applied to the interest income on any of the
Bonds, means that, under federal tax laws and regulations issued thereunder, as
such laws and regulations exist on the Issue Date or as they may thereafter be
amended, the interest income on such Bond is includable in gross income of the
recipient thereof for Federal income tax purposes for any reason other than the
fact (and for the period) that such Bond is held by a person who is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a) of the Code or any successor provision.
"TENDER DATE" means the date on which Bonds are tendered (or
deemed tendered) for purchase pursuant to the optional or mandatory tender
provisions of the Indenture.
"TENDERED BONDS" means Bonds tendered (or deemed tendered) for
purchase pursuant to the optional or mandatory tender provisions of the
Indenture.
"TRUSTEE" means the Trustee at the time serving as such under
the Indenture.
SECTION 1.2 USE OF PHRASES. "Herein," "hereby," "hereunder,"
"hereof," "hereinbefore," "hereinafter" and other equivalent words refer to
this Lease Agreement as an entirety and not solely to the particular portion
thereof in which any such word is used. The definitions set forth in Section
1.1 hereof include both singular and plural, unless a separate definition is
included for the singular or plural, as the case may be. Whenever used herein,
any pronoun shall be deemed to include both singular and plural and to cover
all genders. Any percentage of Bonds, specified herein for any purpose, is to
be figured on the unpaid principal amount thereof then Outstanding.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 REPRESENTATIONS BY THE BOARD. The Board makes the
following representations and warranties as the basis for the undertakings on
its part herein contained:
(a) The Board is duly incorporated under the provisions of the
Authorizing Act by Certificate of Incorporation duly filed for record in
the office of the Judge of Probate of Marengo County, Alabama, and is
not in default under any of the provisions contained in said Certificate
of Incorporation or in the laws of Alabama;
(b) Under the provisions of the Authorizing Act and its
Certificate of Incorporation, the Board has the power to enter into the
transactions contemplated by this Lease Agreement and to carry out its
obligations hereunder;
(c) The Board has good and marketable title to the Project
Site, subject only to Permitted Encumbrances;
(d) The Project Site is located within the limits of Marengo
County, Alabama, but outside the corporate limits of any incorporated
municipality and outside the police jurisdiction of any incorporated
municipality other than the City of Demopolis, Alabama;
(e) The execution and delivery of this Lease Agreement on its
part have been duly authorized by all necessary corporate action and
this Lease Agreement, when executed and delivered, will constitute the
legal, valid and binding agreement of the Board, enforceable in
accordance with its terms subject to laws regarding bankruptcy and
insolvency and other laws of general application affecting the rights
and remedies of creditors.
SECTION 2.2 REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The
Company makes the following representations and warranties as the basis for the
undertakings on its part herein contained:
(a) The Company is a corporation organized under the laws of
Michigan, is in good standing under its certificate of incorporation and
the laws
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of said state, is duly qualified as a foreign corporation in the State
of Alabama and has power to enter into, and to perform and observe the
agreements and covenants on its part contained in, this Lease Agreement;
(b) Neither the execution and delivery of this Lease
Agreement, the consummation of the transactions contemplated hereby, nor
the fulfillment or compliance with the terms and conditions hereof,
conflict with, or result in a breach of, any of the terms, conditions or
provisions of any corporate restriction or limitation or any agreement,
instrument or court or other governmental order to which the Company is
now a party or by which the Company is bound, or constitute a default
under any of the foregoing.
(c) The execution and delivery of this Lease Agreement on its
part have been duly authorized by all necessary corporate action, and
this Lease Agreement, when executed and delivered, will constitute the
legal, valid and binding agreement of the Company enforceable in
accordance with its terms, subject to laws regarding bankruptcy and
insolvency and other laws of general application affecting the rights
and remedies of creditors.
(d) The acquisition, construction, and installation of the
Project were not commenced prior to August 22, 1996 (the effective date
of the Interim Agreement dated as of August 1, 1996, between the Board
and the Company).
(e) Not less than ninety-five percent (95%) of the proceeds
derived by the Board from the sale of the Bonds will be applied for the
acquisition of a "manufacturing facility" within the meaning of Section
144(b)(12)(C) of the Code and the Company presently intends to use or
operate the Project as a "manufacturing facility" (as so defined) until
the date on which the Bonds have been fully paid and knows of no reason
why the Project will not be so operated.
(f) The information furnished by the Company and used by the
Board in preparing the certification pursuant to Section 148 of the Code
and information statement pursuant to Section 149(e) of the Code is
accurate and complete as of the date of the issuance of the Bonds.
(g) On the date of the delivery of this Lease Agreement, the
Company is the only principal user (as the term "principal user" is used
in Section 144(a)(4)(B) of the Code) of the Project and expects to be so
until the date on which the Bonds have been fully paid.
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(h) Not less than ninety-five per cent (95%) of the proceeds
derived by the Board from the sale of the Bonds will be applied for the
acquisition, construction, reconstruction or improvement of land or
property of a character subject to the allowance for depreciation within
the meaning of Section 144(a) of the Code with respect to the Project.
(i) Less than 25% of the net proceeds of the Bonds will be
used (directly or indirectly for the acquisition of land (or an interest
therein) within the meaning of Section 147(c) of the Code.
(j) The Company will expend as Project Development Costs an
amount equal to at least 15% of the cost of those portions of the Plant
and the Equipment the first use of which was not by the Company toward
the rehabilitation of such portions within the meaning of Section 147(d)
of the Code and the regulations issued thereunder.
(k) There have not been issued since April 30, 1968, any bonds
(as the term "bonds" is used in Section 144(a)(2) of the Code) the
proceeds of which were or are to be used primarily with respect to Local
Facilities.
(l) The amount of all capital expenditures (as determined as
provided in Section 144(a)(4)(A)(ii) of the Code) made with respect to
Local Facilities during the period beginning three (3) years prior to
the Issue Date, and ending on the Issue Date, was less than $1,000,000.
(m) The average maturity of the Bonds does not exceed 120% of
the average reasonably expected economic life of the facilities being
financed with the net proceeds of the Bonds, all computed in accordance
with Section 147(b) of the Code
(n) The aggregate face amount of all outstanding tax-exempt
facility-related bonds, including the Bonds, which are required by
Section 144(a)(10)(B) of the Code to be considered in determining
whether there are now outstanding tax-exempt facility-related bonds
attributable or allocated to the Company or any related person, under
Section 144(a)(10)(A) of the Code, is, on the date of the issuance of
the Bonds, less than $40,000,000.
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(o) The Company has not had and will not have issued on its
behalf bonds that will be treated as part of the same issue as the Bonds
within the meaning of Section 1.150T-1 of the Treasury Regulations.
ARTICLE III
DEMISING CLAUSES
SECTION 3.1 The Board hereby demises and leases to the Company,
subject to Permitted Encumbrances, and the Company hereby rents from the Board,
subject to Permitted Encumbrances, for and during the Lease Term, the following
described properties and related rights:
I
The real property situated in Marengo County, Alabama, that is
specifically described in Exhibit A attached hereto and made a part hereof;
II
The Plant and any other improvements constituting real property
now or hereafter situated on the Project Site, all permits, easements,
licenses, rights-of-way, contracts, leases, privileges, immunities and
hereditaments pertaining or applicable to the Project Site and all fixtures now
or hereafter owned by the Board and installed on the Project Site or in any
other improvements now or hereafter located on the Project Site, it being the
intention hereof that all property, rights and privileges hereafter acquired
for use as a part of or in connection with or as an improvement to the Project
Site shall be as fully covered hereby as if such property, rights and
privileges were now owned by the Board and were specifically described herein;
and
III
All items (whether or not fixtures) of machinery, equipment and
other personal property that at any time, under the provisions of this Lease
Agreement, constitute the Equipment, including, without limitation, the items
(whether or not fixtures) of machinery, equipment and other personal property
generally described in Exhibit B attached hereto and made a part hereof,
excluding, however, any equipment or other personal property that, under the
provisions of this Lease Agreement, is, or is to become (prior to the
termination of this Lease Agreement), the sole property of the Company or third
parties.
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This Lease Agreement is made, however, upon and subject to the
following terms and conditions, to each of which the Board and the Company
hereby agree:
ARTICLE IV
CONSTRUCTION OF IMPROVEMENTS AND
ACQUISITION OF EQUIPMENT
SECTION 4.1 AGREEMENT TO CONSTRUCT IMPROVEMENTS AND ACQUIRE AND
INSTALL EQUIPMENT. The Company will proceed with, and will complete as
promptly as practicable,
(a) the construction, wholly within the boundary lines of the
Project Site, of improvements to the existing manufacturing plant
located on the Project Site, substantially in accordance with plans and
specifications therefor prepared by the Company, and
(b) the acquisition and installation in or about the Plant and
wholly within the boundary lines of the Project Site, of the Equipment,
such acquisition and installation to be made substantially in accordance
with written orders and directions from the Company,
and will pay, solely out of the moneys on deposit in the Construction Fund and
other moneys provided by the Company, the costs of such construction,
acquisition and installation. The Company may, after the execution and delivery
of these presents, cause such changes to be made to the aforesaid plans and
specifications as it may desire and as will not result in any material change
in the appearance or basic design of the Plant or in changing the character of
the Plant as a part of a "project" under the provisions of the Authorizing Act.
Except as provided in the preceding sentence and in subsection (a) of Section
4.3 hereof, neither the Company nor the Issuer will cause or permit any changes
to be made to the aforesaid plans and specifications.
The Company will promptly pay or cause to be paid, as and when
due, all expenses incurred in and about said construction, acquisition and
installation and all other Project Development Costs, and it will not suffer or
permit any mechanics' or materialmen's liens that might be filed or otherwise
claimed or established upon or against the Project or any part thereof, and
which might be or become a lien thereon superior to the lien of the Mortgage,
to remain unsatisfied and undischarged for a period exceeding thirty (30) days
after the filing or establishment thereof; provided, however, that the Company
may in good faith contest any such mechanics' or materialmen's lien claims so
filed or established, and, in the event that such lien claims are so contested,
may permit the mechanics' or materialmen's liens so contested to remain
unsatisfied and undischarged during the period of such contest and any appeal
therefrom,
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irrespective of whether such period extends beyond the thirty (30) day period
after the filing or establishment of such liens, unless the Company shall have
furnished the facts relating to such lien contest to the Credit Obligor and the
Credit Obligor shall be of the opinion that by such action the lien of the
Mortgage to any part of the Project shall be materially endangered or that the
Project or any part thereof shall be subject to loss or forfeiture, in which
event such mechanics' or materialmen's liens shall (unless they are bonded or
superseded in a manner satisfactory to the Credit Obligor) be satisfied prior
to the expiration of said thirty (30) day period.
The Company and the Issuer will cooperate with each other in
order that the construction of the Improvements and the acquisition and
installation of the Equipment may be completed as promptly as practicable.
Upon the completion of the construction of the Improvements and the acquisition
and installation of the Equipment, the Company will execute such instruments of
conveyance as may be necessary to convey its interest in the Improvements and
the Equipment to the Issuer, subject to this Lease Agreement.
SECTION 4.2 AGREEMENT TO ISSUE THE BONDS. In order to provide
funds for the permanent financing of the costs of constructing the Improvement
and acquiring and installing the Equipment and the other Project Development
Costs, the Board will, simultaneously with the delivery hereof, issue and sell
the Bonds at a price approved by the Company.
SECTION 4.3 NO WARRANTY OF SUITABILITY BY ISSUER. COMPANY
REQUIRED TO BEAR CERTAIN COSTS IN CERTAIN EVENTS. The Company recognizes that
since the plans and specifications for the Improvements will be prepared to its
order and that since the items of Equipment have been and are to be selected by
it, the Issuer can make no warranty, either express or implied, or offer any
assurances that the Improvements or the Equipment will be suitable for the
Company's purposes or needs or that the proceeds derived from the sale of the
Bonds will be sufficient to pay in full all the Project Development Costs.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE ISSUER MAKES NO
WARRANTIES OF MERCHANTABILITY OR FITNESS WITH RESPECT TO ANY PART OF THE PLANT
OR THE EQUIPMENT. In the event said proceeds issued for such purpose are
insufficient to pay all said costs, the Company
(a) will cause such changes to be made to said plans and
specifications as will result in the Project Development Costs not
exceeding the moneys available for payment thereof derived from the sale
of the Bonds (provided that such changes will not result in any material
alteration in the appearance or basic design of the Plant or in altering
the character of the Plant as part of a "project" under the provisions
of the Authorizing Act), or
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(b) will directly pay that portion of the Project Development
Costs in excess of the available moneys derived from the sale of the
Bonds, or
(c) will pay into the Construction Fund such moneys as are
necessary to provide for payment of all said costs.
The Company shall not, by reason of any changes in said plans and
specifications or any payment of such excess costs (whether by virtue of direct
payments thereof or payments into the Construction Fund), be entitled to any
reimbursement from the Issuer or to any diminution of the rental payable
hereunder.
SECTION 4.4 COMPANY TO PURSUE RIGHTS AGAINST CONTRACTORS, ETC.
In the event of default by any contractor or subcontractor under any contract
with the Company for construction of the Improvements or acquisition or
installation of the Equipment, or any part of either, the Company will proceed,
either separately or in conjunction with others, to exhaust all remedies the
Company may have against such contractor or subcontractor so in default and
against each surety (if any) for the performance of such contract. The net
proceeds recovered by the Company in any such action shall be paid into the
Construction Fund (or, in the event that at the time such proceeds are received
by the Company the Construction Fund is closed shall be applied as excess
Construction Fund moneys in accordance with the provisions of Section 6.1 of
the Indenture).
ARTICLE V
DURATION OF TERM AND
RENTAL PROVISIONS
SECTION 5.1 DURATION OF TERM. The term of this Lease Agreement
and of the lease herein made shall begin on the date of the delivery of this
Lease Agreement and, subject to the provisions of this Lease Agreement, shall
continue until 11:59 o'clock, p.m., on April 1, 2007. The Board will deliver
to the Company sole and exclusive possession of the Project (or such portion or
portions thereof as are then in existence) on the commencement date of the
Lease Term, subject to the inspection and reserved in Section 3.3 hereof, and
the Company will accept possession thereof at such time.
SECTION 5.2 BASIC RENT. For and during the Lease Term, the
Company will pay to the Board the following base rental for use and occupancy
of the Project:
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(a) on or before the last Business Day of each month,
beginning in the month in which the Issue Date occurs, an amount equal
to the interest, if any, that will mature on the Bonds on the first
Business Day of the next succeeding month;
(b) on or before the last Business Day of March, 2007, an
amount equal to the principal amount of Bonds maturing on April 1, 2007;
and
(c) at or before 11:00 a.m. (Chicago, Illinois time) on each
Tender Date with respect to the Bonds, the Company shall pay to the
Trustee, for the account of the Board, an amount equal to the purchase
price of Bonds tendered (or deemed tendered) for purchase on such Tender
Date; provided, however, that any amount already on deposit in the Bond
Purchase Fund on such Tender Date that is available for the payment of
the purchase price of such Tendered Bonds shall be credited against the
amount of such Basic Rent;
provided, however, that there shall be credited against Basic Rent due under
this section (1) any amounts drawn by the Trustee under the Letter of Credit
and (2) income or profits received from the investment of money in the Debt
Service Fund.
The Company acknowledges that Basic Rent required by this Section
have been calculated to provide amounts which will be sufficient to pay debt
service on the Bonds as the same matures and comes due and to pay the purchase
price of Bonds tendered or deemed tendered on each Tender Date. If on any Bond
Payment Date the amount on deposit in the Debt Service Fund is not sufficient
to pay debt service on the Bonds due and payable on such date, the Company
shall immediately deposit the amount of such deficiency in the Debt Service
Fund. If on any Tender Date the amount on deposit in the Bond Purchase Fund is
not sufficient to pay the purchase price of Bonds tendered or deemed tendered
on such date, the Company shall immediately deposit the amount of such
deficiency in the Bond Purchase Fund.
So long as any of the Bonds are Outstanding, all Basic Rent
payments shall be made in Federal or other immediately available funds directly
to the Trustee, or its successor as Trustee under the Indenture at its
principal corporate trust office, for the account of the Board. The Board
will, promptly following the designation of any successor Trustee under the
Indenture, give written notice to the Company of the name and location of the
principal corporate trust office of such successor Trustee, or it will cause
such notice to be promptly given. In the event the due date of any installment
of Basic Rent payable hereunder is not a Business Day, such installment shall
be due on the next succeeding Business Day.
SECTION 5.3 ADDITIONAL RENT - FEES AND EXPENSES OF TRUSTEE AND
REMARKETING AGENT. In addition to the Basic Rent and all other rental payments
due from the Company hereunder, the Company will also pay, as additional rent,
(i) the annual fee of the Trustee for the ordinary services of the Trustee
rendered and its ordinary expenses incurred
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under the Indenture, (ii) the reasonable fees and charges of the Trustee as
registrar, transfer agent and paying agent or tender agent with respect to the
Bonds, as well as the fees and charges of any other paying agent with respect
to the Bonds who shall act as such agent in accordance with the provisions of
the Indenture, (iii) the reasonable fees and expenses of the Trustee in
connection with the issuance of a new Bond upon the partial redemption of a
Bond (including, without limitation, the expenses of printing such new Bond),
(iv) the reasonable fees and expenses of the Trustee in connection with any
other registration, transfer or exchange of any of the Bonds if the Trustee is
not permitted by the Indenture to charge the holder of such Bonds for such fees
and expenses, (v) the reasonable fees, charges and expenses of the Trustee for
necessary extraordinary services rendered by it and extraordinary expenses
incurred by it under the Indenture and (vi) the fees, charges and expenses of
the Remarketing Agent. All such fees, charges and expenses shall be paid
directly to the Trustee, for its own account upon presentation of its
statements therefor, but the Company may, without creating a default hereunder,
contest in good faith the necessity for any of the extraordinary services
performed by the Trustee or the reasonableness of the fees, charges or expenses
of the Trustee in connection therewith.
SECTION 5.4 ADDITIONAL RENT - BOARD'S EXPENSES. In addition to
the Basic Rent and all other rental payments due from the Company hereunder,
the Company will also pay, as additional rent, the reasonable and necessary
expenses, not otherwise provided for, which may be incurred by the Board, or
for which the Board may in any way become liable, as a result of issuing any of
the Bonds and leasing the Project to the Company, or being a party to this
Lease Agreement or the Indenture; provided, however, that so long as the
Company is not in default hereunder, the Company's liability under this Section
5.4 or under any other provision of this Lease Agreement obligating the Company
to pay expenses of the Board or the Trustee shall not include expenses
voluntarily incurred by the Board or the Trustee without prior request or
approval by the Company, unless such expenses are necessary to enable the Board
or the Trustee to perform its or their obligations under this Lease Agreement
and the Indenture; and provided further, that the Company may, without creating
a default hereunder, contest in good faith the necessity for or reasonableness
of any such expenses.
SECTION 5.5 OPTIONS TO PREPAY BASIC RENT. The Company shall
have and is hereby granted the option to prepay Basic Rent in an amount
sufficient to redeem the Bonds in whole or in part in accordance with Section
4.1(b), (c) or (d) of the Indenture, or to provide for the payment of the Bonds
in accordance with Article XIII of the Indenture. Such prepayment shall be
made on the date fixed for the redemption of such Bonds in accordance with
Section 5.7 hereof or on any date if made to provide for payment in accordance
with Article XIII of the Indenture.
SECTION 5.6 MANDATORY PREPAYMENT OF BASIC RENT IN THE EVENT OF
A DETERMINATION OF TAXABILITY. Upon the occurrence of a Determination of
Taxability, the Company shall be obligated to prepay Basic Rent on the date
fixed for the redemption of the Bonds pursuant to Section 5.7 hereof in an
amount sufficient to redeem the Bonds in whole in accordance with the
provisions of Section 4.1(a) of the Indenture.
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SECTION 5.7 NOTICE OF PREPAYMENT. To exercise an option
granted in Section 5.5 hereof or to fulfill the obligation required by Section
5.6 hereof, the Company shall give written notice to the Board and the Trustee
which shall specify therein the date upon which prepayment will be made, which
date shall be not less than forty-five days nor more than sixty days after the
date of such notice. Notice by the Company with respect to prepayment pursuant
to Section 5.6 hereof must be given within 10 days after the occurrence of a
Determination of Taxability. In connection with any redemption of Bonds
pursuant to Section 4.1(b), (c) or (d) of the Indenture, the said notice by the
Company shall specify the principal amount of Bonds to be redeemed by the
Trustee with the moneys paid to it by the Company.
SECTION 5.8 REDEMPTION OF BONDS WITH PREPAYMENT MONEYS. The
Board has directed the Trustee to forthwith take all steps (other than the
payment of the money required to redeem the Bonds) necessary under the
applicable provisions of the Indenture to effect the redemption of all or part
of the then Outstanding Bonds, as may be specified by the Company, on the
earliest redemption date permitted by the Indenture upon receipt by the Trustee
of requests for redemption in accordance with Article IV of the Indenture.
The Company agrees to and shall pay any amount required to be
paid by it under the provisions of Section 5.5 and 5.6 hereof directly to the
Trustee. The Trustee shall use the moneys so paid to it by the Company to
redeem the Bonds (if Bonds are to be redeemed as a result of such prepayment)
in accordance with the provisions of the Indenture.
SECTION 5.9 OBLIGATION OF COMPANY UNCONDITIONAL. The
obligation of the Company to pay the Basic Rent, to make all other payments
provided for herein and to perform and observe the other agreements and
covenants on its part herein contained shall be absolute and unconditional,
irrespective of any rights of set-off, recoupment or counterclaim it might
otherwise have against the Board or the Trustee. The Company will not suspend
or discontinue any such payment or fail to perform and observe any of its other
agreements and covenants contained herein or (except as expressly authorized in
this Lease Agreement) terminate this Lease Agreement for any cause, including,
without limiting the generality of the foregoing, any acts or circumstances
that may constitute an eviction or constructive eviction, failure of
consideration or commercial frustration of purpose, or any damage to or
destruction of the Project or any part thereof, or the taking by eminent domain
of title to or the right to temporary use of all or any part of the Project, or
any change in the tax or other laws of the United States of America, the State
of Alabama or any political or taxing subdivision of either thereof, or any
failure of the Board to perform and observe any agreement or covenant, whether
express or implied, or any duty, liability or obligation arising out of or
connected with this Lease Agreement.
The provisions of the preceding paragraph of this Section 5.9
shall continue in effect only so long as any part of the principal of or the
interest or premium (if any) on any of
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the Bonds remains unpaid. Nothing herein contained shall, however, be
construed to prevent the Company, at its own cost and expense and in its own
name or in the name of the Board, from prosecuting or defending any action or
proceeding or taking any other action involving third persons which the Company
deems reasonably necessary in order to secure or protect its rights of use and
occupancy and other rights hereunder, and the Board will cooperate fully with
the Company in any such action or proceeding.
Without limiting the generality of the foregoing, the Company
will pay directly to the Trustee on behalf of the Board, on the due dates of
the principal of and the interest, and premium, if any, on the Bonds, whether
at the stated maturity thereof, by acceleration, call for redemption or
otherwise, such amounts as may be necessary to provide for the payment in full
of the principal of and the interest and premium, if any, on the Bonds and such
other amounts as may be payable to the holders of the Bonds pursuant to the
provisions of this Lease Agreement and the Indenture.
ARTICLE VI
MAINTENANCE, TAXES AND INSURANCE
SECTION 6.1 MAINTENANCE, ADDITIONS, ALTERATIONS AND
IMPROVEMENTS. The Company will, at its own expense, (a) keep the Project in as
reasonably safe condition as its operations permit, and (b) subject to the
provisions of Section 6.2 hereof, keep the Plant, the Equipment and the other
improvements located on the Project Site in reasonable repair and operating
condition (reasonable wear and tear excepted), making from time to time all
necessary and proper renewals thereto (including, without limitation, exterior
and structural repairs, renewals and replacements). The Company may, also at
its own expense, make any additions, alterations or improvements to the Project
that it may deem desirable for its business purposes, that do not adversely
affect the structural integrity of any building or other structure forming a
part of the Project, and that will not impair the operating unity of the Plant,
or change the character of the Project as a "project" under the Authorizing
Act; provided that all such additions, alterations or improvements shall
(1) be located wholly within the boundary lines of the Project
Site, or
(2) be located wholly within the boundary lines of other
adjacent real property hereafter acquired by the Board, leased to the
Company by the Board, and subjected to the demise of these presents and
to the lien of the Indenture, or
(3) be located wholly within the boundary lines of the Project
Site and such other adjacent real property.
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Any such adjacent real property so leased shall henceforth be considered, for
purposes of this Lease Agreement, as part of the Project Site. All such
additions, alterations and improvements so made by the Company shall become a
part of the Project.
The Company will not permit any mechanics' or other liens to
stand against the Project for labor or materials furnished it in connection
with any additions, alterations, improvements, repairs or renewals so made by
it. The Company may, however, at its own expense and in good faith, contest
any such mechanics' liens or other liens and in the event of any such contest
may permit any such liens to remain unsatisfied and undischarged during the
period of such contest and any appeal therefrom unless by such action the lien
of the Indenture or the Mortgage to any part of the Project shall be endangered
or any part of the Project shall be subject to loss or forfeiture, in either of
which events such mechanics' or other liens (unless bonded or superseded in a
manner satisfactory to the Trustee) shall be promptly satisfied.
SECTION 6.2 REMOVAL OF EQUIPMENT. The Board and the Company
recognize that after the Equipment is installed in the Plant or on the Project
Site, portions thereof may become inadequate, obsolete, worn-out, unsuitable,
undesirable or unnecessary in the operation of the Plant, but the Company shall
not (any provision hereof to the contrary notwithstanding) be under any
obligation to renew, repair or replace any such inadequate, obsolete, worn-out,
unsuitable, undesirable or unnecessary Equipment. However, in any instance
where the Company in its sole discretion determines that any item of Equipment
has become inadequate, obsolete, worn-out, unsuitable, undesirable or
unnecessary in the operation of the Plant,
(a) the Company may, with the consent of the Credit Obligor,
remove such item of Equipment from the Plant or the Project Site and (on
behalf of the Board) sell, trade in, exchange or otherwise dispose of it
without any responsibility or accountability to the Board or the Trustee
therefor, provided that (i) the Company substitutes and installs in the
Plant or on the Project Site (either by direct payment of the costs
thereof or by advancing to the Board the funds necessary therefor, as
hereinafter provided) other machinery or equipment having equal or
greater utility (but not necessarily the same value or function) in the
operation of the Plant, which such substituted machinery or equipment
shall be free of all liens and encumbrances (other than Permitted
Encumbrances), shall be the sole property of the Board, shall be and
become a part of the Equipment subject to the demise hereof and to the
lien of the Indenture and shall be held by the Company on the same terms
and conditions as the items originally comprising the Equipment, and
(ii) such removal and substitution do not impair the operating unity of
the Plant; or
(b) the Company may, with the consent of the Credit Obligor,
remove such item of Equipment from the Plant or the Project Site and (on
behalf of the
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Board) sell, trade in, exchange or otherwise dispose of it, without any
responsibility or accountability to the Board or the Trustee therefor
and without being required to substitute and install in the Plant or on
the Project Site other equipment in substitution therefor, provided that
(i) in the case of the sale of such equipment to anyone other than
itself or any of its Affiliates, or in the case of the scrapping
thereof, the Company pays into the Debt Service Fund the proceeds from
such sale or the scrap value thereof, respectively, (ii) in the case of
the trade-in of such equipment for other property not to be installed in
the Plant or on the Project Site, the Company pays into the Debt Service
Fund an amount in cash equal to the credit received by it in such trade-
in, or (iii) in the case of the sale of such equipment to itself or any
of its Affiliates or in the case of any other disposition thereof, the
Company pays into the Debt Service Fund an amount equal to the original
cost thereof less depreciation at rates calculated in accordance with
generally accepted accounting practices; provided, however, that (1)
there may be credited on any payment that under the provisions of this
subsection (b) is due to be made into the Debt Service Fund by the
Company an amount not in excess of (A) the original cost of any other
equipment then installed in the Plant or on the Project Site that does
not then constitute part of the Equipment and is owned by the Company
and that is free from all liens and encumbrances (other than the lien of
the Indenture and Permitted Encumbrances), less (B) depreciation thereon
at rates calculated in accordance with generally accepted accounting
practices - all to the extent that such amount so credited has not
theretofore been credited on payments theretofore due to be made into
the Debt Service Fund pursuant to this subsection (b); and (2) from and
after any such credit, such other equipment shall be and become the sole
property of the Board and part of the Equipment subject to the demise
hereof and to the lien of the Indenture and shall be held by the Company
on the same terms and conditions as the items originally comprising the
Equipment.
If, at the time of the removal of any item of Equipment from the
Project Site, there is then installed in the Plant or on the Project Site other
equipment not then constituting part of the Equipment, and if such other
equipment has utility in the operation of the Project equal to or greater than
that of the item of Equipment to be removed and is free of all liens and
encumbrances (other than Permitted Encumbrances), and if no part of the cost of
such other equipment has been credited on a payment theretofore due to be made
into the Debt Service Fund pursuant to the provisions of subsection (b) of this
section, the preceding provisions of this section shall not be applicable, it
being understood and agreed, however, that from and after such removal such
other equipment shall be and become the sole property of the Board and part of
the Equipment subject to the demise hereof and to the lien of the Indenture and
shall be held by the Company on the same terms and conditions as the items
originally comprising the Equipment.
In furtherance of the preceding provisions of this section, the
Company will
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(1) pay to the Trustee such amounts as are required by the
provisions of the preceding subsection (b) to be paid by the Company
into the Debt Service Fund promptly after the sale, trade-in, exchange
or other disposition requiring such payment, provided that no such
payment need be made until the aggregate of such payments due but not
theretofore made is $500,000 or more;
(2) execute and deliver to the Board and the Trustee such
documents as the Trustee may reasonably from time to time require to
confirm the title of the Board (subject to Permitted Encumbrances) to,
and the lien of the Indenture with respect to, any items of machinery
and equipment that under the provisions of this section are to become a
part of the Equipment; and
(3) pay all reasonable costs (including reasonable counsel
fees) incurred in subjecting to the demise of this Lease Agreement and
the lien of the Indenture any items of machinery or equipment that under
the provisions of this section are to become a part of the Equipment.
The Company will not remove, or permit the removal of, any of the Equipment
from the Plant or the Project Site except in accordance with the provisions of
this Section 6.2.
The preceding provisions of this Section 6.2 shall apply only so
long as any part of the principal of or the interest or premium, if any, on any
of the Bonds remains unpaid. After full payment of the principal of and the
interest and premium, if any, on the Bonds, neither the Board nor the Company
shall be under any obligation to renew, repair or replace any of the Equipment
that may become inadequate, obsolete, worn out, unsuitable, undesirable or
unnecessary in the operation of the Project, and after such full payment the
Company may, if in its sole discretion any item of the Equipment has become
inadequate, obsolete, worn out, unsuitable, undesirable or unnecessary in the
operation of the Plant, remove such item of Equipment from the Plant or the
Project Site and (on behalf of the Board) sell, trade in, exchange or otherwise
dispose of it, without any responsibility or accountability to the Board
therefor and without being required to substitute and install in the Plant or
on the Project Site other equipment in substitution therefor, and may retain
any money or other consideration received by it upon any disposition of any
such item of Equipment.
Nothing contained herein shall prohibit the Company, at any time
during which it is not in default hereunder, from removing from the Plant or
the Project Site any machinery or equipment that is owned by it or leased by it
from third parties and that does not constitute part of the Equipment, provided
(1) that such machinery or equipment may be removed without adversely affecting
the structural integrity of any building or other structure forming a part of
the Plant or causing any material damage to any such building or structure or
to the Project Site, or (2) that if such removal results in adversely affecting
the structural integrity of any such
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building or structure or in causing material damage to any such building or
structure or to the Project Site, the Company promptly thereafter takes such
action as is necessary to restore the structural integrity of such building or
structure or to repair such damage, as the case may be.
Except as otherwise provided in the preceding provisions of this
Section 6.2, nothing in this Lease Agreement or in the Indenture shall be
construed to grant to the Board or the Trustee any interest in any machinery or
equipment owned by the Company or leased by it from third parties or to impair
the right of the Company to locate such machinery or equipment in the Plant or
on the Project Site or to remove the same therefrom.
SECTION 6.3 TAXES, OTHER GOVERNMENTAL CHARGES AND UTILITY
CHARGES. The Company will pay, as the same respectively become due, (i) all
taxes and governmental charges of any kind whatsoever that may lawfully be
assessed or levied against or with respect to the Project or any machinery,
equipment or other property installed or brought by the Company therein or
thereon (including, without limiting the generality of the foregoing, any taxes
levied upon or with respect to any part of the receipts, income or profits of
the Board from the Project and any other taxes levied upon or with respect to
the Project which, if not paid, would become a lien on the Project prior to or
on a parity with the lien of the Indenture or the Mortgage or a charge on the
revenues and receipts therefrom prior to or on a parity with the charge thereon
and pledge and assignment thereof to be created and made in the Indenture),
(ii) all utility and other similar charges incurred in the operation,
maintenance, use, occupancy and upkeep of the Project, and (iii) all
assessments and charges lawfully made by any governmental body for public
improvements that may be secured by a lien on the Project; provided that with
respect to special assessments or other governmental charges that may lawfully
be paid in installments over a period of years, the Company shall be obligated
to pay only such installments as are required to be paid during the Lease Term.
The Company may, at its own expense and in its own name and
behalf or in the name and behalf of the Board, in good faith contest any such
taxes, assessments and other charges and, in the event of any such contest, may
permit the taxes, assessments or other charges so contested to remain unpaid
during the period of such contest and any appeal therefrom unless by such
action the title of the Board to any part of the Project shall be materially
endangered or the Project or any part thereof shall become subject to loss or
forfeiture, in which event such taxes, assessments or charges shall be paid
prior to their becoming delinquent. The Board will cooperate fully with the
Company in any such contest.
SECTION 6.4 INSURANCE REQUIRED. The Company will take out and
continuously maintain in effect insurance with respect to the Project against
such risks as are customarily insured against by businesses of like size and
type, paying as the same become due all premiums with respect thereto,
including, but not necessarily limited to,
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(a) Insurance against loss or damage to the Plant and the
Equipment by fire and lightning, with uniform standard extended coverage
endorsement limited only as may be provided in the standard form of
extended coverage endorsement at the time in use in Alabama, to the
extent of the full replacement value thereof; and
(b) Insurance against liability for bodily injury to or death
of persons and for damage to or loss of property occurring on or about
the Project Site or in any way related to the operation of the Plant, in
the minimum amounts of $1,000,000 for death of or bodily injury to any
one person, $3,000,000 for total death and bodily injury claims
resulting from any one accident, and $500,000 for property damage.
All policies evidencing the insurance required by the terms of
the preceding paragraph shall be taken out and maintained in generally
recognized responsible insurance companies, qualified under the laws of the
State of Alabama to assume the respective risks undertaken, shall contain an
agreement on the part of the insurer issuing such policy that the same shall
not be cancelled, terminated or permitted to lapse by such insurer unless ten
(10) days' prior written notice of such cancellation, termination or lapse in
coverage shall have been given to the Trustee and may be written with
deductible amounts comparable to those on similar policies carried by persons
engaged in businesses of the size and type of the Company. All such insurance
policies, other than those evidencing the insurance required by clause (b) of
the preceding paragraph and such other policies or portions thereof as may
evidence insurance against liability for injury to persons or property of
others, shall name as insureds the Board, the Trustee and the Company (as their
respective interests shall appear) and shall contain standard mortgage clauses
providing for all losses thereunder in excess of $500,000 to be paid to the
Trustee and all such losses not in excess of said sum to be paid to the
Company; provided that all losses (including those in excess of $500,000) may
be adjusted by the Company. All policies evidencing the insurance required to
be carried by this Section 6.4 shall be deposited with the Trustee; provided,
however, that in lieu thereof the Company may deposit with the Trustee a
certificate or certificates of the respective insurers attesting the fact that
such insurance is in force and effect. Prior to the expiration of any such
policy, the Company will furnish to the Trustee evidence reasonably
satisfactory to the Trustee that such policy has been renewed or replaced by
another policy or that there is no necessity therefor under this Lease
Agreement. Anything herein to the contrary notwithstanding, any insurance
required by the provisions hereof may be evidenced by a blanket policy covering
risks in addition to those hereby required to be covered, but only if
appropriate allocation certificates and loss payable endorsements are furnished
to the Board and the Trustee.
SECTION 6.5 ADVANCES BY BOARD OR TRUSTEE. In the event the
Company fails to take out or maintain the full insurance coverage required by
this Lease Agreement or fails to keep the Project in as reasonably safe
condition as its operating conditions permit and the Plant, the Equipment and
the other improvements located on the Project Site in reasonable repair and
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operating condition, the Board or the Trustee, after first notifying the
Company of any such failure on its part and after the subsequent failure by the
Company to take out or maintain such insurance or to take action reasonably
calculated to keep the Project in as reasonably safe condition as the Company's
operations permit and the Plant, the Equipment and the other improvements
located on the Project Site in reasonable repair and operating condition, may
(but shall not be obligated to) take out the required policies of insurance and
pay the premiums on the same or make such repairs, renewals and replacements as
may be necessary to maintain the Project in as reasonably safe condition as the
Company's operations permit and the Plant, the Equipment and the other
improvements located on the Project Site in reasonable repair and operating
condition, respectively; and all amounts so advanced therefor by the Board or
the Trustee shall become an additional obligation of the Company to the Board
or to the Trustee, as the case may be, which amounts, together with interest
thereon at the Base Rate (as defined in the Indenture) from the date thereof,
the Company will pay. Any remedy herein vested in the Board or the Trustee for
the collection of rental payments shall also be available to the Board and the
Trustee for the collection of all such amounts so advanced.
ARTICLE VII
PROVISIONS RESPECTING DAMAGE,
DESTRUCTION AND CONDEMNATION
SECTION 7.1 DAMAGE AND DESTRUCTION PROVISIONS. If the Project
is destroyed, in whole or in part, or is damaged, by fire or other casualty, to
such extent that the loss to the Project resulting therefrom is not greater
than $500,000, the Company, subject to the provisions of Section 7.6 hereof,
(a) will promptly repair, rebuild or restore the property damaged or destroyed
to substantially the same condition as prior to the event causing such damage
or destruction, with such changes, alterations and modifications as will not
impair the operating unity of the Plant or the character of the Project as a
"project" under the Authorizing Act, (b) will apply for such purpose so much as
may be necessary therefor of any insurance proceeds referable thereto, as well
as any other moneys required therefor, and (c) may, in the event the total
costs of such repair, rebuilding and restoration are less than the amount of
insurance proceeds referable thereto, retain the amount by which such proceeds
exceed said total costs.
If the Project is destroyed, in whole or in part, or is damaged,
by fire or other casualty, to such extent that the loss to the Project
resulting therefrom is in excess of $500,000, the Company will promptly so
notify the Trustee in writing, and the Net Insurance Proceeds shall be paid to
and held by the Trustee (or, if the Bonds have been fully paid, the Company),
whereupon, subject to the provisions of Section 7.6 hereof,
(i) the Company will proceed, as promptly as practicable under
the circumstances and under such terms, conditions and contracts as
shall be approved by the Company, to repair, rebuild or restore the
property damaged or
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destroyed to substantially the same condition as prior to the event
causing such damage or destruction, with such changes, alterations and
modifications as shall be specified by the Company and as will not
impair the operating unity of the Plant or the character of the Project
as a "project" under the Authorizing Act, and
(ii) the Trustee (or, if the Bonds have been fully paid, the
Company) will apply the Net Insurance Proceeds to payment of the costs
of such repair, rebuilding or restoration, either on completion thereof
or as the work progresses, as may be provided in the contracts
pertaining thereto.
Any balance of the Net Insurance Proceeds remaining after payment of all the
costs of such repair, rebuilding or restoration shall be paid to the Company.
In the event said proceeds are not sufficient to pay in full the costs of such
repair, rebuilding or restoration, the Company (1) will nonetheless complete
the work thereof and will pay that portion of the costs thereof in excess of
the amount of the Net Insurance Proceeds available therefor. The Company shall
not, by reason of the payment of such excess costs be entitled to any
reimbursement from the Board or to any abatement or diminution of the rental
provided for herein.
SECTION 7.2 CONDEMNATION PROVISIONS. If the Project or any
part thereof is taken under the exercise of the power of eminent domain by any
governmental authority or person, firm or corporation acting under governmental
authority, the entire condemnation award (if any) referable to the Project,
including any that may be recoverable by the Company, shall be paid to the
Trustee (or, if the Bonds have been fully paid, to the Board) and applied as
hereinafter provided:
(a) If no part of the Plant is taken or damaged and if in the
Company's opinion the efficient utilization of the Project is not
impaired by such taking, the Net Condemnation Award referable thereto
shall be paid to the Company.
(b) If any part of the Plant is taken or damaged or if in the
Company's opinion the efficient utilization of the Project is impaired
by such taking, the Company will, subject to the provisions of Section
7.6 hereof, proceed, as promptly as practicable under the circumstances
and upon such terms as shall be approved in writing by the Company, to
repair, replace, rebuild or restore the Plant or to rearrange the Plant
facilities so as to make the Project suitable for the Company's uses,
and the Trustee (or, if the Bonds have been fully paid, the Company)
will apply the Net Condemnation Award referable to such taking to
payment of the costs of such replacement, repair, rebuilding,
restoration or rearrangement. If the Net Condemnation Award is in
excess of the costs of such replacement, repair, rebuilding, restoration
or rearrangement, the excess shall be paid to the Company. If the Net
Condemnation Award is not sufficient to pay all
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the costs of such repair, rebuilding, restoration or rearrangement, the
Company will pay the deficiency, provided that it shall not by reason of
the payment of any such deficiency be entitled to any reimbursement from
the Board or to any abatement or diminution of the rental provided for
herein.
The Board will cooperate fully with the Company in the handling
and conduct of any prospective or pending condemnation proceeding with respect
to the Project or any part thereof and will follow all reasonable directions
given to it by the Company in connection with such proceeding. The Company
shall have full and complete control of such proceedings, including (without
limitations) the right to select Counsel for the Board. In no event will the
Board settle, or consent to the settlement of, any prospective or pending
condemnation proceeding with respect to the Project or any part thereof without
the prior written consent of the Company.
SECTION 7.3 CONDEMNATION OF RIGHT TO USE OF PROJECT FOR LIMITED
PERIOD. If the use, for a limited period, of all or part of the Project is
taken by any such eminent domain proceeding, this Lease Agreement (including,
without limitation, the provisions hereof relating to the payment of Basic
Rent) shall continue in full force and effect, but with the consequences
specified in the remaining provisions of this Section 7.3. If the period of
such taking expires on or before the expiration of the Lease Term, the Company
shall be entitled to receive the entire condemnation award made therefor,
whether by way of damages, rent or otherwise, and shall upon being restored to
possession restore the Project as nearly as practicable to the condition
existing immediately prior to such taking, with such changes, alterations and
modifications as will not impair the operating unity of the Project or its
character as a "project" under the Authorizing Act. If such taking occurs
during the Lease Term but the period of such taking expires after the
expiration of the Lease Term, the Company shall be entitled to receive the
entire award.
SECTION 7.4 CONDEMNATION OF COMPANY-OWNED PROPERTY. The
Company shall be entitled to any condemnation award or portion thereof made for
damages to or takings of its own property, as well as all other sums awarded as
compensation for the interest of the Company in the part of the Project taken
and as damages to the interest of the Company in any part thereof not taken,
but there shall be deducted therefrom, or paid directly by the Company, all
attorneys' fees and other expenses incurred in connection with the receipt of
such award or sum or portion thereof.
SECTION 7.5 PROVISIONS RELATING TO THE INCURRING OF CERTAIN
EXPENSES AFTER BONDS PAID. The Board will not, at any time after full payment
of the Bonds, incur any expenses in connection with the collection of any
insurance proceeds or condemnation award with respect to the Project, or any
part thereof, without the prior written consent of the Company.
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SECTION 7.6 OPTIONAL APPLICATION OF NET INSURANCE PROCEEDS OR
NET CONDEMNATION AWARD. The provisions of Sections 7.1 and 7.2 hereof to the
contrary notwithstanding, the Company may, within sixty (60) days following the
event giving rise to the receipt of any Net Insurance Proceeds or Net
Condemnation Award, as the case may be, (a) elect by written notice to the
Board and the Trustee, to have such proceeds or award, as the case may be,
applied to the redemption of Bonds, in which event the entire Net Insurance
Proceeds or Net Condemnation Award, as the case may be, shall be deposited in
the Debt Service Fund and applied to such redemption on the earliest
practicable redemption date thereafter, or (b) if none of the Bonds is
Outstanding, elect, by written notice to the Board, to have such proceeds or
award, as the case may be, returned to the Company. If either of such options
is elected by the Company, there shall be no obligation on the part of the
Company to cause the Project to be repaired, rebuilt or reconstituted.
ARTICLE VIII
PARTICULAR COVENANTS OF THE COMPANY
SECTION 8.1 GENERAL COVENANTS. The Company will not do or
permit anything to be done on or about the Project that will affect, impair or
contravene any policies of insurance that may be carried on the Project or any
part thereof against loss or damage by fire, casualty or otherwise. The
Company will, in the use of the Project Site, the Plant, the Equipment and the
public ways abutting the Project Site, comply with all applicable lawful
requirements of all governmental bodies; provided, however, that the Company
may contest to the extent it deems advisable the necessity of its compliance
with any such requirements unless by such action the lien of the Indenture on
any part of the Project shall be subject to loss or forfeiture.
SECTION 8.2 RELEASE AND INDEMNIFICATION COVENANTS. The Company
releases the Board, each director, officer, employee and agent thereof, the
Trustee and the holders of the Bonds from, and will indemnify and hold the
Board, each director, officer, employee and agent thereof, the Trustee and the
holders of the Bonds harmless against, any and all claims, liabilities or
losses of any character or nature whatsoever asserted by or on behalf of any
persons, firm, corporation or governmental authority arising out of, resulting
from, or in any way connected with, the Project, including, without limiting
the generality of the foregoing:
(a) any destruction of or damage to property or any injury to
or death of any person or persons caused by or related to the Project;
(b) any actions taken by the Board at the request or
suggestion of the Company or any person acting for the Company
(including its officers, employees and counsel, as well as bond counsel
involved at the request of the Company in the issuance of the Bonds) in
connection with the offering or sale of the Bonds; and
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(c) any amounts assessed by governmental authorities or
damages incurred by private parties on account of the failure of the
Company to comply with environmental, employment or products liability
laws or standards.
provided, however, that the Company shall not be obligated to indemnify the
Board, any director, officer, employee or agent thereof, the Trustee or the
holders of the Bonds against any claim, liability or loss resulting from
willful misconduct or gross negligence on the part of the Board, such director,
officer, employee or agent, the Trustee or the holders of the Bonds; and
provided, further, that no agent of the Board designated by the Company shall
have any rights as an indemnifiable party pursuant to the provisions of this
section. If any indemnifiable party (whether the Board, any of its directors,
officers, employees or agents, the Trustee or the holders of the Bonds) shall
be obligated to pay any claim, liability or loss, and if in accordance with all
applicable provisions of this section the Company shall have a primary
obligation to pay such claim, liability or loss on behalf of such indemnifiable
party and may not defer discharge of its indemnity obligation hereunder until
such indemnifiable party shall have first paid such claim, liability or loss
and thereby incurred actual loss. The Company will also pay or reimburse all
legal or other expenses reasonably incurred by any indemnifiable party in
connection with the investigation or defense or any action or proceeding,
whether or not resulting in liability, with respect to any claim, liability or
loss in respect of which indemnity may be sought against the Company under the
provisions of this section.
In the event that any action or proceeding is brought against any
indemnifiable party (whether the Board, any of its directors, officers,
employees or agents, the Trustee or the holders of the Bonds) in respect of
which indemnity may be sought against the Company under the provisions of this
section, such indemnifiable party shall, as a condition of the Company's
liability under the provisions of this section give written notice to the
Company of such action or proceeding within a reasonable time following the
commencement thereof and shall thereafter forward to the Company a copy of
every summons, complaint, pleading, motion or other process received with
respect to such action or proceeding. The Company may (and if so requested by
such indemnifiable party, shall) at any time assume the defense of such
indemnifiable party in connection with any such action or proceeding, and in
such case the Company shall pay all expenses of such defense and shall have
full and complete control of the conduct on the part of such party of any such
action or proceeding, subject, however, to the other provisions of this
section. In any action or proceeding where the Company assumes the defense of
any indemnifiable party, the Company shall have the right to select counsel for
such party; provided that such party may in its discretion employ its own
counsel if it deems such action to be necessary, in which case the Company
shall pay the fees and expenses of such other counsel in addition to the fees
and expenses of such counsel selected by the Company.
The Company shall not be obligated to indemnify and hold harmless
any indemnifiable party for any claim, liability or loss if such indemnifiable
party has agreed to a settlement of such claim, liability or loss without the
Company's consent, irrespective of whether the Company had, prior to such
settlement, exercised its right to assume the defense of such
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indemnifiable party in connection with any such action or proceeding; provided,
however, that in the event an indemnifiable party desires to settle a claim in
response to a bona fide offer of settlement, if the Company is unwilling to
settle the claim in accordance with the terms of such offer, then, in that
event, the Company may withhold its consent to the settlement only if it
establishes an escrow fund with an escrow agent acceptable to such
indemnifiable party in a principal amount equal to the difference between the
claimed amount for which the indemnifiable party is potentially liable and the
amount of the settlement offer. Such escrow may consist of cash, direct
obligations of the United States Government or obligations which are
unconditionally guaranteed by the United States Government, bank certificates
of deposit, bank letters of credit or any other security acceptable to such
indemnifiable party. Any interest earned on the funds held in such escrow
shall accrue to the benefit of the Company and shall be paid over to the
Company as earned. Subject to the preceding provisions of this paragraph, the
Company shall have the right to settle or compromise any claim, liability or
loss for which it shall be liable under the provisions of this section upon
such terms and conditions as it shall determine in the exercise of its sole
discretion.
SECTION 8.3 INSPECTION OF PROJECT. The Company will permit the
Board, the Trustee and their duly authorized agents at all reasonable times to
enter upon, examine and inspect the Project.
SECTION 8.4 AGREEMENT TO MAINTAIN CORPORATE EXISTENCE. The
Company will maintain its corporate existence, will not dissolve or otherwise
dispose of all or substantially all its assets (either in a single transaction
or in a series of related transactions) and will not consolidate with or merge
into another corporation or permit one or more corporations to consolidate with
or merge into it; provided that the Company may, without violating the
agreements contained in this section, do or perform any of the following:
(a) It may consolidate with or merge into another corporation,
or permit one or more corporations to consolidate with or merge into it
if the corporation surviving such merger or resulting from such
consolidation, if it shall be one other than the Company, expressly
assumes in writing all the obligations of the Company contained in this
Lease Agreement; and
(b) It may transfer to another corporation all or
substantially all its assets as an entirety, and (if it so elects)
thereafter dissolve, if the corporation to which such transfer shall be
made expressly assumes in writing all the obligations of the Company
contained in this Lease Agreement.
The Company will, promptly following any merger, consolidation or transfer
permitted under the provisions of this Section 8.4, furnish to the Board and
the Trustee fully executed or appropriately certified copies of the writing by
which the Company's successor or transferee
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corporation expressly assumes the obligations of the Company contained in this
Lease Agreement.
If, after a transfer by the Company of all or substantially all
its assets to another United States Corporation under the circumstances
described in the preceding clause (b) of this section, the Company does not
thereafter dissolve, it shall not have any further rights or obligations
hereunder.
SECTION 8.5 QUALIFICATION IN ALABAMA. The Company warrants and
represents that it is now duly qualified to do business as a foreign
corporation in Alabama and will continuously remain so qualified during the
term of the Lease Agreement. If, in accordance with the permissive provisions
of Section 8.4 hereof, the Company should merge into a corporation not
organized and existing under the laws of Alabama, should consolidate with one
or more corporations not organized and existing under the laws of Alabama or
should transfer all or substantially all its assets to a corporation not
organized under the laws of Alabama, it will cause the corporation into which
it merged, the corporation resulting from such consolidation or the corporation
to which all or substantially all its assets were transferred, as the case may
be, to qualify to do business in Alabama as a foreign corporation and to remain
so qualified at all times during the remainder of the Lease Term.
SECTION 8.6 FURTHER ASSURANCES. The Company will, at its own
cost and expense, take all actions that may at the time and from time to time
be necessary to perfect, preserve, protect and secure the interests of the
Board and the Trustee, or either, in and to the Project, including, without
limitation, the filing of all financing and continuation statements that may at
the time be required under the Alabama Uniform Commercial Code to maintain the
perfection and priority of the security interests created under this Lease
Agreement and the Indenture. The Company further agrees, without in any
limiting the generality of foregoing, to take any and all such actions that in
the judgment of the Board or the Trustee are necessary for the perfection,
preservation, protection and securing of such interests.
SECTION 8.7 CONCERNING THE TAX-EXEMPT NATURE OF THE INTEREST
INCOME ON THE BONDS. (a) The Company will file, or will cause to be filed,
with the Internal Revenue Service all statements and reports, if any, required
by the Code or rules or regulations issued thereunder, to be so filed as a
condition to continue qualification of the Bonds as a small issue the interest
income on which is not includable in gross income of the recipients thereof for
Federal income tax purposes.
(b) The Company shall at all times do and perform all acts and
things permitted by law and necessary or desirable in order to assure that
interest paid on the Bonds shall, for purposes of Federal income taxation, be
excludable from the gross income of the holders of the Bonds, except in the
event, and for the period, that any such holder is a
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"substantial user" of the Project or a "related person" (within the meaning of
Section 147(a) of the Code), and any and all actions of any owner or principal
user of the Project or any related person (within the meaning of Section
144(a)(3) of the Code) to any such owner or principal user shall be deemed to
be actions of the Company. In addition, any and all actions to be undertaken
by the Company or by any other person as to which the Board or the Trustee
must, pursuant to the terms hereto, consent or approve in advance shall be
deemed to be the actions of the Company or such other person (and not the
actions of the Board or the Trustee).
(c) The Company shall deliver written notice to the Trustee of
the occurrence of a Determination of Taxability immediately upon having
knowledge thereof.
(d) The Company shall not permit at any time or times any of
the proceeds of the Bonds or any other funds to be used, directly or
indirectly, to acquire any asset or obligation the acquisition of which would
cause the Bonds to be "arbitrage bonds" for the purposes of Section 148 of the
Code and shall remit to the United States in a timely manner all amounts due as
rebate and otherwise take any action or omit to take any action that would
cause the Bonds to be "arbitrage bonds" because of Section 148 of the Code.
The Company shall utilize the proceeds from the sale of the Bonds so as to
satisfy the reasonable expectations of the Company and the Board set forth in
the Federal Tax Certificate of the Company delivered as of the Issue Date.
(e) The Company shall not permit the Project to be used or
occupied in any manner for compensation by the United States or an agency or
instrumentality thereof, including any entity with statutory authority to
borrow from the United States (in any case within the meaning of Section 149(b)
of the Code) or pledge additional security for the repayment of the Bonds
except for tangible property or securities the payment of which is not provided
or guaranteed, in whole or in part, by the Federal Government or any agency or
instrumentality thereof, unless the Company shall deliver to the Trustee an
opinion of Bond Counsel in form and substance satisfactory to the Trustee to
the effect that such use will not impair the exclusion of the interest income
on the Bonds from Federal income taxation.
ARTICLE IX
CERTAIN PROVISIONS RELATING
TO ASSIGNMENT, SUBLEASING AND TO THE BONDS
SECTION 9.1 PROVISIONS RELATING TO ASSIGNMENT AND SUBLEASING BY
COMPANY. The Company may assign this Lease Agreement and the leasehold
interest created hereby, and may sublet the Project or any part thereof,
without the necessity of obtaining the consent of either the Board or the
Trustee; provided however, that no assignee or sublessee or anyone claiming by,
through or under any such assignment or sublease shall by virtue thereof
acquire
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any greater rights in the Project or in any part thereof than the Company then
has under this Lease Agreement, nor shall any such assignment or subleasing or
any dealings or transactions between the Board or the Trustee or any sublessee
or assignee in any way relieve the Company from primary liability for any of
its obligations hereunder. Thus, in the event of any such assignment or
subleasing, the Company shall remain primarily liable for payment of the
rentals herein provided to be paid by it and for performance and observance of
the other agreements and covenants on its part herein provided to be performed
and observed by it.
SECTION 9.2 ASSIGNMENT OF LEASE BY BOARD; REQUIRED CONSENTS TO
AMENDMENTS. It is understood and agreed that in the Indenture the Board will
assign its interest in and pledge any moneys receivable under this Lease
Agreement to the Trustee as security for payment of the principal of and the
interest and premium, if any, on the Bonds. It is further understood and
agreed that the Board will in the Indenture obligate itself to follow the
instructions of the Trustee or the holders of the Bonds or a certain percentage
thereof in the election or pursuit of any remedies herein vested in it. Upon
the assignment and pledge to the Trustee of the Board's interest in this Lease
Agreement, the Trustee shall have all rights and remedies herein accorded the
Board and any reference herein to the Board shall be deemed, with the necessary
changes in detail, to include the Trustee, and the Trustee and the holders of
the Bonds shall be deemed to be third party beneficiaries of the covenants and
agreements on the part of the Company herein contained. Subsequent to the
issuance of the Bonds and prior to their payment in full, the Board and the
Company shall have no power to modify, alter, amend or (except as specifically
authorized herein) terminate this Lease Agreement without the prior written
consent of the Trustee and then only as provided in the Indenture. The Board
will not, so long as the Company is not in default hereunder, amend the
Indenture or any indenture supplemental thereto, and will not exercise any
right voluntarily to redeem the Bonds, without the prior written consent of the
Company.
Without the prior written consent of the Company and the Credit
Obligor, the Board will not, at any time while the Company is not in default
hereunder, hereafter issue any bonds or other securities other than the Bonds,
that are payable out of or secured by a pledge of the revenues and receipts
derived by the Board from the leasing or sale of the Project, nor, without such
consent, will the Board, at any time while the Company is not in default
hereunder, hereafter place any mortgage or other encumbrance (other than the
Indenture and supplemental indentures contemplated thereby) on the Project or
any part thereof.
SECTION 9.3 REFERENCES TO BONDS INEFFECTIVE AFTER BONDS PAID.
Upon full payment of the Bonds, all references in this Lease Agreement to the
Bonds and the Trustee shall be ineffective and neither the Trustee nor the
holders of any of the Bonds shall thereafter have any rights hereunder. For
purposes of this Lease Agreement, any of the Bonds shall be deemed fully paid
if there exists, with respect thereto, the applicable conditions specified in
Article XIII of the Indenture.
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In the event the Bonds are fully paid prior to the final maturity
thereof, the Company shall be entitled to use and occupancy of the Project from
the date of such payment until 11:59 o'clock, p.m., on April 1, 2007, without
the payment of any further Basic Rent but otherwise on all the same terms and
conditions hereof. If after full payment of the Bonds, any moneys then remain
in any of the special funds created in the Indenture, the Board (a) will cause
the Trustee to pay all such moneys to the Company, and (b) hereby assigns all
such moneys to the Company.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT DEFINED. The following shall be
"events of default" under this Lease Agreement, and the terms "event of
default" or "default" shall mean, whenever they are used in this Lease
Agreement, any one or more of the following events:
(a) Failure by the Company to pay, when due and payable, the
Basic Rent hereinabove provided;
(b) Failure by the Company to perform or observe any of its
other agreements or covenants contained in this Lease Agreement, which
failure shall have continued for a period of sixty (60) days after
written notice specifying, in reasonable detail, the nature of such
failure and requiring the Company to perform or observe the agreement or
covenant with respect to which it is delinquent shall have been given to
the Company by the Board or the Trustee, unless (i) the Board and the
Trustee shall agree in writing to an extension of such period prior to
its expiration, or (ii) during such sixty (60) day period or any
extension thereof, the Company has commenced and is diligently pursuing
appropriate corrective action, or (iii) the Company is by reason of
force majeure at the time prevented from performing or observing the
agreement or covenant with respect to which it is delinquent;
(c) The dissolution or liquidation of the Company or the
filing by the Company of a voluntary petition in bankruptcy, or its
failure to lift, within ninety (90) days, any execution, garnishment or
attachment of a size as seriously to impair its ability to carry on its
operations, the commission by it of any act of bankruptcy or its
adjudication as a bankrupt, an assignment by it for the benefit of
creditors, the entry by it into an agreement of composition with its
creditors or the approval by a court of competent jurisdiction as having
been filed in good faith of a petition applicable to it in any
proceeding for its reorganization instituted under the provisions of the
general bankruptcy act, as amended, or
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under any similar act that may hereafter be enacted; provided that the
term "dissolution or liquidation of the Company," as used in this
subsection (c) shall not be construed to include the termination of the
existence of the Company resulting from a merger into or a consolidation
with another corporation or the dissolution of the Company following a
transfer of all or substantially all its assets to another corporation,
under the conditions contained in Section 8.4 hereof and permitting such
actions;
(d) Any warranty, representation or other statement by or on
behalf of the Company contained in the Lease or the Guaranty or in any
instrument or certificate furnished in compliance with or reference to
the Lease shall have been false or misleading in any material respect
when made;
(e) Receipt by the Trustee of notice from the Credit Obligor
that an event of default has occurred under the Credit Agreement; or
(f) An event of default under the Indenture.
The term "force majeure" as used in subsection (b) of this section means acts
of God or the public enemy, strikes, labor disputes, lockouts, work slowdowns
or stoppages or other industrial disturbances, insurrections, riots or other
civil disturbances, orders of the United States of America, the State of
Alabama or any department, agency or political subdivision of either thereof,
or of other civil or military authority, or partial or entire failure of public
utilities.
SECTION 10.2 REMEDIES ON DEFAULT. Whenever any such event of
default shall have happened and be continuing, the Board and the Trustee (or
the Trustee on behalf of the Board) may take any one or more of the following
remedial steps:
(a) They or it may re-enter and take possession of the
Project, exclude the Company from possession thereof and lease the same
for the account of the Company, holding the Company liable for the rent
and other payments due hereunder up to the effective date of such
leasing and for the excess, if any, of the rent and other amounts
payable hereunder over the rents and other amounts which are payable by
the lessee under such new lease;
(b) They or it may terminate this Lease Agreement, exclude the
Company from possession of the Project and hold the Company liable for
the balance due hereunder, in which event the rights of the Company in
the Project and the use and possession thereof shall terminate;
35
<PAGE> 40
(c) They or it may declare immediately due and payable all
installments of rent thereafter coming due hereunder, provided, however,
that the total amount of such rent that may be so declared immediately
due and payable pursuant to subparagraphs (a) and (b) of Section 5.2
hereof shall be an amount which, when added to the total of the amounts
then on deposit in the Debt Service Fund and the Construction Fund, will
be sufficient to pay, redeem and retire all the outstanding Bonds on the
earliest practicable date thereafter on which, under their terms, they
may be redeemed, including, without limitation, principal, premium,
interest to mature until and on such date, expenses of redemption and
Trustee's fees and charges;
(d) They or it may have access to, and inspect, examine and
make copies of, the books, records and accounts of the Company, but if
and only if any of the Bonds are then outstanding; and
(e) They or it may take whatever other action at law or in
equity may appear necessary or desirable to collect the rent then due,
or to enforce any obligation, covenant or agreement of the Company under
this Lease Agreement.
SECTION 10.3 NO REMEDY EXCLUSIVE. No remedy herein conferred
upon or reserved to the Board or the Trustee 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 under this
Lease Agreement or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any default
shall impair any such right or power or shall be construed to be a waiver
thereof but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Board or the Trustee
to exercise any remedy reserved to it in this Article X, it shall not be
necessary to give any notice, other than such notice as is herein expressly
required.
SECTION 10.4 AGREEMENT TO PAY ATTORNEYS' FEES. In the event
that, as a result of a default or a threatened default by the Company
hereunder, the Board or the Trustee should employ attorneys at law or incur
other expenses in or about the collection of rent or the enforcement of any
other obligation, covenant, agreement, term or condition of this Lease
Agreement, the Company will, if the Board or the Trustee are successful in such
efforts or if a final judgment for either is rendered by a court of competent
jurisdiction, pay to the Board or to the Trustee, as the case may be,
reasonable attorneys' fees and other expenses so incurred by the Board or the
Trustee.
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SECTION 10.5 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any agreement contained in this Lease Agreement should be breached by
either party and thereafter waived by the other party, such waiver shall be
limited to the particular breach so waived and shall not be deemed to waive any
other breach hereunder. Further, neither the receipt nor the acceptance of
rental hereunder by the Board, or by the Trustee on its behalf, shall be deemed
to be a waiver of any breach of any covenant or condition herein contained even
though at the time of such receipt or acceptance there has been a breach of one
or more covenants or conditions on the part of the Company herein contained and
the Board or the Trustee (or both) have knowledge thereof.
ARTICLE XI
OPTIONS
SECTION 11.1 OPTION TO PURCHASE AFTER PAYMENT OF BONDS. If the
Company pays the rental herein reserved to the Board or if provision is made
for payment of the Bonds in accordance with the provisions of Article XIII of
the Indenture, it shall have the right and option, herein granted by the Board,
to purchase the Project from the Board at any time during the Lease Term after
or simultaneously with payment (or provision for payment in accordance with
said section) in full of the principal of and the interest and premium (if any)
on the Bonds and all reasonable fees, charges and disbursements of the Trustee,
accrued and to accrue until the date of such full payment, at and for a
purchase price of $100 plus the reasonable costs and expenses (including
reasonable attorneys' fees) incurred by the Board in connection with the
Company's exercise of such option. To exercise any such purchase option, the
Company shall notify the Board in writing not less than thirty (30) days prior
to the date on which it proposes to effect such purchase and, on the date of
such purchase, shall pay the aforesaid purchase price to the Board in cash or
bankable funds, whereupon the Board will, by bills of sale and statutory
warranty deed or other appropriate instruments, transfer and convey the Project
(in its then condition, whatever that may be) to the Company, subject only to
such liens, encumbrances and exceptions to which title thereto was subject when
this Lease Agreement was delivered, those to the creation or suffering of which
the Company consented (except for this Lease Agreement and the Indenture) and
those resulting from the failure of the Company to perform or observe any of
the agreements or covenants on its part herein contained. Nothing herein
contained shall be construed to give the Company any right to any rebate to or
refund of any rental paid by it hereunder prior to the exercise by it of the
purchase option hereinabove granted, even though such rental may have been
wholly or partially prepaid.
SECTION 11.2 OPTION TO TERMINATE. The Company shall have the
right to terminate this Lease Agreement at any time after payment in full of
the principal of and interest and premium (if any) on the Bonds upon giving to
the Board notice in writing not less than five (5) days prior to the day of
termination.
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SECTION 11.3 OPTION TO PURCHASE PORTIONS OF PROJECT SITE. The
Company shall have, and is hereby granted, subject to the conditions
hereinafter specified, the option to purchase from the Board any part of the
Project Site at any time and from time to time while it is not in default
hereunder, provided that the Company furnishes to the Board and the Trustee
(a) A notice in writing containing (i) an adequate legal
description of that portion of the Project Site with respect to which
such option is to be exercised, (ii) a statement that the Company
intends to exercise its option to purchase such portion of the Project
Site on a date stated, which shall not be less than thirty (30) nor more
than ninety (90) days from the date of such notice, and (iii) a
statement that the use to which the Company proposes to devote such
portion of the Project Site will promote the continued industrial
development of the State of Alabama; and
(b) A certificate signed by an Independent Engineer stating
(i) that no part of the Plant or the Equipment, no other improvement
(except for roads, walkways, sewer, water, oil, coal oil, gas, electric
and communication lines, pipe lines and other energy source conveyors
and the like, which shall be specified in such certificate) and no
facility designed for the control of air or water pollution or for the
disposal of solid wastes and necessary in the operation of the Plant are
located on the portion of the Project Site with respect to which such
option is exercised, and (ii) that the severance of such portion of the
Project Site from the Project will not impair the operating unity of the
Plant or unduly restrict ingress or egress to or from the Plant.
