exv10w1



 





Exhibit 10.1

 





LOAN AGREEMENT




by and between




ADAIR COUNTY INDUSTRIAL AUTHORITY

the Authority




and




ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.,

the Company




Related to:




$13,515,000

Adair County Industrial Authority

Solid Waste Recovery Facilities Revenue Bonds

(Advanced Environmental Recycling Technologies, Inc. Project)

Series 2007




Dated as of December 1, 2007




      




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	ARTICLE I

	 
	 	 	 	 
	DEFINITIONS 
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II

	 
	 	 	 	 
	REPRESENTATIONS, WARRANTIES AND COVENANTS

	 
	 	 	 	 
	Section 2.01. Representations, Warranties and Covenants by the Authority
	 	 	2	 
	Section 2.02. Representations, Warranties and Covenants by the Company
	 	 	3	 
	Section 2.03. Environmental Representations and Covenants
	 	 	4	 
	 
	 	 	 	 
	ARTICLE III

	 
	 	 	 	 
	SECURITY PROVISIONS: TERM OF THE LOAN AGREEMENT

	 
	 	 	 	 
	Section 3.01. Security Provisions
	 	 	5	 
	Section 3.02. Term
	 	 	6	 
	Section 3.03. Patent Security
	 	 	6	 
	Section 3.04. Deposit of Pledged Revenues: Control Agreement
	 	 	6	 
	Section 3.05. Assignment of Weyerhaeuser Agreement
	 	 	7	 
	 
	 	 	 	 
	ARTICLE IV

	 
	 	 	 	 
	FINANCING THE COST OF THE FACILITIES: ISSUANCE OF THE SERIES 2007 BONDS

	 
	 	 	 	 
	Section 4.01. Agreement to Complete the Facilities
	 	 	7	 
	Section 4.02. Agreement to Issue the Bonds; Application of Bond Proceeds
	 	 	7	 
	Section 4.03. Disbursements From the Project Fund
	 	 	8	 
	Section 4.04. Obligation of the Parties to Cooperate in Furnishing Documents to Trustee
	 	 	8	 
	Section 4.05. Investment of Moneys
	 	 	8	 
	Section 4.06. Arbitrage and Tax Matters
	 	 	8	 
	Section 4.07. Establishment of Completion Date
	 	 	9	 
	Section 4.08. Completion of the Facilities if Project Fund Insufficient
	 	 	9	 
	Section 4.09. Plans and Specifications
	 	 	9	 
	Section 4.10. Surety Bonds; Company to Pursue Remedies Against Contractors and Subcontractors
and Their Sureties
	 	 	10	 






 









 






	 	 	 	 	 
	 	 	Page
	ARTICLE V

	 
	 	 	 	 
	OBLIGATIONS; PROVISIONS FOR PAYMENT

	 
	 	 	 	 
	Section 5.01. Loan Payments and Other Amounts Payable
	 	 	10	 
	Section 5.02. Payees of Payments
	 	 	12	 
	Section 5.03. Obligations of Company Hereunder Unconditional
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VI

	 
	 	 	 	 
	MAINTENANCE AND INSURANCE

	 
	 	 	 	 
	Section 6.01. Maintenance and Modifications
	 	 	13	 
	Section 6.02. Insurance
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VII

	 
	 	 	 	 
	CASUALTY LOSS AND CONDEMNATION

	 
	 	 	 	 
	Section 7.01. Insurance and Condemnation Proceeds
	 	 	17	 
	 
	 	 	 	 
	ARTICLE VIII

	 
	 	 	 	 
	SPECIAL COVENANTS

	 
	 	 	 	 
	Section 8.01. No Warranty of Condition or Suitability by the Authority
	 	 	17	 
	Section 8.02. Further Assurances
	 	 	17	 
	Section 8.03. Annual Audit
	 	 	18	 
	Section 8.04. Financial Statements; Annual
	 	 	18	 
	Section 8.05. Release and Indemnification Covenants
	 	 	18	 
	Section 8.06. Company Representative
	 	 	19	 
	Section 8.07. Leases and Operating Contracts
	 	 	19	 
	Section 8.08. No Default Certificate
	 	 	20	 
	Section 8.09. [Intentionally Omitted]
	 	 	20	 
	Section 8.10. Limitations on Creation of Liens
	 	 	20	 
	Section 8.11. Limitations on Indebtedness
	 	 	21	 
	Section 8.12. Subordinated Debt
	 	 	22	 
	Section 8.13. Parity Indebtedness
	 	 	24	 
	Section 8.14. Transfer of Assets
	 	 	25	 
	Section 8.15. Consolidation, Merger, Sale or Conveyance
	 	 	26	 
	Section 8.16. Financial Covenants
	 	 	26	 
	Section 8.17. Reporting Extensions
	 	 	27	 
	 
	 	 	 	 
	ARTICLE IX

	 
	 	 	 	 
	ASSIGNMENT AND PLEDGING OF LOAN AGREEMENT; REDEMPTION OF BONDS

	 
	 	 	 	 
	Section 9.01. Assignment by Company
	 	 	27	 






ii 









 






	 	 	 	 	 
	 	 	Page
	Section 9.02. Assignment and Pledge by the Authority
	 	 	27	 
	Section 9.03. Redemption of Bonds
	 	 	28	 
	 
	 	 	 	 
	ARTICLE X

	 
	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES

	 
	 	 	 	 
	Section 10.01. Events of Default Defined
	 	 	28	 
	Section 10.02. Remedies on Default
	 	 	30	 
	Section 10.03. No Remedy Exclusive
	 	 	31	 
	Section 10.04. Agreement to Pay Attorneys’ Fees and Expenses
	 	 	32	 
	Section 10.05. Waiver
	 	 	32	 
	Section 10.06. Appointment of Receiver
	 	 	32	 
	Section 10.07. Remedies Subject to Provisions of Law
	 	 	33	 
	Section 10.08. Waiver of Appraisement, Valuation, Stay, and Execution Laws
	 	 	33	 
	Section 10.09. Purchase of Property by Bondholder or Holder of Parity Indebtedness
	 	 	33	 
	 
	 	 	 	 
	ARTICLE XI

	 
	 	 	 	 
	PREPAYMENT OF THE LOAN

	 
	 	 	 	 
	Section 11.01. General Option to Prepay the Loan
	 	 	34	 
	Section 11.02. Prepayment Credits
	 	 	34	 
	Section 11.03. Notice of Prepayment
	 	 	34	 
	Section 11.04. Use of Prepayment Moneys
	 	 	35	 
	 
	 	 	 	 
	ARTICLE XII

	 
	 	 	 	 
	MISCELLANEOUS

	 
	 	 	 	 
	Section 12.01. Notices
	 	 	35	 
	Section 12.02. Binding Effect
	 	 	35	 
	Section 12.03. Severability
	 	 	35	 
	Section 12.04. Amounts Remaining in Funds
	 	 	36	 
	Section 12.05. Amendments, Changes and Modifications
	 	 	36	 
	Section 12.06. Execution in Counterparts
	 	 	36	 
	Section 12.07. Governing Law
	 	 	36	 
	Section 12.08. Cancellation at Expiration of Term of Agreement
	 	 	36	 
	Section 12.09. Recording
	 	 	36	 
	Section 12.10. No Pecuniary Liability of the Authority
	 	 	36	 
	Section 12.11. Partial Release
	 	 	36	 
	Section 12.12. General Release
	 	 	37	 
	Section 12.13. Captions
	 	 	37	 
	Section 12.14. Payments Due on Non-Business Day
	 	 	37	 
	Section 12.15. Provision of General Application
	 	 	37	 
	 
	 	 	 	 
	EXHIBIT A COSTS OF THE PROJECT
	 	 	 	 
	EXHIBIT B PERMITTED EXCEPTIONS
	 	 	 	 






iii 









 





LOAN AGREEMENT




     THIS LOAN AGREEMENT (this “Loan Agreement”), dated as of December 1, 2007, by and between
ADAIR COUNTY INDUSTRIAL AUTHORITY (the “Authority”), a public trust organized and existing under
the laws of the State of Oklahoma, for the benefit of Adair County, Oklahoma, and ADVANCED
ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC. (the “Company”), a corporation duly organized and
existing under the laws of the State of Delaware.



W I T N E S S E T H :




     WHEREAS, the Company requested that the Authority finance the cost of certain solid waste
recovery facilities located within Adair County, Oklahoma, in accordance with this Loan Agreement;
and



     WHEREAS, Title 60 Oklahoma Statutes 2001, Section 176 et seq., as amended (the “Act”),
authorizes the Authority to finance such costs; and



     WHEREAS, in order to finance such costs, the Authority issued its Adair County Industrial
Authority Solid Waste Recovery Facilities Revenue Bonds (Advanced Environmental Recycling
Technologies, Inc. Project) Series 2007 (the “Bonds”) pursuant to and secured by an Indenture of
Trust, dated as of December 1, 2007 (the “Indenture”), between the Authority and Bank of Oklahoma,
N.A., as trustee (the “Trustee”); and



     WHEREAS, the rights of the Authority in the Loan Agreement are hereby assigned by the
Authority to the Trustee pursuant to the Indenture; and



     WHEREAS, the Authority proposes to loan to the Company and the Company desires to borrow from
the Authority the proceeds of the Bonds upon the terms and conditions hereinafter in this Loan
Agreement set forth.



     NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter
contained, the parties hereto formally covenant, agree and bind themselves as follows:



ARTICLE I




DEFINITIONS




     All terms not defined herein shall have the meanings assigned to such terms in Article I of
the Indenture.



 









 





ARTICLE II




REPRESENTATIONS, WARRANTIES AND COVENANTS




     Section 2.01. Representations, Warranties and Covenants by the Authority. The Authority
represents, covenants and warrants for the benefit of the Company, the Trustee and the Bondholders
that:




     (a) the Authority is a public trust duly organized and existing under the laws of the
State of Oklahoma for the benefit of Adair County, Oklahoma, is authorized pursuant to the
Act to enter into the transactions contemplated by this Loan Agreement and the Indenture and
to carry out its obligations hereunder and thereunder, and has duly authorized the execution
and delivery of this Loan Agreement and the Indenture;




     (b) consistent with the understanding between the Authority and the Company, the
Authority will loan the Company the proceeds of the Bonds to provide for the financing of
the Project;




     (c) the Authority hereby finds that the financing of the Project is in the public
interest;




     (d) to finance the Project, the Authority will issue the Bonds in the aggregate
principal amount of $13,515,000. The Bonds shall mature, bear interest, be subject to
redemption prior to maturity, be secured and have such other terms and conditions as are set
forth in the Indenture;




     (e) neither the execution and delivery of this Loan Agreement or the Indenture, the
consummation of the transactions contemplated hereby or thereby nor the fulfillment of or
compliance with the terms and conditions of this Loan Agreement or the Indenture conflicts
with or results in a breach of any of the terms, conditions or provisions of any restriction
or any agreement or instrument to which the Authority 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 the Authority under the terms of any instrument or agreement;




     (f) the Authority hereby acknowledges the Company’s estimate of the total Cost of the
Project set forth in Exhibit A hereto;




     (g) the Bonds are to be issued under and secured by the Indenture pursuant to which
certain of the Authority’s interest in this Loan Agreement will be pledged and assigned to
the Trustee as security for payment of the principal of, premium, if any, and interest on
the Bonds; and




     (h) the issuance of the Bonds was approved by the governmental unit on behalf of which
the Bonds were issued, Adair County, Oklahoma, by the applicable elected representatives
thereof, the Board of County Commissioners of Adair County, Oklahoma, after a public
hearing following reasonable public notice.



2









 





     Section 2.02. Representations, Warranties and Covenants by the Company. The Company
represents, warrants and covenants for the benefit of the Authority, the Trustee and the
Bondholders, that:




     (a) the Company is a corporation duly organized and in good standing under the laws of
the State of Delaware, is authorized by the laws of each state where its facilities are
located to own, provide and operate the applicable facilities, has power to enter into and
to perform and observe the covenants and agreements on its part contained in this Loan
Agreement and the Tax Certificates and by proper action has duly authorized the execution
and delivery of this Loan Agreement, the Watts Mortgage, the Springdale Mortgage, the Lowell
Mortgage, the Junction Deed of Trust, the Weyerhaeuser Assignment Agreement, the Patent and
Trademark Security Agreement and the Tax Certificates;




     (b) neither the execution and delivery of this Loan Agreement and the Tax Certificates,
the consummation of the transactions contemplated hereby or thereby nor the fulfillment of
or compliance with the terms and conditions of this Loan Agreement and the Tax Certificates
violates any law or conflicts with or results in a breach of any of the terms, conditions or
provisions of any restriction or any agreement or instrument to which the Company 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 lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of the Company under the terms of any instrument or
agreement except for the Indenture and other Permitted Liens;




     (c) the total Cost of the Project is hereby determined to be not less than $13,515,000
and the financing of such cost by the Authority will assist the Company in providing
recycling and manufacturing facilities;




     (d) the Company intends to operate or to cause its facilities to be operated and to use
the Improvements in connection therewith to the expiration of the term of this Loan
Agreement pursuant to the Act;




     (e) as of the date of this Loan Agreement, there is no litigation or legal or
governmental action, proceeding, inquiry or investigation pending or threatened by
governmental authority or to which the Company is a party or of which any property of the
Company is subject, which would, if determined adversely to the Company, materially
adversely affect the transactions contemplated hereby;




     (f) the Company has or shall have good and marketable title to the Springdale Property,
the Lowell Property and the Junction Property and a valid leasehold interest in the Watts
Property, free from all encumbrances except Permitted Liens and such title shall remain in
the Company so long as the Bonds remain Outstanding, except as otherwise provided herein;




     (g) the Company has obtained, or will obtain on or before the date required therefor,
all licenses, authorizations, permits and approvals from applicable local, state



3









 






and federal governmental agencies necessary to construct the Improvements and to
operate the Improvements as plastic waste reclamation and recycling facilities contemplated
by this Loan Agreement. The Company knows of no reasons that such licenses, authorizations,
permits and approvals will not be issued or issued in a timely manner;




     (h) the Company is in possession of Phase One Environmental Assessments which were
performed on the Springdale Property, the Lowell Property, the Junction Property and the
Watts Property, and such assessments have not revealed any contamination of the Springdale
Property, the Lowell Property, the Junction Property or the Watts Property or any violation
of any rules or regulations of the Environmental Protection Agency or any other
environmental protection rule or regulation of any federal, state or local agency;




     (i) no improvements located or to be located in the building set-back shown on the
ALTA/ATSM Land Title Surveys prepared with respect to the Springdale Property, the Lowell
Property, the Junction Property or the Watts Property are used or shall be used in the
business operations of the Company.



