<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to __________
Commission File Number: 000-20997
STERILE RECOVERIES, INC.
(Exact name of Registrant as specified in its Charter)
FLORIDA 59-3252632
(State of incorporation) (I. R. S. Employer
Identification No.)
28100 U.S. HIGHWAY 19 NORTH, SUITE 201
CLEARWATER, FLORIDA 33761
(Address of Principal Executive Offices)
(727) 726-4421
(Registrant's Telephone Number)
Indicate by check whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Number of outstanding shares of each class of Registrant's Common Stock as of
November 1, 1999:
Common Stock, par value $.001 - 5,676,794
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Earnings for the three
months and nine months ended September 30, 1999 (unaudited)
and the three months and nine months ended September 30, 1998
(unaudited)....................................................... 1
Condensed Consolidated Balance Sheets as of September 30, 1999
(unaudited) and December 31, 1998................................. 2
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1999 and September 30, 1998
(unaudited)....................................................... 3
Notes to Condensed Consolidated Financial Statements
(unaudited)....................................................... 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 8
PART II OTHER INFORMATION
Item 1 Legal Proceedings................................................. 16
Item 2 Changes in Securities............................................. 16
Item 3 Defaults Upon Senior Securities................................... 16
Item 4 Submission of Matters to a Vote of Security Holders............... 16
Item 5 Other Information................................................. 16
Item 6 Exhibits and Reports on Form 8-K.................................. 16
SIGNATURE........................................................................... 17
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
STERILE RECOVERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $17,152 $13,021 $51,380 $37,036
Cost of revenues 11,748 8,983 34,642 24,851
------- ------- ------- -------
Gross profit 5,404 4,038 16,738 12,185
Distribution expenses 1,242 940 3,800 2,687
Selling and administrative expenses 2,474 1,728 7,090 5,192
------- ------- ------- -------
Income from operations 1,688 1,370 5,848 4,306
Interest expense, net 67 20 210 8
------- ------- ------- -------
Income before income tax expense 1,621 1,350 5,638 4,298
Income tax expense 632 531 2,183 1,681
======= ======= ======= =======
Net income $ 989 $ 819 $ 3,455 $ 2,617
Dividends on preferred stock 51 16 157 16
------- ------- ------- -------
Net income available for common
shareholders $938 $803 $3,298 $2,601
======= ======= ======= =======
Net income per common share - basic $ 0.17 $ 0.14 $ 0.58 $ 0.46
======= ======= ======= =======
Net income per common share - diluted $ 0.16 $ 0.14 $ 0.55 $ 0.44
======= ======= ======= =======
Weighted average common shares
outstanding - basic 5,677 5,663 5,676 5,661
======= ======= ======= =======
Weighted average common shares
outstanding - diluted 6,330 5,994 6,335 5,916
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 1 of 17
<PAGE> 4
STERILE RECOVERIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1999 1998
--------- --------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 34 $ 172
Accounts receivable, net 9,148 7,580
Reimbursable construction costs 506 331
Inventories 2,791 2,324
Prepaid expenses and other assets 999 1,339
Reusable surgical products, net 16,648 14,705
Property, plant and equipment, net 14,380 12,042
Goodwill, net 5,593 5,127
------- -------
Total assets $50,099 $43,620
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable to bank $ 5,779 $ 3,698
Accounts payable 3,348 2,898
Employee related accrued expenses 1,338 974
Other accrued expenses 980 786
Deferred tax liability 142 142
------- -------
Total liabilities 11,587 8,498
Shareholders' equity
Preferred stock 1 1
Common stock 6 6
Additional paid-in capital 27,413 27,321
Retained earnings 11,092 7,794
------- -------
Total shareholders' equity 38,512 35,122
------- -------
Total liabilities and shareholders' equity $50,099 $43,620
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2 Of 17
<PAGE> 5
STERILE RECOVERIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $ 3,455 $ 2,617
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,172 691
Amortization of reusable surgical products 2,971 2,014
Provision for reusable surgical products shrinkage 1,409 921
Change in assets and liabilities (net of business
combination):
Accounts receivable (1,418) (562)
Inventories (466) 102
Prepaid expenses and other assets 340 26
Accounts payable 489 1,458
Other accrued expenses 585 (2)
-------- -------
Net cash provided by operating activities 8,537 7,265
-------- -------
Cash flows from investing activities
Purchases of property, plant and equipment (3,541) (2,639)
Purchases of reusable surgical products (6,323) (5,411)
Reimbursable construction costs (176) --
Payment for acquisition of business, net of cash acquired (604) (1,340)
-------- -------
