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Exhibit 10.1
 
 
 
 

 
LEASE AGREEMENT
 
 
 
Among
 
 
 
 
GE GOVERNMENT FINANCE, INC.,
 
as Purchaser and initial Bondholder,
 
 
and
 
DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA,
 
as Issuer,
 
 
and
 
 
SYX DISTRIBUTION INC.,
 
as Lessee
 
 
 
Dated as of September 1, 2010
 
 
 
 
______________________
This instrument constitutes a security agreement
under the Georgia Uniform Commercial Code.
 
______________________
 
 
 

 
 

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TABLE OF CONTENTS
 

ARTICLE IDEFINITIONS AND EXHIBITS  2           Section 1.01. Definitions 2
    Section 1.02. Exhibits  6     Section 1.03. Rules of Construction. 7      
ARTICLE II FINANCING OF PROJECT AND TERMS  7           Section 2.01. Acquisition
of Project  7     Section 2.02.   Lease 7     Section 2.03.   Interest 8
    Section 2.04.   Payments 8     Section 2.05. Payment on Non-Business Days  9
    Section 2.06. Lease Payments To Be Unconditional  9     Section 2.07.  
Prepayments. 9     Section 2.08. Purchase Option. 10       ARTICLE III
CONDITIONS PRECEDENT 11       ARTICLE IV REPRESENTATIONS, WARRANTIES AND
COVENANTS OF ISSUER 13       ARTICLE V REPRESENTATIONS, WARRANTIES AND COVENANTS
OF LESSEE 16     ARTICLE VI TITLE TO COLLATERAL; SECURITY INTEREST 20      
    Section 6.01. Title to Project and Other Collateral 20     Section 6.02.
Security Interest in Collateral 20      Section 6.03.  
Change in Name or Corporate Structure of Lessee; Change in Location of Lessee’s
Chief Executive
  Office or Principal Executive Office
21      Section 6.04. Liens and Encumbrances to Title 21     Section 6.05.
Personal Property 21      Section 6.06.   Assignment of Insurance 21 
    Section 6.07. Occupancy 22       ARTICLE VII AFFIRMATIVE COVENANTS OF LESSEE
22         Section 7.01. Reporting Requirements 22      Section 7.02. Books and
Records; Inspection and Examination 23      Section 7.03. Compliance With Laws;
Environmental Indemnity 24     Section 7.04. Payment of Taxes and Other Claims
24     Section 7.05. Maintenance of Collateral 25 

 
 
 
 
 

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    Section 7.06. Insurance. 25      Section 7.07. Preservation of Corporate
Existence 26     Section 7.08. Performance by Bondholder 26        ARTICLE VIII
NEGATIVE COVENANTS OF LESSEE 27            Section 8.01. Lien 27      Section
8.02. Sale of Assets 27      Section 8.03. Consolidation and Merger 27 
    Section 8.04. Accounting 27      Section 8.05. Modifications and
Substitutions. 27      Section 8.06. Use of the Equipment 28        ARTICLE IX 
DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS 28       ARTICLE X ASSIGNMENT,
SUBLEASING AND SELLING 29            Section 10.01. Assignment by Bondholder 29 
    Section 10.02. No Sale or Assignment by Lessee 29       ARTICLE XI EVENTS OF
DEFAULT AND REMEDIES 29            Section 11.01. Events of Default 29 
    Section 11.02. Remedies on Default 31      Section 11.03. Delivery of
Collateral 32      Section 11.04. No Remedy Exclusive 32      Section 11.05.
Late Charge 33        ARTICLE XII MISCELLANEOUS 33            Section 12.01.
Costs and Expenses of Bondholder 33      Section 12.02. Disclaimer of Warranties
33      Section 12.03. Notices 33      Section 12.04. Further Assurance and
Corrective Instruments 34     Section 12.05. Binding Effect; Time of the Essence
34     Section 12.06. Severability 34     Section 12.07. Amendments 34
    Section 12.08. Execution in Counterparts 34     Section 12.09. Applicable
Law 34     Section 12.10. Captions 34     Section 12.11. Entire Agreement 35
    Section 12.12. Usury 35      Section 12.13. Bound Transcripts 35 
    Section 12.14. Limitations of Liability 35      Section 12.15. Press
Releases; Promotional Materials 35      Section 12.16. PATRIOT Act 35 
    Section 12.17. Waiver of Jury Trial 35      36       

 

 
 
 

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EXHIBIT A – SCHEDULE OF EQUIPMENT AND LEASE PAYMENTS
EXHIBIT B – FORM OF OPINION OF COUNSEL TO LESSEE AND GUARANTOR EXHIBIT C – FORM
OF OPINION OF COUNSEL TO ISSUER
 
EXHIBIT D – FORM OF OPINION OF BOND COUNSEL
 
EXHIBIT E – FORM OF BOND
 
EXHIBIT F – SCHEDULE OF PROJECT COSTS
 
EXHIBIT G – FORM OF CERTIFICATE OF CHIEF FINANCIAL OFFICER
 

 
 
 

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LEASE AGREEMENT
 

Bondholder:  GE Government Finance, Inc.   Three Capital Drive   Eden Prairie,
MN 55344   Telephone: (800) 346-3164   Telecopier: (952) 828-2420     Issuer: 
Development Authority of Jefferson, Georgia   106 Washington Street   Jefferson,
GA 30549   Telephone: (706) 367-5264   Telecopier:(706) 367-9431     Lessee: 
SYX Distribution Inc.  
11 Harbor Park Dr.
  Port Washington, NY 11050   Telephone: (516) 608-7608   Telecopier: (516)
608-7001    

 
THIS LEASE AGREEMENT dated as of September 1, 2010 (this “Lease Agreement”)
among GE Government Finance, Inc., a Delaware corporation, as bondholder (with
its successors and assigns, “Bondholder”), Development Authority of Jefferson,
Georgia , a public body corporate and politic duly organized and validly
existing under the laws of the State of Georgia (“Issuer”), and SYX Distribution
Inc., a Delaware corporation (“Lessee”).
 
WHEREAS, Issuer is a public body corporate and politic created by the
Development Authorities Law, O.C.G.A. §36-62-1, et seq. (the “Act”) and
activated by resolution of the governing body of Jefferson, Georgia to develop
and promote trade, commerce, industry and employment opportunities in Jefferson,
Georgia (the “City”) and is authorized to issue its revenue obligations and to
use the proceeds of such revenue obligations to be used to finance or refinance
the cost of any “project” (as defined in the Act) in furtherance of the public
purpose for which it was created; and
 
WHEREAS, Issuer has issued its revenue bond in an amount up to $15,000,000 (the
“Bond”) and will use the proceeds of the Bond to finance the cost of the
acquisition and installation of certain equipment (all such equipment being
called the “Equipment” and the “Project”) in this Lease Agreement; and
 
WHEREAS, after careful study and investigation of the nature of the Project, the
Issuer determined that the Project will develop, and promote industry and
employment opportunities in the City by creating approximately 400 new jobs
within two years following the placing of the new equipment in service, will be
in the public interest of the inhabitants of the City, will further the public
purposes of the Act for which Issuer was created, and that the Project and the
Bond will be economically feasible; and
 

 
 
 

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WHEREAS, it is desirable for Issuer: (i) to sell and issue its Bond, entitled
Recovery Zone Facility Bond (SYX Distribution Inc. Project), Series 2010, having
a principal amount not to exceed $15,000,000, (ii) to use the proceeds of the
Bond for the purposes stated above under this Lease Agreement, to acquire the
items of the Equipment comprising the Project, and Lessee will make Lease
Payments (as hereinafter defined) directly to Bondholder as assignee of Issuer
and as holder of the Bond; and
 
WHEREAS, this Lease Agreement and the Bond shall constitute only limited
obligations of Issuer and will be payable solely from the revenues to be
assigned and pledged to the payment thereof and will not constitute a debt or
general obligation or pledge of the faith and credit of the State of Georgia
(the “State”) or of any political subdivision thereof, including the City, and
shall not directly, indirectly or contingently obligate the State or any
political subdivision thereof, including the City, to levy or to pledge any form
of taxation whatever for the payment thereof;
 
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the premises contained in this Lease
Agreement, Bondholder, Issuer and Lessee agree as follows:
 
ARTICLE I
 
DEFINITIONS AND EXHIBITS
 
Section 1.01. Definitions. The following terms used herein will have the
meanings indicated below unless the context clearly requires otherwise:
 
“Bills of Sale” means the bills of sale given by the Lessee to the Issuer with
respect to the Equipment.
 
“Bond” means the Issuer’s $15,000,000 Recovery Zone Facility Bond (SYX
Distribution Inc. Project), Series 2010, in the form attached hereto as Exhibit
E.
 
“Bondholder” means (a) GE Government Finance, Inc., acting as the initial
bondholder under this Lease Agreement, (b) any surviving, resulting or
transferee corporation of GE Government Finance, Inc., and (c) except where the
context requires otherwise, any assignee(s) of Bondholder.
 
“Bond Proceeds” means the proceeds of the Bond to be paid by the Bondholder to
the Escrow Agent pursuant to Section 2.02 hereof for deposit in the Escrow Fund
for application in accordance with the Escrow Agreement.
 
“Business Day” means a day other than a Saturday or Sunday on which banks are
generally open for business in New York, New York.
 
“Closing Date” means the date on which the Bond is issued and the proceeds
thereof are delivered to Escrow Agent.
 

 
 
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“Code” means the Internal Revenue Code of 1986, as amended, and United States
Treasury regulations promulgated thereunder.
 
“Collateral” means (a) the Equipment, (b) all equipment of Lessee now owned or
hereafter acquired located at 235 Hog Mountain Road, Jefferson, Georgia, (c) all
accessories, attachments, parts, equipment and repairs now or hereafter attached
or affixed or used in connection with any of the foregoing property, (d) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering any of the foregoing property, (e) all securities, funds,
moneys, deposits and other property at any time held in or subject to the Escrow
Fund, (f) all accessions thereto, (g) all substitutions for any of the foregoing
property, and (h) all products and proceeds of any of the foregoing property
(including, without limitation, any property acquired by Lessee with such
proceeds).
 
“Damaged Collateral” means any portion of the Collateral that is lost, stolen,
destroyed or damaged beyond repair.
 
“Damaged Collateral Amount” means an amount equal to the product of (a) the
then- current Prepayment Amount and (b) a percentage equal to the original cost
of the Damaged Collateral divided by the original cost of all of the Collateral.
 
“Default” means an event that, with giving of notice or passage of time or both,
would constitute an Event of Default as provided in Article XI hereof.
 
“Determination of Taxability” means any determination, decision or decree by the
Commissioner of Internal Revenue, or any District Director of Internal Revenue
or any court of competent jurisdiction, or an opinion obtained by Bondholder of
counsel qualified in such matters, that an Event of Taxability shall have
occurred. A Determination of Taxability also shall be deemed to have occurred on
the first to occur of the following:
 
(a) the date when Lessee files any statement, supplemental statement, or other
tax schedule, return or document, which discloses that an Event of Taxability
shall have occurred; or
 
(b) the effective date of any federal legislation enacted after the date of this
Lease Agreement or promulgation of any income tax regulation or ruling by the
Internal Revenue Service that causes an Event of Taxability after the date of
this Lease Agreement; or
 
(c) if upon sale, lease or other deliberate action taken with respect to the
Project within the meaning of Treas. Reg. § 1.141-2(d), the failure to receive
an unqualified opinion of bond counsel to the effect that such deliberate action
will not cause interest payable by Lessee hereunder to become includable in the
gross income of the recipient.
 
“Environmental Laws” has the meaning ascribed thereto in paragraph (h) of
Article V hereof.
 
 
 
 
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“Equipment” means the equipment, goods and other property financed or refinanced
with the proceeds of the Bond and the Lease, including the property identified
in Exhibit A hereto, and such other equipment which is approved by the Purchaser
and complies with the Tax Compliance Certificate.
 
“Escrow Agent” means the fiduciary designated as escrow agent in the Escrow
Agreement, and its successors and assigns permitted under the Escrow Agreement.
The Escrow Agent shall be selected by the Lessee with the approval of the
Purchaser.
 
“Escrow Agreement” means the Escrow Agreement dated as of September 1, 2010
among Bondholder, Issuer, Lessee and Escrow Agent.
 
“Escrow Fund” means the fund established and held by Escrow Agent pursuant to
the Escrow Agreement.
 
“Event of Taxability” means if as the result of any act, failure to act or use
of the proceeds of the Bond, a change in use of the Project or any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Lease Agreement or the Tax Compliance Certificate by
Issuer or Lessee or the enactment of any federal legislation after the date of
this Lease Agreement or the promulgation of any income tax regulation or ruling
by the Internal Revenue Service after the date of this Lease Agreement or for
any other reason, the Interest is or becomes includable in Bondholder’s gross
income for federal income tax purposes.
 
“GAAP” means generally accepted accounting principles applied on a consistent
basis.
 
“GE Entity” means GE Government Finance, Inc., General Electric Capital
Corporation, or any affiliate of GE Government Finance, Inc. or General Electric
Capital Corporation.
 
“Gross-Up Rate” means, with respect to any Interest payment (including payments
made prior to the Event of Taxability), the rate necessary to calculate a total
payment in an amount sufficient such that the sum of the Interest payment plus
an additional payment would, after reduced by the federal tax (including
interest and penalties) actually payable thereon, equal the amount of the
Interest payment.
 
“Guarantor” means Systemax Inc., a company incorporated under the laws of the
State of Delaware.
 
“Guaranty” means that certain Guaranty and Negative Pledge Agreement dated as of
September 1, 2010 by Guarantor for the benefit of Bondholder, as the same may be
amended, restated or supplemented from time to time.
 
“Interest” means the portion of any payment from Issuer to Bondholder designated
as and comprising interest as shown in Exhibit A hereto.
 
“Issuer” means Development Authority of Jefferson, Georgia, acting as issuer
under this Lease Agreement.
 
 
 
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“Lease” means the lease from Issuer to Lessee pursuant to this Lease Agreement.
 
“Lease Agreement” means this Lease Agreement, including all exhibits hereto, as
any of the same may be supplemented or amended from time to time in accordance
with the terms hereof.
 
“Lease Payments” means the lease payments payable by Lessee pursuant to the
provisions of this Lease Agreement and the Bond as specifically set forth in
Exhibit A hereto. As provided in Article II hereof, Lease Payments shall be
payable by Lessee directly to Bondholder, as assignee of Issuer and holder of
the Bond, in the amounts and at the times as set forth in Exhibit A hereto.
 
“Lessee” means SYX Distribution Inc., a Delaware corporation.
 
“Lessee Documents” means, collectively, this Lease Agreement, the Escrow
Agreement, the Memorandum of Agreement Regarding Lease Structure and Valuation
of Leasehold Interest, the Tax Compliance Certificate, and any other agreements,
documents or certificates executed by Lessee in connection with the Bond as
contemplated by this Lease Agreement.
 
“Make Whole Amount” means the positive difference, if any, between (a) the net
present value of the stream of remaining Lease Payments discounted to the date
of prepayment at a per annum interest rate equal to the then Reinvestment Rate
and (b) the principal balance of the Lease and the Bond outstanding as of the
prepayment date before any such prepayment. For the purposes hereof, the “stream
of remaining payments” shall equal the sum of each Lease Payment during the
remaining term of the Lease and the Bond.
 
“Memorandum of Agreement Regarding Lease Structure and Valuation of Leasehold
Interest” means the instrument of that name, the proposed form of which is
attached to the Bond Resolution as Exhibit E thereto, as it may hereafter be
amended in accordance its terms.
 
“PATRIOT Act” means the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed
into law October 26, 2001).
 
“Prepayment Amount” means the amount which Lessee may or must from time to time
pay or cause to be paid to Bondholder as assignee of Issuer and holder of the
Bond in order to prepay the Lease and the Bond, as provided in Section 2.07
hereof, such amount being the sum of (a) the outstanding principal amount of the
Lease and the Bond, (b) accrued but unpaid interest on the Lease and the Bond,
(c) the Prepayment Fee, (d) the Make Whole Amount, and (e) all other amounts due
hereunder.
 
“Prepayment Fee” means an amount equal to 1% of the outstanding principal amount
of the Lease and the Bond, with respect to any prepayment of the Lease and the
Bond before October 1, 2011. No Prepayment Fee shall be payable with respect to
any prepayment of the Lease and the Bond occurring after October 1, 2011.
 
“Principal” means the portion of any Lease Payment designated as principal in
Exhibit A hereto.
 

 
 
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“Project” means the acquisition and installation of the Equipment.
 
“Project Costs” means the acquisition and installation costs of the Project,
including those to be paid to any Vendor or reimbursed to Lessee for any portion
thereof, and any administrative, engineering, legal, financial and other costs
incurred by Bondholder, Issuer, Lessee, Escrow Agent or any Vendor in connection
with the acquisition, installation and financing by Bondholder of such Project
and the costs of issuance and other transaction costs which may be paid pursuant
to the Tax Compliance Certificate, which Project Costs are set forth in Exhibit
F hereto.
 
“Purchase Agreements” means Lessee’s purchase agreements with Vendors of the
Project.
 