Upon the receipt by the Board and the Trustee of a notice and certificate
complying with the provisions of the preceding clauses (a) and (b),
respectively, the Board will, without the payment to it of any additional
monetary consideration, execute and deliver to the Company a statutory warranty
deed conveying to the Company that portion of the Project Site with respect to
which such option was exercised, subject only to such liens, encumbrances and
exceptions to which title thereto was subject when this Lease Agreement was
delivered, those to the creation or suffering of which the Company consented
(except for this Lease Agreement and the Indenture) and those resulting from
the failure of the Company to perform or observe any of the agreements or
covenants on its part herein contained.
From and after the consummation of any purchase effected by the
Company pursuant to the provisions of this section, any reference herein to the
Project Site shall be deemed to refer to the real property that immediately
prior thereto constituted the Project Site, less and except that part so
purchased by the Company under the provisions of this section. No purchase
effected by the Company under the provisions of this section shall entitle the
Company to any abatement or diminution of the rental payable hereunder.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.1 COVENANT OF QUIET ENJOYMENT. SURRENDER OF PROJECT.
So long as the Company performs and observes all the covenants and agreements
on its part herein contained, it shall peaceably and quietly have, hold and
enjoy the Project during the Lease Term of this Lease Agreement subject to all
the terms and provisions hereof. At the end of the Lease Term, as the case may
be, of this Lease Agreement, or upon any prior termination of this Lease
Agreement, the Company will (unless it has simultaneously purchased the Project
from the Board) surrender possession of the Project peaceably and promptly to
the Board in as good condition as at the commencement of the Lease Term,
excepting only (a) loss by fire or other casualty, (b) alterations, changes or
improvements made in accordance with the provisions of this Lease Agreement,
(c) acts of governmental or condemning authorities, and (d) ordinary wear and
tear.
SECTION 12.2 RETENTION OF TITLE TO PROJECT BY BOARD. GRANT OF
UTILITY EASEMENTS. CONNECTING UTILITIES. Without the prior written consent of
the Company, the Board will not itself, at any time during which the Company is
not in default hereunder, (a) except as provided in Section 8.5 of the
Indenture, sell, convey or otherwise dispose of all or any part of the Project
(except to the Company as hereinabove provided), (b) except as provided in
Section 9.2 hereof, mortgage or otherwise encumber the Project or any part
thereof, or (c) except as provided in Section 8.5 of the Indenture, dissolve or
do anything that will result in the termination of its corporate existence.
The Board will, however, grant such utility, access and other similar easements
over, across or under the Project Site as shall be requested by the Company and
as in the judgment of the Company are necessary or convenient for the efficient
operation of the Project. The Company may, at its own expense and without any
consent of the Board or the Trustee, connect or "tie in" utility or other
similar facilities serving the Project to utility or other similar facilities
serving real property adjacent to or near the Project, but only if such
connection or "tie in" of utility or similar facilities will not unreasonably
interfere with the use of the Project.
SECTION 12.3 INTEREST RATE LIMITATION. Any interest rate
specified herein for any purpose shall be deemed to be limited to the lesser of
(a) the rate so specified, or (b) the highest non-usurious rate at the time
permitted by the laws of Alabama.
SECTION 12.4 THIS LEASE A NET LEASE. The Company recognizes and
understands that it is the intention hereof that this lease be a net lease and
that until the Bonds are fully paid all taxes, insurance and maintenance shall
be the sole responsibility of the Company to the end that all Basic Rent be
available for payment of principal and interest and premium (if any) on the
Bonds. This Lease Agreement shall be construed to effectuate such intent.
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SECTION 12.5 NOTICES. All notices, demands, requests and other
communications hereunder shall be deemed sufficient and properly given if in
writing and delivered in person to the following addresses or mailed by
certified or registered mail, postage prepaid with return receipt requested, at
such addresses:
(a) If to the Board:
The Industrial Development Board
of the City of Demopolis
City Hall
Demopolis, Alabama 36732
(b) If to the Company:
McClain of Alabama, Inc.
6200 Elmridge
Sterling Heights, Michigan 48313
(c) If to the Trustee:
LaSalle National Bank - Corporate Trust
135 South LaSalle Street
Chicago, Illinois 60603
(d) If to the Credit Obligor:
Standard Federal Bank
2600 West Beaver Road
Troy, Michigan 48084
Any of the above-mentioned parties may, by like notice, designate any further
or different addresses to which subsequent notices shall be sent. The Board and
the Company will send a copy of each notice that either thereof gives to the
other pursuant to the provisions hereof to the Trustee and to the Credit
Obligor, but the failure to give a copy of such notice to the Trustee or the
Credit Obligor shall not invalidate such notice or render it ineffective unless
in the case of failure to give notice to the Trustee, such notice is otherwise
herein expressly required. Any notice hereunder signed on behalf of the
notifying party by a duly authorized attorney at law shall be valid and
effective to the same extent as if signed on behalf of such party by a duly
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<PAGE> 45
authorized officer or employee. Any notice given hereunder shall be deemed to
have been given upon receipt by the person to whom such notice is required to
be given hereunder.
Whenever, under the provisions hereof, any request, consent or
approval of the Board or the Company is required or authorized, such request,
consent or approval shall (unless otherwise expressly provided herein) be
signed on behalf of the Board by an Authorized Board Representative and on
behalf of the Company by an Authorized Company Representative; and each of the
parties and the Trustee are authorized to act and rely upon any such requests,
consents or approvals so signed.
SECTION 12.6 CERTAIN PRIOR AND CONTEMPORANEOUS AGREEMENTS
CANCELLED. This Lease Agreement shall completely and fully supersede all other
prior or contemporaneous agreements, both written and oral, between the Board
and the Company relating to the leasing of the Project. Neither the Board nor
the Company shall hereafter have any rights under any such prior or
contemporaneous agreement but shall look solely to this Lease Agreement for
definition and determination of all their respective rights, liabilities and
responsibilities respecting the leasing of the Project.
SECTION 12.7 LIMITED LIABILITY OF BOARD. The Board is entering
into this Lease Agreement pursuant to the authority conferred upon it in the
Authorizing Act. No provision hereof shall be construed to impose a charge
against the general credit of the Board or any personal or pecuniary liability
upon the Board except with respect to the proper application of the proceeds to
be derived from the sale of the Bonds and the revenues and receipts to be
derived from any leasing or sale of the Project or any part thereof.
SECTION 12.8 BINDING EFFECT. This Lease Agreement shall inure
to the benefit of, and shall be binding upon, the Board, the Company, and their
respective successors and assigns.
SECTION 12.9 SEVERABILITY. In the event any provision or any
part of a provision of this Lease Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision or part of a provision
hereof.
SECTION 12.10 ARTICLE AND SECTION CAPTIONS. The article and
section headings and captions contained herein are included for convenience
only and shall not be considered a part hereof or affect in any manner the
construction or interpretation hereof.
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SECTION 12.11 GOVERNING LAW. It is the intention of the parties
hereto that this Lease Agreement shall in all respects be governed by the laws
of the State of Alabama.
IN WITNESS WHEREOF, the Board and the Company have caused this
Lease Agreement to be executed in their respective corporate names, have caused
their respective corporate seals to be hereunto affixed, and have caused this
Lease Agreement to be attested, all by their duly authorized officers, in
multiple counterparts, each of which shall be deemed an original, and have
caused this Lease Agreement to be dated as of April 1, 1997.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
By
-------------------------------
Its
---------------------------
Attest:
- -------------------------------
Its
---------------------------
McCLAIN OF ALABAMA, INC.
By
-------------------------------
Its
---------------------------
42
<PAGE> 47
STATE OF ALABAMA )
)
COUNTY OF MARENGO )
I, the undersigned Notary Public in and for said county in said
state, hereby certify that John E. Northcutt, whose name as Chairman of the
Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF
DEMOPOLIS, a public corporation under the laws of Alabama, is signed to the
foregoing instrument and who is known to me, acknowledged before me on this day
that, being informed of the contents of the within instrument, he, as such
officer and with full authority, executed the same voluntarily for and as the
act of said public corporation.
GIVEN under my hand and official seal of office, this ____ day
of _______________, 1997.
---------------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires: _______________
43
<PAGE> 48
STATE OF )
)
COUNTY OF )
I, the undersigned Notary Public in and for said county in said
state, hereby certify that ______________________________, whose name as
_________________________ of MCCLAIN OF ALABAMA, INC., a corporation organized
under the laws of the State of Michigan, is signed to the foregoing instrument
and who is known to me, acknowledged before me on this day that, being informed
of the contents of the within instrument, he, as such officer and with full
authority, executed the same voluntarily for and as the act of said
corporation.
GIVEN under my hand and official seal of office, this ____ day of
_______________, 1997.
---------------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires: _______________
44
<PAGE> 49
EXHIBIT A
To That Lease Agreement
between The Industrial Development Board
of the City of Demopolis and
McClain of Alabama, Inc.
Dated as of April 1, 1997
================================================================================
PROJECT SITE DESCRIPTION
A parcel of land lying and being in Section 11, Township 17 North, Range 1
East, Marengo County, Alabama, containing 88.1 acres more or less, and being
more particularly described as follows:
Commence at the southwest corner of the Northeast Quarter of the Southwest
Quarter of said Section 11; thence run north 01 degrees 50' west along the west
boundary of said Northeast Quarter of Southwest Quarter a distance of 82.6 feet
to a concrete monument set to mark the point of beginning; thence run north 40
degrees 29' east parallel to and 350 feet perpendicular from the centerline of
the existing runway No. 4 of the Demopolis Airport a distance of 3,245.9 feet to
a concrete monument set 600 feet perpendicular from the centerline of existing
runway No. 13 of the said Demopolis Airport; thence run north 51 degrees 55'
west and parallel to said runway No. 13 a distance of 1,568.8 feet to a
concrete monument set on the southeast boundary of a cemetery; thence run south
38 degrees 05' west a distance of 20.0 feet to a concrete monument set at the
southern most corner of said cemetery; thence run north 51 degrees 55' west
along the southwest boundary of said cemetery a distance of 43.2 feet to a
concrete monument set near the left bank of the Tombigbee River. Continue
thence north 51 degrees 55' west to the said Tombigbee River; thence
southwestwardly along the southeast edge of said Tombigbee River to the point of
intersection of said river and the west boundary of the Southeast Quarter of the
Northwest Quarter of Section 11, said course follows generally along a meander
line described as: from last named concrete monument run south 47 degrees 04'
west a distance of 515.2 feet; thence run south 41 degrees 54' west a distance
of 367.2 feet; thence run south 50 degrees 42' west a distance of 370.0 feet to
a concrete monument found on the said west boundary of the Southeast Quarter of
the Northwest Quarter near the left bank of said river; thence run south 01
degrees 50' east and along the west boundary of said Southeast Quarter of
Northwest Quarter and Northeast Quarter of Southwest Quarter a distance of
2,590.2 feet to the point of beginning.
LESS AND EXCEPT THE FOLLOWING DESCRIBED TRACT HERETOFORE CONVEYED TO ALABAMA
POWER COMPANY AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A parcel of land located in the Northeast Quarter of the Southwest Quarter (NE
1/4 of SW 1/4) and the Southeast Quarter of Northwest Quarter (SE 1/4 of NW
1/4) of Section 11, Township 17 North, Range 1 East, Marengo County, Alabama,
being more particularly described as follows:
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<PAGE> 50
Commence at the southwest corner of the Northeast Quarter of Southwest Quarter
(NE 1/4 of SW 1/4) of Section 11 and run North 01 degree 50 minutes West a
distance of 651.4 feet to a point; thence turn an angle to the right and run
North 40 degrees 31 minutes East a distance of 1130.83 feet to a point, said
point being the northwest corner of existing Alabama Power Company substation
and point of beginning of the property herein described; thence from point of
beginning continue North 40 degrees 31 minutes East a distance of 150.0 feet to
a point; thence turn an angle to the right and run South 49 degrees 29 minutes
East a distance of 150 feet to a point; thence turn an angle to the right and
run South 40 degrees 31 minutes West a distance of 50 feet to a point; thence
turn an angle to the left and run South 49 degrees 29 minutes East a distance
of 115.2 feet to the northwesterly boundary line of a paved road; thence turn
an angle to the right and run South 40 degrees 31 minutes West along the
northwesterly margin of said road a distance of 50 feet to a point; thence turn
an angle to the right and run North 49 degrees 29 minutes West a distance of
115.2 feet to a point; thence turn an angle to the left and run South 40
degrees 31 minutes West a distance of 50 feet to a point; thence turn an angle
to the right and run North 49 degrees 29 minutes West a distance of 150 feet to
the point of beginning.
The foregoing property being conveyed to the Alabama Power Company by Deeds
recorded October 2, 1985 in the Probate Office, Marengo County, Alabama, in
Deed Book 7-U, at page 296 and Deed Book 7-U, at page 300.
2
<PAGE> 51
EXHIBIT B
To That Lease Agreement
between The Industrial Development Board
of the City of Demopolis and
McClain of Alabama, Inc.
Dated as of April 1, 1997
================================================================================
EQUIPMENT DESCRIPTION
Tool Smith - 1 Ton Air Hoist
Metal Muncher Punch Press
Air Compressor
Fork Lift Truck
General Office Furniture and Equipment
Computer Monitor
Emulation Board
BellSouth Phone System
Trailer
Burn Table
Crane
Fork Lifts
Welder
Semi Truck
1
<PAGE> 1
EXHIBIT 10.68
================================================================================
TRUST INDENTURE
between
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
and
LASALLE NATIONAL BANK,
as Trustee
DATED AS OF APRIL 1, 1997
================================================================================
Pertaining to
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
Industrial Development Revenue Bonds
Series 1997
(McClain of Alabama, Inc. Project)
<PAGE> 2
TRUST INDENTURE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
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<S> <C> <C>
ARTICLE I
DEFINITIONS AND USE OF PHRASES
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Use of Phrases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II
GRANTING CLAUSES
Section 2.1 Granting Clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
THE BONDS
Section 3.1 General Provisions Respecting the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.2 Variable Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.3 Term Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.4 Optional Tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.5 Mandatory Tenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.6 Procedures for Purchase and Remarketing of Bonds; Delivery of Purchased
and Remarketed Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.7 Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 3.8 Concerning the Confirmation of the Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.9 Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.10 Form of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.11 Execution and Delivery of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.12 Application of Proceeds from Sale of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
REDEMPTION PROVISIONS
Section 4.1 Redemption Dates and Prices of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.2 Selection of Bonds to be Called for Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.3 Notice of Redemption. Deposit of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 4.4 Bonds Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
i
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<TABLE>
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ARTICLE V
GENERAL PROVISIONS
RESPECTING THE BONDS
Section 5.1 Execution of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.2 Authentication of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.3 Replacement of Mutilated, Lost, Stolen or Destroyed Bonds . . . . . . . . . . . . . . . . . . . . . 42
Section 5.4 Registration, Transfer and Exchange of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 5.5 Persons Deemed Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 5.6 Payment of Principal and Interest; Interest Rights Reserved . . . . . . . . . . . . . . . . . . . . 44
Section 5.7 Source of Payment; Limited Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.8 Registration of Bonds in the Book-Entry Only System . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VI
THE CONSTRUCTION FUND
Section 6.1 Construction Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.2 Trustee Protected in Construction Fund Payments. Additional Evidence May Be Required . . . . . . . . 47
Section 6.3 Security for Construction Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 6.4 Investment of Construction Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.5 Agreement Respecting Non-Arbitrage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VII
APPLICATION OF REVENUES
AND CREATION OF DEBT SERVICE
FUND AND BOND PURCHASE FUND
Section 7.1 Debt Service Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.2 Bond Purchase Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 7.3 Money for Bond Payments to be Held in Trust; Repayment of Unclaimed Money . . . . . . . . . . . . . . 52
Section 7.4 Investment of Debt Service Fund and Bond Purchase Fund . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.5 Security for Debt Service Fund Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VIII
PARTICULAR COVENANTS OF THE BOARD
Section 8.1 Payment of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.2 Priority of Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.3 Concerning the Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 8.4 Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
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<TABLE>
<S> <C> <C>
Section 8.5 Sale of Project Prohibited Except under Certain Conditions . . . . . . . . . . . . . . . . . . . . . 55
Section 8.6 Freedom of Project from Prior Liens. Payment of Charges . . . . . . . . . . . . . . . . . . . . . . 55
Section 8.7 Inspections by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.8 Recordation. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 8.9 Concerning Certain Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE IX
CERTAIN PROVISIONS RELATING TO
THE POSSESSION, USE AND RELEASE
OF THE PROJECT AND TO THE
DISPOSITION OF INSURANCE
PROCEEDS AND CONDEMNATION AWARDS
Section 9.1 Retention of Possession of Project by Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.2 Release of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.3 Release Upon Payment of Condemnation Award to Trustee . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.4 Disposition of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.5 Release of Certain Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE X
EVENTS OF DEFAULT AND
REMEDIES OF TRUSTEE AND BONDHOLDERS
Section 10.1 Events of Default Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.2 Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.3 Application of Moneys Received By Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.4 Remedies Vested in Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.5 Waivers of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE XI
CONCERNING THE TRUSTEE, THE
REMARKETING AGENT AND THE TENDER AGENT
Section 11.1 Trustee Acceptance of Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.2 Trustee Authorized to Pay Certain Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.3 Trustee May File Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 11.4 Resignation and Discharge of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.5 Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.6 Concerning Any Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.7 Remarketing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 11.8 Tender Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 11.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE XII
AUTHORIZATION OF SUPPLEMENTAL
INDENTURES AND MODIFICATION OF
THE LEASE AND THE GUARANTY
Section 12.1 Supplemental Indentures without Bondholder Consent . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.2 Supplemental Indenture Requiring Bondholder Consent . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.3 Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.4 Amendments to Lease and Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.5 Notices with Respect to Certain Changes in the Indenture, the Lease and the Guaranty . . . . . . . . 72
Section 12.6 Approval of Credit Obligor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 12.7 Discretion of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE XIII
PAYMENT AND CANCELLATION OF THE
BONDS AND SATISFACTION OF THE INDENTURE
Section 13.1 Satisfaction of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 13.2 Cancellation of Paid Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 13.3 Trust for Payment of Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 14.1 Disclaimer of General Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.2 Retention of Moneys for Payment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.3 Form of Requests, etc., by Bondholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.4 Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 14.5 Manner of Proving Ownership of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 14.6 Interest Rate Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 14.7 Indenture Governed by Alabama Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 14.8 Notices to Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 14.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
Exhibit A - Description of Project Site
Exhibit B - Description of the Leased Equipment
iv
<PAGE> 6
TRUST INDENTURE between THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY
OF DEMOPOLIS, a public corporation under the laws of Alabama (the "Board"), and
LASALLE NATIONAL BANK, a national banking corporation under the laws of Alabama
(the "Trustee"),
R E C I T A L S
The Board makes the following recitals of fact as the basis for the
undertaking following: it is duly incorporated under the provisions of Article
4 of Chapter 54 of Title 11 of the Code of Alabama of 1975, as amended, by
Certificate of Incorporation duly filed for record in the office of the Judge
of Probate of Marengo County, Alabama; it is not in default under any of the
provisions contained in its Certificate of Incorporation or in the laws of said
state; by proper corporate action it has duly authorized the issuance of the
Bonds hereinafter referred to; and to secure payment of the principal of and
the interest and premium (if any) on said Bonds, payment of the purchase price
thereof upon tenders herein provided for, and payment of amounts owing under
the Credit Agreement hereinafter referred to, it has by proper corporate action
duly authorized the execution and delivery of this Indenture.
NOW, THEREFORE, THIS INDENTURE
W I T N E S S E T H:
For the aforesaid purpose and in consideration of the respective
agreements herein contained, it is hereby agreed between the parties signatory
hereto and the Holders of all Bonds issued hereunder (the Holders of said Bonds
evidencing their consent hereto by their acceptance of the said Bonds and the
parties signatory hereto evidencing their consent hereto by their execution
hereof), each with each of the others, as follows (provided, that in the
performance of any of the agreements of the Board herein contained, any
obligation it may thereby incur for the payment of money shall not be a general
debt on its part but shall be payable solely out of the revenues and receipts
derived from the leasing or sale of the Project hereinafter referred to):
ARTICLE I
DEFINITIONS AND USE OF PHRASES
SECTION 1.1 DEFINITIONS. The following words and phrases and
others evidently intended as the equivalent thereof shall, in the absence of
clear implication herein otherwise, be given the following respective
interpretations herein:
"ACT OF BANKRUPTCY" means the filing of a petition in bankruptcy (or
other commencement of a bankruptcy or similar proceeding) by or against the
designated entity under any applicable bankruptcy, insolvency, reorganization
or similar law now or hereafter in effect.
1
<PAGE> 7
"AFFILIATE" means any person, firm or corporation controlled by, or
under common control with, the Company and any person, firm or corporation
controlling the Company.
"AUTHORIZED DENOMINATION" means any denomination of Bonds permitted by
the provisions of Section 3.1(b) hereof.
"AUTHORIZED BOARD REPRESENTATIVE" means the person or persons at the
time designated as such by written certificate furnished to the Company and the
Trustee, containing the specimen signature or signatures of such person or
persons and signed on behalf of the Board by the Chairman or the Vice Chairman
of the Directors.
"AUTHORIZED COMPANY REPRESENTATIVE" means the person or persons at the
time designated as such by written certificate furnished to the Board and the
Trustee, containing the specimen signature or signatures of such person or
persons and signed on behalf of the Company by the Chairman of its Board of
Directors, by its President, by any Vice President, by its Secretary or by its
Treasurer.
"BASIC RENT" means (i) the moneys payable by the Company pursuant to
the provisions of Section 5.2 of the Lease, (ii) any other moneys payable by
the Company pursuant to the Lease to provide for the payment of the principal
of and the interest and premium (if any) on, or purchase price of, the Bonds
(other than the aforesaid moneys payable pursuant to Section 5.2 of the Lease),
and (iii) any other moneys payable by the Company pursuant to the Lease that
are therein referred to as Basic Rent.
"BOARD" means The Industrial Development Board of the City of
Demopolis and, subject to the provisions of Section 8.6 hereof, includes its
successors and assigns and any corporation resulting from or surviving any
consolidation or merger to which it or its successors may be a party.
"BOND COUNSEL" means Independent Counsel whose experience in matters
relating to the issuance of obligations by states and their political
subdivisions is nationally recognized.
"BOND PAYMENT DATE" means each date (including any date fixed for
redemption or acceleration of Bonds) on which Debt Service is payable on the
Bonds.
"BOND PURCHASE FUND" means the Bond Purchase Fund created in to
Section 7.2 hereof.
"BOND REGISTER" means the registry and transfer books maintained by
the Trustee pursuant to the provisions of Section 5.4 hereof.
"BONDHOLDER" means the Holder of any Bond.
"BONDS" means the bonds authorized to be issued in Article III hereof.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions are closed in any of the following locations:
(i) the city in which the
2
<PAGE> 8
principal office of the Trustee is located, (ii) the city in which the
principal office of the Remarketing Agent is located, (iii) the city in which
the office of the Credit Obligor where drawings under the Letter of Credit are
to be made is located, (iv) the City of New York, New York or (v) the City of
Chicago, Illinois.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COLLATERALLY SECURED" means secured by collateral meeting all of the
following requirements:
(a) The collateral shall be in the form of obligations
described in subparagraph (a), (b) or (c) of the definition of
Eligible Investments, except that the security for certificates of
deposit, time deposits or other similar banking arrangements may
include other marketable securities which meet S&P's "qualified
investment criteria" and are eligible as security for trust funds
under applicable regulations of the Comptroller of the Currency of the
United States of America or under applicable state laws and
regulations.
(b) The collateral shall have an aggregate market value,
calculated not less frequently than monthly, at least equal to the
principal amount (less any portion insured by the Federal Deposit
Insurance Corporation or any comparable insurance corporation
chartered by the United States of America) or the repurchase price
secured thereby, as the case may be. The instruments governing the
issuance of and security for the Eligible Investments shall designate
the person responsible for making the foregoing calculations; provided
that the Trustee shall make such calculations if they are not made by
the person so designated.
(c) The Trustee shall have a perfected security interest
in all such collateral, free and clear of the claims of third parties.
Such security interests shall be perfected in such manner as may be
permitted or required by applicable law, provided that if possession
of the collateral is required for such perfection, the collateral
shall be deposited with the Trustee, with a Federal Reserve Bank for
the account of the Trustee or with a bank or trust company (other than
the obligor) which is acting solely as agent for the Trustee and has a
combined net capital and surplus of at least $50,000,000.
"COMPANY" means McClain of Alabama, Inc., a corporation organized
under the laws of the State of Michigan, and, subject to the provisions of
Section 7.4 of the Lease, includes its successors and assigns and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party.
"CONFIRMATION" means the irrevocable confirmation issued by LaSalle
National Bank, confirming the initial Letter of Credit issued by Standard
Federal Bank and delivered to the Trustee on the Issue Date, and any substitute
Confirmation issued in accordance with the provisions of Section 3.8 hereof.
3
<PAGE> 9
"CONFIRMING BANK" means LaSalle National Bank, its successors and
assigns, until a substitute Confirmation shall have been accepted by the
Trustee, and thereafter means the issuer of such substitute Confirmation.
"CONVERSION DATE" means the first day of any Term Rate Period.
"COUNSEL" means an attorney or firm of attorneys duly admitted to
practice before the highest court of one or more states of the United States of
America or of the District of Columbia.
"CREDIT AGREEMENT" means that certain Reimbursement Agreement dated as
of April 1, 1997, between the Credit Obligor and the Company, including any
amendments or supplements to such instrument from time to time entered into
pursuant to the applicable provisions thereof, until a Substitute Letter of
Credit shall have been accepted by the Trustee, and thereafter "Credit
Agreement" means the instrument evidencing the Company's obligations with
respect to such Substitute Letter of Credit.
"CREDIT OBLIGOR" means Standard Federal Bank, a federal savings bank,
and its successors and assigns, until a Substitute Letter of Credit shall have
been accepted by the Trustee, and thereafter "Credit Obligor" means the issuer
of such Substitute Letter of Credit.
"DEBT SERVICE" means the principal of and interest and premium (if
any) payable on the Bonds.
"DEBT SERVICE FUND" means the Bond Principal and Interest Fund created
in Section 7.1 hereof.
"DEFAULT" or "DEFAULT" means an event or condition the occurrence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DETERMINATION OF TAXABILITY" means a determination that the interest
income on any of the Bonds is Taxable, which determination shall be deemed to
have been made upon the occurrence of the first to occur of the following:
(a) the date on which the Company determines that the
interest income on any of the Bonds is Taxable by filing with the
Trustee a statement to that effect; or
(b) the date on which the Company shall be advised by
private ruling, technical advice or any other written communication
from an authorized official of the Internal Revenue Service that,
based upon any filings of the Company, or upon any review or audit of
the Company, or upon any other grounds whatsoever, the interest income
on any of the Bonds is Taxable; or
(c) the date on which the Company shall receive notice
from the Trustee in writing that the Trustee has been advised (i) by
any Holder of any
4
<PAGE> 10
Bonds that the Internal Revenue Service has determined that the
interest income on the Bonds is Taxable or (ii) by any authorized
official of the Internal Revenue Service that the interest income on
any of the Bonds is Taxable;
provided that no Determination of Taxability shall be deemed to have occurred:
(1) as a result of a determination by the Company pursuant to the preceding
clause (a) unless supported by a written opinion of Bond Counsel acceptable to
the Trustee and the Board that the interest income on the Bonds is Taxable; or
(2) as a result of the event described in the preceding clauses (b) or (c)
unless and until (1) the Company has been afforded a reasonable opportunity, at
its expense, to contest such determination either through its own action (if
permitted by law) or by or on behalf of one or more of the holders of the Bonds
and (2) such contest, if made, has been abandoned by the Company or has been
finally determined by a court of competent jurisdiction from which no further
appeal exists, but if such contest has not been abandoned or finally determined
within three years of the event described in either of said clauses (b) and (c)
which forms the basis of the Determination of Taxability in question, then such
Determination of Taxability shall be deemed to have occurred three years after
the date of such event.
"DIRECTORS" means the Board of Directors of the Board.
"DTC" means The Depository Trust Company.
"ELIGIBLE CERTIFICATES" means certificates of deposit issued by (a)
the Trustee or (b) by any bank organized under the laws of the United States of
America or any state thereof having, at the time of the acquisition by the
Board of such certificates of deposit, combined capital and surplus of not less
than $100,000,000.
"ELIGIBLE INVESTMENTS" means any of the following that are at the time
legal investments for the Board:
(a) Federal Securities;
(b) rights to receive the principal of or the interest
on Federal Securities through (i) direct ownership, as evidenced by
physical possession of such Federal Securities or unmatured interest
coupons or by registration as to ownership on the books of the issuer
or its duly authorized paying agent or transfer agent, or (ii)
purchase of certificates or other instruments evidencing an undivided
ownership interest in payments of the principal of or interest on
Federal Securities;
(c) debt obligations issued by agencies of or sponsored
by the United States of America that are rated in any of the three
highest rating categories by S&P;
(d) negotiable and non-negotiable certificates of
deposit, time deposits or other similar banking arrangements which are
issued by banks, trust companies or savings and loan associations,
provided that, unless issued by a Qualified
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Financial Institution, any such certificate, deposit or other
arrangement shall be continuously Collaterally Secured as to
principal;
(e) repurchase agreements for Eligible Investments
described in subparagraph (a), (b) or (c) above with Qualified
Financial Institutions or with dealers in government bonds which
report to, trade with and are recognized as primary dealers by a
Federal Reserve Bank and are members of the Securities Investors
Protection Corporation, provided that any such agreement shall have a
term of less than one year and the repurchase price payable under any
such agreement shall be continuously Collaterally Secured;
(f) investment agreements with Qualified Financial
Institutions;
(g) commercial paper rated in the highest rating
category by S&P;
(h) money market funds registered under the Investment
Company Act of 1940 whose shares are registered under the Securities
Act of 1933 and are rated in the highest rating category by S&P;
(i) interest-bearing demand or time deposits or
interests in money market portfolios issued by state banks or trust
companies or national banking associations that are members of the
Federal Deposit Insurance Corporation ("FDIC"), which deposits or
interests must be (a) continuously and fully insured by FDIC and be
with banks that are rated at least A-1 or AA by S&P, or (b) fully
secured by Federal Securities; and
(j) debt obligations of any state of the United States
or any political subdivision thereof, or of any public corporation
created by or agency of any such state or political subdivision that
are rated in any of the two highest rating categories by S&P.
"EQUIPMENT" means those items of machinery, equipment and other
personal property that are generally described on, and are referred to as
"Equipment" in Exhibit B attached hereto and made a part hereof and any other
items of machinery, equipment and other personal property that, under the
provisions hereof, are to constitute part of the Equipment.
"EVENT OF DEFAULT" means any of the events described in Section 10.1
hereof.
"FEDERAL SECURITIES" means (i) direct obligations of the United States
of America for the payment of which the full faith and credit of the United
States of America is pledged and (ii) obligations issued by a person controlled
or supervised by and acting as an instrumentality of the United States of
America, the payment of the principal of, and premium, if any, and interest on
which is fully guaranteed as a full faith and credit obligation of the United
States of America (including any securities described in (i) or (ii) issued or
held in book-entry form on the books of the Department of Treasury of the
United States of America or Federal Reserve Bank), which
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obligations, in either case, are not subject to redemption prior to maturity at
the option of anyone other than the Holder.
"GUARANTY" means that certain Bond Guaranty Agreement dated as of
April 1, 1997, between the Company and the Trustee.
"HOLDER," when used in conjunction with a Bond, means the person in
whose name such Bond is registered on the registry books of the Trustee
pertaining to the Bonds.
"IMPROVEMENTS" means the improvements to the Plant required by the
provisions of Section 3.1 of the Lease to be constructed by the Company.
"INDENTURE" means these presents and every supplemental agreement with
the Trustee in pursuance hereof.
"INDENTURE INDEBTEDNESS" means all indebtedness of the Board at any
time secured by the Indenture, including without limitation (i) all Debt
Service on the Bonds and (ii) all reasonable and proper fees, charges and
disbursements of the Trustee, the Tender Agent and the Remarketing Agent.
"INDEPENDENT COUNSEL" means an attorney or firm of attorneys duly
admitted to practice before the highest court of one or more states of the
United States of America or the District of Columbia and not employed full time
by the Board, the Company, an Affiliate or the Trustee.
"INDEPENDENT ENGINEER" means an independent engineer or engineering
firm not employed full time by the Board, the Company or an Affiliate.
"INTEREST PAYMENT DATE" means a date on which interest on a Bond is
due and payable as specified in Section 3.1(g) hereof.
"INTERIM AGREEMENT" means that certain Interim Agreement dated as of
August 1, 1996, between the Board and the Company.
"ISSUE DATE" means the date of the initial authentication and delivery
of the Bonds.
"LEASE" means that certain Lease Agreement dated as of April 1, 1997,
between the Board, as lessor, and the Company, as lessee, as said lease now
exists or as it may be amended and supplemented.
"LETTER OF CREDIT" means the initial letter of credit delivered to the
Trustee on the Issue Date and any Substitute Letter of Credit, including the
Confirmation.
"MANDATORY TENDER" means a tender of Bonds required by the provisions
of Section 3.5 hereof.
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"MANDATORY TENDER DATE" means any date on which Bonds are to be
purchased pursuant to a Mandatory Tender.
"MAXIMUM RATE" means the maximum rate per annum, specified in the
Letter of Credit, upon which there has been calculated the amount available to
be drawn on the Letter of Credit to pay interest on the Bonds.
"MORTGAGE" means that certain Mortgage, Assignment of Leases and
Security Agreement dated as of April 1, 1997, executed by the Company and the
Board in favor of the Credit Obligor, including any amendments or supplements
to such instrument from time to time entered into pursuant to the applicable
provisions thereof, until a Substitute Letter of Credit shall have been
accepted by the Trustee, and thereafter "Mortgage" means the instrument (if
any) securing the Company's obligations with respect to such substitute Letter
of Credit.
"MUNICIPALITY" means the City of Demopolis, Alabama, and any
corporation resulting from or surviving any consolidation or merger to which it
or its successors may be a party.
"OBLIGOR BOND" means (i) any Pledged Bond and (ii) any Bond registered
in the name of the Company.
"OPTIONAL TENDER" means a tender of Bonds at the option of the Holder
thereof pursuant to the provisions of Section 3.4 hereof.
"OPTIONAL TENDER DATE" means any date on which Bonds are to be
purchased pursuant to an Optional Tender.
"OUTSTANDING," when used with reference to any of the Bonds, means, at
any date as of which the amount of such Bonds outstanding is to be determined,
all such Bonds which have been theretofore authenticated and delivered by the
Trustee under the Indenture, except (i) those of such Bonds cancelled by the
Trustee because of payment at or after their respective maturities or
redemption prior to their respective maturities, (ii) those of such Bonds for
the payment or redemption of which provisions shall have been made with the
Trustee as provided in Article XIII hereof and (iii) those of such Bonds in
exchange for which, or in lieu of which, other Bonds have been authenticated
and delivered under the Indenture. In determining whether the Holders of a
requisite aggregate principal amount of outstanding Bonds have concurred in any
request, demand, authorization, direction, notice, consent or waiver under the
provisions of the Indenture, Bonds which are owned by the Company or an
Affiliate shall be disregarded and deemed not to be outstanding hereunder for
the purpose of any such determination.
"PERMITTED ENCUMBRANCES" means, as of any particular time, (a) liens
for ad valorem taxes and special assessments not then delinquent, (b) the Lease
and the Indenture, (c) inchoate mechanics' and materialmen's liens, (d)
utility, access, drainage and other easements and rights of way, restrictions
and exceptions that a licensed engineer (who may, but need not be, an employee
of the Company) certifies will not materially interfere with or impair the
operations being conducted in or about the Project (or, if no operations are
being conducted in or about the Project, the operations for which the Project
was designed or last modified), (e) such minor
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defects, irregularities, encumbrances, easements, rights-of-way and clouds on
title (including zoning and other similar restrictions and regulations) as
customarily exist with respect to properties similar in character to the
Project and as do not, in the opinion of Counsel, in the aggregate materially
impair the use of the property affected thereby for the purpose for which it
was acquired or is held by the Board, (f) with respect to the Project Site, any
easements, restrictions and other exceptions referred to in Exhibit A hereto
and (g) the Mortgage.
"PLANT" means that certain manufacturing plant located on the Project
Site, as the said plant may at any time exist.
"PRIME RATE" means the rate of interest publicly announced by LaSalle
National Bank from time to time as its "Prime Rate." The Prime Rate is not
necessarily the lowest rate charged by such bank to commercial borrowers.
"PROJECT" means the Project Site, the Plant and the Equipment as they
may at any time exist, and all other property and rights referred to or
intended so to be in the granting clauses hereof or in any way subject to the
demise of the Lease.
"PROJECT DEVELOPMENT COSTS" means the costs of acquiring the Project
Site and the improvements located thereon, constructing the Improvements and
acquiring and installing the Equipment, the expenses incurred by the Board in
connection with the issuance and sale of the Bonds (including the initial
charge of the Trustee, the fee for the issuance of the initial Letter of Credit
and the fiscal, legal, printing, advertising, recording and other similar fees
and expenses relating thereto), interest on the Bonds to the extent such
interest constitutes a Qualified Project Cost, and all costs and expenses
incurred by the Issuer in connection with and directly related to the planning,
development and design of the Improvements and the Equipment, including,
without limiting the generality of the foregoing, any such costs or expenses
paid by the Company or by the Board with funds advanced by the Company and for
which the Company is entitled to be reimbursed under the provisions of the
Interim Agreement.
"PROJECT SITE" means the real property specifically described in
Exhibit A attached hereto and made a part hereof (to the extent that at the
time it is subject to the demise of the Lease) and any other real property that
under the terms of the Lease constitutes a part of the Project Site.
"QUALIFIED FINANCIAL INSTITUTION" means a bank, trust company,
national banking association, insurance company or other financial services
company or entity, whose unsecured long term debt obligations (in the case of a
bank, trust company, national banking association or other financial services
company or entity) or whose claims paying abilities (in the case of an
insurance company) are rated in any of the three highest rating categories by
S&P.
"QUALIFIED PROJECT COSTS" means Project Development Costs paid or
reimbursed pursuant to the provisions of the Indenture to the extent that such
costs (i) constitute expenditures for the acquisition, construction,
reconstruction or improvement of land or property of a character subject to the
allowance for depreciation within the meaning of Section 144(a)(1) of the Code,
and (ii) were paid or incurred subsequent to the date that was 60 days prior to
the effective date of the Interim Agreement (such effective date being August
22, 1996).
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"RATING AGENCY" means any nationally recognized securities rating
agency.
"REGULAR RECORD DATE" means (a) with respect to any Variable Rate
Interest Payment Date or any Term Rate Interest Payment Date for a Term Rate
Period of less than 6 months the close of business on the last Business Day
preceding such Interest Payment Date and (b) with respect to a Term Rate
Interest Payment Date for a Term Rate Period of 6 months or more, the 15th day
(whether or not a Business Day) next preceding such Interest Payment Date.
"REMARKETING AGENT" means LaSalle National Bank or any successor
appointed pursuant to the provisions of Section 11.7 hereof.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, its successors and assigns, and, if such entity shall be
dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the Trustee, with
the consent of the Company.
"SPECIAL FUNDS" means the Debt Service Fund, the Bond Purchase Fund
and the Construction Fund.
"SPECIAL RECORD DATE" means such date as may be fixed in accordance
with the provisions of Section 5.6 hereof.
"STATED EXPIRATION DATE" means the date on which the Letter of Credit
will, by its terms, expire unless the Letter of Credit is terminated on an
earlier date in accordance with its terms.
"SUBSTITUTE LETTER OF CREDIT" means a letter of credit delivered to
the Trustee in substitution for the letter of credit then held by the Trustee
pursuant to the provisions of Section 3.7 hereof.
"SUPPLEMENTAL INDENTURE" means an agreement supplemental hereto.
"TAXABLE," when applied to the interest income on any of the Bonds,
means that, under federal tax laws and regulations issued thereunder, as such
laws and regulations exist on the date of initial delivery of the Bonds or as
they may thereafter be amended, the interest income on such Bond is includable
in gross income of the recipient thereof for Federal income tax purposes for
any reason other than the fact (and for the period) that such Bond is held by a
person who is a "substantial user" of the Project or a "related person" within
the meaning of Section 147(a) of the Code or any successor provision.
"TENDER AGENT" means any person appointed pursuant to the provisions
of Section 11.8 hereof; provided, however, that until such appointment is made
the Trustee shall perform all duties of the Tender Agent hereunder.
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"TENDER DATE" means an Optional Tender Date or a Mandatory Tender
Date, as the case may be.
"TENDERED BONDS" means Bonds tendered (or deemed tendered) for
purchase pursuant to the provisions hereof respecting Optional or Mandatory
Tender.
"TERM RATE" means the fixed interest rate borne by the Bonds during a
Term Rate Period as provided in Section 3.3 hereof.
"TERM RATE INTEREST PAYMENT DATE" means a date on which interest
calculated according to the Term Rate is payable on the Bonds as provided in
Section 3.1(f) hereof.
"TERM RATE PERIOD" means a period of 30 days, 6 months, 1 year or any
multiple of 1 year specified by the Company during which the Bonds shall bear
interest at a fixed rate per annum as provided in Section 3.3 hereof.
"TRUSTEE" means LaSalle National Bank, in its capacity as Trustee
under the Indenture, and its successors and any corporation resulting from or
surviving any consolidation or merger to which it or its successors may be a
party.
"VARIABLE RATE" means the variable interest rate borne by the Bonds
during a Variable Rate Period as provided in Section 3.2 hereof.
"VARIABLE RATE INTEREST PAYMENT DATE" means a date on which interest
calculated at the Variable Rate is payable on the Bonds as provided in Section
3.1(f) hereof.
"VARIABLE RATE PERIOD" means a period during which the Bonds bear
interest at the Variable Rate as provided in Section 3.2 hereof.
SECTION 1.2 USE OF PHRASES. "Herein," "hereby," "hereunder,"
"hereof," "hereinbefore," "hereinafter" and other equivalent words refer to the
Indenture as an entirety and not solely to the particular portion thereof in
which any such word is used. The definitions set forth in Section 1.1 hereof
include both singular and plural, unless a separate definition is included for
the singular or plural, as the case may be. Whenever used herein, any pronoun
shall be deemed to include both singular and plural and to cover all genders.
Any percentage of Bonds, specified herein for any purpose, is to be figured on
the unpaid principal amount thereof then Outstanding.
ARTICLE II
GRANTING CLAUSES
SECTION 2.1 GRANTING CLAUSES. In order to secure to the Holders
thereof Debt Service on the Bonds and all other Indenture Indebtedness and the
performance and observance of the covenants and conditions herein and therein
contained, and in consideration of purchase and acceptance of the Bonds by the
Holders thereof and of the acceptance by the Trustee of the trusts
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herein provided, the Board does hereby grant, bargain, sell and convey, assign,
transfer and pledge to and with the Trustee the following described properties
of the Board, whether the same are now owned by it or may be hereafter
acquired:
I
All revenues and receipts derived by the Board from the leasing or
sale of the Project (including, without limitation, the Basic Rent payable by
the Company pursuant to the Lease), all other moneys required by the Lease or
the Indenture to be deposited from time to time in any of the Special Funds,
and all other moneys from time to time held by the Trustee for the benefit of
the Bondholders pursuant to the Indenture, together in each case with any
investments and reinvestments of such moneys and the proceeds thereof;
II
All right, title and interest of the Board in and to the Lease (except
(i) the right to require the Company to pay certain expenses incurred by the
Board as provided in Sections 5.4 and 10.4 of the Lease and (ii) the release
and indemnification rights of the Board contained in Section 8.2 of the Lease),
but not including, however, any of the obligations of the Board thereunder; and
III
Any and all moneys, rights and properties of every kind or description
which may from time to time hereafter be sold, transferred, conveyed, assigned,
hypothecated, endorsed, deposited, pledged, mortgaged, granted or delivered to,
or deposited with, the Trustee by the Board or anyone on its part as additional
security for the payment of the Bonds, or which pursuant to any of the
provisions hereof or of the Lease, may come into the possession or control of
the Trustee as such additional security; and the Trustee is hereby authorized
to receive any and all such moneys, rights and properties as and for additional
security for the payment of the Bonds and to hold and apply the same subject to
the terms hereof;
TO HAVE AND TO HOLD the same unto the Trustee, its successor trustees
and assigns forever, subject to Permitted Encumbrances; IN TRUST, NEVERTHELESS,
upon the terms and trusts herein set forth, for the equal and pro rata
protection and benefit of the Holders, present and future, of the Bonds equally
and ratably, without preference, priority or distinction of any over others by
reason of priority in issuance or acquisition or otherwise, as if all the Bonds
at any time outstanding had been executed, sold, authenticated, delivered and
negotiated simultaneously with the execution and delivery hereof.
AND PROVIDED, FURTHER, that money collected by the Trustee pursuant to
the Letter of Credit shall be used solely for the purpose of paying Debt
Service on the Bonds or the purchase price of Bonds tendered for purchase
pursuant to the provisions hereof respecting Optional Tender or Mandatory
Tender.
PROVIDED, HOWEVER, that these presents are upon the condition that if
the Board shall pay or cause to be paid the principal of and the interest and
premium (if any) on all Bonds
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secured hereby, or shall provide for such payment as specified in Article XIII
hereof, and shall pay or cause to be paid all other sums payable by the Board
hereunder, then the Indenture and the estate and rights granted hereby shall
cease, determine and be void; otherwise the Indenture shall be and remain in
full force and effect.
ARTICLE III
THE BONDS
SECTION 3.1 GENERAL PROVISIONS RESPECTING THE BONDS. (a)
Authorization, Principal Amount and Maturity. There is hereby authorized to be
issued under the Indenture a series of Bonds designated Industrial Development
Revenue Bonds, Series 1997 (McClain of Alabama, Inc. Project), limited in
aggregate principal amount to $5,225,000. The Bonds shall be dated the date of
their initial authentication and delivery and shall mature on April 1, 2007.
(b) DENOMINATIONS. The Bonds shall be issuable as registered
Bonds without coupons in the denomination of (i) $100,000 or any larger
denomination that is an integral multiple of $5,000 during any Variable Rate
Period and any Term Rate Period of less than 6 months and (ii) $5,000 or any
integral multiple thereof during any Term Rate Period of 6 months or more. The
Bonds shall be numbered consecutively from 1 upwards.
(c) INTEREST RATES. The Bonds shall bear interest at the Variable
Rate or at the Term Rate, as provided in Sections 3.2 and 3.3 hereof. The
Trustee shall specify on each Bond certificate whether the interest rate then
in effect is the Variable Rate or a Term Rate. If a Term Rate is in effect,
the Trustee shall also specify the Term Rate and the beginning and end of the
Term Rate Period.
(d) COMPUTATION OF INTEREST. Interest at the Variable Rate and
interest at a Term Rate for each Term Rate Period of less than 6 months shall
be computed on the basis of a 365 or 366-day year, as the case may be, for the
actual number of days elapsed. Interest at the Term Rate for each Term Rate
Period of 6 months or more shall be computed on the basis of a 360-day year
with 12 months of 30 days each.
(e) INTEREST ON OVERDUE PRINCIPAL AND INTEREST. Interest shall be
payable on overdue principal on the Bonds and (to the extent legally
enforceable) on any overdue installment of interest on the Bonds calculated at
the rate borne by the Bonds on the day preceding the due date of such principal
or interest.
(f) INTEREST PAYMENT DATES. Interest shall be payable in arrears
on the following dates:
(1) with respect to interest payable at the
Variable Rate, (i) interest accrued through the last day of
each month shall be paid on the first Business Day of the
immediately succeeding month and (ii) interest accrued through
the last day of any Variable Rate Period shall be paid on the
day immediately following such Variable Rate Period;
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(2) with respect to interest payable at a Term
Rate for any Term Rate Period of less than 6 months, interest
accrued through the last day of such Term Rate Period shall be
paid on the day immediately following such Term Rate Period;
and
(3) with respect to interest payable at a Term
Rate for any Term Rate Period of 6 months or more, (i)
interest accrued through the last day of the immediately
preceding month shall be paid (A) on the first day of the
calendar month that is 6 months after the first day of the
calendar month in which such Term Rate Period began and (B)
semiannually thereafter, and (ii) interest accrued through the
last day of such Term Rate Period shall be paid on the day
immediately following such Term Rate Period.
SECTION 3.2 VARIABLE RATE. (a) The Bonds shall initially bear
interest at the Variable Rate which shall remain in effect until and including
the day immediately prior to the earlier of (i) a Conversion Date or (ii) the
final maturity of the Bonds.
(b) The Variable Rate shall be a fluctuating rate per annum
determined by the Remarketing Agent periodically during a Variable Rate Period
as provided below in this section.
(c) The Variable Rate shall be determined on the last Business Day
immediately prior to the commencement of each Variable Rate Period and on
Wednesday of each calendar week during such Variable Rate Period, or if any
such Wednesday is not a Business Day, on the next succeeding Business Day. The
Variable Rate so determined shall become effective on the day following each
date of determination, and once effective shall remain in effect until and
including the next determination date or, if sooner, the end of such Variable
Rate Period; provided, however, that the Variable Rate effective on the date of
issuance of the Bonds shall continue in effect through the determination date
next following such date of issuance; and provided further, that if the
Remarketing Agent fails to determine the Variable Rate on any such
determination date, the Variable Rate for each weekly period shall, until a
determination is thereafter made by the Remarketing Agent, be determined on
each determination date by the Trustee (at the expense, if any, of the Company)
as the rate per annum equal to the J. J. Kenny index rate for high grade
tax-exempt obligations having maturities of 30 days.
(d) The Variable Rate shall be determined by the Remarketing Agent
and shall be the interest rate that would, in the opinion of the Remarketing
Agent, result in the market value of the Bonds equal to 100% of the principal
amount thereof on the date of such determination, taking into account relevant
market conditions and credit rating factors as they exist on such date;
provided, however, that the Variable Rate may never exceed the Maximum Rate.
On each Variable Rate determination date the Remarketing Agent shall deliver
written notice of the Variable Rate so determined to the Trustee. Upon the
request of any Bondholder or the Company, the Trustee shall confirm (by
telephone and in writing, if so requested) the Variable Rate then in effect.
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(e) The Variable Rate determined from time to time by the Remarketing
Agent shall be conclusive and binding on the Board, the Company, the Trustee
and the Bondholders; provided, however, that the Variable Rate may never exceed
the Maximum Rate.
SECTION 3.3 TERM RATE. (a) The Bonds shall bear interest at a
Term Rate during each Term Rate Period of 30 days, 6 months, 1 year or any
multiple of 1 year specified by the Company as provided below in this section.
(b) The Term Rate shall be a fixed rate per annum which shall be
applicable during the entire Term Rate Period and shall be determined by the
Remarketing Agent as provided below in this section.
(c) The Company may elect that the Bonds bear interest at a Term
Rate by delivery of written notice of such election to the Trustee not less
than 40 days prior to the proposed Conversion Date. Such notice shall specify
the first day and the last day of the Term Rate Period elected; provided,
however, that (i) as a condition to the establishment of a Term Rate, the
Company shall cause to be delivered to the Board and the Trustee and opinion of
Bond Counsel stating that the establishment of such Term Rate will not cause
the interest income on the Bonds to become Taxable, (ii) if such election is
made during a Term Rate Period, the specified Conversion Date may not be sooner
than the first day immediately following the Term Rate Period then in effect,
(iii) either (A) the Letter of Credit then in effect must have a Stated
Expiration Date that is not earlier than the 15th day following the expiration
of such Term Rate Period, provide coverage of interest on the Bonds at the
Maximum Rate for a number of days not less than the sum of 15 days plus the
maximum number of days between Interest Payment Dates with respect to such Term
Rate Period and provide coverage for the payment of the maximum redemption
premium payable with respect to the Bonds during such Term Rate Period, or (B)
as a condition to the establishment of such Term Rate Period, the Company shall
be required to deliver to the Trustee a Substitute Letter of Credit in
accordance with the provisions of Section 3.7 hereof, and (iv) the Term Rate
Period may not extend beyond the day immediately prior to the final maturity of
the Bonds. The Trustee shall deliver a copy of such notice to the Board, the
Remarketing Agent, the Tender Agent and the Credit Obligor on or before the
following Business Day, and to each Holder of the Bonds not less than 30 days
prior to the Conversion Date. Any such election by the Company shall be
irrevocable after 3:00 p.m. (Detroit, Michigan time) on the last Business Day
immediately prior to the proposed Conversion Date. A notice given by the
Company pursuant to this section may specify that successive Term Rate Periods
of specified lengths shall be established with respect to the Bonds. If such
notice is provided to the Trustee and the other requirements of this section
are met as of each Conversion Date, no additional notice shall be required from
the Company to establish a new Term Rate on each such Conversion Date. Any
such notice may be revoked prior to 3:00 p.m. (Detroit, Michigan time) on the
last Business Day immediately prior to each proposed Conversion Date, but such
revocation shall be applicable only with respect to proposed Term Rate Periods
commencing after the date of the notice of revocation.
(d) Not less than 20 days prior to the proposed Conversion Date,
the Remarketing Agent shall determine the preliminary interest rate for such
Term Rate Period (herein called the "Term Rate"), and not less than 7 days
prior to the proposed Conversion Date, the Remarketing
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Agent shall fix the final Term Rate, provided that the final Term Rate so
determined shall be no lower than the preliminary Term Rate previously
determined. The Term Rate shall be the interest rate that would, in the
opinion of the Remarketing Agent, result in the market value of the Bonds being
100% of the principal amount thereof on the date of such determination, taking
into account relevant market conditions and credit rating factors as they exist
on such date, and assuming that the Term Rate Period began on such date;
provided, however, that the Term Rate may not exceed the Maximum Rate. The
Remarketing Agent shall deliver written notice of the Term Rate to the Trustee
on the date it is determined. The Trustee shall deliver a copy of such notice
to the Board and the Company on or before the following Business Day.
(e) Notwithstanding the foregoing, a Term Rate shall not be
established if (i) the Company delivers to the Trustee written notice of
revocation of its election to establish the Term Rate before 3:00 p.m.
(Detroit, Michigan time) on the last Business Day immediately prior to the
proposed Conversion Date or (ii) prior to 10:00 a.m. (Detroit, Michigan time)
on the Conversion Date, the Trustee does not receive (a) the Substitute Letter
of Credit that was to be effective on such Conversion Date and the Related
Documentation required pursuant to Section 3.7(f) hereof and (b) the opinion of
Bond Counsel required pursuant to Section 3.3(c) hereof. If all conditions to
the establishment of a Term Rate are not satisfied, the Bonds shall continue
(or, if a Term Rate Period ended on the preceding day, shall begin) to bear
interest at the Variable Rate from the proposed Conversion Date.
(f) The Term Rate determined by the Remarketing Agent shall be
conclusive and binding on the Board, the Company, the Trustee and the
Bondholders; provided, however, that the Term Rate may never exceed the Maximum
Rate.
SECTION 3.4 OPTIONAL TENDERS. (a) The Holder of any Bond shall
have the right to tender such Bond to the Trustee or Tender Agent for purchase
in whole or in part on any Business Day during a Variable Rate Period, at a
purchase price equal to 100% of the principal amount of Bonds (or portions
thereof) tendered plus accrued interest to the specified purchase date. A Bond
may only be tendered in part if the principal amount tendered and the principal
amount to be retained by the Holder of such Bond are both in authorized
denominations. In order to exercise such option with respect to any Bond, the
Holder thereof must deliver notice thereof to the Trustee, as provided below in
this section, at its principal office at least 7 days prior to the proposed
Optional Tender Date.
(b) Any such notice of Optional Tender must be duly executed by
the Bondholder and must specify (i) the name of the registered Holder of the
Bond to be tendered for purchase, (ii) the Optional Tender Date, (iii) the
certificate number and principal amount of such Bond, and (iv) the principal
amount of such Bond to be purchased (if such amount is less than the entire
principal amount, the amount to be purchased and the amount to be retained must
both be in authorized denominations). Such notice may be given to the Trustee
in writing or by telephone, but no such telephonic notice shall be effective
unless confirmed in writing delivered to the Trustee not more than 2 Business
Days after such telephonic notice.
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<PAGE> 22
(c) Unless a notice of Optional Tender indicates that less than
the entire principal amount of the Bond is being tendered for purchase, the
Holder will be deemed to have tendered the Bond in its entire principal amount
for purchase.
(d) Not later than 3:00 p.m. (Detroit, Michigan time) on the
Business Day after receipt of any such telephonic or written notice of Optional
Tender the Trustee shall deliver written notice to the Tender Agent, the
Remarketing Agent, the Company and the Credit Obligor specifying (i) the
principal amount of Bonds for which a notice of Optional Tender has been given
and (ii) the proposed Optional Tender Date therefor.
(e) Upon delivery of a written notice of Optional Tender, the
election to tender shall be irrevocable and binding upon such Holder and may
not be withdrawn. The Trustee shall, in its sole discretion, determine
whether, with respect to any Bond, the Holder thereof shall have properly
exercised the option to have his Bond purchased pursuant to this section.
(f) If a written notice of tender shall have been duly given with
respect to any Bond, the Holder of such Bond shall deliver such Bond to the
Trustee at its principal office or to the Tender Agent at its principal office
at or before 11:00 a.m. (Detroit, Michigan time) on the Optional Tender Date,
together with an instrument of assignment or transfer duly executed in blank
(which instrument of assignment or transfer shall be in the form provided on
such Bond or in such other form as shall be acceptable to the Trustee or the
Tender Agent). Any Bond for which a notice of tender has been given but which
is not so delivered to the Trustee or Tender Agent (an "Unsurrendered Bond")
shall nevertheless be deemed to have been tendered by the Holder thereof on the
Optional Tender Date.
(g) On each Optional Tender Date the Trustee shall purchase, or
cause to be purchased, all Bonds as to which written notices of tender for
purchase have been received at a purchase price equal to 100% of the principal
amount thereof plus accrued interest, if any. Funds for payment of the
purchase price of such Bonds shall be drawn by the Trustee from the Bond
Purchase Fund as provided in Section 7.2 hereof.
(h) If there has been irrevocably deposited in the Bond Purchase
Fund an amount sufficient to pay the purchase price of all Bonds tendered or
deemed to be tendered for purchase on an Optional Tender Date, any
Unsurrendered Bonds shall be deemed to have been tendered for purchase and
purchased from the Holder thereof on such Optional Tender Date and the Holder
of any Unsurrendered Bond shall not be entitled to receive interest on such
Unsurrendered Bond for any period on and after the Optional Tender Date. The
Trustee shall issue a new Bond or Bonds in the same aggregate principal amount
for any Unsurrendered Bonds which are not tendered for purchase on any Optional
Tender Date and, upon receipt by the Trustee or Tender Agent of any such
Unsurrendered Bonds from the Holders thereof, shall pay, or cause to be paid,
the purchase price of such Unsurrendered Bonds to the Holders thereof and
cancel such Unsurrendered Bonds.
(i) Anything in this Indenture to the contrary notwithstanding, no
Optional Tender of Bonds shall be permitted (i) for Pledged Bonds, or (ii) for
any Bond which is deemed paid under the provisions of Article XIII hereof.
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<PAGE> 23
SECTION 3.5 MANDATORY TENDERS. (a) The Holder of each Bond
shall be required to tender such Bond to the Trustee or Tender Agent for
purchase on the following dates (each such date being herein called a
"Mandatory Tender Date"):
(1) each proposed Conversion Date,
(2) the date immediately following the expiration of a
Term Rate Period,
(3) 20 days after the Trustee receives written notice
from the Credit Obligor (i) stating that an event of default, as
therein defined, has occurred and is continuing under the Credit
Agreement, and (ii) directing the Trustee to effect a Mandatory Tender
of all the Bonds,
(4) on any date proposed by the Company for delivery of
a Substitute Letter of Credit; provided, however, that the Holder of
any Bond may waive the requirement for such tender and may retain such
Bond notwithstanding the substitution of the Letter of Credit by
delivering written notice of such waiver and retention to the Trustee
and the Remarketing Agent not less than 7 days prior to the Mandatory
Tender Date; and
(5) 15 days prior to the Stated Expiration Date of the
Letter of Credit.
If any of such dates is not a Business Day, the Mandatory Tender Date shall be
deemed to be the next succeeding Business Day.
(b) Notice of a Mandatory Tender shall be given by the Trustee by
registered or certified mail, mailed to the Holders of all Bonds at their
addresses appearing on the Bond Register not less than 30 days prior to the
Mandatory Tender Date in the case of a Mandatory Tender pursuant to clauses
(1), (2) and (5) of this section and not less than 15 days prior to the
Mandatory Tender Date in the case of a Mandatory Tender pursuant to clauses (3)
and (4) of this section. Such notice of Mandatory Tender shall
(1) specify the Mandatory Tender Date,
(2) state the reason for the Mandatory Tender (that is,
the applicable event listed in subsection (a) of this section), and
(3) state that all Bonds shall be tendered by the Holder
thereof to the Trustee at its principal office or to the Tender Agent
at its principal office at or before 11:00 a.m. (Detroit, Michigan
time) on such Mandatory Tender Date, together with an instrument of
assignment or transfer duly executed in blank (which instrument of
assignment or transfer shall be in such form as shall be acceptable to
the Trustee or Tender Agent), and shall be purchased on the Mandatory
Tender Date at a purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, and any Bond that is not so
delivered
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<PAGE> 24
to the Trustee or Tender Agent shall be deemed to have been tendered
for purchase by the Holder thereof on the Mandatory Tender Date.
(c) All Bonds shall be tendered by the Holders thereof for
purchase at or before 11:00 a.m. (Detroit, Michigan time) on the Mandatory
Tender Date, by delivering such Bonds to the Trustee at its principal office or
to the Tender Agent at its principal office, together with an instrument of
assignment or transfer duly executed in blank (which instrument of assignment
or transfer shall be in the form provided in the Bonds or such other form as
shall be acceptable to the Trustee or Tender Agent). All Bonds so to be
purchased that are not delivered to the Trustee or Tender Agent on the
Mandatory Tender Date ("Unsurrendered Bonds") shall nevertheless be deemed to
have been tendered for purchase by the Holders thereof on the Mandatory Tender
Date.
(d) On the Mandatory Tender Date, the Trustee shall purchase, or
cause to be purchased, all Bonds at a purchase price equal to 100% of the
principal amount thereof plus accrued interest, if any. Funds for payment of
the purchase price of such Bonds shall be drawn by the Trustee from the Bond
Purchase Fund as provided in Section 7.2 hereof.
(e) If there has been irrevocably deposited in the Bond Purchase
Fund an amount sufficient to pay the purchase price of all Bonds tendered or
deemed tendered for purchase on the Mandatory Tender Date, any Unsurrendered
Bonds shall be deemed to be tendered for purchase and purchased from the Holder
thereof on such Mandatory Tender Date and the Holder of any Unsurrendered Bond
shall not be entitled to receive interest on such Unsurrendered Bond for any
period on and after the relevant Mandatory Tender Date. The Trustee shall
issue a new Bond or Bonds in the same aggregate principal amount for any
Unsurrendered Bonds which are not tendered for purchase on any Mandatory Tender
Date and, upon receipt by the Trustee or Tender Agent of any such Unsurrendered
Bonds from the Holders thereof, shall pay, or cause to be paid, the purchase
price of such Unsurrendered Bonds to the Holders thereof and cancel such
Unsurrendered Bonds.
(f) After notice of a Mandatory Tender has been given by the
Trustee, the Bonds shall be subject to Mandatory Tender notwithstanding the
fact that the reasons for giving such notice cease to exist or are no longer
applicable.
SECTION 3.6 PROCEDURES FOR PURCHASE AND REMARKETING OF BONDS;
DELIVERY OF PURCHASED AND REMARKETED BONDS. (a) The Remarketing Agent will
use its best efforts to remarket all Bonds tendered or deemed to be tendered
for purchase pursuant to the Optional or Mandatory Tender provisions hereof,
subject to the provisions of subsection (g) of this section. The Company may
at any time, upon written direction to the Remarketing Agent, direct the
Remarketing Agent to cease or resume the remarketing of some or all of the
Bonds.
(b) At or prior to 11:00 a.m. (Detroit, Michigan time) on any
Tender Date (or at such other time to which the Trustee shall agree), the
Remarketing Agent shall give telegraphic or telephonic notice, promptly
confirmed in writing, to the Trustee specifying or confirming the names,
addresses, and taxpayer identification numbers of the purchasers of, and the
principal amount and denominations of, such Bonds, if any, remarketed by it
pursuant to this section and
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<PAGE> 25
shall specify in such notice which, if any, of such purchasers is the Board,
the Company or an Affiliate. The Remarketing Agent shall make appropriate
settlement arrangements between the purchasers of such remarketed Bonds and the
Trustee, and shall direct such purchasers by appropriate instructions to pay
the purchase price of such Bonds to the Trustee at or before 11:00 a.m.
(Detroit, Michigan time) on the Tender Date. The Trustee shall deposit the
proceeds of any such remarketing in the Bond Purchase Fund.
(c) At or before 3:30 p.m. (Detroit, Michigan time) on each Tender
Date the Trustee shall pay the purchase price to each Holder of a Bond (or
portion thereof) tendered for purchase. The Trustee shall pay the purchase
price of each Bond tendered by check or draft mailed by the Trustee to the
Holder of such Bond at his address appearing in the Bond Register or, upon the
written request of such Holder accompanied by adequate instructions, by wire
transfer to an account of such Holder maintained at a bank in the continental
United States or by any other method providing for payment in same-day funds
that is acceptable to the Trustee. The Trustee shall pay such purchase price
from money on deposit in the Bond Purchase Fund; provided, that the Trustee
shall not pay the purchase price of any Unsurrendered Bond, unless and until
the Holder of such Unsurrendered Bond presents such Unsurrendered Bond to the
Trustee or Tender Agent. All Bonds so purchased by the Trustee shall be
delivered by the Trustee or Tender Agent in accordance with this section.
(d) The Trustee and the Tender Agent shall hold all Bonds
delivered to them pursuant to the Optional or Mandatory Tender provisions
hereof in trust solely for the benefit of the respective Holders who shall have
so delivered such Bonds until money representing the purchase price of such
Bonds shall have been delivered to or for the account of such Holder.
(e) Bonds purchased by the Trustee with money drawn under the
Letter of Credit (herein referred to as "Pledged Bonds") shall be held by the
Trustee or Tender Agent for the benefit of the Credit Obligor, as pledgee,
subject to the following terms and conditions:
(1) If, following a draw under the Letter of Credit to
pay the purchase price of Tendered Bonds, the amount so drawn has been
reinstated in accordance with the terms of the Letter of Credit, the
Trustee shall immediately advise the Tender Agent that such Bonds
shall no longer be considered "Pledged Bonds", and the Trustee shall
register such Bonds as follows: (i) if such Bonds have been
remarketed by the Remarketing Agent, as directed by the Remarketing
Agent, or (ii) if such Bonds have not been remarketed, in the name of
the Company. Bonds registered as directed by the Remarketing Agent
shall be delivered by the Trustee or Tender Agent to, or upon the
direction of, the Remarketing Agent. Bonds registered in the name of
the Company shall be held by the Trustee or Tender Agent for the
account of the Company or, upon written request of the Company, shall
be delivered to the Company.
(2) If the amount drawn under the Letter of Credit to
pay the purchase price of Tendered Bonds has not been reinstated by
the close of business on the Tender Date, then the Trustee shall
register such Pledged Bonds in the name of the Credit Obligor, as
pledgee. Such Pledged Bonds shall be held by the
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<PAGE> 26
Trustee or Tender Agent on behalf of the Credit Obligor, as pledgee,
until the amount drawn under the Letter of Credit to pay the purchase
price of such Tendered Bonds has been reinstated or, upon written
request of the Credit Obligor, shall be delivered to the Credit
Obligor. Upon receipt by the Trustee of written notice from the
Credit Obligor of the reinstatement of the amount so drawn under the
Letter of Credit to pay the purchase price of Tendered Bonds, the
Trustee shall immediately advise the Tender Agent, whereupon such
Bonds shall no longer be considered "Pledged Bonds" and shall, subject
to the provisions of subsection (g) of this section, be disposed of as
provided in paragraph (1) of this subsection (e). The Trustee shall
give prompt notice to the Tender Agent of the reinstatement of the
Letter of Credit.