Net cash used in investing activities (10,644) (9,390)
-------- -------
Cash flows from financing activities
Net change in note payable to bank 2,080 1,734
Net proceeds from issuance of common stock 93 11
Dividends paid (204) --
-------- -------
Net cash provided by financing activities 1,969 1,745
-------- -------
Decrease in cash (138) (380)
Cash and cash equivalents at beginning of period 172 380
-------- -------
Cash and cash equivalents at end of period $ 34 $ --
======== =======
Supplemental cash flow information
Cash paid for interest $ 203 $ 30
======== =======
Cash paid for income taxes $ 2,013 $ 1,661
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 Of 17
<PAGE> 6
STERILE RECOVERIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Sterile Recoveries, Inc. (the "Company") have been prepared in accordance
with the Securities and Exchange Commission's instructions to Form 10-Q and,
therefore, omit or condense footnotes and certain other information normally
included in financial statements prepared in accordance with generally accepted
accounting principles. The accounting policies followed for quarterly financial
reporting conform with generally accepted accounting principles for interim
financial statements and include those accounting policies disclosed in the
Company's Form 10-K for the year ended December 31, 1998 filed with the
Securities and Exchange Commission. In the opinion of management, all
adjustments of a normal recurring nature that are necessary for a fair
presentation of the financial information for the interim periods reported have
been made. The results of operations for the nine months ended September 30,
1999 are not necessarily indicative of the results that can be expected for the
entire year ending December 31, 1999. The unaudited financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Form 10-K.
The Company operates on a 52-53 week fiscal year ending the Sunday
nearest December 31. There are 40 weeks and 39 weeks included for the nine
month periods ended September 30, 1999 and September 30, 1998, respectively.
2. ACQUISITIONS
On August 31, 1998, the Company acquired all the stock of RePak
Surgical Enterprises, Inc. ("RePak"), a wholly owned subsidiary of Standard
Textile Co., Inc.("Standard Textile"), in exchange for 566,667 shares of its
convertible Series A Preferred Stock. The Company also purchased the RePak
facility's real estate for $1.5 million cash from Standard Textile's
affiliates. The Company has accounted for the acquisition as a purchase and
RePak's operating results are included in the Company's operating results since
the date of acquisition.
The following unaudited pro forma information combines the Company's
results of operations with RePak's results of operations as if the acquisition
had occurred at the beginning of the respective period.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30,1998 Sept. 30, 1998
------------- --------------
(In thousands,
except per share data)
(unaudited)
<S> <C> <C>
Revenues $ 14,580 $42,980
========= =======
Net income $ 893 $ 2,942
========= =======
Net income available for common
shareholders $ 846 $ 2,789
========= =======
Net income per common share, basic $ 0.15 $ 0.49
========= =======
Net income per common share, diluted $ 0.14 $ 0.47
========= =======
</TABLE>
This pro forma financial information does not necessarily reflect the
Page 4 of 17
<PAGE> 7
Company's actual operating results if the transaction had been effective during
the periods shown and does not necessarily reflect future results.
On February 26, 1999, the Company acquired NPAC, the reusable surgical
product business of the textile rental segment of National Service Industries,
Inc. The Company purchased the NPAC customer relationships and certain other
assets of the business exclusive of property, plant and equipment for cash
consideration of approximately $604,000, of which $449,000 has been allocated
to goodwill. Goodwill is amortized over 30 years. The Company has accounted for
the acquisition as a purchase and NPAC's operating results are included in the
Company's operating results since the date of acquisition. Pro forma results
are not material and therefore are not presented.
3. LINE OF CREDIT
The Company had approximately $5.8 million outstanding at September
30, 1999 under its $15.0 million revolving credit facility with First Union
National Bank. This credit facility is secured by substantially all of the
Company's assets and has a maturity date of February 28, 2002. The credit
facility's interest rate varies between 100 and 150 basis points over LIBOR
(6.084% as of September 30, 1999), depending on the Company's leverage. The
credit facility requires the Company to maintain (a) consolidated net worth of
$34.9 million plus 75% of cumulative consolidated net income for each fiscal
quarter occurring after February 24, 1999; (b) a consolidated leverage ratio of
not more than 2.5 to 1.0; and (c) a fixed charge coverage ratio of not less
than 2.8 to 1.0. The credit facility restricts the Company's payment of
dividends, acquisition transactions, additional indebtedness, and encumbering
of assets.