“Purchaser” means GE Government Finance, Inc. “Reinvestment Rate” means 3.95%.
 
“State” means the State of Georgia.
 
“Tax Compliance Certificate” means Issuer’s Tax Compliance Certificate, to which
is attached as Addendums certain definitions of terms and Certificates of Lessee
and of Bondholder, dated the date of issuance of the Bond.
 
“Terrorism Laws” means Executive Order 13224 issued by the President of the
United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595
of the U.S. Code of Federal Regulations), the Terrorism List Governments
Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal
Regulations) and the Foreign Terrorist Organizations Sanctions Regulations
(Title 31 Part 597 of the U.S. Code of Federal Regulations), and all other
present and future federal, state and local laws, ordinances, regulations,
policies and any other requirements of any governmental authority (including,
without limitation, the United States Department of the Treasury Office of
Foreign Assets Control) addressing, relating to, or attempting to eliminate,
terrorist acts and acts of war, each as hereafter supplemented, amended or
modified from time to time, and the present and future rules, regulations and
guidance documents promulgated under any of the foregoing, or under similar
laws, ordinances, regulations, policies or requirements of other states or
localities.
 
“UCC” means the Uniform Commercial Code as adopted and in effect in the State.
 
“Vendor” means the manufacturer or vendor of any portion of the Project, as well
as the agents or dealers of the manufacturer, from whom Lessee has purchased or
is purchasing portions of the Project.
 
Section 1.02. Exhibits. The following exhibits are attached hereto and made a
part hereof:
 
Exhibit A:    Schedule of Equipment and Lease Payments describing the Equipment
and setting forth the Lease Payments and Prepayment Amounts. Issuer hereby
authorizes Bondholder to insert in Exhibit A the serial or other identifying
numbers relating to the Equipment when available.
 
 
 
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Exhibit B:    Form of opinion of counsel to Lessee and Guarantor.
 
Exhibit C:    Form of opinion of counsel to Issuer.
 
Exhibit D:    Form of opinion of bond counsel.
 
Exhibit E:    Form of Bond.
 
Exhibit F:    Schedule of Project Costs.
 
Exhibit G:    Form of Certificate of Chief Financial Officer.
 
Section 1.03. Rules of Construction.
 
(a) The singular form of any word used herein, including the terms defined in
Section 1.01 hereof, shall include the plural, and vice versa. The use herein of
a word of any gender shall include correlative words of all genders.
 
(b) Unless otherwise specified, references to Articles, Sections and other
subdivisions of this Lease Agreement are to the designated Articles, Sections
and other subdivision of this Lease Agreement as originally executed. The words
“hereof,” “herein,” “hereunder” and words of similar import refer to this Lease
Agreement as a whole.
 
(c) The headings or titles of the several articles and sections shall be solely
for convenience of reference and shall not affect the meaning, construction or
effect of the provisions hereof.
 
ARTICLE II
 
FINANCING OF PROJECT AND TERMS
 
Section 2.01. Acquisition ofProject. Lessee either has ordered or shall order
the items of Equipment that are to comprise the Project pursuant to one or more
Purchase Agreements from one or more Vendors. Lessee shall remain liable to the
Vendor or Vendors in respect of its duties and obligations in accordance with
each Purchase Agreement and shall bear the risk of loss with respect to any loss
or claim relating to any portion of the Project covered by any Purchase
Agreement, and neither Bondholder nor Issuer shall assume any such liability or
risk of loss.
 
Section 2.02. Lease. Purchaser hereby agrees, subject to the terms and
conditions of this Lease Agreement, to purchase the Bond in the amount not to
exceed $15,000,000; Issuer hereby agrees, subject to the terms and conditions of
this Lease Agreement, to issue the Bond and to use the proceeds thereof to
purchase the Equipment and to lease the Equipment to Lessee; and Lessee hereby
agrees to lease the Equipment from Issuer. Upon fulfillment of the conditions
set forth in
 

 
 
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Article III hereof, Bondholder shall deposit the Bond Proceeds in the Escrow
Fund to be held, invested and disbursed as provided in the Escrow Agreement.
Issuer’s obligation to make payments on the Bond, and Lessee’s obligation to
repay the Issuer for the Bond Proceeds, shall commence, and interest shall begin
to accrue, on the date that Bond Proceeds are deposited in the Escrow Fund. The
term of the Lease shall commence on the Closing Date and shall terminate 97
months thereafter (provided that all Lease Payments and all other amounts
payable hereunder have been indefeasibly paid in full to Bondholder), unless
sooner terminated in accordance with the terms of this Lease Agreement. The
Lessee shall, commencing with the date of delivery of this Lease, have
possession, custody and control of the Project as it exists on such date and the
Lessee hereby accepts such possession, custody and control. The Issuer covenants
and agrees that it shall not take any action to prevent the Lessee from having
possession and enjoyment of the Project during the term of this Lease and shall,
at the request of the Lessee, if indemnified by the Lessee cooperate with the
Lessee in order that the Lessee may have peaceful possession and enjoyment of
the Project.
 
Section 2.03. Interest. The principal amount of the Bond outstanding from time
to time shall bear interest (computed on the basis of twelve 30-day months) at
the rate of Four and 15/100 percent (4.15%). Interest accruing on the principal
balance of the Bond outstanding from time to time shall be payable as provided
in Exhibit A and in the Bond and upon earlier demand in accordance with the
terms hereof or prepayment in accordance with the terms of the Bond and Section
2.07 hereof. Upon the occurrence of a Determination of Taxability, Lessee shall,
with respect to future interest payments on the Bond, begin making Lease
Payments that include interest on the Bond calculated at the Gross-Up Rate. In
addition, Lessee shall make, immediately upon demand of Bondholder, make a
payment to Bondholder sufficient to supplement prior Lease Payments to the
provide for the difference between what prior interest payments would have been
at the Gross-Up Rate and the interest payments actually paid.
 
Section 2.04. Payments. Issuer shall pay the principal of, premium, if any in
accordance with Section 2.07 hereof, and interest on the Bond, but only out of
the amounts paid by Lessee pursuant to this Lease Agreement. Lessee shall pay to
Bondholder, as assignee of Issuer, Lease Payments, in the amounts and on the
dates set forth in Exhibit A hereto. Additionally, Lessee shall pay to
Bondholder, as assignee of Issuer and holder of the Bond, an amount equal to the
product of (i) the lesser of 18% per annum or the highest rate permitted by law
and (ii) the delinquent amount of any Lease Payment not paid when due. As
security for its obligation to pay the principal of, premium, if any in
accordance with Section 2.07 hereof, and interest on the Bond, Issuer assigns to
Bondholder all of Issuer’s right to receive Lease Payments from Lessee hereunder
and all of Issuer’s rights hereunder (the Issuer reserving the right to enforce
and of the Reserved Rights) and all of Issuer’s right, title and interest in and
to the Equipment, and Issuer irrevocably constitutes and appoints Bondholder and
any present or future officer or agent of Bondholder as its lawful attorney,
with full power of substitution and resubstitution, and in the name of Issuer or
otherwise, to collect the Lease Payments and any other payments due hereunder
and under the Bond and to sue in any court for such Lease Payments or other
payments, to exercise all rights hereunder with respect to the Collateral, and
to withdraw or settle any claims, suits or proceedings pertaining to or arising
out of this Lease Agreement upon any terms. The Lessee hereby grants to the
Bondholder a security interest in its interest in the Collateral. Such Lease
Payments and other payments shall be made by Lessee directly to Bondholder, as
Issuer’s
 

 
 
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assignee and holder of the Bond, and shall be credited against Issuer’s payment
obligations hereunder and under the Bond. No provision, covenant or agreement
contained in this Lease Agreement or any obligation imposed on Issuer herein or
under the Bond, or the breach thereof, shall constitute or give rise to or
impose upon Issuer a pecuniary liability, a charge upon its general credit or
taxing powers or a pledge of its general revenues. In making the agreements,
provisions and covenants set forth in this Lease Agreement, Issuer has not
obligated itself except with respect to the Equipment and the application of the
Lease Payments to be paid by Lessee hereunder. All amounts required to be paid
by Lessee hereunder shall be paid in lawful money of the United States of
America in immediately available funds. No recourse shall be had by Bondholder
or Lessee for any claim based on this Lease Agreement, the Escrow Agreement, the
Bond or the Tax Compliance Certificate against any director, officer, employee
or agent of Issuer alleging personal liability on the part of such person,
unless such claim is based on the willful dishonesty of or intentional violation
of law by such person.
 
Section 2.05. Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Bond shall be stated to be due on a day which is not a
Business Day, such payment may be made on the next succeeding Business Day.
 
Section 2.06. Lease Payments To Be Unconditional. The obligations of Lessee to
make the Lease Payments required under this Article II and to make other
payments hereunder and to perform and observe the covenants and agreements
contained herein shall be absolute and unconditional in all events, without
abatement, diminution, deduction, setoff or defense for any reason, including
(without limitation) any failure of the Project to be delivered or installed,
any defects, malfunctions, breakdowns or infirmities in the Project or any
accident, condemnation, destruction or unforeseen circumstances. Notwithstanding
any dispute between Lessee and any of Issuer, Bondholder, any Vendor or any
other person, Lessee shall make all Lease Payments when due and shall not
withhold any Lease Payments pending final resolution of such dispute, nor shall
Lessee assert any right of set-off or counterclaim against its obligation to
make such payments required under this Lease Agreement.
 
Section 2.07. Prepayments.
 
(a) Lessee shall have the option, on any scheduled payment date, to prepay all,
but not less than all, of the outstanding balance of the Bond by paying the
Prepayment Amount.
 
(b) Lessee shall prepay the Bond (by prepaying Lease Payments) in whole or in
part at any time pursuant to Article IX hereof by paying the applicable Damaged
Collateral Amount.
 
(c) Lessee shall prepay the Bond (by prepaying Lease Payments) in full
immediately upon demand of Bondholder after the occurrence of an Event of
Default by paying the applicable Prepayment Amount. If there are any funds
remaining in the Escrow Fund pursuant to the Escrow Agreement a portion of such
prepayment may be made with such funds.
 
(d) Lessee shall prepay the Bond (by prepaying Lease Payments) in full
immediately upon demand of Bondholder after the occurrence of a Determination of
Taxability by paying the
 

 
 
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applicable Prepayment Amount plus an amount necessary to supplement the prior
Lease Payments to the Gross-Up Rate.
 
(e) The amounts due hereunder shall be paid, and the amounts due under the Bond
shall be paid, in part with funds remaining in the Escrow Fund upon termination
of the Escrow Agreement as provided in Section 2.03 of the Escrow Agreement and,
if less than 80% of the amount deposited in the Escrow Fund has been disbursed
pursuant to the Escrow Agreement, together with a prepayment premium calculated
at the percentage used to determine the Prepayment Amount at the date of such
prepayment.
 
(f) Upon any prepayment in part of the Bond, the prepayment shall be applied to
the Bond and to the related Lease Payments and any other amounts due hereunder
as determined by Bondholder.
 
Section 2.08. Purchase Option.
 
(a) Lessee shall have, and is hereby granted, the option to purchase the
Equipment (the “Purchase Option”) for a purchase price of $1.00 (the “Purchase
Price”), which amount shall be paid directly to Issuer for its own account and
not to Bondholder; provided, however, that: (i) the Purchase Option must be
exercised not later than 60 days after the receipt by Lessee of written request
for exercise from Issuer after the end of the term of this Lease Agreement; (ii)
all amounts (including (without limitation) any Prepayment Amount) under the
Bond (A) shall have been indefeasibly paid in full or (B) shall be paid as a
part of the closing of such purchase by Lessee; and (iii) any other amounts due
to Bondholder or Issuer (A) shall have been indefeasibly paid in full or (B)
shall be paid as a part of the closing of such purchase by Lessee.
 
(b) Lessee shall be under no obligation to exercise the Purchase Option.
 
(c) If Lessee exercises the Purchase Option, the Purchase Option shall be
exercised by written notice to Issuer and Bondholder, and the purchase of the
Equipment (including the payment of any amounts to be paid to Issuer or
Bondholder as described in subsection (a) above) shall be closed within 60 days
from the date of such notice of exercise, or on such earlier or later date as
may be agreed to by Bondholder, Issuer and Lessee.
 
(d) At the closing of any purchase pursuant to the exercise of the Purchase
Option, Issuer shall, upon receipt of the Purchase Price, deliver to Lessee or
its designee, as applicable, a bill of sale conveying to Lessee or such designee
good title (of the same quality as received by Issuer) to the Equipment, as the
Equipment then exists, subject to the following: (i) those liens and
encumbrances (if any) to which title to the Equipment was subject at the time
title thereto vested in Issuer; (ii) those liens and encumbrances created by
Lessee or to the creation or suffering of which Lessee consented; and (iii)
those liens and encumbrances resulting from the failure of Lessee to perform or
observe any of the agreements on its part contained in this Lease Agreement.
 

 
 
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ARTICLE III
 
CONDITIONS PRECEDENT
 
Bondholder’s agreement to purchase the Bond and to deposit the Bond Proceeds
into the Escrow Account shall be subject to the condition precedent that
Bondholder shall have received all of the following on or before the Closing
Date, each in form and substance satisfactory to Bondholder:
 
(a) This Lease Agreement, properly executed on behalf of Issuer and Lessee, and
each of the Exhibits hereto properly completed.
 
(b) The Bond, properly executed on behalf of Issuer.
 
(c) The Tax Compliance Certificate, properly executed on behalf of Issuer and
Lessee.
 
(d) The Escrow Agreement, properly executed on behalf of Issuer, Lessee and
Escrow Agent.
 
(e) The Guaranty, property executed on behalf of Guarantor.
 
(f) A certificate of the Secretary or an Assistant Secretary of Lessee,
certifying as to (i) the resolutions of the board of directors and, if required,
the shareholders of Lessee, authorizing the execution, delivery and performance
of the Lessee Documents and any related documents, (ii) the bylaws of Lessee,
and (iii) the signatures of the officers or agents of Lessee authorized to
execute and deliver the Lessee Documents and other instruments, agreements and
certificates on behalf of Lessee.
 
(g) Currently certified copies of the Articles of Incorporation of Lessee and a
Certificate of Good Standing issued as to Lessee by the Secretary of State of
Delaware not more than 20 days prior to the date hereof.
 
(h) A Certificate of Existence issued as to Lessee by the Secretary of State of
the State not more than 20 days prior to the date hereof.
 
(i) A certificate of the Secretary or an Assistant Secretary of Guarantor,
certifying as to (i) the resolutions of the shareholders of Guarantor,
authorizing the execution, delivery and performance of the Guaranty, (ii) the
bylaws of Guarantor, and (iii) the signatures of the officers Guarantor
authorized to execute and deliver the Guaranty on behalf of Guarantor.
 
(j) Currently certified copies of the Articles of Incorporation of Guarantor.
 
(k) A Certificate of Good Standing issued as to Guarantor by the Secretary of
State of Delaware dated not more than 20 days prior to the date hereof.
 

 
 
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(l) Certificates of the insurance required hereunder, containing a lender’s loss
payable clause or endorsement in favor of Bondholder.
 
(m) A completed and executed information return to be filed within the time
required by law with the Internal Revenue Service.
 
(n) A resolution or evidence of other official action taken by or on behalf of
Issuer to authorize the transactions contemplated hereby.
 
(o) Evidence that the issuance of the Bond for the purpose of financing of the
Project has been approved by the “applicable elected representative” after a
public hearing held upon reasonable notice.
 
(p) A true and correct copy of any and all leases pursuant to which Lessee is
leasing the property where the Collateral will be located, together with a
landlord’s disclaimer and consent with respect to each such lease.
 
(q) A true and correct copy of any and all mortgages, deeds of trust or similar
agreements (whether or not Lessee is a party to any such agreement) relating to
the property where the Collateral will be located, together with a mortgagee’s
waiver with respect to each such mortgage, deed of trust or similar agreement.
 
(r) Financing statements authorized by Lessee, as debtor, and naming Bondholder,
as secured party, and/or the original certificate of title or manufacturer’s
certificate of origin and title application if any of the Collateral is subject
to certificate of title laws.
 
(s) Financing statements authorized by Issuer, as debtor, and naming Bondholder,
as secured party.
 
(t) Current searches of appropriate filing offices showing that (i) no state or
federal tax liens have been filed and remain in effect against Lessee, (ii) no
financing statements have been filed and remain in effect against Lessee
relating to the Collateral except those financing statements filed by
Bondholder, and (iii) all financing statements necessary to perfect the security
interest created pursuant to this Lease Agreement have been filed.
 
(u) An opinion of counsel to Lessee, addressed to Bondholder and Issuer, in the
form attached hereto as Exhibit B.
 
(v) The Bill(s) of Sale regarding the Equipment to which such disbursement is
applicable, properly executed on behalf of Lessee.
 
(w) An opinion of counsel to Issuer, addressed to Bondholder and Lessee, in the
form attached hereto as Exhibit C.
 

 
 
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(x) An opinion of Seyfarth Shaw LLP, as bond counsel, addressed to Bondholder,
in the form attached hereto as Exhibit D.
 