     Section 2.03. Environmental Representations and Covenants. Except as may be described in (i)
the Phase I Environmental Site Assessment dated September 2003, prepared by ENVIRON International
Corporation with respect to the Springdale Property, or (ii) the Phase I Environmental Site
Assessment dated September 2003, prepared by ENVIRON International Corporation with respect to the
Junction Property, or (iii) the limited environmental review dated September 12, 2003, prepared by
ENVIRON International Corporation with respect to the Lowell Property, or (iv) the Phase I
Environmental Site Assessment Report, dated October 1, 2002, prepared by B&F Engineering, Inc.,
with respect to the Lowell Property or (iv)  the Phase I Environmental Site Assessment dated
October 25, 2007, prepared by Terracon Consultants, Inc. with respect to the Watts Property,
neither the Company nor, to the Company’s knowledge, any other Person has ever caused or permitted
any Hazardous Material to be placed, held, located or disposed of on, under or at the Springdale
Property, the Lowell Property, the Junction Property or the Watts Property or any part thereof
except in compliance with Environmental Laws. The Company hereby warrants and represents that, to
the best of its knowledge, it has complied and, in the future, will comply in all material respects
with all applicable Environmental Laws. None of the Springdale Property, the Lowell Property, the
Junction Property or the Watts Property has previously contained, and none of such properties now
contain, any underground storage tanks (other than in compliance with all applicable Environmental
Laws) and none has ever been used by the Company or by any other Person as a temporary or permanent
storage or disposal site for any Hazardous Material. The Company has delivered to the Trustee all
environmental reports, studies, audits and other data and information in the possession or control
of the Company relating to the Springdale Property, the Lowell Property, the Junction Property or
the Watts Property.



     If the Authority or the Trustee reasonably suspects that any violation of the Environmental
Laws is occurring involving the Springdale Property, the Lowell Property, the Junction Property or
the Watts Property, or if an Event of Default shall have occurred and be continuing which, with the
passage of time or the giving of notice, or both, would constitute an



4









 







Event of Default, the Authority and the Trustee shall have the right, but no obligation, to
conduct any tests or inspections of the Springdale Property, the Lowell Property, the Junction
Property and the Watts Property at the Company’s expense (including, without limitation, soil and
other tests, borings, sampling and monitoring) in order to determine compliance with Environmental
Laws or the presence thereon or therein of Hazardous Material and to have access to the Springdale
Property, the Lowell Property, the Junction Property and the Watts Property for such purposes.



ARTICLE III




SECURITY PROVISIONS: TERM OF THE LOAN AGREEMENT




     Section 3.01. Security Provisions. In order to secure the payment of the Bonds and Parity
Indebtedness, on a pro rata basis, and payment of all sums advanced under this Loan Agreement,
including advances which may be made in the future and to secure the performance by the Company of
all the covenants expressed or implied by this Loan Agreement (a) the Company does hereby grant,
bargain, sell, convey and mortgage unto the Authority (for the benefit of the Bondholders and
holders of Parity Indebtedness, pro rata) its interest in the real property described in the Watts
Mortgage (the “Site”) and the improvements located or to be constructed thereon (the
“Improvements,” and together with the Site, the “Watts Property”), the Springdale Mortgage, the
Lowell Mortgage and the Junction Deed of Trust and any fixtures or appurtenances now or hereafter
erected thereon; together with all rents and leases, profits, royalties, minerals, geothermal
resources, oil and gas rights and profits, easements and access rights, now owned or hereafter
acquired by the Company, used, belonging to, or in any way connected with the Watts Property, the
Springdale Property, the Lowell Property or the Junction Property, all of which are declared to be
a part of said Watts Property, Springdale Property, Lowell Property or Junction Property, as
applicable, and all the rights, privileges, benefits, hereditaments and appurtenances in any way
belonging, incidental or appertaining to said Watts Property, Springdale Property, Lowell Property
or Junction Property (other than equipment hereafter acquired), subject to Permitted Liens as
described in Section 8.10 hereof; and (b) the Company hereby pledges to and grants to the Authority
a present security interest, within the meaning of the Oklahoma Uniform Commercial Code and to the
extent permitted by law; in (i) the Pledged Revenues; (ii) all of its right, title and interest, if
any, in the Funds (other than the Rebate Fund); (iii) any trust accounts referred to in this Loan
Agreement or in the Indenture; (iv) all tangible personal property, furniture, machinery and
equipment of the Company, now owned by the Company and located on the Springdale Property, the
Lowell Property, the Junction Property or the Watts Property (the “Equipment”); and (v) inventory
of the Company located on the Springdale Property, the Lowell Property, the Junction Property or
the Watts Property, in each case subject to Permitted Liens and subject to liens and security
interests of record as of the date of execution hereof, excluding from such pledge and security
interest all patents, trademarks, copyrights, licenses and similar proprietary rights of the
Company now owned or hereafter acquired, to the extent the same constitute “collateral” within the
meaning of Section 3.03 hereof.



     This pledge shall be valid and binding from and after the date of the first delivery of any of
the Bonds. To the extent any assets pledged pursuant to this Loan Agreement consist of rights of
action or personal property, this Loan Agreement constitutes a security agreement and



5









 







financing statement and is intended when recorded to create a perfected security interest in
such assets in favor of the Authority. The Company shall file financing statements from time to
time relating to this Loan Agreement in such manner and at such places as may be required by law
fully to protect the security of the Bondholders and the right, title and interest of the Trustee
in and to the Trust Estate or any part thereof.



     Notwithstanding the foregoing, the Company shall be entitled to pledge any accounts
receivable, raw materials and inventory, on a basis senior to the pledge herein provided, to secure
the payment of Indebtedness in the form of a revolving credit or similar agreement in a maximum
principal amount up to $25,000,000.



     In addition, the Company shall be entitled to pledge purchase order receipts from Approved
Purchasers and to pledge inventory with respect thereto on a basis senior to the pledge herein
provided, to secure the payment of Indebtedness in a maximum principal amount equal to 95% of the
principal amount of such purchase orders. The terms of such Indebtedness shall require that the
principal balance of such indebtedness be reduced to $0 for a period of not less than three
consecutive business days annually.



     The Trustee, as assignee of the Authority pursuant to the Indenture, will execute such
subordination or similar agreements as reasonably requested by the Company with respect to any such
accounts receivable, purchase order receipts and inventory pledge. In the event the Company is
unable, following a reasonable good faith effort, as certified to the Trustee, to obtain a
commitment from a lending institution to provide either such credit arrangements, the Company may
submit revised proposed lending terms to the holders of the Bonds requesting a consent to such
terms, which consent shall not be unreasonably withheld.



     Section 3.02. Term. This Loan Agreement shall remain in full force and effect from the date
of delivery hereof until such time as all of the Bonds and Parity Indebtedness shall have been
fully paid or provision is made for such payment pursuant to the Indenture and all reasonable and
necessary fees and expenses of the Trustee accrued and to accrue through final payment of the Bonds
and Parity Indebtedness, all fees and expenses of the Authority accrued and to accrue through final
payment of the Bonds and Parity Indebtedness and all other liabilities of the Company accrued and
to accrue through final payment of the Bonds and Parity Indebtedness under this Loan Agreement and
the Indenture have been paid or provision is made for such payments pursuant to the Indenture.



     Section 3.03. Patent Security. Simultaneously with the execution hereof, the Company shall
execute and deliver a Patent and Trademark Security Agreement to the Trustee (for the benefit of
the holders of the Bonds and holders of Parity Indebtedness), the provisions of which shall control
all security and other interests of the Trustee in “collateral,” as therein defined, to the extent
the same shall be inconsistent with the terms hereof or of the Springdale Mortgage, Lowell
Mortgage, Junction Deed of Trust or Watts Mortgage.



     Section 3.04. Deposit of Pledged Revenues: Control Agreement. The Company covenants and
agrees that it shall deposit or cause to be deposited no later than the Business Day following
receipt of such Pledged Revenues all Pledged Revenues in the Deposit Account pursuant to the terms
of the Deposit Account Control Agreement. The Company covenants and



6









 







agrees to maintain or cause to be maintained the Deposit Account while the Bonds are
Outstanding. The Company covenants and agrees to execute any substitute or replacement control
agreements with respect to the Pledged Revenues. The Company hereby consents to the filing of UCC
financing statements and shall execute and cause to be sent to the Depository Bank a notice of the
security interest granted hereunder and shall execute and deliver such other documents (including,
but not limited to, continuation statements and control agreements) as may be necessary or
reasonably requested by the Trustee or the Authority in order to perfect and maintain as perfected
such security interest or give public notice thereof. Amounts on deposit in the Deposit Account
shall be applied pursuant to the Deposit Account Control Agreement and when transferred to the
Trustee shall be applied by the Trustee in accordance with the Indenture. Amounts in the Deposit
Account may be used and withdrawn by the Company and the Trustee as provided in the Deposit Account
Control Agreement, the Indenture and herein; provided, however, that in the event of a conflict
among such documents, the Indenture shall be deemed the controlling instrument. The Deposit
Account Control Agreement shall provide that immediately following receipt of a written notice that
an Event of Default under the Indenture has occurred, the Trustee shall direct the Depository Bank
to withhold disbursements of Pledged Revenues to the Company or its designees and to transfer the
Deposit Account and the collateral held therein to the name and credit of the Trustee upon demand
thereof; provided, the Trustee shall continue to be bound by the Indenture and the Deposit Account
Control Agreement. Following an Event of Default under the Indenture, all Pledged Revenues shall
be disbursed by the Depository Bank to the Trustee for application as may be directed by the
Trustee. The Trustee also shall be entitled to and shall take all steps, actions and proceedings
following an Event of Default under the Indenture reasonably necessary in its judgment to enforce
all of the rights of the Authority which have been assigned to the Trustee and all of the
obligations of the Company under this Loan Agreement. The Company shall execute and deliver all
instruments as may be required to implement this Section. The Company further agrees that a
failure to comply with the terms of this Section shall cause irreparable harm to the Registered
Owners from time to time of the Bonds, and shall entitle the Trustee, as assignee of the Authority,
with or without notice to the Company, to take immediate action to compel the specific performance
of the obligations of the Company as provided in this Section.



     Section 3.05. Assignment of Weyerhaeuser Agreement. Simultaneously with the execution
hereof, the Company shall execute and deliver to the Trustee the Weyerhaeuser Assignment Agreement.



ARTICLE IV




FINANCING THE COST OF THE FACILITIES:

ISSUANCE OF THE SERIES 2007 BONDS




     Section 4.01. Agreement to Complete the Facilities. The Company agrees that it will acquire,
construct, improve and equip the Facilities described in Exhibit A.



     Section 4.02. Agreement to Issue the Bonds; Application of Bond Proceeds. In order to
provide funds to make the Loan for payment of the Project, the Authority will sell and cause



7









 







to be delivered to the initial purchaser thereof the Bonds. Proceeds of the Bonds shall be
deposited in accordance with the Indenture, and invested as provided in Section 6.01 of the
Indenture.