(f) Bonds purchased by the Trustee with money from any source
other than money drawn under the Letter of Credit shall be registered as
follows: (i) if such Bonds have been remarketed by the Remarketing Agent, as
directed by the Remarketing Agent, or (ii) if such Bonds have not been
remarketed, in the name of the Company. Bonds registered as directed by the
Remarketing Agent shall be delivered by the Trustee or Tender Agent to, or upon
the direction of, the Remarketing Agent. Bonds registered in the name of the
Company shall be held by the Trustee or Tender Agent for the account of the
Company or, upon written request of the Company, shall be delivered to the
Company.
(g) Any provision of this Indenture to the contrary
notwithstanding, if the Bonds are purchased pursuant to the Optional or
Mandatory Tender provisions of this Indenture and the Letter of Credit has
expired or terminated (or will expire or terminate within 30 days), the Bonds
may not be sold or remarketed unless the Letter of Credit has been extended to
a date which is not sooner than one year after the date that such Bonds are
remarketed, or there is delivered to the Trustee a Substitute Letter of Credit
satisfying the requirements of Section 3.7 hereof (except that the Company
shall not be required to give the notice required in Section 3.7(d) hereof).
Bonds purchased pursuant to the provisions of Section 3.5(a)(3) hereof may not
be sold or remarketed without the consent of the Credit Obligor.
(h) Any Bond remarketed by the Remarketing Agent that has been
called for prior redemption shall be redelivered with a copy of the redemption
notice, and any Bond as to which notice of Mandatory Tender has been given
shall be redelivered with a copy of the notice of Mandatory Tender. In
addition, if the maturity of the Bonds has been accelerated pursuant to the
provisions of Article X hereof, any Bond remarketed shall be redelivered with
written notice of such acceleration.
(i) Bonds purchased pursuant to the Optional Tender or Mandatory
Tender provisions of this Indenture shall not, by virtue of such purchase, be
deemed paid or cancelled, but shall remain Outstanding until deemed paid under
the provisions of Article XIII hereof.
SECTION 3.7 LETTER OF CREDIT. (a) Simultaneously with the
delivery of the Bonds to the original purchasers thereof, the Board has caused
the Company to deliver to the Trustee the initial Letter of Credit (the
"Initial Letter of Credit"). The Initial Letter of Credit has a Stated
Expiration Date of May 15,1998.
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<PAGE> 27
(b) The Company may at any time and from time to time deliver
another irrevocable letter of credit (a "Substitute Letter of Credit") to the
Trustee in substitution for the Letter of Credit then held by the Trustee (the
"Existing Letter of Credit"), provided that
(1) such Substitute Letter of Credit complies with the
applicable conditions set forth in subsection (e) of this section and
(2) simultaneously with the delivery of such Substitute
Letter of Credit the Company delivers to the Trustee any related
documentation required by subsection (f) of this section (the "Related
Documentation").
(c) The Company may, but shall not be required to, deliver a
Substitute Letter of Credit to the Trustee prior to the expiration of the
Letter of Credit then in effect; provided, however, that if a Substitute Letter
of Credit and the Related Documentation are not delivered to the Trustee at
least 45 days prior to the Stated Expiration Date of the then Existing Letter
of Credit, the Bonds shall be subject to a Mandatory Tender.
(d) The Company shall deliver to the Trustee 30 days' prior
written notice of its intention to deliver a Substitute Letter of Credit.
(e) Each Substitute Letter of Credit delivered to the Trustee
pursuant to this section must meet the following criteria:
(1) such Substitute Letter of Credit must be
substantially in the same form and of the same tenor as the Initial
Letter of Credit, except that such Substitute Letter of Credit must
provide for the payment of interest on the Bonds (or the interest
portion of the purchase price of Bonds tendered, or deemed tendered,
for purchase) at the Maximum Rate, for whichever of the following
periods shall be applicable: (i) if such Substitute Letter of Credit
is to be effective during a Variable Rate Period, not less than 45
days, or (ii) if such Substitute Letter of Credit is to be effective
during a Term Rate Period, a number of days not less than the sum of
15 days plus the maximum number of days between Interest Payment Dates
with respect to such Term Rate Period,
(2) if such Substitute Letter of Credit is being
delivered in connection with a conversion of the interest rate to a
Term Rate, the effective date shall be not later than the Conversion
Date, and the expiration date shall be no sooner than the 15th day
following the expiration of the Term Rate Period commencing on the
Conversion Date,
(3) such Substitute Letter of Credit must provide for
payment of the maximum redemption premium payable with respect to the
Bonds, and
(4) such Substitute Letter of Credit must have a Stated
Expiration Date that is (i) the 15th day of a calendar month and (ii)
not sooner than one year after its effective date; provided, however,
that any Substitute Letter of Credit
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<PAGE> 28
that is to be substituted for an Existing Letter of Credit that is
effective during a Term Rate Period must have a Stated Expiration Date
not sooner than the Stated Expiration Date of such Existing Letter of
Credit.
(f) Each Substitute Letter of Credit delivered to the Trustee must
be accompanied by the following (herein referred to as the "Related
Documentation"), to the extent applicable:
(1) if any Rating Agency maintains a rating with respect
to the Bonds at the time of delivery of such Substitute Letter of
Credit to the Trustee, written evidence from each such Rating Agency
to the effect that the substitution of the proposed Substitute Letter
of Credit will not, by itself, result in a reduction or withdrawal of
its rating then assigned to the Bonds, and
(2) an opinion of counsel for the issuer of such
Substitute Letter of Credit stating in effect that such Substitute
Letter of Credit is a valid and binding obligation of the issuer
thereof.
(g) At the close of business on the effective date of any
Substitute Letter of Credit, the Trustee shall return the Existing Letter of
Credit to the issuer thereof, provided that any draws on such Existing Letter
of Credit made on or prior to such date have been honored. Any draws that,
under the terms of the Indenture, are to be made on the Letter of Credit on or
prior to the effective date of a Substitute Letter of Credit shall be made
under the Existing Letter of Credit. Not later than the close of business on
the effective date of a Substitute Letter of Credit, the Company shall deliver
to the Trustee written evidence that all obligations of the Company to the
issuer of the Existing Letter of Credit for reimbursement of amounts drawn
thereunder have been satisfied, and upon receipt of such evidence any Pledged
Bonds held by the Trustee or the Tender Agent for the benefit of the issuer of
the Existing Letter of Credit shall be delivered to, or upon the order of, the
Company.
(h) If the Trustee accepts a Substitute Letter of Credit as herein
provided, then, unless such Substitute Letter of Credit was described in a
notice of Mandatory Tender, the Trustee shall send written notice of such
substitution to the Bondholders.
(i) If Bonds are redeemed prior to maturity, the Trustee shall
take any action necessary to reduce the interest portion of the Letter of
Credit to the Maximum Interest Coverage, as therein defined.
(j) In the event that the Letter of Credit in effect prior to a
Conversion Date is to remain in effect during the Term Rate Period commencing
on such Conversion Date, all of the requirements of this section with respect
to the delivery of a Substitute Letter of Credit shall be applicable to such
Letter of Credit except the provisions of subsection (f) of this section.
(k) The extension of the expiration date of the Letter of Credit
then in effect shall not constitute the delivery of a Substitute Letter of
Credit hereunder.
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<PAGE> 29
(l) The Letter of Credit shall be in effect so long as any portion
of the principal of or the interest or premium, if any, on the Bonds is
Outstanding.
SECTION 3.8 CONCERNING THE CONFIRMATION OF THE LETTER OF CREDIT.
(a) Simultaneously with the delivery of the Bonds to the original purchasers
thereof, the Board has caused the Company to deliver to the Trustee the initial
Confirmation.
(b) Except as provided in this Section 3.8, all references in the
Indenture to the Letter of Credit shall be deemed to include the Confirmation
unless the context clearly indicates otherwise.
(c) In the event that the Trustee receives a notice from the
Credit Obligor to the effect that the Credit Obligor has in effect a short-term
rating from Moody's Investors Service of not less than P-1 and a short-term
rating from S&P of not less than A-1 (which notice shall be accompanied by
evidence of the effectiveness of both such ratings and evidence to the effect
that the ratings on the Bonds will not be reduced or withdrawn as a result of
the termination of the Confirmation), and as a result thereof the Credit
Obligor directs that the Confirmation be terminated, the Trustee shall
surrender the Confirmation to the Confirming Bank 10 days after receipt of such
notice.
(d) There may be substituted for any Confirmation then in effect a
confirmation having different terms or issued by another confirming bank, but
any such substitution shall be deemed to be the delivery of a Substitute Letter
of Credit and, without limiting the generality of the foregoing, Sections
3.5(a)(4) and 3.7(d), (e), (f) and (h), shall apply to such substitution.
(e) Except as otherwise provided in this Section 3.8(a), the
extension of the expiration date of the Letter of Credit without a
corresponding extension of any Confirmation then in effect shall be deemed to
be the delivery of a Substitute Letter of Credit to which the provisions of
Section 3.7 hereof apply. The extension of the Confirmation shall not be
considered the delivery of a Substitute Letter of Credit.
(f) So long as the Confirmation shall be effective, in the event
of an Act of Bankruptcy with respect to the Credit Obligor or in the event the
Credit Obligor repudiates the Letter of Credit or wrongfully dishonors a draw
made under the Letter of Credit pursuant to the provisions of Section 7.1 or
7.2 hereof, the Trustee shall draw upon the Confirmation in accordance with its
terms and the provisions of the Indenture.
(g) In the event that the Trustee receives any payment from the
Credit Obligor under the Letter of Credit after the Trustee has made a drawing
under the Confirmation and received payment from the Confirming Bank, the
Trustee shall return any such payment received from the Confirming Bank in an
amount not exceeding the lesser of such payment or the amount received from the
Credit Obligor.
(h) The Trustee shall hold any moneys received by virtue of a
drawing under the Confirmation separate and apart from all other money and will
not exercise any right to set-off or impose any lien or otherwise seek the
right to obtain payment for fees or for any other
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<PAGE> 30
purpose but shall apply such money solely to the payment of principal of and
purchase price and interest on the Bonds in accordance with the provisions of
Sections 7.1 and 7.2 hereof.
(i) No investment will be made of money obtained by virtue of
payments made by the Confirming Bank in any investment permitted hereunder
except in such Eligible Investments that may be acquired by the Trustee with
money paid by virtue of a drawing under the Letter of Credit.
(j) The Trustee shall not transfer the Letter of Credit to a
successor Trustee without simultaneously transferring the Confirmation to such
successor Trustee.
SECTION 3.9 PAYMENTS DUE ON NON-BUSINESS DAYS. If any payment
on the Bonds is due on a day which is not a Business Day, such payment may be
made on the first succeeding day which is a Business Day with the same effect
as if made on the day such payment was due.
SECTION 3.10 FORM OF BONDS. The Bonds and the Trustee's
certificate of authentication and the form of assignment applicable thereto
shall be in substantially the form hereinafter set forth with such appropriate
variations, omissions, substitutions and insertions as are permitted or
required hereby and may have such letters, numbers or other marks of
identification and such legends and endorsements placed thereon, as may be
required to comply with any applicable laws or rules or regulations, or as may,
consistent herewith, be determined by the officers executing such Bonds, as
evidenced by their execution of the Bonds.
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<PAGE> 31
(Form of Bond)
No. ____ __________
UNITED STATES OF AMERICA
STATE OF ALABAMA
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
INDUSTRIAL DEVELOPMENT REVENUE BOND
SERIES 1997
(McCLAIN OF ALABAMA, INC. PROJECT)
<TABLE>
<CAPTION>
Original
Maturity Issuance
Date Cusip Date
---------- ----- --------
<S> <C> <C>
April 1, 2007
</TABLE>
Interest Rate: This bond may bear interest at a Variable Rate or a Term Rate,
as herein defined. The interest rate now in effect is
__________*
For value received, THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF
DEMOPOLIS, a public corporation under the laws of Alabama (herein called the
"Board"), will pay to ____________________________________________, or
registered assigns, in lawful money of the United States of America, solely out
of the revenues and receipts hereinafter referred to, the sum of
_________________________________ DOLLARS
on the date specified above with interest thereon from the date hereof, or the
most recent date to which interest has been paid or duly provided, until the
maturity hereof at the Variable Rate or Term Rate, as hereinafter provided.
Interest at the Variable Rate and interest at the Term Rate for a Term
Rate Period of less than 6 months shall be computed on the basis of a 365 or
366-day year, as the case may be, for the actual number of days elapsed.
Interest at the Term Rate for each Term Rate Period of 6
- ----------------------------
*Note: The Trustee is to insert one of the following, as
appropriate: "Variable Rate" or "Term Rate of __% from
_______________ until _______________." If Term Rate is
appropriate, Trustee will complete the blanks as appropriate.
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<PAGE> 32
months or more shall be computed on the basis of a 360-day year with 12 months
of 30 days each.
Interest shall be payable (but solely from the source hereinafter
described) on overdue principal on this bond and (to the extent legally
enforceable) on any overdue installment of interest on this bond at the rate of
interest last applicable to this bond when such overdue principal or interest
became delinquent.
Interest on this bond shall be payable in arrears on the following
dates (each such date being herein called an "Interest Payment Date"):
(1) with respect to interest payable at the Variable
Rate, (i) interest accrued through the last day of each month shall be
paid on the first Business Day of the immediately succeeding month and
(ii) interest accrued through the last day of any Variable Rate Period
shall be paid on the day immediately following such Variable Rate
Period (each such date being herein called a "Variable Rate Interest
Payment Date");
(2) with respect to interest payable at a Term Rate for
any Term Rate Period of less than 6 months, interest accrued through
the last day of such Term Rate Period shall be paid on the day
immediately following such Term Rate Period (each such date being
herein called a "Term Rate Interest Payment Date"); and
(3) with respect to interest payable at a Term Rate for
any Term Rate Period of 6 months or more, (i) interest accrued through
the last day of the immediately preceding month shall be paid (a) on
the first day of the calendar month that is 6 months after the first
day of the calendar month in which such Term Rate Period began, and
(b) semiannually thereafter, and (ii) interest accrued through the
last day of such Term Rate Period shall be paid on the day immediately
following such Term Rate Period (each such date being herein called a
"Term Rate Interest Payment Date").
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture hereinafter
referred to, be paid to the person in whose name this bond is registered at the
close of business on the Regular Record Date for such interest, which shall be
the day next preceding any Variable Rate Interest Payment Date or any Term Rate
Interest Payment Date with respect to a Term Rate Period of less than 6 months,
or the 15th day (whether or not a Business Day) next preceding any Term Rate
Interest Payment Date with respect to a Term Rate Period of 6 months or more.
Any such interest not so punctually paid or duly provided for shall forthwith
cease to be payable to the registered Holder on such Regular Record Date, and
shall be paid to the person in whose name this bond is registered at the close
of business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice of such Special Record Date being given to
Holders of the Bonds not less than 10 days prior to such Special Record Date.
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<PAGE> 33
Payment of interest on this bond due on any Interest Payment Date
shall be made by check or draft mailed by the Trustee to the person entitled
thereto at his address appearing in the Bond Register maintained by the
Trustee. Such payments shall be deemed timely made if so mailed on the
Interest Payment Date (or, if such Interest Payment Date is not a Business Day,
on the Business Day next following such Interest Payment Date). Payment of the
principal of (and premium, if any, on) this bond and payment of accrued
interest on this bond due upon redemption on any date other than an Interest
Payment Date shall be made only upon surrender of this bond at the principal
office of the Trustee. Upon the terms and conditions of the Indenture the
Holder of any Bond in a principal amount of not less than $1,000,000 may
request that payment of Debt Service on such Bond be made by wire transfer to
an account of such Holder maintained at a bank in the continental United States
or by any other method providing for payment in same-day funds that is
acceptable to the Trustee. All such payments shall be made in such coin or
currency of the United States of America as at the time of payment is legal
tender for the payment of public and private debts.
VARIABLE RATE
The Bonds shall initially bear interest at the Variable Rate which
shall remain in effect until and including the day immediately prior to the
earlier of (i) a Conversion Date or (ii) the final maturity of the Bonds. Each
period during which the Variable Rate is in effect is herein called a "Variable
Rate Period."
The Variable Rate shall be a fluctuating rate per annum determined by
the Remarketing Agent periodically during a Variable Rate Period as follows.
The Variable Rate shall be determined on the last Business Day immediately
prior to the commencement of each Variable Rate Period and on Wednesday of each
calendar week during such Variable Rate Period, or if any such Wednesday is not
a Business Day, on the next succeeding Business Day. The Variable Rate so
determined shall become effective on the day following each date of
determination, and once effective shall remain in effect until and including
the next determination date or, if sooner, the end of such Variable Rate
Period; provided, however, that the Variable Rate effective on the date of
issuance of the Bonds shall continue in effect through the determination date
next following such date of issuance; and provided further, that if the
Remarketing Agent fails to determine the Variable Rate on any such
determination date, the Variable Rate for each weekly period shall, until a
determination is thereafter made by the Remarketing Agent, be determined on
each determination date by the Trustee (at the expense, if any, of the Company)
as the rate per annum equal to the J. J. Kenny index rate for high grade
tax-exempt obligations having maturities of 30 days.
The Variable Rate shall be determined by the Remarketing Agent and
shall be the interest rate that would, in the opinion of the Remarketing Agent,
result in the market value of the Bonds being 100% of the principal amount
thereof on the date of such determination, taking into account relevant market
conditions and credit rating factors as they exist on such date; provided,
however, that the Variable Rate may never exceed the Maximum Rate. The Maximum
Rate is defined in the Indenture as the maximum rate per annum, specified
therein, upon which there has been calculated the amount available to be drawn
on such Letter of Credit to pay interest on
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<PAGE> 34
the Bonds. Upon the request of any Bondholder, the Trustee shall confirm (by
telephone and in writing, if so requested) the Variable Rate then in effect.
LaSalle National Bank, Chicago, Illinois, has been appointed as
"Remarketing Agent" pursuant to the Indenture. The Indenture permits the
Company, with the consent of the Credit Obligor, to remove such Remarketing
Agent and appoint a successor, subject to certain terms and conditions
specified in the Indenture.
TERM RATE
The Bonds shall initially bear interest at the Variable Rate. In
addition, the Bonds shall bear interest at a Term Rate during each Term Rate
Period of 30 days, 6 months, 1 year or any multiple of 1 year specified by the
Company as provided below. Each period during which a Term Rate is in effect
is herein called a "Term Rate Period." The first day of any such Term Rate
Period is herein called a "Conversion Date."
The Term Rate shall be a fixed rate per annum which shall be
applicable during the entire Term Rate Period and shall be determined by the
Remarketing Agent as provided below.
The Company may elect that the Bonds bear interest at a Term Rate by
delivery of written notice of such election to the Trustee not less than 40
days prior to the proposed Conversion Date. Such notice shall specify the
first day and the last day of the Term Rate Period elected; provided, however,
that (i) as a condition to the establishment of a Term Rate, the Company shall
cause to be delivered to the Board and the Trustee an opinion of Bond Counsel
stating that the establishment of such Term Rate will not cause the interest
income on the Bonds to become taxable, (ii) if such election is made during a
Term Rate Period, the specified Conversion Date may not be sooner than the
first day immediately following the Term Rate Period then in effect, (iii)
either (A) the Letter of Credit then in effect must have a Stated Expiration
Date that is not earlier than the 15th day following the expiration of such
Term Rate Period, provide coverage of interest on the Bonds at the Maximum Rate
for a number of days not less than the sum of 15 days plus the maximum number
of days between Interest Payment Dates with respect to such Term Rate Period
and provide coverage for the payment of the maximum redemption premium payable
with respect to the Bonds during such Term Rate Period, or, (B) as a condition
to the establishment of such Term Rate Period, the Company shall be required to
deliver to the Trustee a Substitute Letter of Credit in accordance with the
provisions of the Indenture, and (iv) the Term Rate Period may not extend
beyond the day immediately prior to the final maturity of the Bonds. Any such
election by the Company shall be irrevocable after 3:00 p.m. (Detroit, Michigan
time) on the last Business Day immediately prior to the proposed Conversion
Date. A notice given by the Company may specify that successive Term Rate
Periods of specified lengths shall be established with respect to the Bonds.
If such notice is provided to the Trustee and the other requirements of the
Indenture are met as of each Conversion Date, no additional notice shall be
required from the Company to establish a new Term Rate on each such Conversion
Date. Any such notice may be revoked prior to 3:00 p.m. (Detroit, Michigan
time) on the last Business Day immediately prior to each proposed Conversion
Date, but such revocation shall be applicable only with respect to proposed
Term Rate Periods commencing after the date of the notice of revocation.
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<PAGE> 35
Not less than 20 days prior to the proposed Conversion Date, the
Remarketing Agent shall determine the interest rate for such Term Rate Period
(herein called the "Term Rate"), and not less than 7 days prior to the proposed
Conversion Date, the Remarketing Agent shall fix the final Term Rate, provided
that the final Term Rate so determined shall be no lower than the preliminary
Term Rate previously determined. The Term Rate shall be the interest rate that
would, in the opinion of the Remarketing Agent, result in the market value of
the Bonds being 100% of the principal amount thereof on the date of such
determination, taking into account relevant market conditions and credit rating
factors as they exist on such date, and assuming that the Term Rate Period
began on such date; provided, however, that the Term Rate may not exceed the
Maximum Rate.
Notwithstanding the foregoing, a Term Rate shall not be established if
(1) the Company delivers to the Trustee written notice of
revocation of its election to establish the Term Rate before 3:00 p.m.
(Detroit, Michigan time) on the last Business Day immediately prior to
the proposed Conversion Date or
(2) prior to 10:00 a.m. (Detroit, Michigan time) on the
Conversion Date the Trustee does not receive (a) the Substitute Letter
of Credit (if any) that was to be effective on such Conversion Date
and the related documentation required under the Indenture in
connection with the delivery of a Substitute Letter of Credit and (b)
the opinion of Bond Counsel required under the Indenture.
If all conditions to the establishment of a Term Rate are not satisfied, the
Bonds shall continue (or, if a Term Rate Period ended on the preceding day,
shall begin) to bear interest at the Variable Rate from the proposed Conversion
Date.
OPTIONAL TENDER
The Holder of any Bond shall have the right to tender such Bond to the
Trustee or to any Tender Agent appointed pursuant to the Indenture for purchase
in whole or in part (if in part, only in an authorized denomination) on any
Business Day during a Variable Rate Period at a purchase price equal to 100% of
the principal amount of Bonds (or portions thereof) tendered plus accrued
interest to the specified purchase date (an "Optional Tender Date"). A Bond
may only be tendered in part if the principal amount tendered and the principal
amount to be retained by the Holder of such Bond are both in authorized
denominations. In order to exercise such option with respect to any Bond, the
Holder thereof must deliver notice thereof to the Trustee, as provided below,
at its principal office at least 7 days prior to the proposed Optional Tender
Date.
Any such notice of Optional Tender must be duly executed by the
Bondholder and must specify (i) the name of the registered Holder of the Bond
to be tendered for purchase, (ii) the Optional Tender Date, (iii) the
certificate number and principal amount of such Bond, and (iv) the principal
amount of such Bond to be purchased. If the amount to be purchased is less
than the entire principal amount, both the amount to be purchased and the
amount to be retained must
30
<PAGE> 36
be in authorized denominations. Such notice may be given to the Trustee in
writing or by telephone, but no such telephonic notice shall be effective
unless confirmed in writing delivered to the Trustee not more than 2 Business
Days after such telephonic notice. A form of the Optional Tender Notice may be
obtained from the Trustee upon request.
Unless a notice of Optional Tender indicates that less than the entire
principal amount of the Bond is being tendered for purchase, the Holder will be
deemed to have tendered the Bond in its entire principal amount for purchase.
Upon delivery of a written notice of Optional Tender, the election to
tender shall be irrevocable and binding upon such Holder and may not be
withdrawn.
If a written notice of Optional Tender shall have been duly given with
respect to any Bond, the Holder of such Bond shall deliver such Bond to the
Trustee at its principal office or to the Tender Agent at its principal office
at or before 11:00 a.m. (Detroit, Michigan time) on the Optional Tender Date,
together with an instrument of assignment or transfer duly executed in blank.
Any Bond for which a notice of Optional Tender has been given but which is not
so delivered to the Trustee or Tender Agent (an "Unsurrendered Bond") shall
nevertheless be deemed to have been tendered by the Holder thereof on the
Optional Tender Date.
If there has been irrevocably deposited in the Bond Purchase Fund an
amount sufficient to pay the purchase price of all Bonds tendered or deemed to
be tendered for purchase on an Optional Tender Date, any Unsurrendered Bond
shall be deemed to have been tendered for purchase and purchased from the
Holder thereof on such Optional Tender Date and the Holder of any Unsurrendered
Bond shall not be entitled to receive interest on such Unsurrendered Bond for
any period on and after the Optional Tender Date.
Anything in this Bond or the Indenture to the contrary
notwithstanding, no Optional Tender of Bonds shall be permitted (i) for Pledged
Bonds, or (ii) for any Bond which is deemed Fully Paid within the meaning of
the Indenture.
MANDATORY TENDER
The Holder of each Bond shall be required to tender such Bond to the
Trustee or Tender Agent for purchase on the following dates (each such date
being herein called a "Mandatory Tender Date"): (i) each proposed Conversion
Date, (ii) the date immediately following the expiration of a Term Rate Period,
(iii) 20 days after the Trustee receives written notice from the Credit Obligor
(a) stating that an event of default, as therein defined, has occurred and is
continuing under the Credit Agreement, and (b) directing the Trustee to effect
a Mandatory Tender of all the Bonds, (iv) on any date proposed by the Company
for delivery of a Substitute Letter of Credit; provided however, that the
Holder of any Bond may waive the requirement for such tender and may retain
such Bond notwithstanding the delivery of a Substitute Letter of Credit by
delivering written notice of such waiver and retention to the Trustee and the
Remarketing Agent not less than 7 days prior to the Mandatory Tender Date, and
(v) 15 days prior to the Stated Expiration Date of the Letter of Credit. If
any of such dates is not a Business Day, the Mandatory Tender Date shall be
deemed to be the next succeeding Business Day.
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<PAGE> 37
Notice of a Mandatory Tender shall be given by the Trustee by
registered or certified mail, mailed to the Holders of all Bonds at their
addresses appearing on the Bond Register not less than 30 days prior to the
Mandatory Tender Date in the case of a Mandatory Tender pursuant to clauses
(i), (ii) and (v) of the preceding paragraph, and not less than 15 days prior
to the Mandatory Tender Date in the case of a Mandatory Tender pursuant to
clauses (iii) and (iv) of the preceding paragraph. Such notice of Mandatory
Tender shall, among other things, specify the Mandatory Tender Date and the
reason for such Mandatory Tender.
All Bonds shall be tendered by the Holders thereof for purchase at or
before 11:00 a.m. (Detroit, Michigan time) on the Mandatory Tender Date, by
delivering such Bonds to the Trustee at its principal office or to the Tender
Agent at its principal office, together with an instrument of assignment or
transfer duly executed in blank. All Bonds so to be purchased that are not
delivered to the Trustee or Tender Agent on the Mandatory Tender Date
("Unsurrendered Bonds") shall nevertheless be deemed to have been tendered for
purchase by the Holders thereof on the Mandatory Tender Date.
If there has been irrevocably deposited in the Bond Purchase Fund an
amount sufficient to pay the purchase price of all Bonds tendered or deemed
tendered for purchase on the Mandatory Tender Date, any Unsurrendered Bond
shall be deemed to be tendered for purchase and purchased from the Holder
thereof on such Mandatory Tender Date and the Holder of any Unsurrendered Bond
shall not be entitled to receive interest on such Unsurrendered Bond for any
period on and after the relevant Mandatory Tender Date.
After notice of a Mandatory Tender has been given by the Trustee, the
Bonds shall be subject to Mandatory Tender notwithstanding the fact that the
reasons for giving such notice cease to exist or are no longer applicable.
This Bond is one of a duly authorized issue of bonds (herein called
the "Bonds") authorized to be issued in the principal amount of $5,225,000.
The principal of and the interest and premium (if any) on the Bonds are payable
solely out of the revenues and receipts to be derived from the leasing or sale
of certain real property owned by the Board and situated in Marengo County,
Alabama, the manufacturing plant located thereon (herein called the "Plant")
and certain machinery, equipment and other personal property (herein called the
"Equipment") acquired and installed in and around the Plant (the said real
property, the Plant and the Equipment, as they may at any time exist, being
herein together called the "Project"). Payment of the principal of and the
interest and premium (if any) on the Bonds is secured, pro rata and without
preference or priority of one bond over another, by a valid pledge of the said
revenues and receipts out of which they are payable and by a Trust Indenture
dated as of April 1, 1997 (herein called the "Indenture"), from the Board to
LaSalle National Bank, as trustee (herein called the "Trustee"). In connection
with the issuance of the Bonds, the Board has leased the Project to McClain of
Alabama, Inc., a Michigan corporation (herein, together with its successors and
assigns, called the "Company"), under a Lease Agreement dated as of April 1,
1997 (herein called the "Lease"), which obligates the Company to pay rent
directly to the Trustee, for the account of the Board, on such dates and in
such amounts as will provide moneys sufficient to pay, when due, the principal
of and the interest and premium (if any) on the Bonds and to pay the purchase
price of Bonds required to be purchased on Optional or Mandatory
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<PAGE> 38
Tender. The Bonds are further secured by a Bond Guaranty Agreement dated as of
April 1, 1997, between the Company and the Trustee pursuant to which the
Company has guaranteed the full and prompt payment of the principal of and the
interest and premium (if any) on the Bonds and the purchase price of Bonds
required to be purchased on Optional or Mandatory Tender.
As additional security for the payment of the Bonds, the Company has
caused Standard Federal Bank (in its capacity as issuer of the initial Letter
of Credit referred to below, herein called the "Credit Obligor") to issue an
irrevocable letter of credit in favor of the Trustee in the amount of (i) the
aggregate principal amount of the Bonds, to enable the Trustee to pay the
principal amount of Bonds when due and to pay the principal portion of the
purchase price of Bonds tendered (or deemed tendered) to the Trustee for
purchase and (ii) the maximum amount of interest payable on the Bonds at the
rate of 12% per annum for a period of 45 days, to enable the Trustee to pay
interest on the Bonds when due and to pay the interest portion of the purchase
price of Bonds tendered (or deemed tendered) to the Trustee for purchase.
Subject to the terms and conditions of the Indenture, the Company may, at its
option, replace such letter of credit with a substitute letter of credit. The
initial letter of credit so delivered to the Trustee and any substitute letter
of credit delivered to the Trustee pursuant to the Indenture are herein
referred to as the "Letter of Credit." Further, the Company has caused LaSalle
National Bank to issue an irrevocable confirmation of the Letter of Credit.
The initial Letter of Credit will be issued by the Credit Obligor
pursuant to a Reimbursement Agreement dated as of April 1, 1997 (the "Credit
Agreement") between the Credit Obligor and the Company, whereby the Company
will agree, among other things, to reimburse the Credit Obligor for all amounts
drawn by the Trustee pursuant to the initial Letter of Credit.
As security for the Company's obligations under the Credit Agreement,
the Company and the Board have executed a Mortgage, Assignment of Leases and
Security Agreement dated as of April 1, 1997 (the "Mortgage") in favor of the
Credit Obligor, whereby the Credit Obligor will be granted a mortgage,
assignment and pledge of, and security interest in, the Project, the rights of
the Board and the Company under the Lease Agreement, the revenues and receipts
from the Project, and certain other collateral. The lien and security interest
of the Mortgage with respect to the rights of the Board in the Lease and said
revenues and receipts are senior and superior to the assignment and pledge of
said rights, revenues and receipts contained in the Indenture. except with
respect to money and investments from time to time on deposit in, or forming a
part of, the special funds created in the Indenture.
Reference is hereby made to the Indenture for a description of the
Project, the nature and extent of the security afforded thereby, the rights and
duties of the Board and the Trustee with respect thereto and the rights of the
holders of the Bonds. The Indenture provides, inter alia, (1) that in the
event of default by the Board in the manner and for the time therein provided,
the Trustee may, with the consent of the Credit Obligor, declare the principal
of this Bond immediately due and payable, whereupon the same shall thereupon
become immediately due and payable and the Trustee shall be entitled to pursue
the remedies provided in the Indenture, and (2) that all remedies of the
Holders of Bonds thereunder are vested exclusively in the Trustee for the equal
and pro rata benefit of all the Holders of the Bonds, unless the Trustee
refuses or
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<PAGE> 39
neglects to act within a reasonable time after written request so to act
addressed to the Trustee by the Holders of twenty-five per cent (25%) in
principal amount of the outstanding Bonds, accompanied by indemnity
satisfactory to the Trustee, in which event the Holder of any of the Bonds may
(subject to the terms of the Indenture) thereupon so act in the name and behalf
of the Trustee or may so act in his own name in lieu of action by or in the
name and behalf of the Trustee, but that otherwise no Holder of any of the
Bonds shall have the right to enforce any remedy thereunder, and then only for
the equal and pro rata benefit of the Holders of all the Bonds. The Indenture
also provides that the Board and the Trustee, with the written consent of the
Holders of not less than a majority in aggregate principal amount of the Bonds
then outstanding under the Indenture, may at any time and from time to time
amend the Indenture or any Indenture supplemental thereto, and that, so long as
a Letter of Credit shall be in effect or any Bonds constitute Pledged Bonds and
there is no default by the Credit Obligor thereunder, the Credit Obligor shall
be deemed to be the only Holder of all the Bonds for the purpose of granting
such consent; provided that no such amendment shall (a) without the consent of
the Credit Obligor (if any) and the Holder of each bond affected, reduce the
principal of or the rate of interest on or the premium payable upon the
redemption of, any bond, or (b) without the consent of the Credit Obligor (if
any) and the Holders of all the Bonds then outstanding under the Indenture,
extend the maturity of any installment of principal or interest on any of the
Bonds, create a lien or charge on the Project or the revenues and receipts
therefrom ranking prior to the lien and charge thereon contained in the
Indenture, effect a preference or priority of any bond over any other bond or
reduce the aggregate principal amount of Bonds the Holders of which are
required to consent to any such amendment. By acceptance of this Bond, the
Holder consents to the provisions of the Indenture.
Subject to the Indenture, the Bonds are issuable as registered Bonds
in the denominations of $5,000 and any integral multiple thereof except that
Bonds authenticated when bearing interest at the Variable Rate Mode shall be in
denominations of $100,000 and any larger denomination that is an integral
multiple of $5,000. Subject to the limitations provided in the Indenture and
upon payment of any tax or governmental charge, if any, Bonds may be exchanged
for a like aggregate principal amount of Bonds of other authorized
denominations.
This Bond is transferable by the registered Holder hereof or his duly
authorized attorney at the principal corporate trust office of the Trustee upon
surrender of this Bond, accompanied by a duly executed instrument of transfer
in form and with guaranty of signature satisfactory to the Trustee, subject to
such reasonable regulations as the Board or the Trustee may prescribe, and upon
payment of any tax or other governmental charge incident to such transfer.
Upon any transfer, a new Bond or Bonds in the same aggregate principal amount
will be issued to the transferee. Except as set forth in this Bond and as
otherwise provided in the Indenture, the person in whose name this Bond is
registered shall be deemed the Holder hereof for all purposes, and the Board,
the Tender Agent, the Remarketing Agent and the Trustee shall not be affected
by any notice to the contrary.
The Bonds are subject to redemption prior to maturity as follows:
(a) The Bonds are subject to mandatory redemption in whole on any
date prior to maturity in the event of the occurrence of a Determination of
Taxability (as defined in the
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<PAGE> 40
Indenture) at a redemption price of 100% of the principal amount thereof plus
accrued interest to the redemption date.
(b) The Bonds, if bearing interest at a Variable Rate, are subject
to optional redemption by the Board, upon the direction of the Company, in
whole or in part (but if in part, only in multiples of $100,000 or any larger
amount that is an integral multiple of $5,000, with those to be redeemed to be
selected by the Trustee), on any date at and for a redemption price equal to
the principal amount redeemed plus accrued interest thereon to the date fixed
for redemption.
(c) The Bonds, if bearing interest at the Term Rate, are subject
to redemption on any date in whole at and for a redemption price with respect
to each such Bond redeemed equal to the principal amount thereof plus accrued
interest thereon to the date fixed for redemption, but only upon receipt by the
Trustee of a written certificate from the Company stating that within 120 days
prior to the date of such certificate (i) the Project has been damaged or
destroyed to such extent that, in the opinion of an Independent Engineer (as
defined in the Indenture), it cannot be reasonably restored within a period of
four six (6) consecutive months or the Company is thereby prevented from
carrying on its normal operations therein for a period of not less than twelve
(12) consecutive months or the cost of restoration thereof would exceed the net
insurance proceeds referable to such damage or destruction plus certain
self-insurance, or (ii) title to, or the temporary use of, any part of the
Project has been taken by eminent domain, and such taking or takings results
or, in the opinion of an Independent Engineer (as defined in the Indenture),
are likely to result in the Company being thereby prevented from carrying on
its normal operations therein for a period of not less than six (6) consecutive
months, or (iii) there has occurred a change in the economic availability of
raw materials, operating supplies or facilities necessary for the operation of
the Project or such technological or other change which in the good faith
judgment of the Company renders the Project uneconomic and the Company has
determined (as evidenced by a resolution of its board of directors) to
discontinue the operation thereof, or (iv) as a result of changes in the
Constitution of the United States of America or the Constitution of Alabama or
of legislative or administrative action (whether state or federal) or by final
decree or judgment or order of any court or administrative body (whether state
or federal), entered after the contest thereof by the Company in good faith,
the Lease has become void or unenforceable or impossible of performance in
accordance with the intent and purposes of the parties thereto as expressed
therein or unreasonable burdens or excessive liabilities have been imposed on
the Board or the Company.
(d) The Bonds, if bearing interest at the Term Rate, are subject
to redemption by the Board, upon the direction of the Company, in whole or in
part (but if in part, only in multiples of $5,000, with those to be redeemed to
be selected by the Trustee), on any date during the redemption periods and at
the redemption prices (expressed as a percentage of the principal amount to be
redeemed) set forth below, plus interest accrued to the redemption date:
35
<PAGE> 41
<TABLE>
<CAPTION>
Length of Currently Applicable Dates after which Redemption
Term Rate Period is Allowed and
(Expressed in Whole Years) Redemption Prices
<S> <C>
after 5 years at 102%, declining by 0.5% semiannually
greater than 7 . . . . . . . . . . . . . . . . . to 100%
less than or equal to 7 and after 3 years at 102%, declining by 0.5% semiannually
greater than 4 . . . . . . . . . . . . . . . . . to 100%
less than or equal to 4 . . . . . . . . . . . . . not callable
</TABLE>
Any notice of redemption, identifying the Bonds or portion thereof to
be redeemed, shall be given by first class mail to the registered Holder of
each Bond to be redeemed in whole or in part at the address shown on the Bond
Register of the Issuer not more than 60 days and not fewer than 30 days prior
to the redemption date. All Bonds so called for redemption will cease to bear
interest on the specified redemption date, provided funds for their redemption
and any accrued interest payable on the redemption date are on deposit at the
principal place of payment at that time.
The Board is a public corporation organized under the provisions of
Article 4 of Chapter 54 of Title 11 of the Code of Alabama of 1975, as amended,
and the Bonds are authorized to be issued for purposes for which bonds are
authorized to be issued under the provisions of said article. The covenants and
representations herein contained or contained in the Indenture do not and shall
never constitute a personal or pecuniary liability or charge against the
general credit of the Board, nor shall the City of Demopolis, Alabama, in any
manner be liable for payment of the principal of or the interest or premium (if
any) on the Bonds or for the performance of the undertakings of the Board
contained herein or in the Indenture.
It is hereby certified that all conditions, actions and things
required by the Constitution and laws of Alabama to exist, be performed and
happen precedent to or in the issuance of this bond do exist, have been
performed and have happened in due and legal form.
Execution by the Trustee of the authentication certificate hereon is
essential to the validity hereof and is conclusive of the due issue hereof
under the Indenture.
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<PAGE> 42
IN WITNESS WHEREOF, the Board has caused this bond to be executed in
its name and behalf with a facsimile of the signature of the Chairman of its
Board of Directors, has caused a facsimile of its corporate seal to be hereunto
imprinted, has caused this Bond to be attested by its Secretary, and has caused
this Bond to be dated _______________, 1997.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
By
--------------------------------------
Chairman of the Board of Directors
Attest:
- -------------------------------------------
Secretary
(Form of Trustee's Authentication Certificate)
The within bond is one of those described
in the within-mentioned Trust Indenture.
LASALLE NATIONAL BANK,
Trustee
By
--------------------------------------
Its Authorized Officer
Date of Authentication:
-----------------
37
<PAGE> 43
(FORM OF ASSIGNMENT)
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
(Please print or typewrite Name and Address including Zip Code of Transferee)
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints _______________________________________________________________ to
transfer the within Bond on the books kept for registration thereof, with full
power of substitution in the premises.
Dated this _____ day of ____________________, ________.
--------------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as it appears on the face of the
within Bond in every particular,
without alteration or enlargement or
any change whatever.
Signature Guaranteed:
- ---------------------------------------------------
(Bank, Broker or Firm)*
By
-------------------------------------------------
(Authorized Officer)
Its Medallion Number:
------------------------------
* Signature(s) must be guaranteed by an eligible guarantor institution which is
a member of a recognized signature guarantee program, i.e., Securities Transfer
Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP), or
New York Stock Exchange Medallion Signature Program (MSP).
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<PAGE> 44
SECTION 3.11 EXECUTION AND DELIVERY OF THE BONDS. The Bonds
shall be forthwith executed and delivered to the Trustee and shall be
authenticated and delivered by the Trustee upon receipt by the Trustee of an
order signed on behalf of the Board by the Chairman or the Vice Chairman of the
Directors, requesting such authentication and delivery and designating the
person to receive the same or any part thereof.
SECTION 3.12 APPLICATION OF PROCEEDS FROM SALE OF BONDS. The
proceeds derived from the sale of the Bonds shall be paid to the Trustee and
promptly thereafter deposited in the Construction Fund.
ARTICLE IV
REDEMPTION PROVISIONS
SECTION 4.1 REDEMPTION DATES AND PRICES OF THE BONDS. The Bonds
may not be called for redemption prior to maturity except as follows:
(a) MANDATORY REDEMPTION OF BONDS UPON OCCURRENCE OF
DETERMINATION OF TAXABILITY. The Bonds are subject to mandatory
redemption in whole on any date prior to maturity in the event of a
Determination of Taxability at and for a Redemption price with respect
to each such Bond redeemed equal to 100% of the principal amount
thereof plus accrued interest to the redemption date. If called for
redemption prior to maturity upon such occurrence, the Bonds must be
redeemed within the time set forth in Section 5.7 of the Lease
following the Determination of Taxability.
(b) OPTIONAL REDEMPTION OF VARIABLE RATE BONDS. The
Bonds, if bearing interest at the Variable Rate, are subject to
optional redemption by the Board, upon the direction of the Company,
in whole or in part (but if in part, only in multiples of $100,000 or
any larger amount that is an integral multiple of $5,000), on any date
at and for a redemption price equal to the principal amount redeemed
plus accrued interest to the redemption date.
(c) EXTRAORDINARY OPTIONAL REDEMPTION OF TERM RATE
BONDS. The Bonds, if bearing interest at the Term Rate, are subject
to redemption on any date in whole at and for a redemption price with
respect to each such Bond redeemed equal to the principal amount
thereof plus accrued interest thereon to the date fixed for
redemption, but only upon receipt by the Trustee of a written
certificate from the Company stating that within 120 days prior to the
date of such certificate (i) the Project has been damaged or destroyed
to such extent that, in the opinion of an Independent Engineer (as
defined in the Indenture), it cannot be reasonably restored within a
period of six (6) consecutive months or the Company is thereby
prevented from carrying on its normal operations therein for a period
of not less than twelve (12) consecutive months or the cost of
restoration thereof would exceed the net insurance proceeds referable
to such damage or destruction plus certain self-insurance, or (ii)
title to, or the temporary use of, any part of the
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Project has been taken by eminent domain, and such taking or takings
results or, in the opinion of an Independent Engineer (as defined in
the Indenture), are likely to result in the Company being thereby
prevented from carrying on its normal operations therein for a period
of not less than six (6) consecutive months, or (iii) there has
occurred a change in the economic availability of raw materials,
operating supplies or facilities necessary for the operation of the
Project or such technological or other change which in the good faith
judgment of the Company renders the Project uneconomic and the Company
has determined (as evidenced by a resolution of its board of
directors) to discontinue the operation thereof, or (iv) as a result
of changes in the Constitution of the United States of America or the
Constitution of Alabama or of legislative or administrative action
(whether state or federal) or by final decree or judgment or order of
any court or administrative body (whether state or federal), entered
after the contest thereof by the Company in good faith, the Lease has
become void or unenforceable or impossible of performance in
accordance with the intent and purposes of the parties thereto as
expressed therein or unreasonable burdens or excessive liabilities
have been imposed on the Board or the Company. In the event that the
redemption of the Bonds is to be made pursuant to clauses (i), (ii) or
(iii) of this subparagraph (c), such certificate of the Company shall
state that as a result of such event, the Company has discontinued its
operation of the Project.
(d) OPTIONAL REDEMPTION OF TERM RATE BONDS. The Bonds,
if bearing interest at the Term Rate, are subject to redemption by the
Board, upon the direction of the Company, in whole or in part (but if
in part, only in multiples of $5,000), on any date during the
redemption periods and at the redemption prices (expressed as a
percentage of the principal amount to be redeemed) set forth below,
plus interest accrued to the redemption date:
<TABLE>
<CAPTION>
Length of Currently Applicable Dates after which Redemption
Term Rate Period is Allowed and
(Expressed in Whole Years) Redemption Prices
<S> <C>
after 5 years at 102%, declining by 0.5% semiannually
greater than 7 . . . . . . . . . . . . . . . . . to 100%
less than or equal to 7 and after 3 years at 102%, declining by 0.5% semiannually
greater than 4 . . . . . . . . . . . . . . . . . to 100%
less than or equal to 4 . . . . . . . . . . . . . not callable
</TABLE>
SECTION 4.2 SELECTION OF BONDS TO BE CALLED FOR REDEMPTION.
Except as otherwise provided herein or in the Bonds, if less than all the Bonds
are to be redeemed, the particular Bonds to be called for redemption shall be
selected by any method determined by the Trustee to be fair and reasonable;
provided, however, that the Trustee shall first select for redemption any Bonds
which are Pledged Bonds on the date of selection and then any Bonds that are
Company Bonds on the date of selection and provided further that if, as stated
in a certificate of the Company delivered to the Trustee, the Company shall
have offered to purchase all Bonds then Outstanding and less than all of such
Bonds shall have been tendered to the Company for
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such purchase, the Trustee, at the direction of the Company, shall select for
redemption all such Bonds which have not been so tendered. The Trustee shall
treat any Bond of denomination greater than the then minimum Authorized
Denomination as representing that number of separate Bonds each of the then
minimum Authorized Denomination as can be obtained by dividing the actual
principal amount of such Bond by the then minimum Authorized Denomination.
SECTION 4.3 NOTICE OF REDEMPTION. DEPOSIT OF FUNDS. (a) When
required to redeem Bonds under any provision of this Article IV, or when
directed to do so by the Board, the Trustee shall cause notice of the
redemption to be given by first class mail, postage prepaid, to all registered
Holders of Bonds to be redeemed at their registered addresses not more than 60
days and not fewer than 30 days prior to the redemption date. Failure to mail
any such notice or defect in the mailing thereof in respect of any Bond shall
not affect the validity of the redemption of any other Bond. Notices of such
redemptions shall also be mailed to the Remarketing Agent, the Tender Agent,
the Credit Obligor and S&P (if the Bonds are at the time rated by it). Any
such notice shall be given in the name of the Board, shall identify the Bonds
to be redeemed (and, in the case of partial redemption of any Bonds, the
respective principal amounts thereof to be redeemed), shall specify the
redemption date and the redemption price and when any interest accrued to the
redemption date will be payable, and shall state that on the redemption date
the redemption price of the Bonds called for redemption will be payable at the
principal corporate trust office of the Trustee and from that date interest
will cease to accrue. The Trustee may use "CUSIP" numbers in notices of
redemption as convenience to Bondholders, provided that any such notice shall
state that no representation is made as to the correctness of such numbers
either as printed on the Bonds or as contained in any notice of redemption and
that reliance may be placed only on the identification numbers containing the
prefix established under the Indenture.
(b) If at the time of mailing of notice of any optional redemption
in connection with a refunding of the Bonds there shall not have been, and
there is not, under subsection (c) of this section, required to be, deposited
with the Trustee moneys sufficient to redeem all the Bonds called for
redemption, such notice may state that it is conditional in that it is subject
to the deposit of the proceeds of refunding bonds with the Trustee not later
than the redemption date, and such notice shall be of no effect unless such
moneys are so deposited.
(c) On or prior to the mailing of any notice of redemption of
Bonds, unless the Credit Obligor shall have otherwise consented in writing, (i)
the Company shall pay, or cause to be paid, to the Trustee an amount sufficient
to pay the redemption price of all of the Bonds or portions thereof which are
to be so redeemed, together with interest accrued thereon to the date specified
for redemption, (ii) the Trustee shall deposit such payments in the Debt
Service Fund and (iii) the Trustee shall certify to the Credit Obligor the
making of such payment and the deposit thereof in the Debt Service Fund.
SECTION 4.4 BONDS REDEEMED IN PART. Any Bond which is to be
redeemed only in part shall be surrendered at a place stated for the surrender
of Bonds called for redemption in the notice provided for in Section 4.3 hereof
(with due endorsement by, or a written instrument of transfer in form
satisfactory to the Trustee duly executed by, the Holder thereof or his
attorney duly authorized in writing) and the Board shall execute and the
Trustee shall
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<PAGE> 47
authenticate and deliver to the Holder of such Bond without service charge, a
new Bond or Bonds, of any Authorized Denomination as requested by such Holder
in aggregate principal amount equal to and in exchange for the unredeemed
portion of the principal of the Bond so surrendered.
ARTICLE V
GENERAL PROVISIONS
RESPECTING THE BONDS
SECTION 5.1 EXECUTION OF BONDS. The Bonds shall be executed on
behalf of the Board by the facsimile signature of the Chairman or Vice Chairman
of the Directors and a facsimile of the Board's corporate seal shall be printed
or otherwise reproduced thereon and attested by the facsimile signature of the
Secretary or Assistant Secretary of the Board. All such facsimile signatures
shall have the same force and effect as if said Chairman or Vice Chairman and
said Secretary or Assistant Secretary had manually signed each of the Bonds.
If any officer of the Board who shall have executed any Bond shall cease to be
such officer before the Bond so executed (by manual or facsimile signature)
shall be authenticated and delivered, such signature or facsimile shall
nevertheless be valid and sufficient for all purposes, as though the person who
executed such Bond had not ceased to be such officer of the Board, and also any
Bond may be executed on behalf of the Board by such persons as at the actual
time of such execution of such Bond shall be the proper officers of the Board,
although at the date of such Bond such persons may not have been officers of
the Board.
SECTION 5.2 AUTHENTICATION OF BONDS. Only such Bonds as shall
have endorsed thereon a certificate of authentication substantially in the form
hereinabove set forth manually executed by the Trustee shall be entitled to any
right or benefit hereunder and such executed certificate of authentication
shall be conclusive evidence that such Bond has been authenticated and
delivered under the Indenture. Said certificate of authentication on any Bond
shall be deemed to have been executed by the Trustee if signed by an authorized
officer of the Trustee, but it shall not be necessary that the same officer
sign the certificate of authentication on all of the Bonds issued hereunder.
SECTION 5.3 REPLACEMENT OF MUTILATED, LOST, STOLEN OR DESTROYED
BONDS. In the event any Bond is mutilated, lost, stolen or destroyed, the
Board may execute, and the Trustee shall thereupon authenticate and deliver, a
new Bond of like tenor as that mutilated, lost, stolen or destroyed; provided
that (a) in the case of any such mutilated Bond, such Bond is first surrendered
to the Board and the Trustee, and (b) in the case of any such lost, stolen or
destroyed Bond, there is first furnished to the Board and the Trustee evidence
of such loss, theft or destruction satisfactory to each of them, together with
indemnity satisfactory to each of them. The Board may charge the Holder with
the expense of issuing any such new Bond.
SECTION 5.4 REGISTRATION, TRANSFER AND EXCHANGE OF BONDS. The
Trustee shall be, and is hereby appointed as, the registrar and transfer agent
of the Board and shall keep at its principal corporate trust office proper
registry and transfer books in which it will note the
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<PAGE> 48
registration and transfer of such Bonds as are presented for those purposes,
all in the manner and to the extent hereinafter specified.
All Bonds shall be registered as to both principal and interest by the
Trustee as registrar and transfer agent for the Board, and shall be
transferable only on the transfer books of the Trustee. Upon surrender for
registration of transfer of any Bond at such office, the Board shall execute
and the Trustee shall authenticate and deliver in the name of the transferee or
transferees, one or more new fully registered Bonds of authorized denomination
for the aggregate principal amount which the registered Holder is entitled to
receive.
At the option of the Holder, Bonds may be exchanged for other Bonds of
any other Authorized Denomination, of a like aggregate principal amount, upon
surrender of the Bonds to be exchanged at any such office or agency. Whenever
any Bonds are so surrendered for exchange, the Board shall execute, and the
Trustee shall authenticate and deliver, the Bonds which the Bondholder making
the exchange is entitled to receive.
All Bonds presented for registration of transfer, exchange, redemption
or payment (if so required by the Board or the Trustee) shall be accompanied by
a written instrument or instruments of transfer or authorization for exchange,
in form and with guaranty of signature satisfactory to the Trustee, duly
executed by the Holder or by his attorney duly authorized in writing.
No service charge shall be made to a Bondholder for any exchange or
registration of transfer of Bonds, but the Board or the Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
Neither the Board nor the Trustee on behalf of the Board shall be
required (i) to register the transfer of or exchange any Bond during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of Bonds selected for redemption and ending at the close
of business on the day of such mailing, or (ii) to register the transfer of or
exchange any Bond so selected for redemption in whole or in part.
New Bonds delivered upon any registration of transfer or exchange
shall be valid obligations of the Board, evidencing the same debt as the Bonds
surrendered, shall be secured by the Indenture and shall be entitled to all of
the security and benefits hereof to the same extent as the Bonds surrendered.
SECTION 5.5 PERSONS DEEMED HOLDERS. The Board, the Trustee and
the Tender Agent may deem and treat the person in whose name any Bond is
registered as the absolute Holder thereof (whether or not such Bond shall be
overdue and notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Board, the Trustee or the Tender Agent) for the
purpose of receiving payment of or on account of the principal of (and premium,
if any, on), and (subject to Section 5.6 hereof) interest on, such Bond, and
for all other purposes, and neither the Board, the Trustee nor the Tender Agent
shall be affected by any notice to the contrary. All such payments so made to
any such registered Holder, or upon his
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<PAGE> 49
order, shall be valid and, to the extent of the sum or sums so paid, effectual
to satisfy and discharge the liability for moneys payable upon any such Bond.
SECTION 5.6 PAYMENT OF PRINCIPAL AND INTEREST; INTEREST RIGHTS
RESERVED. The principal or redemption or purchase price of, and interest on,
any Bond shall be payable in any coin or currency of the United States of
America which, at the time of payment, is legal tender for the payment of
public and private debts. The principal or redemption price of the Bonds shall
be payable at the principal office of the Trustee. Except as hereinafter
provided, interest on any Bond on each Interest Payment Date in respect thereof
shall be payable by check mailed by the Trustee to the address of the person
entitled thereto as such address shall appear on the registry books maintained
by the Trustee. At the written request of the Holder of at least $1,000,000
aggregate principal amount of Bonds received by the Trustee at least one
Business Day before the corresponding Record Date, interest accrued on such
Holder's Bonds will be paid by wire transfer within the United States of
immediately available funds to the bank account number of such Holder specified
in such request. Interest payable at maturity, earlier redemption date or
purchase date shall be made upon presentation and surrender of such Bond.
Interest on any Bond which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the person in whose
name that Bond is registered at the close of business on the Regular Record
Date for such interest.
Any interest on any Bond which is payable, but is not punctually paid
or provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder of such Bond on
the relevant Regular Record Date by virtue of having been such Holder, and such
Defaulted Interest shall be paid to the person in whose name the Bond is
registered at the close of business on a Special Record Date to be fixed by the
Trustee, such date to be no more than 15 nor fewer than 10 days prior to the
date of proposed payment. The Trustee shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first class postage prepaid, to each Bondholder at his address as it
appears in the Bond Register, not fewer than 10 days prior to such Special
Record Date.
Subject to the foregoing provisions of this section, each Bond
delivered under the Indenture upon registration of transfer of or exchange for
or in lieu of any other Bond shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Bond.
SECTION 5.7 SOURCE OF PAYMENT; LIMITED OBLIGATION. The Bonds,
together with premium, if any, and interest thereon, shall be limited
obligations of the Board payable by the Board solely from the revenues and
receipts to be derived from the leasing or sale of the Project (except to the
extent paid out of moneys attributable to proceeds of the Bonds, the income
from the temporary investment thereof or any payments made pursuant to and any
moneys derived from the Letter of Credit) and shall be a valid claim of the
respective Holders thereof only against the Debt Service Fund and other moneys
held by the Trustee and such revenues and receipts, which revenues and receipts
shall be used for no other purpose than to pay the principal of and the
interest and premium (if any) on the Bonds, except as may be otherwise
expressly
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<PAGE> 50
authorized in the Indenture or the Lease. The Bonds shall not constitute in
any manner an obligation of the Municipality.
No recourse shall be had for the payment of the principal of, premium,
if any, or interest on any of the Bonds or for any claim based thereon or upon
any obligation, covenant or agreement contained in the Indenture, against any
past, present or future official, officer or employee of the Board, or any
incorporator, official, officer, director or trustee of any successor
corporation as such, either directly or through the Board or any successor
corporation, under any rule of law or equity, statute or constitution or by the
enforcement of any assessment or penalty or otherwise, and all such liability
of any such incorporator, official, officer, employee, director or trustee as
such is hereby expressly waived and released as a condition of and in
consideration for the execution of the Indenture and the issuance of any of the
Bonds.
SECTION 5.8 REGISTRATION OF BONDS IN THE BOOK-ENTRY ONLY SYSTEM.
(a) The provisions of this Section 5.8 shall apply with respect to any Bond
registered to CEDE & CO. or any other nominee of The Depository Trust Company
("DTC") while the Book-Entry Only System is in effect and shall, during the
period of their application, supersede any contrary provisions of the
Indenture.
The Bonds shall be issued as a single Bond in the principal amount of
$5,225,000. On the date of the initial authentication and delivery of the
Bonds, the Bonds shall be registered in the name of CEDE & CO., as nominee of
DTC as the Holder of all the Bonds. With respect to Bonds registered in the
name of CEDE & CO., as nominee of DTC, the Board, the Tender Agent and the
Trustee shall have no responsibility or obligation to any Participant (which
means securities brokers and dealers, banks, trust companies, clearing
corporations and various other entities, some of whom, or their
representatives, own DTC) or to any Beneficial Owner (which means, when used
with reference to the Book-Entry Only System, the person who is considered the
beneficial owner thereof pursuant to the arrangements for book entry
determination of ownership applicable to DTC) with respect to the following:
(i) the accuracy of the records of DTC, CEDE & CO. or any participant with
respect to any ownership interest in the Bonds, (ii) the delivery to any
Participant, any Beneficial Owner or any other person, other than DTC, of any
notice with respect to the Bonds, including any notice of redemption, or (iii)
the payment to any Participant, or any Beneficial Owner or any other person,
other than DTC, of any amount with respect to the principal or purchase price
of or premium, if any, or interest on the Bonds. The Trustee shall pay all
principal and purchase price of and premium, if any, and interest on the Bonds
only to or upon the order of DTC, and all such payments shall be valid and
effective fully to satisfy and discharge the Board's obligations with respect
to the principal and purchase price of and premium, if any, and interest on
such Bonds to the extent of the sum so paid. No person other than DTC shall
receive a Bond. Upon delivery by DTC to the Trustee of written notice to the
effect that DTC has determined to substitute a new nominee in place of CEDE &
CO., the words "CEDE & CO." in this section shall refer to such new nominee of
DTC.
Upon receipt by the Board and the Trustee of written notice from DTC
to the effect that DTC is unable or unwilling to discharge its responsibilities
hereunder, the Trustee shall issue, transfer and exchange Bonds as requested by
DTC in Authorized Denominations, and whenever DTC requests the Board and the
Trustee to do so, the Board and the Trustee will cooperate with
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<PAGE> 51
DTC in taking appropriate action after reasonable notice to arrange for a
substitute bond depository willing and able upon reasonable and customary terms
to maintain custody of the Bonds registered in whatever name or names the
Holders transferring or exchanging such Bonds shall designate, in accordance
with this section.
In the event the Board determines that it is in the best interests of
the Beneficial Owners that they be able to obtain Bonds registered in the name
of a Holder other than DTC, the Board may so notify DTC and the Trustee,
whereupon DTC will notify the Participants, of the availability through DTC of
such Bonds. In such event, upon the return by DTC of all Bonds held by DTC in
the name of Cede & Co., the Trustee shall issue, transfer and exchange Bonds in
Authorized Denominations as requested by DTC, and whenever DTC requests the
Board and the Trustee to do so, the Trustee and the Board will cooperate with
DTC in taking appropriate action after reasonable notice to make available
Bonds registered in whatever name or names the Beneficial Owners transferring
or exchanging Bonds shall designate, in accordance with this section.
Notwithstanding any other provision of this Indenture to the contrary,
so long as any Bond is registered in the name of CEDE & CO., as nominee of DTC,
all payments with respect to the principal of and premium, if any, and interest
on such Bond and all notices with respect to such Bond shall be made and given,
respectively, to DTC as provided in the Letter of Representations, the form of
which is attached to this Indenture as Exhibit C.
In the event that the Book-Entry Only System pursuant to this section
is discontinued, the Bonds shall be issued, transferred and exchanged through
DTC and its Participants to the Beneficial Owners.
ARTICLE VI
THE CONSTRUCTION FUND
SECTION 6.1 CONSTRUCTION FUND. There is hereby created a
special trust fund, the name of which shall be the "Construction Fund", for the
purpose of providing funds for payment of Project Development Costs. The
Trustee shall be and remain the depository, custodian and disbursing agent for
the Construction Fund. The moneys in the Construction Fund shall be paid out
by the Trustee from time to time for the purpose of paying Project Development
Costs. Disbursement of moneys in the Construction Fund shall be made only upon
receipt by the Trustee of a requisition or payment request signed by an
Authorized Company Representative and approved by the Credit Obligor, (a)
stating, with respect to each such payment, the amount requested to be paid,
the name and address of the person, firm or corporation to whom such payment is
due, and the particular Project Development Costs for which the obligation to
be paid was incurred, (b) approving the payment thereby requested to be made,
(c) stating that the purpose for which such payment is to be made is one for
which Construction Fund moneys are herein authorized to be expended and that
such payment has not formed the basis for any previous payment request from the
Construction Fund and that such payment constitutes a Qualified Project Cost,
(d) in the case of a request for payment of any part of the cost of
constructing the Improvements (whether bills or contractors' estimates),
certifying that the labor,
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<PAGE> 52
services or materials represented thereby are located on, or are referable to,
the Project Site, (e) in the case of any request for payment of any part of the
purchase price, other acquisition cost or installation cost of the Equipment,
certifying that such item of Equipment is physically located on the Project
Site, or that the amount so requested to be paid on account of such equipment,
together with any amounts theretofore paid out of the Construction Fund on
account thereof, represents no more than progress payments for such equipment
which have been substantiated to the Company's satisfaction and (f) in the case
of any request for payment of an amount constituting interest accrued on the
Bonds (which may be made only through direct payment to the Company and only on
an Interest Payment Date preceding certification of completion as provided in
the next succeeding paragraph of this section and on the date of such
certification), stating that the amount requested to be paid, when added to all
amounts so constituting interest and theretofore paid to the Company from the
Construction Fund, does not exceed the amount of interest that may be
capitalized by the Company under Section 266 of the Code with respect to the
Plant and the Equipment.
After certification by an Authorized Company Representative (1) that
the construction of the Improvements and the acquisition and installation of
the Equipment therein have been completed in substantial accordance with the
plans, specifications and orders therefor, and (2) that all Project Development
Costs have been paid in full, the amount of any Bond Proceeds remaining in the
Construction Fund shall be deposited in a special account constituting a part
of the Debt Service Fund and applied by the Trustee to the redemption of such
Bonds as shall be specified by the Company on the earliest practicable
redemption date thereafter and, in the interim, shall be invested in a manner
(as directed by the Company) that will not, in the opinion of Bond Counsel,
result in any of the Bonds constituting "arbitrage bonds" within the meaning of
Section 148 of the Code. If, as a result of deposits into the Construction
Fund of moneys other than Bond Proceeds, any moneys remain on deposit in the
Construction Fund subsequent to compliance with the provisions of the preceding
sentence, such moneys shall be paid to the Credit Obligor to the extent amounts
are owed to the Credit Obligor under the Credit Agreement, and otherwise such
moneys shall be paid to the Company.
SECTION 6.2 TRUSTEE PROTECTED IN CONSTRUCTION FUND PAYMENTS.
ADDITIONAL EVIDENCE MAY BE REQUIRED. The Trustee shall be fully protected in
making withdrawals and payments out of the Construction Fund for the purposes
specified in Section 6.1 hereof upon presentation to it of the respective
requisitions, payment requests, endorsements, approvals and certificates
provided for in said section but the Trustee may in its discretion and shall,
when requested in writing so to do by the Holders of not less than twenty-five
percent (25%) of the Bonds then outstanding, require as a condition precedent
to any withdrawal or disbursement from the Construction Fund such additional
evidence as it may reasonably deem appropriate respecting the application of
any moneys previously disbursed from the Construction Fund or as to the
correctness of any estimate or bill presented to it for payment pursuant to the
provisions of said Section 6.1.
SECTION 6.3 SECURITY FOR CONSTRUCTION FUND MONEYS. The moneys
at any time on deposit in the Construction Fund shall be and at all times
remain impressed with a trust for the purposes specified in Section 6.1 hereof.
The Trustee shall at all times keep the moneys on
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<PAGE> 53
deposit in the Construction Fund continuously secured, for the benefit of the
Board and the Holders of the Bonds, either
(a) by holding on deposit, as collateral security,
Federal Securities, or other marketable securities eligible as
security for the deposit of trust funds under regulation of the
Comptroller of the Currency, having a market value (exclusive of
accrued interest) not less than the amount of moneys on deposit in the
Construction Fund, or
(b) if the furnishing of security in the manner provided
by the foregoing clause (a) of this section is not permitted by the
then applicable law and regulation, then in such other manner as may
be required or permitted by the then applicable state and federal laws
and regulations respecting the security for, or granting a preference
in the case of, the deposit of trust funds;
provided, however, that it shall not be necessary for the Trustee so to secure
any portion of the moneys on deposit in the Construction Fund that is insured
by the Federal Deposit Insurance Corporation or other agency of the United
States of America that may succeed to its functions; and provided, further,
that it shall not be necessary for the Trustee so to secure any portion of the
moneys on deposit in the Construction Fund that is at the time invested in
Eligible Investments pursuant to the provisions of the next succeeding Section
6.4 hereof.