(y) Payment of Bondholder’s fees, commissions and expenses required by Section
12.01 hereof.
 
(z) Payment of Issuer’s fees, commissions and expenses incurred in connection
with this Lease Agreement and the transactions contemplated hereby.
 
(aa) Any other documents or items required by Bondholder.
 
Bondholder’s agreement to consider approval of any disbursement from the Escrow
Fund shall be subject to the further conditions precedent that on the date
thereof:
 
(bb) Bondholder shall have received each of the items required for a
disbursement pursuant to the Escrow Agreement;
 
(cc) Bondholder shall have received in form and substance satisfactory to
Bondholder Vendor invoice(s) and/or bill(s) of sale relating to the Project and,
if such invoices have been paid by Issuer or Lessee, evidence of payment thereof
and, if applicable, evidence of official intent to reimburse such payment as
required by the Code;
 
(dd) the representations and warranties contained in Articles IV and V hereof
are correct on and as of the date of such disbursement as though made on and as
of such date, except to the extent that such representations and warranties
relate solely to an earlier date; and
 
(ee) no Default, Event of Default or Determination of Taxability has occurred or
would result from such disbursement.
 
ARTICLE IV
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
 
Issuer represents, warrants and covenants for the benefit of Bondholder and
Lessee, as follows:
 
(a) Issuer is a public body corporate and politic duly organized and validly
existing under the Constitution and laws of the State.
 
(b) Issuer will exercise its best efforts to preserve and keep in full force and
effect its existence as a body corporate and politic.
 
(c) Issuer is authorized under the Constitution and laws of the State, including
the Act, to issue the Bond and to enter into this Lease Agreement, the Escrow
Agreement,
 
 
 
 
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the Tax Compliance Certificate and the transactions contemplated hereby and to
perform all of its obligations hereunder.
 
(d) Issuer has duly authorized the issuance of the Bond and the execution and
delivery of this Lease Agreement, the Escrow Agreement and the Tax Compliance
Certificate under the terms and provisions of the resolution of its governing
body or by other appropriate official approval, and further represents,
covenants and warrants that all requirements have been met and procedures have
occurred in order to ensure the enforceability of the Bond, this Lease
Agreement, the Escrow Agreement and the Tax Compliance Certificate against
Issuer, and Issuer represents that there are no public bidding requirements that
are applicable to the Bond, this Lease Agreement, the Escrow Agreement and the
Project. Issuer has taken all necessary action and has complied with all
provisions of the Act, including but not limited to the making of the findings
required by the Act, required to make the Bond, this Lease Agreement, the Escrow
Agreement and the Tax Compliance Certificate the valid and binding obligation of
Issuer.
 
(e) The officer of Issuer executing the Bond, this Lease Agreement, the Escrow
Agreement, the Tax Compliance Certificate and any related documents has been
duly authorized to issue the Bond and to execute and deliver this Lease
Agreement, the Escrow Agreement and the Tax Compliance Certificate and such
related documents under the terms and provisions of a resolution of Issuer’s
governing body, or by other appropriate official action.
 
(f) The Bond, this Lease Agreement, the Escrow Agreement and the Tax Compliance
Certificate are legal, valid and binding obligations of Issuer, enforceable in
accordance with their respective terms, except to the extent limited by
bankruptcy, reorganization or other laws of general application relating to or
affecting the enforcement of creditors’ rights.
 
(g) Issuer has pledged to Bondholder all of Issuer’s rights in the Equipment and
this Lease Agreement (except any indemnification payable to Issuer pursuant to
Section 7.06 hereof and notice to Issuer pursuant to Section 12.03 hereof)
including the assignment of all rights in the security interest granted to
Issuer; provided, however, Issuer will not exercise any rights against the
Equipment without the prior written consent of Bondholder.
 
(h) Issuer will not pledge, mortgage or assign this Lease Agreement or its
duties and obligations hereunder to any person, firm or corporation, except as
provided under the terms hereof.
 
(i) None of the issuance of the Bond or the execution and delivery of this Lease
Agreement, the Escrow Agreement or the Tax Compliance Certificate, the
consummation of the transactions contemplated hereby or the fulfillment of or
compliance with the terms and conditions of the Bond, this Lease Agreement, the
Escrow Agreement or the Tax Compliance Certificate violates any law, rule,
regulation or order, conflicts with or results in a breach of any of the terms,
conditions or provisions of any
 
 
 
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restriction or any agreement or instrument to which Issuer is now a party or by
which it is bound or constitutes a default under any of the foregoing or results
in the creation or imposition of any prohibited lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of Issuer under the
terms of any instrument or agreement.
 
(j) There is no action, suit, proceeding, claim, inquiry or investigation, at
law or in equity, before or by any court, regulatory agency, public board or
body pending or, to the best of Issuer’s knowledge, threatened against or
affecting Issuer, challenging Issuer’s authority to issue the Bond or to enter
into this Lease Agreement, the Escrow Agreement or the Tax Compliance
Certificate or any other action wherein an unfavorable ruling or finding would
adversely affect the enforceability of the Bond, this Lease Agreement, the
Escrow Agreement or the Tax Compliance Certificate or any other transaction of
Issuer which is similar hereto, or the exclusion of the Interest from gross
income for federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Lease Agreement.
 
(k) Issuer will submit or cause to be submitted to the Internal Revenue Service
an information return at the time and in the form required by the Code.
 
(l) The issuance of the Bond for the purpose of financing the Project has been
approved by the “applicable elected representative” (as defined in Section
147(f) of the Code) of Issuer after a public hearing held upon reasonable
notice.
 
(m) Issuer will comply fully at all times with the Tax Compliance Certificate,
and Issuer will not take any action, or omit to take any action, which, if taken
or omitted, respectively, would violate the Tax Compliance Certificate, provided
that Lessee shall pay or indemnify Issuer for all costs associated with the
foregoing.
 
(n) Issuer will take no action that would cause the Interest to become
includable in gross income for federal income tax purposes under the Code
(including, without limitation, intentional acts under Treas. Reg. § 1.148-2(c)
or consenting to a deliberate action within the meaning of Treas. Reg. §
1.141-2(d)), and Issuer will take and will cause its officers, employees and
agents to take all affirmative actions legally within its power necessary to
ensure that the Interest does not become includable in gross income of the
recipient for federal income tax purposes under the Code (including, without
limitation, the calculation and payment of any rebate or yield reduction payment
required to preserve such exclusion).
 
(o) Issuer has authorized Bondholder to file financing statements, and such
financing statements when filed will be sufficient to perfect the security
interest created pursuant to this Lease Agreement. When such financing
statements are filed in the offices noted therein, Bondholder will have a valid
and perfected security interest in the Equipment, subject to no other security
interest, assignment, lien or encumbrance. None of the Equipment is or will
become a fixture on real estate. None of the Equipment constitutes a replacement
of, substitution for or accessory to any property of Issuer subject to a lien of
any kind.
 

 
 
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(p) Issuer will promptly pay or cause to be paid the Lease Payments on each
Payment Date at the place and in the manner set forth herein and in the Escrow
Agreement; provided, however THE BOND, THIS LEASE AGREEMENT AND ANY OBLIGATION
IMPOSED HEREUNDER SHALL CONSTITUTE ONLY LIMITED OBLIGATIONS OF ISSUER AND WILL
BE PAYABLE SOLELY FROM THE REVENUES TO BE ASSIGNED AND PLEDGED TO THE PAYMENT
THEREOF AND WILL NOT CONSTITUTE A DEBT OR A GENERAL OBLIGATION OR A PLEDGE OF
THE FAITH AND CREDIT OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF,
INCLUDING THE CITY AND JACKSON COUNTY, GEORGIA, AND SHALL NOT DIRECTLY,
INDIRECTLY OR CONTINGENTLY OBLIGATE THE STATE OR ANY POLITICAL SUBDIVISION
THEREOF, INCLUDING THE CITY AND JACKSON COUNTY, GEORGIA, TO LEVY TO PLEDGE ANY
FORM OF TAXATION WHATEVER FOR THE PAYMENT THEREOF.
 
ARTICLE V
 
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE
 
Lessee represents, warrants and covenants for the benefit of Bondholder and
Issuer, as follows:
 
(a) Lessee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has power to enter into the
Lessee Documents and by proper corporate action has duly authorized the
execution and delivery of the Lessee Documents. Lessee is in good standing and
is duly licensed or qualified to transact business in the State and in all
jurisdictions where the character of the property owned or leased or the nature
of the business transacted by it makes such licensing or qualification
necessary. Lessee’s exact legal name is as set forth on the execution page
hereof. Lessee’s U.S. Federal Tax Identification Number is 20-08023 93.
 
(b) Lessee has been fully authorized to execute and deliver the Lessee Documents
under the terms and provisions of the resolution of its board of directors, or
by other appropriate official approval, and further represents, covenants and
warrants that all requirements have been met, and procedures have occurred in
order to ensure the enforceability of the Lessee Documents and the Lessee
Documents have been duly authorized, executed and delivered.
 
(c) The officer of Lessee executing the Lessee Documents and any related
documents has been duly authorized to execute and deliver the Lessee Documents
and such related documents under the terms and provisions of a resolution of
Lessee’s board of directors.
 
(d) The Lessee Documents constitute valid and legally binding obligations of
Lessee, enforceable against Lessee in accordance with their respective terms,
except to
 
 
 
 
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the extent limited by bankruptcy, reorganization or other laws of general
application relating to or affecting the enforcement of creditors’ rights.
 
(e) The execution and delivery of the Lessee Documents, the consummation of the
transactions contemplated hereby and the fulfillment of the terms and conditions
hereof do not and will not violate any law, rule, regulation or order, conflict
with or result in a breach of any of the terms or conditions of the articles of
incorporation or bylaws of Lessee or of any corporate restriction or of any
agreement or instrument to which Lessee is now a party and do not and will not
constitute a default under any of the foregoing or result in the creation or
imposition of any liens, charges or encumbrances of any nature upon any of the
property or assets of Lessee contrary to the terms of any instrument or
agreement.
 
(f) The authorization, execution, delivery and performance of this Lease
Agreement by Lessee do not require submission to, approval of, or other action
by any governmental authority or agency, which action with respect to this Lease
Agreement has not been taken and which is final and nonappealable.
 
(g) There is no action, suit, proceeding, claim, inquiry or investigation, at
law or in equity, before or by any court, regulatory agency, public board or
body pending or, to the best of Lessee’s knowledge, threatened against or
affecting Lessee, challenging Lessee’s authority to enter into this Lease
Agreement, the Escrow Agreement or the Tax Compliance Certificate or any other
action wherein an unfavorable ruling or finding would adversely affect the
enforceability of this Lease Agreement, the Escrow Agreement or the Tax
Compliance Certificate or any other transaction of Lessee which is similar
hereto, or the exclusion of the Interest from gross income for federal tax
purposes under the Code, or could reasonably be expected to have a material
adverse effect on the financial condition, operations, business or prospects of
Lessee.
 
(h) The property at which the Collateral is located is properly zoned for its
current and anticipated use and the use of the Collateral will not violate any
applicable zoning, land use, environmental or similar law or restriction. Lessee
has all licenses and permits to use the Collateral. Lessee has obtained all
permits, licenses and other authorizations which are required under federal,
state and local laws relating to emissions, discharges, releases of pollutants,
contaminants, hazardous or toxic materials, or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
(“Environmental Laws”) at Lessee’s facilities or in connection with the
operation of its facilities. Except as previously disclosed to Bondholder in
writing, Lessee and all activities of Lessee at its facilities comply with all
Environmental Laws and with all terms and conditions of any required permits,
licenses and authorizations applicable to Lessee with respect thereto. Except as
previously disclosed to Bondholder in writing, Lessee is also in compliance with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in Environmental
Laws or contained in any plan, order, decree, judgment or notice of which
 

 
 
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Lessee is aware. Except as previously disclosed to Bondholder in writing, Lessee
is not aware of, nor has Lessee received notice of, any events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or which may give rise to
any liability under, any Environmental Laws.
 
(i) The Project is of the type authorized and permitted to be financed with the
proceeds of the Bond pursuant to the Act.
 
(j) Lessee owns or will own the Project and intends to operate the Project, or
cause the Project to be operated, as a “project,” within the meaning of the Act,
until the date on which all of the Lease Payments have been fully paid or the
applicable Prepayment Amount has been fully paid.
 
(k) Lessee will not take any action that would cause the Interest to become
includable in gross income of the recipient for federal income tax purposes
under the Code (including, without limitation, intentional acts under Treas.
Reg. § 1.148-2(c) or deliberate action within the meaning of Treas. Reg. §
1.141-2(d)), and Lessee will take and will cause its officers, employees and
agents to take all affirmative actions legally within its power necessary to
ensure that the Interest does not become includable in gross income of the
recipient for federal income tax purposes under the Code (including, without
limitation, the employment of a rebate consultant for the calculation and
payment of any rebate required to preserve such exclusion and the preparation
and filing of a Form 8038-T (or other applicable form) in connection with the
calculation and payment of any such rebate).
 
(l) Lessee has heretofore furnished to Bondholder the audited consolidated
financial statements of Guarantor for Guarantor’s fiscal years ended December
31, 2005, December 31, 2006, December 31, 2007, December 31, 2008 and December
31, 2009 and the unaudited consolidated financial statements of Lessee for the
six months and rolling 12 months ended June 30, 2010, and those statements
fairly present the consolidated financial condition of Guarantor on the dates
thereof and the results of its operations and cash flows for the periods then
ended and were prepared in accordance with GAAP. Since the date of the most
recent financial statements, there has been no material adverse change in the
business, properties or condition (financial or otherwise) of Lessee.
 
(m) Lessee has paid or caused to be paid to the proper authorities when due all
federal, state and local taxes required to be withheld by it. Lessee has filed
all federal, state and local tax returns which are required to be filed, and
Lessee has paid or caused to be paid to the respective taxing authorities all
taxes as shown on said returns or on any assessment received by it to the extent
such taxes have become due.
 
(n) Immediately prior to the execution and delivery of any Bill of Sale, Lessee
has or will have good and absolute title to all items of Equipment that are to
be conveyed by such Bill of Sale and all proceeds thereof, free and clear of all
mortgages, security interests, liens and encumbrances except for the security
interest created pursuant to this Lease Agreement.
 
 
 
 
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(o) All financial and other information provided to Bondholder by or on behalf
of Lessee in connection with Lessee’s request for the Lease contemplated hereby
is true and correct in all material respects and Lessee has not omitted to
provide Bondholder with any information which would be material to Bondholder’s
decision to enter into this Lease Agreement and, as to projections, valuations
or pro forma financial statements, present a good faith opinion as to such
projections, valuations and pro forma condition and results.
 
(p) Lessee has authorized Bondholder to file financing statements, and such
financing statements when filed will be sufficient to perfect the security
interest created pursuant to this Lease Agreement. When such financing
statements are filed in the offices noted therein, Bondholder, as assignee of
Issuer and holder of the Bond, will have a valid and perfected security interest
in the Collateral, subject to no other security interest, assignment, lien or
encumbrance. None of the Collateral is or will become a fixture on real estate.
None of the Collateral constitutes a replacement of, substitution for or
accessory to any property of Lessee subject to a lien of any kind.
 
(q) Lessee will aid and assist Issuer in connection with preparing and
submitting to the Internal Revenue Service the required information reporting
return at the time and in the form required by the Code.
 
(r) Lessee will comply fully at all times with the Tax Compliance Certificate,
and Lessee will not take any action, or omit to take any action, which, if taken
or omitted, respectively, would violate the Tax Compliance Certificate, and
Lessee will pay or reimburse Issuer for any expenses that may be incurred by
Issuer under paragraphs (m) and (n) of Article IV hereof.
 
(s) Expenses for work done by officers or employees of Lessee in connection with
the Project will be included as a Project Cost, if at all, only to the extent
(i) such persons were specifically employed for such particular purpose, (ii)
the expenses do not exceed the actual cost thereof and (iii) such expenses are
treated or capable of being treated (whether or not so treated) on the books of
Lessee as a capital expenditure in conformity with GAAP.
 
(t) Any costs incurred with respect to that part of the Project paid from the
Bond Proceeds shall be treated or capable of being treated on the books of
Lessee as capital expenditures in conformity with GAAP.
 
(u) No part of the Bond Proceeds will be used to finance inventory or rolling
stock or will be used for working capital or to finance any other cost not
constituting a Project Cost.
 

 
 
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(v) No person other than Lessee or a wholly-owned subsidiary of the Guarantor is
in occupancy or possession of any portion of the real property where the Project
is located.
 
(w) Each item of Equipment comprising the Project is property of the character
subject to the allowance for depreciation under Section 167 of the Code.
 
(x) Neither Lessee nor any individual or entity owning directly or indirectly
any interest in Lessee, is an individual or entity whose property or interests
are subject to being “blocked” under any of the Terrorism Laws or is otherwise
in violation of any of the Terrorism Laws.
 
ARTICLE VI
 
TITLE TO COLLATERAL; SECURITY INTEREST
 
Section 6.01. Title to Project and Other Collateral. Legal title to the Project
and any and all repairs, replacements, substitutions and modifications to the
Project shall be in Issuer. Title to the other Collateral will be in the Lessee.
Lessee shall at all times protect and defend, at its own cost and expense, such
title from and against all claims, liens and legal processes of creditors of
Lessee, and keep the Collateral free and clear of all such claims, liens and
processes other than the liens created hereby.
 