     Section 4.03. Disbursements From the Project Fund. The Authority has, in the Indenture,
authorized and directed the Trustee to make payments from the Project Fund to pay (or to reimburse
the Company for the payment of) the Cost of the Project, including costs related to the design,
planning, acquisition, construction, improvement, equipment and operation of the Facilities. Each
such payment of the Cost of the Project related thereto shall be made only upon receipt by the
Trustee of a requisition signed by the Company Representative showing the payment to be necessary
and reasonable and stating (a) the requisition number; (b) the name and address of the person, firm
or corporation to whom payment is due or was made; (c) the amount to be paid or for which
reimbursement is sought; (d) that none of the items for which the payment or reimbursement is
proposed to be made has been the subject of any payment or reimbursement theretofore made from the
Project Fund; (e) the nature of each item for which the payment or reimbursement is proposed to be
made and in connection with the Facilities described in Exhibit A, if applicable, that such item is
or was reasonable and necessary in connection with the design, planning, acquisition, construction,
improvement and equipping of the Facilities described in Exhibit A, and in all cases is a proper
Cost of the Project and a proper charge against the Project Fund; and (f) that upon payment or
reimbursement of the amount requested in such requisition, the amount remaining in the Project
Fund, together with other legally available moneys of the Company will be sufficient to pay the
portion of the Cost of the Project relating to the design, planning, acquisition, construction,
improving and equipping of the Facilities then unpaid. No disbursement requested in any
requisition (other than with respect to equipment or working capital) shall be made by the Trustee
unless there is attached to the requisition (i) lien waivers covering all work done and/or
materials furnished in connection with the Improvements relating to any prior disbursement from the
Project Fund for payment to contractors or materialmen; and (ii) endorsements reflecting any title
insurance increases. The Trustee may, but shall be under no obligation, to review such lien
waivers.



     Section 4.04. Obligation of the Parties to Cooperate in Furnishing Documents to Trustee. The
Company and the Authority agree to cooperate with each other in furnishing to the Trustee the
requisitions referred to in Section 4.03 hereof. Such obligation of the Authority shall not extend
beyond the moneys in the Project Fund available for payment under the terms of the Indenture.



     Section 4.05. Investment of Moneys. Any moneys held as a part of the Funds shall be
invested, reinvested and transferred to other Funds by the Trustee as provided in Article VI of the
Indenture.



     Section 4.06. Arbitrage and Tax Matters. The Company hereby covenants and represents for the
benefit of each owner of the Bonds and the Authority that it will not make or permit any use of the
proceeds of the Bonds or the moneys in the Funds or take any other action which will cause the
Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code. The Company covenants
that it will comply with the applicable requirements of Section 148 of the Code so long as any
Bonds are Outstanding. The Company shall deliver to the Authority certificates in such reasonable
form as the Authority shall specify upon which the



8









 







Authority may rely in furnishing the certificates required by Section 6.02 of the Indenture.
The Company covenants and agrees to comply with the provisions of the Tax Certificates.



     Section 4.07. Establishment of Completion Date. The Company agrees to provide to the Trustee
the certificate with respect to completion of the Facilities on the Completion Date. The Company
covenants that the acquisition, construction, improvement and equipping of the Facilities described
in Exhibit A will be completed no later than December 31, 2008.



     Section 4.08. Completion of the Facilities if Project Fund Insufficient. The Company
acknowledges that the moneys in the Project Fund available for payment of the Cost of the Project
may not be sufficient to pay the cost thereof in full, and agrees to complete the Facilities and to
pay that portion of the cost of the Facilities in excess of the moneys available therefor in the
Project Fund from any moneys legally available for such purpose. The Authority does not make any
warranty, either express or implied, that the moneys which will be paid into the Project Fund will
be sufficient to pay all the cost of the Facilities. The Company shall not be entitled as a result
of paying a portion of the Cost of the Project pursuant to this Section to any reimbursement
therefor from the Authority, the Trustee or from the owners of any Bonds, nor shall it be entitled
to any diminution in or postponement of the payments required to be paid under this Loan Agreement.



     Section 4.09. Plans and Specifications. Any Improvements which have not yet been completed
shall be acquired, constructed, improved and equipped substantially in accordance with the plans
and specifications therefor and any amendments thereto. A copy of all such plans and
specifications for Improvements not yet constructed shall be filed by the Company with the Trustee
for safekeeping but the Trustee shall be under no affirmative obligation to review such plans and
specifications. The Company may revise the plans and specifications at any time prior to
completion of the acquisition, construction, improvement and equipping of the Facilities described
in Exhibit A, provided that (a) a Company Representative shall certify to the Trustee that the
Facilities described in Exhibit A in accordance with the revised plans and specifications will
constitute a project permitted pursuant to the Act; (b) such Facilities when completed in
accordance with the revised plans and specifications will not be materially inconsistent with the
description attached as Exhibit A hereto; (c) the Company shall comply with the requirements of
clauses (a) and (b) of the following paragraph, and clause (e) if applicable, evidence that the
Company has sufficient funds to construct such Facilities.



     In addition, the Company may make revisions to the plans and specifications which will cause
the Facilities to be materially inconsistent with the description attached hereto as Exhibit A so
long as the Company has obtained the prior written consent of a majority of the holders or
Beneficial Owners of the Bonds and has provided the following to the Trustee and the Authority:




     (a) a certificate of an Independent Architect stating the Facilities, after completion
in accordance with the revised plans and specifications, will constitute a project permitted
pursuant to the Act;




     (b) a construction budget and construction schedule for the completion of the
Improvements;



9









 






     (c) an Opinion of Bond Counsel acceptable to the Authority to the effect that such
revisions will not adversely affect the validity of the Bonds or the exclusion of interest
on the Bonds from gross income for federal income tax purposes;




     (d) a revised Exhibit A hereto; and




     (e) if applicable, evidence that the Company has sufficient funds to complete such
Facilities (from any source).



     Section 4.10. Surety Bonds; Company to Pursue Remedies Against Contractors and Subcontractors
and Their Sureties. The Company shall secure from each contractor directly employed by the Company
or from any subcontractor to such contractor in connection with the acquisition, construction,
improvement and equipping of the Improvements under a contract or contracts totaling over $50,000
payment and performance bonds executed by a responsible surety company authorized to do business in
the State of Oklahoma in a penal sum equal to the entire amount to become payable. Each bond shall
be conditioned on the completion of the work under the contract with such general contractor in
accordance with the plans and specifications and upon the payment of all claims of subcontractors
and suppliers. A dual obligee rider in favor of the Authority and the Trustee shall be obtained by
the Company for each such bond obtained prior to and after the date of the delivery of the Bonds.
Each such bond shall be delivered by the Company to the Trustee and the Authority, promptly upon
receipt thereof by the Company.



     In the event of a material default of any contractor or subcontractor under any contract in
connection with the acquisition, construction, improvement and equipping of the Improvements or in
the event of a material breach of warranty with respect to any material, workmanship or performance
guaranty, the Company will promptly proceed to exhaust the remedies of the Company, the Authority
and the Trustee against the contractor, subcontractor or supplier in default and against any surety
for the performance of such contract. The Company shall advise the Authority and the Trustee of
the steps it intends to take in connection with any such default. Any amounts recovered by way of
damages, refunds, adjustments or otherwise in connection with the foregoing shall be paid into the
Project Fund, net of legal fees and other reasonable collection costs, unless recovered after the
Completion Date and full disposition of the Project Fund in accordance with the Indenture, in which
case such amounts shall first be used to correct defects created by such default or breach of
warranty or to reimburse the Company for amounts paid by the Company to correct such defects and,
second, any excess shall be deposited in to the Bond Principal Fund.



ARTICLE V




OBLIGATIONS; PROVISIONS FOR PAYMENT




     Section 5.01. Loan Payments and Other Amounts Payable.




     (a) As repayment of the Loan, the Company shall deposit with the Trustee, on the date
of issuance of the Bonds, and thereafter not later than the fifteenth day of each month, the
Monthly Payment with respect to the following calendar month, in accordance with the
Indenture, which amounts shall be applied to the payment of the Bonds at the



10









 







times and in the manner provided in the Indenture. The Company shall be entitled to
credit with respect to such Monthly Payments for any transfers to the Bond Principal Fund
and Bond Interest Fund pursuant to Section 3.07(b) of the Indenture.




     (b) Upon any acceleration of amounts due under the Loan Agreement, the Company shall
immediately pay as repayment of the Loan, for deposit in the Bond Principal Fund, the Bond
Interest Fund and the Reserve Fund, an amount which, together with other moneys available
under the Loan Agreement, is sufficient to pay the entire principal of and interest on the
Bonds.




     (c) On or before any redemption date (other than a sinking fund redemption date) for
which a notice of redemption has been given pursuant to the Indenture, the Company shall pay
as repayment of the Loan, for deposit in the Bond Principal Fund, an amount which, together
with other moneys available therefor in the Bond Principal Fund (and, if all Bonds are
called for redemption, the Reserve Fund), is sufficient to pay the principal of and premium,
if any, on the Bonds called for optional or mandatory redemption and for deposit into the
Bond Interest Fund an amount of money which, together with other moneys available therefor
in the Bond Interest Fund, is sufficient to pay the unpaid interest accrued to the
redemption date on the Bonds called for optional or mandatory redemption. If on any
principal or interest payment date on the Bonds or the date any other amounts are payable on
the Bonds the amount held by the Trustee in the Bond Principal Fund and the Bond Interest
Fund is insufficient to make the required payments of principal of, premium, if any, and
interest on the Bonds, the Company shall forthwith pay such deficiency as repayment of the
Loan for deposit in the Bond Principal Fund or the Bond Interest Fund, as the case may be.




     (d) At the option of the Company Representative, so long as no Event of Default has
occurred or is occurring, to be exercised by delivery of a written certificate to the
Trustee and the Authority not less than 45 days next preceding the applicable sinking fund
redemption date, it may (i) deliver to the Trustee for cancellation Bonds in an aggregate
principal amount desired by the Company Representative or (ii) specify a principal amount of
such Bonds which prior to said date have been redeemed (otherwise than through the operation
of the applicable sinking fund) and canceled by the Trustee and not theretofore applied as a
credit against the respective sinking fund redemption obligation. Each such Bond so
delivered or previously redeemed shall be credited by the Trustee at 100% of the principal
amount thereof against the obligation of the Company on such respective sinking fund
redemption date for Bonds and any excess over such amounts shall be credited against future
sinking fund redemption obligations for such Bonds as directed by the Company
Representative. In the event the Company Representative shall avail itself of the
provisions of clause (i) of the first sentence of this paragraph, the certificate required
by the first sentence of this paragraph shall be accompanied by the Bonds to be canceled.




     (e) The Company shall deposit the following amounts to the Reserve Fund:




     (i) on the date of issuance of the Bonds, $1,351,500 from proceeds of the
Bonds;



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     (ii) in the event any moneys in the Reserve Fund are transferred to the Bond
Principal Fund or the Bond Interest Fund pursuant to the Indenture, or to the Rebate
Fund pursuant to the Indenture, or in the event the valuation of the amounts in the
Reserve Fund required by the Indenture reveals there is an amount less than the
Reserve Requirement on deposit in the Reserve Fund, the Company shall deposit, on
the first day of each month following such transfer or valuation, substantially
equal monthly payments into the Reserve Fund to cause the total amount in the
Reserve Fund to equal the Reserve Requirement not later than the next succeeding
Interest Payment Date.




     (f) The Company agrees to pay to the Trustee and the Authority, respectively, as an
Operating Expense, the reasonable and necessary fees and expenses of the Trustee and the
Authority, respectively, including the reasonable fees and other costs incurred for the
services of any paying agent or engineers, architects, attorneys, management consultants,
accountants and other consultants employed by the Trustee or the Authority to make
examinations and reports, provide services and render opinions required under the Loan
Agreement or the Indenture, plus the Company agrees to pay to the appropriate party the fees
and expenses of any Rebate Analyst, as and when the same become due, upon submission of a
statement therefor.




     (g) The Company agrees to pay to the Trustee as an Operating Expense all amounts to be
deposited to the Rebate Fund, as and when the same become due as determined pursuant to the
Indenture, to the extent there are no other amounts available to make such deposits, and to
cause the Trustee to apply such funds in compliance with the terms of the Indenture.




     (h) The Company agrees to pay as an Operating Expense all costs and expenses which may
be incurred in connection with any removal or substitution of the Trustee and the
appointment of any successor trustee.



     Section 5.02. Payees of Payments. The payments provided for in Sections 5.01(a), (b) and (c)
hereof shall be paid in funds immediately available in the Authority in which the designated office
of the Trustee is located directly to the Trustee for the account of the Authority and shall be
deposited as therein provided. The payments provided for in Section 5.01(e) hereof shall be paid
in funds immediately available in the Authority in which the designated office of the Trustee is
located directly to the Trustee for the benefit of the Bondholders and shall be deposited in the
Reserve Fund. The payments to be made under Sections 5.01(d), (g) and (h) hereof shall be paid
directly to the payee for its own use.



     Section 5.03. Obligations of Company Hereunder Unconditional. The obligations of the Company
to make the payments required in Section 5.01 hereof and to perform and observe the other
agreements on its part contained herein shall be absolute and unconditional. The Company (a) will
not suspend or discontinue, or permit the suspension or discontinuance of, any payments provided
for in Section 5.01 hereof; (b) will perform and observe all of its other agreements contained in
this Loan Agreement; and (c) except as provided in Article XI hereof, will not terminate this Loan
Agreement for any cause including, without limiting the generality of the foregoing, failure to
acquire, construct, improve and equip the Improvements, any acts or



12









 







circumstances that may constitute failure of consideration, eviction or constructive eviction,
destruction of or damage to its solid waste recovery facilities, commercial frustration of purpose,
or change in the tax or other laws or administrative rulings of or administrative actions by the
United States of America or the State of Oklahoma or any political subdivision of either, any
failure of the Authority to perform and observe any agreement, whether express or implied, or any
duty, liability, or obligation arising out of or connected with this Loan Agreement, whether
express or implied, or any failure of the Trustee to perform and observe any agreement, whether
express or implied, or any duty, liability or obligation arising out of or connected with the
Indenture, whether express or implied. Nothing contained in this Section shall be construed to
release the Authority from the performance of any agreements on its part herein contained, and if
the Authority shall fail to perform any such agreement, the Company may institute such action
against the Authority as the Company may deem necessary to compel performance, provided that no
such action shall violate the agreements on the part of the Company contained herein. The Company
may, however, at its own cost and expense and in its own name or in the name of the Authority,
prosecute or defend any action or proceeding or take any other action involving third persons which
the Company deems reasonably necessary in order to secure or protect its right of possession,
occupancy and use of its solid waste recovery facilities, and in such event the Authority hereby
agrees to cooperate fully with the Company (without expense to the Authority).