SECTION 6.4 INVESTMENT OF CONSTRUCTION FUND MONEYS. As promptly
as practicable following the issuance and sale of the Bonds, the Company shall
direct the Trustee in writing to invest the money held in the Construction Fund
in any Eligible Investments having stated maturities in such amounts and at
such times as will make available from the Construction Fund cash moneys
sufficient to meet the needs of the Construction Fund. In making such
investments, the Trustee shall follow such written instructions as may be given
to it by an Authorized Company Representative. In the event of any such
investment, the securities and certificates in which such moneys are so
invested, together with all income derived therefrom, shall become a part of
the Construction Fund to the same extent as if they were moneys originally
deposited therein. The Trustee may from time to time sell or otherwise convert
any such securities or certificates into cash if in its sole discretion it
deems such conversion is necessary or desirable or if such sale or conversion
is necessary to provide for payment of a payment request presented to it
pursuant to the provisions of the preceding Section 6.1 hereof, whereupon the
net proceeds from such sale or conversion shall become a part of the
Construction Fund. The Trustee shall be fully protected in making any such
investment, sale or conversion in accordance with the provisions of this
section. In any determination of the amount of moneys at any time forming a
part of the Construction Fund, all such securities and all such certificates in
which any portion of the Construction Fund is at the time so invested shall be
included therein at their then market value.
SECTION 6.5 AGREEMENT RESPECTING NON-ARBITRAGE. (a) In order
that there will be no investment of moneys in the Construction Fund that would
result in any of the Bonds being considered "arbitrage bonds" within the
meaning of Section 148 of the Code, in the event that it is necessary to
restrict the yield on the investment of any moneys paid to or held by the
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<PAGE> 54
Trustee in said fund in order to avoid any of the Bonds being considered
"arbitrage bonds" within the meaning of said Section 148, the Company may issue
to the Trustee a written certificate to such effect together with written
instructions respecting investment of moneys in said fund, in which event the
Trustee shall follow the written directions of the Company.
(b) The Trustee shall not be responsible for (i) determining that
any investment of moneys in the Construction Fund complies with the limitations
imposed by Section 148 of the Code, including, without limitation, the
provisions of Section 148(d)(3) relating to the limitation on the amount
invested in non-purpose obligations with a yield higher than the yield on the
Bonds, or (ii) calculating the amount of, or making payment of, any rebate due
to the United States of America.
ARTICLE VII
APPLICATION OF REVENUES
AND CREATION OF DEBT SERVICE
FUND AND BOND PURCHASE FUND
SECTION 7.1 DEBT SERVICE FUND. (a) There is hereby created a
special trust fund, the name of which shall be the "Bond Principal and Interest
Fund," for the purpose of providing for payment of the principal of and the
interest (and premium, if any) on the Bonds and which shall be maintained until
the principal of and the interest and premium (if any) on the Bonds have been
paid in full. The Trustee shall be and remain the depository, custodian and
disbursing agent for the Debt Service Fund. Moneys on deposit in the Debt
Service Fund shall be used (i) to pay Debt Service on the Bonds as the same
shall become due and payable or (ii) to reimburse the Credit Obligor for
amounts drawn under the Letter of Credit, as provided in subsection (d) of this
section.
(b) There shall be deposited in the Debt Service Fund, as and when
received:
(1) all money drawn by the Trustee under the Letter of
Credit for the purpose of paying the principal amount of the Bonds and
the interest due thereon on any Bond Payment Date,
(2) All Basic Rent under the Lease with respect to Debt
Service on the Bonds,
(3) All other money required to be deposited in the Debt
Service Fund pursuant to the Lease or this Indenture, and
(4) All other money received by the Trustee when
accompanied by directions that such money is to be deposited in the
Debt Service Fund.
(c) The Board hereby authorizes and directs the Trustee to
withdraw sufficient money from the Debt Service Fund to pay Debt Service on the
Bonds as the same become due and payable, whether at maturity, by call for
redemption, or otherwise, which authorization and
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direction the Trustee hereby accepts. Funds for such payments of Debt Service
on the Bonds other than Obligor Bonds shall be derived from the following
sources in the order of priority indicated:
(1) FIRST, money drawn by the Trustee under the Letter
of Credit, and
(2) SECOND, all other money on deposit in the Debt
Service Fund.
(d) Prior to 11:30 a.m. (Detroit, Michigan time) (or, in the event
of a draw on the Confirmation required by the provisions of Section 3.8 hereof,
prior to 1:45 p.m. Detroit, Michigan time) on each Bond Payment Date the
Trustee shall, without making any prior claim or demand upon the Company for
the payment of Basic Rent, make a draw under the Letter of Credit in an amount
equal to the amount of Debt Service due on such Bond Payment Date on Bonds
other than Obligor Bonds. Any such money drawn under the Letter of Credit
shall be deposited and held in a separate, segregated account in the Debt
Service Fund, and shall not be commingled with other money in the Debt Service
Fund. If money from any source other than the Letter of Credit is, at the time
of such draw, on deposit in the Debt Service Fund and available for the payment
of Debt Service on Bonds other than Obligor Bonds, the Trustee shall
nevertheless draw under the Letter of Credit to make such payment of Debt
Service, and the money available from such other source shall, to the extent of
the amount paid by the Credit Obligor against such draw, be paid to the Credit
Obligor, and any excess shall be applied to the payment of Debt Service on
Obligor Bonds. All money so drawn under the Letter of Credit shall be used to
pay Debt Service on Bonds other than Obligor Bonds; Debt Service on Obligor
Bonds shall be paid with money deposited in the Debt Service Fund from any
source other than the Letter of Credit after payment to the Credit Obligor of
the amount drawn under the Letter of Credit to pay debt service on Bonds other
than Obligor Bonds.
(e) Debt Service due on all Pledged Bonds shall be paid to the
Credit Obligor.
SECTION 7.2 BOND PURCHASE FUND. (a) There is hereby created a
special trust fund, the name of which shall be the "Bond Purchase Fund." The
Trustee shall be the custodian for the Bond Purchase Fund, and money in such
Fund may be disbursed by the Trustee as hereinafter provided. Moneys on
deposit in the Bond Purchase Fund shall be used (i) to pay the purchase price
of Bonds due on any Tender Date or (ii) to reimburse the Credit Obligor for
amounts drawn under the Letter of Credit, as provided in subsection (d) of this
section.
(b) There shall be deposited in the Bond Purchase Fund, as and
when received:
(1) all money drawn by the Trustee under the Letter of
Credit for the purpose of paying the purchase price of Bonds other
than Obligor Bonds due on any Tender Date,
(2) all Basic Rent under the Lease with respect to the
purchase price of Tendered Bonds,
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(3) the proceeds of any remarketing of Bonds by the
Remarketing Agent,
(4) all other money required to be deposited in the Bond
Purchase Fund pursuant to the Lease or this Indenture, and
(5) all other money received by the Trustee when
accompanied by directions that such money is to be deposited in the
Bond Purchase Fund.
(c) The Trustee is hereby authorized and directed to withdraw
sufficient money from the Bond Purchase Fund to pay the purchase price of Bonds
due on any Tender Date. Funds for such payments with respect to all Bonds
other than Obligor Bonds shall be derived from the following sources in the
order of priority indicated:
(1) FIRST, money received by the Trustee from the
remarketing of Bonds by the Remarketing Agent to anyone other than the
Board, the Company or an Affiliate,
(2) SECOND, money drawn by the Trustee under the Letter
of Credit, and
(3) THIRD, all other money on deposit in the Bond
Purchase Fund.
(d) Except to the extent the Trustee has received proceeds from
the remarketing of Bonds by the Remarketing Agent to anyone other than the
Board, the Company or an Affiliate by 11:30 a.m. (Detroit, Michigan time) on
each Tender Date in accordance with the provisions of Section 3.6(b) hereof,
the Trustee shall, prior to 11:30 a.m. (Detroit, Michigan time) (or, in the
event of a draw on the Confirmation required by the provisions of Section 3.8
hereof, prior to 1:45 p.m. Detroit, Michigan time) on each Tender Date and
without making any prior claim or demand upon the Company for Basic Rent with
respect to the purchase price of Bonds, make a draw under the Letter of Credit
in an amount equal to the purchase price of all Bonds other than Obligor Bonds
to be purchased on such Tender Date less such remarketing proceeds then on
deposit with the Trustee. Any such money drawn under the Letter of Credit
shall be deposited and held in a separate, segregated account in the Bond
Purchase Fund, and shall not be commingled with other money in the Bond
Purchase Fund. If money from any source other than the Letter of Credit remain
on deposit in the Bond Purchase Fund after payment of all Tendered Bonds, such
excess from such other sources (including without limitation, proceeds of
remarketing of Bonds) shall, to the extent of the amount paid by the Credit
Obligor against such draw, be paid to the Credit Obligor, and any excess shall
be applied to the payment of the purchase price of Obligor Bonds. All moneys
so drawn under the Letter of Credit shall be used solely to pay the purchase
price of Tendered Bonds other than Obligor Bonds; the purchase price of
Obligor Bonds shall be paid with moneys deposited in the Bond Purchase Fund
from any source other than the Letter of Credit after payment to the Credit
Obligor of the amount drawn under the Letter of Credit to pay the purchase
price of Bonds other than Obligor Bonds. If proceeds from the remarketing of
Bonds are deposited in the Bond Purchase Fund after such Tender Date, the
Trustee shall pay such proceeds to the Credit Obligor to the extent of the
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amount paid by the Credit Obligor against such draw, and the excess shall be
applied to the payment of the purchase price of Obligor Bonds.
SECTION 7.3 MONEY FOR BOND PAYMENTS TO BE HELD IN TRUST;
REPAYMENT OF UNCLAIMED MONEY. (a) If money is on deposit in the Debt Service
Fund on any Bond Payment Date sufficient to pay Debt Service on the Bonds due
and payable on such date, but the Holder of any Bond that matures on such date
or that is subject to redemption on such date fails to surrender such Bond to
the Trustee for payment of Debt Service due and payable on such date, the
Trustee shall segregate and hold in trust for the benefit of the person
entitled thereto money sufficient to pay the Debt Service due and payable on
such Bond on such date. Money so segregated and held in trust shall not be a
part of the trust estate and shall not be invested, but shall constitute a
separate trust fund for the benefit of the persons entitled to such Debt
Service.
(b) If money is on deposit in the Bond Purchase Fund on any Tender
Date sufficient to pay the purchase price on the Bonds to be paid on such
Tender Date, but the Holder of any Unsurrendered Bond fails to deliver such
Bond to the Trustee or Tender Agent for payment of such purchase price on such
Tender Date, the Trustee shall segregate and hold in trust for the benefit of
the person entitled thereto money sufficient to pay such purchase price due and
payable on such Bond on such Tender Date. Money so segregated and held in
trust shall not be a part of the trust estate and shall not be invested, but
shall constitute a separate trust fund for the benefit of the persons entitled
to such purchase price.
(c) Any money held in trust by the Trustee for the payment of Debt
Service on or the purchase price of any Bond pursuant to subsections (a) and
(b) of this section and remaining unclaimed for 3 years after such Debt Service
has become due and payable shall be paid to the Company upon request of an
Authorized Company Representative; and the Holder of such Bond shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee with respect to such trust
money, and all liability of the Board with respect thereto, shall thereupon
cease; provided, however, that the Trustee, before being required to make any
such payment to the Company, may at the expense of the Company cause to be
published once, in a newspaper of general circulation in the city where the
principal office of the Trustee is located, notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication, any unclaimed balance of such
money then remaining will be paid to the Company.
SECTION 7.4 INVESTMENT OF DEBT SERVICE FUND AND BOND PURCHASE
FUND. (a) Any money held as part of the Debt Service Fund or the Bond
Purchase Fund shall be invested in accordance with the instructions of the
Company only in Federal Securities with a maturity not later than the earlier
of (i) 30 days after the date of such investment, or (ii) the date such money
will be needed for the payment of Debt Service on, or the purchase price of,
Bonds. Any investment made with money on deposit in the Debt Service Fund or
the Bond Purchase Fund shall be held by or under control of the Trustee and
shall be deemed at all times a part of the special fund where such money was on
deposit, and the interest and profits realized from such investment shall be
credited to such Fund and any loss resulting from such investment shall be
charged to such Fund.
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(b) Any investment of money in the Debt Service Fund or the Bond
Purchase Fund may be made by the Trustee through its own bond department,
investment department or other commercial banking department providing
investment services. Any certificate of deposit issued by, or other
interest-bearing deposit with, the Trustee shall be deemed an investment rather
than a deposit requiring security in the manner specified in Section 7.5
hereof.
SECTION 7.5 SECURITY FOR DEBT SERVICE FUND MONEYS. The moneys
at any time on deposit in the Debt Service Fund or the Bond Purchase Fund shall
be and at all times remain impressed with a trust for the purposes for which
said fund was created. The Trustee shall at all times keep the moneys on
deposit in such fund continuously secured, for the benefit of the Board and the
Holders of the Bonds, either
(a) by holding on deposit, as collateral security,
Federal Securities, or other marketable securities eligible as
security for the deposit of trust funds under regulation of the
Comptroller of the Currency, having a market value (exclusive of
accrued interest) not less than the amount of moneys on deposit in the
Debt Service Fund or the Bond Purchase Fund, as the case may be; or
(b) if the furnishing of security in the manner provided
in the foregoing clause (a) of this section is not permitted by the
then applicable law and regulation, then in such other manner as may
be required or permitted by the then applicable state and federal laws
and regulations respecting the security for, or granting a preference
in the case of, the deposit of trust funds;
provided, however, that it shall not be necessary for the Trustee so to secure
any portion of the moneys on deposit in such fund that is insured by the
Federal Deposit Insurance Corporation or by any agency of the United States of
America that may succeed to its functions or to secure any portion of such
moneys that is invested in Eligible Investments pursuant to the provisions of
Section 7.4 hereof.
ARTICLE VIII
PARTICULAR COVENANTS OF THE BOARD
SECTION 8.1 PAYMENT OF THE BONDS. The Board will pay or will
cause to be paid, out of the revenues and receipts derived from the leasing or
sale of the Project, the principal of and the interest and premium, if any, on
the Bonds as specified therein, and it will otherwise perform all obligations
that, either expressly or by reasonable implication, are imposed on it in the
Indenture, and it will not default hereunder.
SECTION 8.2 PRIORITY OF PLEDGE. The pledge herein made of the
revenues and receipts from any leasing or sale of the Project shall be prior
and superior to any pledge thereof hereafter made for the benefit of any other
securities hereafter issued or any contract hereafter made by the Board. In
the event the Board should hereafter issue any other securities payable, in
whole or in part, out of the revenues or receipts to be derived from the
leasing or sale of the Project or for which any part of said revenues or
receipts may be pledged or any part of the Project may
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be mortgaged, or in the event the Board should hereafter make any contract
payable, in whole or in part, out of said revenues and receipts or for which
any part of said revenues and receipts may be pledged or any part of the
Project may be mortgaged, the Board will, in the proceedings under which any
such securities or contract are hereafter authorized, recognize the priority of
the pledge of said revenues and receipts made herein for the benefit of the
Bonds. The Board recognizes that in the Lease it has agreed
(a) not to issue any securities, other than the Bonds,
that are payable out of or secured by a pledge of the revenues and
receipts derived by the Board from the leasing or sale of the Project
or any part thereof, and
(b) not to place any mortgage or other encumbrance
(other than the Indenture or Supplemental Indentures contemplated
thereby) on the Project or any part thereof,
without, in either case, the prior written consent of the Company.
SECTION 8.3 CONCERNING THE LEASE. The Indenture and the rights
and privileges of the Trustee and the Holders of the Bonds hereunder are
specifically made subject to the rights, options and privileges of the Company
under the Lease, and nothing herein contained shall be construed to impair the
rights, options and privileges granted to the Company by the Lease. The Board
will perform and observe, or cause to be performed and observed, all
agreements, covenants, terms and conditions required to be observed and
performed by it in the Lease. Without relieving the Board from the
consequences hereunder of any default in connection therewith, the Trustee (on
behalf of the Board) may perform and observe, or cause to be performed and
observed, any such agreement, covenant, term or condition, all to the end that
the Board's rights under the Lease may be unimpaired and free from default.
The Board will promptly notify the Trustee in writing of (a) the
occurrence of any Event of Default by the Company under the Lease (as the term
"Event of Default" is used and defined in the Lease), provided that the Board
has knowledge of such default, and (b) the giving of any notice of default
under the Lease. The Board will also promptly notify the Trustee in writing
if, to the knowledge of the Board, the Company fails to perform or observe any
of the agreements or covenants on its part contained in the Lease. In the
event of any such occurrence of an Event of Default, any such giving of notice
of default or any such failure, whether notice thereof is given to the Trustee
by the Board, as aforesaid, or whether the Trustee independently has knowledge
thereof, the Trustee will promptly give written notice thereof to the Company
and shall in such notice expressly require the Company to perform or observe
the agreement or covenant with respect to which the Company is delinquent, all
to the end that if the Company does not perform or observe such agreement or
covenant (or cause such agreement or covenant to be performed or observed) in
the manner and within the time provided by the Lease, a default may be declared
thereunder without delay.
So long as the Lease shall remain in effect the Board will cause the
Basic Rent payable thereunder to be paid to the Trustee as provided in the
Lease. The Board will not cancel, terminate or modify, or consent to the
cancellation, termination or modification of, the Lease
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(except as is specifically provided, authorized or contemplated therein or
herein) unless and until the principal of and the interest and premium (if any)
on the Bonds shall have been paid in full or provision for such payment, as
specified in Article XIII hereof, shall have been made. In the event of any
such default, or in the event of a default on the part of the lessee under any
other lease entered into by the Board with respect to the Project or any part
thereof, the Board will exhaust or cause to be exhausted, as promptly as may be
practicable, all legal remedies that it may have against the defaulting lessee
to obtain compliance with the lease provisions, including payment of the
rentals therein provided and performance and observance of all agreements and
covenants on the part of the lessee therein contained.
SECTION 8.4 WARRANTY OF TITLE. The Board warrants its title to
the Project Site as being free and clear of every lien, encumbrance, trust or
charge prior hereto, other than Permitted Encumbrances and warrants that it has
power and authority to subject the revenues and receipts from the leasing or
sale of the Project to the pledge hereof and that it has done so hereby.
SECTION 8.5 SALE OF PROJECT PROHIBITED EXCEPT UNDER CERTAIN
CONDITIONS. The Board will not hereafter sell or otherwise dispose of the
whole or any integral part of the Project until the principal of and the
interest and premium (if any) on all the Bonds have been paid in full, or
unless and until provision for such payment has been made. If the laws of
Alabama at the time shall permit such action to be taken, nothing contained in
this section shall prevent the consolidation of the Board with, or the merger
of the Board into, any public corporation having corporate authority to carry
on the business of owning and leasing the Project and whose property and income
are not subject to Federal or Alabama taxation, or the transfer by the Board of
the Project as an entirety to the Municipality or to another public corporation
whose property and income are not subject to Federal or Alabama taxation;
provided that upon any such consolidation, merger or transfer the due and
punctual payment of the principal of and the interest on the Bonds according to
their tenor and the due and punctual performance and observance of all the
agreements and conditions of the Indenture to be kept and performed by the
Board shall be expressly assumed in writing by the corporation resulting from
such consolidation or surviving such merger or to which the Project shall be
transferred as an entirety; and provided, further, that such consolidation,
merger or transfer shall not cause or result in any mortgage or other lien
being affixed to or imposed on or becoming a lien on the Project or the
revenues therefrom that will be prior to or on a parity with the lien of the
Indenture or the pledge herein made for the benefit of the Bonds or in the
interest income on the Bonds becoming subject to Federal or Alabama income
taxation. Nothing contained herein shall, however, be construed to prevent the
Board from granting, subject to the lien of the Indenture, the easements and
other rights referred to in Section 12.2 of the Lease or from disposing of
property pursuant to the provisions of Section 9.3 hereof or property released
from the lien of the Indenture pursuant to the provisions of Section 9.2
hereof.
SECTION 8.6 FREEDOM OF PROJECT FROM PRIOR LIENS. PAYMENT OF
CHARGES. The Board will keep the Project free from all liens and encumbrances
prior to or on a parity with the lien hereof (other than Permitted
Encumbrances), but it may defer payment pending the bona fide contest of any
claim unless the Trustee shall be of the opinion that by such action the lien
of the Indenture as to any part of the Project shall be materially endangered
or the Project or
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any part thereof shall be subject to loss or forfeiture, in which event any
such payment then due shall not be deferred. Nothing herein contained shall be
construed to prevent the Board from hereafter purchasing additional property on
conditional or lease sale contract or subject to vendor's lien or purchase
money mortgage, and as to all property so purchased, the Indenture shall be
subject and subordinate to such conditional or lease sale contract, vendor's
lien or purchase money mortgage.
The Board will discharge, pay or satisfactorily provide to the
Trustee, or cause to be discharged, paid or provided, all liabilities, expenses
and advances reasonably incurred, disbursed or made by the Trustee in the
execution of the trusts hereby created (including the reasonable compensation
and expenses and disbursements of its counsel and of all other persons not
regularly in its employ), and it will from time to time pay to the Trustee, or
cause to be paid, reasonable compensation for its services hereunder, including
extra compensation for unusual or extraordinary services. All such
liabilities, expenses, advances and compensation shall be secured hereby, shall
be entitled to priority of payment over the principal of and the interest on
the Bonds and shall bear interest until paid, at a per annum rate equal to
Prime Rate plus 2% per annum, from and after thirty (30) days after the
respective dates on which the Trustee makes demand for the payment thereof.
SECTION 8.7 INSPECTIONS BY TRUSTEE. The Board will permit the
Trustee and its duly authorized agents to inspect, at any reasonable time, any
and every part of the Project and will permit the Trustee to inspect, at any
reasonable time, the books and records of the Board pertaining to the Project.
The Board will assist in furnishing facilities for any such inspection.
SECTION 8.8 RECORDATION. FURTHER ASSURANCES. The Board will
file the Indenture, and all Supplemental Indentures hereafter executed, in such
public office or offices in which said documents are required by law to be
filed in order to constitute constructive notice thereof and to preserve and
protect fully the rights and security afforded thereby to the Trustee and the
Holders of the Bonds. In addition, the Board (a) will, upon reasonable
request, execute and deliver such further instruments and do such further acts
as may be necessary or proper to carry out more effectually the purpose of the
Indenture, and in particular (without in any way limiting the generality of the
foregoing) to make subject to the lien hereof any property hereafter acquired
as a part of the Project and to transfer to any successor trustee or trustees
the assets, powers, instruments and funds held in trust hereunder and to
confirm the lien of the Indenture with respect to any bonds issued hereunder,
and (b) will take all actions that at the time and from time to time may be
necessary (or, in the opinion of the Trustee, may be necessary) to perfect,
preserve, protect and secure the interests of the Board and the Trustee, or
either, in and to the Project, including, without limitation, the filing of all
financing and continuation statements that may at the time be required under
the Alabama Uniform Commercial Code.
No failure to request such further instruments or further acts shall
be deemed a waiver of any right to the execution and delivery of such
instruments or the doing of such acts or be deemed to affect the interpretation
of any provisions of the Indenture.
SECTION 8.9 CONCERNING CERTAIN FEDERAL TAX MATTERS. The Board
will not take any action that would have the result of causing the interest
income on the Bonds to be includible
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in gross income for purposes of Federal income taxation. Without limiting the
generality of the foregoing, the Board will (a) cooperate with the Company in
the observance of the Company's warranties, representations and covenants
contained in Sections 2.2 and 8.7 of the Lease and (b) not take any action that
is not permitted to the Company under Section 8.7(d) of the Lease.
ARTICLE IX
CERTAIN PROVISIONS RELATING TO
THE POSSESSION, USE AND RELEASE
OF THE PROJECT AND TO THE
DISPOSITION OF INSURANCE
PROCEEDS AND CONDEMNATION AWARDS
SECTION 9.1 RETENTION OF POSSESSION OF PROJECT BY BOARD. While
the Board is not in default hereunder, it may retain actual possession of the
Project and may manage and lease the same, and may collect, use and enjoy the
rents, revenues, income and profits thereof to such extent as is not violative
of the Board's covenants herein contained or contained in the Lease.
SECTION 9.2 RELEASE OF EQUIPMENT. Reference is hereby made to
Section 6.2 of the Lease which permits the Company, upon compliance with the
conditions therein contained, to remove items of the Equipment from the Project
Site and to sell or otherwise dispose of the same free and clear of the demise
of the Lease and of the lien of the Indenture. Any item of the Equipment
released from the demise of the Lease in accordance with the provisions thereof
shall also be released from the lien of the Indenture, and the Trustee shall at
the request of the Board or the Company execute and deliver all instruments
that may be necessary to confirm such release.
SECTION 9.3 RELEASE UPON PAYMENT OF CONDEMNATION AWARD TO
TRUSTEE. If the Project or any part thereof shall be taken through the
exercise of the power of eminent domain, the entire condemnation award
referable thereto shall be paid directly to the Trustee. Upon payment to the
Trustee of such award, the Trustee shall, at the expense of the Board, execute
and deliver to the Board or to the corporation or governmental agency
successfully exercising such power of eminent domain any and all instruments
that may be necessary (i) to release from the demise of the Lease all property
forming part of the Project that shall be so taken and (ii) to release from the
lien of the Indenture all property forming part of the Project that shall be so
taken.
SECTION 9.4 DISPOSITION OF INSURANCE PROCEEDS. Reference is
hereby made to the Lease wherein it is provided that if the Project is
destroyed, in whole or in part, or are damaged, by fire or other casualty, to
such extent that the loss to the Project resulting therefrom is in excess of
$500,000, then all "Net Insurance Proceeds" (as defined in the Lease) recovered
by the Board, the Company and the Trustee shall be paid to and held by the
Trustee in a special sub-account forming a part of the Debt Service Fund and
shall thereafter be applied by the Trustee in the manner and for the purposes
specified in Section 7.1 of the Lease. The Trustee hereby accepts the duties
and obligations on its part specified in the Lease with respect to such
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proceeds and agrees that such proceeds shall be applied in accordance with the
applicable provisions of the Lease.
SECTION 9.5 RELEASE OF CERTAIN REAL PROPERTY. While the Board
is not to the knowledge of the Trustee in default in the payment of the
principal of or the interest on any Bond outstanding hereunder or in respect of
any of the covenants on the part of the Board herein contained, it may, at any
time and from time to time, obtain the release of any portion of the Project
Site, and the Trustee shall release the same from the lien hereof upon deposit
by the Board with the Trustee of the following:
(a) A notice signed by the Chairman of the Directors
containing an adequate legal description of the real property
requested to be released, stating that the Board is not in default
under any of the provisions of the Indenture, and requesting such
release; and
(b) A Certificate of an Independent Engineer stating (i)
that no part of the Plant or the Equipment, no other improvement
(except for roads, walkways, sewer, water, gas and electric lines and
the like, which shall be specified in such certificate) and no
facilities designed for the control of air or water pollution or for
the disposal of solid wastes and necessary in the operation of the
Project are located on the real property requested to be released, and
(ii) that the severance of such property from the Project will not
impair the operating unity of the Project or unduly restrict ingress
or egress to or from the Project.
Upon compliance by the Board with the foregoing conditions the Trustee shall,
at the expense of the Company, execute and deliver to the Board any and all
instruments that may be necessary to release from the lien of the Indenture
that portion of the Project Site with respect to which said conditions shall
have been complied with.
ARTICLE X
EVENTS OF DEFAULT AND
REMEDIES OF TRUSTEE AND BONDHOLDERS
SECTION 10.1 EVENTS OF DEFAULT DEFINED. Any of the following
shall constitute an event of default hereunder by the Board:
(a) Failure by the Board to pay the principal of, the
interest on or the premium (if any) on any Bond as and when the same
become due as therein and herein provided (whether such shall become
due by maturity or otherwise);
(b) A default by the Company under the Lease or the
Guaranty and the continuance thereof after the grace period, if any,
provided therein;
(c) Failure by the Board to perform and observe any of
the agreements and covenants on its part herein contained other than
(i) its agreement
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to pay the principal of, the interest on and the premium (if any) on
the Bonds, and (ii) any other agreement with respect to which its
failure to perform is the result of an "event of default" by the
Company under the Lease after sixty (60) days' written notice to the
Board of such failure made by the Trustee or by the Holders of not
less than twenty-five per cent (25%) in principal amount of the Bonds
then outstanding and secured hereby, unless during such period or any
extension thereof the Board has commenced and is diligently pursuing
appropriate corrective action;
(d) failure to pay when due the purchase price of any
Bond tendered for purchase pursuant to the Optional Tender or
Mandatory Tender provisions hereof;
(e) receipt by the Trustee of written notice from the
Credit Obligor or the Confirming Bank (i) that an event of default, as
therein defined, has occurred and is continuing under the Credit
Agreement and (ii) directing that the principal of all the Bonds and
the interest accrued thereon be declared immediately due and payable
hereunder; or
(f) An Act of Bankruptcy with respect to the Company or
the Board; or
(g) An Act of Bankruptcy with respect to the Credit
Obligor or the Confirming Bank or the wrongful dishonor or repudiation
of the Letter of Credit by the Credit Obligor.
SECTION 10.2 REMEDIES ON DEFAULT. Upon any default in any one of
the ways defined in the preceding Section 10.1 hereof, the Trustee shall have
the following rights and remedies:
(a) ACCELERATION. Subject to subsection (d) of this
Section 10.2 and to Section 10.5 hereof, upon the occurrence of (i)
any event of default under subsections (b), (c) or (f) of Section 10.1
hereof, the Trustee may, and at the written request of the Holders of
not less than twenty-five per cent (25%) in Outstanding principal
amount of Bonds shall, or (ii) any event of default under subsections
(a), (d), (e) or (g), of Section 10.1 hereof, the Trustee shall, by
notice in writing delivered to the Board, the Company, the Credit
Obligor, the Remarketing Agent and the Tender Agent declare the
principal of all Bonds and the interest accrued thereon to the date of
declaration of such acceleration immediately due and payable. Upon
any acceleration hereunder, the Trustee shall immediately declare the
payments required to be made by the Company under the Lease to be
immediately due and payable in accordance with Section 10.2(c) of the
Lease and if the Letter of Credit is in effect, shall draw moneys
under the Letter of Credit for the payment of the Bonds to the fullest
extent permitted by the Letter of Credit. Upon the payment by the
Credit Obligor of the amount so drawn under the Letter of Credit and
the payment in full of the principal of and the interest and premium,
if any, on the Outstanding Bonds, the Trustee shall at
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the request of the Credit Obligor and after deducting all proper
costs, expenses and liabilities incurred and disbursements made by the
Trustee hereunder, pay to the Credit Obligor any amounts on deposit in
the Debt Service Fund which are not required to pay the principal of
and the interest and premium, if any, on the Bonds.
(b) POSSESSION OF PROJECT. The Trustee shall have the
power to require the Board to surrender possession of the Project to
it, and the Board shall, upon demand so to do by the Trustee,
forthwith surrender to the Trustee actual possession of the Project or
such part or parts thereof as the Trustee may designate, and the
Trustee shall take possession thereof and may wholly exclude the Board
and its agents and servants therefrom. The Trustee shall thereafter
operate and manage the same by its chosen representatives with power
to make, at the expense of the trust estate, such repairs,
replacements, alterations, additions or improvements thereto as it may
consider advisable, to collect the income therefrom and to pay all
proper charges and maintenance expenses thereof, including all proper
disbursements by the Trustee.
(c) OTHER REMEDIES. The Trustee shall have the power to
proceed with any other right or remedy independent of or in aid of the
foregoing powers, as it may deem best, including the right to
foreclose the Indenture by bill in equity or by proceedings at law,
the right to secure specific performance by the Board of any agreement
on its part herein contained, and the right to the appointment, as a
matter of right and without regard to the sufficiency of the security
afforded by the Project, of a receiver for all or any part of the
Project and the earnings, rents and income therefrom; the rights here
specified are to be cumulative to all other available rights, remedies
or powers and shall not exclude any such.
(d) RIGHTS OF CREDIT OBLIGOR. Anything in Section
10.2(a), (b) or (c) hereof to the contrary notwithstanding, so long as
the Letter of Credit is in effect and the Credit Obligor has honored
all proper drawings under the Letter of Credit or all Bonds constitute
Pledged Bonds, or all Bonds have been paid by a drawing under the
Letter of Credit and the Credit Obligor has not been fully reimbursed,
without the prior written consent of the Credit Obligor, the Trustee
shall not have the right to declare, either on its own or with the
consent of Holders of Bonds, the principal of all Bonds and the
interest accrued thereon to become immediately due and payable or to
pursue any remedy available to it under Section 10.2(b) or (c) hereof
as a result of the occurrence of an Event of Default under subsections
(b), (c) or (f) of Section 10.1 hereof, and any remedy so pursued by
the Trustee where such consent is necessary shall be at the direction
of the Credit Obligor.
SECTION 10.3 APPLICATION OF MONEYS RECEIVED BY TRUSTEE. Any
moneys received by the Trustee pursuant to the provisions of this article or
pursuant to any right given to it or action taken by it under the provisions of
this article, together with all other funds then held by it
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hereunder, shall, after payment of all proper costs, expenses and liabilities
incurred and disbursements made by the Trustee hereunder, and all liens and
charges on the rentals or other receipts from the Project prior hereto which in
the opinion of the Trustee it is advisable to pay, be applied as follows:
(a) Unless the principal of all the Bonds shall have
become or shall have been declared due and payable, all such moneys
shall be applied:
FIRST - To the payment to the persons entitled
thereto of all installments of interest then due on the Bonds,
in the order of the maturity of the installments of such
interest, with interest on overdue installments of interest
and, if the amount available shall not be sufficient to pay in
full any particular installment plus said interest thereon,
then to the payment ratably, according to the amounts due on
such installments and with respect to said interest, to the
persons entitled thereto, without any discrimination or
privilege;
SECOND - To the payment to the persons entitled
thereto of the unpaid principal of and premium, if any, on any
of the Bonds which shall have become due (other than Bonds
matured or called for redemption for the payment of which
moneys are held pursuant to the provisions of the Indenture),
with interest on overdue installments of principal, and, if
the amount available shall not be sufficient to pay in full
all such principal (and premium, if any), together with such
interest, then to the payment of such principal, premium (if
any) and interest ratably, without any discrimination or
privilege; and
THIRD - The surplus, if any there be, into the Debt
Service Fund, or in the event the Bonds have been fully paid,
to the Credit Obligor if the Credit Agreement is still in
effect; otherwise to the Board or to whomsoever may be
entitled thereto, unless the Letter of Credit is in effect, in
which case such surplus shall be held until all Bonds are
fully paid and then applied as provided above.
(b) If the principal of all the Bonds shall have become
or been declared due and payable, all such moneys shall be applied as
follows:
FIRST - To the payment of the principal and interest
then due and unpaid upon the Bonds (with interest on overdue
principal and interest), without preference or priority of
principal over interest or of interest over principal, or of
any installment of interest over any other installment of
interest, or of any Bond over any other Bond, ratably,
according to the amounts due respectively
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for principal and interest, to the persons entitled thereto
without any discrimination or privilege; provided, however,
that if the principal of all the Bonds shall have been
declared due and payable and if such declaration shall
thereafter have been rescinded under the provisions of Section
10.5, then, subject to the provisions of this subsection (b)
in the event that the principal of all the Bonds shall later
become or be declared due and payable, such moneys shall be
applied in accordance with the provisions of subsection (a) of
this Section 10.3; and
SECOND - The surplus, if any there be, to the Credit
Obligor if the Credit Agreement is still in effect; otherwise
to the Board or to whomsoever may be entitled thereto.
Whenever moneys are to be applied pursuant to the provisions of this Section
10.3, such moneys shall be applied at such time or times, and from time to
time, as the Trustee shall determine, having due regard to the amount of such
moneys available for application and the likelihood of additional moneys
becoming available for such application in the future; provided that, if all
Bonds have been paid in full with funds drawn under the Letter of Credit, the
Trustee will act at the direction of the Credit Obligor. Whenever the Trustee
shall apply such funds, it shall fix the date (which shall be an interest
payment date unless it shall deem another date more suitable) upon which such
application is to be made, and upon such date interest on the amounts of
principal and interest to be paid on such dates shall cease to accrue. The
Trustee shall give such notice as it may deem appropriate of the deposit with
it of any such moneys and of the fixing of any such date and shall not be
required to make payment to the Holder of any unpaid Bond until such Bond shall
be presented to the Trustee for appropriate endorsement or for cancellation if
fully paid. In no event shall moneys drawn under the Letter of Credit be
applied under this section for any purpose other than payment of debt service
with respect to the Bonds.
SECTION 10.4 REMEDIES VESTED IN TRUSTEE. All remedies hereunder
are vested exclusively in the Trustee for the equal and pro rata benefit of all
Holders of the Bonds and (to the extent herein provided) for the benefit of the
Credit Obligor, unless the Trustee refuses or neglects to act within a
reasonable time after written request so to act addressed to the Trustee by the
Holders of twenty-five percent (25%) in principal amount of the Outstanding
Bonds, accompanied by indemnity satisfactory to the Trustee, in which event,
subject to the rights of the Credit Obligor under Sections 10.2 and 10.5
hereof, the Holder of any of the Bonds may thereupon so act in the name and
behalf of the Trustee or may so act in his own name in lieu of action by or in
the name and behalf of the Trustee. Except as above provided, no Holder of any
of the Bonds shall have the right to enforce any remedy hereunder, and then
only for the equal and pro rata benefit of the Holders of all the Bonds.
Notwithstanding any other provision hereof, the right of the Holder of
any Bond, which is absolute and unconditional, to receive payment of the
principal of and the interest and premium, if any, on such Bond on or after the
due date thereof, but solely from the revenues and receipts from the leasing or
sale of the Project as therein and herein expressed, or to institute suit for
the enforcement of such payment on or after such due date, or the obligation
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of the Board, which is also absolute and unconditional, to pay, but solely from
said revenues and receipts, the principal of and the interest and premium (if
any) on the Bonds to the respective Holders thereof at the time and place in
said Bonds expressed, shall not be impaired or affected without the consent of
such Holder; provided, however, that no Bondholder shall be entitled to take
any action or institute any such suit to enforce the payment of his Bonds,
whether for principal, interest or premium, if and to the extent that the
taking of such action or the institution or prosecution of any such suit or the
entry of judgment therein would under applicable law result in a surrender,
impairment, waiver or loss of the lien hereof upon the Project, or any part
thereof, as security for the Bonds held by any other Bondholder.
SECTION 10.5 WAIVERS OF EVENTS OF DEFAULT. The Trustee may, with
the consent of the Credit Obligor, waive any Event of Default and its
consequences and rescind any declaration of maturity of principal and shall do
so upon the written request of the Credit Obligor or (if no Letter of Credit is
in effect and less than all of the Bonds constitute Pledged Bonds) the Holders
of a majority in principal amount of all outstanding Bonds; provided, however,
that there shall not be waived any Event of Default pertaining to the payment
when due of the principal of any Bonds at the date of maturity specified
therein or of the purchase price of any Bond or of the interest or premium (if
any) on any such Bonds, unless prior to such waiver or rescission, all arrears
of interest on such Bonds, with interest (to the extent permitted by law) at
the rate borne by such Bonds on overdue installments of interest, and all
arrears of payments of principal or purchase price of such Bonds with interest
at the rate borne by such Bonds on overdue principal, and all expenses of the
Trustee in connection with such default then due, shall have been paid or
provided for, and in case of any such waiver or rescission, or in case any
proceeding taken by the Trustee on account of any such Event of Default shall
have been discontinued or abandoned or determined adversely, then and in every
such case the Board, the Credit Obligor, the Trustee and the Bondholders shall
be restored to their former positions and rights hereunder respectively
(subject, however, to such determination), but no such waiver or rescission
shall extend to any subsequent or other Event of Default, or impair any right
consequent thereon; and provided further that no waiver of an Event of Default
under subsection (e) of Section 10.1 hereof shall be effective unless the
Trustee receives written notice from the Credit Obligor that the Letter of
Credit has been reinstated.
The provisions of this Section 10.5 are subject to the condition that
with respect to an Event of Default under subsection (e) of Section 10.1
hereof, receipt by the Trustee of written notice from the Credit Obligor of the
waiver of any Event of Default under the Credit Agreement, rescission and
annulment of the consequences and reinstatement (or verification of
reinstatement) of the Letter of Credit shall constitute a waiver of the
corresponding Event of Default under the Indenture and a rescission and
annulment of the consequences thereof. If notice of such Event of Default
under the Credit Agreement shall have been given as provided herein and if the
Trustee shall thereafter have received notice that such Event of Default shall
have been waived, the Trustee shall promptly give notice by first class mail,
postage prepaid, of such waiver, rescission or annulment to the Board, the
Company, and the Credit Obligor, and shall give notice thereof by first class
mail, postage prepaid, to all registered Holders of the Bonds at their
addresses as they appear in the registration books kept by the Trustee. No
such waiver, rescission and annulment shall extend to or affect any subsequent
Event of Default or impair any right or remedy consequent thereon; and provided
further that no waiver of an Event
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of Default under subsection (e) of Section 10.1 hereof shall be effective
unless the Trustee receives written notice from the Credit Obligor that the
Letter of Credit has been reinstated.
Anything contained herein to the contrary notwithstanding, there shall
be no waiver of an Event of Default hereunder in the event that the Bonds have
been accelerated pursuant to Section 10.2(a) hereof and moneys drawn under the
Letter of Credit for such purposes.
ARTICLE XI
CONCERNING THE TRUSTEE, THE
REMARKETING AGENT AND THE TENDER AGENT
SECTION 11.1 TRUSTEE ACCEPTANCE OF TRUSTS. The Trustee accepts
the trusts hereby created and agrees to perform the duties herein required of
it subject, however, to the following conditions:
(a) It shall not be liable hereunder except for its
non-compliance with the provisions hereof, its willful misconduct or
its gross negligence.
(b) It may execute any of the trusts and powers
conferred on it hereunder or perform any duty hereunder either
directly or through agents and attorneys in fact who are not regularly
in its employ and who are selected by it with reasonable care.
(c) It may consult Counsel on any matters connected
herewith and shall not be answerable for any action taken or failure
to take any action in good faith on the advice of Counsel, provided
that its action or inaction is not contrary to any express provision
hereof.
(d) It need not recognize a Holder of a Bond or Bonds as
such without the satisfactory establishment of his title to such Bond
or Bonds.
(e) It shall not be answerable for any action taken in
good faith on any notice, request, consent, certificate or other paper
or document which it believes to be genuine and signed or acknowledged
by the proper party.
(f) Subject to the provisions of Section 10.2 hereof, it
need not notice any default hereunder unless requested so to do by the
Holders of twenty-five percent (25%) of the then outstanding Bonds.
(g) Subject to the provisions of Section 10.2 hereof, in
the Event of Default by the Board hereunder, the Trustee need not
exercise any of its rights or powers specified in Section 10.2 hereof
or take any action under said Section 10.2 unless requested in writing
so to do by the Holders of twenty-five percent (25%) of the then
outstanding Bonds; it may exercise any such rights or powers
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or take any such action, if it thinks advisable, without any such
request; it shall do so when so requested; provided that, subject to
the last sentence of this Section 11.1(g), the furnishing of
indemnity, satisfactory to the Trustee, against its prospective
liabilities and expenses by the Holders requesting any action by the
Trustee under said Section 10.2 shall be a condition precedent to the
duty of the Trustee to take or continue any action under said Section
10.2 which in the opinion of the Trustee would involve it in any such
liabilities or expenses. Whenever it has a choice of remedies under
said Section 10.2 or a discretion as to details in the exercise of its
powers thereunder, it must, subject to the last sentence of said
Section 10.2, follow any specific directions given by the Holders of a
majority of the Bonds at the time outstanding, anything therein or
herein to the contrary notwithstanding, unless the observance of such
directions would, in the opinion of the Trustee, unjustly prejudice
the non-assenting Bondholders or the Credit Obligor. Anything herein
to the contrary notwithstanding, the furnishing of indemnity shall not
be a condition precedent to the obligations of the Trustee to
accelerate the principal of and the interest on the Bonds upon the
occurrence of an Event of Default under subsections (a), (e), (f) or
(g) of Section 10.1 hereof or to draw moneys under the Letter of
Credit to pay the principal of and the interest on the Bonds in
accordance with the provisions of the Indenture and the Letter of
Credit.
(h) It shall be entitled to reasonable compensation for
its services hereunder, including extra compensation for unusual or
extraordinary services, provided that no such compensation shall be
payable from a drawing under the Letter of Credit.
(i) Any action taken by the Trustee at the request of
and with the consent of the Holder of a Bond will bind all subsequent
Holders of the same Bond and any Bond issued hereunder in lieu
thereof.
(j) It may be the Holder of Bonds as if not Trustee
hereunder.
(k) It shall not be liable for the proper application of
any moneys other than those that may be paid to or deposited with it.
(l) It shall not unreasonably withhold or delay any
consent or approval required of it under the provisions hereof or of
the Lease.
(m) All moneys received by the Trustee to be held by it
hereunder shall be held as trust funds until disbursed in the manner
herein provided therefor. The Trustee shall not be liable to pay or
allow interest thereon or otherwise to invest any such moneys except
as specifically required herein.
(n) It may make any investments permitted hereby through
its own bond department, and any certificate of deposit issued by it
hereunder shall be deemed investments and not deposits.
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(o) It shall, upon reasonable request, advise the Board,
the Company or the Credit Obligor of the amount at the time on deposit
in any of the special funds herein created.
(p) It shall, upon reasonable request, issue to the
Board, the Company or the Credit Obligor certificates indicating
whether, to the knowledge of the Trustee, the Board or the Company is
in default under the provisions of the Indenture or the Lease,
respectively.
(q) The recitals of fact herein and in the Bonds are
statements by the Board and not by the Trustee, and the Trustee is in
no way responsible for the validity or security of the Bonds, the
existence of any part of the Project, the value thereof, the title of
the Board thereto, the security afforded hereby or the validity or
priority of the lien hereof.
(r) The Tender Agent shall be entitled to the same
immunities with respect to their respective duties under the Indenture
as the Trustee is under this Section 11.1 with respect to its duties
hereunder.
SECTION 11.2 TRUSTEE AUTHORIZED TO PAY CERTAIN CHARGES. Without
relieving the Board from the consequences of any default in connection
therewith, the Trustee may pay any charge which the failure of the Board to pay
has made or will make an encumbrance or lien prior hereto on the Project, and
in the event the Company shall fail to take out insurance on the Project to the
extent required by the Indenture, the Trustee may take out any such insurance
on the Project that the Company has failed to furnish or cause to be furnished
and may pay the premiums thereon; provided that in each case (a) the Trustee
first gives to the Board such notice as is reasonable under the circumstances
of the Board's failure to pay such charge or the Company's failure to take out
or cause to be taken out such insurance, and (b) the Board does not within such
time thereafter as the Trustee deems reasonable under the circumstances pay
such charge or the Company fails to take out such insurance. The Trustee,
however, shall not be required to pay any such charge or take out any such
insurance, and it shall not be liable in any manner for any failure to do so.
All sums expended by the Trustee under the provisions of this section shall be
secured by the Indenture, shall bear interest at a per annum rate equal to the
Prime Rate, plus 2%, from the date of payment thereof, and shall, except with
respect to moneys drawn under the Letter of Credit,be entitled to priority of
payment over the principal of or the interest on any of the Bonds. The Board
will reimburse the Trustee on demand for all sums so expended by the Trustee on
behalf of the Board, together with interest at said rate.
SECTION 11.3 TRUSTEE MAY FILE CLAIMS. The Trustee may at any
time file a claim in its own name or for the benefit of the Holders of the
Bonds in any court proceeding where any such claim may be permitted or
required, whether such proceeding be by way of reorganization, bankruptcy,
receivership or of any other nature. The Holders of the Bonds do hereby
constitute and appoint the Trustee as their irrevocable agent and attorney in
fact for the purpose of filing any such claim, but such authorization shall not
include the power to agree to accept new securities of any nature in lieu of
the Bonds or to alter the terms of the Bonds.
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SECTION 11.4 RESIGNATION AND DISCHARGE OF TRUSTEE. The Trustee
may resign and be discharged of the trusts hereby created upon written notice
to the Board, the Company, the Bondholders, the Credit Obligor, the Remarketing
Agent and the Tender Agent specifying the effective date of such resignation.
The effective date of the resignation shall be at least thirty (30) days after
the giving of such notice unless it be coincident with the appointment by the
Holders of the Bonds of a successor Trustee as herein provided. The Trustee
may at any time, with the consent of the Credit Obligor, be removed by a
written instrument signed by the Holders of a majority in principal amount of
the Bonds then outstanding. If the Trustee resign or be removed, it shall be
reimbursed for all its proper prior expenses reasonable under the
circumstances. The preceding provisions of this Section 11.4 to the contrary
notwithstanding, no resignation or discharge of the Trustee shall be effective
until the appointment of a successor Trustee hereunder.
SECTION 11.5 APPOINTMENT OF SUCCESSOR TRUSTEE. If the Trustee
resign, be removed, be placed by a court or governmental authority under the
control of a receiver or other public officer or otherwise become incapable of
acting, a successor may be appointed by a written instrument signed by the
Credit Obligor and the Holders of a majority in principal amount of the Bonds
then outstanding (which instrument shall be filed for record in the office of
the Judge of Probate of the county in which the Project is located) and in the
interim by an instrument executed by the Board, such interim successor Trustee
to be immediately and ipso facto superseded by the one appointed as above by
the said Holders. The Board shall give written notice of such interim
appointment, in the event such is made, to the Company, the Bondholders, the
Credit Obligor, the Remarketing Agent and the Tender Agent and when the
appointment of a successor Trustee, as selected by the Holders of a majority in
principal amount of the Bonds then outstanding, becomes effective, the Board
shall give written notice of that fact to the Company. Any successor Trustee
shall be a bank or trust company authorized to administer trusts and having, at
the time of its acceptance of such appointment, combined capital and surplus of
at least $100,000,000.
SECTION 11.6 CONCERNING ANY SUCCESSOR TRUSTEE. Any successor
Trustee shall execute and deliver to the Board an instrument accepting the
trusts and shall thereupon ipso facto succeed to all the estate and title of
the retiring Trustee to the Project and to its rights, powers and
responsibilities hereunder and its predecessor shall pay over, assign and
deliver any moneys held by it to such successor Trustee. The Board will, upon
request of the successor Trustee, execute and deliver to it any instrument
reasonably requested in further assurance thereof. Any such instrument so
executed shall be filed for record in the office of the Judge of Probate of the
county in which the Project is located. Any successor Trustee may effectively
adopt the authentication certificate of a predecessor Trustee on Bonds already
authenticated and not delivered, and may so deliver them; and it may
effectively authenticate Bonds in its own name.
SECTION 11.7 REMARKETING AGENT. (a) LaSalle National Bank is
hereby appointed as "Remarketing Agent" for the Bonds, subject to the
conditions set forth in this section.
(b) The Remarketing Agent shall signify its acceptance of the
duties and obligations imposed upon it by this Indenture by execution and
delivery of an agreement satisfactory to the Trustee.
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(c) The Remarketing Agent (i) shall be authorized by law to
perform all the duties imposed upon it by this Indenture and (ii) shall be a
bank, trust company or member of the National Association of Securities
Dealers, Inc., approved by the Credit Obligor in writing (which approval shall
not be unreasonably withheld) organized and doing business under the laws of
the United States or any state or the District of Columbia and having a
capitalization of at least $15,000,000 as shown in its most recent published
annual report.
(d) The Remarketing Agent may resign at any time by giving 30
days' prior written notice thereof to the Board, the Trustee, the Company and
the Credit Obligor; provided, however, that no such resignation shall become
effective until a successor Remarketing Agent has been appointed and has
accepted its duties and obligations hereunder.
(e) The Company may, with the prior written consent of the Credit
Obligor, remove the Remarketing Agent at any time upon 30 days' prior written
notice thereof to the Remarketing Agent, the Board and the Trustee.
(f) If at any time:
(1) the Remarketing Agent shall cease to be eligible
under this section and shall fail to resign after written request
therefor by the Trustee, or
(2) the Remarketing Agent shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or a receiver of
the Remarketing Agent or of its property shall be appointed or any
public officer shall take charge or control of the Remarketing Agent
or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, the Trustee may remove the Remarketing Agent upon 7
days' written notice thereof to the Remarketing Agent, the Credit Obligor, the
Board and the Company.
(g) If the Remarketing Agent shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Remarketing
Agent for any cause, the Board shall, with the prior written consent of the
Company and the Credit Obligor, promptly appoint a successor Remarketing Agent.
(h) The Trustee shall give notice of each resignation and each
removal of the Remarketing Agent and each appointment of a successor
Remarketing Agent by mailing written notice of such event by first-class mail,
postage prepaid, to the Holders of Bonds as their names and addresses appear in
the Bond Register. Each notice shall include the name of the successor
Remarketing Agent and the address of its principal office.
SECTION 11.8 TENDER AGENT. (a) The Trustee may, with the
consent of the Company, appoint an agent (the "Tender Agent") to act on its
behalf in the acceptance of delivery of Bonds tendered for purchase pursuant to
the optional or mandatory tender provisions of this Indenture and in the
authentication and delivery of Bonds pursuant to the transfer and exchange
provisions of this Indenture. For all purposes of this Indenture, (i) Bonds to
be purchased pursuant to the
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optional or mandatory tender provisions of this Indenture may be delivered to
the Tender Agent, as well as the Trustee, and (ii) the authentication and
delivery of Bonds by the Tender Agent pursuant to the transfer and exchange
provisions of this Indenture shall be deemed to be the authentication and
delivery of Bonds "by the Trustee."
(b) Any Tender Agent appointed by the Trustee shall signify its
acceptance of such appointment by execution and delivery of an agreement
satisfactory to the Trustee.
(c) Any such Tender Agent (i) shall at all times be a commercial
bank or trust company, (ii) shall at all times be a corporation organized and
doing business under the laws of the United States or of any state with a
combined capital and surplus of at least $50,000,000 and authorized under such
laws to exercise corporate trust powers and subject to supervision and
examination by federal or state authority, and (iii) shall (A) have an
investment grade rating from at least one Rating Agency and from each other
Rating Agency maintaining a rating with respect to such commercial bank or
trust company or (B) be otherwise acceptable to S&P. If such corporation
publishes reports of condition at least annually pursuant to law or the
requirements of such authority, then for the purposes of this section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(d) Any corporation into which any Tender Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Tender Agent shall be
a party, or any corporation succeeding to the corporate trust business of any
Tender Agent, shall be the successor of the Tender Agent hereunder, if such
successor corporation is otherwise eligible under this section, without the
execution or filing of any further act on the part of the parties hereto or the
Tender Agent or such successor corporation.
(e) Any Tender Agent may at any time resign by giving written
notice of resignation to the Trustee, the Board and the Company. The Trustee
may at any time terminate the agency of any Tender Agent by giving written
notice of termination to such Tender Agent, the Board and the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time any Tender Agent shall cease to be eligible under this section, the
Trustee shall promptly appoint a successor Tender Agent, shall give written
notice of such appointment to the Board and the Company, and shall mail notice
of such appointment to all Holders of Bonds as the names and addresses of such
Holders appear on the Bond Register.
(f) The Trustee agrees to pay to the Tender Agent from time to
time reasonable compensation for its services, and the Trustee shall be
entitled to be reimbursed for such payments.
SECTION 11.9 NOTICES. The Trustee shall, within 30 days of its
receipt of written notice of the resignation or removal of the Remarketing
Agent or the Tender Agent or the appointment of a successor Remarketing Agent
or Tender Agent, give notice thereof by first class mail, postage prepaid, to
the Holders of the Bonds.
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SECTION 11.10 LIMITATION ON RESIGNATION OR REMOVAL OF TRUSTEE OR
APPOINTMENT OF SUCCESSOR TRUSTEE. So long as there is a Letter of Credit on
file with the Trustee and notwithstanding any of the foregoing provisions of
this Article XI concerning the resignation or removal of the Trustee or the
appointment of a successor trustee, no such resignation, removal or appointment
shall be effective until the Credit Obligor shall have issued and delivered to
the successor trustee a replacement Letter of Credit complying with the
provisions of the Lease in favor of such successor trustee, whereupon the
Trustee shall return the Letter of Credit then held by it to the entity which
issued such Letter of Credit.
ARTICLE XII
AUTHORIZATION OF SUPPLEMENTAL
INDENTURES AND MODIFICATION OF
THE LEASE AND THE GUARANTY
SECTION 12.1 SUPPLEMENTAL INDENTURES WITHOUT BONDHOLDER CONSENT.
The Board and the Trustee may at any time and from time to time enter into such
Supplemental Indentures (in addition to such Supplemental Indentures as are
otherwise provided for herein or contemplated hereby) as shall not be
inconsistent with the terms and provisions hereof, for any one or more of the
following purposes:
(a) To add to the covenants and agreements of the Board
herein contained other covenants and agreements thereafter to be
observed and performed by the Board, provided that such other
covenants and agreements shall not either expressly or impliedly limit
or restrict any of the obligations of the Board contained in the
Indenture;
(b) To cure any ambiguity or to cure, correct or
supplement any defect or inconsistent provision contained in the
Indenture or in any Supplemental Indenture or to make any provisions
with respect to matters arising under the Indenture or any
Supplemental Indenture for any other purpose if such provisions are
necessary or desirable and are not inconsistent with the provisions of
the Indenture or any Supplemental Indenture and do not adversely
affect the interests of the Holders of the Bonds; or
(c) To subject to the lien of the Indenture and the
pledge herein contained additional property and the revenues
therefrom.
Any Supplemental Indenture entered into under the provisions of and pursuant to
this section shall not require the consent of any Bondholders.
SECTION 12.2 SUPPLEMENTAL INDENTURE REQUIRING BONDHOLDER CONSENT.
The Board and the Trustee may, at any time and from time to time, with the
written consent of the Holders of not less than a majority of the Bonds, enter
into such Supplemental Indentures as shall be deemed necessary or desirable by
the Board and the Trustee for the purpose of modifying, altering, amending,
adding to or rescinding, in any particular, any of the terms or provisions
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contained in the Indenture or in any Supplemental Indenture; provided that
without the written consent of the Holder of each Bond affected, no reduction
in the principal amount of or rate of interest on or premium payable upon the
redemption of any Bond shall be made; and provided, further, that without the
written consent of the Holders of all the Bonds none of the following shall be
permitted:
(a) An extension of the maturity of any installment of
principal of or interest on any Bond;
(b) The creation of a lien or charge on the Project or
the revenues and receipts therefrom ranking prior to or on a parity
with the lien and charge thereon contained herein;
(c) The establishment of preferences or priorities as
between the Bonds; or
(d) A reduction in the aggregate principal amount of
Bonds the Holders of which are required to consent to such
Supplemental Indenture.
Upon the execution of any Supplemental Indenture under and pursuant to the
provisions of this section, the Indenture shall be deemed to be modified and
amended in accordance therewith, and the respective rights, duties and
obligations under the Indenture of the Board, the Trustee and all Holders of
the Bonds then outstanding shall thereafter be determined, exercised and
enforced hereunder, subject in all respects to such modifications and
amendments.
SECTION 12.3 EXECUTION OF SUPPLEMENTAL INDENTURES. The Board and
the Trustee recognize that under the terms of Section 9.2 of the Lease, they
may not make any amendment of the Indenture or any Supplemental Indenture
without the prior written consent of the Company. Subject to such consent, the
Trustee is authorized to join with the Board in the execution of any
Supplemental Indenture authorized under the provisions of this article and to
make the further agreements and stipulations which may be contained therein,
but the Trustee shall not be obligated to enter into any such Supplemental
Indenture which affects its rights, duties or immunities under the Indenture.
Any Supplemental Indenture executed in accordance with the provisions of this
article shall thereafter form a part of the Indenture, and all the terms and
conditions contained in such Supplemental Indenture as to any provisions
authorized to be contained therein, shall be deemed to be a part of the terms
and conditions of the Indenture for any and all purposes.
SECTION 12.4 AMENDMENTS TO LEASE AND GUARANTY. The Board may,
with the written consent of the Trustee but without the consent of or any
notice to the Holders of any of the Bonds,
(a) amend, change or modify the Lease so as to identify
more precisely the Equipment, and
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(b) amend, change or modify the Lease to cure any
ambiguity or to cure, correct or supplement any defect or inconsistent
provision contained in the Lease, or to make provision with respect to
matters arising under the Lease for any other purpose if such
provisions are necessary or desirable and are not inconsistent with
the provisions of the Lease or the Indenture and do not, in the sole
and uncontrolled judgment of the Trustee, adversely affect the
interests of the Holders of the Bonds.
The Board or (in the case of the Guaranty) the Trustee may, at any
time and from time to time, with the written consent of the Trustee and the
written consent of the Holders of not less than a majority of the Bonds, amend,
change or modify the Lease or the Guaranty to such extent as shall be deemed
necessary or desirable by the Board and the Trustee, provided that without the
written consent of the Holders of all the Bonds, no such amendment,
modification or change shall permit (i) a reduction in the amount of Basic Rent
payable by the Company under the Lease, or the amounts guaranteed under the
Guaranty prior to payment in full of the principal of and the interest on the
Bonds, (ii) any change in the due dates of such Basic Rent payments or amounts
guaranteed prior to such full payment of the Bonds, or (iii) any other change
that, in the sole and uncontrolled judgment of the Trustee, might adversely
affect the interests of the Holders of the Bonds.
SECTION 12.5 NOTICES WITH RESPECT TO CERTAIN CHANGES IN THE
INDENTURE, THE LEASE AND THE GUARANTY. If at any time the Board shall request
the Trustee to enter into any Supplemental Indenture requiring the written
consent of the Credit Obligor or any Bondholders or any amendment, change or
modification of the Lease or the Guaranty requiring the written consent of the
Credit Obligor or any Bondholders, the Trustee shall, upon being satisfactorily
indemnified with respect to its prospective expenses incident thereto, cause
notice of the proposed Supplemental Indenture or the proposed amendment, change
or modification to be forwarded by United States registered or certified mail
to the Credit Obligor and to the registered Holder of each Bond, at the address
of such registered Holder as such address appears on the registry books of the
Trustee pertaining to the registration of the Bonds. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture or the proposed
amendment, modification or change and shall state that copies thereof are on
file at the principal office of the Trustee for inspection by all Bondholders.
If, within sixty (60) days or such longer period as shall be prescribed by the
Board following the forwarding of such notice, the Holders of not less than
two-thirds in aggregate principal amount of the Bonds outstanding at the time
of the execution of any such Supplemental Indenture or at the time of the
execution of such proposed amendment, change or modification with respect to
the Lease or the Guaranty shall have consented to and approved the execution
thereof as herein provided, no Holder of any Bond shall have any right to
object to any of the terms and provisions contained therein, or the operation
thereof, or in any manner to question the propriety of the execution thereof,
or to enjoin or restrain the Trustee or the Board from executing the same or
from taking any action pursuant to the provisions thereof.
SECTION 12.6 APPROVAL OF CREDIT OBLIGOR. Anything contained in
this Article XII to the contrary notwithstanding, so long as the Letter of
Credit shall be in effect, and there is no default by the Credit Obligor
thereunder or all of the Bonds constitute Pledged Bonds, the Credit
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<PAGE> 78
Obligor shall be deemed to be the Holder of all the Bonds for the purpose of
giving any consent to any amendment, waiver, change or modification of the
Indenture or the Lease or the Guaranty; provided, however, that any such
amendment, change or modification of the type described in the provisos to the
first sentence of Section 12.2 hereof shall also require the consent of the
actual Holders of the Bonds as therein specified.
SECTION 12.7 DISCRETION OF THE TRUSTEE. In the case of any
Supplemental Indenture or amendment, modification or change with respect to the
Lease or the Guaranty authorized under the provisions of this Article, the
Trustee shall be entitled to exercise its discretion in determining whether or
not any proposed Supplemental Indenture or amendment, modification or change
with respect to the Lease or the Guaranty, or any term or provision therein
contained, may be entered into under the provisions of the Indenture, and the
Trustee shall not be under any responsibility or liability to the Board or to
any Bondholder or to anyone whomsoever for any act or thing which it may in
good faith do or decline to do under and in accordance with the provisions of
this Article. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of Independent Counsel acceptable to it
as conclusive evidence that any such Supplemental Indenture or any such
amendment, modification or change with respect to the Lease complies with the
provisions of the Indenture and that it is proper for the Trustee acting under
the provisions of this article to join in the execution of such Supplemental
Indenture or to consent to such amendment, modification or change with respect
to the Lease.
ARTICLE XIII
PAYMENT AND CANCELLATION OF THE
BONDS AND SATISFACTION OF THE INDENTURE
SECTION 13.1 SATISFACTION OF INDENTURE. When the principal or
redemption price (as the case may be) of, and interest on, all Bonds issued
hereunder have been paid, or provision has been made for payment of the same as
described Section 13.1 hereof, together with the compensation of the Trustee
and all other sums payable hereunder by the Board and the Letter of Credit has
been cancelled, the right, title and interest of the Trustee shall thereupon
cease and the Trustee, on demand of the Board, shall release this Indenture and
shall execute such documents to evidence such release as may be reasonably
required by the Board and shall turn over to the Company or to such person,
body or authority as may be entitled to receive the same all balances then held
by it hereunder. If payment or provision therefor is made with respect to less
than all of the Bonds, the particular Bonds (or portion thereof) for which
provision for payment shall have been considered made shall be selected by lot
by the Trustee, and thereupon the Trustee shall take similar action for the
release of this Indenture with respect to such Bonds.
Notwithstanding the satisfaction of the Indenture, the Trustee shall
have a continuing obligation to carry out the provisions for mandatory
redemption of the Bonds as provided for in Section 4.1(a) hereof upon the
occurrence of a Determination of Taxability.
SECTION 13.2 CANCELLATION OF PAID BONDS. When and as the Bonds
are paid, those so paid shall be forthwith cancelled by the Trustee and
delivered to the Board. Likewise all
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mutilated Bonds replaced by new Bonds shall forthwith be cancelled by the
Trustee and delivered to the Board.
SECTION 13.3 TRUST FOR PAYMENT OF DEBT SERVICE. (a) The Board
may provide for the payment of any of the Bonds by establishing a trust for
such purpose with the Trustee and depositing therein cash and/or Federal
Securities which (assuming the due and punctual payment of the principal of and
interest on such Federal Securities, but without reinvestment) will provide
funds sufficient to pay the Debt Service on such Bonds as the same becomes due
and payable until the maturity or redemption of such Bonds; provided, however,
that
(1) such Federal Securities must not be subject to
redemption prior to their respective maturities at the option of the
issuer of such Securities,
(2) if any of such Bonds are to be redeemed prior to
their respective maturities, either (i) the Trustee shall receive
evidence that notice of such redemption has been given in accordance
with the provisions hereof and such Bonds or (ii) the Board shall
confer on the Trustee irrevocable authority for the giving of such
notice on behalf of the Board,
(3) such trust must be established only during a Term
Rate Period and, if established during a Term Rate Period, all Bonds
to be retired with funds from such trust must either mature or be
called for redemption on or before the date immediately following such
Term Rate Period,
(4) prior to the establishment of such trust the Trustee
must receive an opinion of Counsel with nationally recognized
experience in bankruptcy matters stating in effect that upon the
occurrence of an Act of Bankruptcy with respect to the Board or the
Company, money and investments in such trust will not be subject to
any preference claim under the Federal Bankruptcy Code.
(5) prior to the establishment of such trust the Trustee
must receive a report by an independent certified public accountant
stating in effect that the principal and interest payments on the
Federal Securities in such trust, without reinvestment, together with
the cash initially deposited therein, will be sufficient to make the
required payments from such trust.
(6) prior to the establishment of such trust the Trustee
must receive an opinion of Bond Counsel stating in effect that the
creation of such trust will not cause any of the Bonds to become
Taxable.
(b) Cash and/or Federal Securities deposited with the Trustee
pursuant to this section shall not be a part of the trust estate but shall
constitute a separate, irrevocable trust fund for the benefit of the Holders of
the Bonds to be paid from such fund. Such cash and the principal and interest
payable on such Federal Securities shall be applied by the Trustee solely to
the payment of Debt Service on such Bonds.