Section 6.02. Security Interest in Collateral. This Lease Agreement is intended
to constitute a security agreement within the meaning of the UCC. As security
for Lessee’s payment to Bondholder, as assignee of Issuer, of Lease Payments and
all other amounts payable to Bondholder hereunder, Lessee and Issuer hereby
grant to Bondholder a security interest constituting a first lien on the
Collateral. To the extent that the same entity (or an affiliate thereof) is the
bondholder under this Lease Agreement and under any other document or agreement
with Lessee, the security interest in the Collateral shall secure all of
Lessee’s obligations under all such agreements, but shall not secure Lessee’s
obligations under any such agreements under which a different entity is the
bondholder. Lessee ratifies its previous authorization for Bondholder to
pre-file UCC financing statements and any amendments thereto describing the
Collateral and containing any other information required by the applicable UCC.
Lessee authorizes Bondholder, and hereby grants Bondholder a power of attorney
(which is coupled with an interest), to file financing statements and amendments
thereto describing the Collateral and containing any other information required
by the applicable UCC and all proper terminations of the filings of other
secured parties with respect to the Collateral, in such form and substance as
Bondholder, in its sole discretion, may determine. Lessee agrees to execute such
additional documents, including demands for terminations, assignments,
affidavits, notices and similar instruments, in form satisfactory to Bondholder,
and take such other actions that Bondholder deems necessary or appropriate to
establish and maintain the security interest created by this Section, and Lessee
hereby designates and appoints Bondholder as its agent, and grants to Bondholder
a power of attorney (which is coupled with an interest), to execute on behalf of
Lessee such additional documents and to take such other actions. Lessee hereby
waives any right
 

 
 
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that Lessee may have to file with the applicable filing officer any financing
statement, amendment, termination or other record pertaining to the Collateral
and/or Bondholder’s interest therein. If requested by Bondholder, Lessee shall
obtain a landlord and/or mortgagee’s consent and waiver with respect to the
property where the Collateral is located. If requested by Bondholder, Lessee
shall conspicuously mark the Collateral with appropriate lettering, labels or
tags, and maintain such markings, so as clearly to disclose Bondholder’s
security interest in the Collateral.
 
Section 6.03. Change in Name or Corporate Structure of Lessee; Change in
Location of Lessee’s Chief Executive Office or Principal Executive Office.
Lessee’s chief executive office and principal executive office are located at
the address set forth above, and all of Lessee’s records relating to its
business and the Collateral are kept at such location. Lessee hereby agrees to
provide written notice to Bondholder and Issuer of any change or proposed change
in its name, corporate structure, chief executive office or principal executive
office or change or proposed change in the location of the Collateral. Such
notice shall be provided 30 days in advance of the date that such change or
proposed change is planned to take effect.
 
Section 6.04. Liens and Encumbrances to Title. Lessee shall not, directly or
indirectly, create, incur, assume or suffer to exist any mortgage, deed of
trust, pledge, lien, charge, encumbrance or claim (together, “Liens”) on or with
respect to the Collateral other than as created by this Lease Agreement or on or
with respect to the real property where the Collateral will be located;
provided, however, Lessee may create, incur, assume or suffer to exist a
mortgage, deed of trust or similar lien on the real property where the
Collateral will be located if Lessee provides Bondholder with a mortgagee’s
waiver or similar waiver in form and substance acceptable to Bondholder. Lessee
shall promptly, at its own expense, take such action as may be necessary to
discharge or remove any such Lien or to provide Bondholder with a mortgagee’s
waiver or similar waiver. Lessee shall reimburse Bondholder for any expenses
incurred by Bondholder to discharge or remove any Lien or for obtaining such
waiver.
 
Section 6.05. Personal Property. The parties hereby agree that the Collateral
is, and during the period this Lease Agreement is in force will remain, personal
property and, when subjected to use by Lessee hereunder, will not be or become
fixtures.
 
Section 6.06. Assignment of Insurance. As additional security for the payment
and performance of Lessee’s obligations hereunder, Lessee hereby assigns to
Bondholder any and all moneys (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of Lessee with respect to, any and all policies of insurance now or
at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and Lessee hereby
directs the issuer of any such policy to pay all such moneys directly to
Bondholder. Lessee hereby assigns to Bondholder, as assignee of Issuer, any and
all moneys due or to become due with respect to any condemnation proceeding
affecting the Collateral. At any time, whether before or after the occurrence of
any Event of Default, Bondholder may (but need not), in Bondholder’s name or in
Lessee’s name, execute and deliver proof of claim, receive all such moneys,
endorse checks and other instruments representing payment of such moneys, and
adjust, litigate, compromise or release any claim against the issuer of any such
policy or party in any condemnation proceeding.
 

 
 
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Section 6.07. Occupancy.
 
(a) Lessee hereby irrevocably grants to Bondholder the right to occupy the
property where the Collateral is located (the “Premises”) at any time after the
occurrence and during the continuance of an Event of Default.
 
(b) Bondholder may occupy the Premises only to hold, sell, store, liquidate,
realize upon or otherwise dispose of the Collateral and for other purposes that
Bondholder may in good faith deem to be related or incidental purposes.
 
(c) The right of Bondholder to occupy the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all obligations of
Lessee and Issuer hereunder, and (ii) final sale or disposition of all of the
Collateral and delivery of all such Collateral to purchasers.
 
(d) Bondholder shall not be obligated to pay or account for any rent or other
compensation for the occupancy of the Premises. Lessee will pay, or reimburse
Bondholder for, all taxes, fees, duties, levies, charges and expenses at any
time incurred by or imposed upon Bondholder by reason of the execution,
delivery, existence, recordation, performance or enforcement of this Section.
 
ARTICLE VII
 
AFFIRMATIVE COVENANTS OF LESSEE
 
So long as the Lease shall remain unpaid, Lessee will comply with the following
requirements:
 
Section 7.01. Reporting Requirements. Lessee will deliver, or cause to be
delivered, to Bondholder each of the following, which shall be in form and
detail acceptable to Bondholder:
 
(a) as soon as available, and in any event within 120 days after the end of each
fiscal year of Guarantor, audited consolidated financial statements of Guarantor
with the unqualified opinion of independent certified public accountants
selected by Guarantor and acceptable to Bondholder, which annual financial
statements shall include the consolidated balance sheet of Guarantor as at the
end of such fiscal year and the related consolidated statements of income,
retained earnings and cash flows of Guarantor for the fiscal year then ended,
all in reasonable detail and prepared in accordance with GAAP, together with (i)
a report signed by such accountants stating that in making the investigations
necessary for said opinion they obtained no knowledge, except as specifically
stated, of any Default or Event of Default hereunder; and (ii) a certificate of
the chief financial officer of Guarantor in the form of Exhibit G hereto stating
that such financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
 

 
 
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(b) as soon as available and in any event within 90 days after the end of each
fiscal quarter of Guarantor, an unaudited/internal balance sheet and statements
of income and retained earnings of Guarantor as at the end of and for such
quarter and for the year to date period then ended, in reasonable detail and
stating in comparative form the figures for the corresponding date and periods
in the previous year, all prepared in accordance with GAAP and certified by the
chief financial officer of Guarantor, subject to year-end audit adjustments; and
accompanied by a certificate of that officer in the form of Exhibit G hereto
stating (i) that such financial statements have been prepared in accordance with
GAAP, and (ii) whether or not such officer has knowledge of the occurrence of
any Default or Event of Default hereunder not theretofore reported and remedied
and, if so, stating in reasonable detail the facts with respect thereto;
 
(c) immediately after the commencement thereof, notice in writing of all
litigation and of all proceedings before any governmental or regulatory agency
affecting Lessee of the type described in Article V hereof or which seek a
monetary recovery against Lessee in excess of $100,000;
 
(d) as promptly as practicable (but in any event not later than five Business
Days) after an officer of Lessee obtains knowledge of the occurrence of any
event that constitutes a Default or an Event of Default hereunder, notice of
such occurrence, together with a detailed statement by a responsible officer of
Lessee of the steps being taken by Lessee to cure the effect of such Default or
Event of Default;
 
(e) promptly upon knowledge thereof, notice of any loss or destruction of or
damage to any of the Collateral or of any material adverse change in any of the
Collateral;
 
(f) promptly upon their distribution, copies of all financial statements,
reports and proxy statements that Lessee or Guarantor shall have sent to their
stockholders;
 
(g) promptly after the amending thereof, copies of any and all amendments to its
certificate of incorporation, articles of incorporation or bylaws;
 
(h) promptly upon knowledge thereof, notice of the violation by Lessee or
Guarantor of any law, rule or regulation, the noncompliance with which could
reasonably be expected to cause a material adverse effect on its financial
condition, operations, business or prospects;
 
(i) promptly upon receipt thereof, a copy of any notice of audit from the
Internal Revenue Service; and
 
(j) promptly upon knowledge thereof, notice of any material adverse change in
the financial or operating condition of Lessee or Guarantor.
 
Section 7.02. Books and Records; Inspection and Examination. Lessee will keep
accurate books of record and account for itself pertaining to the Collateral and
pertaining to Lessee’s business and financial condition and such other matters
as Bondholder may from time to time request in which true and complete entries
will be made in accordance with GAAP and, upon request of Bondholder, will
permit any officer, employee, attorney or accountant for
 
 
 
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Bondholder to audit, review, make extracts from, or copy any and all corporate
and financial books, records and properties of Lessee at all times during
ordinary business hours, and to discuss the affairs of Lessee will permit
Bondholder, or its employees, accountants, attorneys or agents, to examine and
copy any or all of its records and to examine and inspect the Project at any
time during Lessee’s business hours upon at least two Business Days’ advance
written notice.
 
Section 7.03. Compliance With Laws; Environmental Indemnity. Lessee will (a)
comply with the requirements of applicable laws and regulations, the
noncompliance with which could reasonably be expected to cause a material
adverse effect on its financial condition, operations, business or prospects,
(b) comply with all applicable Environmental Laws and regulations and obtain any
permits, licenses or similar approvals required by any such laws or regulations
and (c) use and keep the Collateral, and will require that others use and keep
the Collateral, only for lawful purposes, without violation of any federal,
state or local law, statute or ordinance. Lessee shall secure all permits and
licenses, if any, necessary for the installation and operation of the
Collateral. Lessee shall comply in all respects (including, without limitation,
with respect to the use, maintenance and operation of each portion of the
Collateral) with all laws of the jurisdictions in which its operations involving
any portion of the Collateral may extend and of any legislative, executive,
administrative or judicial body exercising any power or jurisdiction over the
portions of the Project or its interest or rights under this Lease Agreement.
Lessee will indemnify, defend and hold Bondholder harmless from and against any
claims, loss or damage to which Bondholder may be subjected as a result of any
past, present or future existence, use, handling, storage, transportation or
disposal of any hazardous waste or substance or toxic substance by Lessee or on
property owned, leased or controlled by Lessee. This indemnification shall
survive the termination of this Lease Agreement and payment of the indebtedness
hereunder and under the Bond.
 
Section 7.04. Payment of Taxes and Other Claims. Lessee will pay or discharge,
when due, (a) all taxes, assessments and governmental charges levied or imposed
upon it or upon its income or profits, upon any properties belonging to it
(including, without limitation, the Collateral) or upon or against the creation,
perfection or continuance of the security interest created pursuant to this
Lease Agreement, prior to the date on which penalties attach thereto, (b) all
federal, state and local taxes required to be withheld by it, and (c) all lawful
claims for labor, materials and supplies which, if unpaid, might by law become a
lien or charge upon any properties of Lessee; provided, that Lessee shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is diligently being contested in good faith by
appropriate proceedings. Lessee will pay, as the same respectively come due, all
taxes and governmental charges of any kind whatsoever that may at any time be
lawfully assessed or levied against or with respect to the Collateral, as well
as all gas, water, steam, electricity, heat, power, telephone, utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Collateral.
 

 
 
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Section 7.05. Maintenance of Collateral.
 
(a) Lessee shall, at its own expense, maintain, preserve and keep the Collateral
in good repair, working order and condition, and shall from time to time make
all repairs and replacements necessary to keep the Collateral in such condition,
and in compliance with state and federal laws, ordinary wear and tear excepted.
Lessee shall maintain the Collateral in a condition suitable for certification
by the manufacturer thereof (if certification is available) and in conformance
with all manufacturer’s recommended maintenance requirements. In the event that
any parts or accessories forming part of any portion or portions of the
Collateral become worn out, lost, destroyed, damaged beyond repair or otherwise
rendered unfit for use, Lessee, at its own expense and expeditiously, will
replace or cause the replacement of such parts or accessories by replacement
parts or accessories free and clear of all liens and encumbrances and with a
value and utility at least equal to that of the parts or accessories being
replaced (assuming that such replaced parts and accessories were otherwise in
good working order and repair). All such replacement parts and accessories shall
be deemed to be incorporated immediately into and to constitute an integral
portion of the Collateral and, as such, shall be subject to the terms of this
Lease Agreement. Neither Bondholder nor Issuer shall have any responsibility in
any of these matters, or for the making of improvements or additions to the
Collateral.
 
(b) Lessee will defend the Equipment against all claims or demands of all
persons (other than Bondholder) claiming the Equipment or any interest therein.
 
(c) Lessee will keep the Equipment free and clear of all security interests,
liens and encumbrances except the security interest created pursuant to this
Lease Agreement.
 
Section 7.06. Insurance.
 
(a) Lessee shall, at its own expense, procure and maintain continuously in
effect: (i) public liability insurance for personal injuries, death or damage to
or loss of property arising out of or in any way relating to the Collateral
sufficient to protect Bondholder and Issuer from liability in all events, with a
coverage limit of not less than $1,000,000 per occurrence unless a different
coverage minimum with respect to particular collateral is required by
Bondholder, and (ii) insurance against such hazards as Bondholder may require,
including, but not limited to, all- risk casualty and property insurance, in an
amount equal to the greater of the full replacement cost of the Collateral with
new collateral having substantially similar specifications or the applicable
Prepayment Amount.
 
(b) If required by State law, Lessee shall carry workers’ compensation insurance
covering all employees on, in, near or about the Collateral, and upon request,
shall furnish to Bondholder certificates evidencing such coverage.
 
(c) All insurance policies required by this Article shall be taken out and
maintained with insurance companies acceptable to Bondholder and to Issuer; and
shall contain a provision that the insurer shall not cancel or revise coverage
thereunder without giving written notice to the insured parties at least 30 days
before the cancellation or revision becomes effective. No insurance shall be
subject to any co-insurance clause. Each insurance policy required by this
 

 
 
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Article shall name Bondholder and the Issuer as an additional insured party and
loss payee without regard to any breach of warranty or other act or omission of
Lessee and shall include a lender’s loss payable endorsement for the benefit of
Bondholder. Prior to the issuance of the Bond, Lessee shall deposit with Bond
Counsel, for the benefit of Bondholder and the Issuer, evidence satisfactory to
Bondholder of such insurance and, prior to the expiration thereof, shall provide
Bondholder evidence of all renewals or replacements thereof.
 
(d) As among Bondholder, Lessee and Issuer, Lessee assumes all risks and
liabilities
from any cause whatsoever, whether or not covered by insurance, for loss or
damage to any of the Collateral and for injury to or death of any person or
damage to any property, whether such injury or death be with respect to agents
or employees of Lessee or of third parties, and whether such property damage be
to Lessee’s property or the property of others. Whether or not covered by
insurance, Lessee hereby assumes responsibility for and agrees to reimburse
Bondholder and Issuer for and will indemnify, defend and hold Bondholder and
Issuer harmless from and against all liabilities, obligations, losses, damages,
penalties, claims, actions, costs and expenses (including reasonable attorneys’
fees) of whatsoever kind and nature, imposed on, incurred by or asserted against
Bondholder or Issuer that in any way relate to or arise out of this Lease
Agreement, the transactions contemplated hereby and the Project and the
Collateral, including but not limited to, (i) the selection, manufacture,
purchase, acceptance or rejection of the Collateral or the ownership of the
Collateral, (ii) the delivery, lease, possession, maintenance, use, condition,
return or operation of the Collateral, (iii) the condition of the Collateral
sold or otherwise disposed of after possession by Lessee, (iv) any patent or
copyright infringement, (v) the conduct of Lessee, its officers, employees and
agents, (vi) a breach of Lessee of any of its covenants or obligations hereunder
and (vii) any claim, loss, cost or expense involving alleged damage to the
environment relating to the Collateral, including, but not limited to
investigation, removal, cleanup and remedial costs. All amounts payable by
Lessee pursuant to the immediately preceding sentence shall be paid immediately
upon demand of Issuer or Bondholder, as the case may be. This provision shall
survive the termination of this Lease Agreement.
 
Section 7.07. Preservation of Corporate Existence. Lessee will preserve and
maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business; and
shall conduct its business in an orderly, efficient and regular manner.
 