ARTICLE VI




MAINTENANCE AND INSURANCE




     Section 6.01. Maintenance and Modifications . The Company agrees that during the term of
this Loan Agreement its Property, Plant and Equipment shall be operated and maintained in
substantial compliance with all laws, building codes, ordinances and regulations and zoning laws as
shall be applicable to the Property, Plant and Equipment. The Company agrees that during the term
of this Loan Agreement it will at its own expense (a) keep the Property, Plant and Equipment in as
reasonably safe condition as its operations permit; and (b) keep the Property, Plant and Equipment
in good repair and in good operating condition, making from time to time all necessary repairs
thereto (including external and structural repairs) and renewals and replacements thereof. The
Company may also at its own expense, make from time to time any additions, modifications or
improvements to the Property, Plant and Equipment it may deem desirable for its purposes that do
not adversely affect the structural integrity of any building or substantially reduce its value or
impair the character of its use permitted pursuant to the Act, provided that all such additions,
modifications, renovations, repairs and improvements made by the Company shall become a part of the
Property, Plant and Equipment; provided, however, that nothing in this subsection shall prevent the
Company from ceasing to operate any immaterial portion of the Property, Plant and Equipment. The
Company hereby covenants and agrees that it shall not construct any improvements or install any
equipment on any portion of the Springdale Property, Lowell Property, Junction Property or Watts
Property located within a federally designated flood hazard zone unless and until such property
shall be insured against loss or damage by flood in accordance with Section 6.02(a) hereof.



13









 





     Section 6.02. Insurance.




     (a) Throughout the term of this Loan Agreement, the Company will keep the Springdale
Property, the Lowell Property, the Junction Property and the Watts Property (or cause the
Springdale Property, the Lowell Property, the Junction Property and the Watts Property to be
kept) continuously insured against such risks as are customarily insured against with
respect to property similar to the Springdale Property, the Lowell Property, the Junction
Property and the Watts Property by businesses of like size and type, paying as the same
becomes due all premiums in respect thereto, including but not necessarily limited to:




     (i) insurance to the full insurable value of the Property, Plant and Equipment
of the Company as determined by the Company sufficient to prevent the Company from
being a co-issuer (and in no event less than the principal amount of the Bonds
Outstanding from time to time), against loss or damage by fire, lightning and flood
(if the Springdale Property, the Lowell Property, the Junction Property or the Watts
Property is located within a federally designated flood hazard zone) and such other
risks and matters, including without limitation, rental loss, public liability and
boiler insurance, with uniform standard extended coverage endorsement limited only
as may be provided in the standard form of extended coverage endorsement at that
time customarily used in the state where such property is located, provided that the
insurance required by this subsection may contain a deductible provision and be in
amounts which in the opinion of an Insurance Consultant is normal and reasonable;




     (ii) general public liability insurance against claims for bodily injury, death
or property damage occurring on, in or about the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property and the adjoining streets,
sidewalks and passageways, such insurance to afford protection of the type and in an
amount which in the opinion of an Insurance Consultant is normal and reasonable with
respect to bodily injury and property damage;




     (iii) rental or business interruption insurance against abatement of rent
resulting from fire or other casualty in an amount not less than $1,000,000, with
the proceeds from such rental or business interruption insurance being payable to
the Company and the Trustee, as their respective interest may appear;




     (iv) Worker’s Compensation Insurance as required by law; and




     (v) key-man insurance with respect to Joe Brooks, the Co-Chairman of the Board
of Directors of the Company, in the amount of $4 million and Douglas Brooks, as the
Vice President, in the amount of $2.5 million.




     (b) Anything herein to the contrary notwithstanding, a Significant Bondholder may, by
notice thereof in writing to the Company and the Trustee, require additional insurance to be
carried by the Company with respect to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property beyond that expressly



14









 







identified herein, with respect to such risks and in such coverage amounts and other
terms as in each case are reasonable and customary with respect to property similar to the
Springdale Property, the Lowell Property, the Junction Property or the Watts Property, and
the Company will obtain such insurance and furnish to the Trustee and Significant Bondholder
evidence thereof satisfactory to the Trustee and Significant Bondholder. All policies of
insurance shall be issued by an insurer authorized to do business in the state where the
respective property is located having a rating of at least A:6 in Best’s Key Rating Guide.
Not later than 30 days prior to the expiration date of each of the insurance policies, the
Company will deliver to the Trustee satisfactory evidence of the renewal of each of the
policies. If at any time the Trustee is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, the Trustee will have the right
without notice to the Company to take such action as the Trustee deems necessary to protect
its interest in the Springdale Property, the Lowell Property, the Junction Property and the
Watts Property, including without limitation the obtaining of such insurance coverage as the
Trustee in its sole discretion deems appropriate, and all expenses incurred by the Trustee
in connection with such action or in obtaining such insurance and keeping it in effect will
be paid by the Company to the Trustee upon demand; provided, however, that if that the
Trustee takes any such action, the Trustee shall give the Company notice of such action
within five Business Days thereof.




     (c) All of the insurance policies required pursuant to this Section 6.02 will
(i) contain a standard noncontributory form of mortgage clause (in favor of the Trustee and
entitling the Trustee to collect any and all proceeds payable under such insurance), as well
as a standard waiver of subrogation endorsement, and in the case of such liability policy,
name the Trustee as an additional insured, all to be in form and substance satisfactory to
the Trustee; (ii) provide, to the extent obtainable, that such policies may not be canceled
or amended to diminish the coverage thereunder without at least 30 days prior written notice
to the Trustee; and (iii) provide that no act, omission or negligence of the Company, or its
agents, servants or employees, or of any tenant under any lease, which might otherwise
result in a forfeiture of such insurance or any part thereof, shall in any way affect the
validity or enforceability of such insurance insofar as the Trustee is concerned. The
Company will not carry separate insurance, concurrent in kind or form or contributing in the
event of loss, with any insurance required under this Section 6.02.



     The Company shall retain an Insurance Consultant to review the insurance requirements of the
Company at the date of issuance of the Bonds and from time to time thereafter (but not less
frequently than every two years) and to cause a certificate to be delivered to the Trustee and to
the Bondholders as to whether the insurance being maintained is in compliance with the requirements
of this Section. If the Insurance Consultant makes recommendations for the increase of any
coverage, the Company shall increase or cause to be increased such coverage in accordance with such
recommendations, to the extent that the Governing Body of the Company determines in good faith that
such recommendations are in the best interests of the Company. If the Insurance Consultant makes
recommendations for the decrease or elimination of any coverage, the Company may decrease or
eliminate such coverage in accordance with such recommendations, to the extent that the Governing
Body of the Company determines in good faith that such recommendations are in the best interest of
the Company.



15









 





     Notwithstanding anything in this Section to the contrary, the Company shall have the right,
without giving rise to an Event of Default solely on such account, (a) to maintain insurance
coverage below that most recently recommended by the Insurance Consultant, if the Company furnishes
to the Trustee a report of the Insurance Consultant to the effect that the insurance so provided
affords either the greatest amount of coverage available for the risk being insured against at
rates which in the judgment of the Insurance Consultant are reasonable in connection with
reasonable and appropriate risk management, or the greatest amount of coverage necessary by reason
of state or federal laws now or hereafter in existence; or (b) to adopt alternative risk management
programs which the Insurance Consultant determines to be reasonable, including, without limitation,
to self-insure in whole or in part individually or in connection with other institutions, to
participate in programs of captive insurance companies, to participate with other solid waste
disposal and manufacturing companies in mutual or other cooperative insurance or other risk
management programs, to participate in state or federal insurance programs, or to establish or
participate in other alternative risk management programs; all as may be approved by the Insurance
Consultant as reasonable and appropriate risk management by the Company. If the Company shall be
self-insured for any coverage, the report of the Insurance Consultant mentioned above shall state
whether the anticipated funding of any self-insurance fund is actuarially sound, and if not, the
required funding to produce such result and such coverage shall be reviewed by the Insurance
Consultant not less frequently than annually. Notwithstanding the other provisions of this
Section, the Company shall not self-insure (other than with respect to reasonable deductibles
certified as such in an Officer’s Certificate of the Company Representative) or otherwise
participate in programs described in clause (b) above with respect to any insurance against loss or
damage to the Property, Plant and Equipment by fire, lightning, vandalism, malicious mischief or
other casualty or with respect to boiler insurance and provided further that, the Company shall not
self-insure if such self-insurance has a material adverse effect on reimbursement from any third
party payor unless its Governing Body shall have determined in good faith, evidenced by a
resolution of the Governing Body, that such self-insurance is in the best interests of the Company
and the Company has given prior notice of such self-insurance to the Trustee and the Bondholders.



     The Company Representative shall deliver to the Trustee (a) upon execution and delivery of
this Loan Agreement, the originals or certified copies thereof of all insurance policies (or
certificates thereof) which the Company is required to maintain pursuant to this Section, together
with a Certificate of the Company Representative that payment of all premiums then due thereon has
been made; (b) at least 30 days prior to the expiration of any such policies evidence as to the
renewal thereof, if then required by this Section or the terms of such policies, and an Officer’s
certificate of the Company Representative that payment of all premiums then due with respect
thereto has been made; and (c) promptly upon request by the Trustee, but in any case within 90 days
after the end of each calendar year, a certificate of the Company Representative setting forth the
particulars as to all insurance policies maintained by the Company pursuant to this Section and
certifying that such insurance policies are in full force and effect, that such policies comply
with the provisions of this Section and that all premiums then due thereon have been paid.



16









 





ARTICLE VII




CASUALTY LOSS AND CONDEMNATION




     Section 7.01. Insurance and Condemnation Proceeds. In the event that damage or destruction
to the Springdale Property, the Lowell Property, the Junction Property or the Watts Property or any
portion thereof occurs such that claims for loss do not exceed $100,000 or in the event title to or
the temporary use of the Springdale Property, the Lowell Property, the Junction Property or the
Watts Property, or any portion thereof, will be taken under the exercise of the power of eminent
domain and the Net Proceeds from any condemnation award are less than $100,000, the Net Proceeds of
insurance resulting from such claims or from any such condemnation award will be paid to the
Company and will be used for such purposes as the Company, in its discretion, may deem appropriate.
In the event that any damage or destruction is such that claims for loss are between $100,000 and
$1,000,000, both inclusive, or the Net Proceeds from any condemnation award are between $100,000
and $1,000,000, both inclusive, the Net Proceeds of insurance resulting from such claims or from
any such condemnation award will be paid to the Company and used by the Company with the consent of
a Significant Bondholder either to redeem Bonds or to repair, rebuild, restore or replace the
property. In the event that any damage or destruction is such that claims for loss exceed
$1,000,000, or the Net Proceeds from any condemnation award exceed $1,000,000, the Net Proceeds of
insurance resulting from such claims or from any such condemnation award will be held by the
Trustee, and the Company will elect to have the Net Proceeds received applied to either the
redemption of the Bonds or to repair, rebuild, restore or replace the property. If the Company
elects the latter option, then the Net Proceeds will be paid by the Trustee from a separate
account, from time to time, upon evidence of the expenditures therefor, upon receipt of a
certificate of an Independent Architect. The Company may elect to redeem less than all of the
Bonds only if (a) the property damaged, destroyed or condemned is not essential to the Company’s
use or occupancy of the Springdale Property, the Lowell Property, the Junction Property or the
Watts Property; (b) the Springdale Property, the Lowell Property, the Junction Property or the
Watts Property has been restored to a condition substantially equivalent to their condition prior
to such damage, destruction or condemnation; or (c) suitable replacement property has been acquired
for the Company’s operations.



ARTICLE VIII




SPECIAL COVENANTS




     Section 8.01. No Warranty of Condition or Suitability by the Authority. The Authority makes
no warranty, either express or implied, as to the condition of the Facilities, or that they will be
suitable for the purposes or needs of the Company.



     Section 8.02. Further Assurances. The Authority and the Company agree that they will, from
time to time, execute, acknowledge and deliver, or cause to be executed, acknowledge and delivered,
such supplements hereto and such further instruments as may reasonably be required for carrying out
the intention of or facilitating the performance of this Loan Agreement.



17









 





     Section 8.03. Annual Audit. The Company will have the books and records of the Company
audited annually, and shall furnish within 120 days after the end of each Fiscal Year to the
Authority, the Notice Beneficial Owners, the Underwriter and the Trustee a copy of the audit report
certified by independent public accountants.