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(c) The Board shall give each Rating Agency that maintains a
rating with respect to the Bonds 10 days' notice of its intent to establish a
trust for the payment of Bonds in accordance with this section and shall
deliver to each such Rating Agency a copy of the opinions and report required
by subsection (a)(4)(5) and (6) of this section.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.1 DISCLAIMER OF GENERAL LIABILITY. It is hereby
expressly made a condition of this Indenture that any agreements, covenants or
representations herein contained or contained in the Bonds do not and shall
never constitute or give rise to any personal or pecuniary liability or charge
against the general credit of the Board, and in the event of a breach of any
such agreement, covenant or representation, no personal or pecuniary liability
or charge payable directly or indirectly from the general revenues of the Board
shall arise therefrom. Nothing contained in this section, however, shall
relieve the Board from the observance and performance of the several covenants
and agreements on its part herein contained.
SECTION 14.2 RETENTION OF MONEYS FOR PAYMENT OF BONDS. Should
any of the Bonds not be presented for payment when due, whether by maturity or
otherwise, the Trustee shall, subject to the provisions of any applicable
escheat or other similar law, retain from any moneys transferred to it for the
purpose of paying said Bonds so due, for the benefit of the Holders thereof, a
sum of money sufficient to pay such Bonds when the same are presented by the
Holders thereof for payment (upon which sum the Trustee shall not be required
to pay interest). All liability of the Board to the Holders of such Bonds and
all rights of such Holders against the Board under the Bonds or under the
Indenture shall thereupon cease and determine, and the sole right of such
Holders shall thereafter be against such deposit. If any Bond shall not be
presented for payment within a period of three (3) years following the date
when such Bond becomes due, whether by maturity or otherwise, the Trustee
shall, subject to the provisions of any applicable escheat or other similar
law, return to the Board any moneys theretofore held by it for payment of such
Bond, and such Bond shall (subject to the defense of any applicable statute of
limitation) thereafter be an unsecured obligation of the Board.
SECTION 14.3 FORM OF REQUESTS, ETC., BY BONDHOLDERS. Any
request, direction or other instrument required to be signed or executed by
Holders of the Bonds may be in any number of concurrent instruments of similar
tenor, signed, or executed in person or by agent appointed in writing. Such
signature or execution may be proved by the certificate of a notary public or
other officer at the time authorized to take acknowledgments to deeds to be
recorded in Alabama, stating that the signer was known to him and acknowledged
to him the execution thereof.
SECTION 14.4 LIMITATION OF RIGHTS. Nothing herein or in the
Bonds shall confer any right on anyone other than the Board, the Trustee, the
Company, the Holders of the Bonds, the Credit Obligor, the Tender Agent and the
Remarketing Agent.
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SECTION 14.5 MANNER OF PROVING OWNERSHIP OF BONDS. The ownership
at any given time of a Bond may be proved by a certificate of the Trustee
stating that on the date stated the Bond described was registered on its books
in the name of the stated party.
SECTION 14.6 INTEREST RATE LIMITATION. Any interest rate
specified herein for any purpose shall be deemed to be limited to the lesser of
(a) such rate so specified, or (b) the highest non-usurious rate at the time
permitted by the laws of Alabama.
SECTION 14.7 INDENTURE GOVERNED BY ALABAMA LAW. It is the
intention of the parties hereto that the Indenture shall in all respects be
governed by the laws of the State of Alabama.
SECTION 14.8 NOTICES TO RATING AGENCIES. In addition to all
other notices required herein, the Trustee shall give prompt written notice to
each Rating Agency that maintains a rating with respect to the Bonds of any
proposed amendment of any instrument under the provisions of Article XII
hereof, any Event of Default, any dishonor, repudiation, termination or
extension (other than an extension occurring automatically by operation of the
Letter of Credit) of the Letter of Credit, any redemption of Bonds prior to
maturity, any issuance of a Substitute Letter of Credit and any appointment of
a successor trustee or successor Remarketing Agent.
SECTION 14.9 NOTICES. All notices, demands, requests and other
communications hereunder shall be deemed sufficient and properly given if in
writing and delivered in person to the following addresses or mailed by
certified or registered mail, postage prepaid with return receipt requested, at
such addresses:
(a) If to the Board:
The Industrial Development Board
of the City of Demopolis
City Hall
Demopolis, Alabama 36732
(b) If to the Company:
McClain of Alabama, Inc.
6200 Elmridge
Sterling Heights, Michigan 48313
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(c) If to the Trustee:
LaSalle National Bank - Corporate Trust
135 South LaSalle Street
Chicago, Illinois 60603
(d) If to the Credit Obligor:
Standard Federal Bank
2600 West Beaver Road
Troy, Michigan 48084
(e) If to the Remarketing Agent:
LaSalle National Bank
181 West Madison, Suite 3200
Chicago, Illinois 60602
Any of the above-mentioned parties may, by like notice, designate any further
or different addresses to which subsequent notices shall be sent. The Trustee
and the Board will send a copy of each notice that either thereof gives to the
other pursuant to the provisions hereof to the Company and the Credit Obligor;
provided, however, that the failure of either the Board or the Trustee to send
a copy of any such notice to the Company or the Credit Obligor shall not
invalidate such notice or render it ineffective unless notice to the Company or
the Credit Obligor, as the case may be, is otherwise expressly required herein.
Any notice hereunder signed on behalf of the notifying party by a duly
authorized attorney at law shall be valid and effective to the same extent as
if signed on behalf of such party by a duly authorized officer or employee.
Any notice given hereunder shall be deemed to have been given upon receipt by
the person to whom such notice is required to be given hereunder; provided,
however, that all notices to Bondholders given by the Trustee, including,
without limitation, notices of redemption, shall be deemed given on the date
such notices are deposited, postage prepaid, in the United States mail.
IN WITNESS WHEREOF, the Board has caused this Indenture to be executed
in its corporate name and behalf by the Chairman of the Directors, has caused
its corporate seal to be hereunto affixed and has caused this Indenture to be
attested by its Secretary, and the Trustee, to evidence its acceptance of the
trusts hereby created, has caused this Indenture to be executed in its
corporate name and behalf, has caused its corporate seal to be hereunto affixed
and has
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<PAGE> 83
caused this Indenture to be attested, by its duly authorized officers, all in
six (6) counterparts, each of which shall be deemed an original, and the Board
and the Trustee have caused this Indenture to be dated as of April 1, 1997.
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
By
-----------------------------------------
Its
--------------------------------------
Attest:
- ------------------------------------------
Its Secretary
LASALLE NATIONAL BANK,
as Trustee
By
-----------------------------------------
Its Assistant Vice President
Attest:
- ------------------------------------------
Its Assistant Secretary
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<PAGE> 84
STATE OF ALABAMA )
:
COUNTY OF MARENGO )
I, ______________________________, a Notary Public in and for said
county in said state, hereby certify that JOHN E. NORTHCUTT, whose name as
Chairman of the Board of Directors of THE INDUSTRIAL DEVELOPMENT BOARD OF THE
CITY OF DEMOPOLIS, a public corporation under the laws of Alabama, is signed to
the foregoing instrument and who is known to me, acknowledged before me on this
day that, being informed of the contents of the within instrument, he, as such
officer and with full authority, executed the same voluntarily for and as the
act of said public corporation.
GIVEN under my hand and official seal of office, this ____ day of
_______________, 1997.
------------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires: _______________
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<PAGE> 85
STATE OF _______________ )
:
COUNTY OF _______________ )
I, ______________________________, a Notary Public in and for said
county in said state, hereby certify that Estelita Tucker, whose name as
Assistant Vice President of LASALLE NATIONAL BANK, a national banking
association, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of the
within instrument, he, as such officer and with full authority, executed the
same voluntarily for and as the act of said association.
GIVEN under my hand and official seal of office, this ____ day of
_______________, 1997.
---------------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires: ___________
80
<PAGE> 86
EXHIBIT A
To That Certain Trust Indenture
between The Industrial Development Board
of the City of Demopolis and
LaSalle National Bank,
Dated as of April 1, 1997
================================================================================
PROJECT SITE DESCRIPTION
A parcel of land lying and being in Section 11, Township 17 North, Range 1
East, Marengo County, Alabama, containing 88.1 acres more or less, and being
more particularly described as follows:
Commence at the southwest corner of the Northeast Quarter of the Southwest
Quarter of said Section 11; thence run north 01degrees50' west along the west
boundary of said Northeast Quarter of Southwest Quarter a distance of 82.6 feet
to a concrete monument set to mark the point of beginning; thence run north
40degrees29' east parallel to and 350 feet perpendicular from the centerline of
the existing runway No. 4 of the Demopolis Airport a distance of 3,245.9 feet
to a concrete monument set 600 feet perpendicular from the centerline of
existing runway No. 13 of the said Demopolis Airport; thence run north
51degrees55' west and parallel to said runway No. 13 a distance of 1,568.8 feet
to a concrete monument set on the southeast boundary of a cemetery; thence run
south 38degrees05' west a distance of 20.0 feet to a concrete monument set at
the southern most corner of said cemetery; thence run north 51degrees55' west
along the southwest boundary of said cemetery a distance of 43.2 feet to a
concrete monument set near the left bank of the Tombigbee River. Continue
thence north 51degrees55' west to the said Tombigbee River; thence
southwestwardly along the southeast edge of said Tombigbee River to the point
of intersection of said river and the west boundary of the Southeast Quarter of
the Northwest Quarter of Section 11, said course follows generally along a
meander line described as: from last named concrete monument run south
47degrees04' west a distance of 515.2 feet; thence run south 41degrees54' west
a distance of 367.2 feet; thence run south 50degrees42' west a distance of
370.0 feet to a concrete monument found on the said west boundary of the
Southeast Quarter of the Northwest Quarter near the left bank of said river;
thence run south 01degrees50' east and along the west boundary of said
Southeast Quarter of Northwest Quarter and Northeast Quarter of Southwest
Quarter a distance of 2,590.2 feet to the point of beginning.
LESS AND EXCEPT THE FOLLOWING DESCRIBED TRACT HERETOFORE CONVEYED TO ALABAMA
POWER COMPANY AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:
A parcel of land located in the Northeast Quarter of the Southwest Quarter (NE
1/4 of SW 1/4) and the Southeast Quarter of Northwest Quarter (SE 1/4 of NW
1/4) of Section 11, Township 17 North, Range 1 East, Marengo County, Alabama,
being more particularly described as follows:
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<PAGE> 87
Commence at the southwest corner of the Northeast Quarter of Southwest Quarter
(NE 1/4 of SW 1/4) of Section 11 and run North 01 degree 50 minutes West a
distance of 651.4 feet to a point; thence turn an angle to the right and run
North 40 degrees 31 minutes East a distance of 1130.83 feet to a point, said
point being the northwest corner of existing Alabama Power Company substation
and point of beginning of the property herein described; thence from point of
beginning continue North 40 degrees 31 minutes East a distance of 150.0 feet to
a point; thence turn an angle to the right and run South 49 degrees 29 minutes
East a distance of 150 feet to a point; thence turn an angle to the right and
run South 40 degrees 31 minutes West a distance of 50 feet to a point; thence
turn an angle to the left and run South 49 degrees 29 minutes East a distance
of 115.2 feet to the northwesterly boundary line of a paved road; thence turn
an angle to the right and run South 40 degrees 31 minutes West along the
northwesterly margin of said road a distance of 50 feet to a point; thence turn
an angle to the right and run North 49 degrees 29 minutes West a distance of
115.2 feet to a point; thence turn an angle to the left and run South 40
degrees 31 minutes West a distance of 50 feet to a point; thence turn an angle
to the right and run North 49 degrees 29 minutes West a distance of 150 feet to
the point of beginning.
The foregoing property being conveyed to the Alabama Power Company by Deeds
recorded October 2, 1985 in the Probate Office, Marengo County, Alabama, in
Deed Book 7-U, at page 296 and Deed Book 7-U, at page 300.
2
<PAGE> 88
EXHIBIT B
To That Certain Trust Indenture
between The Industrial Development Board
of the City of Demopolis and
LaSalle National Bank,
Dated as of April 1, 1997
================================================================================
EQUIPMENT DESCRIPTION
Tool Smith - 1 Ton Air Hoist
Metal Muncher Punch Press
Air Compressor
Fork Lift Truck
General Office Furniture and Equipment
Computer Monitor
Emulation Board
BellSouth Phone System
Trailer
Burn Table
Crane
Fork Lifts
Welder
Semi Truck
1
<PAGE> 89
EXHIBIT C
[DTC LOGO]
BOOK-ENTRY-ONLY VARIABLE-RATE DEMAND OBLIGATION (VRDO)
Letter of Representations
[To be Completed by Issuer, Remarketing Agent,
Tender Agent, Paying Agent, and Trustee]
-----------------------------------------------------------
[Name of Issuer]
-----------------------------------------------------------
[Name of Remarketing Agent]
-----------------------------------------------------------
[Name of Tender Agent]
-----------------------------------------------------------
[Name of Paying Agent]
-----------------------------------------------------------
[Name of Trustee]
-------------------------
[Date]
Attention: Underwriting Department
The Depository Trust Company
55 Water Street; 50th Floor
New York, NY 10041-0099
Re: -----------------------------------------------------------
-----------------------------------------------------------
----------------------------------- ----------------------
(Issue Description) (CUSIP)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). The Securities
will be issued pursuant to a trust indenture, bond resolution, or other such
document authorizing the issuance of the Securities dated _________________,
199__ (the "Document") _____________________________________("Underwriter")
is distributing the Securities through The Depository Trust Company ("DTC").
<PAGE> 90
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer,
Remarketing Agent, Tender Agent, Paying Agent, and Trustee make the following
representations to DTC:
1. Prior to closing on the Securities on __________________, 199___, there
shall be deposited with DTC one Security certificate registered in the name of
DTC's nominee, Cede & Co., for each stated maturity of the Securities, the
total of which represents 100% of the principal amount of such Securities. If,
however, the aggregate principal amount of any maturity exceed $150 million,
one certificate will be issued with respect to each $150 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount. Each Security certificate shall bear the following
legend:
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Issuer
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by holders
of the Securities, Trustee or Issuer shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall, to the extent possible, send notice of such record date to
DTC not less than 15 calendar days in advance of such record date. If delivered
by hand or sent by mail or overnight delivery, such notice shall be sent to:
Supervisor; Proxy
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
If sent by telephone, such notice shall be sent to (212) 709-6896 or (212)
709-6897. Trustee or Issuer shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-6870.
3. In the event of a redemption or any other similar transaction resulting
in the retirement of all Securities outstanding or a reduction in the aggregate
principal amount of Securities outstanding ("full or partial redemption"),
Trustee or Issuer shall send DTC a notice of such event not less than 30 days
nor more than 60 days prior to the redemption date or, in the case of an
advance refunding of all or part of the Securities outstanding, the date that
the proceeds are deposited in escrow.
In the event of a partial redemption of the outstanding Securities, Trustee or
Issuer shall send a notice to DTC specifying: (a) the amount of the redemption;
(b) the date such notice is to be mailed to beneficial owners or published (the
"Publication Date"); and (c) whether any concurrent optional tender privilege
is available. Such notice shall be sent to DTC by a secure means (e.g., legible
telecopy, registered or certified mail, overnight delivery) in a timely manner
designed to assure that such notice is in DTC's possession no later than the
close of business two business days before the Publication Date. Trustee or
Issuer shall forward such notice either in a separate secure transmission for
each CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable), which shall include a manifest or list of each CUSIP number
submitted in that transmission. The Publication Date shall not be less than 30
days nor more than 60 days prior to the redemption date.
<PAGE> 91
Notices to DTC pursuant to Paragraph 3, if sent by mail or overnight delivery,
shall be sent to:
Supervisor; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
If sent by telecopy, such notices shall be sent to (516) 227-4164 or (516)
227-4190. If Trustee or Issuer does not receive a telecopy receipt from DTC
confirming that the notice has been received, it should telephone (516)
227-4070.
In the event that certain Securities are not subject to a partial redemption,
DTC will exclude such Securities from its redemption procedures if such
exclusion is requested as follows. Such request shall be in writing and shall
contain: (a) certification by Trustee or Issuer that the principal amount of
such Securities is not subject to the partial redemption and certification by a
custodian/DTC Participant that the Participant's position on DTC's records
includes such Securities; and (b) certification by Trustee or Issuer that the
election to exclude such Securities from the partial redemption is authorized
under the Document. Such request shall be sent to DTC's Call Notification
Department in the manner indicated above to assure that such request is in
DTC's possession no later than the close of business two business days before
the Publication Date of the partial redemption notice.
4. For so long as the Securities have an adjustable rate of interest,
Remarketing Agent shall deliver to DTC by hand or by telecopy, before the close
of business on the final rate determination date preceding each interest
payment date*, a written notice containing the following information:
(a) "Today's" date (the final rate determination date);
(b) Security CUSIP number;
(c) Security description;
(d) Interest record date;
(e) Interest payment date;
(f) Amount of the interest payment expressed in whole and fractional
dollars per $1,000 of Security face amount;
(g) Whether interest accrues record date to record date or payment
date to payment date; and
(h) The name, telephone number, and address of Remarketing Agent
person responsible for determining (f) and (g) above.
The name, telephone number, telecopy number (if available), and address of
Remarketing Agent person initially responsible for determining (f) and (g)
above at the time of issuance of the Securities will be:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
__________________________
* The final rate determination date for each interest payment shall occur not
less than two business days prior to the interest payment date.
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<PAGE> 92
If delivered by hand, such notice shall be sent to:
Manager; VRDO Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to (212) 709-1723 or (212)
709-1686. Remarketing Agent shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-1178.
If the interest payment date is a moving calendar day (such as the first
Wednesday or fifth business day of each month), or if optional tenders of
Securities are made daily following same-day notice, Remarketing Agent shall
send a copy of such notice to a service bureau designated by DTC, by hand or by
telecopy, before the close of business on the final rate determination date
preceding each interest payment date. Such notice initially shall be sent to:
Attention: Ms. Jennifer Haynes
Municipal Market Data
155 Federal Street; 4th Floor
Boston, MA 02110-1715
If sent by telecopy, such notice shall be sent to (617) 426-8068. Remarketing
Agent shall confirm Municipal Market Data's receipt of such telecopy by
telephoning (617) 542-2277.
In order to enable DTC to confirm independently the interest payment
information provided by Remarketing Agent, Trustee shall deliver to DTC by noon
ET on the business day next following the final rate determination date a
written notice containing the following information.
(a) "Today's" date (the business day next following the final rate
determination date);
(b) Security CUSIP number;
(c) Security description;
(d) Interest record date;
(e) Interest payment date;
(f) Amount of the interest payment expressed in whole and fractional
dollars per $1,000 of Security face amount; and
(g) The name, telephone number, telecopy number (if available), and
address of Trustee person responsible for determining (f) above.
The name, telephone number, telecopy number (if available), and address of
Trustee person initially responsible for determining (f) above at the time of
issuance of the Securities will be:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
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<PAGE> 93
Such notice shall be sent to Manager, VRDO Announcements, Dividend Department,
as indicated above.
If the interest payment date is a moving calendar day (such as the first
Wednesday or fifth business day of each month), or if optional tenders of
Securities are made daily following same-day notice. Trustee shall send a copy
of such notice to a service bureau designated by DTC, by hand or by telecopy,
by noon ET on the business day next following the final rate determination
date. Such notice initially shall be sent to Municipal Market Data in the
manner indicated earlier in this Paragraph.
5. Transactions in the Securities shall be eligible for same-day (Federal)
funds settlement in DTC's Same-Day Funds Settlement ("SDFS") system. For so
long as the Securities are Eligible Securities in the SDFS system ("SDFS
Securities"):
A. Interest payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns in same-day funds on each payment date (or
the equivalent in accordance with existing arrangements between
Paying Agent and DTC). Such payments shall be made payable to the
order of Cede & Co. Absent any other existing arrangements, such
payments shall be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
B. Principal payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns in same-day funds on each payment date
in the manner set forth in the SDFS Paying Agent Operating Procedures
(a copy of which has previously been furnished to Paying Agent). Such
payments shall be sent to DTC in time to be credited to DTC's account
at the Federal Reserve Bank of New York ("FRBNY") no later than
10:00 a.m. (Paying Agent's local time) on the payment date or as soon
as possible thereafter following Paying Agent's receipt of funds from
Issuer. It is understood that unless DTC receives such payments in
its FRBNY account by 2:00 p.m. (Eastern Time), it may be unable to
distribute such payments that same day.
The name, telephone number, telecopy number (if available), and address of
Paying Agent person initially responsible for arranging such payments to DTC
will be:
________________________________________
________________________________________
________________________________________
________________________________________
6. In the event that transactions in the Securities become eligible for
next-day (Clearinghouse) funds settlement in DTC's Next-Day Funds Settlement
("NDFS") system, and for so long as the Securities are Eligible Securities in
the NDFS system ("NDFS Securities");
-5-
<PAGE> 94
A. Interest payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns, in next-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Paying
Agent and DTC). Such payments shall be made payable to the order of
Cede & Co. Absent any other existing arrangements, such payments shall
be addressed as follows:
Manager; Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square; 24th Floor
New York, NY 10004-2695
B. Principal payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns, in next-day funds on each payment date (or
the equivalent in accordance with existing arrangements between Paying
Agent and DTC). Such payments shall be made payable to the order of
Cede & Co., and shall be addressed as follows:
Collection Supervisor; Redemptions
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
7. It is understood that for so long as optional tenders of the
Securities may be made daily following same-day or seven-day notice, such
tenders will be effected by means of DTC's Deliver Order Procedures, DTC shall
have no responsibility to distribute notices regarding such optional tenders,
or to ascertain whether any such tender has been made. Except as otherwise
provided herein, and in accordance with DTC's procedures for exercise of voting
and consenting rights, the parties hereto acknowledge that so long as Cede &
Co. is the sole record owner of the Securities it shall be entitled to all
voting rights applicable to the Securities and to receive the full amount of
all distributions payable with respect to the Securities. The parties
acknowledge that DTC shall treat any DTC Participant (""Participant'') having
Securities credited to its DTC accounts as entitled to the full benefits of
ownership of such Securities even if the credits of Securities to the DTC
accounts of such Participant result from failures to deliver Securities or
improper deliveries of Securities by an owner of Securities subject to tender
for purchase. Without limiting the generality of the preceding sentence, the
parties acknowledge that DTC shall treat any Participant having Securities
credited to its DTC accounts as entitled to receive distributions and voting
rights, if any, with respect to the Securities and to receive certificates
evidencing Securities if such certificates are to be issued in accordance with
paragraphs 12 or 13 hereof. (The treatment by DTC of the effects of the
crediting by it of Securities to the accounts of Participants described in the
preceding two sentences shall not affect the rights of the parties hereto
against any Participant.)
8. It is understood that for so long as optional tenders of the
Securities may be made less frequently than daily following same-day or
seven-day notice (e.g., during a monthly, quarterly, semi-annual, or annual
tender period) and Cede & Co., as nominee of DTC, or its registered assigns, as
the record owner of Securities, is entitled to tender the Securities, such
tenders will be effected by means of DTC's Repayment Option Procedures. Under
the Repayment Option Procedures, DTC will receive during the applicable tender
period instructions from its Participants to tender Securities for purchase.
The undersigned agree that such tenders for purchase may be made by DTC by
means of a book-entry credit of such Securities to the account of Tender Agent,
provided that such credit is made on or before the final day of the applicable
tender period. DTC agrees that, promptly after the recording of any such
book-entry credit, it will pro-
-6-
<PAGE> 95
vide to Tender Agent an Agent Put Daily Activity Report in accordance with the
Repayment Option Procedures, identifying the Securities and the aggregate
principal amount thereof as to which such tenders for purchase have been made.
Trustee or Issuer shall send a notice to DTC regarding such optional tenders of
Securities by hand or by a secure means (e.g., legible telecopy, registered or
certified mail, overnight delivery) in a timely manner designed to assure that
such notice is in DTC's possession no later than the close of business two
business days before the Publication Date. The Publication Date shall be not
less than 15 days prior to the start of the applicable tender period. Such
notice shall state whether any partial redemption of the Securities is
scheduled to occur during the applicable optional tender period.
If delivered by hand or sent by mail or overnight delivery, such notice shall
be sent to:
Supervisor; Pub Bond Unit
Reorganization Department
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to (212) 709-1093 or (212)
709-1094. Trustee or Issuer shall confirm DTC's receipt of such telecopy by
telephoning (212) 709-1470.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders for purchase
effected by means of DTC's Repayment Option Procedures shall be received by DTC
on each purchase date in same-day funds in the manner set forth in the SDFS
Paying Agent Operating Procedures. Such payments shall be sent in time to be
credited to DTC's account at the FRBNY no later than 10:00 a.m. (Paying Agent's
local time) on the purchase date or as soon as possible thereafter following
Paving Agent's receipt of funds from Issuer. It is understood that; (a) until
DTC receives such payments in its FRBNY account, the optionally tendered
Securities will remain in Tender Agent's DTC account; and (b) unless DTC
receives such payments in its FRBNY account by 2:00 p.m. (Eastern Time), it may
be unable to distribute such payments to DTC Participants nor release the
Securities to the Remarketing Agent that same day.
The name, telephone number, telecopy number (if available), and address of
Tender Agent person initially responsible for arranging such payments to DTC
will be:
_________________________________________
_________________________________________
_________________________________________
_________________________________________
For so long as the Securities are NDFS Securities, principal payments (plus
accrued interest, if any) as the result of optional tenders for purchase
effected by means of DTC's Repayment Option Procedures shall be received by
Cede & Co., as nominee of DTC, or its registered assigns, on each purchase date
in next-day funds or the equivalent in accordance with existing arrangements
between Tender Agent and DTC. Such payments shall be made payable to the order
of Cede & Co. and shall be addressed to Supervisor, Put Bond Unit,
Reorganization Department, as indicated above.
-7-
<PAGE> 96
9. In the event of a change or proposed change in the interest rate mode
of the Securities from one variable-rate mode to any other variable-rate mode,
or to a fixed-rate mode, Trustee or Issuer shall send a notice to DTC of such
event specifying, as applicable: (a) the name and number of the DTC Participant
account to which mandatorily tendered Securities are to be delivered by DTC on
the purchase date after DTC receives payment for such Securities; and (b) the
first interest payment date under the new mode. Such notice shall be sent to
DTC by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business two business days
before the Publication Date. the Publication Date shall be not less than 15
days prior to the expiration date of the period provided for security owner
elections to retain Securities as discussed in paragraph 10. If delivered by
hand or sent by mail or overnight delivery, such notice shall be sent to both:
Manager: VRDO Eligibility Section Supervisor; Put Bond Unit
Underwriting Department Reorganization Department
The Depository Trust Company - and - The Depository Trust Company
55 Water Street; 50th Floor 7 Hanover Square; 23rd Floor
New York, NY 10041-0099 New York, NY 10004-2695
If sent by telecopy, such notice shall be sent to both:
DTC's Underwriting Department DTC's Reorganization Department
at (212) 898-3726 or - and - at (212) 709-1093 or
(212) 344-1531 (212) 709-1094
Trustee or Issuer shall confirm DTC's receipt of such telecopy by telephoning
the Underwriting Department at (212) 898-3731 and the Reorganization Department
at (212) 709-1470.
All other notices regarding the interest rate on the Securities (before and
after any change in the interest rate mode) shall be delivered to manager, VRDO
Announcements, Dividend Department, as indicated in Paragraph 4.
10. In the event of expiration or substitution of a facility supporting
the Securities (such as a letter of credit) or non-reinstatement of the amount
available to pay interest on the Securities pursuant to such a facility,
Trustee or Issuer shall send a notice to DTC of such event specifying, as
applicable, the name and number of the DTC Participant account to which
mandatorily tendered Securities are to be delivered by DTC on the purchase date
after DTC receives payment for such Securities. Such notice shall be sent to
DTC by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business two business days
before the Publication Date or, as applicable, immediately after Trustee
receives notice that the Securities are subject to acceleration. The
Publication Date shall be not less than 15 days prior to the expiration date of
the period provided for security owner elections to retain Securities as
discussed in paragraph 10. Such notice shall be sent to Supervisor, Put Bond
Unit, Reorganization Department, as indicated in Paragraph 7.
11. Where the Document provides that the Securities are subject to
mandatory tender except with respect to security owner elections to retain
Securities, it is understood that DTC will use its Repayment Option Procedures
to process such elections. Under the Repayment Option Procedures, DTC will
receive instructions during the applicable election period from participants to
retain Securities. DTC, on behalf of such Participants, will notify Tender
Agent of the aggregate principal amount of Securities that will not be tendered
and will be retained. If the mandatorily tendered Securities are to be replaced
with two or more issues of Securities (the
-8-
<PAGE> 97
"Replacement Securities"), Tender Agent shall be responsible for allocating
specific Replacement Securities by CUSIP number to the Participants that
elected to retain Securities.
In cases in which prior to a mandatory tender, certain Securities are not
subject to such mandatory tender, if requested as follows DTC will exclude such
Securities from its mandatory tender procedures. Such request shall be in
writing and shall contain: (a) certification by Trustee or Issuer that the
principal amount of such Securities is not subject to the mandatory tender and
certification by a custodian/Participant that the Participant's position on
DTC's records includes such Securities; and (b) certification by Trustee or
Issuer that the election to exclude such Securities from the mandatory tender
is authorized under the Document. Such request shall be sent to Supervisor. Put
Bond Unit, Reorganization Department, in the manner indicated in paragraph 7
to assure that such request is in DTC's possession no later than the close of
business two business days before the Publication Date of the mandatory tender
notice.
For so long as the Securities are SDFS Securities, principal payments (plus
accrued interest, if any) as the result of mandatory tenders for purchase
(including mandatory tenders upon change in the interest rate mode of the
Securities, or upon expiration, substitution, or non-reinstatement of a
facility supporting the Securities) shall be received by DTC on the purchase
date in same-day funds in the manner set forth in Paragraph 7.
For so long as the Securities are NDFS Securities, such principal payments
shall be received by DTC on the purchase date in next-day funds in the manner
set forth in Paragraph 7.
12. In the event of a redemption, acceleration, or any other similar
transaction (e.g., tenders made and accepted in response to Trustee's or
Issuer's invitation to tender) necessitating a reduction in aggregate principal
amount of Securities outstanding or an advance refunding of part of the
Securities outstanding, DTC, in its discretion: (a) may request Trustee or
Issuer to issue and authenticate a new Securities certificate; or (b) may make
an appropriate notation on the Security certificate indicating the date and
amounts of such reduction in principal except in the case of final maturity, in
which case the certificate must be presented to Trustee prior to payment. In
the event of an advance refunding of part of the Securities outstanding,
Trustee or Issuer shall obtain a CUSIP number from the CUSIP Service Bureau and
issue and authenticate a new Security certificate for the refunded Securities.
13. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Trustee or Issuer
shall notify DTC of the availability of Security certificates. In such event,
Issuer or Trustee shall issue, transfer, and exchange Security certificates in
appropriate amounts, as required by DTC and others.
14. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Trustee or Issuer (at which time DTC will confirm with Trustee or Issuer the
aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Trustee or Issuer shall cooperate fully with
DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any Participant having Securities
credited to its DTC accounts.
15. Nothing herein shall be deemed to require Paying Agent to advance
funds on behalf of Issuer.
-9-
<PAGE> 98
16. All notices and payment advices sent to DTC shall contain the CUSIP
number of Securities.
17. DTC may direct Issuer, Remarketing Agent, Tender Agent, paying Agent,
or Trustee to use any other telephone number or address as the number or
address to which notices or payments of interest or principal may be sent.
18. Issuer, Remarketing Agent, Tender Agent, Paying Agent, or Trustee
sending notices or requests to DTC shall have a method to verify subsequently
the use of the means to deliver such notices and requests to DTC, and timeliness
of receipt of them by DTC.
19. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither Participants nor any person having an interest in the
Securities shall be deemed to have notice of the provisions of the Security
certificate(s) by virtue of submission of such certificate(s) to DTC.
Note: Very truly yours,
- ----
Schedule A contains statements that
DTC believes accurately described
DTC, the method of effecting book-
entry transfers of securities
distributed through DTC, and certain
related matters.
---------------------------------
(Issuer)
By: -----------------------------
(Authorized Officer's Signature)
- --------------------------------- ---------------------------------
(Remarketing Agent) (Tender Agent)
By: ----------------------------- By: -----------------------------
(Authorized Officer's Signature) (Authorized Officer's Signature)
- --------------------------------- ---------------------------------
(Paying Agent) (Trustee)
By: ----------------------------- By: -----------------------------
(Authorized Officer's Signature) (Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By: -----------------------------
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<PAGE> 99
SCHEDULE A
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
(Prepared by DTC--bracketed material may be applicable only to certain issues)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One fully-registered Security certificate will
be issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $150 million, one certificate
will be issued with respect to each $150 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "cleaning corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, cleaning corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The Rules applicable to DTC and its Participants are on file with the
Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
[6. Redemption notices shall be sent to Cede & Co. If less than all of
the Securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
issue to be redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
<PAGE> 100
8. Principal and interest payments on the Securities will be made to
DTC. DTC's practice is to credit Direct participants' accounts on payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Agent, or
the Issuer, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Issuer or the Agent, disbursement of such payments to
Direct Participants shall be the responsibility of DTC, and disbursement of
such payments to the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its
Securities purchased or tendered, through its Participant, to the
[Tender/Remarketing] Agent, and shall effect delivery of such Securities by
causing the Direct participant to transfer the Participant's interest in the
Securities, on DTC's records, to the [Tender/Remarketing] Agent. The
requirement for physical delivery of Securities in connection with a demand for
purchase or a mandatory purchase will be deemed satisfied when the ownership
rights in the Securities are transferred by Direct Participants on DTC's
records.]
10. DTC may discontinue providing its services as securities
depository with respect to the Securities at any time by giving reasonable
notice to the Issuer or the Agent. Under such circumstances, in the event that
a successor securities depository is not obtained. Security certificates are
required to be printed and delivered.
11. The issuer may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Issuer believes to be
reliable, but the Issuer takes no responsibility for the accuracy thereof.
-11-
<PAGE> 1
EXHIBIT 10.69
================================================================================
BOND GUARANTY AGREEMENT
between
MCCLAIN OF ALABAMA, INC.
and
LASALLE NATIONAL BANK
DATED AS OF APRIL 1, 1997
================================================================================
<PAGE> 2
BOND GUARANTY AGREEMENT between MCCLAIN OF ALABAMA, INC., a
corporation organized under the laws of Michigan (herein called the "Company"),
and LASALLE NATIONAL BANK, a national banking association in its capacity as
trustee under the Trust Indenture to which reference is hereinafter made (said
Bank being herein called the "Trustee"),
R E C I T A L S
Contemporaneously with the execution and delivery of this
Guaranty Agreement, The Industrial Development Board of the City of Demopolis,
a public corporation and instrumentality organized under the laws of the State
of Alabama (herein called the "Board") will enter into a Trust Indenture dated
as of April 1, 1997 (herein called the "Indenture") with the Trustee, under
which the Board will issue its Industrial Revenue Bonds, McClain of Alabama,
Inc. Series 1997 (herein called the "Bonds"), in the aggregate principal amount
of $5,225,000. The proceeds of the Bonds will be used to finance the costs of
the construction of improvements to a manufacturing plant and the acquisition
and installation therein of certain items of machinery, equipment and other
personal property (the real property on which said plant is located, said plant
and said machinery, equipment and other personal property herein together
called the "Project"), all for lease to the Company. Also contemporaneously
with the execution and delivery of this Guaranty Agreement, the Board will
enter into a Lease Agreement dated as of April 1, 1997 (herein called the
"Lease") whereby the Board will lease the Project to the Company at and for a
rental sufficient to pay the principal of and the interest (and premium, if
any) on the Bonds as said principal, interest and premium, respectively, become
due and to provide for the purchase of Bonds in accordance with the provisions
of the Indenture.
In order to induce the original purchaser of the Bonds to
purchase the Bonds and in order to enhance the marketability of the Bonds to
subsequent purchasers, thereby achieving a lower interest rate on the Bonds
which will be reflected in a lower rental cost of the Project to the Company,
the Company has entered into this Guaranty Agreement with the Trustee for the
benefit of all who shall at any time be holders of any of the Bonds.
NOW, THEREFORE, in consideration of the premises and of the
respective agreements herein contained, it is hereby agreed among the Company,
the Trustee, and the holders of all the Bonds issued under the Indenture (the
holders of the Bonds evidencing their consent hereto by their acceptance of the
Bonds and the Company and the Trustee evidencing their consent hereto by their
execution hereof), each with each of the others, as follows:
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SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants that it is a corporation duly
organized and in good standing under the laws of the State of Michigan; that it
is not in violation of any provisions of its certificate of incorporation, or
the laws of the State of Michigan; that it is duly qualified and in good
standing as a foreign corporation in the State of Alabama; that it has power to
enter into this Guaranty Agreement and has duly authorized the execution and
delivery of this Guaranty Agreement by proper corporate action; and that no
provision of this Guaranty Agreement violates or constitutes a default under
any agreement, instrument, or indenture to which it is a party, or violates any
provision of its certificate of incorporation, or contravenes any other
requirement of law to which it may be subject.
SECTION 2. GUARANTY OF THE BONDS. The Company hereby
unconditionally guarantees to the Trustee for the benefit of the holders from
time to time of the Bonds (a) the full and prompt payment of the principal of
the Bonds and the premium, if any, payable on redemption thereof when and as
the same shall become due, whether at the stated maturity thereof, by
acceleration, call for redemption or otherwise, (b) the full and prompt payment
of the interest on the Bonds when and as the same shall become due and (c) the
full and prompt payment of all amounts required for the purchase of Bonds
pursuant to the Indenture when and as the same shall become due. All payments
by the Company on account of this Guaranty Agreement shall be paid in lawful
money of the United States of America. The guarantee of the Company herein
shall be for the equal and pro rata protection and benefit of the holders,
present and future, of the Bonds, if, as, when and to the extent issued,
equally, and ratably, without preference, priority or distinction of any over
others by reason of priority in issuance or acquisition or otherwise. Each and
every default in payment of the principal of, the premium, if any, payable on
redemption of, or the interest on any of the Bonds, or the purchase price of
any Bond shall give rise to a separate cause of action hereunder, and separate
suits may be brought hereunder as each cause of action arises.
SECTION 3. OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. The
obligations of the Company under this Guaranty Agreement shall be absolute and
unconditional and shall remain in full force and effect (except where a longer
period is specified) until the principal of, the premium (if any) and the
interest on all of the Bonds shall have been paid or provision for the payment
thereof shall have been made in accordance with the terms of the Indenture, and
such obligation shall not be discharged, impaired, modified or otherwise
affected upon the happening from time to time of any event, including, without
limitation thereto, any of the following, whether or not with notice to, or the
consent of, the Company:
(a) The compromise, settlement, release or termination of
any or all of the obligations, covenants or agreements of the Board or
the Company under the Lease or the Indenture;
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(b) The failure to give notice to the Company of the
occurrence of an event of default under the terms and provisions of
the Lease, the Indenture or this Guaranty Agreement;
(c) The assignment, pledge or mortgaging or the purported
assignment, pledge or mortgaging of all or any part of the interest of
the Board in the Lease or the Project or the revenues therefrom;
(d) The waiver of the payment, performance or observance
by the Board or the Company of any of the obligations, covenants or
agreements of either of them contained in the Lease, the Indenture or
this Guaranty Agreement;
(e) The extension of the time for payment of the
principal of, the premium (if any) or the interest on, any of the
Bonds or the extension of the time for the performance of any other
obligations, covenants or agreements of the Board or the Company under
the Lease, the Indenture or this Guaranty Agreement or under any
renewals or extensions thereof or successor agreements thereto;
(f) The modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement on the part of the
Board or the Company contained in the Lease, the Indenture or this
Guaranty Agreement;
(g) Any failure, omission, delay or lack on the part of
the Board or the Trustee, or any assignee or successor of either of
them, to enforce, assert or exercise any right, power or remedy
conferred upon the Trustee by this Guaranty Agreement or upon the
Board or the Trustee by the Lease or the Indenture or any other act or
acts on the part of the Board, the Trustee, or any of the holders from
time to time of the Bonds;
(h) The bankruptcy, insolvency, reorganization,
appointment of a receiver for, or (except as otherwise permitted in
the Lease, the Indenture or this Guaranty Agreement) dissolution of
the Company, the Board, or the Trustee, or the entering by any or all
of them into an agreement of composition with creditors, or the making
by any or all of them of an assignment for the benefit of creditors;
(i) The assertion of any rights of set-off, recoupment or
counterclaim which the Company might otherwise have against the Board
or the Trustee;
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(j) The default or failure of the Company to fully
perform any of its obligations, covenants or agreements contained in
the Lease;
(k) The release or discharge of the Company by operation
of law from the performance or observance of any obligation, covenant
or agreement contained in the Lease;
(l) The release or discharge of the Company by operation
of law, to the extent that such release or discharge may be lawfully
avoided, from the performance or observance of any obligation,
covenant or agreement contained in this Guaranty Agreement; and
(m) The invalidity or unenforceability of the Lease or
the Indenture or of any provision of any thereof.
SECTION 4. REMEDIES. In the event of a default in the
payment of the principal of any of the Bonds or the premium, if any, payable on
redemption thereof when and as the same shall become due, whether at the stated
maturity thereof, by acceleration, call for redemption or otherwise, or in the
event of a default in the payment of any interest on any of the Bonds when and
as the same shall become due, or in the event of a default in the payment of
the purchase price of any Bond required to be purchased pursuant to the
Indenture, the Trustee may proceed directly, and if requested in writing so to
do by the holders of twenty-five per cent (25%) in aggregate principal amount
of the Bonds then outstanding, shall be obligated, upon the furnishing of
satisfactory indemnity as hereinafter provided, to proceed directly against the
Company under this Guaranty Agreement without first resorting to any other
remedies which it may have and without resorting to any other security held by
the Board or the Trustee. Before taking any action hereunder the Trustee may
require that satisfactory indemnity be furnished by the holders of the Bonds
then outstanding for the reimbursement of all expenses of the Trustee and for
the protection of the Trustee against all liabilities, except liabilities which
are adjudicated to have resulted from its own gross negligence or willful
misconduct.
SECTION 5. RIGHT OF ENFORCEMENT VESTED IN TRUSTEE. The right
to enforce this Guaranty Agreement is (except to the extent otherwise
specifically provided) vested exclusively in the Trustee for the equal and pro
rata benefit of all holders at any time of the Bonds, unless the Trustee
refuses or neglects to act within a reasonable time after being requested in
writing so to do by the holders of twenty-five per cent (25%) in aggregate
principal amount of the Bonds then outstanding and after being furnished
satisfactory indemnity as aforesaid, in which event the holder of any of the
Bonds may thereupon so act in the name and behalf of the Trustee; provided,
however, that no such holder shall be entitled to take any action to enforce
this Guaranty Agreement if and to the extent that the taking of such action
would under applicable
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law result in a surrender, impairment, waiver or loss of the rights under this
Guaranty Agreement of any other holders of any of the Bonds. Except to the
extent allowed above, no holder of any of the Bonds shall have the right to
enforce this Guaranty Agreement, and then only for the equal and pro rata
benefit of the holders of all of the Bonds.
SECTION 6. WAIVERS. The Company hereby expressly waives
notice in writing or otherwise from the Trustee or from the holders at any time
of the Bonds of their or any of their acceptance and reliance on this Guaranty
Agreement. The obligations of the Company hereunder shall attach absolutely
and unconditionally when the Lease shall have been executed and delivered by
the Board and the Bonds shall have been sold and issued under the Indenture.
The Company further waives, as to the enforcement of this Guaranty Agreement,
all rights of exemption that it may have under the constitution and laws of the
State of Alabama or any other state as to any levy on and sale of property; and
it will pay all reasonable costs, expenses and fees, including any reasonable
attorneys' fees, that may be incurred by the Trustee or any holder of the Bonds
in enforcing, or attempting to enforce, this Guaranty Agreement following any
default on the part of the Company hereunder, whether the same shall be
enforced by suit or otherwise, but if and only if any such party entitled to
enforce this Guaranty Agreement is successful in such efforts or a final
judgment for such party is rendered by a court of competent jurisdiction.
SECTION 7. COMPANY TO MAINTAIN EXISTENCE. So long as this
Guaranty Agreement shall remain effective, the Company will maintain its
existence and will not merge, consolidate or dispose of all or substantially
all its assets (either in a single transaction or in a series of related
transactions) except as permitted in the Lease.
SECTION 8. DELAY NO WAIVER. No delay in the exercise of, or
failure to exercise any, right, remedy or power accruing upon any default or
failure in the performance of any obligation under this Guaranty Agreement
shall impair any such right, remedy or power or shall be construed to be a
waiver thereof, but any such right, remedy or power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the
Trustee or any holder or former holder of a Bond to exercise any right, remedy
or power reserved to it in this Guaranty Agreement, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
If the Company should default in the performance of any obligation under this
Guaranty Agreement and such default should thereafter be waived by the Trustee,
such waiver shall be limited to the particular default so waived. No waiver,
amendment, release or modification of this Guaranty Agreement shall be
established by conduct, custom or course of dealing, but solely by an
instrument in writing duly executed by the Trustee.
SECTION 9. NOTICES. All notices, demands, requests and other
communications hereunder shall be deemed sufficient and properly given if in
writing and delivered in person to the following addresses or received by
certified or registered mail, postage prepaid, at such addresses:
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(a) If to the Board:
The Industrial Development Board of the
City of Demopolis
City Hall
Demopolis, Alabama 36732
(b) If to the Company:
McClain of Alabama, Inc.
6200 Elmridge
Sterling Heights, Michigan 48313
(c) If to the Trustee:
LaSalle National Bank - Corporate Trust
135 South LaSalle Street
Chicago, Illinois 60603
Any of the above-mentioned parties may, by like notice, designate any further
or different addresses to which subsequent notices shall be sent. A copy of
any notice given to the Board, the Company or the Trustee pursuant to the
provisions of this Guaranty Agreement shall also be given to the other parties
to whom notice is not herein required to be given, but the failure to give a
copy of such notice to any party claiming the right to receive it pursuant to
this sentence shall not invalidate such notice or render it ineffective unless
notice to such party is otherwise herein expressly required. Any notice
hereunder signed on behalf of the notifying party by a duly authorized attorney
at law shall be valid and effective to the same extent as if signed on behalf
of such party by a duly authorized officer or employee.
SECTION 10. AMENDMENTS. This Guaranty Agreement may only be
amended as provided in the Indenture.
SECTION 11. BINDING EFFECT. This Guaranty Agreement shall be
binding upon, and shall inure to the benefit of, the Company, the Trustee and
the holders from time to time of the Bonds and their respective successors and
assigns.
SECTION 12. TERMINATION UPON PAYMENT OF BONDS. The Company's
obligations hereunder shall cease and terminate upon full payment of the
principal of and the interest and premium (if any) on the Bonds as provided in
the Indenture.
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SECTION 13. SEVERABILITY. The provisions of this Guaranty
Agreement are severable. In the event any portion, provision, section or
clause hereof is held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any of
the remaining portions, provisions, sections or clauses hereof. This Guaranty
Agreement shall be governed exclusively by the applicable laws of the State of
Alabama.
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IN WITNESS WHEREOF, the Company and the Trustee have caused
this Guaranty Agreement to be executed in their respective names, the Company
and the Trustee have caused their respective corporate seals to be hereunto
affixed and has caused this Guaranty Agreement to be attested, all by their
duly authorized officers, in six (6) counterparts, each of which shall be
deemed an original, and the Company and the Trustee have caused this Guaranty
Agreement to be dated as of April 1, 1997.
McCLAIN OF ALABAMA, INC.
By
---------------------------------
Its
---------------------------------
Attest:
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Its Secretary
LASALLE NATIONAL BANK
By
-------------------------------
Its Assistant Vice President
Attest:
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Its Assistant Secretary
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<PAGE> 10
STATE OF _______________ )
:
COUNTY OF _______________ )
I, the undersigned, a Notary Public in and for said county in
said state, hereby certify that ______________________________, whose name as
_______________________ of MCCLAIN OF ALABAMA, INC., a Michigan corporation, is
signed to the foregoing instrument and who is known to me, acknowledged before
me on this day that, being informed of the contents of the within instrument,
he, as such officer and with full authority, executed the same voluntarily for
and as the act of said corporation.
GIVEN under my hand and official seal of office, this _____
day of _______________, 1997.
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Notary Public
[NOTARIAL SEAL] My Commission Expires:
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STATE OF _______________ )
:
COUNTY OF _______________ )
I, the undersigned, a Notary Public in and for said county in
said state, hereby certify that ESTELITA TUCKER, whose name as Assistant Vice
President of LASALLE NATIONAL BANK, a national banking association, is signed
to the foregoing instrument and who is known to me, acknowledged before me on
this day that, being informed of the contents of the within instrument, she, as
such officer and with full authority, executed the same voluntarily for and as
the act of said association.
GIVEN under my hand and official seal of office, this ____ day
of _______________, 1997.
----------------------------------------
Notary Public
[NOTARIAL SEAL] My Commission Expires:
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EXHIBIT 10.70
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MORTGAGE, ASSIGNMENT OF LEASES
AND SECURITY AGREEMENT
Dated as of April 1, 1997
from
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
and
McCLAIN OF ALABAMA, INC.
to
LaSALLE NATIONAL BANK
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THIS DOCUMENT WAS PREPARED BY:
<PAGE> 2
MORTGAGE, ASSIGNMENT OF LEASES
AND SECURITY AGREEMENT
THIS MORTGAGE, ASSIGNMENT OF LEASES AND SECURITY AGREEMENT dated as of
April 1, 1997 is entered into by THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY
OF DEMOPOLIS, a public corporation organized under the laws of the State of
Alabama (the "Board") and McCLAIN OF ALABAMA, INC., an Alabama corporation (the
"Company"), (the Board and the Company being hereinafter sometimes together
referred to as the "Mortgagors"), for the benefit of LaSALLE NATIONAL BANK, a
national banking association (the "Credit Obligor").
Recitals
Simultaneously with the execution and delivery hereof, the Board will
issue its $_________ Industrial Revenue Bonds, McClain of Alabama, Inc., Series
1997 (the "Bonds") pursuant to a Trust Indenture dated as of April 1, 1997 (the
"Indenture") between the Board and LaSalle National Bank (the "Trustee"). The
proceeds of the Bonds will be used to construct a manufacturing plant (the
"Plant") on certain real property owned by the Board (the "Project Site") and
to acquire and install in the Plant and elsewhere on the Project Site certain
items of machinery, equipment and other personal property (the "Equipment").
Simultaneously with the delivery of the Bonds, the Board and the
Company will enter into a Lease Agreement dated as of April 1, 1997 (the "Lease
Agreement"), whereby the Board will lease the Project Site, the Plant and the
Equipment (together, the "Project") to the Company and the Company will agree
to pay rentals to the Board at such times and in such amounts as shall be
sufficient (i) to pay when due the principal of, premium (if any), and interest
("Debt Service") on the Bonds and the purchase price of Bonds tendered for
purchase pursuant to the mandatory or optional tender provisions of the
Indenture and (ii) to pay certain additional amounts to the Board with respect
to the Project Site.
The Bonds shall be limited obligations of the Board payable solely out
of the rentals payable by the Company pursuant to the Lease Agreement and any
other revenues and receipts derived by the Board from the leasing or sale of
the Project (the "Lease Revenues").
As security for the payment of Debt Service on the Bonds, the Company
will enter into a Bond Guaranty Agreement dated as of April 1, 1997 (the "Bond
Guaranty") in favor of the Trustee, whereby the Company will guarantee payment
when due of Debt Service on the Bonds.
As additional security for the payment of the Bonds, the Company will
cause LaSalle National Bank (in its capacity as issuer of the initial Letter of
Credit referred to below, herein
<PAGE> 3
called the "Credit Obligor") to issue an irrevocable letter of credit (the
"Letter of Credit') in favor of the Trustee in the amount of (i) the aggregate
principal amount of the Bonds, to enable the Trustee to pay the principal
amount of Bonds when due and to pay the principal portion of the purchase price
of Bonds tendered (or deemed tendered) to the Trustee for purchase, (ii)
interest on the Bonds for a period of 45 days at the rate of 12% per annum, to
enable the Trustee to pay interest on the Bonds when due and to pay the
interest portion of the purchase price of Bonds tendered (or deemed tendered)
to the Trustee for purchase and (iii) 3% of the principal of the Bonds, to
enable the Trustee to pay premium due upon the redemption of the Bonds under
certain circumstances.
The Letter of Credit will be issued by the Credit Obligor pursuant to
a Credit Agreement dated as of April 1, 1997 (the "Credit Agreement") between
the Credit Obligor and the Company, whereby the Company will, agree, among
other things, to reimburse the Credit Obligor for all amounts drawn by the
Trustee pursuant to the initial Letter of Credit.
As security for the Company's obligations under the Credit Agreement,
the Company and the Board shall execute this instrument in favor of the Credit
Obligor, whereby the Credit Obligor will be granted a mortgage, assignment and
pledge of, and security interest in, the Project, the rights of the Board and
the Company under the Lease Agreement, the Lease Revenues, and certain other
collateral.
NOW, WHEREFORE, in consideration of the foregoing recitals and to
induce the Credit Obligor to enter into the Credit Agreement and to issue the
Letter of Credit, and to secure the prompt payment of all amounts due under the
Credit Agreement and this Mortgage, and also to secure the full and complete
performance of each and every obligation, covenant, duty and agreement of the
Mortgagors contained in this Mortgage and of the Company contained in the
Credit Agreement:
<PAGE> 4
ARTICLE 1
Definitions and Other Provisions
of General Application
SECTION 1.1 Definitions For all purposes of this Mortgage, except as
otherwise expressly provided or unless the context otherwise requires:
(1) The terms defined in this Article have the meanings
assigned to them in this Article. Singular terms shall include the
plural as well as the singular and vice versa.
(2) The definition in the recitals to this instrument are
for convenience only and shall not affect the construction, hereof.
(3) All references in this instrument to designated
"articles", "sections" and other subdivisions are to the designated
articles, sections and subdivisions of this instrument as originally
executed.
(4) The terms "herein", "hereof" and "hereunder and other
words of similar import refer to this Mortgage as a whole and not to
any particular article, section or other subdivision.
(5) All references in this instrument to a separate
instrument are to such separate instrument as the same may be amended
or supplemented from time to time pursuant to the applicable
provisions thereof.
(6) The term "person" shall include any individual,
corporation, partnership, joint venture, association, trust,
unincorporated organization and any government or any agency or
political subdivision thereof.
Additional Rent shall mean the Rental Payments payable pursuant to
Sections 5.3 and 5.4 of the Lease Agreement.
Basic Rent shall mean the Rental Payments payable pursuant to Section
5.2 of the Lease Agreement.
Bond Guaranty shall mean that certain Bond Guaranty Agreement dated as
of April 1, 1997, executed by the Company in favor of the Trustee.
<PAGE> 5
Bonds shall mean the $_________ aggregate principal amount of
Industrial Revenue Bonds, McClain of Alabama, Inc. Series 1997 issued by the
Board pursuant to the Indenture.
Collateral shall mean all property and, rights mortgaged, assigned or
pledged pursuant to, or otherwise subject to the lien of, this Mortgage.
Condemnation Awards shall have the meaning stated in the fourth
Granting Clause of Article 2.
Credit Agreement shall mean that certain Credit Agreement dated as of
April 1, 1997 between the Company and the Credit Obligor.
Credit Obligor shall mean LaSalle National Bank, an Alabama banking
corporation, and its successors and assigns.
Equipmentshall have meaning stated in the third Granting Clause of
Article 2.
Event of Default shall have the meanings stated in Section 7.01
hereof. An Event of Default shall "exist" if an Event of Default shall have
occurred and be continuing.
Financing Documents shall mean the Indenture, the Lease Agreement, the
Bond Guaranty, the Credit Agreement and this Mortgage.
Indentureshall mean that certain Trust Indenture dated as of April 1,
1997 between the Board and the Trustee.
Board shall mean The Industrial Development Board of the City of
Auburn, a public corporation organized under the laws of the State of Alabama,
and its successors and assigns.
Lease Agreement shall mean that certain Lease Agreement dated as of
April 1, 1997, between the Board and the Company.
Lease Revenues shall mean all Rental Payments and all other revenues,
rentals or receipts derived by the Board from the leasing or sale of the
Project.
<PAGE> 6
Letter of Creditshall mean the letter of credit with respect to the
Bonds to be issued by the Credit Obligor in favor of the Trustee pursuant to
the Credit Agreement.
Mortgage shall mean this instrument as originally executed or as it
may from time to time be supplemented, modified or amended by one or more
instruments entered into pursuant to the applicable provisions hereof.
Mortgagors shall mean the Board and the Company.
Obligations shall mean:
(i) all letter of credit commissions, fees, charges and
costs becoming due and payable under the Credit Agreement in
accordance with the terms thereof,
(ii) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof as reimbursement of
sums paid by the Credit Obligor under the Letter of Credit;
(iii) all interest becoming due and payable under the
Credit Agreement in accordance with the terms thereof;
(iv) all amounts becoming due and payable under the Credit
Agreement in accordance with the terms thereof upon the occurrence and
continuance of an event of default, as therein defined, under the
Credit Agreement;
(v) all amounts payable by the Company under the Credit
Agreement as reimbursement of increased cost to the Credit Obligor
caused by changes in laws or regulations or in the interpretation
thereof;
(vi) all other amounts payable by the Company under the
Credit Agreement;
(vii) all amounts payable by the Company under the terms of
this Mortgage (including but not limited to reimbursement for
advancements made by the Credit Obligor under this Mortgage) and any
other security agreements, pledge agreements or other documents now or
hereafter evidencing or securing the Company's performance of its
obligations under the Credit Agreement; and
(viii) all renewals and extensions of any or all the
obligations of the Company described in the foregoing clauses (i)
through (vii) (including without limitation any renewal or extension
of, and any substitute for, the Letter of Credit), whether or not any
renewal or extension agreement is executed in connection therewith.
<PAGE> 7
Permitted Encumbrances shall mean (i) the Indenture; (ii) the Lease
Agreement; (iii) liens for taxes, assessments and other governmental charges
that are not delinquent or that are being contested in good faith by
appropriate proceedings; (iv) mechanics', materialmen's or other similar liens
arising in the ordinary course of business, securing obligations that are not
delinquent or that are being contested in good faith by appropriate
proceedings; (y) liens in respect of judgments or awards with respect to which
an appeal or other proceedings for review are being prosecuted in good faith
and with respect to which a stay of execution pending such appeal or
proceedings for review has been secured; and (vi) restrictions, exceptions,
reservations, conditions, limitations, interests and other matters that are
identified in Exhibit B to this Mortgage.
Personal Property and Fixtures shall mean the Equipment and all other
personal property and fixtures constituting part of the Collateral.
Plant means the manufacturing plant to be constructed on the Project
Site out of the proceeds of the Bonds.
Project shall mean (i) the Project Site, (ii) the Plant and (iii) the
Equipment.
Project Sitemeans the real property described in the first Granting
Clause of Article 2.
Rental Payments shall mean the Basic Rent and the Additional Rent.
Rents shall have the meaning suited in the ninth Granting Clause of
Article 2.
Special Funds shall mean all funds and accounts established pursuant
to the Indenture, including without limitation the Debt Service Fund, and the
Bond Purchase Fund and the Construction Fund established pursuant to the
Indenture.
Subleasesshall have the meaning stated in the ninth Granting Clause of
Article 2.
Trusteeshall mean LaSalle National Bank, a national banking
association, in its capacity as trustee under the Indenture, and its successors
and assigns.
Company shall mean McClain of Alabama, Inc., an Alabama corporation,
and its successors and assigns.
<PAGE> 8
SECTION 1.2 Effect of Headings and Table of Contents. The article
and section headings herein and in the Table of Contents are for convenience
only and shall not affect the construction hereof.
SECTION 1.3 Date of Mortgage. The date of this Mortgage is intended
as and for a date for the convenient identification of this Mortgage and is not
intended to indicate that this Mortgage was executed and delivered on said
date.
SECTION 1.4 Severability Clause. If any provision in this Mortgage
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.5 Governing Law. This Mortgage shall be construed in
accordance with and governed by the laws of the State of Alabama.
SECTION 1.6 Counterparts. This instrument may be executed in any
number of counterparts, each of which so executed shall be deemed an original,
but all such counterparts shall together constitute but one and the same
instrument.
<PAGE> 9
ARTICLE 2
Granting Clause
The Mortgagors have bargained and sold and do hereby grant, bargain,
sell and convey to the Credit Obligor, its successors and assigns, the
following property and interests in property, and have granted and do hereby
grant to the Credit Obligor a security interest in said property and interests
in property:
I.
(Project Site)
[Insert Property Description]
II.
(Equipment for Project)
The personal property and fixtures described in Exhibit A attached
hereto and all other personal property and fixtures acquired or to be acquired
by the Board with proceeds of the Bonds or pursuant to any provision of the
Lease Agreement, including all substitutions and replacements for such personal
property and fixtures and the, proceeds thereof (herein referred to as the
"Equipment").
III.
(Company's Other Equipment)
All personal property and fixtures now owned or hereafter acquired by
Company, or in which the Company has or shall hereafter acquire any interest,
that are located on or in the property constituting a part of the Project or
that are used or useful in connection with the business of the Company
conducted at the Project.
IV.
(Condemnation Awards)
All awards or payments, including all interest thereon, together with
the right to receive the same, that may be made to the Board or the Company
with respect to the Collateral as a result of the exercise of the right of
eminent domain, any damage to or destruction of the Collateral or any pan
thereof, or any other injury to or decrease in the value of the Collateral
(herein referred to as "Condemnation Awards"), and all right, title and
interest of the Board or
<PAGE> 10
the Company in and to any policies of insurance (and the proceeds thereof) with
respect to any damage to or destruction of the Collateral.
V.
(Rental Payments With Respect to Project)
All Rental Payments and all other revenues, rentals and receipts
derived by the Board from the leasing or sale of the Project, except for
Additional Rent payable to the Board or the Trustee; provided, however, that
unless and until the Bonds are accelerated pursuant to Section 10.2(a) of the
Indenture and the Credit Obligor pays the draw on the Letter of Credit made
pursuant to Section 10.2(a) of the Indenture, all Rental Payments with respect
to debt service on the Bonds shall be applied as provided in the Lease
Agreement and the Indenture.
VI.
(Rights of Board Under Lease Agreement)
All right, title and interest of the Board in and to the Lease
Agreement (except for (i) rights of the Board to indemnification, reimbursement
of expenses or Additional Rent payable to the Board, and (ii) rights of the
Board to receive notices or other communications thereunder), together with all
powers, privileges, options and other benefits of the Board contained in the
Lease Agreement; provided, however, that nothing contained in this clause shall
impair, diminish or otherwise affect the Board's obligations under the Lease
Agreement or impose any such obligations on the Credit Obligor.
VII.
(Special Funds)
Money and investments from time to time on deposit in, or forming a
part of, the Special Funds (as defined in the Indenture), subject to the
provisions of the Indenture permitting the application thereof for the purposes
and on the terms and conditions set forth therein.
VIII.
(Leasehold Estate of Company in Project)
The Company's leasehold estate and all other rights, title and
interests of the Company under and pursuant to the Lease Agreement, together
with all the rights, privileges and options set forth therein (including but
not limited to the options set forth in Article XI of the Lease Agreement).
<PAGE> 11
IX.
(Subleases and Rents)
(a) All written or oral subleases or other agreements for the use
or occupancy of all or any portion of the Collateral with respect to which the
Company is the sublessor and any and all extensions and renewals thereof, now
or hereafter existing (collectively, the "Subleases");
(b) Any and all guaranties of performance by sublessee under the
Subleases;
(c) The immediate and continuing right to collect and receive all
the rents, income, receipts, revenues, issues and profits now due or that may
hereafter become due or to which the Company may now be or may hereafter
(including during the period of redemption, if any) become entitled to demand
or claim, arising or issuing from or out of the Subleases or from or out of the
Collateral, or any part thereof, including but not limited to minimum rents,
additional rents, percentage rents, common area maintenance charges, parking
charges, tax and insurance premium contributions, liquidated damages upon
default, the premium payable by any sublessee upon the exercise of any
cancellation privilege provided for in any of the Subleases, and all proceeds
payable under any policy of insurance covering loss of rents resulting from
untenantability caused by destruction or damage to the Collateral, together
with any and all rights and claims of any kind that the Company may have
against any such sublessee under the Subleases or against any sub-sublessee, or
occupants of the Collateral, all such moneys, rights and claims described in
this subparagraph (c) being hereinafter referred to as the "Rents"; provided,
however, that so long as no Event of Default has occurred under this Mortgage,
the Company shall have the right under a license granted hereby (but limited as
provided in Section 8.07 below) to collect, receive and retain the Rents (but
not prior to accrual thereof); and
(d) Any award, dividend or other payment made hereafter to the
Company in any court procedure involving any of the sublessee under the
Subleases in any bankruptcy, insolvency or reorganization proceeding in any
state or federal court and any and all payments made by sublessee in lieu of
rent, the Company hereby appointing the Credit Obligor as their irrevocable
attorney-in-fact to appear in any action and collect any such award, dividend
or other payment.
X.
Any and all other real or personal property of every kind and nature
from time to time hereafter by delivery or by writing of any kind conveyed,
mortgaged, pledged, assigned or transferred to the Credit Obligor as and for
additional security hereunder by the Mortgagors, or any of them, or by anyone
in the behalf of, or with the written consent of, the Mortgagors, or any of
them.
<PAGE> 12
All of the property described in the foregoing Granting Clauses is
herein sometimes together referred to as the "Collateral."
TO HAVE AND TO HOLD the Collateral, together with all the rights,
privileges and appurtenances thereunto belonging, unto the Credit Obligor, its
successors and assigns, forever.
<PAGE> 13
ARTICLE 3
Representations and Warranties
To induce the Credit Obligor to enter into the Credit Agreement and to
issue the Letter of Credit, the Mortgagors, jointly and severally, represent
and warrant that:
(1) Valid Title, etc. The Board is lawfully seized of an
indefeasible estate in fee simple in and to, and good title to, the Project
Site, subject to the Lease Agreement; the Company is lawfully seized of a valid
leasehold estate, under the terms of the Lease Agreement, in the Project Site;
the Mortgagors have a good right to sell and mortgage, and grant a security
interest in, the Collateral; the Collateral is subject to no liens,
encumbrances or security interests other than Permitted Encumbrances; and the
Mortgagors will forever warrant and defend the title to the Collateral unto the
Credit Obligor against the claims of all persons whomsoever, except those
claiming under Permitted Encumbrances. It is expressly understood and agreed
that, with respect to the Special Funds, the lien and security interest created
by this Mortgage is junior and subordinate to the lien and security interest
created by the Indenture.
(2) Compliance by Board with Terms of Lease Agreement and
Indenture. The Board shall comply, fully and faithfully, with all of its
obligations under the Lease Agreement and Indenture. If the Board shall fail
or refuse to do so, the Credit Obligor may, but shall not be required to,
perform any or all of such obligations of the Board under the Lease Agreement
and Indenture, including, but not limited to, the payment of any or all sums
due from the Board thereunder. Any sums so paid by the Credit Obligor shall
constitute part of the Obligations and shall be secured hereby.
(3) Maintenance of Lien Priority. The Mortgagors shall take all
steps necessary to preserve and protect the validity and priority of the liens
on and security interests in the Collateral created hereby. The Mortgagors
shall execute, acknowledge and deliver such additional instruments as the
Credit Obligor may deem necessary in order to preserve, protect, continue,
extend or maintain the lien and security interest created hereby as a lien on
and security interest in the Collateral subject only to Permitted Encumbrances,
except as otherwise permitted under the terms of this Mortgage. All costs and
expenses incurred in connection with the protection, preservation,
continuation, extension or maintaining of the liens and security interests
hereby created shall be paid by the Company.
<PAGE> 14
ARTICLE 4
Covenants of Company
SECTION 4.1 Payment of Taxes and Other Assessments. The Company will
pay or cause to be paid all taxes, assessments and other governmental,
municipal or other public dues, charges, fines or impositions imposed or levied
upon the Collateral or on the interests created by this Mortgage or with
respect to the filing of this Mortgage, and any tax or excise on rents or other
tax, however described, assessed or levied by any state, federal or local
taxing authority as a substitute, in whole or in part, for taxes assessed or
imposed on the Collateral or on the lien and other interests created by this
Mortgage, and at least 10 days before said taxes, assessments and other
governmental charges are due, the Company will deliver receipts therefor to the
Credit Obligor or, in the case of mortgage filing privilege taxes, pay to the
Credit Obligor an amount equal to the taxes. The Company may, at its own
expense, in good faith contest any such taxes, assessments and other
governmental charges and, in the event of any such contest, may permit the
taxes, assessments or other governmental charges so contested to remain unpaid
during the period of such contest and any appeal therefrom, provided that
during such period enforcement of such contested items shall be effectively
stayed.