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
As of February 1, 1999, the Company secured a $10.0 million lease
financing agreement to provide financing for land, building and equipment for
new processing facilities. The principal amount of this facility has recently
been increased by an additional $573,000. The lease financing margins are
substantially the same as under the Company's revolving line of credit. Under
the agreement, the lessor purchases land, reimburses the Company for the
facility's construction and equipment costs, and leases the completed facility
to the Company for three years. The Company guarantees all lease payments and a
substantial residual value for the facility when the lease term ends. Each
lease agreement includes a purchase option for the Company at the original cost
of the leased facility. The Company accounts for these leases as operating
leases. Construction of two facilities that were financed under this agreement
were completed in the third quarter of 1999 at a cost of approximately $5.0
million for each facility. The Company had outstanding construction costs,
reimbursable by the lessor, of $506,000 as of September 30, 1999. The Company
incurred $26,750 and $12,513 in lease payments for its Stockton, California and
Chattanooga, Tennessee facilities, respectively, in the three month period
ended September 30, 1999.
Page 5 of 17
<PAGE> 8
5. WEIGHTED AVERAGE COMMON SHARES
Historical net income per common share is computed by dividing
historical net income by the basic and diluted weighted average number of
shares of common stock outstanding. For diluted weighted average shares
outstanding, the Company used the treasury stock method to calculate the Common
Stock equivalents that the stock options would represent.
The following table sets forth the computation of historical basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
1999 1998 1999 1998
------- ------- ------- -------
(In thousands, except
per share data)
(Unaudited)
<S> <C> <C> <C> <C>
BASIC
Numerator:
Net income $ 989 $ 819 $ 3,455 $ 2,617
Less effect of dividends of
preferred stock (51) (16) (157) (16)
------- ------- ------- -------
Net income available to
common shareholders $ 938 $ 803 $ 3,298 $ 2,601
======= ======= ======= =======
Denominator:
Weighted average shares
outstanding 5,677 5,663 5,676 5,661
======= ======= ======= =======
Net income per common share
- basic $ 0.17 $ 0.14 $ 0.58 $ 0.46
======= ======= ======= =======
DILUTED
Numerator:
Net income $ 989 $ 819 $ 3,455 $ 2,617
======= ======= ======= =======
Denominator:
Weighted average shares
outstanding 5,677 5,663 5,676 5,661
Effect of dilutive securities:
Employee stock options 86 157 92 197
Convertible preferred stock 567 174 567 58
------- ------- ------- -------
6,330 5,994 6,335 5,916
======= ======= ======= =======
Net income per common share
- diluted $ 0.16 $ 0.14 $ 0.55 $ 0.44
======= ======= ======= =======
</TABLE>
Page 6 of 17
<PAGE> 9
Options to purchase 518,000 and 363,000 shares of common stock for the
three month periods ended September 30, 1999 and September 30, 1998,
respectively, and options to purchase 518,000 and 260,000 shares of common
stock for the nine month periods ended September 30, 1999 and September 30,
1998, respectively, were not included for all or a portion of the computation
of diluted net income per common share because the options' exercise prices
were greater than the average market price of the common shares on September
30, 1999, and therefore their exercise would have an anti-dilutive effect.
Page 7 of 17
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
OVERVIEW
The Company provides hospitals and surgery centers with a
comprehensive surgical procedure-based delivery and retrieval service for
reusable gowns, towels, drapes, and basins and provides other disposable
products necessary for surgery. At eleven regional facilities, the Company
collects, sorts, cleans, inspects, packages, sterilizes, and delivers its
reusable products on a just-in-time basis. The Company offers an integrated
"closed-loop" reprocessing service that uses two of the most technologically
advanced reusable textiles: (i) a GORE(R) Surgical Barrier Fabric for gowns and
drapes that is breathable yet liquidproof and provides a viral/bacterial
barrier and (ii) an advanced microfiber polyester surgical fabric for gowns and
drapes that is liquid and bacterial resistant. The Company believes that its
reusable surgical products made from these fabrics provide protection and
comfort that are superior to disposable alternatives.
The Company is using its trademarked name SRI/Surgical Express to
market its platform of services including delivery and retrieval of reusable
gowns, drapes, towels and basins, and other disposable products necessary for
surgery. The Company expects to expand its services to include reusable
instrument reprocessing and additional disposable products as part of its daily
service.
The Company's two new reprocessing facilities opened in Stockton,
California and Chattanooga, Tennessee in the third quarter of 1999. These new
facilities now serve a portion of the customers previously served by the Long
Beach, California and Raleigh, North Carolina facilities.
The Company purchased RePak Surgical Enterprises, Inc. on August 31,
1998 and the NPAC division of National Service Industries on February 26, 1999.
RePak's and NPAC's results of operations are included in the Company's results
of operations since the respective dates of acquisition.
GORE(R) Surgical Barrier Fabric is a registered trademark of W.L. Gore &
Associates, Inc.