     Section 8.04. Financial Statements; Annual. The Company agrees that it will maintain proper
books of records and accounts of its Property, Plant and Equipment with full, true and correct
entries of all of its dealings in accordance with generally accepted accounting principles, and
that it will furnish to the Trustee, the Underwriter and Notice Beneficial Owners quarterly
financial statements within 45 days after the close of each such quarter, including a statement of
income in comparative form, to the extent practicable, with the financial figures from the
corresponding period in the preceding Fiscal Year and a balance sheet as of the end of each such
period and of the preceding Fiscal Year.



     Section 8.05. Release and Indemnification Covenants. The Company agrees to protect and
defend the Authority, former, present and future council members, officers, employees and other
agents of the Authority and each person, if any, who has the power, directly or indirectly, to
direct or cause the direction of the management or policies, now or hereafter, of the Authority and
to protect and defend the Trustee, its officers, employees and agents (collectively, the
“Indemnified Parties” and individually, the “Indemnified Party”) and further agrees to indemnify
and hold harmless the Indemnified Parties from and against any and all liabilities, losses,
damages, costs, expenses (including reasonable attorneys’ fees and court costs, including those for
post-judgment and appellate proceedings), judgments, claims, demands, suits, actions or other
proceedings of whatsoever kind or nature (including, without limitation, those in any manner
directly or indirectly arising or resulting from, out of or in connection with any injury to, or
death of any person or and damage to property but excluding those arising or resulting from any
intentional misrepresentation or any willful and wanton misconduct of the Indemnified Party or
Indemnified Parties) in any manner directly or indirectly (in any case, whether or not by the
Company, or its successors and assigns, or directly or indirectly through the agents, contractors,
employees, licensees or otherwise of the Company, or its successors and assigns) by any person or
entity whatsoever except the Authority or the Trustee, arising or purportedly arising from this
Loan Agreement, the Indenture, the Bonds, Parity Indebtedness, the initial and any subsequent
offers and sales of the Bonds, the Tax Certificates or the transactions contemplated hereby and
thereby, the Project and the ownership or the operation by the Company of the Property, Plant and
Equipment the breach or violation of its or any material inaccuracy or material omission in any
agreement, covenant, representation or warranty of the Company set forth herein or in any document
delivered pursuant hereto, the presence of any Hazardous Material or underground storage tanks on
or under the Property, Plant and Equipment or any escape, seepage, leakage, spillage, discharge,
emission or release of any Hazardous Material from the Property, Plant and Equipment, any liens
against the Property permitted under or imposed by any Environmental Laws, or any violation or
actual or asserted liability or obligations of the Company under any Environmental Laws, regardless
of whether or not caused by, or within the control of, the Company, any actual or asserted
liability or obligations of the aforesaid Persons under any Environmental Law relating to the
Property, Plant and Equipment, regardless of whether or not caused by, or within the control of,
the Company or any action or failure to act by an Indemnified Party or Indemnified Parties with
respect to any of the foregoing.



18









 





     The Company releases the Authority and all former, present and future council members,
servants, officers, employees and other agents of the Authority, and the Trustee from, agrees that
the Authority and the Trustee and all former, present and future directors, members, servants,
officers, employees and other agents of the Authority and the Trustee shall not be liable for, and
agrees to hold the Authority and all former, present and future directors, members, servants,
officers, employees and other agents of the Authority and the Trustee harmless against, any expense
or damages incurred because of any lawsuit commenced as a result of action taken by the Authority,
and the Trustee or their former, present and future directors, members, servants, officers,
employees or other agents (except for any intentional misrepresentation or willful and wanton
misconduct of the aforesaid) with respect to this Loan Agreement, the Indenture, the Bonds, Parity
Indebtedness, the Tax Certificates, the Project or the Property, Plant and Equipment and the
Authority and the Trustee shall promptly give written notice to the Company with respect thereto.
All covenants, stipulations, promises, agreements and obligations of the Authority contained herein
shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the
Authority and not of any former, present or future director, member, servant, officer, employee or
other agent of the Authority in his or her individual capacity, and no recourse shall be had for
the payment of the principal of, premium, if any, or interest on the Bonds or Parity Indebtedness
or for any claim based thereon or hereunder against any former, present or future director, member,
servant, officer, employee or other agent of the Authority or any natural person executing the
Bonds.



     The indemnification arising under this Section shall continue in full force and effect
notwithstanding the full payment of all obligations under this Loan Agreement or the termination of
this Loan Agreement for any reason.



     Section 8.06. Company Representative. Whenever, under the provisions of this Loan Agreement,
the Tax Certificates or the Indenture, the approval or direction of the Company is required, or the
Authority or the Trustee is required to take some action at the request of the Company, such
approval or such request shall be made by the Company Representative unless otherwise specified in
this Loan Agreement, the Tax Certificates or the Indenture. The Authority or the Trustee shall be
authorized to act on any such approval or request and the Company shall have no complaint against
the Authority or the Trustee as a result of any such action taken in accordance with such approval
or request. The execution of any document or certificate required under the provisions of this
Loan Agreement, the Tax Certificates or the Indenture by the Company Representative shall be on
behalf of the Company and shall not result in any personal liability of such Company
Representative.



     Section 8.07. Leases and Operating Contracts. The Company may lease (as lessor) any part of
the Property from which it derives revenues or contract for the performance by others of operations
or services on or in connection with the Property from which it derives revenues, or any part
thereof, for any lawful purpose, provided that (a) the Trustee shall receive written notice of such
lease or contract if such lease or contract has a value in excess of $250,000 or a duration longer
than six months; (b) each such lease or contract shall not be inconsistent with the provisions of
the Indenture or this Loan Agreement; (c) the Company shall remain fully obligated and responsible
under this Loan Agreement to the same extent as if such lease or contract had not been executed;
and (d) no such lease or operating contract shall adversely affect the validity of the Bonds or
Parity Indebtedness or the exclusion of interest on the Bonds from



19









 







gross income for federal and state income tax purposes. The Trustee shall request the Company
to deliver an opinion of Bond Counsel addressed to the Trustee relating to the matters set forth in
(d) if the Company enters into a lease or operating contract covered by this Section 8.07.



     Section 8.08. No Default Certificate. Within 150 days after the end of each Fiscal Year, the
Company shall furnish to the Trustee a certificate of the Company Representative stating that no
Event of Default under Section 10.01 hereof has occurred and is continuing and that he has no
knowledge of an event which, with the passage of time or the giving of notice, or both, would
constitute an Event of Default under Section 10.01 hereof, respectively, or describing any such
Event of Default or event known to the Company.



     Section 8.09. [Intentionally Omitted].



     Section 8.10. Limitations on Creation of Liens.




     (a) The Company agrees that it will not create or suffer to be created or permit the
existence of any Lien on any tangible or intangible assets of the Company mortgaged or
pledged pursuant hereto or pursuant to the Watts Mortgage, the Lowell Mortgage, the Junction
Deed of Trust or the Springdale Mortgage, other than Permitted Liens, as described in
Section 8.10(b) hereof.




     (b) Permitted Liens shall consist of the following:




     (i) Liens arising by reason of good faith deposits with the Company in
connection with leases of real estate, bids or contracts (other than contracts for
the payment of money), deposits by the Company to secure public or statutory
obligations, or to secure or in lieu of surety, stay or appeal bonds. and deposits
as security for the payment of taxes or assessments or other similar charges;




     (ii) any Lien arising by reason of deposits with, or the giving of any form of
security to, any governmental agency or any body created or approved by law or
governmental regulation for any purpose at any time as required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege or license, or to enable the Company to maintain
self-insurance or to participate in any funds established to cover any insurance
losses or in connection with workers’ compensation, unemployment insurance, pension
or profit sharing plans or other social security, or to share in the privileges or
benefits required for companies participating in such arrangements;




     (iii) any judgment lien against the Company so long as such judgment is being
contested in good faith and execution thereon is stayed and it will not materially
interfere with or materially impair the operations conducted on the Property, Plant
and Equipment;




     (iv) (A) rights reserved to or vested in any municipality or public authority
by the terms of any right, power, franchise, grant, license, permit or provision of
law, affecting its Property, Plant and Equipment; (B) any liens on the Property,
Plant and Equipment for taxes, assessments, levies, fees, water and



20









 







sewer rents, and other governmental and similar charges and any liens of
mechanics, materialmen, laborers, suppliers or vendors for work or services
performed or materials furnished in connection with the Property, Plant and
Equipment which are not due and payable or which are not delinquent or which, or the
amount or validity of which, are being contested and execution thereon is stayed or,
with respect to liens of mechanics, materialmen, laborers, suppliers or vendors,
have been due for less than 90 days; (C) easements, rights-of-way servitude,
restrictions, oil, gas or other mineral reservations and other minor defects,
encumbrances and irregularities in the title to the Property which in the opinion of
the Company Representative do not materially impair the use of the Property, Plant
and Equipment for its intended purpose or materially and adversely affect the value
thereof provided that the Company Representative shall have given the Trustee
written notice thereof at least 120 days before the imposition of such Lien;
(D) statutory landlord’s liens; and (E) all exceptions shown on the policies of
title insurance delivered pursuant to the Indenture;




     (v) any Lien securing Additional Indebtedness permitted hereby;




     (vi) any Lien permitted pursuant to Section 3.01 hereof;




     (vii) any Lien created by the Indenture or this Loan Agreement;




     (viii) any Lien described in Exhibit B hereto; and




     (ix) any Lien in favor of a creditor or a trustee on the proceeds of
Indebtedness and any earnings thereon prior to the application of such proceeds and
such earnings, and any Liens on trust funds established and held by a trustee or
creditor with respect to Indebtedness properly incurred.




     (c) Until such time as the lien filed by Advanced Control Solutions, Inc. (“ACS”) on
the Lowell Property, as evidenced by document number 2006-1433 of the records of Benton
County, Arkanas (the “ACS Lien”), has been released, the Company shall maintain in favor or
ACS a direct pay letter of credit issued by a reputable a bank, a trust company or other
financial institution in an amount of at least $800,000 to secure its obligations with
respect to the ACS Lien.



     Section 8.11. Limitations on Indebtedness. The Company may incur Additional Indebtedness, if
the Income Available for Debt Service for the two immediately preceding Fiscal Years based on
Audited Financial Statements is not less than 250% of the Long-Term Debt Service Requirements in
such period, taking into account the Loan and Indebtedness then Outstanding and the Additional
Indebtedness proposed to be incurred. Notwithstanding the foregoing, Commitment Indebtedness and
Nonrecourse Indebtedness may be incurred by the Company at any time, without limit. In addition,
the Company may incur Additional Indebtedness secured by accounts receivable and inventory, and
Additional Indebtedness with respect to Approved Purchaser purchase orders, as provided in
Section 3.01 of this Loan Agreement.



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     Section 8.12. Subordinated Debt. Subordinated Debt shall include only Indebtedness of the
Company incurred pursuant to loan agreements, credit agreements or similar arrangements
(“Subordinate Loan Documents”) which contain provisions substantially to the following effect:




     (a) Subordinated Debt shall, to the extent and in the manner hereinafter set forth, be
fully subordinated to the Superior Indebtedness as herein defined. For all purposes of this
Section the term “Superior Indebtedness” shall mean all obligations of the Company arising
under this Loan Agreement, the Springdale Mortgage, the Lowell Mortgage, the Junction Deed
of Trust or the Watts Mortgage (the “Loan Documents”), as each may be supplemented and
modified to the date hereof, or as the same may hereafter from time to time be further
supplemented and modified and any other obligations secured by or evidencing, directly or
indirectly, obligations evidenced by such Loan Documents, including post-petition interest.




     (b) No action or proceedings, judicial or otherwise (including without limitation the
commencement of or joinder in any bankruptcy or liquidation), shall be instituted or pursued
by the holder of any Subordinated Debt (together, the “Subordinate Creditors”), nor shall
such Subordinate Creditors take steps to enforce other judgments or encumbrances on assets
of the Company pledged to the payment of the obligations of the Company arising under any
Subordinate Loan Document (an “Enforcement Action”), other than an action to compel specific
performance, and other than an action with respect to collateral pledged to the payment of
such Subordinated Debt and not pledged to the payment of the Superior Indebtedness, unless
all Bondholders shall have consented thereto, or the Bondholders shall have been paid in
full or provision therefor shall have been made in accordance with the terms of the
Indenture.




     (c) No payment on account of principal, premium, if any, sinking funds or interest on
Subordinated Debt shall be made, nor shall any property or assets pledged to the payment of
the obligations of the Company arising under any Subordinate Loan Document, other than
collateral pledged to the payment thereof and not pledged to the payment of the Superior
Indebtedness, be applied to the payment or prepayment of Subordinated Debt, unless payment
of all amounts then due and payable for principal, premium, if any, sinking funds and
interest on Superior Indebtedness has been made or duly provided for in accordance with the
terms of the Loan Documents. No payment of principal of and interest on and other amounts
due under any Subordinate Loan Document may be made prior to full payment of Superior
Indebtedness, (other than payment derived with respect to collateral pledged to the payment
of Subordinated Debt and not pledged to the payment of the Superior Indebtedness) if, at the
time of such payment or application or immediately after giving effect thereto, (i)  there
shall exist any default in the payment of principal, premium, if any, sinking funds or
interest with respect to the Bonds or any Superior Indebtedness; or (ii) there shall have
occurred an Event of Default (other than a default in the payment of principal, premium, if
any, sinking funds or interest) with respect to the Bonds or any Superior Indebtedness
permitting the Trustee to accelerate the maturity thereof, and written notice of such
occurrence shall have been given to the Subordinate Creditors and such event of default
shall not have been cured or waived or shall not have ceased to exist.