Section 7.08. Performance by Bondholder. If Lessee at any time fails to perform
or observe any of the covenants or agreements contained in any Lessee Document,
and if such failure shall continue for a period of 10 calendar days after
Bondholder gives Lessee written notice thereof (or in the case of the agreements
contained in Sections 7.05 and 7.06 hereof, immediately upon the occurrence of
such failure, without notice or lapse of time), Bondholder may, but need not,
perform or observe such covenant on behalf and in the name, place and stead of
Lessee (or, at Bondholder’s option, in Bondholder’s name) and may, but need not,
take any and all other actions which Bondholder may reasonably deem necessary to
cure or correct such failure (including, without limitation, the payment of
taxes, the satisfaction of security interests, liens or encumbrances, the
performance of obligations owed to account debtors or other obligors, the
procurement and maintenance of insurance, the execution of assignments, security
agreements and financing statements, and the endorsement of instruments); and
Lessee shall thereupon pay to Bondholder on demand the amount of all moneys
expended and all costs and
 
 
 
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expenses (including reasonable attorneys’ fees and legal expenses) incurred by
Bondholder in connection with or as a result of the performance or observance of
such agreements or the taking of such action by Bondholder, together with
interest thereon from the date expended or incurred at the lesser of 18% per
annum or the highest rate permitted by law. To facilitate the performance or
observance by Bondholder of such covenants of Lessee, Lessee hereby irrevocably
appoints Bondholder, or the delegate of Bondholder, acting alone, as the
attorney in fact of Lessee with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file in the name and
on behalf of Lessee any and all instruments, documents, assignments, security
agreements, financing statements, applications for insurance and other
agreements and writings required to be obtained, executed, delivered or endorsed
by Lessee under this Lease Agreement.
 
ARTICLE VIII
 
NEGATIVE COVENANTS OF LESSEE
 
So long as the Lease and the Bond shall remain unpaid, Issuer and Lessee agree
that:
 
Section 8.01. Lien. Neither Lessee nor Issuer will create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of the Equipment except for the transfer of title to
the Equipment to Issuer and the security interest in favor of Bondholder created
by the Bond Resolution and this Lease Agreement.
 
Section 8.02. Sale ofAssets. Except as provided in Sections 2.02 and 2.08
hereof, Issuer will not sell, lease, assign, transfer or otherwise dispose of
any of its interest in any part of the Equipment (whether in one transaction or
in a series of transactions); provided, however, Issuer may, if required by a
change in law, transfer its interest therein to a successor governmental entity
that assumes, by operation of law or otherwise, all of Issuer’s obligations
hereunder. Lessee will not sell, lease, assign, transfer or otherwise dispose of
all or a substantial part of its assets or of any of the Equipment or any
interest therein (whether in one transaction or in a series of transactions).
 
Section 8.03. Consolidation and Merger. Lessee will not consolidate with or
merge into any person, or permit any other person to merge into it, or acquire
(in a transaction analogous in purpose or effect to a consolidation or merger)
all or substantially all of the assets of any other person.
 
Section 8.04. Accounting. Lessee will not adopt, permit or consent to any
material change in accounting principles other than as required by GAAP. Lessee
will not adopt, permit or consent to any change in its fiscal year.
 
Section 8.05. Modifications and Substitutions.
 
(a) Lessee will not make any material alterations, modifications or additions to
the Collateral which cannot be removed without materially damaging the
functional capabilities or economic value of the Collateral. Upon delivery of
the Collateral to Bondholder and at the request of Bondholder, Lessee, at its
sole cost and expense, will remove all alterations,
 
 
 
 
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 modifications and additions and repair the Collateral as necessary to return
the Collateral to the condition in which it was furnished, ordinary wear and
tear and permitted modifications excepted.
 
(b) Notwithstanding the provisions of subparagraph (a) of this Section, Lessee
may, with the prior written consent of Bondholder, substitute for parts,
elements, portions or all of the Collateral, other parts, elements, portions,
equipment or facilities; provided, however, that any substitutions made pursuant
to Lessee’s obligations to make repairs referenced under any provision of this
Lease Agreement shall not require such prior written consent. Lessee shall
provide such documents or assurances as Bondholder may reasonably request to
maintain or confirm the security interest assigned to Bondholder in the
Collateral as so modified or substituted.
 
Section 8.06. Use of the Equipment. Each of Lessee and Issuer agree that it will
not install, use, operate or maintain the Equipment improperly, carelessly, in
violation of any applicable law or in a manner contrary to that contemplated by
this Lease Agreement.
 
ARTICLE IX
 
DAMAGE AND DESTRUCTION; USE OF NET PROCEEDS
 
Lessee shall provide a complete written report to Bondholder immediately upon
any loss, theft, damage or destruction of any Collateral and of any accident
involving any Collateral. With respect to any Damaged Collateral, Lessee shall
as soon as practicable after such event either: (a) replace the same at Lessee’s
sole cost and expense with collateral having substantially similar
specifications and of equal or greater value to the Damaged Collateral
immediately prior to the time of the loss occurrence, such replacement
collateral to be subject to Bondholder’s approval, whereupon such replacement
collateral shall be substituted in this Lease Agreement and the other related
documents by appropriate endorsement or amendment; or (b) pay the Damaged
Collateral Amount. Lessee shall notify Bondholder of which course of action it
will take within 15 calendar days after the loss occurrence. If, within 45
calendar days of the loss occurrence, (a) Lessee fails to notify Bondholder; (b)
Lessee and Bondholder fail to execute an amendment to this Lease Agreement to
delete the Damaged Collateral and add the replacement collateral or (c) Lessee
fails to pay the Damaged Collateral Amount, then Bondholder may, at its sole
discretion, declare the Damaged Collateral Amount to be immediately due and
payable, and Lessee is required to pay the same. The Net Proceeds of insurance
with respect to the Damaged Collateral shall be made available by Bondholder to
be applied to discharge Lessee’s obligation under this Article. The payment of
the Damaged Collateral Amount and the termination of Bondholder’s interest in
the Damaged Collateral is subject to the terms of Section 2.07 hereof. For
purposes of this Article, the term “Net Proceeds” shall mean the amount
remaining from the gross proceeds of any insurance claim or condemnation award
after deducting all expenses (including reasonable attorneys’ fees) incurred in
the collection of such claim or award.
 

 
 
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ARTICLE X
 
ASSIGNMENT, SUBLEASING AND SELLING
 
Section 10.01. Assignment by Bondholder. This Lease Agreement, and the
obligations of Lessee to make payments hereunder, may be assigned and reassigned
in whole or in part to one or more assignees or subassignees (who shall be
purchaser of the Bond or an interest therein) by Bondholder at any time
subsequent to its execution, without the necessity of obtaining the consent of
Issuer or Lessee; provided, however, that no such assignment or reassignment
shall be effective unless and until (a) Issuer and Lessee shall have received
notice of the assignment or reassignment disclosing the name and address of the
assignee or subassignee, which notice Issuer shall maintain as evidence of the
ownership and registration of the Bond, and (b) in the event that such
assignment or reassignment is made to a bank or trust company as trustee for
holders of certificates representing interests in this Lease Agreement and the
Bond, such bank or trust company agrees to maintain, or cause to be maintained,
a book-entry system by which a record of the names and addresses of such holders
as of any particular time is kept and agrees, upon request of Issuer or Lessee,
to furnish such information to Issuer or Lessee. Upon receipt of notice of
assignment, Lessee will reflect in a book-entry the assignee designated in such
notice of assignment, and shall agree to make all payments to the assignee
designated in the notice of assignment, notwithstanding any claim, defense,
setoff or counterclaim whatsoever (whether arising from a breach of this Lease
Agreement or otherwise) that Issuer and Lessee may from time to time have
against Bondholder or the assignee. Issuer and Lessee agree to execute all
documents, including replacement bonds, notices of assignment and chattel
mortgages, which may be reasonably requested by Bondholder or its assignee to
protect their interest in the Collateral and in this Lease Agreement.
 
Section 10.02. No Sale or Assignment by Lessee. This Lease Agreement and the
interest of Lessee in the Collateral may not be sold, assumed, assigned or
encumbered by Lessee.
 
ARTICLE XI
 
EVENTS OF DEFAULT AND REMEDIES
 
Section 11.01. Events of Default. The following constitute “Events of Default”
under this Lease Agreement:
 
(a) failure by Lessee to pay to Bondholder, as assignee of Issuer, when due any
Lease Payment or to pay any other payment required to be paid hereunder and the
continuation of such failure for a period of 10 days;
 
(b) failure by Lessee to maintain insurance in accordance with Section 7.06
hereof;
 
(c) failure by Lessee to comply with the provisions of Sections 8.01, or 8.02
hereof;
 

 
 
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(d) failure by Lessee or Issuer to observe and perform any other covenant,
condition or agreement contained in any Lessee Document or in any other document
or agreement executed in connection herewith on its part to be observed or
performed for a period of 30 days after written notice is given to Lessee or
Issuer, as the case may be, specifying such failure and directing that it be
remedied; provided, however, that, if the failure stated in such notice cannot
be corrected within such 30-day period, Bondholder will not unreasonably
withhold its consent to an extension of such time if corrective action is
instituted by Lessee or Issuer, as the case may be, within the applicable period
and diligently pursued until the default is corrected;
 
(e) initiation by Issuer of a proceeding under any federal or state bankruptcy
or insolvency law seeking relief under such laws concerning the indebtedness of
Issuer;
 
(f) Lessee or Guarantor shall be or become insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the benefit
of creditors; or Lessee or Guarantor shall apply for or consent to the
appointment of any receiver, trustee or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar officer
shall be appointed without the application or consent of Lessee or Guarantor, as
the case may be; or Lessee or Guarantor shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction; or any
such proceeding shall be instituted (by petition, application or otherwise)
against Lessee or Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a substantial
part of the property of Lessee or Guarantor;
 
(g) determination by Bondholder that any representation or warranty made by
Lessee, Issuer or Guarantor in any Lessee Document or in any other document
executed in connection herewith was untrue in any material respect when made;
 
(h) an Event of Taxability shall occur;
 
(i) an amendment or termination relating to a filed financing statement
describing any of the Collateral is improperly filed;
 
(j) the occurrence of a default or an event of default under any instrument,
agreement or other document evidencing or relating to any indebtedness or other
monetary obligation of Lessee or Guarantor;
 
(k) Guarantor shall repudiate, purport to revoke or fail to perform Guarantor’s
obligations under the Guaranty; or
 
(l) ownership of the stock of Lessee changes during the period that the Lease is
outstanding (Lessee hereby acknowledges that Bondholder has made its decision to
enter into the transactions contemplated hereby based upon the management
expertise of the current stockholders and their ownership of the stock of
Lessee).
 

 
 
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Section 11.02. Remedies on Default. Whenever an Event of Default described in
Section 11.01(f) hereof shall have occurred, the Prepayment Amount automatically
shall be due and payable, whereupon the Prepayment Amount automatically shall
become and be forthwith due and payable without presentment, notice of dishonor,
protest or further notice of any kind, all of which are hereby expressly waived
by Lessee. Whenever any Event of Default shall have occurred, Bondholder shall
have the right, at its sole option without any further demand or notice, to take
any one or any combination of the following remedial steps insofar as the same
are available to secured parties under Article 9 of the UCC in effect in the
State from time to time and which are otherwise accorded to Bondholder by
applicable law:
 
(a) by notice to Issuer and Lessee, declare the Prepayment Amount to be
forthwith due and payable, whereupon the Prepayment Amount shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which are hereby expressly waived by Lessee;
 
(b) take possession of the Collateral wherever situated, without any court order
or other process of law and without liability for entering the premises, and
lease, sublease or make other disposition of the Collateral for use over a term
in a commercially reasonable manner, all for the account of Bondholder, provided
that Lessee shall remain directly liable for the deficiency, if any, between the
rent or other amounts paid by a lessee or sublessee of the Collateral pursuant
to such lease or sublease during the same period of time, after deducting all
costs and expenses, including reasonable attorneys’ fees and expenses, incurred
with respect to the recovery, repair and storage of the Collateral during such
period of time;
 
(c) take possession of the Collateral wherever situated, without any court order
or other process of law and without liability for entering the premises, and
sell the Collateral in a commercially reasonable manner. All proceeds from such
sale shall be applied in the following manner:
 
FIRST, to pay all proper and reasonable costs and expenses associated with the
recovery, repair, storage and sale of the Collateral, including reasonable
attorneys’ fees and expenses;
 
SECOND, to pay (i) Bondholder the amount of all unpaid Lease Payments or other
obligations (whether direct or indirect owed by Lessee to Bondholder), if any,
which are then due and owing, together with interest and late charges thereon,
(ii) Bondholder the then applicable Prepayment Amount (taking into account the
payment of past-due Lease Payments as aforesaid), plus a pro rata allocation of
interest, at the rate utilized to calculate the Lease Payments, from the next
preceding due date of a Lease Payment until the date of payment by the buyer,
and (iii) any other amounts due hereunder, including indemnity payments, taxes,
charges, reimbursement of any advances and other amounts payable to Bondholder
or Issuer hereunder; and
 

 
 
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THIRD, to pay the remainder of the sale proceeds, purchase moneys or other
amounts paid by a buyer of the Collateral to Lessee;
 
(d) proceed by appropriate court action to enforce specific performance by
Issuer or Lessee of the applicable covenants of this Lease Agreement or to
recover for the breach thereof, including the payment of all amounts due from
Lessee. Lessee shall pay or repay to Bondholder or Issuer all costs of such
action or court action, including, without limitation, reasonable attorneys’
fees; and
 
(e) take whatever action at law or in equity that may appear necessary or
desirable to enforce its rights with respect to the Collateral. Lessee shall pay
or repay to Bondholder or Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys’ fees.
 
Notwithstanding any other remedy exercised hereunder, Lessee shall remain
obligated to pay to Bondholder any unpaid portion of the Prepayment Amount.
 
In the event of any Event of Default that adversely affects the rights of
Issuer, including, but not limited to, any failure of Lessee to provide
liability insurance for its benefit, Issuer may proceed by appropriate court
action to enforce specific performance by Lessee of the applicable covenants of
this Lease Agreement or to recover damages for the breach thereof, and Lessee
shall pay or repay to Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys’ fees.
 
Section 11.03. Delivery of Collateral. Upon an Event of Default, Lessee shall
within 10 calendar days after notice from Bondholder, at its own cost and
expense: (a) perform any testing and repairs required to place the Collateral in
the condition required by Article VII; (b) if deinstallation, disassembly or
crating is required, cause the Collateral to be deinstalled, disassembled and
crated by an authorized manufacturer’s representative or such other service
person as is satisfactory to Bondholder; and (c) deliver the Collateral to a
location specified by Bondholder, freight and insurance prepaid by Lessee. If
Lessee refuses to deliver the Collateral in the manner designated, Bondholder
may enter upon Lessee’s premises where the Collateral is kept and take
possession of the Collateral and charge to Lessee the costs of such taking.
Lessee hereby expressly waives any damages occasioned by such taking.
 
Section 11.04. No Remedy Exclusive. No remedy herein conferred upon or reserved
to Bondholder or Issuer is intended to be exclusive 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. No delay or
omission to exercise any right or power accruing upon any Event of 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 Bondholder or Issuer to exercise any
remedy reserved to it in this Article, it shall not be necessary to give any
notice other than such notice as may be required by this Article. All remedies
herein conferred upon or reserved to Bondholder or Issuer shall survive the
termination of this Lease Agreement.
 

 
 
32

--------------------------------------------------------------------------------

 
 

 
Section 11.05. Late Charge. Any Lease Payment not paid by Lessee on the due date
thereof shall, to the extent permissible by law, bear a late charge equal to the
lesser of five cents ($.05) per dollar of the delinquent amount or the lawful
maximum, and Lessee shall be obligated to pay the same immediately upon receipt
of Bondholder’s written invoice therefor.
 
ARTICLE XII
 
MISCELLANEOUS
 
Section 12.01. Costs and Expenses of Bondholder. Lessee shall pay to Bondholder,
in addition to the Lease Payments payable by Lessee hereunder, such amounts as
shall be required by Bondholder in payment of any reasonable costs and expenses
incurred by Bondholder in connection with the execution, performance or
enforcement of this Lease Agreement, including but not limited to payment of all
reasonable fees, costs and expenses and all administrative costs of Bondholder
in connection with the Collateral, expenses (including, without limitation,
attorneys’ fees and disbursements), fees of auditors or attorneys, insurance
premiums not otherwise paid hereunder and all other direct and necessary
administrative costs of Bondholder or charges required to be paid by it in order
to comply with the terms of, or to enforce its rights under, this Lease
Agreement. Such costs and expenses shall be billed to Lessee by Bondholder from
time to time, together with a statement certifying that the amount so billed has
been paid by Bondholder for one or more of the items above described, or that
such amount is then payable by Bondholder for such items. Amounts so billed
shall be due and payable by Lessee within 30 days after receipt of the bill by
Lessee.
 
Section 12.02. Disclaimer of Warranties. BONDHOLDER AND ISSUER MAKE NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN,
CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR FITNESS FOR
USE OF THE COLLATERAL, OR ANY OTHER WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, WITH RESPECT THERETO. In no event shall Bondholder or Issuer be liable
for any loss or damage in connection with or arising out of this Lease
Agreement, the Collateral or the existence, furnishing, functioning or Lessee’s
use of any item or products or services provided for in this Lease Agreement.
 