Page 8 of 17
<PAGE> 11
RESULTS OF EARNINGS
The following table sets forth for the periods shown the percentage of
revenues represented by certain items reflected in the statement of earnings of
the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1999 1998 1999 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues 68.5 69.0 67.4 67.1
----- ----- ----- -----
Gross profit 31.5 31.0 32.6 32.9
Distribution expenses 7.2 7.2 7.4 7.3
Selling and administrative expenses 14.5 13.3 13.8 14.0
----- ----- ----- -----
Income from operations 9.8 10.5 11.4 11.6
Interest expense, net 0.4 0.1 0.4 0.0
----- ----- ----- -----
Income before income taxes 9.4 10.4 11.0 11.6
Income tax expense 3.6 4.1 4.3 4.5
----- ----- ----- -----
Net income 5.8% 6.3% 6.7% 7.1%
===== ===== ===== =====
</TABLE>
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS
AND NINE MONTHS ENDED SEPTEMBER 30, 1998
REVENUES. The Company's revenues increased $4.1 million, or 31.7%, to
$17.2 million in the three months ended September 30, 1999, from $13.0 million
in the three months ended September 30, 1998. In the nine months ended
September 30, 1999, the Company's revenues increased $14.3 million, or 38.7%,
to $51.4 million, from $37.0 million in the nine months ended September 30,
1998. The revenue increases were attributable in roughly equal amounts to new
customers, increased revenues from current customers, and added revenues from
the RePak and NPAC acquisitions.
GROSS PROFIT. Gross profit increased $1.4 million, or 33.8%, to $5.4
million in the three months ended September 30, 1999 from $4.0 million in the
three months ended September 30, 1998; and $4.6 million, or 37.4%, to $16.7
million in the nine months ended September 30, 1999, from $12.2 million in the
nine months ended September 30, 1998. Gross profit as a percentage of revenues
increased by 0.5% to 31.5% in the three months ended September 30, 1999, from
31.0% in the three months ended September 30, 1998; and decreased 0.3% to 32.6%
in the nine months ended September 30, 1999, from 32.9% in the nine months
ended September 30, 1998. Gross profit increases for both the three month and
nine month periods ended September 30, 1999 were primarily due to increased
revenues. The benefits of increased revenues were partially offset by higher
amortization and shrinkage expense of reusable surgical products and by
additional expenses incurred in opening a new disposable products facility,
continued implementation costs of the Company's new information systems, and a
lower than anticipated revenue increase for the quarter.
DISTRIBUTION EXPENSES. Distribution expenses increased $302,000, or
32.1%, to $1.2 million in the three months ended September 30, 1999, from
$940,000 in the three months ended September 30, 1998; and $1.1 million, or
41.4%, to $3.8 million in the nine months ended September 30, 1999, from $2.7
million in the nine months ended September 30, 1998. Distribution expenses as a
percentage of revenues
Page 9 of 17
<PAGE> 12
remained the same at 7.2% in the three months ended September 30, 1999 and
September 30, 1998; and increased 0.1% to 7.4% in the nine months ended
September 30, 1999, from 7.3% in the nine months ended September 30, 1998.
Distribution expense increased because of truck routes added for new customers
as the Company continues to expand its geographic reach.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative
expenses increased $746,000, or 43.2%, to $2.5 million in the three months
ended September 30, 1999, from $1.7 million in the three months ended September
30, 1998; and increased $1.9 million, or 36.6%, to $7.1 million in the nine
months ended September 30, 1999, from $5.2 million in the nine months ended
September 30, 1998. As a percentage of revenues, selling and administrative
expenses increased 1.2% to 14.5% in the three months ended September 30, 1999
from 13.3% in the three months ended September 30, 1998; and decreased 0.2% to
13.8% in the nine months ended September 30, 1999, from 14.0% in the nine
months ended September 30, 1998. The increase in selling and administrative
expenses as a percentage of revenues resulted primarily from expenses incurred
by the Company in adding sales representatives and implementing its new
information systems.
INCOME FROM OPERATIONS. Income from operations increased $318,000, or
23.2%, to $1.7 million in the three months ended September 30, 1999, from $1.4
million in the three months ended September 30, 1998; and increased $1.5
million, or 35.8%, to $5.8 million in the nine months ended September 30, 1999,
from $4.3 million in the nine months ended September 30, 1998. Income from
operations as a percentage of revenues decreased from 0.7% to 9.8% for the
three months ended September 30, 1999 from 10.5% for the three months ended
September 30, 1998; and decreased 0.2% to 11.4% for the nine months ended
September 30, 1999 from 11.6% for the nine months ended September 30, 1998 as a
result of the increased costs described above.