22









 






     (d) Upon (i) any acceleration of maturity of the principal amount due on any
Subordinated Debt; or (ii) any payment or distribution of any kind or character, whether in
cash, property or securities, upon any dissolution or winding-up or total or partial
liquidation, reorganization or arrangement of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if
any, and interest due or to become due upon the Bonds and all Superior Indebtedness shall
first be paid in full, or payment thereof provided for in accordance with the terms of the
Indenture, before any payment is made on account of the principal, premium, if any, or
interest on the Subordinated Debt (other than payment derived with respect to collateral
pledged to the payment of Subordinated Debt and not pledged to the payment of the Superior
Indebtedness), and upon any such dissolution or winding-up or liquidation, reorganization or
arrangement, any payment or distribution of any kind or character, whether in cash, property
or securities, to which the holders of the Subordinated Debt would be entitled, except for
the provisions hereof, shall be paid by the Company, or by a receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or distribution,
to the Trustee to the extent necessary to pay all Superior Indebtedness in full, before any
payment or distribution is made to the holders of the Subordinate Debt.




     (e) In the event that, in violation of any of the foregoing provisions, any payment or
distribution of any kind or character, whether in cash, property or securities, shall be
received by any Subordinate Creditor before all Bonds and Superior Indebtedness is paid in
full or provision for such payment in accordance with the terms of the Indenture, such
payment or distribution shall be held in trust for the benefit of, and shall be paid over or
delivered to the Trustee for application to the payment of all Bonds remaining unpaid to the
extent necessary to pay all such Bonds in full in accordance with its terms.




     (f) Neither the Trustee nor any present or future holder of any Bonds shall be
prejudiced in any right to enforce subordination of the indebtedness evidenced by the
Subordinate Loan Documents by any act or failure to act on the part of the Company or anyone
in custody of its assets or property.




     (g) The foregoing subordination provisions shall be for the benefit of the holders of
Bonds and may be enforced by the Trustee against the holders of Subordinate Indebtedness or
any trustee therefor.



     The foregoing provisions are solely for the purpose of defining the relative rights of the
holders of Superior Indebtedness on the one hand and the holders of the Subordinated Debt on the
other hand, and nothing therein shall impair, as between the Company and the holders of the
Subordinate Indebtedness, the obligation of the Company, which is unconditional and absolute, to
pay to the holders thereof the principal thereof, premium, if any, and interest thereon in
accordance with its terms, nor shall anything herein prevent the holders of the Subordinated Debt
or any trustee on their behalf from exercising all remedies otherwise permitted by applicable law
or thereunder upon default thereunder, subject to the rights set forth above of the holders of
Superior Indebtedness to receive cash, property or securities otherwise payable or deliverable to
the holders of the Subordinate Indebtedness. Upon any payment or distribution of assets of the



23









 







Company of the character referred to in the fifth paragraph of the foregoing provisions, the
holders of Subordinate Indebtedness shall be entitled to rely upon any order or decree of a court
of competent jurisdiction in which such dissolution, winding-up, liquidation, reorganization or
arrangement proceedings are pending, and upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making any such payment or distribution, delivered to
the holders of Subordinate Indebtedness for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of Subordinate Indebtedness and other indebtedness of
Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to the foregoing provisions. No holders of Subordinate
Indebtedness shall be charged with knowledge of the existence of any facts which would prohibit the
making of any payment of moneys to or by such holders of Subordinate Indebtedness, unless and until
the holders of Subordinate Indebtedness, as the case may be, have actual notice or shall have
received notice thereof from the Company, the Trustee or one or more holders of Superior
Indebtedness. The Company hereby covenants and agrees in each case to provide such notice.



     Section 8.13. Parity Indebtedness. The Company covenants not to incur or assume any Parity
Indebtedness or Subordinated Indebtedness unless the Company has received consent of the holders of
100% of the principal amount of the Bonds Outstanding; provided, however, that the Indebtedness
incurred by the Company in connection with the City of Springdale, Arkansas Industrial Development
Refunding Revenue Bonds (Advanced Environmental Recycling Technologies Project) Series 2008 shall
be deemed Parity Indebtedness approved by the holders of the Bonds. Upon issuance of Parity
Indebtedness, such debt will be entitled to share on a parity in all property and rights securing
the Bonds, except the moneys in the Funds, which shall secure only the Bonds.



     Unless otherwise consented to by the holders of 100% of the principal amount of the Bonds
Outstanding, all instruments creating or securing Parity Indebtedness shall (a) provide that the
Trustee shall have the sole power to select remedies to be used to enforce rights against common
security for the Bonds and Parity Indebtedness, subject to the right of the owners of a majority in
aggregate principal amount of the sum of the Bonds and Parity Indebtedness then Outstanding to
direct remedies in the manner provided in the Indenture; (b) provide that the holders of Parity
Indebtedness or the trustee therefor shall undertake such actions as may be requested by the
Trustee that are reasonably necessary to effectuate the purposes of clause (a); and (c) contain
cross default provisions with the Loan Agreement, the Indenture and all other instruments creating
Parity Indebtedness.



     All collateral given or to be given to secure Parity Indebtedness (other than credit
enhancement devices such as letters of credit, insurance or surety bonds and other than reserve
funds) shall also secure the obligations of the Company under the Loan Agreement on a parity basis;
and the instruments under which any Parity Indebtedness is incurred shall contain provisions that
all Parity Indebtedness and the obligations of the Company under the Loan Agreement shall be
secured equally and ratably by all such security provided for any such Parity Indebtedness. The
Property, the Pledged Revenues and any other collateral at any time given to secure the obligations
of the Company under the Loan Agreement (other than the Funds) shall likewise secure Parity
Indebtedness, and such shall be set forth and so provided in any instrument securing Parity
Indebtedness. No release by or permission from the Authority and the



24









 







Trustee under the Loan Agreement shall be necessary (other than the Company’s payment of any
Trustee fees or any fees or expenses of the Trustee) to allow such collateral to be pledged
pursuant to any instrument relating to Parity Indebtedness, so long as the conditions of the Loan
Agreement are complied with.



     Section 8.14. Transfer of Assets. The Company agrees that it will not Transfer assets
without the consent of 100% of the owners of the Bonds, except for Transfers of assets:




     (a) to any Person if prior to the sale, lease or other disposition there is delivered
to the Trustee an Officer’s Certificate of the Company Representative stating that such
assets have or will within the next 24 months become inadequate, obsolete, worn out,
unsuitable, unprofitable, undesirable or unnecessary and the sale, lease, removal or other
disposition thereof will not impair the structural soundness, efficiency, or economic value
of the remaining assets of the Company;




     (b) to any Person provided there shall be delivered to the Trustee prior to such
Transfer a report of a Consultant to the effect that the assets being transferred are not an
integral part of the Property, Plant and Equipment; and either:




     (i) an Officer’s Certificate (accompanied by the Audited Financial Statements)
certifying the Long-Term Debt Service Coverage Ratio, adjusted to exclude the
revenues and expenses derived from the assets proposed to be disposed of, for the
most recent Fiscal Year for which the Audited Financial Statements are available and
such Long-Term Debt Service Coverage Ratio is not less than 2.00 and not less than
65% of what it would have been were such Transfer not to take place; or




     (ii) the report of a Consultant to the effect that the forecasted Long-Term
Debt Service Coverage Ratio, taking such Transfer into account, for each of the two
Fiscal Years succeeding the date on which such Transfer is expected to occur, and
the Long-Term Debt Service Coverage Ratio for each such period is not less than 2.00
and not less than 65% of what it would have been were such Transfer not to take
place, accompanied by a statement of the relevant assumptions upon which such
forecasts are based;




     (c) with respect to any Transfer of non-inventory assets, to any Person in the ordinary
course of business and on terms not less favorable to the Company than arm’s length, but not
to exceed $1,000,000 in aggregate proceeds in any Fiscal Year unless otherwise consented to
by a majority of the Bondholders;




     (d) with respect to any Transfer of inventory, to any Person in the ordinary course of
business;




     (e) to any Person if the aggregate Net Book Value of the assets transferred pursuant to
this clause in any five consecutive Fiscal Years, does not exceed 5% of the Net Book Value
of all assets of the Company as shown in the Audited Financial Statements for the most
recent Fiscal Year; or



25









 






     (f) to any Person, if the Company shall determine to sell all or substantially all of
its assets, and (i) the Company exercises its option to prepay the Loan; or (ii) the holders
of 100% of the Bonds shall consent to such transfer, all as provided in Section 8.15 hereof.



     Section 8.15. Consolidation, Merger, Sale or Conveyance. The Company covenants that it will
not merge or consolidate with, or sell or convey all or substantially all of its assets to, any
Person, unless (a) such merger, consolidation or sale shall be consented to by the holders of 100%
of the Bonds; or (b) the Company shall elect to prepay the Loan and redeem the Bonds in accordance
with Section 5.01(b) of the Indenture. In case of any such consolidation, merger, sale or
conveyance and upon any such assumption by the successor corporation, such successor corporation
shall succeed to its predecessor, with the same effect as if it had been named herein as such
predecessor.



     Section 8.16. Financial Covenants.




     (a) The Company shall calculate quarterly the Debt Service Coverage Ratio for the prior
four fiscal quarters, and shall provide a copy of such calculation for such period to the
Trustee and Notice Beneficial Owners at the time of delivery of the quarterly financial
statements delivered in accordance with Section 8.04 hereof. If the Debt Service Coverage
Ratio computation delivered at the time of delivery of any such statement indicates that the
Long-Term Debt Service Coverage Ratio of the Company for such previous period shall be less
than 1.50 to 1.00 (and, beginning with the report with respect to the fiscal quarter ending
March 31, 2009, shall be less than 2.00 to 1.00), the Company covenants to retain a
Consultant at the expense of the Company, within 30 days, to make recommendations to
increase such Long-Term Debt Service Coverage Ratio in the then-current Fiscal Year to such
level or, if in the opinion of the Consultant the attainment of such level is impracticable,
to the highest level attainable in such Fiscal Year. Any Consultant so retained shall be
required to submit such recommendations to the Trustee and the Notice Beneficial Owners
within 90 days after being so retained. The Company agrees that it will, to the extent
permitted by law, follow the recommendations of the Consultant. The Company shall not be
obligated to retain such a Consultant more often than once during any 24-month period.




     (b) The Company covenants and agrees that it shall maintain a Current Ratio, calculated
as of the last day of each calendar quarter, of not less than 1.00 to 1.00. The Company
shall provide a copy of such calculation to the Trustee and Notice Beneficial Owners at the
time of delivery of the quarterly financial statements delivered in accordance with
Section 8.04 hereof.




     (c) The Company covenants and agrees that it shall maintain a Debt to Equity Ratio,
calculated as of the last day of each Fiscal Year, of not more than 3.00 to 1.00. The
Company shall provide a copy of such calculation to the Trustee and Notice Beneficial Owners
at the time of delivery of the annual audit delivered in accordance with Section 8.03
hereof.



26









 






     (d) The Company covenants and agrees that not more than 20% of its accounts payable
(for the deferred purchase price of property or services) from time to time incurred in the
ordinary course of operations and activities shall be in excess of 75 days past the invoice
or billing date, or, if greater than 75 days, are being contested in good faith by the
Company.




     (e) The Company covenants and agrees that not more than 20% of its accounts receivable
(for the deferred purchase price of property or services) from time to time shall be in
excess of 90 days past the invoice or billing date, excluding from such calculation
(i) amounts being contested in good faith by the obligated party, and (ii) amounts which the
Company has determined, in good faith, are not likely to be collected and are to be treated
as losses in accordance with generally accepted accounting principles.



     Section 8.17. Reporting Extensions. Notwithstanding the foregoing, in the event the Company
receives an extension of time with respect to any annual or quarterly reports filed with the
Securities and Exchange Commission pursuant to Section 13 and Section 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall be entitled to the same extension for annual
and quarterly reports required to be filed under this Loan Agreement.



ARTICLE IX




ASSIGNMENT AND PLEDGING OF LOAN AGREEMENT; REDEMPTION OF

BONDS




     Section 9.01. Assignment by Company. This Loan Agreement may be assigned by the Company with
the prior written consent of the Bondholders subject to each of the following conditions:




     (a) no assignment shall relieve the Company from primary liability for any of its
obligations hereunder, and in the event of any such assignment, the Company shall continue
to remain primarily liable for payment of the Loan Payments, payments on Parity Indebtedness
and other payments required to be made under Section 5.01 hereof and for performance and
observance of the other covenants and agreements on its part herein provided;




     (b) no assignment shall impair the exclusion of interest on the Bonds from gross income
for federal income tax purposes;




     (c) the assignee shall assume in writing the obligations of the Company hereunder to
the extent of the interest assigned; and




     (d) the Company shall, within 30 days after the delivery thereof, furnish or cause to
be furnished to the Authority and the Trustee a true and complete copy of each such
assumption of obligations and assignment.