SECTION 4.2 Insurance. (a) The Company shall obtain and maintain
insurance against liability for bodily injury and property damage and against
loss or damage by fire and other hazards and casualties arising or occurring
with respect to the Project and the Personal Property and Fixtures, with such
limits and coverage as the Credit Obligor may from time to time require, and in
any event including:
(1) insurance against loss or damage to the Project,
Personal Property and Fixtures by fire, lightning, water and wind,
with uniform standard extended coverage endorsement limited only as
may be provided in the standard form of extended coverage endorsement
at the time in use in the State of Alabama, to the extent of the full
insurable value of such property, but in any event not less than the
Credit Amount (as defined in the Credit Agreement);
(2) rental or business interruption insurance in amounts
sufficient to pay, during any period of up to 6 months in which the
Project, Personal Property and Fixtures may be damaged or destroyed,
to the Credit Obligor all amounts required by this Mortgage and the
Credit Agreement;
(3) steam boiler, machinery and other similar insurance
of the types and in amounts not less than customarily carried by
persons owning or operating like properties;
(4) if any part of the Project, Personal Property and
Fixtures is located in a flood hazard area designated as such under
the national flood insurance program, flood insurance to the extent of
the maximum limit of coverage made available with respect to such
property under such program; and
<PAGE> 15
(5) insurance against liability for bodily injury to or
death of persons and for damage to or loss of property occurring on or
about or with respect to the Project, Personal Property and Fixtures
in the minimum amount of $5,000,000 combined single limit coverage.
(b) All such policies of casualty insurance shall be in such
companies as shall be satisfactory to the Credit Obligor and shall name the
Credit Obligor as a named insured and provide that any losses payable
thereunder shall (pursuant to loss payable clauses, in form and content
acceptable to the Credit Obligor, to be attached to each policy) be payable to
the Credit Obligor, and provide that the insurance provided thereby, as to the
interest of the Credit Obligor, shall not be invalidated by any act or neglect
of the Mortgagors, nor by the commencing of any proceedings by or against any
of the Mortgagors in bankruptcy, insolvency, receivership or any other
proceedings for the relief of a debtor, nor by any foreclosure, repossession or
other proceedings relating to the property insured, nor by any occupation of
such property or the use of such property for purposes more hazardous than
permitted in the policy.
(c) The Company shall furnish to the Credit Obligor insurance
certificates, in form and substance satisfactory to the Credit Obligor,
evidencing compliance by it with the terms of this Section and, upon the
request of the Credit Obligor at any time, the Company shall furnish the Credit
Obligor with photostatic copies of the policies required by the terms of this
Section. The Company will cause each insurer under each of the policies to
agree (either by endorsement upon such policy or by letter addressed to the
Credit Obligor) to give the Credit Obligor at least 10 days' prior written
notice of the cancellation of such policies in whole or in part or the lapse of
any coverage thereunder.
(d) The Mortgagors agree that they will not take any action or
fail to take any action which action or inaction would result in the
invalidation of any insurance policy required hereunder. At least 10 days
prior to the date the premiums on each such policy or policies shall become due
and payable, the Company shall furnish to the Credit Obligor evidence of the
payment of such premiums.
(e) With respect to all such casualty insurance, the Credit
Obligor is hereby authorized, but not required, on behalf of the Mortgagors, to
collect for, adjust or compromise any losses under any such insurance policies
and to apply, at its option, the loss proceeds (less expenses of collection) on
the Obligations, in any order and whether or not then due, or hold such
proceeds as a reserve against the Obligations, or apply such proceeds to the
restoration of the property affected, or release the same to the Mortgagors;
but no such application, holding in reserve or release shall cure or waive any
default by the Mortgagors. In case of a sale pursuant to the foreclosure
provisions hereof, or any conveyance of all or any part of the Project,
Personal Property and Fixtures in extinguishment of the Obligations, complete
title to all insurance policies on the Collateral and the unearned premiums
with respect thereto shall pass to and vest in the purchaser or grantee of such
property.
<PAGE> 16
SECTION 4.3 Condemnation Awards. The entire proceeds of any
Condemnation Award shall be paid to the Credit Obligor and, after first
applying such award to the payment of all costs and expenses (including
attorneys' fees) reasonably incurred by the Credit Obligor in the collection
thereof, the Credit Obligor may, at its option, apply the balance to the
payment of the Obligations in any order and whether or not then due, or hold
such balance as a reserve against the Obligations, or apply such balance to the
restoration or replacement of the Collateral, or release such balance to the
Mortgagors. No such application, holding in reserve or release shall cure or
waive any default of the Mortgagors.
SECTION 4.4 Waste, Demolition, Alteration or Replacement. The
Company will cause the Collateral and every part thereof to be maintained,
preserved and kept in safe and good repair, working order and condition, will
not commit or permit waste thereon, will not remove, demolish or materially
alter the design or structural character of any building now or hereafter
erected on the Project Site without the express prior written consent of the
Credit Obligor, will comply with all laws and regulations of any governmental
authority with reference to the Collateral and the manner and use of the same,
and will from time to time make all necessary and proper repairs, renewals,
additions and restorations thereto so that the value and efficient use thereof
shall be preserved and maintained. The Company agree not to remove any of the
fixtures or personal property included in the Collateral, without the express
prior written consent of the Credit Obligor and unless the same is immediately
replaced with like property of at least equal value and utility.
SECTION 4.5 Compliance by Company with Term of Lease. The Company
shall comply, fully and faithfully, with all of its obligations under the Lease
Agreement, so as to keep the Lease Agreement in full force and effect. If the
Company fails or refuses, to do so, the Credit Obligor may, but shall not be
required to, perform any and all of such obligations of the Company under the
Lease Agreement, including but not limited to the payment of any or all rent
and other sums due from the Company thereunder. Any rent or other sums so paid
by the Credit Obligor shall constitute part of the Obligations and shall be
secured hereby.
SECTION 4.6 Hazardous Materials and Related Matters. (a) The
Company represents and warrants that it is currently in compliance with, and
covenants and agrees that it and all other persons who manage, use, operate or
occupy the Project, Personal Property and Fixtures shall comply with, all
federal, soft and local laws, regulations and orders regulating health, safety
and environmental matters, including without limitation air pollution, soil and
water pollution and the use, generation, storage, handling or disposal of
hazardous material (defined below in this Section).
(b) The Company shall not generate, handle, use, store, treat,
discharge, release or dispose of any hazardous material at the Project without
the express written approval of the Credit Obligor.
<PAGE> 17
(c) Credit Obligor shall have the right at any time to conduct an
environmental audit of the Project, and the Company agrees to cooperate in the
conduct of such audit.
(d) Company agrees to indemnify and hold harmless Credit Obligor
from and against all losses, liabilities, penalties, claims and other costs of
any kind or of any nature (including without limitation the fees and expenses
of counsel for the Credit Obligor) which may at any time be imposed upon,
incurred by or asserted against Credit Obligor in connection with or arising
from or out of the breach of any warranty, covenant or agreement or the
inaccuracy of any representation contained in this Section. The covenant of
indemnification contained in this Section shall survive the payment of the
Obligations.
(e) For purposes of this Section the term "hazardous material"
shall mean any hazardous, toxic or dangerous waste, substance or material
defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation and Liability Act of the United States Congress, or in
any other law, regulation or order, now or hereafter in effect, of any
governmental authority regulating, or imposing liability or standards of
conduct relating to, any hazardous, toxic or dangerous waste, substance or
material.
<PAGE> 18
ARTICLE 5
Transfer of, or Liens on, Collateral
SECTION 5.1 Prohibition Against Transfers and Liens. The Mortgagors
covenant and agree that they will not, without the express prior written
consent of the Credit Obligor, sell, transfer, convey or otherwise dispose of,
or create, or permit or suffer to exist, any lien, security interest or other
encumbrance (other than Permitted Encumbrances) on, all or any part of the
Collateral (including but not limited to any leases and rents) or any interests
therein, it being expressly understood and agreed that a violation by the
Mortgagors or either of them of the provisions of this Article 5 shall
constitute an Event of Default under this Mortgage. Any sale, transfer,
conveyance, other disposition or act of creating, permitting or suffering to
exist any lien, security interest or other encumbrance in violation of this
Article 5 shall be null, void and of no effect.
<PAGE> 19
ARTICLE 6
Defeasance
If (i) the Company shall pay in full and discharge all the
Obligations; and (ii) the Mortgagors shall then have kept and performed each
and every obligation, covenant, duty, condition and agreement herein or in the
Credit Agreement (or both) imposed on or agreed to by them; and (iii) the
Letter of Credit shall then be terminated; then this Mortgage and the grants
and conveyances contained herein shall become null and void, and the Collateral
shall revert to the Mortgagors, and the entire estate, right, title and
interest of the Credit Obligor shall thereupon cease; and the Credit Obligor
shall, upon the request of the Mortgagors and at the cost and expense of the
Company, deliver to the Mortgagors proper instruments acknowledging
satisfaction of this instrument and terminating all financing statements filed
in connection herewith; otherwise, this Mortgage shall remain in full force and
effect. Notwithstanding anything to the contrary contained in this Article 6
or elsewhere in this Mortgage, it is expressly understood and agreed that,
although there may be from time to time occasions when no Obligations shall be
outstanding, this Mortgage and the lien thereof and security interests created
thereby shall nevertheless remain in full force and effect, and none of the
estate, right, title and interest of the Credit Obligor passing by this
Mortgage shall divest nor shall the Collateral revert to the Mortgagors, so
long as any one or more or all of the following circumstances exist:
(1) the Credit Obligor has any obligation to issue the
Letter of Credit; or
(2) the Letter of Credit has been issued and is
outstanding; or
(3) any Obligations are outstanding.
<PAGE> 20
ARTICLE 7
Events of Default
SECTION 7.1 Events of Default. Any one or more of the following
shall constitute an event of default (an "Event of Default") under this
Mortgage (whatever the reason for such event and whether it shall be voluntary
or involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the performance, or breach, of any
covenant, condition or agreement on the part of the Mortgagors
contained in Sections 4.01, 4.02, 4.04 or 5.01 hereof, or
(2) default in the performance, or breach, of any
covenant or warranty of the Mortgagors in this Agreement (other than a
covenant or warranty, a default in the performance or breach of which
is elsewhere in this Section specifically dealt with), and the
continuance of such default or breach for a period of 30 days after
there has been given, by registered or certified mail, to the
Mortgagors by the Credit Obligor a written notice specifying such
default or breach and requiring it to be remedied and stating that
such notice is a "notice of default" hereunder; or
(3) the occurrence of an event of default, as therein
defined, under any other Financing Document and the expiration of the
applicable grace period, if any, specified therein; or
(4) the interest of the Credit Obligor in the Collateral
shall become endangered by reason of the enforcement of any prior lien
or encumbrance thereon (other than the lien of the Indenture with
respect to the Special Funds); or
(5) the lien or security interest created by this
Mortgage is invalid or unenforceable as to any part of the Obligations
or is invalid or unenforceable as to any part of the Collateral.
<PAGE> 21
ARTICLE 8
Rights of Credit Obligor Upon Default
SECTION 8.1 Acceleration of Indebtedness, etc. If an Event of
Default exists, the Credit Obligor may notify the Trustee that an event of
default, as therein defined, under the Credit Agreement has occurred and is
continuing (it being understood that the occurrence of an Event of Default
hereunder shall constitute an event of default under the Credit Agreement) and
may, by notice to the Mortgagors, affective upon dispatch, declare all of the
Obligations, including but not limited to the obligation of the Company to
reimburse the Credit Obligor under the Credit Agreement, to be forthwith due
and payable, whereupon all the Obligations shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Mortgagors, and the
Credit Obligor may immediately enforce payment of all such amounts and exercise
any or all of its rights and remedies under this Mortgage and the Credit
Agreement.
SECTION 8.2 Operation of Collateral by Credit Obligor. In addition
to all other rights herein and in the Credit Agreement conferred on the Credit
Obligor, if an Event of Default exists, the Credit Obligor (or any person, firm
or corporation assigned by the Credit Obligor) may, but shall not be obligated
to, enter upon and take possession of any or all of the Collateral, exclude the
Mortgagors therefrom, and hold, use, administer, manage and operate the same to
the extent that the Mortgagors could do so, without any liability to the
Mortgagors resulting therefrom; and the Credit Obligor may collect, receive and
receipt for all proceeds accruing from such operation and management, make
repairs and purchase needed additional property, and exercise every power,
right and privilege of the Mortgagors with respect to the Collateral.
SECTION 8.3 Judicial Proceedings: Right to Receiver. If an Event of
Default exists, the Credit Obligor, in lieu of or in addition to exercising the
power of sale hereinafter given, may proceed by suit for a foreclosure of its
lien on and security interest in the Collateral, to sue the Company for damages
on account of or arising out of said default or breach, or to sue the
Mortgagors or any of them for specific performance of any provision contained
herein, or to enforce any other appropriate legal or equitable right or remedy,
whether under this Mortgage, the Credit Agreement or otherwise. The Credit
Obligor shall be entitled, as a matter or right, upon bill filed or other
proper legal proceedings being commenced for the foreclosure of this Mortgage,
to the appointment of any competent court or tribunal, without notice to the
Mortgagors or any other party, of a receiver of the rents, issues and profits
of the Collateral, with power to lease and control the Collateral and with such
other powers as may be deemed necessary, subject to the rights of the Trustee
under the Indenture.
SECTION 8.4 Foreclosure Sale. This Mortgage shall be subject to
foreclosure and may be foreclosed as now provided by law in case of past due
mortgages, and the Credit Obligor shall be authorized, at its option, whether
or not possession of the Collateral is taken, to sell the Collateral (or such
part or parts thereof as the Credit Obligor may from time to time elm to sell)
under the power of sale which is hereby given to the Credit Obligor, at public
outcry, to the
<PAGE> 22
highest bidder for cash, at the front or main door of the courthouse of the
county in which the real property to be sold, or a substantial and material
part thereof, is located, after first giving notice by publication once a week
for three successive weeks of the time, place and terms of such sale, together
with a description of the Collateral to be sold, by publication in some
newspaper published in the county or counties in which the real property to be
sold is located. If there is real property to be sold in more than one county,
publication shall be made in all counties where the real property to be sold is
located, but if no newspaper is published in any such county, the notice shall
be published in a newspaper published in an adjoining county for three
successive weeks. The sale shall be hold between the hours of 1:00 a.m. and
4:00 p.m. on the day designated for the exercise of the power of sale
hereunder. The Credit Obligor, its successors and assigns, may bid at any sale
or sales had under the terms of the Mortgage and may Purchase the Collateral,
or any part thereof, if the highest bidder therefor. The purchaser at any such
sale or sales shall be under no obligation to see to the proper application of
the purchase money. At any foreclosure sale any part or all of the Collateral,
real, personal or mixed, may be offered for sale in parcels or en masse for one
total price, the proceeds of any such sale an masse to be accounted for in one
account without distinction between the items included therein or without
assigning to them any proportion of such proceeds, the Mortgagors hereby
waiving the application of any doctrine of marshalling or like proceeding. If
the Credit Obligor, in the exercise of the power of sale herein given, elects
to sell the Collateral in parts or parcels, sees thereof may be held from time
to time, and the power of sale granted herein shall not be fully exercised
until all of the Collateral not previously sold shall have been sold or all the
Obligations shall have been paid in full. The Mortgagors hereby waive any
equitable rights otherwise available to any of them with respect to marshalling
of assets hereunder, so as to require separate sales of the fee estate and the
leasehold estate encumbered hereby or to require the Credit Obligor to exhaust
its remedies against either the fee estate or the leasehold estate before
proceeding against the other; and the Mortgagors hereby expressly consent to
and authorize, at the option of the Credit Obligor, the sale, either separately
or together, of the fee estate and leasehold estate, or otherwise the merger,
prior to sale, of the leasehold estate into the fee estate in order that the
fee estate may be sold free and clear of the leasehold estate. Without in any
way limiting the generality of the foregoing provisions of this Section, it is
expressly agreed that the Credit Obligor may, at its option, sell the part of
the Collateral described in Granting Clause VII above separately from the
remainder of the Collateral.
SECTION 8.5 Personal Property and Fixtures. (a) The Credit Obligor
shall have and may exercise with respect to any or all personal property and
fixtures included in the Collateral (the "Personal Property and Fixtures"), all
rights, remedies and powers of a secured party under the Alabama Uniform
Commercial Code with reference to the Personal Property and Fixtures or any
other items in which a security interest has been granted herein, including
without limitation the right and power to sell at public or private sale or
sales or otherwise dispose of, lease or utilize the Personal Property and
Fixtures and any part or parts thereof in any manner, to the fullest extent
authorized or permitted under the Alabama Uniform Commercial Code after default
hereunder, without regard to preservation of the Personal Property and Fixtures
or its value and without the necessity of a court order. The Credit Obligor
shall have, among other rights, the right to take possession of the Personal
Property and Fixtures and to enter upon any premises where the same may be
situated for the purpose of repossessing the same without being guilty of
trespass and without liability for damages occasioned thereby and to take any
action deemed appropriate or desirable by the Credit Obligor, at its option and
in its sole discretion,
<PAGE> 23
to repair, restore or otherwise prepare the Personal Property and Fixtures for
sale or lease or other use or disposition. To the extent permitted by law, the
Mortgagors, expressly waive any notice of sale or any other disposition of the
Personal Property and Fixtures and any rights or remedies of the Credit Obligor
with respect to, and the formalities prescribed by law relative to, the sale or
disposition of the Personal Property and Fixtures or to the exercise of any
other right or remedy of the Credit Obligor existing after default. To the
extent that such notice is required and cannot be waived, the Mortgagors agree
that if such notice is given to the Mortgagors in accordance with the
provisions of Section 9.08 below, at least 5 days before the time of the sale
or other disposition, such notice shall be deemed reasonable, and shall fully
satisfy any requirement for giving said notice.
(b) The Mortgagors agree that the Credit Obligor may sell or
dispose of the Personal Property and Fixtures in accordance with the rights and
remedies granted under this Mortgage with respect to the real property covered
hereby. The Mortgagors hereby grant to the Credit Obligor the right, at its
option after default by the Mortgagors, to transfer at any time to itself or
its nominee the Personal Property and Fixtures or any part thereof and to
receive the monies, income, proceeds and benefits attributable to the same and
to hold the same as additional Collateral or to apply it on the Obligations in
such order and manner as the Credit Obligor may elect. The Mortgagors covenant
and agree that all recitals in any instrument transferring, assigning, leasing
or making other disposition of the Personal Property and Fixtures or any part
thereof shall be full proof of the matters stated therein, and no other proof
shall be required to establish the legal propriety of the sale or other action
taken by the Credit Obligor and that all prerequisites of sale shall be
presumed conclusively to have been performed or to have occurred.
SECTION 8.6 Conveyance After Sale. The Mortgagors, hereby authorize
and empower the Credit Obligor or the auctioneer at any foreclosure sale had
hereunder, for and in the name of the Mortgagors, to execute and deliver to the
purchaser or purchasers of any of the Collateral sold at foreclosure good and
sufficient deeds of conveyance or bills of sale thereto.
SECTION 8.7 Rents and Subleases. (a) If an Event of Default exists,
the Credit Obligor, at its option, shall have the right, power and authority to
exercise and enforce any or all of the following rights and remedies with
respect to Rents and Subleases):
(1) to terminate the license granted to the Company in
Article 2 hereof to collect the Rents, and, without taking possession,
in the Credit Obligor's own name to demand, collect, receive, sue for,
attach and Levy the Rents, to give proper receipts, releases and
acquittances therefor, and after deducting all necessary and
reasonable costs and expenses of collection, including reasonable
attorney's fees, to apply the net proceeds thereof to the Obligations
in such order and amounts as the Credit Obligor may choose (or hold
the same in a reserve as security for the Obligations);
(2) without regard to the adequacy of the security, with
or without any action or proceeding, through any person or by agent,
or by a receiver to be appointed by court, to enter upon, take
possession of, manage and operate the Collateral or any part
<PAGE> 24
thereof for the account of the Mortgagors, make, modify, force, cancel
or accept surrender of any Sublease, remove and evict any sublessee or
sub-sublessee, increase or reduce rents, decorate, clean and make
repairs, and otherwise do any act or incur any cost or expenses the
Credit Obligor shall deem proper to protect the security hereof, as
fully and to the same extent as the Mortgagors could do if in
possession, and in such event to apply any funds so collected to the
operation and of the Collateral (including payment of reasonable
management, brokerage and attorney's fees) and payment of the
Obligations in such order and amounts as the Credit Obligor may choose
(or hold the same in reserve as security for the Obligations);
(3) to take whatever legal proceedings may appear
necessary or desirable to enforce any obligation or covenant or
agreement of the Mortgagors under this Mortgage.
(b) The collection of the Rents and application thereof (or
holding thereof in reserve) as aforesaid or the entry upon and taking
possession of the Collateral or both shall not cure or waive any default or
waive, modify or affect any notice of default under this Mortgage, or
invalidate any act done pursuant to such notice, and the enforcement of such
right or remedy by the Credit Obligor, once exercised, shall continue for so
long as the Credit Obligor shall elect, notwithstanding that the collection and
application aforesaid of the Rents may have cured the original default. If the
Credit Obligor shall thereafter elect to discontinue the exercise of any such
right or remedy, the same or any other right or remedy hereunder may be
reasserted at any time and from time to time following any subsequent default.
SECTION 8.8 Application of Proceeds. All payments then held or
thereafter received by the Credit Obligor as proceeds of the Collateral, as
well as any and all amounts realized by the Credit Obligor in connection with
the enforcement of any right or remedy under or with respect to this Mortgage,
shall be applied by the Credit Obligor as follows:
(1) to reimburse the Credit Obligor for any payments made
by the Credit Obligor under the Letter of Credit, to accrued but
unpaid commissions, fees, costs and charges under the Credit
Agreement, and to the payment of all costs and expenses of any kind
then or thereafter at any time reasonably incurred by the Credit
Obligor in exercising its rights under this Mortgage and under the
Credit Agreement or otherwise reasonably incurred by the Credit
Obligor in collecting or enforcing payment of the Obligations, as well
as to the payment of any other amount then or thereafter at any time
owing by the Company to the Credit Obligor under the Credit Agreement
or under this Mortgage, all in such priority as among such principal,
interest, costs, fees, expenses and other amounts as the Credit
Obligor shall elect;
(2) any balance remaining after payment in full of all
amounts referred to in paragraph (1) above shall be applied by the
Credit Obligor to any other Obligations then owing by the Company to
the Credit Obligor;
(3) any balance remaining after payment in full of all
amounts referred to in paragraphs (1) and (2) above shall be held by
the Credit Obligor as a cash collateral
<PAGE> 25
reserve against the making of any payment under the Letter of Credit
(if then outstanding); and
(4) any balance remaining after payment in full of all
amounts referred to in paragraphs (1), (2) and (3) above shall be paid
by the Credit Obligor to the Mortgagors or to whoever else may then be
legally entitled thereto.
SECTION 8.9 Multiple Sales. The Credit Obligor shall have the option
to proceed with foreclosure, either through the courts or by proceeding with
foreclosure as provided for in this Mortgage, but without declaring all of the
Obligations due. Any such sale may be made subject to the unmatured part of
the Obligations, and such sale, if so made, shall not in any manner affect the
unmatured part of the Obligations, but as to such unmatured part of the
Obligations this Mortgage shall remain in full force and effect as though no
sale had been made under the provisions of this Section. Several sales may be
made under the provisions of this Section without exhausting the right of sale
for any remaining part of the Obligations whether then matured or unmatured,
the purpose hereof being to provide for a foreclosure and sale of the
Collateral for any matured part of the Obligations without exhausting any power
of foreclosure and the power to sell the Collateral for any other part of the
Obligations, whether matured at the time or subsequently maturing.
SECTION 8.10 Waiver of Appraisement Laws. The Mortgagors waive, to
the fullest extent permitted by law, the benefit of all laws now existing or
hereafter enacted providing for (i) any appraisement before sale of any portion
of the Mortgaged property (commonly known as appraisement laws) or (ii) any
extension of time for the enforcement of the collection of the Obligations or
any creation or extension of a period of redemption from any sale made in
collecting the Obligations (commonly known as stay laws and redemption laws).
<PAGE> 26
ARTICLE 9
Miscellaneous Provisions
SECTION 9.1 Waiver, Election, etc. The exercise by the Credit
Obligor of any option given under the terms of this Mortgage shall not be
considered as a waiver of the right to exercise any other option given herein,
and the filing of a suit to foreclose the lien and security interest granted by
this Mortgage, either on any matured portion of the Obligations or for the
whole of the Obligations, shall not be considered an election so as to preclude
foreclosure under power of sale after a dismissal of the suit; nor shall the
publication of notices for foreclosure preclude the prosecution of a later suit
thereon. No failure or delay on the part of the Credit Obligor in exercising
any right, power or remedy under this Mortgage shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder or thereunder. The remedies provided in
this Mortgage and in the Credit Agreement are cumulative and not exclusive of
any remedies provided by law. No amendment, modification, termination or
waiver of any provisions of this Mortgage or the Credit Agreement, nor consent
to any departure by the Mortgagors, therefrom, shall be effective unless the
same shall be in writing and signed by an executive officer of the Credit
Obligor, and then such waiver of consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to
or demand on the Mortgagors or any of them in any case shall entitle the
Mortgagors or any of them to any other or further notice or demand in similar
or other circumstances.
SECTION 9.2 Landlord-Tenant Relationship. Any sale of the Collateral
under this Mortgage shall, without further notice, create the relationship of
landlord and tenant at sufferance between the purchaser and the Mortgagors,
subject to the provisions of the Lease Agreement.
SECTION 9.3 Enforceability. If any provision of this Mortgage is now
or at any time hereafter becomes invalid or unenforceable, the other provisions
hereof shall remain in full force and effect, and the remaining provisions
hereof shall be construed in favor of the Credit Obligor to effectuate the
provisions hereof.
SECTION 9.4 Application of Payments. If the lien or the security
interest created by this Mortgage is invalid or unenforceable as to any part of
the Obligations or is invalid or unenforceable as to any part of the
Collateral, the unsecured or partially secured portion of the Obligations shall
be completely paid prior to the payment of the remaining and secured or
partially secured portion of the Obligations, and all payments made on the
Obligations, whether voluntary or under foreclosure or other enforcement action
or procedures, shall be considered to have been first paid on and applied to
the full payment of that portion of the Obligations that is not secured or not
fully secured by the hen or security interest created hereby.
<PAGE> 27
SECTION 9.5 Advances by Credit Obligor. If the Mortgagors shall fail
to comply with the provisions hereof with respect to the securing of insurance,
the payment of taxes, assessments and other charges, the keeping of the
Collateral in repair, or any other term or covenant herein contained, the
Credit Obligor may (but shall not be required to) make advances to perform the
same, and where necessary enter or take possession of the Collateral for the
purpose of performing any such term or covenant. The Company agrees to repay
all sums advanced upon demand, with interest from the date such advances are
made, at the raw provided in Section 2.06 of the Credit Agreement (to the
fullest extent permitted by applicable law), and all sums so advanced, with
interest, shall be secured hereby.
SECTION 9.6 Release or Extension by Credit Obligor. The Credit
Obligor, without notice, may release any part of the Collateral or any person
liable for the Obligations without in any way affecting the rights of the
Credit Obligor hereunder as to any part of the Collateral not expressly
released and may agree with any party with an interest in the Collateral to
extend the time for payment of all or any part of the Obligations or to waive
the prompt and full performance of any term, condition or covenant of this
Mortgage or the Credit Agreement.
SECTION 9.7 Partial Payments. Acceptance by the Credit Obligor of
any payment of less than the amount due on the Obligations shall be deemed
acceptance on account only, and the failure of the Company to pay the entire
amount then due shall be and continue to constitute an Event of Default, and at
any time thereafter and until the entire amount due on the Obligations has been
paid, the Credit Obligor shall be entitled to exercise all rights conferred on
it by the terms of this Mortgage in case of the existence of an Event of
Default.
SECTION 9.8 Addresses for Notices. (a) Any request, demand,
authorization, direction, notice, consent, or other document provided or
permitted by this Mortgage to be made upon, given or furnished to, or filed
with, the Board, the Company or the Credit Obligor shall be sufficient for
every purpose hereunder if in writing and (except as otherwise provided in this
Mortgage) either (i) delivered personally to the party or, if such party is not
an individual, to an officer, partner or other legal representative of the
party to whom the same is directed at the hand delivery address specified
below, or (ii) mailed by certified mail, postage prepaid and addressed as
provided below. The hand delivery address and mailing address for the parties
are as follows:
Board
Hand delivery address:
The Industrial Development Board of the City of Demopolis
Mailing address:
<PAGE> 28
The Industrial Development Board of the City of Demopolis
Company
Hand delivery address:
McClain of Alabama, Inc.
Mailing address:
McClain of Alabama, Inc.
Credit Obligor
Hand delivery address:
LaSalle National Bank
Mailing address:
LaSalle National Bank
Any of such parties may specify a different address for the receipt of such
documents by mail by giving notice of the change in address to the other
parties.
(b) Any such notice or other document shall be deemed delivered
when actually received by the party to whom directed (or, if such party is not
an individual, to an officer, director or other legal representative of the
party) at the address specified pursuant to this Section, or, if sent by mail,
3 days after such notice or document is deposited in the United States mail,
addressed as provided above.
SECTION 9.9 Construction of Mortgage. This Mortgage may be construed
as a mortgage, chattel mortgage, conveyance, assignment, security agreement,
pledge, financing statement, hypothecation or contract, or any one or more of
them, in order fully to effectuate
<PAGE> 29
the lion hereof and security interest created hereby and the purposes and
agreements herein set forth.
SECTION 9.10 Limitation of Liability of Board. The covenants and
agreements contained in this Mortgage do not and shall never constitute or give
rise to a personal or pecuniary liability or charge against the general credit
of the Board, and in the event of a breach of any such covenant or agreement,
no personal or pecuniary liability or charge payable directly or indirectly
from the general assets or revenues of the Board (other than the Collateral)
shall arise therefrom. Nothing contained in this Section, however, shall
relieve the Board from the observance and performance of the covenants and
agreements on its part contained herein. The Obligations shall never
constitute an indebtedness of the City of Auburn within the meaning of any
constitutional provision or statutory limitation. and shall never constitute or
give rise to a pecuniary liability of the City of Demopolis or a charge against
its general credit or taxing powers.
<PAGE> 30
IN WITNESS WHEREOF, the Board and the Company have caused this
instrument to be duly executed and the Board has caused its seal to be hereunto
affixed and attested.
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF DEMOPOLIS
By:
---------------------------------------
Chairman of its Board of Directors
[S E A L]
Attest:
---------------------------
Secretary
McCLAIN OF ALABAMA, INC.
By:
----------------------------------------
Its:
---------------------------------------
[S E A L]
Attest:
--------------------------
Secretary
<PAGE> 31
STATE OF ALABAMA )
__________________ COUNTY )
I, the undersigned Notary Public in and for said County in said State,
hereby certify that ____________________ _______, whose name as Chairman of the
Board of Directors of The Industrial Development Board of the City of
Demopolis, a public corporation, is signed to the foregoing instrument and who
is known to me, acknowledged before me on this day that, being informed of the
contents of said instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
Given under my hand this the ___ day of __________________,1997.
-------------------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
---------------
STATE OF )
________________ COUNTY )
I, the undersigned Notary Public in and for said County in said State,
hereby certify that ____________________ _______, whose name as
_____________________________ of McClain of Alabama, Inc., a Michigan
corporation, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of said
instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand this the ___ day of __________________,1997.
--------------------------------------
Notary Public
[NOTARIAL SEAL]
My commission expires:
----------------
<PAGE> 32
EXHIBIT "A"
LEGAL DESCRIPTION
A parcel of land lying and being in Section 11, Township 17 North, Range I
East, Marengo County, Alabama, containing 88.1 acres more or less, and being
more particularly described as follows:
Commence at the southwest corner of the Northeast Quarter of the Southwest
Quarter of said Section 11; thence run north 01 degrees 50' west along the west
boundary of said Northeast Quarter of Southwest Quarter a distance of 82.6 feet
to a concrete monument set to mark the point of beginning; thence run north 40
degrees 29' east parallel to and 350 feet perpendicular from the centerline of
the existing runway No. 4 of the Demopolis Airport a distance of 3,245.9 feet
to a concrete monument set 600 feet perpendicular from the centerline of
existing runway No. 13 of the said Demopolis Airport; thence run North 51
degrees 55' west and parallel to said runway No. 13 a distance of 1,568.8 feet
to a concrete monument set on the southeast boundary of a cemetery; thence run
south 38 degrees 05' west a distance of 20.0 feet to a concrete monument set at
the southern most corner of said cemetery; thence run north 51 degrees 55' west
along the southwest boundary of said cemetery a distance of 43.2 feet to a
concrete monument set near the left bank of the Tombigbee River. Continue
thence north 51 degrees 55' west to the said Tombigbee River; thence
southwestwardly along the southeast edge of said Tombigbee River to the point
of intersection of said river and the west boundary of the Southeast Quarter of
the Northwest Quarter of Section 11, said course follows generally along a
meander line described as: from last named concrete monument run south 47
degrees 04' west a distance of 515.2 feet; thence run south 41 degrees 54' west
a distance of 367.2 feet; thence run south 50 degrees 42' west a distance of
515.2 feet; thence run south 41 degrees 54' west a distance of 367.2 feet;
thence run south 50 degrees 42' west a distance of 370.0 feet to a concrete
monument found on the said west boundary of the Southeast Quarter of the
Northwest Quarter near the left bank of said river; thence run south 01 degrees
50' east and along the west boundary of said Southwest Quarter of Northwest
quarter and Northeast Quarter of Southwest Quarter a distance of 2,590.2 feet
to the point of beginning.
LESS AND EXCEPT the following described tract heretofore conveyed to Alabama
Power Company and more particularly described as follows:
A parcel of land located in the Northeast Quarter of the Southwest Quarter (NE
1/4 of SW 1/4) and the Southeast Quarter of Northwest Quarter (SE 1/4 of NW
1/4) of Section 11, Township 17 North, Range 1 East, Marengo County, Alabama,
and being more particularly described as follows:
Commence at the southwest corner of the Northeast Quarter of Southwest Quarter
(NE 1/4 of SW 1/4) of Section 11 and run North 01 degree 50 minutes West a
distance of 651.4 feet to a point; thence turn an angle to the right and run
North 40 degrees 31 minutes East a distance of 1130.83 feet to a point, said
point being the northwest corner of existing Alabama Power Company substation
and point of beginning of the property herein described; thence from point of
beginning continue North 40 degrees 31 minutes East a distance of 150.0 feet to
a point; thence turn an angle to the right and run South 49 degrees 29 minutes
East a distance of 150 feet to a point; thence turn an angle to the right and
run South 40 degrees 31 minutes West a distance of 50 feet to a point; thence
turn an angle to the left and run South 49 degrees 29 minutes East a distance
of 115.2 feet to the northwesterly boundary line of a paved road; thence turn
an angle to the right and run South 40 degrees 31 minutes West along the
northwesterly margin of said road a distance of 50 feet to a point; thence turn
an angle to the right and run North 49 degrees 29 minutes West a distance of
115.2 feet to a point; thence turn an angle to the left and run South 40
degrees 31 minutes West a distance of 50 feet to a point; thence turn an angle
to the right and run North 49 degrees 29 minutes West a distance of 150 feet to
the point of beginning.
The foregoing property being conveyed to the Alabama Power Company by Deeds
recorded October 2, 1985 in the Probate Office, Marengo County, Alabama, in
Deed Book 7-U at Page 296 and Deed Book 7-U, at Page 300.
<PAGE> 1
EXHIBIT 10.71
STANDARD FEDERAL BANK
IRREVOCABLE LETTER OF CREDIT
Date: April 23, 1997
Irrevocable Letter of Credit No. 284
LaSalle National Bank, as Trustee under
the Trust Indenture referred to below
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Administration
Ladies and Gentlemen:
1. For the account of McClain of Alabama, Inc., a Michigan corporation
(the "Company"), we hereby authorize you to draw on us at sight, as hereinafter
provided, an amount not exceeding $5,302,301.37 (such amount, as reduced from
time to time pursuant to paragraph 9 below and as reinstated from time to time
pursuant to paragraphs 10 and 11 below, being herein called the "Stated
Amount").
2. This Letter of Credit is irrevocable and is issued to you, as
Trustee under the Trust Indenture dated as of April 1, 1997 (the "Indenture"),
between you and The Industrial Development Board of the City of Demopolis, an
Alabama public corporation (the "Board"), pursuant to which $5,225,000 in
aggregate principal amount of the Board's Industrial Development Revenue Bonds,
Series 1997 (McClain of Alabama, Inc. Project) (the "Bonds") are being issued.
This Letter of Credit is issued pursuant to a Reimbursement Agreement dated as
of April 1, 1997 (the "Reimbursement Agreement") between us and the Company.
3. Of the Stated Amount, up to $5,225,000, which is an amount equal to
the principal amount of the Bonds (the "Principal Portion"), may be drawn with
respect to payment of the unpaid principal amount of the Bonds, or payment of
the principal portion of the purchase price of Bonds tendered (or deemed
tendered) to you for purchase in accordance with the optional or mandatory
tender provisions of the Indenture ("Tendered Bonds") and up to $77,301.37,
which is an amount equal to the maximum amount of interest payable on the Bonds
at the rate of 12% per annum for a period of 45 days, computed on the basis of a
365-day year (the "Interest
<PAGE> 2
Portion"), may be drawn with respect to payment of accrued but unpaid interest
on the Bonds, or payment of the interest portion of the purchase price of
Tendered Bonds. This Letter of Credit does not apply to any interest that may
accrue on the Bonds after the Bonds become due (whether by maturity, redemption,
acceleration or otherwise). No demand for payment under this Letter of Credit
may be made with respect to any Obligor Bond (as defined in the Indenture).
4. Funds under this Letter of Credit are available to you against your
sight draft(s), drawn on us, stating on their face: "Drawn under Standard
Federal Bank Irrevocable Letter of Credit No. 284" accompanied by your written
certificate signed by your authorized officer, appropriately completed, in the
form of Appendix A, B or C hereto, as indicated below. Presentation of such
documents shall be made at our office located at
2600 West Big Beaver Road
Troy, Michigan 48084
Attention: Dee Swanson/David Bartlett
or at any other office that may be designated by us by written notice delivered
to you (the office address specified above and any other office so designated by
us being herein called our "Designated Office"). Presentation may be made by
actual delivery or by facsimile transmission to our Designated Office at (810)
637-5003 or such other number as we shall specify by written notice to you. For
purposes of this Letter of Credit, a document shall be deemed "presented" only
when such document is actually received by us at our Designated Office, whether
presented in person or by facsimile as provided above. You may verify our
receipt of documents delivered by facsimile by telephone inquiry at (810)
643-9600, extension 6347, or at such other telephone number as we shall specify
by written notice to you. If documents are presented to us by facsimile, the
requirement for presentation of a draft shall be waived.
5. For drawings under the Principal Portion to pay principal of the
Bonds due upon maturity, redemption or acceleration (a "Principal Drawing"),
your drafts must be accompanied by your written certificate signed by your
authorized officer and appropriately completed in the form of Appendix A.
6. For drawings under the Interest Due Portion to pay the interest due
on the Bonds (an "Interest Drawing"), your drafts must be accompanied by your
written certificate signed by your authorized officer and appropriately
completed in the form of Appendix B.
7. For drawings under the Principal Portion and (if applicable) the
Interest Portion to pay the purchase price of Tendered Bonds (a "Purchase
Drawing"), your draft must be accompanied by your written certificate signed by
your authorized officer and appropriately completed in the form of Appendix C.
2
<PAGE> 3
8. We hereby agree that each draft drawn under and in compliance with
the terms of this Letter of Credit will be duly honored by us with our own funds
upon delivery of the required documentation at our Designated Office on or
before the expiration date hereof. If a drawing is made by you hereunder at or
prior to 11:30 a.m. (Eastern Standard time) on a business day, and provided that
the documents so presented conform to the terms and conditions hereof, payment
shall be made to you, or to your designee, of the amount specified, in
immediately available funds, not later than 1:30 p.m. (Eastern Standard time) on
the same business day. If a drawing is made by you hereunder after 11:30 a.m.
(Eastern Standard time) on a business day, and provided that the documents so
presented conform to the terms and conditions hereof, payment shall be made to
you, or to your designee, of the amount specified, in immediately available
funds, not later than 11:00 a.m. (Eastern Standard time) on the next succeeding
business day. Payment under this Letter of Credit may be made by deposit of
immediately available funds into a designated account that you maintain with us.
As used herein "business day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the city where our Designated Office
is located are closed.
9. Multiple drawings may be made hereunder, provided that drawings
honored by us hereunder shall not, in the aggregate, exceed the Stated Amount.
The Stated Amount shall be reduced as follows:
(a) Payment by us of a Principal Drawing shall reduce the
Principal Portion of the Stated Amount by the amount of such drawing,
without reinstatement.
(b) Payment by us of an Interest Drawing shall reduce the
Interest Portion of the Stated Amount by the amount of such Drawing,
subject to reinstatement as provided in paragraph 10 below.
(c) Payment by us of a Purchase Drawing shall reduce the
Principal Portion of the Stated Amount, to the extent of the Principal
Portion of the purchase price so drawn, and shall reduce the Interest
Portion of the Stated Amount, to the extent of the interest portion of
the purchase price so drawn, in each case subject to reinstatement as
provided in paragraph 11 below.
(d) At any time after the principal amount of the Bonds
outstanding is reduced as a result of payment of the principal of Bonds
due upon maturity, redemption or acceleration other than as a result of
a payment made pursuant to a drawing under this Letter of Credit, the
Interest Portion of the Stated Amount may be reduced by delivery to us
of written notice from you certifying the maximum amount of interest
that would be payable on the Bonds then outstanding for a period of 45
days at the rate of 12% per annum, computed on the basis of a 365-day
year (the "Maximum Interest Coverage"). Upon receipt by us of such
notice from you, the Interest Portion of the Stated Amount shall be
reduced to the
3
<PAGE> 4
Maximum Interest Coverage so certified by you and shall not thereafter
be increased or reinstated to an amount in excess of such Maximum
Interest Coverage.
Reductions of the Stated Amount as provided in this paragraph
shall be effective notwithstanding the fact that the sight draft or certificate
presented does not strictly comply with the terms of this Letter of Credit,
contains a signature or endorsement that proves to be forged, fraudulent or
otherwise insufficient, or contains an inaccurate statement, and notwithstanding
any improper use made by you of the proceeds of any such draw.
10. At the close of business on the 10th day following payment by us of
any Interest Drawing hereunder made in connection with a regularly scheduled
interest payment, the Interest Portion of the Stated Amount will be
automatically reinstated by the amount of such Interest Drawing unless prior to
the close of business on the 10th day following payment of such Interest Drawing
you shall receive notice from us (or the issuer of any confirmation of this
Letter of Credit) (i) stating that an event of default, as defined in the Credit
Agreement, has occurred and is continuing and (ii) directing that the Bonds be
declared due and payable pursuant to Section 10.2(a) of the Indenture; provided,
however, that the Interest Portion shall never be reinstated to an amount in
excess of the Maximum Interest Coverage, as certified in the most recent notice
with respect to Maximum Interest Coverage received by us pursuant to paragraph 9
above.
11. After payment by us of a Purchase Drawing with respect to any
Tendered Bond or Bonds, this Letter of Credit shall be reinstated by the amount
of such Drawing upon the occurrence of either of the following events:
(a) Reinstatement shall occur simultaneously with payment of
funds by you to us in the amount of such Drawing; or
(b) Reinstatement shall occur upon receipt by you of written
notice from us stating that we have been reimbursed by the Company for
the amount of such Drawing.
Upon any such reinstatement, the Principal Portion of the Stated Amount shall be
reinstated by the amount of such Drawing related to the principal portion of the
purchase price of Tendered Bonds, and the Interest Portion of the Stated Amount
shall be reinstated by the amount of such Drawing related to the interest
portion of the purchase price of Tendered Bonds; provided, however, that the
Interest Portion shall never be reinstated to an amount in excess of the Maximum
Interest Coverage.
12. Only you, as trustee under the Indenture, may make a drawing under
this Letter of Credit. Upon the payment to you or your account of the amount
specified in sight drafts drawn hereunder, we shall be fully discharged of our
obligation under this Letter of Credit with respect to such sight drafts and we
shall not thereafter be obligated to make any further payments under
4
<PAGE> 5
this Letter of Credit in respect of such sight drafts to you or any other person
who may have made or makes a demand for payment of principal or interest with
respect to any Bond.
13. This Letter of Credit shall be effective immediately and shall
automatically terminate upon the earliest of
(a) the honoring by us of the final drawing available to be
made hereunder, provided that the principal balance of the Stated
Amount has been reduced to zero.
(b) our receipt of a certificate in the form of Appendix D
hereto appropriately completed and purportedly signed by your duly
authorized officer, and
(c) our close of business on May 15, 1998 (the "Expiration
Date").
provided however, that on each March 15, beginning March 15, 1998 (each such
date being referred to as an "Extension Date"), the Expiration Date of this
Letter of Credit shall be extended for one year unless we shall send you written
notice in the form of Appendix F prior to such Extension Date stating that the
Expiration Date shall not be so extended; provided, further, that the Expiration
Date shall not in any event be later than May 15, 2007. Upon the expiration of
this Letter of Credit you shall immediately deliver the same to us for
cancellation.
14. You may transfer your rights in their entirety (but not in part) to
any transferee who has succeeded you as trustee under the Indenture, and such
transferred rights may be successively transferred. Such transfer shall be
effected upon the presentation to us (or the issuer of any confirmation of this
Letter of Credit in the event we have wrongfully dishonored a drawing under this
Letter of Credit, we have repudiated this Letter of Credit or we are insolvent)
of this Letter of Credit accompanied by a transfer letter in the form attached
hereto as Appendix E. Upon presentation of such documents to us, we shall
forthwith issue an irrevocable letter of credit to your transferee with
provisions consistent with this Letter of Credit or endorse the transfer on the
reverse of this Letter of Credit and forward it directly to the transferee
together with our customary notice of transfer.
15. This Letter of Credit is subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce, Publication No. 500 (the "Uniform Customs"). This Letter of Credit
shall be deemed to be made under the laws of the State of Michigan, including
Article 5 of the Uniform Commercial Code as now in effect in the State of
Michigan, and shall be governed by and construed in accordance with the laws of
the State of Michigan. As to any matter of conflict between the provisions
of the Uniform Customs and the laws of the State of Michigan, the Uniform
Customs shall govern this Letter of Credit.
5
<PAGE> 6
16. This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document (except for the Uniform Customs), instrument or
agreement referred to herein (including, without limitation, the Bonds); and any
such reference shall not be deemed to incorporate herein by reference any
document, instrument or agreement except for such certificates, such sight
drafts and the Uniform Customs.
Very truly yours,
STANDARD FEDERAL BANK
By:_____________________
Name: David Bartlett
Title: Vice President
6
<PAGE> 7
APPENDIX A
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Certificate for Principal Drawing
LaSalle National Bank, as trustee (the "Trustee"), hereby certifies to
Standard Federal Bank (the "Bank"), with reference to Irrevocable Letter of
Credit No. 284 (the "Letter of Credit"); capitalized terms not otherwise defined
herein shall have the meaning assigned to such terms in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Principal Portion of the
Letter of Credit in the amount of $______________ to be used for the payment of
unpaid principal on the Bonds due upon [maturity]*, [redemption]* or
[acceleration]*. Such amount is due and payable with respect to the principal of
the Bonds, or will be due and payable on the date that the Bank is required to
pay [the draft(s) accompanying]** this certificate.
(3) The aggregate amount [of the sight draft(s) accompanying]** this
certificate that is allocable to the payment of principal of the Bonds does not
exceed the amount available on the date hereof to be drawn under the Principal
Portion of the Letter of Credit.
(4) After the Bonds with respect to which this draw is made are
retired, the aggregate principal amount of Bonds outstanding under the Indenture
will be $__________________ After payment by you of this drawing and the
accompanying Interest Drawings, if any, the Maximum Interest Coverage (as
defined in the Letter of Credit) will be $________________.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this day of , .
LaSALLE NATIONAL BANK,
as Trustee
By:________________________
Title:_____________________
_______________________________
* Insert as applicable.
** Delete if presentation is by telecopy.
<PAGE> 8
APPENDIX B
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Certificate for Interest Drawing
LaSalle National Bank, as trustee (the "Trustee"), hereby certifies to
Standard Federal Bank (the "Bank"), with reference to Irrevocable Letter of
Credit No. 284 (the "Letter of Credit"); capitalized terms not otherwise defined
herein shall have the meaning assigned to such terms in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Interest Portion of the
Letter of Credit in the amount of $______________ to be used for the payment of
unpaid interest due on the Bonds relating to [acceleration] [redemption]
[maturity] [a regularly scheduled interest payment]*. Such amount is due and
payable with respect to interest on the Bonds, or will be due and payable on the
date that the Bank is required to pay [the draft(s) accompanying]** this
certificate.
(3) The aggregate amount of [the sight draft(s) accompanying this
certificate]** does not exceed the amount available on the date hereof to be
drawn under the Interest Portion of the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this ____ day of
_________, _______________.
LaSALLE NATIONAL BANK, as Trustee
By:_______________________________
Title:____________________________
_________________________________
* Insert as applicable.
** Delete if presentation is by telecopy.
<PAGE> 9
APPENDIX C
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Certificate for Purchase Drawing
LaSalle National Bank, as trustee (the "Trustee"), hereby certifies to
Standard Federal Bank (the "Bank"), with respect to Irrevocable Letter of Credit
No. 284 (the "Letter of Credit"); capitalized terms not otherwise defined herein
shall have the meaning assigned to such terms in the Letter of Credit) issued by
the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture.
(2) The Trustee is making a drawing under the Letter of Credit
in the amount of $ to be used to pay the purchase price of Tendered
Bonds. Of the aggregate amount drawn, $ is drawn under the Interest
Portion of the Letter of Credit to pay the interest portion of such
purchase price and $ is drawn under the Principal Portion of the Letter
of Credit to pay the principal portion of such purchase price. The
aggregate amount so drawn is due and payable with respect to the
purchase price of Tendered Bonds, or will be due and payable on the
date that the Bank is required to pay [the draft(s) accompanying]* this
certificate.
(3) The aggregate amount of [the sight draft(s) accompanying]*
this certificate does not exceed the amount available on the date
hereof to be drawn under the Letter of Credit; the amount designated
above as drawn against the Interest Portion does not exceed the amount
available on the date hereof to be drawn under the Interest Portion of
the Letter of Credit; and the amount designated above as drawn against
the Principal Portion does not exceed the amount available on the date
hereof to be drawn under the Principal Portion of the Letter of Credit.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this ____ day of
________, ________________.
LaSALLE NATIONAL BANK, as Trustee
By:__________________________________
Title:_______________________________
_______________________________
* Delete if presentation is by telecopy.
<PAGE> 10
APPENDIX D
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Certificate for Cancellation
LaSalle National Bank, as trustee (the "Trustee"), hereby certifies to
Standard Federal Bank (the "Bank"), with reference to Irrevocable Letter of
Credit No. 284 (the "Letter of Credit"); capitalized terms not otherwise defined
herein shall have the meaning assigned to such terms in the Letter of Credit)
issued by the Bank in favor of the Trustee, that:
(1) The Trustee is the trustee under the Indenture
(2) The Letter of Credit is hereby delivered to the Bank for
cancellation because:
(a) the Bonds have been fully paid, or provision for such
payment has been made, in accordance with the terms of Article 16 of the
Indenture; or
(b) the terms and conditions of the Indenture for the
acceptance by the Trustee of a substitute letter of credit and the cancellation
of the Letter of Credit have been satisfied.
IN WITNESS WHEREOF, the Trustee has caused this certificate to be
executed and delivered by its duly authorized officer on this ____ day of
______, ________________.
LaSALLE NATIONAL BANK,
as Trustee
BY:___________________________________
NAME:_________________________________
TITLE:________________________________
cc: [The issuer of any confirmation of the
Letter of Credit referring to the confirmation number]
<PAGE> 11
APPENDIX E
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Transfer Letter
Standard Federal Bank
2600 West Big Beaver Road
Troy, Michigan 48084
Attention:____________________
Date:_________________________
Gentlemen:
With reference to your Irrevocable Letter of Credit No. 284 (the
"Letter of Credit"; capitalized terms not otherwise defined herein shall have
the meaning assigned to such terms in the Letter of Credit), we hereby transfer
to [insert name and address of transferee] all right, title and interest of the
undersigned in and to the Letter of Credit, including any amendments already
existing or hereafter made.
We hereby certify that the transferee is the successor trustee under
the Indenture.
Please notify the transferee of this transfer.
The Letter of Credit (including amendments to this date, if any) is
returned herewith, and we request that you issue a new irrevocable letter of
credit in favor of the transferee with provisions consistent with the Letter of
Credit, as required by the terms of the Letter of Credit. This transfer shall be
void and of no effect if you fail to transfer such a letter of credit to the
transferee or endorse the transfer on the reverse of the original Letter of
Credit and forward the same directly to the transferee together with your
customary notice of transfer.
Yours very truly,
LaSALLE NATIONAL BANK, as Trustee
By:__________________________________
Title:_______________________________
cc: [The issuer of any confirmation of this
Letter of Credit referring to the confirmation number]
<PAGE> 12
APPENDIX F
TO
STANDARD FEDERAL BANK IRREVOCABLE
LETTER OF CREDIT NO. 284
Notice of Non-Extension
LaSalle National Bank, as Trustee
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Administration
Ladies and Gentlemen:
Standard Federal Bank hereby notifies you that the Expiration Date of
our Letter of Credit No. 284 ("Letter of Credit") will not be extended past
_____, ________________.
This notice is being given pursuant to paragraph 13 of the Letter of Credit.
Yours very truly,
STANDARD FEDERAL BANK
By:_______________________________
Title:____________________________
cc: [Issuer of any confirmation of the
Letter of Credit referring to the confirmation number]
<PAGE> 13
IRREVOCABLE CONFIRMATION NO. 9200101378
Date of Issue: April 23, 1997
Stated Expiration Date: May 15, 1998
To: LaSalle National Bank, as Trustee
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Department
Ladies and Gentlemen:
At the request of Standard Federal Bank ("SFB") we hereby issue this
Confirmation to you, LaSalle National Bank, as Trustee under the Trust Indenture
dated as of April 1, 1997 between you and The Industrial Development Board of
the City of Demopolis ("Issuer") (together with any amendments or supplements
thereto, the "Indenture"), for the benefit of the holders of the Issuer's
Industrial Development Revenue Bonds, Series 1997 (McClain of Alabama, Inc.
Project)(the "Bonds"), and we hereby confirm SFB's Irrevocable Letter of Credit
No. 284, issued on April 23, 1997 (the "Letter of Credit"), in your favor as
security for the payment of principal of, interest on, and the purchase price of
the Bonds. Our confirmation herein is provided in favor of you, as Trustee for
the benefit of the holders of the Bonds. Drawings under this Confirmation may be
made by you as Trustee under the Indenture to the extent provided herein.
This Confirmation is for the maximum amount of $5,302,301.37 subject to
reduction and reinstatement as provided in the Letter of Credit (the "Stated
Amount"). The Stated Amount will, subject to reduction and reinstatement as
aforesaid, at all times during the term of this Confirmation, be an amount equal
to the outstanding principal balance of the Bonds plus an amount equal to 45
days accrued interest on the principal balance at an interest rate of twelve
percent (12%) per annum. All drawings under this Confirmation will be paid with
our own funds.
Up to the Stated Amount shall be available upon presentation by you of
a draft or drafts (each of which drafts shall have been signed by a duly
authorized officer of the Trustee(and which shall be indicated "Drawn under the
Standard Federal Bank Irrevocable Letter of Credit No. 284 and LaSalle National
Bank Confirmation No. 9200101378" accompanied by a Certificate (also so signed)
in the form set forth in Exhibit A hereto.
All documents presented to us in connection with any demand for payment
hereunder, as well as all notices and other communications to us in respect of
this Confirmation, shall be in writing and addressed and presented to us on or
prior to the expiration date of this Confirmation at our office located at: 200
West Monroe, Suite 100, Chicago, Illinois 60606, Attention:
1
<PAGE> 14
International Banking Department, and shall make specific reference to this
Confirmation by number. Such documents, notices and other communications shall
be personally delivered to us, or may be sent to us by telecopy to such office
(Telecopier Number 312-904-6303) (and if by telecopy, the original documents
need not be presented).
We confirm to the Trustee that we will honor a draft or drafts under
and in compliance with the terms of this Confirmation if presented on a Business
Day at our address stated above in accordance herewith, together with payment
instructions from the Trustee, prior to the expiration date of this
Confirmation. For purposes of this Confirmation, a "Business Day" shall mean any
other than a Saturday, a Sunday or a day on which banking institutions in
Chicago, Illinois are closed.
Funds under this Confirmation are available to the Trustee against a
draft referring thereon to the number of this Confirmation and accompanied by a
written and completed certificate signed by the Trustee in the form of Exhibit A
attached hereto, together with a copy of the documents presented under SFB's
Irrevocable Letter of Credit No. 284. If we receive any drafts from the Trustee
at our office referred to above, all in strict conformity with the terms and
conditions of this Confirmation, no later than 1:45 p.m. (Eastern Standard
time), on a Business Day prior to the termination hereof, we will honor the same
no later than 3:30 p.m. (Eastern Standard time), on the same day in accordance
with the payment instructions of the Trustee. If we receive any of the drafts
and certificates of the Trustee at such office, all in strict conformity with
the terms and conditions of this Letter of Credit, after 1:45 p.m. (Eastern
Standard time), on a Business Day prior to the termination hereof, we will honor
the same no later than 11:00 a.m. (Eastern Standard time) on the next succeeding
Business Day in accordance with the payment instructions of the Trustee.
This Confirmation shall automatically expire upon the earliest of (a)
May 15, 1998, (b) the termination of the Letter of Credit or (c) your surrender
to us of this Confirmation; provided however, that on each March 15, beginning
March 15, 1998 (each such date being referred to as an "Extension Date"), the
expiration date of this Confirmation shall be extended for one year unless we
shall send you written notice prior to such Extension Date stating that the
expiration date shall not be so extended; provided, further, that the expiration
date shall not in any event be later than May 15, 2007. Upon the expiration of
this Confirmation you shall immediately deliver the same to us for cancellation.
Except as set forth in the Exhibits and drafts referred to herein which
are hereby incorporated by reference, this Confirmation sets forth in full the
terms of our undertaking and this undertaking shall not in any way be modified,
amended, amplified or limited by reference to any document (except the Uniform
Customs, as defined below), instrument or agreement referred to herein
(including, without limitation, the Bonds) or in which this Confirmation is
referred to; and any such reference shall not be deemed to incorporate
therein by reference any document, instrument or agreement except for such
Exhibits, such drafts and the Uniform Customs.
2
<PAGE> 15
This Confirmation is transferable in its entirety to any transferee who
is acceptable to us whom you certify to us as has succeeded you as Trustee and
as beneficiary of the Letter of Credit, and may be successively transferred. In
addition, the Trustee may transfer its beneficial rights hereunder to any
transferee whom the Trustee certifies to us has succeeded it as Trustee for the
Bonds, and may be successively transferred. Transfer of this Confirmation to
such transferee shall be effected by the presentation to us of this Confirmation
accompanied by a certificate in substantially the form of Exhibit B attached
hereto. Upon such presentation we shall forthwith transfer the same to the
transferee by endorsing the transfer on the reverse of this Confirmation and
forwarding the same directly to the transferee together with our customary
notice of transfer or, if so requested by the transferee, issue a confirmation
to the transferee with provisions therein consistent with this Confirmation.
This Confirmation is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). This Confirmation shall be governed
by the laws of the State of Illinois, including the Uniform Commercial Code as
in effect in the State of Illinois. As to any matter of conflict between the
provisions of the Uniform Customs and the laws of the State of Illinois, the
Uniform Customs shall govern this Confirmation.
Very truly yours,
LASALLE NATIONAL BANK
By:_______________________________
Name:
Title:________________________
By:_______________________________
Name:
Title:________________________
3
<PAGE> 16
EXHIBIT A
TO THE
IRREVOCABLE CONFIRMATION NO. 9200101378
OF
LASALLE NATIONAL BANK
CERTIFICATE
The undersigned is the incumbent Trustee for the benefit of the holders
of the outstanding Industrial Development Revenue Bonds, Series 1997 (McClain of
Alabama, Inc. Project) (the "Bonds"), issued by The Industrial Development Board
of the City of Demopolis (the "Issuer"), which Bonds were issued under the Trust
Indenture dated April 1, 1997 between the Issuer and the Trustee (together with
any amendments or supplements thereto, the "Indenture"). As such Trustee, the
undersigned is the beneficiary of Irrevocable Letter of Credit No. 284 (the "SFB
Letter of Credit"), issued on April 23, 1997, by Standard Federal Bank ("SFB").
1. The undersigned is making a drawing under the Irrevocable
Confirmation No. 9200101378 (the "Confirmation") of LaSalle National Bank.
2. [The undersigned has timely presented document(s) in the amount of
$_____________ to SFB under and in full compliance with the terms of the SFB
Letter of Credit, which draft has been wrongfully dishonored by SFB.] [SFB has
repudiated the Letter of Credit] [SFB is insolvent]*
3. The attached is a copy of the document(s) presented to SFB described
in Paragraph 2 above.
4. The amount of the draft which accompanies this Certificate was
computed in accordance with the provisions of the Bonds and the Indenture.
5. The drawing under the SFB Letter of Credit was made in accordance
with the terms of the Resolution.
6. The amount hereby demanded does not exceed the amount available to
be drawn under the SFB Letter of Credit for this drawing.
_________________________
*Insert as applicable.
<PAGE> 17
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this ____ day of________________,________.
LASALLE NATIONAL BANK, as Trustee
By:_______________________________
Name:
Title:
B-2
<PAGE> 18
EXHIBIT B
TO THE
IRREVOCABLE CONFIRMATION NO. 9200101378
OF
LASALLE NATIONAL BANK
[FORM OF TRANSFER CERTIFICATE]
INSTRUCTION TO TRANSFER
LaSalle National Bank
200 West Monroe
Suite 1100
Chicago, Illinois 60606
Attention: ___________________________
Re: Your Irrevocable Confirmation No. 9200101378
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
__________________________
[Name of Transferee]
__________________________
[Address]
all rights of the undersigned beneficiary to draw under the above-referenced
Confirmation (the "Confirmation"). The transferee has succeeded the undersigned
as Trustee under the Indenture and as beneficiary under SFB's Letter of Credit
(as such terms are defined in the Confirmation).
By this transfer, all rights of the undersigned beneficiary in the
Confirmation are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof, provided, however, that
no right shall be deemed to have been transferred to the transferee until such
transfer complies with the requirements of the Confirmation pertaining to
transfers.
<PAGE> 19
The Confirmation is returned herewith and in accordance therewith we
ask that this transfer be effective and that you transfer the Confirmation to
our transferee by endorsing the transfer on the reverse of the original
Confirmation and forwarding the same directly to the transferee together with
your customary notice of transfer or that, if so requested by the transferee,
you issue a new irrevocable confirmation in favor of the transferee with
provisions consistent with the Confirmation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this ____ day of___________________,______.
LASALLE NATIONAL BANK, as Trustee
By:_______________________________________
Name:
Title:
C-2
<PAGE> 20
IRREVOCABLE CONFIRMATION NO. 9200101378
Date of Issue: April 23, 1997
Stated Expiration Date: May 15, 1998
To: LaSalle National Bank, as Trustee
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Department
Ladies and Gentlemen:
At the request of Standard Federal Bank ("SFB") we hereby issue this
Confirmation to you, LaSalle National Bank, as Trustee under the Trust Indenture
dated as of April 1, 1997 between you and The Industrial Development Board of
the City of Demopolis ("Issuer") (together with any amendments or supplements
thereto, the "Indenture"), for the benefit of the holders of the Issuer's
Industrial Development Revenue Bonds, Series 1997 (McClain of Alabama, Inc.
Project)(the "Bonds"), and we hereby confirm SFB's Irrevocable Letter of Credit
No. 284, issued on April 23, 1997 (the "Letter of Credit"), in your favor as
security for the payment of principal of, interest on, and the purchase price of
the Bonds. Our confirmation herein is provided in favor of you, as Trustee for
the benefit of the holders of the Bonds. Drawings under this Confirmation may be
made by you as Trustee under the Indenture to the extent provided herein.
This Confirmation is for the maximum amount of $5,302,301.37 subject to
reduction and reinstatement as provided in the Letter of Credit (the "Stated
Amount"). The Stated Amount will, subject to reduction and reinstatement as
aforesaid, at all times during the term of this Confirmation, be an amount equal
to the outstanding principal balance of the Bonds plus an amount equal to 45
days accrued interest on the principal balance at an interest rate of twelve
percent (12%) per annum. All drawings under this Confirmation will be paid with
our own funds.
Up to the Stated Amount shall be available upon presentation by you of
a draft or drafts (each of which drafts shall have been signed by a duly
authorized officer of the Trustee(and which shall be indicated "Drawn under the
Standard Federal Bank Irrevocable Letter of Credit No. 284 and LaSalle National
Bank Confirmation No. 9200101378" accompanied by a Certificate (also so signed)
in the form set forth in Exhibit A hereto.
All documents presented to us in connection with any demand for payment
hereunder, as well as all notices and other communications to us in respect of
this Confirmation, shall be in writing and addressed and presented to us on or
prior to the expiration date of this Confirmation at our office located at: 200
West Monroe, Suite 100, Chicago, Illinois 60606, Attention:
<PAGE> 21
International Banking Department, and shall make specific reference to this
Confirmation by number. Such documents, notices and other communications shall
be personally delivered to us, or may be sent to us by telecopy to such office
(Telecopier Number 312-904-6303) (and if by telecopy, the original documents
need not be presented).
We confirm to the Trustee that we will honor a draft or drafts under
and in compliance with the terms of this Confirmation if presented on a Business
Day at our address stated above in accordance herewith, together with payment
instructions from the Trustee, prior to the expiration date of this
Confirmation. For purposes of this Confirmation, a "Business Day" shall mean any
other than a Saturday, a Sunday or a day on which banking institutions in
Chicago, Illinois are closed.
Funds under this Confirmation are available to the Trustee against a
draft referring thereon to the number of this Confirmation and accompanied by a
written and completed certificate signed by the Trustee in the form of Exhibit A
attached hereto, together with a copy of the documents presented under SFB's
Irrevocable Letter of Credit No. 284. If we receive any drafts from the Trustee
at our office referred to above, all in strict conformity with the terms and
conditions of this Confirmation, no later than 1:45 p.m. (Eastern Standard
time), on a Business Day prior to the termination hereof, we will honor the same
no later than 3:30 p.m. (Eastern Standard time), on the same day in accordance
with the payment instructions of the Trustee. If we receive any of the drafts
and certificates of the Trustee at such office, all in strict conformity with
the terms and conditions of this Letter of Credit, after 1:45 p.m. (Eastern
Standard time), on a Business Day prior to the termination hereof, we will honor
the same no later than 11:00 a.m. (Eastern Standard time) on the next succeeding
Business Day in accordance with the payment instructions of the Trustee.
This Confirmation shall automatically expire upon the earliest of (a)
May 15, 1998, (b) the termination of the Letter of Credit or (C) your surrender
to us of this Confirmation; provided however, that on each March 15, beginning
March 15, 1998 (each such date being referred to as an "Extension Date"), the
expiration date of this Confirmation shall be extended for one year unless we
shall send you written notice prior to such Extension Date stating that the
expiration date shall not be so extended; provided, further, that the expiration
date shall not in any event be later than May 15, 2007. Upon the expiration of
this Confirmation you shall immediately deliver the same to us for cancellation.