INTEREST EXPENSE , NET. Interest expense increased $47,000 to $67,000
in the three months ended September 30, 1999 compared to $20,000 in the three
months ended September 30, 1998, and increased $202,000 to $210,000 in the nine
months ended September 30, 1999 compared to $8,000 in the nine months ended
September 30, 1998, due to higher borrowings under the Company's revolving
credit facility.
INCOME TAX EXPENSE. Income tax expense increased $101,000 to $632,000
in the three months ended September 30, 1999, compared to $531,000 in the three
months ended September 30, 1998; and increased $502,000 to $2.2 million in the
nine months ended September 30, 1999, compared to $1.7 million in the nine
months ended September 30, 1998. The Company's effective tax rate is 39.0%.
NET INCOME PER SHARE. The Company's net income per share is $0.17 on a
basic per share basis and $0.16 on a diluted per share basis for the three
months ended September 30, 1999, compared with $0.14 for both basic and diluted
per share net income for the three months ended September 30, 1998; and net
income per share of $0.58 on a basic per share basis and $0.55 on a diluted per
share basis for the nine months ended September 30, 1999, compared with a net
income per share of $0.46 on a basic per share basis and $0.44 on a diluted per
share basis for the nine months ended September 30, 1998.
Page 10 of 17
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company's positive cash flow from operating activities was $8.5
million during the nine months ended September 30, 1999, compared to $7.3
million during the nine months ended September 30, 1998. The increase in cash
flows from operating activities resulted primarily from increased net income
before amortization, shrinkage, and depreciation expense, and a decrease in
accounts payable, partially offset by an increase in accounts receivable and
inventories. The Company's positive cash flow from operating activities
exceeded its purchases of reusable surgical products during the nine months
ended September 30, 1999 and the cost of the NPAC acquisition.
The Company used approximately $1.3 million more net cash in investing
activities in the nine months ended September 30, 1999 than in the nine months
ended September 30, 1998. The Company has made capital expenditures in the nine
months ended September 30, 1999 for equipment of $3.5 million and for reusable
surgical products of $6.3 million compared to $2.6 million for equipment and
$5.4 million for reusable surgical products during the nine months ended
September 30, 1998. These expenditures were funded primarily by cash provided
by operating activities and the balance from borrowings under the Company's
revolving credit facility.
The Company continues to invest in more reusable surgical products,
primarily to support anticipated increases in business. The Company's business
is capital intensive and will require substantial capital expenditures for
additional surgical products and equipment during the next several years to
achieve its operating and expansion plans. To adequately service a new
customer, the Company estimates that it makes an investment in new reusable
surgical products and carts equal to approximately 45% of the projected first
year revenue from the customer. The Company estimates capital expenditures for
new carts and reusable surgical products will be approximately $1.5 million per
month for the next 12 months, although the amount will fluctuate with the
growth of its business. The Company also expects to make additional
expenditures of approximately $5.0 million during the last quarter of 1999 and
the first quarter of 2000 for equipment upgrades to increase the aggregate
capacity of its facilities, including approximately $4.0 million to expand and
further equip its Cincinnati, Ohio facility. The Company spent $800,000 in the
nine months ended September 30, 1999 for new information systems and expects to
spend $200,000 more during the balance of 1999, as it substantially completes
its current upgrade of these systems. See "Year 2000 Compliance" below. The
Company expects to fund these expenditures primarily from cash provided by
operating activities and borrowings under its revolving credit facility.
The Company had approximately $5.8 million outstanding at September
30, 1999 under its $15.0 million revolving credit facility with First Union
National Bank. This credit facility is secured by substantially all of the
Company's assets and has a maturity date of February 28, 2002. The credit
facility's interest rate varies between 100 and 150 basis points over LIBOR
(6.084% as of September 30, 1999), depending on the Company's leverage. The
credit facility requires the Company to maintain (a) consolidated net worth of
$34.9 million plus 75% of cumulative consolidated net income for each fiscal
quarter occurring after February 24, 1999; (b) a consolidated leverage ratio of
not more than 2.5 to 1.0; and (c) a fixed charge coverage ratio of not less
than 2.8 to 1.0. The credit facility restricts the Company's payment of
dividends, acquisition transactions, additional indebtedness, and encumbering
of assets.