     Section 9.02. Assignment and Pledge by the Authority. The Authority shall assign certain of
its interests in and pledge certain of the moneys receivable under this Loan Agreement



27









 







to the Trustee pursuant to the Indenture as security for payment of the principal of, premium,
if any, and interest on the Bonds and Parity Indebtedness. The Company hereby consents to such
assignment and pledge.



     Section 9.03. Redemption of Bonds. Upon the agreement of the Company to deposit moneys in
the Bond Principal Fund and the Bond Interest Fund in an amount sufficient to redeem Bonds subject
to redemption, the Authority, at the request of the Company Representative, shall forthwith take
all reasonable steps consistent with the Indenture and this Loan Agreement necessary under the
applicable redemption provisions of the Indenture to effect redemption of all or part of the then
Outstanding Bonds on the redemption date.



ARTICLE X




EVENTS OF DEFAULT AND REMEDIES




     Section 10.01. Events of Default Defined. The following shall be “events of default” under
this Loan Agreement and the term “event of default” shall mean any one or more of the following
events:




     (a) failure to pay the Loan Payments required to be paid under Section 5.01(a) hereof
for a period of 15 days after the time such Loan Payments were required to be paid
thereunder;




     (b) failure by the Company to observe and perform any covenant, condition or agreement
on its part to be observed or performed, other than as referred to in Section 10.01(a)
hereof, for a period of 30 days after written notice, specifying such failure and requesting
that it be remedied, shall have been given to the Company by the Authority or the Trustee,
provided, with respect to any such failure covered by this clause (b) no event of default
shall be deemed to have occurred so long as a course of action adequate to remedy such
failure shall have been commenced within such 30-day period and shall thereafter be
diligently prosecuted to completion and the failure shall be remedied thereby; provided,
however, that failure to correct such default within 90 days after receipt of such notice
shall constitute an Event of Default;




     (c) any representation or warranty made by the Company hereunder or otherwise in
connection with the sale and delivery of the Bonds shall prove to have been incorrect in any
material respect on or as of the date of issuance of the Bonds or the date of making such
representation or warranty and cannot be cured within 30 days after written notice by the
Authority or the Trustee, specifying such incorrect representation or warranty and
requesting that it be cured, provided no event of default shall be deemed to have occurred
under this subsection (c) so long as a course of action adequate to cure shall have been
commenced within such 30-day period and shall thereafter be diligently prosecuted to
completion and remedied thereby; provided, however, that failure to correct such default
within 90 days after receipt of such notice shall constitute an Event of Default;



28









 






     (d) an event of default shall have occurred under the Indenture or the Tax Certificates
or with respect to any Parity Indebtedness;




     (e) if the Company shall file a petition in bankruptcy or for reorganization or for an
arrangement pursuant to any present or future federal bankruptcy act or under any similar
federal or state law, or shall be adjudicated a bankrupt or insolvent, or shall make an
assignment for the benefit of its creditors or shall admit in writing its inability to pay
its debts generally as they become due, or if a petition or answer proposing the
adjudication of the Company as a bankrupt or its reorganization under any present or future
federal bankruptcy act or any similar federal or state law shall be filed in any court and
such petition or answer shall not be discharged or denied within 90 days after the filing
thereof, or if a receiver, trustee or liquidator of the Company or of all or substantially
all of the assets of the Company, or the Property, Plant and Equipment shall be appointed in
any proceeding brought against the Company and shall not be discharged within 90 day’s after
such appointment or if the Company shall consent to or acquiesce in such appointment if the
estate or interest of the Company in the Property, Plant and Equipment or any part thereof
shall be levied upon or attached in any proceeding and such process shall not be vacated,
discharged or released within 60 days after such levy or attachment, or if the Property,
Plant and Equipment shall have been abandoned by the Company for a period of 30 consecutive
days, or if the Company shall be dissolved or liquidated (other than as a result of a merger
or consolidation of the Company into or with another entity under the conditions permitting
such actions contained in this Loan Agreement); and




     (f) a final judgment is entered against the Company which, together with all
unsatisfied final judgments against the Company, exceeds the sum of $1,000,000 and which is
not covered by insurance or adequate Company reserves and such judgment shall remain
unsatisfied or unstayed for a period of 90 days after the entry thereof.



     The foregoing provisions of Section 10.01(b) hereof are subject to the following limitations:
If by reason of force majeure the Company is unable in whole or in part to carry out its agreements
herein contained, other than the obligations on the part of the Company contained in Article V and
in Sections 4.07 and 8.05 hereof, the Company shall not be deemed in default during the continuance
of such inability so long as (a) the Company provides the Bondholders written notice that an Event
of Default has occurred by reason of force majeure within 10 Business Days of the receipt of the
notice of an Event of Default from the Trustee, and (b) a majority of Bondholders consents to
implementation of Company’s plan to cure such Event of Default. The Company agrees to promptly
submit its plans for curing the Event of Default to the Bondholders; provided that the settlement
of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of
the Company, and the Company shall not be required to make settlement of strikes, lockouts or other
industrial disturbances by acceding to the demands of the opposing party or parties when such
course is in the reasonable judgment of the Company unfavorable to the Company. The term “force
majeure” as used herein shall mean the following: acts of God; strikes, lockouts or other
industrial disturbances; acts of public enemies, insurrections; riots; epidemics; landslides;
lightning; earthquake; fire; hurricane; tornadoes; storms; floods; washouts; droughts; arrests;
restraint of government and people; civil disturbances; war, explosions; or partial or entire
failure of utilities.



29









 





     Section 10.02. Remedies on Default. Whenever any event of default referred to in
Section 10.01 hereof shall have occurred and is continuing, the Authority, or the Trustee, where so
provided herein, may take any one or more of the following remedial steps:




     (a) the Trustee (acting as assignee of the Authority), as and to the extent provided in
the Indenture, or the Authority (in the event of a failure of the Trustee to act under this
subsection), may, and, at the direction of holders of 25% of the aggregate principal amount
of the Bonds Outstanding and Parity Indebtedness, the Trustee shall, declare the Loan
Payments payable hereunder for the remainder of the term of this Loan Agreement to be
immediately due and payable, whereupon the same shall become due and payable;




     (b) the Trustee may, subject to indemnification as provided in the Indenture, and, at
the direction of holders of 25% of the aggregate principal amount of the Bonds Outstanding
and Parity Indebtedness, shall, take any action permitted under the Indenture with respect
to an Event of Default thereunder;




     (c) the Trustee (acting as assignee of the Authority) may foreclose on all or any
portion of the Property or any interest of the Company therein as and to the extent
permitted of a mortgagee by applicable laws and exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code of the applicable jurisdiction with respect
thereto and to the tangible personal property, furniture, machinery and equipment of the
Company described in Section 3.01;




     (d) the Trustee may foreclose on all or any portion of the Springdale Property, the
Lowell Property, the Junction Property and the Watts Property and any interest of the
Company therein as and to the extent permitted of a mortgagee by the laws of the State of
Arkansas, the State of Texas and the State of Oklahoma, as applicable, and exercise all of
the rights and remedies of a secured party under the Uniform Commercial Code of the State of
Arkansas, the State of Texas and the State of Oklahoma, as applicable, with respect thereto;




     (e) the Trustee may take exercise any rights permitted pursuant to the Patent and
Trademark Security Agreement and the Weyerhaeuser Assignment Agreement;




     (f) the Trustee (acting as assignee of the Authority) may realize upon the security
interest in the Pledged Revenues and exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code of the applicable jurisdiction with respect thereto;
or




     (g) the Trustee (acting as assignee of the Authority), as and to the extent provided in
the Indenture, or the Authority (in the event of a failure of the Trustee to act under this
subsection) may take whatever action at law or in equity as may appear necessary or
desirable to collect the amounts then due and thereafter to become due, or to enforce
performance or observance of any obligations, agreements or covenants of the Company under
this Loan Agreement.



30









 






     At any time after such a declaration of acceleration has been made, but before the
entry of a judgment or decree to enforce remedies under the Indenture or this Loan
Agreement, such declaration and its consequences shall be rescinded and annulled (unless the
Trustee is otherwise directed by the holders of a majority of the principal amount of the
Bonds Outstanding (excluding Bonds of any series which are subordinate to any other Series
of Bonds)) if:




     (i) there has been paid to or deposited with the Trustee, or provision
satisfactory to the Trustee has been made for the payment of a sum sufficient to
pay:




     (A) all sums reasonably paid or advanced by the Trustee (including
reasonable counsel fees and disbursements) under the Indenture or this Loan
Agreement and the reasonable compensation, expenses, disbursements and
advances of the Trustee (including reasonable counsel fees and
disbursements);




     (B) all overdue installments of interest on the Bonds payable by the
Company with interest on such overdue interest at the rate of 1% per annum
above the interest borne by the Bonds during the 365 days prior to the date
of such payment;




     (C) the principal of any Bonds which have become due otherwise than by
such declaration of acceleration and accrued but unpaid interest thereon to
the date of payment of such Bonds payable by the Company at the rate or
rates borne by such Bonds;




     (D) the amounts required to be on deposit in the Reserve Fund in
accordance with the Indenture; and




     (E) all sums, including the reasonable fees and expenses of counsel,
reasonably paid or advanced by any Bondholder because of the Company’s
default.




     (ii) All Events of Default of the Company, other than the nonpayment of the
principal of the Bonds, which have become due solely by such declaration of
acceleration, have been cured or waived as provided in the Indenture and this Loan
Agreement.



     In the event that the Company fails to make any payment required hereby, the payment so in
default shall continue as an obligation of the Company until the amount in default shall have been
fully paid. Any proceeds received by the Authority or the Trustee from the exercise of any of the
above remedies, after reimbursement of any costs incurred by the Authority or the Trustee in
connection therewith, shall be applied by the Trustee in accordance with the provisions of the
Indenture.



     Section 10.03. No Remedy Exclusive. No remedy herein conferred upon or reserved to the
Authority or the Trustee is intended to be exclusive of any other available remedy or



31









 







remedies, but each and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but any such right or
power may be exercised from time to time and as often as may be deemed expedient. In order to
entitle the Authority to exercise any remedy reserved to it in this Article, it shall not be
necessary to give any notice, other than notice required herein or by applicable law. Such rights
and remedies given the Authority hereunder shall also extend to the Trustee and the owners of the
Bonds, subject to the Indenture.



     Section 10.04. Agreement to Pay Attorneys’ Fees and Expenses. In the event the Company
should default under any of the provisions of this Loan Agreement, the Indenture or the Tax
Certificates, and the Authority, any Significant Bondholder or the Trustee should employ attorneys
or incur other expenses for the collection of Loan Payments or the enforcement of performance or
observance of any obligation or agreement on the part of the Company herein or in the Tax
Certificates or the Indenture, the Company agrees that it will within 30 days of a request therefor
pay to the Authority, any Significant Bondholder or the Trustee, as the case may be, the reasonable
fees of such attorneys and such other reasonable expenses incurred by the Authority, any
Significant Bondholder or the Trustee. This Section shall continue in full force and effect,
notwithstanding the full payment of all obligations under this Loan Agreement or the termination of
this Loan Agreement for any reason.



     Section 10.05. Waiver. In the event any agreement contained in this Loan Agreement should be
breached by any party and thereafter waived by any other party, such waiver shall be limited to the
particular breach waived and shall not be deemed to waive any other breach hereunder. In view of
the assignment of the Authority’s rights in and under this Loan Agreement to the Trustee under the
Indenture, the Authority shall have no power to waive any Event of Default hereunder without the
written consent of the Trustee. Notwithstanding the foregoing, a waiver of an Event of Default
under the Indenture or a rescission of a declaration of acceleration of the Bonds and a rescission
and annulment of its consequences shall constitute a waiver of the corresponding event of default
under this Loan Agreement and a rescission and annulment of its consequences; provided that no such
waiver or rescission shall extend to or affect any subsequent or other default hereunder or impair
any right consequent thereon.



     Section 10.06. Appointment of Receiver. Upon the occurrence of any Event of Default, unless
the same shall have been waived as herein provided, the Trustee, acting as assignee of the
Authority, shall be entitled as a matter of right if it shall so elect, without notice or demand
(such notice being expressly waived hereby), ex parte, (a) forthwith and without declaring the
Bonds or Parity Indebtedness to be due and payable; (b) after declaring the same to be due and
payable; or (c) upon the commencement of an action to enforce the specific performance hereof or in
aid thereof or upon the commencement of any other judicial proceeding to enforce any right of the
Trustee, the Bondholders or the holders of Parity Indebtedness, to the appointment of a receiver or
receivers of any or all of the Springdale Property, the Lowell Property, the Junction Property and
the Watts Property with such powers as the court making such appointment shall confer. The Company
hereby consents and agrees, and will if requested by the Trustee consent and agree at the time of
application by the Trustee for appointment of a receiver of the Springdale Property, the Lowell
Property, the Junction Property and the Watts



32









 







Property, to the appointment of such receiver of the Springdale Property, the Lowell Property,
the Junction Property and the Watts Property and that such receiver may be given, the right, power
and authority, to the extent the same may lawfully be given to take possession of and operate and
deal with the Springdale Property, the Lowell Property, the Junction Property and the Watts
Property and the revenues, profits and proceeds therefrom, with like effect as the Company could do
so, and to borrow money and issue evidences of indebtedness as such receiver.