Section 12.03. Notices. All notices, certificates, requests, demands and other
communications provided for under any Lessee Document shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed to the party to whom notice is being given at
its address as set forth above and, if telecopied, transmitted to that party at
its telecopier number set forth above or, as to each party, at such other
address or telecopier number as may hereafter be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section. All such notices, requests, demands and other communications shall
be deemed to have been given on (a) the date received if personally delivered,
(b) when deposited in the mail if delivered by mail, (c) the date sent if sent
by overnight courier, or (d) the date of transmission if delivered by telecopy.
If notice to Lessee of any intended disposition of the Collateral or any other
intended action is required by law in a
 

 
 
33

--------------------------------------------------------------------------------

 

 
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in this Section) at least 10 calendar days prior
to the date of intended disposition or other action.
 
Section 12.04. Further Assurance and Corrective Instruments. Issuer and Lessee
hereby agree that they will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such further acts,
instruments, conveyances, transfers and assurances, as Bondholder reasonably
deems necessary or advisable for the implementation, correction, confirmation or
perfection of any Lessee Document and any rights of Bondholder thereunder.
 
Section 12.05. Binding Effect; Time of the Essence. This Lease Agreement shall
inure to the benefit of and shall be binding upon Bondholder, Issuer, Lessee and
their respective successors and assigns. Time is of the essence.
 
Section 12.06. Severability. In the event any 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
hereof.
 
Section 12.07. Amendments. To the extent permitted by law, the terms of this
Lease Agreement shall not be waived, altered, modified, supplemented or amended
in any manner whatsoever except by written instrument signed by the parties
hereto, and then such waiver, consent, modification or change shall be effective
only in the specific instance and for the specific purpose given.
 
Lessee and Bondholder agree to amend Exhibit A to this Lease Agreement to more
specifically identify the Collateral at such time as such identification is
possible. Such amendment shall be effected by written instrument signed by
Lessee and Bondholder. Issuer’s consent to the amendment referred to in this
paragraph shall not be required. Such amendment may take the form of a Payment
Request Form in the form attached to the Escrow Agreement as Exhibit A executed
by Lessee and Bondholder.
 
Section 12.08. Execution in Counterparts. This Lease Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute one and the same instrument, and any of the parties hereto may
execute this Lease Agreement by signing any such counterpart, provided that only
the original marked “Original: 1 of 4” on the execution page thereof shall
constitute chattel paper under the UCC. A purchase of this chattel paper from
Issuer would violate the rights of Bondholder.
 
Section 12.09. Applicable Law. This Lease Agreement shall be governed by and
construed in accordance with the laws of the State.
 
Section 12.10. Captions. The captions or headings in this Lease Agreement are
for convenience only and in no way define, limit or describe the scope or intent
of any provisions or sections of this Lease Agreement.
 

 
 
34

--------------------------------------------------------------------------------

 

Section 12.11. Entire Agreement. The Lessee Documents and the exhibits thereto
constitute the entire agreement among Bondholder, Issuer, Lessee and Escrow
Agent. There are no understandings, agreements, representations or warranties,
express or implied, not specified herein or in such documents regarding this
Lease Agreement or the Project financed hereby.
 
Section 12.12. Usury. It is the intention of the parties hereto to comply with
any applicable usury laws; accordingly, it is agreed that, notwithstanding any
provisions to the contrary in this Lease Agreement, in no event shall this Lease
Agreement require the payment or permit the collection of interest or any amount
in the nature of interest or fees in excess of the maximum permitted by
applicable law.
 
Section 12.13. Bound Transcripts. Within 45 days of the day of closing, Lessee
shall cause to be prepared and furnished, at Lessee’s expense, to Bondholder and
its counsel, bound transcripts containing the Lessee Documents and all other
documents related thereto.
 
Section 12.14. Limitations of Liability. In no event, whether as a result of
breach of contract, warranty, tort (including negligence or strict liability),
indemnity or otherwise, shall Bondholder, its assignees, if any, or Issuer be
liable for any special, consequential, incidental, punitive or penal damages,
including, but not limited to, loss of profit or revenue, loss of use of the
Collateral, service materials or software, damage to associated equipment,
service materials or software, cost of capital, cost of substitute property,
service materials or software, facilities, services or replacement power or
downtime costs.
 
Section 12.15. Press Releases; Promotional Materials. Each of Lessee and Issuer
agrees that neither it nor its affiliates will in the future issue any press
release or other public disclosure using the name of any GE Entity or referring
to this Lease Agreement, the other Lessee Documents, the other Issuer Documents
or any related documents without at least two Business Days’ prior written
notice to Bondholder and without the prior written consent of Bondholder unless
(and only to the extent that) Lessee, Issuer or such affiliate is required to do
so under law and then, in any event, Lessee, Issuer or such affiliate will
consult with Bondholder before issuing such press release or other public
disclosure. Lessee and Issuer each consent to the publication by Bondholder of a
tombstone or similar advertising material relating to the transactions
contemplated by this Lease Agreement. Lessee consents to the publication by
Bondholder of advertising material relating to the financing transactions
contemplated by this Lease Agreement using Lessee’s product photographs, logo or
trademark; provided that Bondholder will obtain Lessee’s prior consent to any
such publication, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, Bondholder reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.
 
Section 12.16. PATRIOT Act. Bondholder hereby notifies Lessee and Guarantor
that, pursuant to the requirements of the PATRIOT Act, Bondholder is required to
obtain, verify and record information that identifies Lessee and each Guarantor,
which information includes the name and address of Lessee, Guarantor and other
information that will allow Bondholder to identify Lessee and Guarantor in
accordance with the PATRIOT Act.
 
 
 
35

--------------------------------------------------------------------------------

 
 
 
Section 12.17. Waiver of Jury Trial. Bondholder, Issuer and Lessee hereby waive
their respective rights to a jury trial of any claim or cause of action based
upon or arising out of, directly or indirectly, this Lease Agreement, any of the
related documents, any dealings among Bondholder, Issuer or Lessee relating to
the subject matter of the transactions contemplated by this Lease Agreement or
any related transactions, and/or the relationship that is being established
among Bondholder, Issuer and Lessee. The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court
(including, without limitation, contract claims, tort claims, breach of duty
claims and all other common law and statutory claims). This waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, renewals, supplements
or modifications to this Lease Agreement, any related documents, or to any other
documents or agreements relating to the transactions contemplated by this Lease
Agreement or any related transactions. In the event of litigation, this Lease
Agreement may be filed as a written consent to a trial by the court.
 
 
[SIGNATURES BEGIN ON FOLLOWING PAGE]
 
 

 
 
36

--------------------------------------------------------------------------------

 
 

 
IN WITNESS WHEREOF, the parties hereto have executed this Lease Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.

Bondholder
 
GE Government Finance, Inc.
By: /s/ Phil Long                
   Vice President
 

 

 
37

--------------------------------------------------------------------------------

 

 
Issuer:
 
DEVELOPMENT AUTHORITY
OF JEFFERSON, GEORGIA
 
BY:  /s/ Ronald S. Bond
   Chairman
 
Attest:
 
 
 
/s/ Roy Stowe
 
 
 
 
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
 
 

 
38

--------------------------------------------------------------------------------

 

 
Lessee:
 
SYX DISTRIBUTION INC.
 
 
 
By: /s/ Lawrence P. Reinhold
Lawrence P. Reinhold
Vice President and Treasurer
 
ATTEST:
 

 
/s/ Thomas Axmacher
 
VicePresident
 
[SEAL]
 
t,
 
 
 
 
 
 
Original 1 of 4
 
 
 
39
 

 
 

--------------------------------------------------------------------------------

 

Exhibit A to Lease Agreement
 
 
SCHEDULE OF EQUIPMENT AND LEASE PAYMENTS
 
Description of Equipment
 
 
Conveyor for broken case picking and station system
Conveyor for retail order fulfillment system (120 stores)
Conveyor for “Express” order processing
Conveyor for full case fulfillment
Pallet rack for 15,000 pallets
Carton flow rack (4500 sku’s)
Bulk hand load racks
 
Pallet flow module (240 pallets)
Pick module deck
Pick to light (4620 zones)
Pack to light (384 lights)
Automatic box erectors (4)
Empty box monorail
Reach Fork Lift Trucks (8)
Order pickers (8)
Electric pallet Jacks (12)
Electric dock and sit down clamp trucks (10)
 
Battery charging stations for all equipment
Ship label and pack ship printers
Security system (cameras, alarms, burglar, card access)
Misc. electrical distribution
 
Air cooling and circulation system
Pallet shrink wrap machines (3)
Automatic corrugated bailer
Misc. workbenches, totes, cages
Office cubicles, chairs and furniture
Retail Store fixtures, Equipment
Telecommunication and Network Equipment
 

 
 
 

--------------------------------------------------------------------------------

 

Schedule of Lease Payments
 
Interest Rate: 4.15%
 
PAYMENT
PAYMENT
LEASE
PRINCIPAL
INTEREST
PRINCIPAL
DATE
NUMBER
PAYMENT
COMPONENT
COMPONENT
BALANCE*
           
9/23/2010
0
$                                         -
$                                         -
$                                     -
$                          15,000,000.00
11/1/2010
1
$                         184,056.64
$                         118,348.31
$                       65,708.33
$                          14,881,651.69
12/1/2010
2
$                         184,056.64
$                         132,590.93
$                       51,465.71
$                          14,749,060.76
1/1/2011
3
$                         184,056.64
$                         133,049.47
$                       51,007.17
$                          14,616,011.29
2/1/2011
4
$                         184,056.64
$                         133,509.60
$                       50,547.04
$                          14,482,501.69
3/1/2011
5
$                         184,056.64
$                         133,971.32
$                       50,085.32
$                          14,348,530.37
4/1/2011
6
$                         184,056.64
$                         134,434.64
$                       49,622.00
$                          14,214,095.73
5/1/2011
7
$                         184,056.64
$                         134,899.56
$                       49,157.08
$                          14,079,196.17
6/1/2011
8
$                         184,056.64
$                         135,366.09
$                       48,690.55
$                          13,943,830.08
7/1/2011
9
$                         184,056.64
$                         135,834.23
$                       48,222.41
$                          13,807,995.85
8/1/2011
10
$                         184,056.64
$                         136,303.99
$                       47,752.65
$                          13,671,691.86
9/1/2011
11
$                         184,056.64
$                         136,775.37
$                       47,281.27
$                          13,534,916.49
10/1/2011
12
$                         184,056.64
$                         137,248.39
$                       46,808.25
$                          13,397,668.10
11/1/2011
13
$                         184,056.64
$                         137,723.04
$                       46,333.60
$                          13,259,945.06
12/1/2011
14
$                         184,056.64
$                         138,199.33
$                       45,857.31
$                          13,121,745.73
1/1/2012
15
$                         184,056.64
$                         138,677.27
$                       45,379.37
$                          12,983,068.46
2/1/2012
16
$                         184,056.64
$                         139,156.86
$                       44,899.78
$                          12,843,911.60
3/1/2012
17
$                         184,056.64
$                         139,638.11
$                       44,418.53
$                          12,704,273.49
4/1/2012
18
$                         184,056.64
$                         140,121.03
$                       43,935.61
$                          12,564,152.46
5/1/2012
19
$                         184,056.64
$                         140,605.61
$                       43,451.03
$                          12,423,546.85
6/1/2012
20
$                         184,056.64
$                         141,091.87
$                       42,964.77
$                          12,282,454.98
7/1/2012
21
$                         184,056.64
$                         141,579.82
$                       42,476.82
$                          12,140,875.16
8/1/2012
22
$                         184,056.64
$                         142,069.45
$                       41,987.19
$                          11,998,805.71
9/1/2012
23
$                         184,056.64
$                         142,560.77
$                       41,495.87
$                          11,856,244.94
10/1/2012
24
$                         184,056.64
$                         143,053.79
$                       41,002.85
$                          11,713,191.15
11/1/2012
25
$                         184,056.64
$                         143,548.52
$                       40,508.12
$                          11,569,642.63
12/1/2012
26
$                         184,056.64
$                         144,044.96
$                       40,011.68
$                          11,425,597.67
1/1/2013
27
$                         184,056.64
$                         144,543.12
$                       39,513.52
$                          11,281,054.55
2/1/2013
28
$                         184,056.64
$                         145,042.99
$                       39,013.65
$                          11,136,011.56
3/1/2013
29
$                         184,056.64
$                         145,544.60
$                       38,512.04
$                          10,990,466.96
4/1/2013
30
$                         184,056.64
$                         146,047.94
$                       38,008.70
$                          10,844,419.02
5/1/2013
31
$                         184,056.64
$                         146,553.02
$                       37,503.62
$                          10,697,866.00
6/1/2013
32
$                         184,056.64
$                         147,059.85
$                       36,996.79
$                          10,550,806.15
7/1/2013
33
$                         184,056.64
$                         147,568.44
$                       36,488.20
$                          10,403,237.71
8/1/2013
34
$                         184,056.64
$                         148,078.78
$                       35,977.86
$                          10,255,158.93
9/1/2013
35
$                         184,056.64
$                         148,590.88
$                       35,465.76
$                          10,106,568.05
10/1/2013
36
$                         184,056.64
$                         149,104.76
$                       34,951.88
$                          9,957,463.29
11/1/2013
37
$                         184,056.64
$                         149,620.41
$                       34,436.23
$                          9,807,842.88

 

 
 
 

--------------------------------------------------------------------------------

 

 

12/1/2013
38
$                         184,056.64
$                         150,137.85
$                       33,918.79
$                          9,657,705.03
1/1/2014
39
$                         184,056.64
$                         150,657.08
$                       33,399.56
$                          9,507,047.95
2/1/2014
40
$                         184,056.64
$                         151,178.10
$                       32,878.54
$                          9,355,869.85
3/1/2014
41
$                         184,056.64
$                         151,700.92
$                       32,355.72
$                          9,204,168.93
4/1/2014
42
$                         184,056.64
$                         152,225.56
$                       31,831.08
$                          9,051,943.37
5/1/2014
43
$                         184,056.64
$                         152,752.00
$                       31,304.64
$                          8,899,191.37
6/1/2014
44
$                         184,056.64
$                         153,280.27
$                       30,776.37
$                          8,745,911.10
7/1/2014
45
$                         184,056.64
$                         153,810.36
$                       30,246.28
$                          8,592,100.74
8/1/2014
46
$                         184,056.64
$                         154,342.29
$                       29,714.35
$                          8,437,758.45
9/1/2014
47
$                         184,056.64
$                         154,876.06
$                       29,180.58
$                          8,282,882.39
10/1/2014
48
$                         184,056.64
$                         155,411.67
$                       28,644.97
$                          8,127,470.72
11/1/2014
49
$                         184,056.64
$                         155,949.14
$                       28,107.50
$                          7,971,521.58
12/1/2014
50
$                         184,056.64
$                         156,488.46
$                       27,568.18
$                          7,815,033.12
1/1/2015
51
$                         184,056.64
$                         157,029.65
$                       27,026.99
$                          7,658,003.47
2/1/2015
52
$                         184,056.64
$                         157,572.71
$                       26,483.93
$                          7,500,430.76
3/1/2015
53
$                         184,056.64
$                         158,117.65
$                       25,938.99
$                         7,342,313.11
4/1/2015
54
$                         184,056.64
$                         158,664.47
$                       25,392.17
$                          7,183,648.64
5/1/2015
55
$                         184,056.64
$                         159,213.19
$                       24,843.45
$                          7,024,435.45
6/1/2015
56
$                         184,056.64
$                         159,763.80
$                       24,292.84
$                          6,864,671.65
7/1/2015
57
$                         184,056.64
$                         160,316.32
$                       23,740.32
$                          6,704,355.33
8/1/2015
58
$                         184,056.64
$                         160,870.75
$                       23,185.89
$                          6,543,484.58
9/1/2015
59
$                         184,056.64
$                         161,427.09
$                       22,629.55
$                          6,382,057.49
10/1/2015
60
$                         184,056.64
$                         161,985.36
$                       22,071.28
$                          6,220,072.13
11/1/2015
61
$                         184,056.64
$                         162,545.56
$                       21,511.08
$                          6,057,526.57
12/1/2015
62
$                         184,056.64
$                         163,107.69
$                       20,948.95
$                          5,894,418.88
1/1/2016
63
$                         184,056.64
$                         163,671.78
$                       20,384.86
$                          5,730,747.10
2/1/2016
64
$                         184,056.64
$                         164,237.81
$                       19,818.83
$                          5,566,509.29
3/1/2016
65
$                         184,056.64
$                         164,805.80
$                       19,250.84
$                          5,401,703.49
4/1/2016
66
$                         184,056.64
$                         165,375.75
$                       18,680.89
$                          5,236,327.74
5/1/2016
67
$                         184,056.64
$                         165,947.67
$                       18,108.97
$                          5,070,380.07
6/1/2016
68
$                         184,056.64
$                         166,521.58
$                       17,535.06
$                          4,903,858.49
7/1/2016
69
$                         184,056.64
$                         167,097.46
$                       16,959.18
$                          4,736,761.03
8/1/2016
70
$                         184,056.64
$                         167,675.34
$                       16,381.30
$                          4,569,085.69
9/1/2016
71
$                         184,056.64
$                         168,255.22
$                       15,801.42
$                          4,400,830.47
10/1/2016
72
$                         184,056.64
$                         168,837.10
$                       15,219.54
$                          4,231,993.37
11/1/2016
73
$                         184,056.64
$                         169,421.00
$                       14,635.64
$                          4,062,572.37
12/1/2016
74
$                         184,056.64
$                         170,006.91
$                       14,049.73
$                          3,892,565.46
1/1/2017
75
$                         184,056.64
$                         170,594.85
$                       13,461.79
$                         3,721,970.61
2/1/2017
76
$                         184,056.64
$                         171,184.83
$                       12,871.81
$                          3,550,785.78
3/1/2017
77
$                         184,056.64
$                         171,776.84
$                       12,279.80
$                          3,379,008.94
4/1/2017
78
$                         184,056.64
$                         172,370.90
$                       11,685.74
$                          3,206,638.04
5/1/2017
79
$                         184,056.64
$                         172,967.02
$                       11,089.62
$                          3,033,671.02
6/1/2017
80
$                         184,056.64
$                         173,565.20
$                       10,491.44
$                          2,860,105.82
7/1/2017
81
$                         184,056.64
$                         174,165.44
$                       9,891.20
$                          2,685,940.38
8/1/2017
82
$                         184,056.64
$                         174,767.76
$                       9,288.88
$                          2,511,172.62
9/1/2017
83
$                         184,056.64
$                         175,372.17
$                       8,684.47
$                          2,335,800.45
10/1/2017
84
$                         184,056.64
$                         175,978.66
$                       8,077.98
$                          2,159,821.79
11/1/2017
85
$                         184,056.64
$                         176,587.26
$                       7,469.38
$                          1,983,234.53