Page 11 of 17
<PAGE> 14
As of February 1, 1999, the Company secured a $10.0 million lease
financing arrangement to finance land, building, and equipment for its two new
reprocessing facilities in Stockton, California and Chattanooga, Tennessee,
each estimated to cost approximately $5.0 million. The principal amount of the
facility has recently been increased by an additional $573,000. The lease
financing margins are substantially the same as under the Company's credit
facility. Under the arrangement, a lessor purchases land, reimburses the
Company for the facility's construction and equipment costs, and leases the
completed facility to the Company for three years. The Company guarantees all
lease payments and a substantial residual value for the facility when the lease
term ends. The lease agreement includes a purchase option for the Company at
the original cost of the leased facility. The Company accounts for these leases
as operating leases. Construction of two facilities that were financed under
this agreement were completed in the third quarter of 1999 at a cost of
approximately $5.0 million for each facility. The Company had outstanding
construction costs, reimbursable by the lessor, of $506,000 as of September 30,
1999. The Company incurred $26,750 and $12,513 in lease payments for its
Stockton, California and Chattanooga, Tennessee facilities, respectively, in
the three months ended September 30, 1999.
As of September 30, 1999, the Company had cash of approximately
$34,000. The Company believes this current cash balance, combined with its cash
flows from operating activities and funds available under its credit facility,
will be sufficient to fund its growth and anticipated capital requirements for
the next twelve months. The Company expects to fund additional capital
expenditures from a combination of internal cash flows, its credit facility,
and other capital sources.
YEAR 2000 COMPLIANCE
The Company has developed and is implementing a comprehensive program
to address year 2000 issues for its information technology and non-information
technology systems. The program consists of identification, compliance, and
post-implementation phases, and considers the effects of the year 2000 on the
Company's internal systems, customers, products, and services, as well as its
effects on suppliers and other critical business partners.
The Company has been replacing its financial and operational systems
with enterprise-wide systems that are year 2000 compliant and that facilitates
its growth. The Company has and will continue to incur staff, consulting, and
other expenses to prepare its information systems and applications for this
implementation. The Company had implemented this system in ten of its eleven
reprocessing facilities as of September 30, 1999. The Company had spent $2.0
million for this project through September 30, 1999, and estimates that it will
spend an additional $200,000 for this project by its estimated completion time
of mid-December 1999.
The Company has also distributed questionnaires and conducted
follow-up meetings with critical suppliers and other business partners to
determine the extent that their year 2000 issues might affect the Company.
These parties' timely year 2000 compliance is beyond the Company's control, and
their failure to achieve timely compliance could materially adversely affect
the Company.
The Company has developed contingency plans for year 2000 compliance
and will implement them if necessary. Because of the difficulty of fully
anticipating all potential crises and problems that might arise, these plans
might not fully address the Company's risk of year 2000 non-compliance. A
significant interruption in its business due to year 2000 non-compliance could
materially adversely affect the Company.
Page 12 of 17
<PAGE> 15
CERTAIN CONSIDERATIONS
This report, other documents that are publicly disseminated by the
Company, and oral statements that are made on behalf of the Company contain or
might contain both statements of historical fact and forward-looking
statements. Examples of forward-looking statements include: (a) projections of
revenue, earnings, capital structure, and other financial items, (b) statements
of the plans and objectives of the Company and its management, (c) statements
of future economic performance, and (d) assumptions underlying statements
regarding the Company or its business. The cautionary statements set forth
below discuss important factors that could cause actual results to differ
materially from any forward-looking statements.
Sales Process and Market Acceptance of Products and Services. The
Company's future performance depends on its ability to increase revenues to new
and existing customers. The Company's sales process for new customers is
typically between six and twelve months in duration from initial contact to
purchase commitment. The extended sales process is typically due to the
complicated approval process within hospitals for purchases from new suppliers,
the long duration of existing supply contracts, and implementation delays
pending termination of a hospital's previous supply relationships. The long
sales process inhibits the ability of the Company to quickly increase revenues
from new and existing customers or enter new markets. The Company's future
performance will also depend on market acceptance of its combination of
reusable surgical products, disposable accessory packs, and direct delivery and
retrieval service. The Company's market is now dominated by disposable
products, and the Company's primary strategic emphasis on reusable surgical
products and reprocessing services requires its customers to change their
customary purchasing patterns. There is no assurance that a significant portion
of the market will shift from disposable products to the Company's reusable
surgical products and reprocessing services. The Company's inability to gain
wider market acceptance of its reusable products and reprocessing services
would have a material adverse effect on the Company's operating and expansion
plans.
Need for Capital. The Company's business is capital intensive and will
require substantial capital expenditures for additional surgical products and
equipment during the next several years to achieve its operating and expansion
plans. In the longer term, the Company expects that its needs for capital
expenditures will be substantial and will depend on its growth and
opportunities. The Company's inability to obtain adequate capital could have a
material adverse effect on the Company. See -- "Liquidity and Capital
Resources."