     Section 10.07. Remedies Subject to Provisions of Law. All rights, remedies and powers
provided by this Article may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and all the provisions of this Article are intended to be
subject to all applicable mandatory provisions of law which may be controlling and to be limited to
the extent necessary so that they will not render this instrument or the provisions hereof invalid
or unenforceable under the provisions of any applicable law.



     Section 10.08. Waiver of Appraisement, Valuation, Stay, and Execution Laws. The Company
agrees, to the extent permitted by law, that in the case of the occurrence of an Event of Default,
neither the Company nor anyone claiming through or under it shall or will set up, claim or seek to
take advantage of any appraisement, valuation, stay or extension laws now or hereafter in force in
order to prevent or hinder the enforcement or foreclosure of the lien of this Loan Agreement, or
the absolute sale of the Springdale Property, the Lowell Property, the Junction Property and the
Watts Property, or any interest of the Company therein, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereof, and the Company for
itself and all who may at any time claim through or under it, hereby waives, to the full extent
that it may lawfully do so, the benefit of all such laws, and any and all right to have the estates
comprising the security intended to be hereby created marshaled upon any foreclosure of the Lien
hereof and agrees that the Trustee or any court having jurisdiction to foreclose such Lien may sell
the Springdale Property, the Lowell Property, the Junction Property and the Watts Property, or any
interest of the Company therein as an entirety.



     Section 10.09. Purchase of Property by Bondholder or Holder of Parity Indebtedness. Upon the
occurrence of an Event of Default, the Lien and/or security interest on the Springdale Property,
the Lowell Property, the Junction Property and the Watts Property created and vested by this Loan
Agreement may be foreclosed. If sold at public sale, any Bondholder, and holder of Parity
Indebtedness or the Trustee may bid for and purchase the Springdale Property, the Lowell Property,
the Junction Property or the Watts Property or any interest of the Company therein and upon
compliance with the terms of sale, may hold, retain and possess and dispose of such Springdale
Property, Lowell Property, Junction Property or Watts Property or interest therein in his own
absolute right without further accountability; and any purchaser at any such sale may, if permitted
by law, after allowing for the proportion of the total purchase price required to be paid in cash
for the costs and expenses of the sale, compensation and other charges, in paying purchase money,
surrender Bonds or Parity Indebtedness then Outstanding, as the case may be, in lieu of cash. Said
Bonds or Parity Indebtedness, in case the amount so payable thereon shall be less than the amount
due thereon, shall be returned to the holders thereof after being properly stamped to show partial
payment. If the Trustee shall acquire title to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property or any interest of the Company therein as a result of any
such



33









 







foreclosure sale or any proceedings or transaction in lieu of foreclosure, the Trustee may
thereafter take any lawful action with respect to the Springdale Property, the Lowell Property, the
Junction Property and the Watts Property or interest therein which it shall deem to be in the best
interest of the holders of the Bonds or Parity Indebtedness, including but not limited to: (a) the
enforcement of all rights and remedies set forth in the Indenture and the taking of all other
courses of action permitted herein; and (b) the sale of the Springdale Property, the Lowell
Property, the Junction Property and the Watts Property or any interest therein, or any portion
thereof.



ARTICLE XI




PREPAYMENT OF THE LOAN




     Section 11.01. General Option to Prepay the Loan. Subject to Section 11.03 hereof, the
Company shall have and is hereby granted the option exercisable at any time to prepay all or any
portion of the Loan by depositing with the Trustee an amount of money or Government Obligations
described in Section 1(a) of the definition of such term as set forth in Article I of the Indenture
to the extent permitted by Section 7.01 of the Indenture, the principal and interest on which, when
due, will be equal (giving effect to the credit, if any, provided by Section 11.02 hereof) to an
amount sufficient to pay the principal of (in integral multiples of $100,000 and in multiples of
$5,000 in excess thereof), premium, if any, and interest on any portion of the Bonds then
Outstanding under the Indenture. The exercise of the option granted by this Section shall not be
cause for redemption of Bonds unless such redemption is permitted or required at that time under
the provisions of Article V of the Indenture, and the Company Representative specifies the date for
such redemption. In the event the Company prepays all of the Loan pursuant to this Section (and
the Bonds are defeased in accordance with the Indenture) and pays all reasonable and necessary fees
and expenses of the Trustee accrued and to accrue through final payment or redemption of the Bonds
as a result of such prepayment and all of its liabilities accrued and to accrue hereunder to the
Authority through final payment or redemption of the Bonds as a result of such prepayment, this
Loan Agreement shall terminate except for Sections 5.01 (f), 4.06 and 8.05 hereof. The Authority
and the Trustee may certify to the Company prior to payment all expenses, fees and liabilities due
for payment hereunder. Payment of moneys or securities to the Trustee under this Section 11.01
shall be accompanied by an Opinion of Bond Counsel to the effect that the application of such
payment will not adversely affect the tax-exempt status of the Bonds Outstanding.



     Section 11.02. Prepayment Credits. In the event of prepayment by the Company of the Loan in
whole the amounts then contained in the Funds related to the Bonds shall be credited first to the
Rebate Fund so that it shall be fully funded for any required payment to the federal government
therefrom, and then against the Company’s prepayment obligation.



     Section 11.03. Notice of Prepayment. In order to exercise the option granted by this
Article, the Company shall give written notice to the Authority and the Trustee which shall specify
therein the date of making the prepayment, which date shall be not less than 60 days nor more than
90 days from the date the notice is mailed. In the case of any prepayment pursuant to this
Article, the Company Representative shall make arrangements with the Trustee for giving the
required notice of redemption of any Bonds to be redeemed.



34









 





     Section 11.04. Use of Prepayment Moneys. By virtue of the assignment of the rights of the
Authority under this Loan Agreement to the Trustee, the Company agrees to and shall pay any amount
required to be paid by it under this Article directly to the Trustee (other than amounts to be paid
to the Authority for its own account or as otherwise provided in Section 5.03 hereof). The Trustee
shall use the moneys so paid to it by the Company to pay the principal of and interest on the Bonds
on regularly scheduled payment or redemption dates.



ARTICLE XII




MISCELLANEOUS




     Section 12.01. Notices. All notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed given when mailed by certified mail, return-receipt
requested, postage prepaid, or dispatched by telegram or telecopy (if confirmed promptly
telephonically and in writing by the sender of such facsimile and if receipt of such facsimile is
confirmed in writing by the intended recipient), addressed as follows:



	 	 	 	 	 
	 

	 	to the Authority:
	 	Adair County Industrial Authority
	 

	 	 	 	c/o Lloyd E. Cole, Jr., Esq.
	 

	 	 	 	120 W. Division
	 

	 	 	 	Stilwell, OK 74960
	 

	 	 	 	Attention: Chairman
	 
	 	 	 	 
	 

	 	to the Trustee:
	 	Bank of Oklahoma, N.A.
	 

	 	 	 	9520 North May Avenue, 2nd Floor
	 

	 	 	 	Oklahoma City, OK 73120
	 

	 	 	 	Telephone: (214) 346-3953
	 

	 	 	 	Facsimile: (214) 987-8890
	 
	 	 	 	 
	 

	 	to the Company:
	 	Advanced Environmental Recycling Technologies, Inc.
	 

	 	 	 	801 North Jefferson
	 

	 	 	 	Springdale, AR 72764
	 

	 	 	 	Telephone: (479) 750-1299
	 

	 	 	 	Facsimile: (479) 750-1322






     The Authority, the Company, and the Trustee may, by notice hereunder, designate any further or
different addresses to which subsequent notices, certificates or other communications shall be
sent.



     Section 12.02. Binding Effect. This Loan Agreement shall inure to the benefit of and shall
be binding upon the Authority and the Company and their respective successors and assigns, subject,
however, to the limitations contained in Sections 8.14, 9.01, 9.02 and 12.10 hereof.



     Section 12.03. Severability. In the event any provision of this Loan 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.



35









 





     Section 12.04. Amounts Remaining in Funds. It is agreed by the parties hereto that any
amounts remaining in the Funds upon expiration of the term of this Loan Agreement shall be paid by
the Trustee as directed in writing by the Company Representative as provided in the Indenture.



     Section 12.05. Amendments, Changes and Modifications. Except as otherwise provided in this
Loan Agreement or in the Indenture, this Loan Agreement may not be amended, changed, modified,
altered or terminated.



     Section 12.06. Execution in Counterparts. This Loan Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.



     Section 12.07. Governing Law. This Loan Agreement shall be governed and construed in
accordance with the laws of the State of Oklahoma.



     Section 12.08. Cancellation at Expiration of Term of Agreement. Upon the expiration of the
term of this Loan Agreement, the Authority shall deliver to the Company any documents and take or
cause the Trustee to take such actions as may be necessary to evidence the termination of this Loan
Agreement and the discharge of the Lien hereof.



     Section 12.09. Recording. In accordance with the Indenture, the Company shall cause the
security interest in the Pledged Revenues, Funds, the Equipment and trust accounts referred to in
Section 3.01 hereof granted to the Authority, the assignment of such security interest to the
Trustee and the security interest in this Loan Agreement granted to the Trustee to be perfected to
the extent permitted by law, including the filing of all financing statements. The parties further
agree that all necessary continuation statements shall be filed by the Company within the time
prescribed by applicable law and all other appropriate actions will be taken in order to continue
such security interests.



     Section 12.10. No Pecuniary Liability of the Authority. No provision, covenant or agreement
contained in this Loan Agreement, or any obligations herein imposed upon the Authority, or the
breach thereof, shall constitute an indebtedness or liability of the Authority within the meaning
of any Oklahoma constitutional provision or statutory limitation or shall constitute or give rise
to a pecuniary liability of the Authority or any member, officer or agent of the Authority or a
charge against the Authority’s general credit. In making the Loan, the Authority has not obligated
itself except with respect to the Trust Estate.



     Section 12.11. Partial Release. So long as no Event of Default shall have occurred and be
continuing under this Loan Agreement, whenever under the terms of this Loan Agreement any portion
of the Springdale Property, Lowell Property, Junction Property, Watts Property or Equipment is
permitted to be sold, transferred, disposed of or released from the provisions of this Loan
Agreement, including releases in the event of condemnation of the Springdale Property, Lowell
Property, Junction Property, Watts Property or Equipment in accordance with Article VII hereof, or
Transfers permitted under Section 8.14 hereof, the Trustee shall take all actions reasonably
necessary to release that portion of the Springdale Property, Lowell Property, Junction Property,
Watts Property or Equipment so sold, leased or disposed of from the Lien of



36









 







this Loan Agreement. Any such release shall be requested of the Authority in writing by the
Company Representative and shall be accompanied by a description of the Springdale Property, Lowell
Property, Junction Property, Watts Property or Equipment to be released, an amendment or supplement
to the exhibits of this Loan Agreement to the extent necessary to provide for such release, a plat
or improvement location survey of the remaining Springdale Property, Lowell Property, Junction
Property and Watts Property after the release by a registered civil engineer or surveyor licensed
in the state in which the applicable Springdale Property, Lowell Property, Junction Property, Watts
Property or Equipment is located in accordance with the standard detail requirements for land title
surveys adopted by ALTA, and an Opinion of Counsel to the effect that such release is permitted by
the provisions of this Loan Agreement.



     Section 12.12. General Release. Upon payment of all sums secured by this Loan Agreement and
upon full performance hereof by the Company, the Trustee, as assignee of the Authority, shall
promptly, after written notice from the Company Representative, execute and deliver to the Company
a release of the Lien of this Loan Agreement in form reasonably acceptable to the Trustee. The
Company shall, however, pay all costs and expenses in connection with the preparation, review,
recordation and execution of said release.



     Section 12.13. Captions. The captions and headings in this Loan Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any provisions or
sections of this Loan Agreement.



     Section 12.14. Payments Due on Non-Business Day. If the date for making any payment or the
last date for performance of any act or the exercise of any right, as provided in this Loan
Agreement shall not be a Business Day, such payment may be made or act performed or right exercised
on the next succeeding Business Day with the same force and effect as if done on the nominal date
provided in this Loan Agreement, except as otherwise expressly provided herein.



     Section 12.15. Provision of General Application. Any consent or approval of the Authority
required pursuant to this Loan Agreement shall be in writing and shall not be unreasonably
withheld.



[Remainder of page intentionally left blank]




37









 








     IN WITNESS WHEREOF, the Authority and the Company have caused this Loan Agreement to be
executed in their respective corporate names and attested by their duly authorized officers, all as
of the date first above written.



	 	 	 	 	 
	 	ADAIR COUNTY INDUSTRIAL

AUTHORITY

 	 
	 	By  	 	 
	 	 	Doyle Guthrie, Chairman 	 
	 	 	 	 
	 
	 	ADVANCED ENVIRONMENTAL 

RECYCLING TECHNOLOGIES, INC.

 	 
	 	By  	



 	 
	 	 	Joe Brooks, Chief Executive Officer 	 
	 	 	 	 
	 




38









 





EXHIBIT A




COSTS OF THE PROJECT




 









 





EXHIBIT B




PERMITTED EXCEPTIONS