Except as set forth in the Exhibits and drafts referred to herein which
are hereby incorporated by reference, this Confirmation sets forth in full the
terms of our undertaking and this undertaking shall not in any way be modified,
amended, amplified or limited by reference to any document (except the Uniform
Customs, as defined below), instrument or agreement referred to herein
(including, without limitation, the Bonds) or in which this Confirmation is
referred to; and any such reference shall not be deemed to incorporate therein
by reference any document, instrument or agreement except for such Exhibits,
such drafts and the Uniform Customs.
2
<PAGE> 22
This Confirmation is transferable in its entirety to any transferee who
is acceptable to us whom you certify to us as has succeeded you as Trustee and
as beneficiary of the Letter of Credit, and may be successively transferred. In
addition, the Trustee may transfer its beneficial rights hereunder to any
transferee whom the Trustee certifies to us has succeeded it as Trustee for the
Bonds, and may be successively transferred. Transfer of this Confirmation to
such transferee shall be effected by the presentation to us of this Confirmation
accompanied by a certificate in substantially the form of Exhibit B attached
hereto. Upon such presentation we shall forthwith transfer the same to the
transferee by endorsing the transfer on the reverse of this Confirmation and
forwarding the same directly to the transferee together with our customary
notice of transfer or, if so requested by the transferee, issue a confirmation
to the transferee with provisions therein consistent with this Confirmation.
This Confirmation is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500 (the "Uniform Customs"). This Confirmation shall be governed
by the laws of the State of Illinois, including the Uniform Commercial Code as
in effect in the State of Illinois. As to any matter of conflict between the
provisions of the Uniform Customs and the laws of the State of Illinois, the
Uniform Customs shall govern this Confirmation.
Very truly yours,
LASALLE NATIONAL BANK
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
3
<PAGE> 23
EXHIBIT A
TO THE
IRREVOCABLE CONFIRMATION NO. 9200101378
OF
LASALLE NATIONAL BANK
CERTIFICATE
The undersigned is the incumbent Trustee for the benefit of the holders
of the outstanding Industrial Development Revenue Bonds, Series 1997 (McClain of
Alabama, Inc. Project) (the "Bonds"), issued by The Industrial Development Board
of the City of Demopolis (the "Issuer"), which Bonds were issued under the Trust
Indenture dated April 1, 1997 between the Issuer and the Trustee (together with
any amendments or supplements thereto, the "Indenture"). As such Trustee, the
undersigned is the beneficiary of Irrevocable Letter of Credit No. 284 (the "SFB
Letter of Credit"), issued on April 23, 1997, by Standard Federal Bank ("SFB").
1. The undersigned is making a drawing under the Irrevocable
Confirmation No. 9200101378 (the "Confirmation") of LaSalle National Bank.
2. [The undersigned has timely presented document(s) in the amount of $
to SFB under and in full compliance with the terms of the SFB Letter of Credit,
which draft has been wrongfully dishonored by SFB.] [SFB has repudiated the
Letter of Credit] [SFB is insolvent]*
3. The attached is a copy of the document(s) presented to SFB described
in Paragraph 2 above.
4. The amount of the draft which accompanies this Certificate was
computed in accordance with the provisions of the Bonds and the Indenture.
5. The drawing under the SFB Letter of Credit was made in accordance
with the terms of the Resolution.
6. The amount hereby demanded does not exceed the amount available to
be drawn under the SFB Letter of Credit for this drawing.
- -----------------
*Insert as applicable.
<PAGE> 24
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this day of _______ ,__ .
LASALLE NATIONAL BANK, as Trustee
By:
----------------------------------
Name:
Title:
B-2
<PAGE> 25
EXHIBIT B
TO THE
IRREVOCABLE CONFIRMATION NO. 9200101378
OF
LASALLE NATIONAL BANK
[FORM OF TRANSFER CERTIFICATE]
INSTRUCTION TO TRANSFER
LaSalle National Bank
200 West Monroe
Suite 1100
Chicago, Illinois 60606
Attention:
-------------------------------------
Re: Your Irrevocable Confirmation No. 9200101378
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
------------------------------
[Name of Transferee]
------------------------------
[Address]
all rights of the undersigned beneficiary to draw under the above-referenced
Confirmation (the "Confirmation"). The transferee has succeeded the undersigned
as Trustee under the Indenture and as beneficiary under SFB's Letter of Credit
(as such terms are defined in the Confirmation).
By this transfer, all rights of the undersigned beneficiary in the
Confirmation are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof, provided, however, that
no right shall be deemed to have been transferred to the transferee until such
transfer complies with the requirements of the Confirmation pertaining to
transfers.
<PAGE> 26
The Confirmation is returned herewith and in accordance therewith we
ask that this transfer be effective and that you transfer the Confirmation to
our transferee by endorsing the transfer on the reverse of the original
Confirmation and forwarding the same directly to the transferee together with
your customary notice of transfer or that, if so requested by the transferee,
you issue a new irrevocable confirmation in favor of the transferee with
provisions consistent with the Confirmation.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this day of ______________, __.
LASALLE NATIONAL BANK, as Trustee
By:
-------------------------------------
Name:
Title:
C-2
<PAGE> 27
EXHIBIT "C"
All mortgages, security agreements, guaranties and other collateral
documents now or in the future executed and delivered to Bank by Obligor or any
guarantors in connection with the Bonds or any other credit facilities from the
Bank to the Obligor or any of the guarantors.
<PAGE> 28
GENERAL CERTIFICATE OF
AN OFFICER OF LASALLE NATIONAL BANK
The undersigned officer of LaSalle National Bank (the "Bank") does
hereby certify and represent that:
1. The Bank is a national banking association duly organized and
validly existing under the laws of the United States of America. The Bank has
full power to execute and deliver and to carry out and perform its obligations
under Confirmation No. 9200101378 (the "Confirmation") issued by the Bank to
LaSalle National Bank, as Trustee, including the making of payments thereunder.
2. The statements contained under the caption "The Confirmation"
in the Placement Memorandum dated April 23, 1997 relating to the $5,225,000 The
Industrial Development Board of the City of Demopolis Industrial Development
Revenue Bonds, Series 1997 (McClain of Alabama, Inc. Project) (the "Placement
Memorandum") are fair and accurate summaries of the provisions of the
agreements referred to therein.
3. The information and statements relating to the Bank contained
in the Placement Memorandum, including, without limitation, Appendix C thereto,
as of its date, and on the date hereof, do not and will not contain any untrue
statement of a material fact.
4. There has been no material adverse change in the general
affairs or in the financial condition or net assets of the Bank as a whole, as
shown in the Preliminary Placement Memorandum and to the Placement Memorandum.
Dated as of April 23, 1997
LASALLE NATIONAL BANK
By:
---------------------------
Its:
--------------------------
<PAGE> 29
EXECUTION COPY
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT (the "Agreement") dated as of April 1, 1997
(the "Execution Date") by and between McClain of Alabama, Inc., a Michigan
corporation, whose address is 6200 Elmridge, Sterling Heights, Michigan 48310
(the "Obligor") and STANDARD FEDERAL BANK, a federal savings bank, with an
office located at 2600 West Big Beaver Rd., Troy, Michigan 48084 (the "Bank").
WITNESSETH:
WHEREAS, The Industrial Development Board of the City of Demopolis
("Issuer") has issued its $5,225,000 Industrial Development Revenue Bonds
("Bonds") to finance a part of the cost of the acquisition of, construction of
and equipping of an industrial facility located in Demopolis, Alabama (the
"Project"). The Bonds are being issued pursuant to a Trust Indenture dated as
of April 1, 1997 (the "Indenture"), naming LaSalle National Bank, as trustee
(the "Trustee"), and
WHEREAS, in order to induce the purchasers of the Bonds (the "Bond
Purchasers") to purchase the Bond, the Obligor has requested that the Bank
issue an irrevocable letter of credit (such letter of credit and any successor
letter of credit as described in Section 2 of this Agreement being herein
called the "Letter of Credit") in an amount not to exceed $5,302,301.37 (such
amount being herein called the "Letter of Credit Amount") to secure payment of
the principal and purchase price of, and interest on, the Bonds;
NOW, THEREFORE, in consideration of the premises, the Obligor and the
Bank hereby agree as follows:
SECTION 1. Reimbursement and Other Payments.
(a) The Obligor hereby agrees with the Bank as follows:
(i) to pay the Bank, following payment by the Bank of any draft presented
under a Letter of Credit, and on the same day on which such draft is so paid, a
sum (and interest on such sum as provided in clause (ii) below) equal to the
amount so paid under the Letter of Credit; (ii) to pay the Bank, interest on
any and all amounts
<PAGE> 30
remaining unpaid by the Obligor hereunder, at any time from the date any such
amount becomes payable until payment in full, payable on demand, at a
fluctuating interest rate per annum (computed on the basis of a 360 day year
for the actual number of days elapsed) as shall be in effect from time to time,
which rate per annum shall be equal to three percent (3%) above the Wall Street
Journal Prime Rate, provided that such fluctuating interest rate shall in no
event be higher than the maximum rate permitted by law and, in addition, upon
demand by the Bank any and all reasonable expenses including but not limited to
legal expenses incurred by the Bank in enforcing any rights under this
Agreement. As used herein the phrase "Wall Street Journal Prime Rate" shall
mean the "Prime Rate" published by the Wall Street Journal as the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks as the
same may be changed from time to time. If more than one Prime Rate is
published, the highest rate published shall be deemed the Wall Street Journal
Prime Rate. If the publication of the Wall Street Journal Prime Rate is
discontinued during the term hereof, then the interest rate under this
Agreement shall be based upon the index which is published by The Wall Street
Journal in replacement thereof based on similar base rates on corporate loans
or if no such replacement index is published, the index which, in the Bank's
sole determination, most nearly corresponds to the Wall Street Journal Prime
Rate. It is understood and agreed by the Obligor that the interest rate under
this Agreement shall be determined by reference to the "Wall Street Journal
Prime Rate" and not by reference to the actual rate of interest charged by an
particular bank to any particular borrower or borrowers and shall automatically
increase or decrease when and to the extent that the Wall Street Journal Prime
Rate shall have been increased or decreased.
(b) In addition, the Obligor hereby agrees to pay to the Bank a
commission with respect to the Letter of Credit, computed (on the basis of a
year of 360 days for the actual number of days elapsed) at the rate of 1% per
annum on the Letter of Credit Amount (or, in the event, and effective the first
date on which an annual payment of the Letter of Credit commission is due
following the date of any reduction in the maximum amount available under the
Letter of Credit in accordance with the terms thereof, on such smaller amount
to which the maximum amount available under the Letter of Credit may have been
so reduced from time to time) from and including the date of issuance of the
Letter of Credit to but excluding the last
2
<PAGE> 31
day a drawing is available under the Letter of Credit (the "Expiration Date"),
payable annually in advance on the fifteenth day of April of each year until
the Expiration Date; provided, that the first installment shall be payable on
the date of issuance of the Letter of Credit for the period from and including
such date of issuance until April 15, 1998. If the Expiration Date occurs on a
day prior to the date to which a commission has been prepaid under this Section
1(b), the Bank agrees to repay, promptly after the Expiration Date, such
portion of such commission as is allocable to the period from and including the
Expiration Date until the day to which such commission has been prepaid;
provided, that during such time as an Event of Default (as defined herein)
shall have occurred and be continuing, the Bank shall not be obligated to repay
any portion of such commission.
(c) If any change in any law or regulation or in the
interpretation or implementation thereof by any court or administrative or
governmental authority charged with the administration thereof (including,
without limitation, a change in a requirement that affects the manner in which
the Bank allocates capital resources to its commitments, including its
obligations hereunder and under the Letter of Credit) shall either (i) impose,
modify or deem applicable any reserve, special deposit, limitation or similar
requirement against letters of credit issued by, or assets held by, or deposits
in or for the account of, the Bank or (ii) impose upon, modify, require, make
or deem applicable to the Bank any increased capital requirement or similar
requirement (including, without limitation, a new requirement that affects the
manner in which the Bank allocates capital resources to its commitments
including its obligations hereunder or under the Letter of Credit) or (iii)
impose on the Bank any other condition regarding this Agreement or the Letter
of Credit, and the result of any event referred to in clause (i), (ii) or (iii)
above shall be an increase in the cost to the Bank of issuing or maintaining
the Letter of Credit or reduce the rate of return on capital, as a consequence
of the issuing or maintaining the Letter of Credit or performing the Bank's
obligations hereunder, to a level below that which the Bank would have achieved
but for such events; (which increase in cost or decreased benefit shall be
determined by the Bank's reasonable allocation of the aggregate of such cost
increases or reduced benefits resulting from such events), then, upon demand by
the Bank, the Obligor, shall immediately pay to the Bank, from time to time as
specified by the Bank, additional
3
<PAGE> 32
amounts which shall be sufficient to compensate the Bank for such increased
cost or decreased benefit, together with interest on each such amount
commencing ten (10) days after the date such compensation is demanded until
payment in full thereof at the rate provided in subsection (a)(ii) above. A
certificate as to such increased cost or decreased benefit incurred by the Bank
as a result of any event mentioned in clause (i), (ii) or (iii) above,
submitted by the Bank to the Obligor, shall be rebuttably presumed correct as
to the amount thereof absent fraud or demonstrable mistake in calculation.
(d) In addition, in the event that a successor Trustee is
appointed pursuant to the Indenture, the Obligor agrees to pay the Bank a
commission equal to $1,500 for transferring the Letter of Credit to the
successor Trustee, plus any out-of-pocket expenses incurred by the Bank in
connection with such transfer. Both such commission and such expenses shall be
paid within 10 days of delivery of a bill.
(e) In addition, the Obligor agrees to pay the Bank a Letter of
Credit draw processing fee of $100 for each draft under the Letter of Credit
submitted by the Trustee to the Bank, said fee to be due and payable on the
date a draft is submitted by the Trustee to the Bank.
(f) In addition, the Obligor agrees to pay to the Bank on the date
of execution of this Agreement a closing fee in the amount of $13,000.
(g) All payments by the Obligor to the Bank hereunder shall be
made in lawful money of the United States and in immediately available funds at
the Bank's office at 2600 West Big Beaver Road, Michigan 48084, or such other
office of the Bank as may be designated from time to time by written notice to
the Company by the Bank. All such payments may be charged when due to Obligor's
account no. 106-4000169 maintained with Bank (or any other deposit or other
accounts of Obligor with Bank); provided, however, this authorization shall not
affect Obligor's obligation to pay, when due, any indebtedness hereunder
whether or not account balances are sufficient to pay amounts due.
SECTION 2. Issuance of Letter of Credit. On or before April 24,
1997, upon written notice from the Obligor to the Bank
4
<PAGE> 33
and subject to the satisfaction of the conditions precedent specified in
Section 3 below, the Bank will issue the Letter of Credit in substantially the
form of Exhibit A hereto, in favor of the Trustee and expiring no later than
May 15, 1998. The Obligor hereby requests that the Bank issue the Letter of
Credit in the form attached as Exhibit A.
SECTION 3. Conditions Precedent to the Issuance of the Letter of
Credit. The obligation of the Bank to issue the Letter of Credit is subject to
the satisfaction of the following conditions precedent:
(a) On or before the date of issuance of the Letter of
Credit, the Obligor shall have paid to the Bank the commission payable
on such date of issuance under Section 1(b) above.
(b) On or before the date of issuance of the Letter of
Credit, the Bank shall have received the following, each dated
contemporaneous with the date of issuance of the Letter of Credit and
in form and substance satisfactory to the Bank:
(i) Certified copies of resolutions of the
Board of Directors of the Obligor approving this Agreement,
the form and content of the Letter of Credit and the other
matters and documents contemplated hereby.
(ii) A Certificate of the Secretary or an
Assistant Secretary of the Obligor, certifying the names and
true signatures and incumbency of the members of the Obligor,
authorized to sign this Agreement and any amendments to the
Letter of Credit, and the other documents to be delivered by
it hereunder.
(iii) Certified copies of the Articles of
Incorporation of the Obligor and certificates of good standing
for the Obligor from each jurisdiction in which its conduct or
activities require it to be licensed to do business.
(iv) A certified copy of the Obligor's Bylaws
duly certified by the Secretary or an Assistant Secretary of
the Obligor.
5
<PAGE> 34
(v) A favorable opinion of Jaffe, Raitt, Heuer
& Weiss, Professional Corporation, counsel for the Obligor, in
form and substance satisfactory to the Bank.
(vi) A favorable opinion of Bradley Arant Rose
& White LLP as Bond Counsel, in form and substance
satisfactory to the Bank.
(vii) A favorable opinion of Bodman, Longley &
Dahling LLP, as counsel for the Bank, in form and substance
satisfactory to the Bank.
(viii) An executed copy of the Indenture (or a
copy thereof certified as to authenticity by the Trustee)
(ix) An executed copy of the Lease Agreement
dated as of April 1, 1997 between the Obligor and the Issuer
("Lease Agreement").
(x) Counterpart originals of the guarantees,
security agreements and other documents constituting the
Collateral Documents (as defined in Section 9 of this
Agreement) together with evidence of such recordings, filings
of financing statements or of other actions necessary or
desirable to establish the priority of lien in the security as
the Bank may require.
(xi) A copy of the preliminary Private
Placement Memorandum and the final Private Placement
Memorandum (together with the documents incorporated therein
by reference, herein called the "Private Placement
Memorandum") of the Issuer relating to the Bonds.
(xii) An executed original of that certain
Pledge and Security Agreement dated as of the Execution Date
between the Obligor, the Bank and the Trustee.
(xiii) 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.
6
<PAGE> 35
(c) The following statements shall be true and correct on
and as of the date of issuance of the Letter of Credit, and the Bank
shall have received a certificate signed by a duly authorized officer
of the Obligor, dated the date of such issuance, stating that:
(i) the representations and warranties contained
in Section 5 of this Agreement are correct on and as of the
date of such issuance as though made on and as of such date;
and
(ii) no event has occurred which constitutes an
Event of Default (as defined in Section 8 hereof) or which
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both, nor will the
issuance of the Letter of Credit give rise to the occurrence
of an Event of Default.
(d) On or before the day of the issuance of the Letter of
Credit:
(i) the Issuer and the Trustee shall have duly
authorized and executed the Indenture and the Indenture shall
continue to be in full force and effect;
(ii) the Obligor shall have duly authorized and
executed the Collateral Documents and the Collateral Documents
shall continue to be in full force and effect;
(iii) the Bonds, the Indenture, the Lease
Agreement, the Collateral Documents, the Pledge and Security
Agreement and any other agreement or instrument relating to
any of the foregoing (the "Operative Documents") shall be in
form and substance satisfactory to the Bank.
SECTION 4. Obligations Absolute. The payment obligations of the
Obligor under this Agreement shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including, without limitation, the
following circumstances, either alleged or established:
(a) any lack of validity or enforceability of the
Operative Documents;
7
<PAGE> 36
(b) any amendment or waiver of or any consent to
departure from or in connection with the Operative Documents,
including any substitution, exchange or release of collateral with
respect to any of the Operative Documents;
(c) the existence of any claim, set-off, defense or other
right which the Obligor may have at any time against the Trustee, any
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 Operative Documents,
the transactions contemplated herein or therein 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 whatsoever;
(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;
(f) any failure, omission, delay or lack on the part of
the Bank or any party to any of the Operative Documents to enforce,
assert or exercise any right, power or remedy conferred upon the Bank
or any such party under this Agreement or any of the Operative
Documents, or any other acts or omissions on the part of the Bank or
any such party;
(g) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the
assets of the Obligor or the Issuer; the receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment or other
similar proceedings affecting the Obligor or the Issuer or any of the
assets of either of them, or any allegation or contest of the validity
of this Agreement or any of the Operative Documents, in any such
proceedings;
(h) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, and any other
8
<PAGE> 37
event or action that would, in the absence of this clause, result in
the release or discharge by operation of law of the Obligor from the
performance or observance of any obligation, covenant or agreement
contained in this Agreement.
No setoff, counterclaim, reduction or diminution of any obligation, or
any defense of any kind or nature which the Obligor has or may have against the
Issuer or the Trustee shall be available hereunder to the Obligor against the
Bank.
SECTION 5. Representations and Warranties. The Obligor
represents and warrants as of the Execution Date, as follows:
(a) The Obligor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan.
(b) The execution, delivery and performance by the
Obligor of this Agreement, the Lease Agreement, the Pledge and
Security Agreement and the Collateral Documents, as the case may be,
are within the Obligor's corporate powers, have been duly authorized
by all necessary corporate action, do not contravene or violate (i)
the Articles of Incorporation or Bylaws of the Obligor, (ii) any law,
order, rule or regulation applicable to the Obligor, (iii) any
contract or agreement to which the Obligor is a party or by which it
is bound and does not result in or require the creation of any lien,
security interest or other charge or encumbrance (other than pursuant
to the Collateral Documents, this Agreement, the Indenture or the
Pledge and Security Agreement) upon or with respect to any of its
properties.
(c) All registration with, authorizations by, or
approvals of any governmental body required to be obtained by the
Obligor for its execution, delivery and performance of this Agreement,
the Pledge and Security Agreement and the Collateral Documents have
been obtained and remain in full force and effect.
(d) This Agreement, the Pledge and Security Agreement and
the Collateral Documents are legal, valid and binding obligations of
the Obligor, enforceable against it in accordance with their
respective terms, except as affecting
9
<PAGE> 38
enforceability may be subject, to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally
(e) There is not pending or, to the knowledge of the
Obligor, threatened any action or proceeding before any court,
governmental agency or arbitrator against or affecting the Obligor
which, if determined adversely to the Obligor, would materially and
adversely affect the financial condition or operations of the Obligor.
(f) No representation or warranty of the Obligor
contained in this Agreement or in any of the Collateral Documents, and
no statement contained in any certificate, schedule, list, financial
statement or other instrument furnished to the Bank by or on behalf of
the Obligor contains, or will contain, any untrue statement of a
material fact, or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not
misleading in any material respect when made.
The representations and warranties set forth in the Loan Agreement
dated August 29, 1996 between the Obligor, certain related parties and the Bank
("Credit Agreement") are incorporated herein by reference as continuing
representations and warranties of the Obligor.
SECTION 6. Affirmative Covenants. So long as a drawing is
available under the Letter of Credit, the Obligor will, unless the Bank gives
its prior consent in writing:
(a) Comply with Covenants. Comply with all covenants
contained in the Credit Agreement (as the same may be amended or
modified from time to time), as if explicitly set forth herein in
their entirety. The provisions of the Credit Agreement as incorporated
herein by reference in accordance with the foregoing, shall remain in
full force and effect, notwithstanding any termination of the Credit
Agreement after the date hereof.
(b) Reporting Requirements. Furnish to the Bank the
following:
10
<PAGE> 39
(i) as soon as possible after becoming aware of
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, a written statement from the
chief financial officer (or in such officer's absence, a
responsible senior officer) of the Obligor setting forth
details of such Event of Default or event and the action which
the Obligor has taken or proposes to take with respect
thereto;
(ii) such other information respecting the
business, properties, or the financial condition or operations
of the Obligor as the Bank may from time to time reasonably
request.
(c) Optional Redemption of Bonds. The Obligor shall cause
the Bonds to be optionally redeemed at the times and in the amounts
set forth in Exhibit "B" attached hereto. On the first day of each
month (beginning May 1, 1997), the Obligor shall pay to the Bank for
deposit to a cash collateral account one twelfth of the annual
redemption payment next coming due, which moneys shall be used to
reimburse the Bank for payments by the Bank of drafts submitted by the
Trustee under the Letter of Credit.
SECTION 7. Negative Covenants of the Obligor. So long as a
drawing is available under the Letter of Credit, the Obligor agrees that it
will not:
(a) Amendment of Indenture or Lease Agreement. Enter into
or agree to any amendment, change or modification of, or any waiver of
any provision of, the Indenture or the Lease Agreement.
(b) Misrepresentation. Furnish the Bank with any
certificate or other document that contains any untrue statement of a
material fact or omits to state a material fact necessary to make such
certificate or document not misleading in light of the circumstances
under which it was furnished.
11
<PAGE> 40
SECTION 8. Events of Default.
(a) The occurrence of any of the following events shall
be an "Event of Default" hereunder unless waived by the Bank pursuant
to Section 10 hereof:
(i) Any representation or warranty made by the
Obligor pursuant to Section 5 hereof shall prove to have been
incorrect in any material respect when made; or
(ii) The Obligor shall fail to pay when due any
amount specified in Section 1 hereof; or
(iii) The Obligor shall fail to perform or observe
any of its obligations or covenants under, or shall fail to
comply with any of the provisions of Section 6(a) and such
failure continues beyond the applicable notice and cure
period, if any, provided for such failure under the terms of
the Credit Agreement; or
(iv) The Obligor shall fail to perform or observe
any of its obligations or covenants under, or shall fail to
comply with any of the provisions of Section 6(b)(i) or
Section 6(c) which continues for ten (10) days; or
(v) The Obligor shall fail to perform or observe
any other term, covenant or agreement herein contained, or the
Obligor shall fail to perform or observe any term, count or
agreement in any other agreement with the Bank to which it may
be a party and such failure shall continue unremedied for a
period of thirty (30) days after the date on which written
notice thereof shall be given by the Bank to the Obligor; or
(vi) Any material provision of this Agreement or
any guaranty given in connection herewith shall at any time
for any reason cease to be valid and binding on the Obligor or
any guarantor, as applicable, or shall be declared to be null
and void, or the validity or enforceability thereof against
the Obligor or any guarantor, as applicable shall be contested
by the Obligor or any governmental agency or authority, or the
Obligor or any guarantor, as applicable, shall deny that it
has any or further liability or obligation under this
Agreement or the guaranty, as applicable; or
12
<PAGE> 41
(vii) An Event of Default under and as defined in the
Indenture or the Credit Agreement (regardless of whether the
Credit Agreement has terminated) shall have occurred and be
continuing without the same being cured or waived pursuant to
the terms thereof.
(b) If any of the Events of Default specified in
subsection (a) above shall have occurred and be continuing, in
addition to the Bank's other remedies available under the Indenture,
the Pledge and Security Agreement, the Collateral Documents, or such
other documents executed in connection herewith, or any other remedy
available at law or in equity, then the Bank may, at any time and in
its sole discretion, but shall not be obligated to, terminate its
commitment to issue the Letter of Credit or, if the Letter of Credit
shall have been issued, may elect to give notice to the Trustee
pursuant to the Indenture thereby requiring the Trustee to declare the
principal of all Bonds then outstanding and the interest accrued
thereon and any premium thereon and thereby owing to be immediately
due and payable and/or require the Obligor to deliver cash collateral
to the Bank in the amount equal to the maximum amount that may be
available to be drawn at any time under the Letter of Credit.
SECTION 9. Collateral Security. To secure full and timely
performance of the Obligor's covenants set out in this Agreement and to secure
the repayment of all other moneys owing by the Obligor to the Bank whensoever
arising and whether associated with this Agreement or otherwise the Obligor has
delivered or caused to be delivered to the Bank the documents described in
attached Exhibit "C" (herein collectively called the "Collateral Documents").
SECTION 10. Amendments, Waivers, Etc. No amendments or waiver of
any provision of this Agreement nor consent to any departure by the Obligor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank and the Obligor, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment, waiver or consent with respect to any
provision of this Agreement shall affect any other provision of this Agreement.
13
<PAGE> 42
SECTION 11. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and mailed or
delivered as follows:
if to the Obligor:
6200 Elmridge
Sterling Heights, Michigan 48310
Attention: Carl Jaworski
if to the Bank:
Standard Federal Bank
2600 West Big Beaver Road
Troy, Michigan 48084
Attention: David Bartlett
if to the Trustee:
LaSalle National Bank
135 South LaSalle Street
Suite 1825
Chicago, Illinois 60603
Attention: Corporate Trust Department
or as to any party or the Trustee, at such other address as shall be designated
by such party or the Trustee, as the case may be, in a written notice to the
other party and the Trustee or the parties, as the case may be. All such
notices and other communications shall, when mailed, be effective on the date
of deposit in the mails, addressed as aforesaid.
SECTION 12. No Waiver; Remedies. 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. The remedies herein provided are cumulative and exclusive of any
remedies provided by law.
SECTION 13. Indemnification. The Obligor hereby indemnifies and
holds the Bank harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which
14
<PAGE> 43
the Bank may incur (or which may be claimed against the Bank by any person or
entity whatsoever) :
(i) by reason of any untrue statement or alleged untrue
statement of fact contained in the Private Placement Memorandum or any
amendment or supplement thereto or the Preliminary Private Placement
Memorandum, in the Sections entitled "The Obligor and the Project,
"Uses of Proceeds," "Reimbursement Agreement" and "Pledge and Security
Agreement" insofar as the aforesaid Sections provide summary
descriptions of the matters contained therein in the Private Placement
Memorandum or any amendment or supplement thereto or the Preliminary
Private Placement Memorandum, or the omission or alleged omission to
state therein facts necessary to make such statements, in the light of
the circumstances under which they were made, not misleading;
provided, however, that, the Obligor shall not be required to
indemnify the Bank with respect to information concerning the Bank in
the Private Placement Memorandum or in the Preliminary Private
Placement Memorandum under the Section entitled "Letter of Credit
Bank" (the "Bank Information") which is finally determined to contain
an untrue statement of a material fact or omit to state a material
fact necessary to make the statements in the Bank Information, in the
light of the circumstances under which they were made, not misleading;
or
(ii) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, the
Letter of Credit; provided, however, that the Obligor shall not be
required to indemnify the Bank pursuant to this clause (ii) for any
claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (a) the willful misconduct or gross
negligence of the Bank or (b) the Bank's willful or grossly negligent
failure to pay under the Letter of Credit after the presentation to it
by the Trustee of a draft and certificates strictly complying with the
terms and conditions of the Letter of Credit.
Nothing in this Section 13 is intended, nor shall be deemed, to limit the
Obligor's reimbursement obligation contained in Section 1 hereof.
15
<PAGE> 44
SECTION 14. Continuing Obligation. This Agreement is a continuing
obligation and shall (i) be binding upon the Obligor, its successors and
assigns, and (ii) inure to the benefit of and be binding upon and be
enforceable by the Bank and its successors, transferees and assigns; provided,
however, that the Obligor may not assign all or any part of this Agreement
without the prior written consent of the Bank. The Obligor's warranties and
representations made in Section 5 of this Agreement shall survive the delivery
and performance of all documents and agreements contemplated by this Agreement.
SECTION 15. Transfer of Letter of Credit. The Letter of Credit
first issued by the Bank pursuant to Section 2 hereof may be transferred and
each successor Letter of Credit may be successively transferred, all in
accordance with the terms of such first Letter of Credit.
SECTION 16. Liability of the Bank. The Obligor assumes all risks
of the acts or omissions of the Trustee and any 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 shall be liable or responsible
for: (a) the use which may be made of the Letter of Credit or for any acts or
omissions of the Trustee and any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement(s) thereof, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (c) payment by
the Bank in good faith made against presentation of documents which do not
comply fully with the terms of the Letter of Credit; or (d) any other
circumstances whatsoever in making or failing to make payment under the Letter
of Credit, except only that the Obligor shall have a claim against the Bank,
and the Bank shall be liable to the Obligor, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by the
Obligor which the Obligor proves were caused by (i) the Bank's willful
misconduct or gross negligence, (ii) the Bank's willful, grossly negligent or
bad faith failure to pay under the Letter of Credit after the presentation to
it by the Trustee or a successor trustee under the Indenture of a sight draft
and certificate strictly complying with the terms and conditions of the Letter
of Credit or (iii) the Bank's bad faith payment under the Letter of Credit
after presentation to it by the Trustee or a successor trustee under the
Indenture of a sight draft and
16
<PAGE> 45
certificate which do not comply fully 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 17. Costs, Expenses and Taxes. The Obligor agrees to pay
on demand all costs and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of this Agreement, any other
documents which may be delivered in connection with this Agreement and any
transfer of the Letter of Credit including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel for the Bank, with respect thereto
and with respect to advising the Bank as to its rights and responsibilities
under this Agreement and all costs and expenses, if any, in connection with the
enforcement of this Agreement and such other documents which may be delivered
in connection with this Agreement, including, but not limited to the Collateral
Documents. In addition, the Obligor shall pay any and all stamp and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement 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 18. Disbursements. The Trustee shall be authorized to
disburse the proceeds of the Bonds pursuant to the terms of the Indenture upon
presentation by the Obligor of a requisition certificate conforming to the
requirements therefor set forth in the Lease Agreement and herein, including
endorsement of each requisition certificate by the Bank. The Obligor
acknowledges and agrees that the Bank shall only be required to execute
requisition certificates and thereby authorize disbursements to the Obligor
(a) provided that no Event of Default has occurred under this Agreement, the
Pledge and Security Agreement or the Collateral Documents and no event which
with notice and/or the passage of time would become an Event of Default under
this Agreement, the Pledge and Security Agreement or the Collateral Documents
has occurred, (b) provided that the Project shall not have been materially
damaged by fire or other casualty, or if so damaged the Obligor has
17
<PAGE> 46
complied with all insurance requirements under the Loan Agreement and
hereunder, and (c) disbursement of no more than eighty five percent (85%) of
the costs of machinery and equipment (excluding installation, taxes,
engineering, delivery and other soft costs). All such calculations shall be
performed by the Bank or its agent using a methodology satisfactory to the Bank
in its sole discretion.
SECTION 19. 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 nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 20. Waiver of Jury Trial. The Obligor and the Bank hereby
irrevocably waive the right to trial by jury with respect to any and all
actions or proceedings at any time in which Obligor and the Bank are parties
arising out of this Agreement or the other documents contemplated hereby.
SECTION 21. Jurisdiction. Obligor hereby irrevocably submits to
the non-exclusive jurisdiction of any United States Federal or Michigan state
court sitting in Detroit in any action or proceeding arising out of or relating
to this Agreement or the Letter of Credit and the Obligor hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such United States Federal or Michigan state court. The
Obligor irrevocably consents to the service of any and all process in any such
action or proceeding brought in any court in or of the State of Michigan by the
delivery of copies of such process to the Obligor at its address specified in
Section 10 hereof or by certified mail directed to such address.
SECTION 22. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Michigan.
SECTION 23. 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.
18
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
In the Presence of: MCCLAIN OF ALABAMA, INC.
By:
- ------------------------- ----------------------------
Its: Secretary
STANDARD FEDERAL BANK
By:
- ------------------------- ----------------------------
Its: Vice President
19
<PAGE> 48
EXHIBIT "B"
Obligor shall optionally redeem Bonds in the following amounts on
April 1 of each year beginning April 1, 1998.
<TABLE>
<CAPTION>
December 1 Amount of Redemption
---------- --------------------
<S> <C>
1998 $525,000
1999* $525,000
2000* $525,000
2001* $525,000
2002* $525,000
2003* $525,000
2004* $525,000
2005* $525,000
2006* $525,000
2007* $500,000
</TABLE>
* These dates are for informational purposes only and will apply only if
the Bank extends the expiration date of the Letter of Credit. There is
no commitment or obligation on the part of the Bank to extend the
expiration date of the Letter of Credit.
20
<PAGE> 49
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of April 1, 1997, made by
McClain of Alabama, Inc., a Michigan corporation (the "Pledgor"), LaSalle
National Bank, which is Trustee under the Indenture (as hereinafter defined)
and as custodian hereunder (the "Agent") and Standard Federal Bank, a federal
savings bank (the "Bank") pursuant to the Reimbursement Agreement dated as of
April 1, 1997, between the Pledgor and the Bank (hereinafter, as the same may
from time to time be amended or supplemented, called the "Reimbursement
Agreement"):
W I T E S S E T H:
WHEREAS, The Industrial Development Board of the City of Demopolis has
issued its Industrial Development Revenue Bonds, Series 1997 (McClain of
Alabama, Inc. Project) (the "Bonds") under the Trust Indenture dated as of
April 1, 1997 (the "Indenture"), between the Pledgor and LaSalle National Bank,
as Trustee;
WHEREAS, the Indenture requires the Pledgor under the circumstances
provided therein to purchase Bonds duly tendered for purchase by the holders
thereof and to register the Bonds so purchased in the name of the Pledgor in
accordance with the Indenture (the "Tendered Bonds");
WHEREAS, in the Indenture the Issuer and the Trustee have agreed to
certain remarketing provisions for the Bonds pursuant to which LaSalle National
Bank or its successor remarketing agent (the "Remarketing Agent") has agreed to
the remarketing of certain Bonds;
WHEREAS, in connection with the issuance of the Bonds, the Pledgor has
agreed to enter into the Reimbursement Agreement in order to cause the Bank to
issue an irrevocable letter of credit in favor of the Trustee (the "Letter of
Credit") which may be used, inter alia, to pay all or a portion of the purchase
price of the Tendered Bonds in the event the same are not remarketed prior to
the date for purchase of the Tendered Bonds (any of such Tendered Bonds so
purchased from a draw under the Letter of Credit being hereinafter referred to
as the "Pledged Bonds");
WHEREAS, it is a condition precedent to the obligation of the Bank to
enter into the Reimbursement Agreement and to issue the Letter of Credit that
the Pledgor and the Agent shall have executed and delivered this Agreement to
the Bank;
<PAGE> 50
NOW, THEREFORE, in consideration of the premises and in order to
induce the Bank to enter into the Reimbursement Agreement and issue the Letter
of Credit and for other good and valuable consideration, receipt of which is
hereby acknowledged, the Pledgor and Agent hereby agree with the Bank as
follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in
the Reimbursement Agreement shall have such defined meanings when used herein.
2. Pledge. The Pledgor hereby pledges, assigns, hypothecates,
transfers, and delivers to the Bank or its designee all its right, title and
interest in the Pledged Bonds as the same may be from time to time delivered to
the Agent, by the holders thereof or by the Remarketing Agent and held by the
Agent as agent for the Bank, and hereby grants to the Bank, a first lien on,
and security interest in, its right, title and interest in and to the Pledged
Bonds, together with all payments of principal, premium and interest thereon
and all proceeds thereof, including without limitation remarketing proceeds
(collectively, the "Collateral"), as collateral security for (a) the prompt and
complete payment of all amounts payable to the Bank under the Reimbursement
Agreement, (b) performance and observance of all covenants, terms and
conditions upon which the Letter of Credit is issued, including without
limitation the covenants, terms and conditions set forth in the Reimbursement
Agreement, and (c) the performance of the covenants herein contained and any
monies expended by the Bank in connection therewith (collectively, the
"Obligations").
3. Payments on the Pledged Bonds. Payments received by the Agent in
respect of the Pledged Bonds shall be held by the Agent in trust for the
benefit of the Bank, and the Agent shall pay the same forthwith to the Bank.
Upon receipt by the Bank, such amounts shall be credited against the
Obligations.
4. Release of Pledged Bonds. Upon reinstatement of the amount
available under the Letter of Credit to be drawn under a Purchase Drawing
following payment by the Bank of a Purchase Draft under the Letter of Credit
(which would occur following repayment to the Bank of all amounts owed by the
Pledgor to the Bank in connection with payment by the Bank of such Purchase
Drawing or upon satisfaction of such other requirements as may be agreed to by
Pledgor and the Bank), the Agent automatically shall release and deliver to the
Pledgor or its designee Pledged Bonds in a principal amount up to but not
exceeding the amount by which the stated amount of the Letter of Credit shall
have been so increased;
2
<PAGE> 51
provided, however, that in any event, if all existing and future liabilities
and obligations of Pledgor to the Bank under the Reimbursement Agreement are
fully paid and fully secured, all Pledged Bonds shall be released and delivered
to the Pledgor or its designee. The foregoing notwithstanding, all Pledged
Bonds shall be released and delivered to the Trustee for cancellation at
maturity. Pledged Bonds which have been held by the Agent for a period of 30
days and have not been remarketed or sold thereupon shall be released and
delivered to the Trustee for cancellation.
5. Rights of the Bank. The Bank shall not be liable for failure to
collect the Obligations or for failure to realize upon any collateral security
or guarantee therefor, or any part thereof, or for any delay in so doing nor
shall the Bank be under any obligation to take any action whatsoever with
regard thereto. If an Event of Default under the Reimbursement Agreement has
occurred and is continuing, the Bank may thereafter without notice exercise all
rights, privileges or options pertaining to any Pledged Bonds as if it were the
absolute owner thereof, upon such terms and conditions as it may determine, all
without liability except to account for property actually received by it, but
the Bank shall have no duty to exercise any of the aforesaid rights, privileges
or options and shall not be responsible for any failure to do so or delay in so
doing.
6. Remedies. In the event that any portion of the Obligations has been
declared due and payable 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) to or upon the Pledgor or any
other person (all and each of which demands, advertisements and notices are
hereby expressly waived), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and 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 to 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 Pledgor, which right or equity is hereby expressly waived
or released. The Bank shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale,
3
<PAGE> 52
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 attorney's fees and legal expenses, to the payment in
whole or in part of the Obligations in such order as the Bank may elect, the
Pledgor remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and after the
payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9504(1)(c) of the Uniform Commercial
Code of the State of Michigan, and after expiration of the Letter of Credit,
need the Bank account for the surplus, if any, to the Pledgor. The Bank agrees
to give the Pledgor, the Agent and the Issuer not less than ten days' written
notice of the time and place of any public sale and of the time after which a
private sale or other intended disposition is to take place. The Pledgor agrees
that such notice is reasonable notification of such matters. No notification
need be given to the Pledgor 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
Michigan. The Pledgor further agrees to waive and agrees not to assert any
rights or privileges which it may acquire under Section 9112 of the Uniform
Commercial Code and the Pledgor shall be liable for the deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay all amounts to which the Bank is entitled, and the fees of any attorneys
employed by the Bank to collect such deficiency.
7. Representations, Warranties and Covenants of the Pledgor. The
Pledgor represents and warrants that: (a) on the date of delivery to the Bank
or its designee of any Pledged Bonds in accordance with Section 2 hereof,
neither the Issuer, the Remarketing Agent nor the Agent will have any right,
title or interest in and to the Pledged Bonds; (b) it has, and on the date of
delivery to the Bank or its designee of any Pledged Bonds will have, full
power, authority and legal right to pledge all of its right, title and interest
in and to the Pledged Bonds pursuant to this Agreement; (c) this Agreement has
been duly authorized, executed and delivered by the Pledgor and constitutes a
legal, valid and binding obligation of the Pledgor enforceable in accordance
with its terms; (d) no consent of any other party
4
<PAGE> 53
(including, without limitation, any creditors of the Pledgor) and no consent,
license, permit, approval or authorization of exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority,
domestic or foreign, is required to be obtained by the Pledgor in connection
with the execution, delivery or performance of this Agreement; (e) the
execution, delivery and performance of this Agreement will not violate any
provision of any applicable law or regulation or of any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, or of the charter documents of the Pledgor or of any securities issued
by the Pledgor, or of any mortgage, indenture, lease, contract, or other
agreement, instrument or undertaking to which the Pledgor is a party or which
purports to be binding upon the Pledgor or upon any of its assets and will not
result in the creation or imposition of any lien, charge or encumbrance on or
security interest in any of the assets of the Pledgor except as contemplated by
this Agreement; and (f) the pledge, assignment and delivery of such Pledged
Bonds pursuant to this Agreement will create a valid first lien on, and a first
perfected security interest in, all right, title or interest of the Pledgor in
or to such Pledged Bonds, 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 Pledgor which would include the Pledged Bonds.
The Pledgor covenants and agrees that it will defend the Bank's right, title
and security interest in and to the Pledged Bonds and the proceeds thereof
against the claims and demands of all persons whomsoever; and covenants and
agrees that it will have like title to and right to pledge any other property
at any time hereafter pledged to the Bank as Collateral hereunder and will
likewise defend the Bank's right thereto and security interest therein.
8. No Disposition. etc. Except as otherwise provided in the
Remarketing Agreement with respect to Pledged Bonds sold to or by the
Remarketing Agent, the Pledgor agrees that it will not, without the prior
written consent of the Bank sell, assign, transfer, exchange, or otherwise
dispose of, or grant any option with respect to, the Collateral, nor will it
create, incur or permit to exist any pledge, lien, mortgage, hypothecation,
security interest, charge, option or any other encumbrance with respect to any
of the Collateral, or any interest therein, or any proceeds thereof, except for
the lien and security interest provided for by this Agreement.
5
<PAGE> 54
9. Sale of Collateral. (a) The Pledgor recognizes that the Bank may be
unable to effect a public sale of any or all of the Pledged Bonds by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable to the seller than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Bank
shall be under no obligation to delay a sale of any of the Pledged Bonds for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if the issuer would agree to do so.
(b) The Pledgor further agrees to do or cause to be done all such
other acts and things (except to cause the Pledged Bonds to be registered) as
may be necessary to make such sale or sales of any portion or all of the
Pledged Bonds valid and binding and in compliance with any and all applicable
laws, regulations, orders, writs, injunctions, decrees or awards of any and all
courts, arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at the Pledgor's expense.
10. Further Assurances. The Pledgor agrees that at any time and from
time to time upon the written request of the Bank, it will execute and deliver
such further documents and do such further acts and things as the Bank may
reasonably request in order to effect the purposes of this Agreement.
11. Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. No Waiver; Cumulative Remedies. The Bank shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid
6
<PAGE> 55
unless in writing, signed by the Bank, and then only to the extent therein set
forth. A waiver by the Bank of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Bank
would otherwise have on any future occasion. No failure to exercise nor any
delay in exercising on the part of the Bank, any right, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
13. Waivers, Amendments; Applicable Law. None of the terms or
provisions of this Agreement may be waived, altered, modified or amended except
by an instrument in writing, duly executed by all parties hereto. This
Agreement and all obligations of the Pledgor hereunder shall be binding upon
the successors and assigns of the Pledgor, and shall, together with the rights
and remedies of the Bank hereunder, inure to the benefit of the Bank and its
successors and assigns. This Agreement shall be governed by, and be construed
and interpreted in accordance with, the laws of the State of Michigan.
14. Fees and Expenses. Pledgor agrees to pay and reimburse the Agent
and the Bank for and indemnify and hold them harmless against all costs,
expenses, taxes and fees (including reasonable attorneys' fees and
disbursements) and any liability incurred in connection with the administration
and enforcement of this Agreement. Such undertaking of Pledgor shall survive
the termination of this Agreement.
15. Termination. This Agreement shall terminate upon the expiration of
the Letter of Credit and payment in full and the performance and satisfaction
of all Obligations, and upon such termination the Bank and the Trustee shall
assign, transfer and deliver without recourse and without warranty the
Collateral to Pledgor (and any property received in respect thereof) as has not
theretofore been sold or otherwise applied pursuant to the provisions of this
Agreement.
16. Waiver. The Bank hereby agrees to waive any and all claims,
liabilities and causes of action against the Agent which may arise by reason of
or in connection with any and all of the Agent's obligations, duties and
responsibilities set forth in this
7
<PAGE> 56
Pledge Agreement, including but not limited to holding the Pledged Bonds and
any payments with respect thereto as agent for the Bank and the release and
delivery of the Pledged Bonds to the Pledgor or its designee; provided,
however, that the Bank shall not be required to waive any claim, liability or
cause of action against the Agent to the extent, but only to the extent,
arising as a result of the willful and wrongful failure or willful and wrongful
misconduct or gross negligence of the Agent.
17. Captions/Counterparts. Captions in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose. This Agreement may be executed in any
number of counterparts and if so executed shall be read and interpreted as a
single agreement.
IN WITNESS WHEREOF, the undersigned parties have executed and
delivered this Agreement or have caused this Agreement to be duly executed and
delivered by their duly authorized officers on the day and year first above
written.
MCCLAIN OF ALABAMA, INC.
By:
----------------------------------------
Its: Secretary
LASALLE NATIONAL BANK, AS AGENT
By:
----------------------------------------
Its:
STANDARD FEDERAL BANK
By:
----------------------------------------
Its: Vice President
8
<PAGE> 57
GUARANTY
THIS GUARANTY, is made this 23rd day of April by Galion Holding
Company, a Michigan corporation; McClain E-Z Pack, Inc., a Michigan
corporation; Galion Dump Bodies, Inc., a Michigan corporation; McClain
Industries, Inc., a Michigan corporation; McClain of Georgia, Inc. , a Georgia
corporation; Shelby Steel Processing Company, a Michigan corporation; McClain
Tube Company d/b/a Quality Tube, a Michigan corporation; McClain of Ohio, Inc.,
a Michigan corporation; McClain Epco, Inc., a New York corporation; and McClain
Group Sales of Florida, Inc., a Florida corporation, whose address is 6200
Elmridge, Sterling Heights, Michigan 48310 (collectively, "Guarantor"), to and
with Standard Federal Bank, a federal savings bank ("Standard Federal").
WITNESSETH:
WHEREAS, McClain of Alabama, Inc., a Michigan corporation
("Borrower"), may from time to time request loans, advances or other financial
accommodations from Standard Federal and Standard Federal may, in its
discretion, honor such requests in whole or part and thereby Borrower may from
time to time be indebted to Standard Federal; and
WHEREAS, Standard Federal is unwilling to make loans, advances or
extend other financial accommodations to or otherwise do business with Borrower
unless Guarantor unconditionally guarantees payment of all present and future
indebtedness and obligations of Borrower to Standard Federal; and
WHEREAS, Guarantor will directly benefit from Standard Federal's
making of loans advances or extending other financial accommodations to or
otherwise doing business with Borrower.
NOW, THEREFORE, in order to induce Standard Federal to make loans,
advances or extend other financial accommodations to and otherwise do business
with Borrower and for other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged, Guarantor hereby covenants and
agrees with Standard Federal as follows:
<PAGE> 58
SECTION 1. GUARANTY.
1.1 Guarantor hereby irrevocably and unconditionally guarantees to Standard
Federal and its successors and assigns: (a) the full and prompt payment and
performance when due of the Indebtedness, as hereinafter defined; and (b) the
payment, compliance with and performance of all other obligations, covenants,
representations and warranties of every kind, nature and description in
accordance with all instruments and documents executed by the Borrower in favor
of Standard Federal, whether now owing or existing or heretofore or hereafter
created or arising, regardless of whether such obligations, covenants,
representations or warranties are held to be unenforceable, void or of no
effect against the Borrower and including without limitation, those under any
loan agreement and/or promissory note executed and delivered by Borrower to
Standard Federal, and any extensions, modifications or renewals thereof. The
term "Indebtedness" shall mean all principal, interest, attorneys' fees,
commitment fees, liabilities for costs and expenses and all other indebtedness,
obligations and liabilities under and in accordance with the terms of all
instruments and documents executed by Borrower in favor of Standard Federal,
whether direct or indirect, absolute or contingent and whether now owing or
existing or heretofore or hereafter created or arising, and regardless of
whether such indebtedness, obligations or liabilities are held to be
unenforceable, void or of no effect against the Borrower, and all costs,
expenses and fees, including reasonable attorneys' fees, arising in connection
with the collection or enforcement of any or all amounts, indebtedness,
obligations and liabilities of Borrower to Standard Federal, as described
above, regardless of whether the Borrower is held to be liable for such
amounts. Guarantor acknowledges and agrees that any indebtedness of the
Borrower to Standard Federal as evidenced by any promissory note may be
extended or renewed upon maturity at the sole discretion of Standard Federal
and that the Indebtedness as defined herein, the payment of which is hereby
guaranteed, shall include, without limitation, all indebtedness and other
obligations as extended or renewed and as may be evidenced by any renewal
promissory note.
1.2 This is an irrevocable, unconditional and absolute guaranty of payment, and
not of collection, and the undersigned agrees that its liability on this
Guaranty shall be immediate and Standard Federal may have immediate recourse
against the undersigned for full and immediate payment of the Indebtedness at
any time after the Indebtedness or any part thereof, has not been paid when due
(whether by acceleration or otherwise) or the Borrower has
2
<PAGE> 59
defaulted or otherwise failed to perform when due any of its obligations,
covenants, representations or warranties to Standard Federal.
SECTION 2. LIABILITY OF GUARANTOR,
2.1 The liability of Guarantor on this Guaranty shall not be contingent upon
the exercise or enforcement by Standard Federal of whatever remedies it may
have against the Borrower or others, or the enforcement of any lien or
realization upon any security or collateral Standard Federal may at any time
possess. Any one or more successive and/or concurrent actions may be brought
hereon against Guarantor either in the same action, if any, brought against
Borrower or in separate actions, as often as Standard Federal, in it sole
discretion, may deem advisable. No election to proceed in one form of action or
proceeding, or against any party, or on any obligation, shall constitute a
waiver of Standard Federal's right to proceed in any other form of action or
proceeding or against other parties unless Standard Federal has expressly
waived such right in writing. Specifically, but without limiting the generality
of the foregoing, no action or proceeding by Standard Federal against Borrower
under any document or instrument evidencing or securing the Indebtedness shall
serve to diminish the liability of Guarantor, except to the extent Standard
Federal realizes payment by such action or proceeding, notwithstanding the
effect of any such action or proceeding upon Guarantor's right of subrogation
against Borrower. Receipt by Standard Federal of payment or payments with
knowledge of the breach of any provision with respect to any of the
Indebtedness shall not, as to the Guarantor, be deemed a waiver of such breach.
All rights, powers and remedies of Standard Federal hereunder and under any
other agreement now or at any time hereafter in force between Standard Federal
and the Guarantor shall be cumulative and not alternative and shall be in
addition to all rights, powers and remedies given to Standard Federal by law.
2.2 Guarantor agrees that its liability hereunder is absolute and unconditional
and that Standard Federal shall not be obligated (although it may do so at its
sole option) before being entitled to direct recourse against Guarantor to take
any steps, whatsoever to preserve, protect, accept, perfect Standard Federal's
interest in, foreclose upon or realize on collateral security, if any, for the
payment of the Indebtedness or any other guaranty of the
3
<PAGE> 60
Indebtedness or in any other respect exercise any diligence whatever in
collecting or attempting to collect the Indebtedness by any means.
2.3 The liability of the Guarantor shall in no way be affected or impaired by:
(a) any amendment, alteration, extension, renewal, waiver, indulgence or other
modification of the Indebtedness; (b) any settlement or compromise in
connection with the Indebtedness; (c) any subordination of payments under the
Indebtedness to any other debt or claim; (d) any substitution, exchange,
release or other disposition of all or any part of the Indebtedness; (e) any
failure,, delay, neglect, act or omission by Standard Federal to act in
connection with the Indebtedness; (f) any advances for the purpose of
performing any covenant or agreement of the Borrower, or curing any breach; (g)
the filing by or against Borrower of bankruptcy, insolvency, reorganization or
other debtor's relief afforded Borrower pursuant to the present or future
provisions of the Bankruptcy Code or any other state or federal statute or by
the decision of any court; or (h) any other matter whether similar or
dissimilar to the foregoing. The obligations of Guarantor are unconditional,
notwithstanding any defect in the genuineness, validity, regularity or
enforceability of the Indebtedness or any other circumstances whether or not
referred to herein, which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.
2.4 The Guarantor hereby waives each and every defense which, under principles
of guaranty or suretyship law or otherwise, would otherwise operate to impair
or diminish the liability of Guarantor hereunder, including, without
limitation: (a) notice of acceptance of this Guaranty and of creations of
Indebtedness of Borrower to Standard Federal; (b) any subrogation to the rights
of Standard Federal against Borrower until the Indebtedness has been paid in
full; (c) presentment and demand for payment of any Indebtedness of Borrower;
(d) protest, notice or protest, and notice of dishonor or default to the
Guarantor or to any other party with respect to any of the Indebtedness; (e)
all other notices to which the Guarantor might otherwise be entitled; (f) any
demand for payment under this Guaranty; (g) any defense arising by reason of
any disability or other defense of Borrower by reason of the cessation from any
cause whatsoever of the liability of the Borrower; (h) any rights to extension,
composition or otherwise under the Bankruptcy Code or any amendments thereof,
or under any state or other federal
4
<PAGE> 61
statute; and (i) any right or claim or claim of right to cause a marshalling of
Borrower's assets. No notice to or demand on the Guarantor shall be deemed to
be a waiver of the obligation of the Guarantor or of the right of Standard
Federal to take further action without notice or demand as provided herein; nor
in any event shall any modification or waiver of the provisions of this
Guaranty be effective unless in writing nor shall any such waiver be applicable
except in the specific instance for which given.
SECTION 3. WARRANTIES AND REPRESENTATIONS.
3.1 Guarantor represents, warrants and covenants to Standard Federal that, as
of the date of this Guaranty: the fair salable value of Guarantor's assets
exceeds its liabilities, including the liability undertaken pursuant to this
Guaranty; Guarantor is meeting its current liabilities as they mature; any
financial statements of Guarantor furnished Standard Federal are true and
correct and include in the footnotes thereto all contingent liabilities of
Guarantor: since the date of said financial statements there has been no
material adverse change in the financial condition of Guarantor; there are not
now pending any material court or administrative proceedings or undischarged
judgments against Guarantor and no federal or state tax liens have been filed
or threatened against Guarantor, nor is Guarantor in default or claimed default
under any agreement for borrowed money.
3.2 Guarantor agrees to immediately give Standard Federal written notice of any
material adverse change in its financial condition, including but not limited
to litigation commenced (where the amount claimed exceeds $100,000 individually
or in the aggregate), tax liens filed, default claimed under its indebtedness
for borrowed money or bankruptcy proceedings commenced by or against Guarantor.
Guarantor agrees to deliver, timely to Standard Federal, annual financial
statements for the preceding fiscal year; and at such reasonable times as
Standard Federal requests to furnish its current financial statements to
Standard Federal and permit Standard Federal or its representatives to inspect
at Guarantor's offices, its financial records and properties and make extracts
therefrom in order to evaluate the financial condition of Guarantor. Guarantor
is fully aware of the financial condition of the Borrower. Guarantor delivers
this Guaranty based solely upon its own independent investigation and in no
part upon any representation or statement of Standard Federal with respect
thereto. Guarantor is in a position to and hereby assumes full responsibility
for
5
<PAGE> 62
obtaining any additional information concerning Borrower's financial condition
as Guarantor may deem material to its obligations hereunder; and Guarantor is
not relying upon nor expecting Standard Federal to furnish it any information
in Standard Federal's possession concerning Borrower's financial condition.
SECTION 4. MISCELLANEOUS.
4.1 This Guaranty shall inure to the benefit of Standard Federal and its
successors and assigns, including each and every holder or owner of any of the
indebtedness guaranteed hereby. In the event that there shall be more than one
such holder or owner, this Guaranty shall be deemed a separate contract with
each such holder and owner. In the event that any person other than Standard
Federal shall become a holder or owner of any of the Indebtedness, each
reference to Standard Federal hereunder shall be construed as if it referred to
each such holder or owner.
4.2 This Guaranty shall be binding upon Guarantor and its successors and
assigns. Guarantor agrees that recourse may be had against its earnings and
separate property for all of Guarantor's obligations under this Guaranty.
4.3 The liability of each Guarantor executing this Guaranty shall be joint and
several and the term "Guarantor" shall mean each and all such guarantors.
4.4 This Guaranty and all rights and obligations hereunder, including matters
of construction, validity and performance, shall be governed by the laws of the
State of Michigan.
4.5 THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO STANDARD FEDERAL BY
GUARANTOR, JOINTLY AND SEVERALLY, WITHOUT ANY DURESS OR COERCION, AND AFTER
GUARANTOR, JOINTLY AND SEVERALLY, HAS EITHER CONSULTED WITH COUNSEL OR BEEN
GIVEN AN OPPORTUNITY TO DO SO, AND GUARANTOR, JOINTLY AND SEVERALLY, HAS
CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF THIS GUARANTY.
6
<PAGE> 63
IN WITNESS WHEREOF, this Guaranty was executed and delivered by the
undersigned on the day and year first above written.
WITNESSES: GUARANTOR:
GALION HOLDING COMPANY, a Michigan
corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Assistant Secretary
Taxpayer Identification Number:
38-3060196
McCLAIN E-Z PACK, INC., a Michigan
corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
GALION DUMP BODIES, INC., a
Michigan corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
SHELBY STEEL PROCESSING COMPANY, a
Michigan corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
59-3241829
McCLAIN GROUP SALES OF FLORIDA,
INC., a Florida corporation
7
<PAGE> 64
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
59-3241829
McCLAIN INDUSTRIES, INC., a
Michigan corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
McCLAIN OF GEORGIA, INC., a
Michigan corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
McCLAIN TUBE COMPANY, a Michigan
corporation
- -------------------------------- By:
----------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
McCLAIN OF OHIO, INC., an Ohio
corporation
- -------------------------------- By:
---------------------------------------
Carl Jaworski
Assistant Secretary
Taxpayer Identification Number:
-------------------------------
McCLAIN EPCO COMPANY, a New York
corporation
- -------------------------------- By:
---------------------------------------
Carl Jaworski
Secretary
Taxpayer Identification Number:
-------------------------------
STANDARD FEDERAL BANK, a federal
savings bank
2600 W. Big Beaver Road
Troy, Michigan 48084
8
<PAGE> 1
EXHIBIT 10.72
PLACEMENT AGENCY AGREEMENT
April 23,1997
$5,225,000
THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF DEMOPOLIS
INDUSTRIAL DEVELOPMENT REVENUE BONDS
SERIES 1997
(McCLAIN OF ALABAMA, INC. PROJECT)
The Industrial Development Board of the City of Demopolis
Demopolis, Alabama
Ladies and Gentlemen:
The undersigned placement agent (the "Placement Agent") offers to
enter into this Placement Agency Agreement (the "Agreement") with you, for the
placement by us and the execution and delivery by The Industrial Development
Board of the City of Demopolis (the "Issuer") of the Bonds specified below.
This offer is made subject to acceptance by the Issuer and approval by McClain
of Alabama, Inc. (the "Company") prior to 12:00 p.m., Central Daylight Savings
Time, on the date hereof, and upon such acceptance this Agreement shall be in
full force and effect in accordance with its terms and shall be binding upon
the Issuer, the Placement Agent and the Company. All terms not defined herein
shall have the meanings set forth in the Placement Memorandum (defined below),
or if not set forth therein, as set forth in the Indenture (defined below).
1. Upon the terms and conditions herein, the Placement Agent will
use its best efforts to arrange for the placement of, and the Issuer will
deliver to the Placement Agent, all (but not less than all) of the $5,225,000
aggregate principal amount of the Issuer's Industrial Development Revenue
Bonds, Series 1997 (McClain of Alabama, Inc., Project) (the "Bonds"), as more
fully described in the Placement Memorandum, at a price of 100% of par, for a
placement fee, payable by the Company, in an amount equal to $30,000 as
compensation for the placement of the Bonds.
<PAGE> 2
In addition, the Company is responsible for paying all other costs associated
with the issuance and placement of the Bonds, including the fees and expenses
of counsel to the Placement Agent and the Credit Obligor (as defined below), to
the extent that they are not paid from Bond proceeds.
2. The Bonds shall be as described in, and shall be secured under
and pursuant to, the Trust Indenture, dated as of April 1, 1997 (the
"Indenture"), between the Issuer and LaSalle National Bank, as trustee (the
"Trustee"), substantially in the form previously submitted to the Placement
Agent, with only such changes therein as shall be mutually agreed upon by the
Trustee, the Company, the Issuer and the Placement Agent. The Bonds are
secured by a manufacturing facility (the "Project") to be located on certain
real property in the City of Demopolis, Alabama, and leased to the Company
pursuant to the Lease Agreement between the Issuer and the Company, dated as of
April 1, 1997 (the "Lease Agreement"). The Bonds are further secured by a
letter of credit (the "Letter of Credit"), dated the date of issuance of the
Bonds, issued by Standard Federal Bank (the "Credit Obligor"), pursuant to the
Reimbursement Agreement (the "Reimbursement Agreement"), dated as of April 23,
1997 among the Company and the Credit Obligor, which Letter of Credit is
confirmed by LaSalle National Bank, as confirming bank (the "Confirming Bank").
3. The Issuer and the Company shall deliver or cause to be
delivered to the Placement Agent promptly after their acceptance hereof, two
copies of the Placement Memorandum, dated April 23, 1997 relating to the Bonds.
The Placement Memorandum, in its preliminary and final form, including the
cover page, the appendices thereto and all information incorporated therein,
with only such amendments, supplements or changes therein as shall have been
accepted by us, is hereinafter referred to as the "Placement Memorandum." The
Company has authorized the use of copies of the Placement Memorandum, the
Indenture and the Lease Agreement and the Remarketing Agreement among the
Issuer, the Company and LaSalle National Bank, as described in the Placement
Memorandum, in connection with the placement of the Bonds. The Placement Agent
agrees that it will not confirm the placement of any Bonds unless the
confirmation of such placement is accompanied or preceded by the delivery of a
copy of the Placement Memorandum.
4. The Issuer, subject to the limitations provided herein,
represents and warrants to and agrees with the Placement Agent as follows with
respect to the Bonds:
(a) The Issuer is a political subdivision and a body
political and corporate and public instrumentality of the State,
created and existing under the Act.
(b) The Issuer is authorized under the laws of the State
to (i) issue the Bonds for the purposes for which they are to be
issued as set forth in the Placement Memorandum; (ii) use the proceeds
of the Bonds to acquire, construct and equip the Project; (iii) enter
into the Indenture, the Lease Agreement, this Agreement and the
Remarketing Agreement; and (iv) pledge and assign to the Trustee the
payments to be made by the Company under the Lease Agreement and the
Issuer's rights under the Lease Agreement that are pledged or assigned
as security for the payment of the principal of, premium, if any, and
interest on the Bonds.
-2-
<PAGE> 3
(c) The Issuer has full power and authority to consummate
the transactions contemplated on its part by the Bonds, the Placement
Memorandum, the Indenture, the Lease Agreement, this Agreement and the
Remarketing Agreement.
(d) The information relating to the Issuer contained
under the caption "THE BOARD" in the Placement Memorandum does not, as
of the date hereof, and will not, as of the Closing Date (as
hereinafter defined), contain an untrue statement of a material fact
or omit to state a material fact necessary to make the statements made
therein, in the light of the circumstances under which they were made,
not misleading.
(e) The Issuer has duly authorized and approved the
execution and delivery of this Agreement.
(f) Prior to the Closing (as hereinafter defined), the
Issuer shall have duly authorized all necessary action to be taken by
it for (i) the issuance and sale of the Bonds and the use of the
proceeds of the Bonds to finance the costs of the Project on the terms
and for the purposes set forth herein and in the Placement Memorandum
and (ii) the approval, execution, delivery and/or receipt, as the case
may be, by the Issuer of the Indenture, the Lease Agreement, this
Agreement, the Remarketing Agreement, the Bonds, the Placement
Memorandum and any and all such other agreements and documents as may
be required to be approved, executed, delivered and/or received by the
Issuer in order to carry out, give effect to, and consummate the
transactions contemplated hereby and by the Placement Memorandum.
(g) The Issuer shall, on or before the Closing Date,
execute and deliver the Indenture, the Lease Agreement, this
Agreement, the Remarketing Agreement and the Bonds and shall approve
and authorize the use of the Placement Memorandum.
(h) The Bonds, when issued, delivered and paid for as
provided herein and in the Indenture will have been duly authorized
and issued and will constitute valid and binding limited obligations
of the Issuer enforceable in accordance with their terms and entitled
to the benefits and security of the Indenture and the Lease Agreement,
subject in each instance to any applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws and laws affecting the
enforcement of creditors' rights generally or relating to a public
body such as the Issuer as from time to time in effect, and further
subject to the availability of equitable remedies. The Bonds do not
pledge the credit of the Issuer, the State or any political
subdivision or agency thereof nor shall there be a charge against the
general revenues of such entities or of the Issuer or a lien against
any of their property except as specifically provided in the
Indenture. The Bonds shall be limited obligations of the Issuer and
no taxes are required to be levied for the payment of the principal
of, premium, if any, and interest on the Bonds; such principal of,
premium, if any, and interest on the Bonds being payable (except to
the extent otherwise provided in the Indenture) solely out of moneys
to be received by the Issuer as payments under the Lease Agreement
that are pledged under
-3-
<PAGE> 4
the Indenture and any other amounts derived from the Lease Agreement,
from specified amounts on deposit with the Trustee under the Indenture
and from amounts available from draws on the Letter of Credit and the
income from the temporary investment of any of the foregoing.