Dependence on Significant Customers and Market Consolidation. During
the third quarter of 1999, Columbia/HCA Healthcare Corporation ("Columbia") and
Premier, Inc. ("Premier") hospitals, with which the Company currently does
business, accounted for approximately 11.5% and 18.1% of the Company's revenues
respectively, compared to 15.0% and 21.2% respectively in the third quarter of
1998. Although each Columbia and Premier hospital currently makes its
purchasing decisions on an individual basis, and no single hospital accounted
for more than 2.6% of the Company's revenues, the Company believes the
executive managements of Columbia and Premier have the ability to influence the
selection of particular vendors. The loss of a substantial portion of the
Columbia or Premier hospitals' business would have a material adverse effect on
the Company. Additionally, hospitals are increasingly buying products and
services in groups to improve efficiency and lower costs. Although the Company
is increasingly targeting these groups for its sales efforts, a change of its
customers' purchasing patterns could have a material adverse effect on the
Company.
Page 13 of 17
<PAGE> 16
Competition. The Company's business is highly competitive. The
Company's competitors include a number of distributors and manufacturers, as
well as the in-house reprocessing operations of hospitals. Certain of the
Company's existing and potential competitors possess substantially greater
resources than the Company, and the Company's market is dominated by their
disposable products. Some of the Company's competitors, including the
Convertors Division of Allegiance Corporation, serve as the sole supplier of a
wide assortment of products to a significant number of hospitals. The Company
does not provide an array of products as complete as those provided by some of
its competitors, which in some instances is a competitive disadvantage. There
is no assurance that the Company will be able to compete effectively with
existing or potential competitors.
Dependence on Key Executives. The Company is largely dependent upon
the management expertise and experience of Richard T. Isel, Bertram T. Martin,
Jr., Wayne R. Peterson, and James T. Boosales, its principal officers. The loss
of the services of one or more of these key executives could have a material
adverse effect on the Company.
Increased Replacement and Amortization Costs. The Company acquired its
equipment and surgical products at a cost substantially below both their
original cost and current replacement cost, which has resulted in lower
depreciation, amortization, and shrinkage expense for those assets since the
Acquisition, as compared to the expenses incurred by Amsco Sterile. Since the
Acquisition, the Company has purchased equipment and surgical products at
current replacement cost, resulting in increased depreciation, amortization,
and shrinkage expense. SRI amortizes its reusable surgical products on a per
use basis. If the products' actual number of uses proves to be shorter than
SRI's current estimates, the Company's annual product amortization expense
would increase, which would adversely affect its profitability. The amount of
shrinkage (loss and scrap of reusable surgical products) experienced by the
Company is influenced by a variety of factors including the customers' surgical
product rotation and operating room control procedures, the Company's internal
tracking of reusable surgical products through bar coding and the Company's
increased use of standardized surgical packs.
Recent Acquisitions and Implementation of Acquisition Strategy. The
Company acquired RePak Surgical Enterprises, Inc., a surgical products
reprocessing company located in the Cincinnati, Ohio area, on August 31, 1998,
and NPAC, the reusable surgical product business of the textile rental segment
of National Service Industries, Inc., on February 26, 1999. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Overview". The Company might make other acquisitions in the future.
Acquisitions involve risks to the Company, including (a) diversion of
management's attention to identifying and negotiating the acquisitions and
integrating the acquired businesses; (b) costs incurred in integrating the
acquired company's financial, operating, and other systems; (c) unforeseen
liabilities or operating difficulties of the acquired businesses; (d) the
adverse earnings impact of amortizing goodwill and other acquired intangible
assets; and (e) the potentially dilutive effect on per share earnings of any
new issuance of equity securities to the seller.
New Facilities. The Company might in the future construct new
facilities. This expansion program involves risks that could materially
adversely affect the Company, including (a) diversion of management's
attention; (b) unforeseen costs or delays in construction; (c) customers lost
in their transition to new facilities; (d) unanticipated (although
non-recurring) start-up expenses; and (e) unforeseen operating difficulties of
the facilities.
Page 14 of 17
<PAGE> 17
Government Regulation. Significant aspects of the Company's businesses
are subject to state and federal statutes and regulations governing, among
other things, medical waste-disposal and workplace health and safety. In
addition, most of the products furnished or sold by the Company are subject to
regulation as medical devices by the U.S. Food and Drug Administration (FDA),
as well as by other federal and state agencies. The Company's facilities are
subject to regular inspections by FDA officials. The FDA has the power to
enjoin future violations, seize adulterated or misbranded devices, require the
manufacturer to remove products from the market, and publicize relevant facts.
Federal or state governments might impose additional restrictions or adopt
interpretations of existing laws that could materially adversely affect the
Company.