 

 
 
 

--------------------------------------------------------------------------------

 

 

12/1/2017
86
$                         184,056.64
$                         177,197.96
$                       6,858.68
$                          1,806,036.57
1/1/2018
87
$                         184,056.64
$                         177,810.76
$                       6,245.88
$                         1,628,225.81
2/1/2018
88
$                         184,056.64
$                         178,425.69
$                       5,630.95
$                          1,449,800.12
3/1/2018
89
$                         184,056.64
$                         179,042.75
$                       5,013.89
$                          1,270,757.37
4/1/2018
90
$                         184,056.64
$                         179,661.94
$                       4,394.70
$                          1,091,095.43
5/1/2018
91
$                         184,056.64
$                         180,283.27
$                       3,773.37
$                             910,812.16
6/1/2018
92
$                         184,056.64
$                         180,906.75
$                       3,149.89
$                             729,905.41
7/1/2018
93
$                         184,056.64
$                         181,532.39
$                       2,524.25
$                             548,373.02
8/1/2018
94
$                         184,056.64
$                         182,160.18
$                       1,896.46
$                            366,212.84
9/1/2018
95
$                         184,056.64
$                         182,790.16
$                       1,266.48
$                            183,422.68
10/1/2018
96
$                         184,056.64
$                         183,422.68
$                          633.96
$                                       0.00
           
TOTAL
 
$                 17,669,437.44
$                15,000,000.00
$           2,669,437.44
             
* AFTER PAYMENT OF LEASE PAYMENT DUE ON SUCH DATE
   

 
 
 

 
 
 

--------------------------------------------------------------------------------

 

Exhibit B to Lease Agreement
 
 
FORM OF OPINION OF COUNSEL TO LESSEE AND GUARANTOR
 
 
, 20__
 
GE Government Finance, Inc.
Three Capital Drive
Eden Prairie, Minnesota 55344
 
Development Authority of Jefferson, Georgia
106 Washington Street
Jefferson, Georgia 30549
 
Seyfarth Shaw LLP
1075 Peachtree Street NE – Suite 2500
Atlanta, Georgia 30309
 
$15,000,000
Development Authority of Jefferson, Georgia
Recovery Zone Facility Bond
(SYX Distribution Inc. Project),
Series 2010
 
Ladies and Gentlemen:
 
We have acted as counsel to (i) SYX Distribution Inc. (“Lessee”) with respect to
the issuance and delivery of the Bond described above (the “Bond”) and with
respect to the Lease Agreement dated as of September 1, 2010 (the “Lease
Agreement”) among GE Government Finance, Inc., as bondholder (“Bondholder”),
Development Authority of Jefferson, Georgia (“Issuer”), and Lessee, and the
other Lessee Documents (as defined in the Lease Agreement) and various related
matters, and (ii) Guarantor (as defined in the Lease Agreement) with respect to
the Guaranty (as defined in the Lease Agreement) and various related matters
and, in this capacity, have reviewed a duplicate original or certified copy of
each of the Lessee Documents and the Guaranty. Based upon the examination of
these and such other documents as we deem relevant, it is our opinion that:
 
1. Lessee has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware with full power and
authority to own its properties and conduct its business.
 
2. Lessee has full power and authority to execute and deliver the Lessee
Documents and to carry out the terms thereof. The Lessee Documents have been
duly and validly authorized, executed and delivered, are in full force and
effect and are the legal, valid and binding contracts
 

 
 
 

--------------------------------------------------------------------------------

 

of Lessee enforceable in accordance with their respective terms (including
against claims of usury), except to the extent limited by state and federal laws
affecting remedies and by bankruptcy, reorganization, or other laws of general
application relating to or affecting the enforcement of creditors’ rights.
 
3. No consent, authorization, approval or other action by, and no notice to, or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by Lessee of the Lessee Documents,
except for such action which has been duly obtained or taken and is in full
force and effect.
 
4. The consummation of the transactions contemplated by the Lessee Documents and
the carrying out of the terms thereof will not result in violation of any
provisions of the articles of incorporation or bylaws of Lessee or result in the
violation of any provision of, or in a default under, any indenture, mortgage,
deed of trust, indebtedness, agreement, judgment, decree, order, statute, rule
or regulation to which Lessee is a party or by which it or its property is
bound.
 
5. There are no legal or governmental actions, suits, proceedings, inquiries or
investigations pending, threatened or contemplated, or any basis therefor, to
which Lessee is or may become a party or of which any property of Lessee is or
may become subject, other than ordinary routine litigation incident to the kind
of business conducted by Lessee which, if determined adversely to Lessee, would
not, individually or in the aggregate, have a material adverse effect on the
financial position or results of operations of Lessee.
 
6. There are no legal or governmental proceedings pending, threatened or
contemplated, or any basis therefor, wherein an unfavorable decision, ruling or
finding would adversely affect the validity of or security for the Bond, the
Lessee Documents or the transactions contemplated thereby.
 
7. Lessee has taken all steps legally required as a condition precedent to the
execution and delivery of the Lease Agreement and to permit the commencement of
the acquisition, installation and operation of the Project (as defined in the
Lease Agreement). Lessee has made all submissions to governmental authorities
and has obtained, and there are currently in full force and effect, all
consents, approvals, authorizations, accreditations, licenses, permits and
orders of any governmental or regulatory authority that are required to be
obtained by Lessee to enable the Project to be acquired and installed in
accordance with the plans and specifications therefor.
 
8. The provisions of the Lease Agreement are effective to create a security
interest in favor of Bondholder in all of Lessee’s right, title and interest in
and to the Collateral (as defined in the Lease Agreement) and all proceeds
thereof. Such security interest has been properly perfected and is subject to no
liens or encumbrances.
 
9. Guarantor has been duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware with full power and
authority to own its properties and conduct its business.
 
B-2
 
 
 
 

--------------------------------------------------------------------------------

 
 
 
10. Guarantor has full power and authority to execute and deliver the Guaranty
and to carry out the terms thereof. The Guaranty has been duly and validly
authorized, executed and delivered, is in full force and effect and is the
legal, valid and binding contract of Guarantor enforceable in accordance with
its terms (including against claims of usury), except to the extent limited by
state and federal laws affecting remedies and by bankruptcy, reorganization, or
other laws of general application relating to or affecting the enforcement of
creditors’ rights.
 
11. The consummation of the transactions contemplated by the Guaranty and the
carrying out of the terms thereof will not result in violation of any provisions
of the articles of incorporation or bylaws of Guarantor or result in the
violation of any provision of, or in a default under, any indenture, mortgage,
deed of trust, indebtedness, agreement, judgment, decree, order, statute, rule
or regulation to which Guarantor is a party or by which it or its property is
bound.
 
12. There are no legal or governmental actions, suits, proceedings, inquiries or
investigations pending, threatened or contemplated, or any basis therefor, to
which Guarantor is or may become a party or of which any property of Guarantor
is or may become subject, other than ordinary routine litigation incident to the
kind of business conducted by Guarantor which, if determined adversely to
Guarantor, would not, individually or in the aggregate, have a material adverse
effect on the financial position or results of operations of Guarantor.
 
This opinion may be relied upon by the addressees hereto and any permitted
assignee of the Bond.
 
Very truly yours,
 
 
 
B-3
 

 
 

--------------------------------------------------------------------------------

 

Exhibit C to Lease Agreement
 
FORM OF OPINION OF COUNSEL TO ISSUER
 
 
, 20__
 
GE Government Finance, Inc.
Three Capital Drive
Eden Prairie, Minnesota 55344
 
Development Authority of Jefferson, Georgia
106 Washington Street
Jefferson, Georgia 30549
 
Seyfarth Shaw LLP
1075 Peachtree Street NE – Suite 2500
Atlanta, Georgia 30309
 
$15,000,000
Development Authority of Jefferson, Georgia
Recovery Zone Facility Bond
(SYX Distribution Inc. Project),
Series 2010
 
Ladies and Gentlemen:
 
We have acted as counsel to Development Authority of Jefferson, Georgia
(“Issuer”) in connection with the issuance and sale of the bond described above
(the “Bond”) and with respect to the Lease Agreement dated as of September 1,
2010 (the “Lease Agreement”) among GE Government Finance, Inc. (“Bondholder”),
Issuer and SYX Distribution Inc. (“Lessee”), the Escrow Agreement of even date
therewith (the “Escrow Agreement”) among Bondholder, Issuer, Lessee and Marshall
& Ilsley Trust Company, N.A., as escrow agent, the Tax Compliance Certificate of
even date therewith (the “Tax Compliance Certificate”; the Lease Agreement, the
Escrow Agreement and the Tax Compliance Certificate may be referred to herein
collectively as the “Agreements”) and various related matters and, in this
capacity, have reviewed a duplicate original or certified copy of the
Agreements. Based upon the examination of these and such other documents as we
deem relevant, it is our opinion that:
 
1. The Issuer is a public body corporate and politic created by the Development
Authorities Law, O.C.G.A. §36-62-1, et seq. (the “Act”) and activated by
resolution of the City Council of the City of Jefferson to develop and promote
trade, commerce, industry and employment opportunities in the City of Jefferson
(the “City”) and is authorized to issue its revenue obligations and to use the
proceeds of the Bond to finance or refinance the cost of any “project” (as
defined in the Act) in furtherance of the public purpose for which it was
created.
 

 
 
 

--------------------------------------------------------------------------------

 

The members of Issuer have been duly appointed and lawfully hold office. Issuer
has filed its annual registration statement with the Georgia Department of
Community Affairs for the year 2010, as required by law.
 
2. Issuer is authorized and has power under applicable law to enter into the
Agreements, to issue the Bond and to carry out its obligations thereunder and
the transactions contemplated thereby.
 
3. The issuance of the Bond has been duly and validly authorized, all conditions
precedent to the issuance of the Bond have been fulfilled and the Bond has been
issued in accordance with the laws of the State. The Bond is the legal, valid
and binding obligation of Issuer, enforceable in accordance with its terms.
 
4. The Agreements have been duly authorized, approved, executed and delivered by
and on behalf of Issuer and are legal, valid and binding contracts of Issuer
enforceable in accordance with their terms, except to the extent limited by
state and federal laws affecting remedies and by bankruptcy, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors’ rights.
 
5. The issuance of the Bond and the authorization, approval and execution of the
Agreements and all other proceedings of Issuer relating to the transactions
contemplated thereby have been performed in accordance with all open meeting,
public bidding and other laws, rules and regulations of the State.
 
6. There is no litigation, action, suit or proceeding pending or before any
court, administrative agency, arbitrator or governmental body that challenges
the organization or existence of Issuer; the authority of Issuer or its officers
or its employees to issue the Bond or to enter into the Agreements; the proper
authorization, approval and/or execution of the Bond, the Agreements and the
other documents contemplated thereby; or the ability of Issuer otherwise to
perform its obligations under the Bond, the Agreements and the transactions
contemplated thereby.
 
This opinion may be relied upon by the addressees hereto and any permitted
assignee of the Bond.
 
Very truly yours,
 
 
C-2
 
 

 
 

--------------------------------------------------------------------------------

 

Exhibit D to Lease Agreement
 
 
FORM OF OPINION OF BOND COUNSEL
 
 
, 20__
 
Development Authority of Jefferson, Georgia
106 Washington Street
Jefferson, Georgia 30549
 
GE Government Finance, Inc.
Three Capital Drive
Eden Prairie, Minnesota 55344
 
SYX Distribution Inc.
11 Harbor Park Dr.
Port Washington, NY 11050
 
$15,000,000
Development Authority of Jefferson, Georgia
Recovery Zone Facility Bond
(SYX Distribution Inc. Project),
Series 2010
 
Ladies and Gentlemen:
 
We have acted as Bond Counsel to SYX Distribution Inc. (“Lessee”), in connection
with the issuance and delivery on the date hereof by the Development Authority
of Jefferson, Georgia (“Issuer”) to GE Government Finance, Inc. (“Bondholder”)
of the bond described above (the “Bond”) and in connection with the Lease
Agreement dated as of September 1, 2010 (the “Lease Agreement”) among
Bondholder, Lessee and the Issuer the Escrow Agreement of even date therewith
(the “Escrow Agreement”) among Bondholder, Issuer, Lessee and Marshall & Ilsley
Trust Company, N.A., as escrow agent (“Escrow Agent”), and the Issuer’s Tax
Compliance Certificate of even date herewith (the “Tax Compliance Certificate”);
the Lease Agreement, the Escrow Agreement and the Tax Compliance Certificate may
be referred to herein collectively as the “Agreements”). The Bond is issued in
order that the Issuer may acquire equipment (the “Project”) to be located in the
City of Jefferson, Georgia (the “City”) to be leased by the Issuer to the Lessee
for use in a distribution center.
 
We have examined the law, the transcript of proceedings (the “Transcript”)
relating to the issuance of the Bonds, including the resolution approving the
issuance of the Bond (the “Bond Resolution”), the executed Bond, and the
executed Agreements and such other documents, resolutions and records of the
Issuer and other instruments as we have deemed necessary or relevant to enable
us to express the opinions set forth below. In making the examinations described
above, we have assumed the genuineness of all signatures and the
 

 
 
 

--------------------------------------------------------------------------------

 

 
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such documents. With your
consent, we have relied on the Certificate of the Issuer, dated as of even date
herewith, and upon representations and warranties contained in the Agreements,
as to factual matters represented therein. As to questions of fact material to
our opinion, we have relied upon representations of the Issuer and the Lessee
contained in the Agreements and other documents in the Transcript for the Bonds,
the certified proceedings and other certifications of public officials furnished
to us, and certifications furnished to us by or on behalf of the Lessee, without
undertaking to verify the same by independent investigation.
 
Reference is made to an opinion of even date of Curt Rush, the Lessee’s General
Counsel, upon which we have relied, with your permission, with respect to all
matters set forth in such opinion. Reference is also made to an opinion of even
date herewith of Davidson, Hopkins, and Alexander, P.C., as counsel to the
Issuer, upon which we have relied, with your permission, with respect to all
matters set forth in such opinion. We have also relied on the final judgment of
validation of the Superior Court of Jackson County validating the Bonds.
 
Based upon the foregoing, we are of the opinion, as of the date hereof and under
existing law, that:
 
1. The Issuer is a public body corporate and politic created by the Development
Authorities Law, O.C.G.A. Section 36-62-1, et seq. (the “Act”) and activated by
resolution of the governing body of the City to develop and promote trade,
commerce, industry and employment opportunities in the City and is authorized to
issue its revenue obligations and to use the proceeds of such revenue
obligations to finance or refinance the cost of any “project” (as defined in the
Act) in furtherance of the public purpose for which the Issuer was created. The
members of Issuer have been duly appointed and lawfully hold office. The Issuer
has filed its annual registration statement with the Georgia Department of
Community Affairs for the year 2010, as required by law.
 
