Section 11-97-10

Security for payment of bonds; contracts and agreements to secure.

(a) Bonds issued by any corporation may, as its board may deem advisable, be either general obligations of such corporation or limited obligations payable only out of certain specified revenues or assets of such corporation; provided, that any corporation may enter into contracts with the holders of any of its bonds preventing such corporation from thereafter issuing general obligation bonds or limiting the amount of such bonds that may thereafter be issued. To the extent permitted by any contracts with the holders of outstanding bonds and any other contractual obligations or requirements, any corporation may pledge any of its revenues or mortgage or assign any of its assets, whether real or personal and whether tangible or intangible, to secure the payment of any of its bonds.

(b) As security for payment of the principal of and the interest and premium, if any, on any bonds issued or assumed by it, any corporation may enter into a contract or contracts, and adopt resolutions or other proceedings containing provisions constituting a part of the contract or contracts with the holders of such bonds, pertaining to, among other things, the following matters:

(1) Pledging all or any part of the revenues of such corporation to secure the payment of such bonds, subject to contracts with the holders of its then outstanding bonds;

(2) Pledging, assigning or mortgaging all or any part of the assets of such corporation to secure the payment of such bonds, subject to contracts with the holders of its then outstanding bonds;

(3) The creation of reserves, sinking funds or other funds and the regulation and disposition thereof;

(4) Limitations on the purpose to which the proceeds of sale of such bonds may be applied and pledging such proceeds to secure the payment of such bonds;

(5) Limitations on the issuance of additional bonds, the terms upon which additional bonds may be issued and secured and the refunding of outstanding bonds;

(6) Binding the corporation to impose and collect reasonable rates for and the imposition of reasonable regulations respecting any service rendered from or with respect to any facility or facilities;

(7) The procedure, if any, by which the terms of any contract with the holders of such bonds may be amended or abrogated, the amount of bonds the holders of which must consent thereto and the manner in which such consent may be given;

(8) Limitations on the amount of moneys to be expended by such corporation for its operating expenses;

(9) Vesting in a trustee or trustees such property, rights, powers and duties as such corporation may determine;

(10) Defining the acts or omissions to act that shall constitute a default in the performance of the obligations and duties of such corporation to the holders of such bonds and providing for the rights and remedies of such holders in the event of such default; provided, however, that such rights and remedies shall not be inconsistent with the general laws of the state and the other provisions of this chapter; and

(11) Any other matters of like or different character which in any way affect the security or protection of the holders of such bonds.

(c) Any mortgage of property granted by any corporation, any security interest in property created by it or any assignment or pledge of revenues or contract rights made by it, in each case to secure the payment of its bonds, shall be valid and binding from the time when such mortgage is granted, such security interest is created or such assignment or pledge is made, as the case may be, and the property so mortgaged, the property with respect to which such security interest is so created and the revenues and contract rights so assigned or pledged shall immediately (or as soon thereafter as such corporation obtains any right thereto or interest therein) be subject to such mortgage, security interest, assignment or pledge, as the case may be, without physical delivery of any property, revenues or contract documents covered thereby or any further act, and the lien of any such mortgage, security interest, assignment or pledge shall be valid and binding as against all persons having claims of any kind in tort, contract or otherwise against such corporation, irrespective of whether such persons have actual notice thereof, from the time notice of such mortgage, security interest, assignment or pledge is filed for record (i) in the office of the judge of probate in which the certificate of incorporation of such corporation was filed for record and (ii) in the case of any mortgage or security interest covering any tangible property, whether real, personal or mixed, in the office of the judge of probate of the county in which such property is or is to be located pursuant to any agreement made by such corporation with any person respecting the location and use of such property. Such notice shall contain a statement of the existence of any such mortgage, security interest, assignment or pledge, as the case may be, a description of the property, revenues or contract rights subject thereto and a description of the bonds secured thereby, all in terms sufficient to give notice to a reasonably prudent person of the existence and effect of any such mortgage, security interest, assignment or pledge. If the requirements of the preceding sentence are met, such notice may consist of (i) a summary statement prepared specially for the purpose of serving as such notice, (ii) an executed counterpart of any mortgage, security agreement, assignment, trust indenture or any other instrument granting such mortgage, creating such security interest or making such assignment or pledge, as the case may be, or (iii) a certified copy of the resolution adopted by the board of such corporation authorizing such mortgage, security interest, assignment or pledge, as the case may be.

(d) Any corporation shall have power, subject to contracts with the holders of its then outstanding bonds, to purchase for retirement and cancellation any of its bonds and to use any of its available funds for such purpose, provided that, if such bonds are then redeemable, the purchase price thereof shall not exceed the redemption price then applicable, plus accrued interest thereon to the date of purchase, and if such bonds are not then redeemable, the purchase price thereof shall not exceed the redemption price applicable on the earliest date after such purchase upon which such bonds become subject to redemption, plus accrued interest thereon to the date of purchase.

(e) The bonds of any corporation may, at the discretion of such corporation, be issued under and secured by a trust indenture or trust indentures by and between such corporation and a corporate trustee, which may be any trust company or bank having the power of a trust company within or without the state. Any such trust indenture may contain such provisions for protecting and enforcing the rights and remedies of bondholders as may be reasonable and proper and not in violation of law, including covenants setting forth the duties of such corporation in relation to the exercise of its corporate powers and the custody, safeguarding and application of all moneys. Such authority may provide by any such trust indenture for the payment to the trustee thereunder or other depository of the proceeds of any bonds issued thereunder and any revenues pledged for the security of such proceeds and revenues, with such safeguards and restrictions as it may determine. All expenses incurred in connection with such trust indenture may be treated as part of the operating expenses of such corporation.

(f) Whether or not the bonds of any corporation are of such form and character as to be negotiable instruments under the terms of the Alabama Uniform Commercial Code, such bonds are hereby made negotiable instruments within the meaning of the Alabama Uniform Commercial Code and for all purposes thereof, subject only to any registration provisions of such bonds. In case any of the directors or officers of any corporation whose signatures appear on any bonds or coupons appertaining to any bond shall cease to be such directors or officers before the delivery of such bonds or coupons, such signatures shall, nevertheless, be valid and sufficient for all purposes to the same extent as if such directors or officers had remained in office until such delivery.

(g) The directors and officers of any corporation shall not be subject to any personal liability by reason of the issuance of any bonds of such corporation.

(Acts 1984, No. 84-314, p. 695, §10.)