(i) This Agreement is and, when executed and delivered,
each of the Indenture, the Lease Agreement, this Agreement, the
Remarketing Agreement will be, assuming the due and valid
authorization, execution and delivery of such documents by the other
parties thereto, the legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their
respective terms, subject to any applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and subject to the
availability of equitable remedies, and to the qualification that
enforcement of the indemnification provisions of this Agreement may be
limited by federal or state securities laws.
(j) Except as may be set forth in the Placement
Memorandum, 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 in which summons has been served or, to the best
knowledge of the Issuer, threatened against or affecting the Issuer
wherein an unfavorable decision, ruling or finding would adversely
affect (i) the corporate existence of the Issuer or the right of the
members of the Issuer to their offices or the right of the officers of
the Issuer to their respective offices, (ii) the validity of or the
Issuer's power to engage in the transactions contemplated hereby or by
the Placement Memorandum, (iii) the validity of the proceedings taken
by the Issuer for the approval, adoption, authorization, execution,
delivery, receipt and performance, as the case may be, of the Bonds,
the Placement Memorandum, the Indenture, the Lease Agreement, this
Agreement, the Remarketing Agreement, or any agreement or any
instrument to which the Issuer is a party and which is used or
contemplated for use in the consummation of the transactions
contemplated hereby or by the Placement Memorandum, (iv) the validity
or enforceability of the Bonds, the Placement Memorandum, the
Indenture, the Lease Agreement, this Agreement, the Remarketing
Agreement, or any agreement or instrument to which the Issuer is a
party and which is used or contemplated for use in the consummation of
the transactions contemplated herein or in the Placement Memorandum or
(v) the federal tax-exempt status of the interest on the Bonds or the
amounts to be received by the Issuer pursuant to the Lease Agreement.
(k) The execution and delivery by the Issuer of the
Bonds, the Indenture, the Lease Agreement, this Agreement, the
Remarketing Agreement and the other documents contemplated hereby or
by the Placement Memorandum, and compliance with their respective
provisions, the approval and delivery by the Issuer of the Placement
Memorandum, and the assignment of the Lease Agreement, including the
specified rights of the Issuer under the Lease Agreement, to the
Trustee, do not and will not conflict with, or constitute on the part
of the Issuer a breach of, or a default under, any existing law, court
or
-4-
<PAGE> 5
administrative regulation, decree, order, agreement, indenture,
mortgage or lease to which the Issuer is a party or by which the
Issuer or any of its property is or may be bound.
(l) A public hearing was held with respect to the Bonds
on April 7, 1997 and the approval of the "applicable representative"
has or will be obtained prior to the Closing, all as described in
Section 147(f) of the Code.
(m) The resolution of the Issuer, adopted April 17, 1997,
approving and authorizing the execution and delivery of the Indenture,
the Lease Agreement, this Agreement, the Remarketing Agreement and the
Bonds and the use and distribution of the Placement Memorandum, was
duly adopted at a meeting of the members of the Issuer that was called
and held pursuant to law and with all public notice required by law
and at which a quorum was present and acting throughout.
(n) The Issuer will furnish such information, execute
such instruments and take such other action in cooperation with the
Placement Agent and Placement Agent's counsel as they may reasonably
request (i) in any endeavor to qualify the Bonds for offering and sale
under the securities or "blue sky" laws or other securities laws or
regulations of such jurisdictions of the United States as the
Placement Agent may request, (ii) for the application for exemption
from such qualification, (iii) for the Placement Agent's determination
of their eligibility for investment under the laws of such
jurisdictions as the Placement Agent designates and (iv) to provide
for the continuance of such qualifications or exemptions in effect for
so long as required for the distribution of the Bonds; provided,
however, that the Issuer shall not be required by the foregoing to
consent to jurisdiction in any state other than the State and shall
not be deemed to have made any representation with regard to
securities or "blue sky" laws or other securities laws of the United
States. The Issuer shall not be obligated to pay any expenses or
costs (including legal fees) incurred in connection with such
qualification.
(o) Any certificate signed by an authorized officer of
the Issuer and delivered to the Placement Agent shall be deemed a
representation and warranty by the Issuer to the Placement Agent as to
the statements made therein.
(p) Other than as disclosed in the Placement Memorandum
and as required under Section 147(f) of the Code, no further
authorization, approval, consent or other order of any governmental
authority or agency, or of any other entity or person(s) is required
for the valid authorization, execution and delivery by the Issuer of
the Bonds and the other documents contemplated thereby or the
authorization and delivery of the Placement Memorandum.
(q) Neither the corporate existence or territorial
jurisdiction of the Issuer nor the title of the officers or members of
the governing body of the Issuer to their respective offices or
membership are being contested and no authority or proceeding for the
issuance of the Bonds has been repealed, revoked or rescinded.
-5-
<PAGE> 6
Under no circumstances will any obligation, covenant, representation
or warranty of the Issuer created by or arising out of this Agreement or out of
the Bonds, or the resolution authorizing the Bonds, be or become an
indebtedness of the Issuer, the State or any political subdivision of the State
or be a charge against the general credit or taxing power of the Issuer or the
State or any political subdivision of the State or give rise to a pecuniary
liability of the Issuer, or on the part of any member, officer, employee or
agent of the Issuer, the State or any political subdivision of the State, but
shall be payable solely out of the revenues and other funds pledged under the
Indenture.
5. The Company represents and warrants to and agrees with the
Issuer and the Placement Agent as follows with respect to the Bonds:
(a) The Company has full power and authority to own its
properties and to conduct its business as now being conducted.
(b) The information relating to the Company contained in
the Placement Memorandum on the cover page and under the captions "THE
COMPANY" and "THE PROJECT" are, as of date hereof, and will be, as of
the Closing Date, true and correct in all material respects for the
purposes for which their use is or was authorized; and such sections
do not, and as of the Closing Date will not, include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements made in such sections in light of the
circumstances under which they are or were made, not misleading.
Neither this Agreement nor any other document, certificate or written
statement furnished to the Placement Agent or the Issuer pursuant to
this Agreement or the Lease Agreement by or relating to the Company
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or
therein, under the circumstances under which they are or were made,
not misleading.
(c) Subsequent to the respective dates as of which
information was given to the Placement Agent and except as set forth
in or contemplated by the Placement Memorandum, no event has occurred
which has affected or may affect materially and adversely the
business, properties, operations or financial condition of the
Company.
(d) Neither the execution and delivery of the Lease
Agreement, the Reimbursement Agreement, the Remarketing Agreement, and
this Agreement nor the approval and distribution of the Placement
Memorandum and compliance by the Company with the provisions on the
Company's part contained therein nor the consummation of any other of
the transactions contemplated hereby or thereby, nor the fulfillment
of the terms hereof or thereof, conflicts with or constitutes a breach
of or default under nor contravenes any law, administrative
regulation, judgment, decree, loan agreement, indenture, bond, note,
resolution, agreement or other instrument to which the Company is a
party or to which the Company is otherwise subject, nor does any such
execution, delivery, approval, adoption or compliance result in the
creation or imposition of any lien, charge or other security interest
or encumbrance of any nature whatsoever upon any of the properties or
assets of the
-6-
<PAGE> 7
Company under the terms of any such law, administrative regulation,
judgment, decree, loan agreement, indenture, bond, note, deed of trust,
resolution, agreement or other instrument, except as provided by the Indenture,
the Lease Agreement or the Reimbursement Agreement or the other documents
executed in connection therewith.
(e) To the best of the Company's knowledge and belief,
the Company is not in breach of or default in any material respect
under any applicable law or administrative regulation or any
applicable judgment or decree or any loan agreement, indenture, bond,
note, resolution, agreement or other instrument to which the Company
is a party or to which the Company is otherwise subject, and no event
has occurred and is continuing which, with the passage of time or the
giving of notice, or both, would constitute a default or an event of
default under any such instrument.
(f) There is no action, suit, proceeding or investigation
at law or in equity before or by any court or governmental agency or
body pending or threatened against the Company wherein an adverse
decision, ruling or finding would (i) result in any material and
adverse change in the condition (financial or otherwise), business or
prospects of the Company which would materially and adversely affect
the properties of the Company, and which has not been disclosed in the
Placement Memorandum (ii) materially and adversely affect the
transactions contemplated by this Agreement, or (iii) materially and
adversely affect the validity or enforceability against the Company of
the Lease Agreement, the Reimbursement Agreement, the Remarketing
Agreement or this Agreement.
(g) The Company has the full power and authority to
execute and deliver and to perform its obligations under the Lease
Agreement, the Reimbursement Agreement, the Remarketing Agreement, and
this Agreement and to engage in the transactions contemplated thereby
and by the Placement Memorandum relating to the offer and sale of the
Bonds. The Lease Agreement, the Reimbursement Agreement, the
Remarketing Agreement and this Agreement have been duly authorized
and, when executed and delivered by the respective parties hereto and
thereto, will constitute legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms, except
as enforcement thereof may be limited by bankruptcy, insolvency or
other laws affecting enforcement of creditors' rights and general
principles of equity, and except as the indemnification provisions
hereof may be limited by applicable securities laws or public policy.
(h) The application to the Issuer and the completed
questionnaires, if any, supplied by the Company to the Issuer, Bond
Counsel and/or the Placement Agent or its counsel with respect to the
Project to be financed with the proceeds of the Bonds are true,
correct and complete in all material respects for the purposes for
which supplied.
(i) No consent, approval, authorization or other action
by any governmental or regulatory authority that has not been obtained
is or will be required by the Company for the issuance and sale of the
Bonds or the consummation of the other transactions contemplated
-7-
<PAGE> 8
by the Remarketing Agreement, this Agreement and the Placement
Memorandum, except for such licenses, certificates, approvals,
variances or permits which may be necessary for the construction or
operation of the Project and for which the Company has applied (or for
which the Company will apply in the ordinary course of business) and
expects to receive, and except as may be required under the state
securities or "blue sky" laws in connection with the placement of the
Bonds by the Placement Agent.
(j) The Company authorizes the use by the Placement Agent
of the Placement Memorandum (including the Appendices thereto and all
information incorporated therein by reference), the Lease Agreement,
the Reimbursement Agreement, and this Agreement and the information
therein and herein in connection with the placement of the Bonds.
(k) The Company will not take or omit to take any action
which action or omission will in any way cause the proceeds from the
sale of the Bonds to be applied in a manner contrary to that provided
in the Indenture, and the Lease Agreement.
(l) The Company will deliver all opinions, certificates,
letters and other instruments and documents reasonably required by the
Lease Agreement, the Reimbursement Agreement, the Remarketing
Agreement and this Agreement.
(m) Any certificate of the Company delivered to the
Placement Agent shall be deemed a representation and warranty by the
Company to the Placement Agent as to the statements made therein.
(n) The Company will furnish such information, execute
such instruments and take such other action in cooperation with the
Issuer and the Placement Agent as may be required to qualify the Bonds
for offering and sale under the "blue sky" or other securities laws of
such jurisdictions as the Placement Agent may designate; provided,
however, that the Company shall not be obligated to accept, or consent
to accept, service of process, or to appoint an agent to accept
service of process, outside the State of Alabama or any other state in
which the Company is qualified to do business;
(o) The representations, warranties, agreements and
indemnities contained herein shall survive the Closing and any
investigation made by or on behalf of the Issuer or the Placement
Agent or any such director, officer or any such controlling person as
to any matters described in or related to the transactions
contemplated hereby and by the Placement Memorandum, the Indenture,
the Reimbursement Agreement, the Lease Agreement and the Remarketing
Agreement.
6. The Company shall indemnify the Issuer and the Placement Agent
and shall hold them harmless as follows:
-8-
<PAGE> 9
(a) The Company shall pay and indemnify and hold harmless
the Issuer and any person who "controls" the Issuer within the meaning
of Section 15 of the Securities Act of 1993, as amended, and any
member, officer, director, trustee, official, employee and agent of
the Issuer, and each person, if any, who has the power, directly or
indirectly, to direct or cause the direction of the management and
policies of the Issuer pursuant to the Act or the Issuer's regulations
or bylaws (each an "Issuer Indemnified Party", and collectively, the
"Issuer Indemnified Parties") from any loss, claim, damage, tax,
penalty or expense (including reasonable attorneys' fees and
expenses), or liability of any nature due to any and all suits,
actions, legal or administrative proceedings, or claims arising or
resulting from or in any way connected with: (i) the financing of the
Project or the installation, operation, use, or maintenance of the
properties of the Company, (ii) any act, failure to act, or
misrepresentation by any person in connection with the issuance, sale,
delivery or remarketing of the Bonds, or (iii) any act, failure to
act, or misrepresentation by the Issuer in connection with this
Agreement or any other document involving the Issuer in this matter.
If any suit, action or proceeding is brought against any of the Issuer
Indemnified Parties, that suit, action or proceeding shall be defended
by counsel to the Issuer or the Company, as the Issuer shall
determine. If the defense is by counsel to the Issuer, the Company
shall indemnify the Issuer Indemnified Parties for the reasonable cost
of that defense including reasonable attorneys' fees and expenses. If
the Issuer determines that the Company shall defend the Issuer or any
Issuer Indemnified Parties, the Company shall immediately assume the
defense at its own cost. Neither the Issuer nor the Company shall be
liable for any settlement of any proceeding made without each of their
consent (which consent shall not be unreasonably withheld).
(b) The Company shall indemnify and hold harmless the
Placement Agent and any person who "controls" the Placement Agent
within the meaning of Section 15 of the Securities Act of 1933, as
amended, and any officer, director, official, employee and agent of
the Placement Agent (each an "Agent Indemnified Party" and
collectively, the "Agent Indemnified Parties") from any loss, claim,
damage, tax, penalty, or expense (including reasonable attorneys' fees
and expenses), or liability of any nature due to any and all suits,
actions, legal or administrative proceedings, or claims arising or
resulting from, or in any way connected with: (i) the financing of the
Project or the installation, operation, use, or maintenance of the
properties of the Company, (ii) any act, failure to act, or
misrepresentation by the Company or any director, officer, employee,
agent, or independent contractor of the Company in connection with the
issuance, sale, delivery or remarketing of the Bonds, or (iii) any
act, failure to act, or misrepresentation by the Issuer or the
Placement Agent in connection with this Agreement or any other
document involving the Issuer or the Placement Agent in this matter
(except to the extent any such act, failure to act or
misrepresentation by the Placement Agent or any director, officer,
employee, agent, or independent contractor of the Placement Agent
involved the gross negligence or willful misconduct of the Placement
Agent or any of its directors, officers, employees, agents or
independent contractors); provided, however, that no such
indemnification shall be extended to the Placement Agent in connection
with any matter to the extent that the Placement Agent
-9-
<PAGE> 10
is required to indemnify the Company or the Company Indemnified
Parties (as defined in Section 7(b) hereof) therefor pursuant to
Section 7(b) of this Agreement. In case any claim shall be made or
any action shall be brought against one or more of the Agent
Indemnified Parties, the Agent Indemnified Parties seeking indemnity
hereunder shall promptly notify the Company in writing, and the
Company shall promptly assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Placement Agent,
the payment of all expenses and the right to negotiate and consent to
settlement. If any of the Agent Indemnified Parties is advised in an
opinion of counsel that there may be legal defenses available to it
which are adverse to or in conflict with those available to the
Company, or that the defense of such Agent Indemnified Party should be
handled by separate counsel, the Company shall not have the right to
assume the defense of such Agent Indemnified Party, but shall be
responsible for the reasonable fees and expenses of counsel retained
by the Agent Indemnified Party in assuming its own defense, and
provided also that if the Company shall have failed to assume the
defense of such action or to retain counsel reasonably satisfactory to
the Company, within a reasonable time after written notice of the
commencement of such action, the fees and expenses of counsel retained
by the Agent Indemnified Parties shall be paid by the Company.
Notwithstanding and in addition to any of the foregoing, any one or
more of the Agent Indemnified Parties shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Agent Indemnified Parties, unless the employment of
such counsel had been specifically authorized, in writing, by the
Company. The Company shall not be liable for any settlement of any
such action effected without its written consent, but if settled with
the consent of the Company or if there is a final judgment for the
plaintiff in any such action with or without consent, the Company
shall indemnify and hold harmless the Agent Indemnified Parties from
and against any loss or liability by reason of such settlement or
judgment.
(c) The Company shall also indemnify the Issuer
Indemnified Parties and the Agent Indemnified Parties for all
reasonable costs and expenses, including reasonable attorneys' fees
and expenses, incurred in: (i) enforcing any obligation of the Company
under this Agreement or any related agreement, (ii) taking any action
requested by the Company, (iii) taking any action required by this
Agreement or any related agreement, or (iv) taking any action
considered necessary by the Issuer or the Placement Agent and which is
authorized by this Agreement or any related agreement.
(d) Any provision of this Agreement or any other
instrument or document executed and delivered in connection therewith
to the contrary notwithstanding, the Issuer retains the right to (i)
enforce any applicable federal or state law or regulation pertaining
to the Issuer and (ii) enforce any rights accorded the Issuer by
federal or state law or regulation, and nothing in this Agreement
shall be construed as an express or implied waiver thereof.
(e) The indemnity provided herein is not intended to
supersede any indemnity to which the Issuer is entitled to under the
Lease Agreement. Any indemnity provided herein
-10-
<PAGE> 11
is in addition to any other indemnification provided by the Company to
the Indemnified Parties.
7. The Placement Agent shall indemnify the Issuer and the Company
and shall hold them harmless as follows:
(a) The Placement Agent shall indemnify, defend and hold
harmless the Issuer and the Issuer Indemnified Parties to the fullest
extent permitted by law, from and against any and all losses, claims,
damages, demands, liabilities, costs or expenses, including reasonable
attorneys' fees and expenses related thereto, (i) arising out of or
based upon an untrue statement or misleading statement or alleged
untrue statement or alleged misleading statement of a material fact
contained in the Placement Memorandum or arising out of or based upon
the omission or alleged omission of the Placement Agent to make the
statements therein, in light of the circumstances under which they
were made, not misleading, but in each case only to the extent that
such untrue or misleading statement or alleged untrue or misleading
statement or omission or alleged omission was made in the Placement
Memorandum in reliance upon and in conformity with information
furnished to the Issuer or the Company in writing by the Placement
Agent, including, without limitation, the information therein
describing the Placement Agent or its activities with respect to the
Bonds, contained under the caption "PLACEMENT OF THE BONDS" and (ii)
to the extent of the aggregate amount paid in settlement of any
litigation commenced or threatened arising from a claim based upon any
such untrue statement or omission, if such settlement is effected with
the written consent of the Placement Agent and (iii) as a result of,
or in connection with, the violation of federal or state securities
laws by the Placement Agent in its sale of the Bonds to the purchasers
thereof.
(b) The Placement Agent shall indemnify, defend and hold
harmless the Company, its directors, officers and each person, if any,
who has the power, directly or indirectly, to direct or cause the
direction of the management and policies of the Company (each a
"Company Indemnified Party," and collectively, the "Company
Indemnified Parties") to the fullest extent permitted by law, from and
against any and all losses, claims, damages, demands, liabilities,
costs or expenses, including reasonable attorneys' fees and expenses
related thereto, (i) arising out of or based upon an untrue statement
or alleged misleading statement of a material fact contained in the
Placement Memorandum or arising out of or based upon the omission or
alleged omission of the Placement Agent to make the statement therein,
in light of the circumstances under which they were made, not
misleading, but in each case only to the extent that such untrue or
misleading statement or alleged untrue or misleading statement or
omission or alleged omission was made in the Placement Memorandum in
reliance upon and in conformity with information furnished to the
Company or the Issuer in writing by the Placement Agent, including,
without limitation, the information therein describing the Placement
Agent or its activities with respect to the Bonds, contained under the
caption "PLACEMENT OF THE BONDS" and (ii) to the extent of the
aggregate amount paid in settlement of any litigation commenced or
threatened arising
-11-
<PAGE> 12
from a claim based upon any such untrue statement or omission, if such
settlement is effected with the written consent of the Placement
Agent.
(c) The Placement Agent shall indemnify, defend and hold
harmless the Issuer Indemnified Parties and the Company Indemnified
Parties to the fullest extent permitted by law from and against any
and all losses, claims, damages, demands, liabilities, costs or
expenses (including reasonable attorneys' fees and expenses) caused by
(i) the failure of the Placement Agent to comply with the registration
or qualification requirements applicable to the Placement Agent or the
Bonds under any securities or "blue sky" laws of any state in which
such registration or qualification is required and (ii) the violation
of any applicable federal or state securities laws in connection with
the sale of the Bonds.
(d) In case any claim shall be made or any action shall
be brought against one or more of the Issuer Indemnified Parties or
the Company Indemnified Parties based upon information furnished in
writing to the Issuer or the Company by the Placement Agent,
describing therein the Placement Agent or its activities with respect
to the Bonds or pursuant to the preceding paragraph, the Issuer
Indemnified Parties or the Company Indemnified Parties seeking
indemnity shall promptly notify the Placement Agent in writing, and
the Placement Agent shall promptly assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Issuer and the Company, the payment of all expenses and the right to
negotiate and consent to settlement. If any of the Issuer Indemnified
Parties or the Company Indemnified Parties is advised in an opinion of
counsel that there may be legal defenses available to it which are
adverse to or in conflict with those available to the Placement Agent,
or that the defense of such Issuer Indemnified Party or Company
Indemnified Party should be handled by separate counsel, the Placement
Agent shall not have the right to assume the defense of such Issuer
Indemnified Party or Company Indemnified Party, but shall be
responsible for the reasonable fees and expenses of counsel retained
by the Issuer Indemnified Party and/or Company Indemnified Party in
assuming its own defense, and provided also that if the Placement
Agent shall have failed to assume the defense of such action or to
retain counsel reasonably satisfactory to the Issuer or the Company,
as the case may be, within a reasonable time after written notice of
the commencement of such action, the fees and expenses of counsel
retained by the Issuer Indemnified Parties and/or the Company
Indemnified Parties, as the case may be, shall be paid by the
Placement Agent. Notwithstanding and in addition to any of the
foregoing, any one or more of the Issuer Indemnified Parties and/or
the Company Indemnified Parties, as the case may be, shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Issuer Indemnified Parties and/or the
Company Indemnified Parties, as the case may be, unless the employment
of such counsel had been specifically authorized, in writing, by the
Placement Agent. The Placement Agent shall not be liable for any
settlement of any such action effected without its written consent,
but if settled with the consent of the Placement Agent or if there is
a final judgment for the plaintiff in any such action with or without
consent based on the preceding paragraph, the Placement Agent shall
indemnify and
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<PAGE> 13
hold harmless the Issuer Indemnified Parties and the Company
Indemnified Parties from and against any loss or liability by reason
of such settlement or judgment.
8. The Company further agrees as follows:
(a) The Company approves and ratifies the use by the
Placement Agent prior to the date hereof of a Preliminary Placement
Memorandum (the "Preliminary Placement Memorandum") in connection with
the offering of the Bonds.
(b) The Company ratifies, confirms and consents to the
use of the Preliminary Placement Memorandum, drafts of the Preliminary
Placement Memorandum and the Placement Memorandum by counsel to the
Placement Agent in obtaining necessary qualification, exemption,
determination or continuation of any of the foregoing under applicable
securities laws.
(c) The Company approves the form of and authorizes the
Placement Agent to prepare, use and distribute the Placement
Memorandum in the final form in connection with the placement and sale
of the Bonds.
(d) The Company shall provide to the Placement Agent, on
the date hereof, sufficient copies of the Placement Memorandum to
enable the Placement Agent to comply with the requirements of SEC Rule
15c2-12(b)(4), Rule G-32 of the Municipal Securities Rulemaking Board
and with other applicable legal requirements.
(e) No amendment or supplement to the Placement
Memorandum shall be made without the written approval of the Placement
Agent. If, during the period from the date of this Agreement to and
including the date which is 90 days following the End of the
Underwriting Period for the Bonds (as such term is hereinafter
defined) an event occurs affecting the Company of which the Company
has knowledge and which might or would cause the Placement Memorandum
to contain any untrue statement of a material fact or omit to state a
material fact necessary to be stated therein for the purpose for which
it is to be used or to make the statements therein, in the light of
the circumstances under which they were made, not misleading in any
material respect, the Company will notify the Placement Agent and the
Issuer, and if in the opinion of the Placement Agent such event
requires an amendment or supplement to the Placement Memorandum, the
Company will amend or supplement the Placement Memorandum in a form
and in a manner approved by the Placement Agent and the Issuer and
furnish to the Placement Agent and the Issuer (i) a reasonable number
of copies of the amendment or supplement and (ii) if such notification
shall be subsequent to the date of the Closing, such legal opinions,
certificates, instruments and other documents as the Placement Agent
may reasonably deem necessary to evidence the truth and accuracy of
such amendment or supplement. The cost of providing any amendment or
supplement during the period prior to and including the date which is
90 days following the End of the Underwriting Period for the Bonds
shall be paid by the Company.
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<PAGE> 14
(f) As used herein, "End of the Underwriting Period" for
the Bonds shall mean the date on which the End of the Underwriting
Period for the Bonds has occurred under SEC Rule 15c2-12; provided,
however, that the Placement Agent shall be entitled to treat the
Closing Date as the End of the Underwriting Period for the Bonds.
9. By 11:00 a.m., Central Daylight Savings Time, on April 23,
1997 (the "Closing Date"), the certificates, opinions, commitments and other
documents required by Section 10 hereof shall be executed and delivered and
payment of such fees as are called for herein shall be made (such execution,
delivery and payment, together, being referred to as the "Closing"). The
Closing shall take place at the offices of Bodman, Longley & Dahling LLP,
Detroit, Michigan, or such other location as may be agreed upon by the Issuer,
the Company and the Placement Agent. At least two (2) business days prior to
the Closing Date, the Issuer will deliver the Bonds to the Placement Agent in
definitive form duly executed (or, at the option of the Placement Agent, in
book entry form under the book entry system maintained by The Depository Trust
Company), together with the other documents herein mentioned, and the Placement
Agent will accept such delivery and facilitate the payment of the purchase
price of the Bonds in federal funds.
10. The obligations of the Placement Agent hereunder shall be
subject to the performance by the Issuer and the Company of their respective
obligations to be performed hereunder at and prior to the Closing, to the
accuracy in all material respects, in the reasonable judgment of the Placement
Agent, of the representations and warranties of the Issuer and the Company
herein as of the date hereof and as of the Closing and, in the reasonable
discretion of the Placement Agent, to the following conditions, including the
delivery by the Issuer and the Company, as the case may be, of the Closing
Documents (hereinafter defined) enumerated herein, in each case in form and
substance reasonably satisfactory to the Placement Agent's counsel, as of the
Closing:
(a) At the time of the Closing, (i) the resolution
authorizing the Bonds, the Indenture, the Lease Agreement, the
Reimbursement Agreement, the Letter of Credit, the confirmation of the
Letter of Credit, this Agreement and the Remarketing Agreement shall
be in full force and effect in the form heretofore approved by the
Issuer, the Company, the Credit Obligor, the Confirming Bank and the
Trustee, as the case may be, and none of the foregoing documents shall
have been amended, repealed, modified or supplemented from the forms
thereof as of the date hereof, or as may have been approved in writing
by the Placement Agent and (ii) the Issuer and the Company shall have
duly adopted and there shall be in full force and effect such other
resolutions as, in the opinion of Bond Counsel and the Placement
Agent's counsel, are necessary and appropriate in connection with the
transactions contemplated hereby and by the Placement Memorandum.
(b) At or prior to the Closing, the Issuer shall have
duly executed and delivered, and the Trustee shall have authenticated,
the Bonds, and at the time of the Closing the proceeds derived from
the sale of the Bonds shall be deposited and applied for the purposes
described in the Placement Memorandum and as provided in the
Indenture.
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<PAGE> 15
(c) At or prior to the Closing, the Placement Agent shall
have received the following documents (the "Closing Documents"):
(i) the unqualified approving opinion of Bond
Counsel, dated the Closing Date, and the supplemental opinion
of Bond Counsel, dated the Closing Date and addressed to the
Placement Agent and the Issuer in substantially the form and
substance satisfactory to each of them;
(ii) [reserved];
(iii) the opinion of counsel to the Company, dated
the Closing Date and addressed to the Issuer, the Trustee, the
Placement Agent and the Credit Obligor, in substantially the
form and substance satisfactory to each of them;
(iv) the opinion of counsel to the Credit Obligor,
dated the Closing Date, and addressed to the Issuer, the
Company, the Trustee, the Placement Agent and Bond Counsel, in
form and substance reasonably satisfactory to the Placement
Agent;
(v) the opinion of counsel to the Confirming
Bank, dated the Closing Date, and addressed to the Issuer, the
Company, the Trustee, the Placement Agent and Bond Counsel, in
form and substance reasonably satisfactory to the Placement
Agent;
(vi) a certificate, dated the Closing Date, of the
Issuer executed on its behalf by an authorized officer thereof
to the effect that (A) the representations and warranties of
the Issuer contained herein are true and correct in all
respects on and as of the Closing Date with the same effect as
if made on the Closing Date, (B) the Issuer has complied with
all agreements and conditions of this Agreement to be
performed or satisfied by the Issuer at or prior to the
Closing Date and (C) no event affecting the Issuer has
occurred since the date of the Placement Memorandum (as
amended or supplemented to date) which should be disclosed in
the Placement Memorandum for the purposes for which it is to
be used or which it is necessary to disclose therein in order
to make the statements and information therein not misleading
in any material respect;
(vii) a certificate, dated the Closing Date, of the
Company executed on its behalf by an authorized representative
thereof to the effect that (A) the representations and
warranties of the Company contained herein are true and
correct in all respects on and as of Closing Date with the
same effect as if made on the Closing Date, (B) the Company
has complied with all agreements and conditions of this
Agreement to be performed or satisfied by the Company at or
prior to the Closing Date and (C) no event affecting the
Company has occurred since the date of
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<PAGE> 16
the Placement Memorandum (as amended or supplemented to date)
which should be disclosed in the Placement Memorandum for the
purposes for which it is to be used or which it is necessary
to disclose therein in order to make the statements and
information therein not misleading in any material respect;
(viii) copies of the preliminary and final Placement
Memorandum, in a quantity as reasonably determined by the
Placement Agent, duly executed by or on behalf of the Issuer;
(ix) a copy of all resolutions duly adopted by the
Company authorizing or approving the execution and delivery of
the documents required to be executed and delivered by the
Company or approving, as necessary, the forms of the Indenture
and the Bonds, certified by an authorized representative of
the Company;
(x) good standing certificates for the Company
issued by the Secretary of the State of Michigan and the
Secretary of the State of Alabama;
(xi) evidence that Standard & Poor's has issued a
rating for the Bonds that is not lower than AA-/A-1+ and that
such rating is in effect at the Closing Date and is not then
being reviewed;
(xii) a certificate of the Trustee, in form and
substance satisfactory to the Placement Agent, the Company and
the Issuer, to the effect that all moneys and securities
delivered to the Trustee under and pursuant to the Indenture
have been duly deposited to the credit of the appropriate
funds established under or in accordance with the Indenture or
otherwise applied as provided in the Indenture and that the
Trustee has no knowledge of any default under the Indenture;
(xiii) copies of all closing documents (not
otherwise specified for delivery hereunder) identified for
delivery in the most recent closing list for the Closing
provided by Bond Counsel, duly executed, if applicable, by the
respective parties thereto; and
(xiv) such additional legal opinions, certificates,
proceedings, instruments and other documents as counsel to the
Placement Agent, Bond Counsel and the Issuer may reasonably
request to evidence compliance by the Issuer and the Company
with legal requirements, the truth and accuracy, as of the
time of the Closing, of the respective representations and
warranties of the Company and the Issuer herein and the due
performance or satisfaction by the Issuer and the Company at
or prior to such time of all agreements then to be performed
and all conditions then to be satisfied by the Issuer and the
Company or as otherwise may be deemed necessary by such
counsel in connection with the issuance of the Bonds.
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<PAGE> 17
(d) If the Issuer or the Company shall be unable to
satisfy the conditions to the obligations of the Placement Agent
contained in this Agreement, or if the obligations of the Placement
Agent hereunder may be terminated for any reason permitted by this
Agreement, then this Agreement may be terminated by the Placement
Agent and if so terminated neither the Placement Agent nor the Company
or the Issuer shall be under any obligations hereunder; provided,
however, that the respective obligations to pay expenses, as provided
in Section 13 hereof, and the respective indemnification obligations
contained in Section 6 hereof, shall continue in full force and
effect.
11. For a period of 90 days after the Closing (a) the Issuer will
not adopt any amendment of or supplement to the Placement Memorandum to which
the Placement Agent shall object in writing or which shall be disapproved by
counsel for the Placement Agent and (b) if any event relating to or affecting
the Issuer and the Company shall occur as a result of which it is necessary, in
the opinion of counsel to the Placement Agent, to amend or supplement the
Placement Memorandum in order to make the Placement Memorandum not misleading
in light of the circumstances existing at the time it is delivered to the
initial purchasers of the Bonds, the Issuer and the Company will forthwith
prepare and furnish to the Placement Agent a reasonable number of copies of an
amendment of or supplement to the Placement Memorandum (in form and substance
satisfactory to counsel for the Placement Agent and at the Company's expense)
which will amend or supplement the Placement Memorandum so that it will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Placement Memorandum is delivered to the
initial purchasers of the Bonds, not misleading. For purposes of this Section,
the Issuer and the Company will each furnish such information with respect to
themselves as the Placement Agent may from time to time request.
12. The Placement Agent shall have the right to cancel its
obligations to place the Bonds if, between the date hereof and the Closing
Date:
(a) legislation shall be enacted, or actively considered
for enactment, by the Congress or recommended by the President of the
United States to the Congress for passage, or favorably reported for
passage to either house of the Congress by any committee of such house
to which such legislation has been referred for consideration, a
decision by a court of the United States or the United States Tax
Court shall be rendered, or a ruling, regulation or official statement
by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service or other agency or department of the United
States shall be made or proposed to be made which has the purpose or
effect, directly or indirectly, of imposing federal income taxes upon
revenues or other income to be derived by the Issuer under the Lease
Agreement, or upon interest on the Bonds;
(b) any other action or event shall have transpired which
has the purpose or effect, directly or indirectly, of materially and
adversely affecting the federal income tax consequences of any of the
transactions contemplated hereby or by the Placement
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<PAGE> 18
Memorandum, and, in the reasonable opinion of the Placement Agent,
such action or event pertaining to the federal income tax consequences
referenced above materially and adversely affects the market for the
Bonds or the sale, at the contemplated offering price by the Placement
Agent, of the Bonds;
(c) legislation shall be enacted or actively considered
for enactment by the Congress, with an effective date on or prior to
the Closing Date, or a decision by a court of the United States shall
be rendered, or a ruling or regulation by the Securities and Exchange
Commission or other governmental agency having jurisdiction over the
subject matter shall be made, the effect of which is that (i) the
Bonds are not exempt from the registration, qualification or other
requirements of the Securities Act of 1933, as amended and as then in
effect, or the Securities Exchange Act of 1934, as amended and as then
in effect, or (ii) the Indenture is not exempt from the registration,
qualification or other requirements of the Trust Indenture Act of
1939, as amended and as then in effect;
(d) a stop order, ruling or regulation by the Securities
and Exchange Commission shall be issued or made, the effect of which
is that the issuance, offering or sale of the Bonds, as contemplated
hereby or by the Placement Memorandum, is in violation of any
provision of the Securities Act of 1933, as amended and as then in
effect, the Securities Exchange Act of 1934, as amended and as then in
effect, or the Trust Indenture Act of 1939, as amended and as then in
effect;
(e) there shall occur any outbreak of hostilities or any
national or international calamity or crisis or a financial crisis the
effect of which on the financial markets of the United States is such
as, in the reasonable judgment of the Placement Agent, would
materially and adversely affect the market for the Bonds or the sale,
at the contemplated offering price by the Placement Agent, of the
Bonds;
(f) a general suspension of trading on the New York Stock
Exchange is in force, the effect of which on the financial markets of
the United States in the reasonable judgment of the Placement Agent,
as such as would materially and adversely affect the market for the
Bonds or the sale, at the contemplated offering price, by the
Placement Agent, of the Bonds;
(g) a general banking moratorium is declared by federal
or state (including specifically Illinois and New York) authorities,
the effect of which on the financial markets of the United States in
the reasonable judgment of the Placement Agent, as such as would
materially adversely affect the market for the Bonds or the sale, at
the contemplated offering price by the Placement Agent, of the Bonds;
(h) there occurs any material adverse change in the
affairs, operations or financial conditions of the Company except as
set forth in or contemplated by the Placement Memorandum;
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<PAGE> 19
(i) the Placement Memorandum is not executed, approved
and delivered as provided herein;
(j) any rating of the Confirming Bank or the Bonds by a
national rating agency shall be withdrawn or downgraded;
(k) in the reasonable judgment of the Placement Agent,
the market price of the Bonds, or the market price generally of
obligations of the general character of the Bonds, might be adversely
affected because (i) additional material restrictions not in force as
of the date hereof shall have been imposed upon trading in securities
generally by any governmental authority or by any national securities
exchange, or (ii) the New York Stock Exchange or other national
securities exchange, or any governmental authority, shall impose, as
to the Bonds or similar obligations, any material restrictions not now
in force, or increase materially those now in force, with respect to
the extension of credit by, or the charge to the net capital
requirements of, the Placement Agent; or
(l) other than disclosed in the Placement Memorandum, any
litigation shall be instituted, pending or threatened to restrain or
enjoin the issuance, sale or delivery of the Bonds or in any way
protesting or affecting any authority for or the validity of the
Bonds, the resolution of the Issuer authorizing the Bonds, the
Indenture, the Agreement, the Remarketing Agreement, the Letter of
Credit, the confirmation of the Letter of Credit, or the existence or
powers of the Issuer or the Company.
13. Whether or not the transactions contemplated by this Agreement
are consummated, all expenses and costs of the Issuer incident to the
performance of its obligations in connection with the authorization, issuance
and delivery of the Bonds to the Placement Agent, shall be paid by the Company.
14. Any notice or other communication to be given under this
Agreement shall be given by mail or courier delivery or by facsimile
transmission as follows:
If to the Company:
McClain Industries, Inc.
6200 Elmridge Road
Sterling Heights, MI 48310
P.O. Box 180913
Utica, MI 48318
Attention: Mr. Carl Jaworski
Telephone: (810) 264-3611
Facsimile number: (810) 264-7191
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<PAGE> 20
If to the Issuer:
The Industrial Development Board of the City of Demopolis
City Hall
Demopolis, Alabama 36732
Attention:
Telephone:
Telecopier:
If to the Placement Agent:
LaSalle National Bank
181 West Madison Street
Suite 3203
Chicago, Illinois 60602-4510
Attention: Capital Markets Group
Telephone number: 312-904-7047
Facsimile number: 312-904-8167
All notices or communications hereunder by any party shall be given
and served upon each other party.
15. The approval of the Placement Agent when required hereunder or
the determination of satisfaction as to any document referred to herein shall
be in writing signed by the Placement Agent and delivered to the party
requesting such approval or determination of satisfaction.
16. This Agreement is made solely for the benefit of the Issuer,
the Company and the Placement Agent and no other person shall acquire or have
any rights hereunder or by virtue hereof except as otherwise provided in
Sections 6 and 7 hereof. All representations, warranties and agreements of
authority in this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent and
shall survive the delivery of and payment for the Bonds. The covenants and the
agreements of each of the respective parties hereto shall survive the delivery
of and payment for the Bonds and shall remain in full force and effect
thereafter.
17. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, and such counterparts shall together constitute but one and the same
instrument.
18. This Agreement shall be governed exclusively by and construed
in accordance with the internal laws of the State of Illinois applicable to
contracts to be wholly performed therein.
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<PAGE> 21
Very truly yours,
LASALLE NATIONAL BANK,
as Placement Agent
By:
-------------------------------------
Title:
----------------------------------
Accepted:
THE INDUSTRIAL DEVELOPMENT BOARD
OF THE CITY OF DEMOPOLIS
By:
-------------------------------------
Title:
----------------------------------
Approved:
MCCLAIN OF ALABAMA, INC.
By:
-------------------------------------
Carl Jaworski
Title: Secretary
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<PAGE> 1
EXHIBIT 10.73
REMARKETING AGREEMENT
This Remarketing Agreement made and entered into as of April 23, 1997
among LaSalle National Bank, a national banking corporation (the "Remarketing
Agent"), The Industrial Development Board of the City of Demopolis, a public
corporation under the laws of Alabama (the "Issuer"), and McClain of Alabama,
Inc., a Michigan corporation ("Company").
WITNESSETH:
WHEREAS, the Issuer has authorized the issuance of its $5,225,000 The
Industrial Development Board of the City of Demopolis Industrial Development
Revenue Bonds, Series 1997 (McClain of Alabama, Inc. Project) (the "Bonds") to
finance the acquisition, construction and equipping of a manufacturing facility
that will be leased by the Issuer to the Company pursuant to the Lease
Agreement, dated as of April 1, 1997 by and between the Issuer and the Company
(the "Lease Agreement"); and
WHEREAS, the Bonds are subject to purchase upon optional and mandatory
tender upon notice and delivery, pursuant to the provisions of the Trust
Indenture, dated as of April 1, 1997 (the "Indenture"), by and between the
Issuer and LaSalle National Bank, a national banking corporation as trustee
(the "Trustee"); and
WHEREAS, LaSalle National Bank, as placement agent (the "Placement
Agent"), has agreed to arrange for the placement of the Bonds upon the initial
delivery thereof pursuant to the terms of a Placement Agency Agreement, dated
as of April 23, 1997 among the Placement Agent, the Company and the Issuer; and
WHEREAS, the Company and the Issuer desire that the Remarketing Agent
provide a mechanism for remarketing the Bonds according to the terms and
subject to the conditions described herein and in the Indenture;
NOW, THEREFORE, for and in consideration of the covenants herein made,
and subject to the conditions herein set forth, the parties agree as follows:
1. Definitions. All capitalized terms not defined herein shall
have the meanings ascribed to them in the Indenture unless a different meaning
clearly appears from the context.
2. Appointment, Resignation and Removal of Remarketing Agent,
Responsibilities of Remarketing Agent.
(a) In reliance upon the representations and agreements but
subject to the terms and conditions contained in the Indenture
and in this Agreement, the Company and the Issuer appoint the
Remarketing Agent, and the Remarketing Agent accepts appointment, as
exclusive Remarketing Agent in connection with the remarketing of the
Bonds from time to
<PAGE> 2
time in the secondary market subsequent to the initial offering,
issuance and delivery of the Bonds.
(b) The Indenture sets forth rights of, and duties and
obligations imposed on, the Remarketing Agent in connection with the
remarketing of the Bonds. The parties hereto agree that the
provisions of the Indenture relating to the Remarketing Agent shall be
incorporated herein by reference and be made a part hereof as if fully
set forth herein, and the Remarketing Agent accepts such duties and
obligations imposed pursuant to the Indenture.
(c) The Remarketing Agent will keep such books and records
as shall be consistent with prudent industry practice and will
summarize (i) the principal amount of the Bonds, if any, remarketed by
it pursuant to this Agreement and the Indenture, and (ii) the interest
rate on the Bonds for each Variable Rate Period and Term Rate Period
determined pursuant to and in accordance with the Indenture and
deliver such summary on a monthly basis to the Company, the Issuer and
Standard Federal Bank, as issuer of the Initial Letter of Credit (the
"Credit Obligor").
(d) The Remarketing Agent may at any time resign and be
discharged of the duties and obligations created hereby and by the
Indenture by notifying the Issuer, the Trustee, the Tender Agent, if
any, the Credit Obligor and the Company at least 30 days before the
effective date of such resignation. The Company, with the consent of
the Credit Obligor and the Issuer, may remove the Remarketing Agent,
and upon the removal or resignation of the Remarketing Agent may, with
the consent of the Credit Obligor and the Issuer, appoint a successor
by notifying the Remarketing Agent and the Trustee. No removal or
resignation shall be effective until a successor Remarketing Agent has
delivered an acceptance of its appointment to the Trustee. Any such
successor Remarketing Agent, upon its appointment pursuant to the
terms and conditions hereof, and those contained in the Indenture,
shall succeed to and become vested with all the rights, powers,
privileges and duties of the former Remarketing Agent. Notwithstanding
the foregoing, the Remarketing Agent may resign and be discharged of
its duties and obligations hereunder and under the Indenture by
notifying the Issuer, the Trustee, the Tender Agent, if any, the
Credit Obligor and the Company, and such resignation shall take
immediate effect without the appointment of a successor Remarketing
Agent, if an Event of Default has occurred and is continuing under the
Indenture or the Company fails to pay the fees and expenses of the
Remarketing Agent in the amounts and at the time provided in Section 6
hereof. Notwithstanding the foregoing, no termination shall affect
the rights and obligations of the parties regarding Bonds with respect
to which the Remarketing Agent is obligated to use its best efforts to
remarket the Bonds pursuant to Section 3(d) hereof or which
theretofore otherwise have been remarketed by the Remarketing Agent.
(e) The Remarketing Agent's responsibilities hereunder will
include (i) soliciting purchases of Bonds by institutional investors
that customarily purchase tax-exempt securities in large denominations
at market rates, (ii) effecting and processing such purchases, (iii)
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<PAGE> 3
causing the distribution of any written disclosure materials,
as shall have been approved and paid for by the Company, to
prospective purchasers in connection with the remarketing of the
Bonds, and (iv) performing such other related functions as may be
requested by the Issuer and the Company and agreed to by the
Remarketing Agent. The Remarketing Agent will furnish copies of the
foregoing disclosure materials to the Issuer, the Company and the
Trustee upon their written request therefor. The Remarketing Agent
may purchase Bonds but shall be under no obligation to purchase Bonds
remarketed pursuant to this Agreement. Upon a repurchase of Bonds and
prior to their remarketing, the Remarketing Agent will be entitled to
all rights of a Bondholder.
If, during and prior to such time as the Placement Memorandum,
dated April 23, 1997, relating to the Bonds (the "Placement
Memorandum") (including the Preliminary Placement Memorandum
circulated in connection with the placement of the Bonds) is used in
connection with the placement of the Bonds, any event known to the
Company relating to or affecting the Company, the Issuer, the Credit
Obligor, or the Bonds shall occur, the result of which is that the
Placement Memorandum would include a misstatement of a material fact,
or would omit to state a material fact necessary in order to make the
statements made therein, in light of the circumstances under which
they were made, not misleading, the Company will promptly notify the
Remarketing Agent in writing of the circumstances and details of such
event. The Company and the Issuer will cooperate with the Remarketing
Agent in the preparation of any additional disclosure statement or
marketing materials (a "Disclosure Statement") that the Remarketing
Agent determines are necessary or desirable in connection with the
remarketing of the Bonds or which the Remarketing Agent determines
should be provided to owners of the Bonds.
The Company and the Remarketing Agent acknowledge that certain
remarketings of the Bonds may be subject to the requirements of Rule
15c2-12 promulgated under the Securities Exchange Act of 1934, as
amended ("Rule 15c2-12"). The Company agrees, in the event Rule
15c2-12 is applicable to any remarketing of Bonds hereunder, to take
such actions as are necessary at the time to enable the Remarketing
Agent to comply with the provisions of Rule 15c2-12. The Company
shall furnish to the Issuer and the Remarketing Agent a Disclosure
Statement at such times and in such quantities as are necessary to
enable the Issuer and the Remarketing Agent to comply with Rule
15c2-12, if applicable.
If the Company fails to perform its obligations under this
Section, the Remarketing Agent may immediately cease remarketing
efforts.
(f) The Remarketing Agent agrees that, so long as this
Agreement remains in effect, it will be available to consult with the
Company and the Issuer on a timely basis with respect to the
determination of the interest rate on the Bonds, all in the manner
contemplated by the Indenture and with respect to all other matters
relating to its responsibilities under this Agreement. In addition,
the Remarketing Agent will furnish the Issuer and the Company with
information as to the prices at which such Bonds are placed, as the
Issuer and the Company
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<PAGE> 4
may from time to time reasonably request. The Remarketing
Agent shall not be liable for any action taken or omitted to be taken
pursuant to this Agreement, except for its own gross negligence or
willful misconduct or that of its agents which have been so appointed
in writing by the Remarketing Agent.
(g) The Remarketing Agent may, if it elects to do so in its
sole discretion, purchase, as principal, any Bonds rendered to it, but
it will not in any event be obligated to do so, and, if it purchases
Bonds tendered to it, it will have the same rights under the Indenture
as any other holder of such Bonds.
3. Representations, Warranties, Covenants and Agreements of the
Remarketing Agent. The Remarketing Agent, by its acceptance hereof,
represents, warrants, covenants and agrees with the Issuer as follows:
(a) The Remarketing Agent has a capitalization of at least
$15,000,000 as shown in its most recent published annual report.
(b) The Remarketing Agent is authorized by law to perform
the duties imposed upon it by the Indenture and has full power and
authority to take all actions required or permitted to be taken by the
Remarketing Agent by or under, and to perform and observe the
covenants and agreements on its part contained in this Agreement.
(c) The Remarketing Agent shall determine the interest rate
of the Bonds, all in accordance with Article III of the Indenture.
(d) The Remarketing Agent shall use its best efforts to
remarket or place the Bonds pursuant to the Indenture and this
Agreement, unless there has occurred an Event of Default under the
Indenture.
(e) The Remarketing Agent will not remarket any tendered
Bonds if the Credit Obligor notifies the Remarketing Agent that the
Letter of Credit or any Substitute Letter of Credit, if drawn upon,
has not been reinstated to an amount equal to the principal amount of
Bonds Outstanding together with at least 45 days' accrued interest
thereon.
4. Representations, Warranties, Covenants and Agreements of the
Company. The Company, by its acceptance hereof, represents, warrants,
covenants and agrees with the Remarketing Agent as follows:
(a) The Company has the requisite power and authority to
take all actions required or permitted to be taken by the Company by
or under, and to perform and observe the covenants and agreements on
its part contained in, this Agreement and any other instrument or
agreement relating thereto to which the Company is a party.
-4-
<PAGE> 5
(b) The Company has, as of the date hereof, duly taken all
action necessary to be taken by it prior to such date, for (i) the
execution, delivery and performance of this Agreement and any other
instrument or agreement to which the Company is a party and which has
been or will be executed in connection with the transactions
contemplated by the foregoing documents and (ii) the carrying out,
giving effect to, consummation and performance of, the transactions
and obligations contemplated hereby and by the Placement Memorandum.
(c) This Agreement and any other instrument or agreement to
which the Company is a party and which has been or will be executed in
connection with the consummation of the transactions contemplated by
the foregoing documents, when executed and delivered by the parties
hereto and thereto, constitutes or will constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws, judicial decisions or principles of equity
relating to or affecting the enforcement of creditors' rights
generally.
(d) The execution and delivery of this Agreement and any
other instrument or agreement to which the Company is a party and
which has been or will be executed in connection with the consummation
of the transactions contemplated by the foregoing documents, the
compliance with the terms, conditions or provisions hereof and
thereof, and the consummation of the transactions herein and therein
contemplated do not upon the date of execution and delivery hereof and
thereof, and will not, (i) violate any law or any regulation, order,
writ, injunction or decree of any court or governmental
instrumentality applicable to the Company which violation would have a
material adverse effect on the Company, except under the federal
securities or state securities or blue sky laws in connection with the
placement of the Bonds by the Placement Agent pursuant to the
Placement Agency Agreement or the remarketing of the Bonds by the
Remarketing Agent pursuant to this Agreement, or (ii) result in a
breach of any of the terms, conditions or provisions of, or constitute
default under, any mortgage, indenture, agreement or instrument to
which the Company is a party or by which it or any of its property is
bound.
(e) All authorizations, consents and approvals of, notices
to, registrations or filings with, or actions in respect to any
governmental body, agency or other instrumentality or court required
in connection with the execution, delivery and performance by the
Company of this Agreement and any other agreement or instrument to
which the Company is a party and which has been or will be executed in
connection with the consummation of the transactions contemplated by
the foregoing documents, have been obtained, given or taken and are in
full force and effect, except for such licenses, certificates,
approvals, ordinances or permits which may be necessary for the use of
the proceeds of the Bonds or described in the Placement Memorandum and
for which the Company has applied or will apply and which it expects
to receive and except as may be required under the state securities or
blue sky laws in connection with the placement of the Bonds by the
Placement Agent pursuant to the
-5-
<PAGE> 6
Placement Agency Agreement or the remarketing of the Bonds by the
Remarketing Agent pursuant to this Agreement.
(f) Except as disclosed by the Company to the Placement
Agent and described in the Placement Memorandum or any supplement
thereto delivered to the Remarketing Agent, there is no action, suit,
investigation, proceeding, or arbitration, at law or in equity or
before or by any foreign or domestic court or other governmental
entity, pending or, to the knowledge of the Company, threatened
against or affecting the Company wherein an unfavorable decision,
ruling or finding could have a material adverse effect on the
transactions contemplated by this Agreement or by the Placement
Memorandum, or which would materially and adversely affect the
validity or enforceability of or the authority or ability of the
Company to perform its obligations under, this Agreement or any other
agreement or instrument to which the Company is a party and which is
used or contemplated for use in consummation of the transactions
contemplated by this Agreement or the Placement Memorandum.
(g) The Company is not in default under any indenture or
other agreement or instrument governing outstanding indebtedness to
which the Company is a party or by which it is bound, which default
would have a material adverse effect on the transactions contemplated
by this Agreement or by the Placement Memorandum, nor has any event
occurred which with notice or the passage of time or both would
constitute such a default under any such document.
(h) The Company will cooperate with the Remarketing Agent
in the qualification of the Bonds for placement and the determination
of the eligibility of the Bonds for investment under the laws of such
jurisdictions as the Remarketing Agent shall designate and will use
its best efforts to continue any such qualification in effect so long
as required for the distribution of the Bonds by the Remarketing
Agent, provided that the Company shall not be required to qualify to
do business in any jurisdiction where it is not so qualified or to
take any action which would subject it to general service of process
in any jurisdiction where it is not now so subject.
(i) The Company has no knowledge or reason to believe that
any information relating to the Company contained in the Placement
Memorandum, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they are
made, not misleading.
(j) The Company shall, consistent with the terms of the
Indenture, if the Remarketing Agent deems it advisable as a means of
facilitating its performance under this Agreement, cooperate with the
Issuer and the Remarketing Agent in connection with maintaining the
rating of the Bonds from Standard & Poor's.
-6-
<PAGE> 7
5. Conditions of the Remarketing Agent's Obligations. The
obligations of the Remarketing Agent under this Agreement have been undertaken
in reliance on, and shall be subject to, the due performance by the Company of
its obligations and agreements to be performed hereunder and to the accuracy of
and compliance with the respective representations, warranties, covenants and
agreements of the Company contained herein, in each case on and as of the date
of delivery of this Agreement and on and as of each date on which Bonds are to
be placed pursuant to this Agreement. The obligations of the Remarketing Agent
to remarket the Bonds pursuant to this Agreement are also subject, in the
discretion of the Remarketing Agent, to the following further conditions:
(a) The Letter of Credit or any Substitute Letter of
Credit, covering the aggregate principal amount of originally issued
Bonds Outstanding and at least 45 days' accrued interest thereon
calculated at an interest rate of 12% based on a 365/366 day year,
shall be in full force and effect and shall not have been amended,
modified or supplemented in any way which would materially and
adversely affect the Bonds and there shall be in full force and effect
such additional resolutions, agreements, certificates (including such
certificates as may be required by regulations of the Internal Revenue
Service in order to establish the tax-exempt character of interest on
the Bonds) and opinions as shall be reasonably necessary to effect the
transactions contemplated by this Agreement, which resolutions,
agreements, certificates and opinions, at the request of the
Remarketing Agent, shall be satisfactory in form and substance to the
Remarketing Agent;
(b) The representations, warranties, covenants and
agreements of the Company made herein and in the Placement Agency
Agreement and of the Issuer made in the Placement Agency Agreement
shall be true and correct in all material respects;
(c) The Company shall have complied with the second and
third paragraphs of Section 2(e) hereof required in connection with
any remarketing of the Bonds; and
(d) No Event of Default (as such term is defined in the
Indenture) shall have occurred and be continuing and no event shall
have occurred and be continuing which, with the passage of time or
giving of notice or both, would constitute such an Event of Default.
6. Payment of Fees and Expenses. In consideration for the
services to be performed by the Remarketing Agent under this Agreement, the
Company shall pay to the Remarketing Agent:
(a) a fee (the "Remarketing Fee") which is determined as
follows: the principal amount of the Bonds Outstanding as of the later
of the Closing Date or on each January 1 following the Closing Date
(each, a "Calculation Date") multiplied by 0.125% and the result
thereof is multiplied by a fraction the numerator of which is the
number of actual days elapsed since the Closing Date or the most
recent Calculation Date, whichever is later, and the current
Calculation Date and the denominator is 365 days. The Remarketing
Fee, as determined on the Closing Date or a subsequent Calculation
Date, shall be payable in advance to the Remarketing Agent on the
Closing Date and each subsequent Calculation Date thereafter; and
-7-
<PAGE> 8
(b) with respect to all other Bonds, a remarketing fee which
will be agreed upon by the Remarketing Agent and the Company at the
time of remarketing of such Bonds. The Remarketing Agent will not be
entitled to such compensation for any period after this Agreement is
terminated except for a pro rata portion of the fee in respect of the
year in which such termination occurs. The Company shall pay to the
Remarketing Agent on demand all reasonable costs, expenses and
attorney's fees incurred by the Remarketing Agent in connection with
actions initiated by the Remarketing Agent to enforce this Agreement
in which the Remarketing Agent prevails. The Company shall make all
such payments directly to the person or entity to whom or to which
they are due.
7. Indemnification.
(a) The Company shall indemnify and hold harmless the
Remarketing Agent and the Issuer and their directors, officers,
members, employees, agents and each person, if any, who controls the
Remarketing Agent or the Issuer, respectively, within the meaning of
Section 15 of the Securities Act of 1933, as amended (the "Securities
Act") (such persons being herein sometimes collectively referred to as
the "Indemnified Persons" and individually, an "Indemnified Person"),
from any losses, claims, damages or liabilities to which any
Indemnified Person may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of,
or are based upon (i) an allegation or determination that the Bonds or
the obligations of the Company under the Lease Agreement or the
Reimbursement Agreement or the obligations of the Credit Obligor under
the Letter of Credit or any Substitute Letter of Credit should have
been registered under the Securities Act or the Indenture should have
been qualified under the Trust Indenture Act of 1939, as amended;
provided, however, that the provisions of this subsection (i) shall
not be applicable to the Remarketing Agent or any related Indemnified
Person if the Remarketing Agent is also the Placement Agent, (ii) any
untrue statement or alleged untrue statement of a material fact
relating to the Company contained in the Placement Memorandum or any
Disclosure Statement provided pursuant to Section 2(e) hereof or any
amendment or supplement thereto or the omission or alleged omission to
state therein a material fact necessary to make the statements therein
not misleading, and will reimburse each Indemnified Person for any
legal or other expenses reasonably incurred by such Indemnified Person
in investigating, defending or preparing to defend any such action or
claim. The indemnity agreement in this paragraph shall be in addition
to any liability which the Company may otherwise have to any
Indemnified Person.
(b) Promptly after receipt by an Indemnified Person under
paragraph (a) of this Section of notice of the commencement of any
action, such Indemnified Person shall, if a claim in respect thereof
is to be made against the Company under such paragraph, notify the
Company in writing of the commencement thereof. In case any such
action shall be brought against any Indemnified Person, and such
Indemnified Person shall notify the Company of the commencement
thereof, the Company shall be entitled to participate in and, to the
extent that it wishes, to assume the defense thereof, with counsel
satisfactory to such Indemnified Person,
-8-
<PAGE> 9
and after notice from the Company to such Indemnified Person of
its election so to assume the defense thereof, the Company shall not
be liable to such Indemnified Person under such paragraph for any
legal or other expenses subsequently incurred by such Indemnified
Person in connection with the defense thereof other than reasonable
costs of any investigation; provided, however, that if the named
parties to any such action (including any impleaded parties) include
both the Remarketing Agent (or its partners, officers, employees or
agents or any person so controlling the Remarketing Agent) and the
Company, and the Remarketing Agent (or such partners, officers,
employees or agents or such person so controlling the Remarketing
Agent) shall have reasonably concluded that there may be one or more
legal defenses available to it which are different from or additional
to those available to the Company, the Remarketing Agent (or such
partners, officers, employees or agents or such person so controlling
the Remarketing Agent) shall have the right to select, separate
counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of the Remarketing Agent (or such
partners, officers, employees or agents or such person so controlling
the Remarketing Agent); provided further, however, that the Company
shall not, in connection with any one such action, or separate but
substantially similar or related actions arising out of the same
general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys at any point in
time for the Remarketing Agent and partners, officers, employees and
agents and all persons so controlling the Remarketing Agent.
(c) The Company shall not be liable for any settlement of
any such action effected without its consent by any Indemnified
Person, but if settled with the consent of the Company or if there be
a final judgment for the plaintiff in any such action against the
Company or any Indemnified Person, with or without the consent of the
Company, the Company shall indemnify and hold harmless such
Indemnified Person to the extent provided in this Agreement.
(d) The Remarketing Agent shall indemnify and hold harmless
the Company and the directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of Section
15 of the Securities Act (such persons being herein sometimes
collectively referred to as the "Company Indemnified Persons" and
individually, a "Company Indemnified Person"), from any losses,
claims, damages or liabilities to which any Company Indemnified Person
may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of, or are based
upon any untrue statement or alleged untrue statement of a material
fact contained in the Placement Memorandum or any Disclosure Statement
provided pursuant to Section 2(e) hereof or any amendment or
supplement thereto or the omission or alleged omission to state
therein a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that such untrue or
misleading statement or alleged untrue or misleading statement or
omission or alleged omission was made in the Placement Memorandum or
such Disclosure Statement or in such amendment or supplement thereto
in reliance upon and in conformity with information furnished to the
Company in writing by the Remarketing Agent. The
-9-
<PAGE> 10
Remarketing Agent shall reimburse each Company Indemnified
Person for any legal or other expenses reasonably incurred by such
Company Indemnified Person in investigating, defending, or preparing
to defend any such action or claim. The indemnity agreement in this
paragraph shall be in addition to any liability which the Remarketing
Agent may otherwise have to any Company Indemnified Person.
(e) Promptly after receipt by a Company Indemnified Person
under paragraph (d) of this Section of notice of the commencement of
any action, such Company Indemnified Person shall, if a claim for
indemnification in respect thereof is to be made against the
Remarketing Agent under this paragraph, notify the Remarketing Agent
of the commencement thereof, and the Remarketing Agent shall promptly
assume the defense thereof, including the employment of legal counsel
reasonably satisfactory to the Company, the payment of all expenses,
and the right to negotiate and consent to settlement. If the
Remarketing Agent assumes the defense of such claim, the Remarketing
Agent shall not be liable to any Company Indemnified Person under such
paragraph for any legal or other expense subsequently incurred by such
Company Indemnified Person in connection with the defense thereof;
provided, however, that if the named parties to any such action
(including any impleaded parties) include both any Company Indemnified
Person and the Remarketing Agent, and the Company Indemnified Person
shall have reasonably concluded, based upon the advice of legal
counsel, that there may be one or more legal defenses available to it
which are different from or additional to those available to the
Remarketing Agent, and that as a result thereof such counsel has
advised such Company Indemnified Person that employment of the same
legal counsel may involve a conflict of interest, the Company
Indemnified Person shall have the right to select separate counsel to
assume such legal defense and to otherwise participate in the defense
of such action on behalf of the Company Indemnified Person; provided
further, however, that the Remarketing Agent shall not, in connection
with any one such action, or separate but substantially similar or
related actions arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys at any point in time for the Company and
other Company Indemnified Persons.
(f) The Remarketing Agent shall not be liable for any
settlement of any such action effected without its consent by any
Company Indemnified Person, but if settled with the consent of the
Remarketing Agent or if there is a final judgment for the plaintiff in
any such action against any Company Indemnified Person, with or
without the consent of the Remarketing Agent, the Remarketing Agent
shall indemnify and hold harmless such Company Indemnified Person to
the extent provided in this Agreement.
(g) The indemnity agreements contained in this Section 7
shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Remarketing Agent and the Company, and
shall survive the termination or cancellation of this Agreement.
-10-
<PAGE> 11
8. Nature of the Remarketing Agent's Obligations. Without
limiting the foregoing, the Remarketing Agent is expressly authorized and
directed to honor its obligations under and in compliance with the terms of
this Agreement without regard to, and without any duty on its part to inquire
into, the existence of any disputes or controversies between the Company, the
Trustee, the Credit Obligor or any other person or the respective rights,
duties or liabilities of any of them, or whether the facts or occurrences
represented in any of the documents presented under this Agreement are true and
correct. Furthermore, the Company fully understands and agrees that the
Remarketing Agent's sole obligation to the Company shall be limited to honoring
its obligations under and in compliance with the terms of this Agreement.
9. Intention of Parties. It is the express intention of the
parties hereto that neither the determination of any interest rate on the Bonds
nor any placement, tender or transfer of any Bond, as herein provided, shall
constitute or be construed to be the extinguishment of any Bond or the
indebtedness represented thereby or the reissuance of any Bonds.
10. Registration of Letter of Credit. If the blue sky or
securities laws of any state or other jurisdiction requires the registration or
qualification of the Letter of Credit or any Substitute Letter of Credit, the
Remarketing Agent shall not offer or place any Bonds in or into such state or
other jurisdiction.
11. Miscellaneous. (a) Except as otherwise specifically provided
in this Agreement, all notices, demands and formal actions under this Agreement
shall be in writing and mailed or delivered by courier or facsimile
transmission to:
The Remarketing Agent:
LaSalle National Bank
181 West Madison Street, Suite 3203
Chicago, Illinois 60602-4510
Attention: Capital Markets Group
Telephone: (312) 904-7047
Facsimile number: (312) 904-8167
-11-
<PAGE> 12
The Company:
McClain Industries, Inc.
6200 Elmridge Road
Sterling Heights, MI 48310
P.O. Box 180913
Utica, MI 48318
Attention: Mr. Carl Jaworski
Telephone: (810) 264-3611
Facsimile number: (810) 264-7191
The Issuer:
The Industrial Development Board of the City of Demopolis
City Hall
Demopolis, Alabama 36732
Attention:
Telephone:
Telecopier:
Each of the above-named addressees may by notice given under this
Agreement, designate other addresses to which subsequent notices, requests,
reports or other communications shall be directed.
(b) This Agreement will inure to the benefit of and be
binding upon the Remarketing Agent and the Company and their
respective successors and assigns. The terms "successors" and
assigns" shall not include any purchaser of any of the Bonds merely
because of such purchase.
(c) All of the representations, warranties and covenants of
the Company, the Issuer and the Remarketing Agent in this Agreement
shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of the Remarketing Agent, the
Issuer or the Company or (ii) delivery of and any payment for any
Bonds.
(d) Section headings have been inserted in this Agreement
as a matter of convenience for reference only, and such section
headings are not a part of this Agreement and will not be used in the
interpretation of any provisions of this Agreement.
(e) This Agreement shall be governed exclusively by and
construed in accordance with the internal laws of the State of
Illinois applicable to contracts to be wholly performed therein.
(f) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, and such counterparts shall together constitute
but one and the same instrument.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
McCLAIN OF ALABAMA, INC.
By: ???
------------------------------------------
Title: Secretary
---------------------------------------
LASALLE NATIONAL BANK,
as Remarketing Agent
By: Thomas Boland
------------------------------------------
Title: Vice President
---------------------------------------
THE INDUSTRIAL DEVELOPMENT
BOARD OF THE CITY OF DEMOPOLIS
By: John E. Northcutt (?)
------------------------------------------
Title: Chairman of the Board of Directors
-13-
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
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<SECURITIES> 0
<RECEIVABLES> 16,589,263
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 87,185,567
<SALES> 90,061,170
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<INCOME-PRETAX> (1,990,780)
<INCOME-TAX> (287,000)
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