2. The Bond Resolution has been duly adopted, the Bond and each of the
Agreements have been duly authorized, executed and delivered by Issuer in
accordance with the Act and are legal, valid, binding and enforceable
obligations of Issuer, subject to the qualifications set forth below. Issuer is
serving as a mere conduit in the financing and the Bond is a special and limited
obligation of Issuer payable solely from the security pledged by the Bond
Resolution and the Lease. The Bond shall not constitute a debt of Issuer or a
pledge of the faith and credit of Issuer, of the City, of the State of Georgia
(the “State”) or of any municipality or political subdivision thereof. No holder
of the Bond shall ever have the right to compel any exercise of the taxing power
of the City, of the State or of any municipality or political subdivision
thereof to pay the Bond or the debt service thereon, or to enforce payment
thereof against any funds or property (other than such pledged security) of the
City, of the State or of any municipality or political subdivision thereof, nor
shall the Bond constitute a charge, lien or encumbrance, legal or equitable,
upon any funds or property of Issuer (other than the pledged security), of the
City, of the State or of any municipality or political subdivision thereof. The
Bond has been judicially validated by judgment of the Superior Court of Jackson
County in accordance with the provisions of the Revenue Bond Law of the State
(O.C.G.A. Section 3 6-82-
 
 
D-2
 
 
 
 

--------------------------------------------------------------------------------

 
 
 
60, et seq.). This opinion is, as to the binding effect and enforceability of
the Bond and the Agreements, subject to (i) Bankruptcy, fraudulent transfer,
moratorium, insolvency, reorganization or other laws generally affecting the
enforcement of creditors’ rights, (ii) limitations imposed by general principles
of equity upon specific enforcement, injunctive relief or other equitable
remedies, (iii) the exercise of judicial discretion in appropriate cases and
(iv) to the following qualifications:
 
(a) We express no opinion as to the validity or enforceability of any of the
following provisions that may be contained in the Bond or in the Agreements: (i)
any provisions which purport to waive any defense, counterclaim, set-off or
deduction arising from any violation of applicable federal or state securities
or usury laws, any fraud on the part of any other party, any failure to give
notice of a disposition of collateral to the extent required under applicable
law, any disposition of collateral other than in a commercially reasonable
manner or the effect of any applicable statute of limitation, (ii) any choice of
law provisions therein, (iii) any provisions which purport to waive the right to
trial by jury or purport to consent to or waive any objection to the
jurisdiction or venue of any particular court and (iv) any provisions which
provide for payment of interest on unpaid interest or which, due to prepayment,
acceleration or otherwise, would cause the rate of interest to exceed five
percent (5.0%) per month. We also note that any provisions requiring any party
to pay the attorneys’ fees of any other party will be subject to compliance with
the requirements and limitations of O.C.G.A. Section 13-1-11 and that the
provisions thereof will be subject to the effect of the provisions of O.C.G.A.
Section 13-4-4 regarding mutual departures from strict contractual terms.
Nothing in this paragraph (a) is intended to limit any of the other
qualifications or exceptions to our opinion set forth in this letter.
 
(b) Enforcement of any warranties and indemnities contained therein may be
limited by applicable federal or state securities laws as violations of public
policy and may be limited to the extent such indemnities would require any party
to indemnify another party for costs, losses, liabilities, claims, damages or
expenses incurred by or asserted against such party as a result of action or
inaction of such party constituting negligence. In addition, it is possible that
a court would not enforce any warranties or indemnities with respect to
environmental matters contained therein.
 
(c) With respect to the enforceability thereof, we have assumed that, to the
extent that applicable law would require the rights and remedies set forth
therein to be exercised in good faith or in a reasonable or commercially
reasonable manner as a condition to the enforceability thereof, the persons
having remedial rights thereunder will observe and satisfy such legal
requirements.
 
(d) We express no opinion as to (i) the priority of any security interest,
security title or lien granted under any of the Agreements (except as expressly
stated above); (ii) the requirements for continuation of priority or perfection
of any such security interest, security title or lien; or (iii) the title to or
encumbrances on the Project.
 
 
D-3
 
 
 
 

--------------------------------------------------------------------------------

 
 
 
(e) Certain waivers of notices and certain waivers of other rights and certain
waivers of remedial provisions contained therein may be unenforceable under
Georgia law, particularly typical statutory and common law principles concerning
rights of guarantors that may impede enforcement of a guaranty in accordance
with its terms or, in some cases, permit the discharge of a guarantor, such as a
discharge under O.C.G.A. Section 10-7-2 from extinction of the principal’s
obligation.
 
3. The interest on the Bond is excludable from gross income for federal income
tax purposes under Section 103(a) of the Code, except for interest on any Bond
for any period during which such Bond is held by a person who is a “substantial
user” of the Project or a “related person” thereto within the meaning of Section
147(a) of the Code. Interest on the Bond is not treated as an item of tax
preference for purposes of the federal alternative minimum tax imposed on
individuals and corporations and that, with respect to corporations, such
interest is not taken into account in determining adjusted current earnings for
the purpose of computing the alternative minimum tax imposed on such
corporations. We express no opinion regarding other federal income tax
consequences caused by the receipt or accrual of interest on the Bond. In giving
the tax opinions expressed in this paragraph, we have assumed and relied upon
compliance with the covenants of the Issuer and of the Lessee contained in the
documents included in the Transcript, and of the representations and
certifications of the Issuer and of the Lessee contained in the Transcript, the
accuracy of which we have not independently investigated or verified. The
accuracy of certain of those representations and certifications, and compliance
by the Issuer and of the Lessee with those covenants, may be necessary for the
interest on the Bond to be and remain excludable from gross income for federal
income tax purposes and for other tax effects stated in this paragraph. Failure
to comply with certain of those covenants subsequent to issuance of the Bond or
the inaccuracy of certain of those representations and certifications could
cause interest on the Bond to be included in gross income for federal income tax
purposes retroactively to the date of issuance of the Bond. We express no
opinion regarding other federal tax consequences arising with respect to the
Bond. Prospective purchasers of the Bond should consult its own tax advisors
with respect to other tax consequences of owning the Bond.
 
4. The Bond and the interest on the Bond are exempt from all present income
taxes and property taxes within the State. We express no opinion regarding other
tax consequences arising with respect to the Bond under the laws of the State or
any other state.
 
5. The Bond is exempt from registration pursuant to the Securities Act of 1933,
as amended, and the Bond Resolution is exempt from qualification as an indenture
pursuant to the Trust Indenture Act of 1939, as amended.
 
In giving the tax opinions expressed in paragraph 3, above, we have assumed and
relied upon compliance with the covenants and representations of Issuer and of
Lessee in the Agreements, and of the representations and certifications of
Issuer and of Lessee in certificates delivered in connection with the Bond, the
accuracy, which we have not independently verified.
 
 
D-4
 
 
 
 

--------------------------------------------------------------------------------

 
 
 
The accuracy of certain of those representations and certifications, and
compliance by Issuer and of Lessee with those covenants, may be necessary for
the interest on the Bond to be and remain excludable from gross income for
federal income tax purposes and for other tax effects stated in paragraph 3,
above. Failure to comply with certain of those covenants or the inaccuracy of
certain of those representations and certifications could cause interest on the
Bond to be included in gross income for federal income tax purposes either
prospectively or retroactively to the date of issuance of the Bond. Under the
Code, portions of the interest on the Bond earned by corporations (as defined
for federal income tax purposes) may be subject to an environmental tax imposed
on certain corporations for certain taxable years, and interest on the Bond may
be subject to a branch profits tax imposed on certain foreign corporations doing
business in the United States and to a tax imposed on excess net passive income
of certain S corporations.
 
The undersigned’s engagement as Lessee’s Bond Counsel imposed no duty upon the
undersigned to undertake any due diligence investigation as to either: (i) the
adequacy of the pledged security or (ii) the business or financial condition of
the Lessee. No opinion is expressed as to the applicability of the Blue Sky laws
of any state on the transaction described above. No opinion is expressed as to
the applicability of the federal securities laws or the Blue Sky laws of any
state as to any subsequent transfer of the Bond. No representations have been
made by the undersigned to the Bondholder in connection with its purchase of the
Bond other than those expressly set forth in this opinion.
 
The opinions set forth herein are limited to the laws of the State and
applicable federal laws. This opinion may be relied on only by the persons to
whom it is addressed and any permitted assignee of the Bond. This opinion is
given as of the date hereof and we assume no obligation to update, revise or
supplement this opinion to reflect any facts or circumstances that may hereafter
come to our attention or any changes in law that may hereafter occur.
 
Very truly yours,
 
 
 
D-5
 

 
 

--------------------------------------------------------------------------------

 

Exhibit E to Lease Agreement
 
FORM OF BOND
 
 
UNITED STATES OF AMERICA
STATE OF GEORGIA
 
DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA
RECOVERY ZONE FACILITY BOND
(SYX DISTRIBUTION INC. PROJECT), SERIES 2010
 
No. R-_ 
$15,000,000
 
Date of Issuance                                           Maturity
Date        Interest Rate
 
,2010                                         , ____              ____%
 
The DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA, a public body corporate and
politic duly organized and validly existing under the laws of the State of
Georgia (hereafter referred to as “Issuer”), for value received, hereby promises
to pay GE GOVERNMENT FINANCE, INC., Three Capital Drive, Eden Prairie, Minnesota
55344, or to registered assigns, but solely from the Lease Payments hereinafter
described, the principal sum of
 
FIFTEEN MILLION DOLLARS
 
in any coin or currency of the United States of America which on the date of
payment thereof is the legal tender for the payment of public and private debts,
and to pay, solely from such Lease Payments, in like coin and currency, interest
on the principal sum from the date hereof, such interest to be at the rates, and
all such payments of interest, principal or interest and principal to be payable
at the time and place, in the amounts and in accordance with the terms set forth
in that certain Lease Agreement dated as of September 1, 2010 (the “Lease
Agreement”) among the Issuer, GE Government Finance, Inc. and SYX Distribution
Inc. (the “Lessee”). All terms used herein in capitalized form and not otherwise
defined herein shall have the meanings ascribed thereto in the Lease Agreement.
 
This Bond is payable as to principal and prepayment premium, if any, solely from
Lease Payments to be made by Lessee and is secured by, among other things, a
lien on the Collateral.
 
THIS BOND SHALL NOT CONSTITUTE A DEBT OF ISSUER NOR A PLEDGE OF THE FAITH AND
CREDIT OF ISSUER, OF CITY OF JEFFERSON (THE “CITY”), OF THE STATE OF GEORGIA
(THE “STATE”), OR OF ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF. NO
HOLDER OF THE BOND SHALL EVER HAVE THE RIGHT TO COMPEL ANY EXERCISE OF THE
TAXING POWER OF
 
 
 
 

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THE CITY, OF THE STATE, OR OF ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF
TO PAY THIS BOND OR THE DEBT SERVICE HEREON, OR TO ENFORCE PAYMENT HEREOF
AGAINST ANY FUNDS OR PROPERTY (OTHER THAN THE LEASE PAYMENTS), OF THE ISSUER, OF
THE CITY, OF THE STATE, OR OF ANY MUNICIPALITY OR POLITICAL SUBDIVISION THEREOF,
NOR SHALL THIS BOND CONSTITUTE A CHARGE, LIEN OR ENCUMBRANCE, LEGAL OR
EQUITABLE, UPON ANY FUNDS OR PROPERTY OF ISSUER (OTHER THAN THE LEASE PAYMENTS)
OR OF THE CITY, OF THE STATE, OR OF ANY MUNICIPALITY OR POLITICAL SUBDIVISION
THEREOF.
 
THIS BOND HAS BEEN JUDICIALLY VALIDATED BY JUDGMENT OF THE SUPERIOR COURT OF
JACKSON COUNTY, GEORGIA, IN ACCORDANCE WITH THE PROVISIONS OF THE REVENUE BOND
LAW OF THE STATE (O.C.G.A. § 36-82-60, et seq.).
 
This Bond is subject to prepayment upon the terms and conditions set forth in
the Lease Agreement.
 
It is hereby certified, recited and declared that all acts, conditions and
things required to exist to happen and to be performed precedent to and in the
issuance of this Bond exist, have happened and have been performed in regular
and due form and time as required by the Constitution and laws of the State of
Georgia applicable thereto and that the issuance of this Bond is in full
compliance with all Constitutional and statutory limitations, provisions and
restrictions.
 
IN WITNESS WHEREOF, the Development Authority of Jefferson, Georgia has issued
this Bond and has caused the same to be executed in its name by the manual or
facsimile signature of its Chairman or Vice Chairman and its corporate seal to
be hereunto affixed or imprinted or otherwise reproduced hereon and attested by
the manual or facsimile signature of its Secretary or Assistant Secretary as of
the Date of Issuance shown above.
 
DEVELOPMENT AUTHORITY
OF JEFFERSON, GEORGIA
 
[SEAL]
 
By:
   Chairman
 
 
ATTEST:
 
 
____________________________
Secretary
 
 
 
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VALIDATION CERTIFICATE
 
The undersigned Clerk of the Superior Court of Jackson County, State of Georgia,
DOES HEREBY CERTIFY that this Bond was validated and confirmed by judgment of
the Superior Court of Jackson County, on the ____ day of , 2010 in the case of
STATE OF GEORGIA vs. DEVELOPMENT AUTHORITY OF JEFFERSON, GEORGIA AND SYX
DISTRIBUTION INC., Case No. , that no intervention or objection was filed
opposing the validation of this Bond and that no appeal of such judgment of
validation has been taken.
 
IN WITNESS WHEREOF, I have hereunto set my hand and have caused to be affixed
hereon the official seal of the Superior Court of Jackson County, Georgia.
 
 
 
_____________________________________
Clerk, Superior Court, Jackson County, Georgia
 
 
 
[SEAL]
 
 
 
 
 
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ASSIGNMENT
 
FOR VALUE RECEIVED, the undersigned  (the _____________“Transferor”) hereby
sells, assigns and transfers unto _________________ (the “Transferee”)
 
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF TRANSFEREE
 
_________________________
 
the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints  as attorney to register the transfer of the within Bond on the
books kept for registration of transfer thereof, with full power of substitution
in the premises.
 
Date:
 
NAME OF HOLDER:
 
______________________________________
(Type or print)
 
 
______________________________________
Signature of Holder
 
NOTICE: No transfer will be registered and no new Bond will be issued in the
name of the Transferee, unless the signature(s) to this assignment correspond(s)
with the name as it appears on the face of the within Bond in every particular,
without alteration or enlargement or any change whatever and the Social Security
or Federal Employer Identification Number of the Transferee is supplied.
 
Signature Guaranteed:
 
___________________________________
NOTICE: 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.
 
 
E-4
 

 
 
 

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Exhibit F to Lease Agreement
 
SCHEDULE OF PROJECT COSTS
 
Material and Labor
 
Cost
 
Conveyor for broken case picking and station system
  $ 4,100,000  
Conveyor for retail order fulfillment system (120 stores)
  $ 1,500,000  
Conveyor for “Express” order processing
  $ 700,000  
Conveyor for full case fulfillment
  $ 200,000  
Pallet rack for 15,000 pallets
  $ 700,000  
Carton flow rack (4500 sku’s)
  $ 270,000  
Bulk hand load racks
  $ 325,000  
Pallet flow module (240 pallets)
  $ 60,000  
Pick module deck
  $ 150,000  
Pick to light (4620 zones)
  $ 575,000  
Pack to light (384 lights)
  $ 48,000  
Automatic box erectors (4)
  $ 240,000  
Empty box monorail
  $ 50,000  
Total MHE Equipment
  $ 8,918,000            
Reach Fork Lift Trucks (8)
  $ 320,000  
Order pickers (8)
  $ 240,000  
Electric pallet Jacks (12)
  $ 180,000  
Electric dock and sit down clamp trucks (10)
  $ 340,000  
Battery charging stations for all equipment
  $ 80,000  
Total Motorized Fork Equipment
  $ 1,160,000            

 

 
 
 

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Ship label and pack ship printers
  $ 350,000  
Security system (cameras, alarms, burglar, card access)
  $ 300,000  
Misc. electrical distribution
  $ 85,000  
Air cooling and circulation system
  $ 150,000  
Pallet shrink wrap machines (3)
  $ 30,000  
Automatic corrugated bailer
  $ 35,000  
Misc. workbenches, totes, cages, Etc.
  $ 100,000  
Total Misc. WIT Requirements
  $ 1,050,000            
Office cubicles, chairs and furniture
  $ 275,000            
Retail Store fixtures, Equipment and Set Up
  $ 300,000            
Telecommunication and Network Equipment and Set Up
  $ 3,297,000  
TOTAL
  $ 15,000,000  

 
 
 
F-2

 
 

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Exhibit G to Lease Agreement
 
FORM OF CERTIFICATE OF CHIEF FINANCIAL OFFICER
 
I, the undersigned, hereby certify that I am the duly qualified and acting chief
financial officer of SYX Distribution Inc. (“Lessee”) and, with respect to
Section [7.01 (a)/7.01 (b)] of the Lease Agreement dated as of September 1, 2010
(the “Lease Agreement”) by and among Lessee, GE Government Finance, Inc.
(“Bondholder”) and Development Authority of Jefferson, Georgia (“Issuer”), that:
 
1. The attached financial statements have been prepared in accordance with GAAP.
 
2. I have no knowledge of any Default or Event of Default under the Lease
Agreement.
 
Dated: ________, 20__.
 
Lessee:
 
SYX DISTRIBUTION INC.
 
 
By:___________________________
   Chief Financial Officer
 
 
Date:__________________________