Page 15 of 17
<PAGE> 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor any of its property is subject to any
litigation or other legal proceeding that is expected to have a material effect
on the Company or its business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
4.3 Trust Indenture dated as of June 1, 1999, between First Union National
Bank and First Security Bank, National Association (lease facility).
10.32 Lease Agreement dated as of June 15, 1999, between the Company and
ProLogis Limited Partnership IV.
27 Financial Data Schedules (for SEC use only).
REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the third quarter of 1999.
Page 16 of 17
<PAGE> 19
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
STERILE RECOVERIES, INC.
Date: November 11, 1999 By: /s/ James T. Boosales
-------------------------------------
Executive Vice President
Chief Financial Officer
Page 17 of 17
<PAGE> 1
Exhibit 4.3
TRUST INDENTURE
-----------------------
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner Trustee under
the SRI Realty Trust 1998-1
and
FIRST UNION NATIONAL BANK,
as Trustee
-----------------------
securing the
$5,200,000
-----------------------
SRI REALTY TRUST 1998-1
TAXABLE VARIABLE RATE DEMAND BONDS, SERIES 1999
-----------------------
DATED AS OF JUNE 1,1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I................................DEFINITIONS AND RULES OF CONSTRUCTION 3
Section 1.1..................................................Definitions 3
Section 1.2........................................Rules of Construction 14
ARTICLE 2............................................................THE BONDS 15
Section 2.1.....................Amount, Terms, and Issuance of the Bonds 15
Section 2.2 ......Designation, Denominations, Maturity Date and Interest
Rates of the Bonds 15
(a)..............................Designation, Denominations, Maturity Date 15
(b).........................................................Interest Rates 16
(c)..................................................Initial Interest Rate 16
(d) .........................................................Variable Rate 16
(e)...................................Fixed Rate: Conversion to Fixed Rate 16
Section 2.3......................Optional Tender Provisions of the Bonds 19
Section 2.4..Registered Bonds Required: Bond Registrar and Bond Register 20
Section 2.5........................................Transfer and Exchange 20
Section 2.6....................................................Execution 22
Section 2.7.........................Authentication: Authenticating Agent 22
Section 2.8..................Payment of Principal and Interest; Interest
Rights Preserved 23
Section 2.9........................................Persons Deemed Owners 24
Section 2.10.....Mutilated, Destroyed, Lost, Stolen or Undelivered Bonds 24
Section 2.11.............................................Temporary Bonds 25
Section 2.12...........................Cancellation of Surrendered Bonds 25
Section 2.13......................................Conditions of Issuance 25
Section 2.14..................................................Book Entry 26
ARTICLE 3...........................PURCHASE AND REMARKETING OF TENDERED BONDS 27
Section 3.1................................Remarketing of Tendered Bonds 27
Section 3.2..............Purchase of Bonds Delivered to the Tender Agent 28
Section 3.3..................................Delivery of Purchased Bonds 29
Section 3.4.....Delivery of the Proceeds of the Sale of Remarketed Bonds 30
Section 3.5..........................No Remarketing After Certain Events 31
ARTICLE 4.........................................................PROJECT FUND 31
Section 4.1.................Creation of and Deposits to the Project Fund 31
Section 4.2...............................Payments from the Project Fund 31
Section 4.3.............................Trustee May Rely on Requisitions 32
Section 4.4...................................Transfers to the Bond Fund 32
Section 4.5............................................Trustee's Records 32
ARTICLE 5......................................AMOUNTS AND APPLICATION THEREOF 32
Section 5.1...........................Amounts to be Paid Over to Trustee 32
</TABLE>
-ii-
<PAGE> 3
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Section 5.2................................................The Bond Fund 32
Section 5.3...Amounts to Be Held for All Bondholders; Certain Exceptions 34
ARTICLE 6.................................DEPOSITARIES OF MONEYS; SECURITY FOR
DEPOSITS AND INVESTMENT OF FUNDS 34
Section 6.1........................................Security for Deposits 34
Section 6.2.........................................Investment of Moneys 34
Section 6.3..........................................The Credit Facility 35
(a)...............................................Initial Letter of Credit 35
(b).............................................................Expiration 36
(c)............................................Alternate Credit Facilities 36
(d)..............Notices of Substitution or Replacement of Credit Facility 37
ARTICLE 7..................................REDEMPTION OR PURCHASE OF THE BONDS 37
Section 7.1......................Redemption or Purchase Dates and Prices 37
(a)....................................................Optional Redemption 38
(b)..................................Mandatory Purchase on Conversion Date 38
Section 7.2.........................Issuer to Direct Optional Redemption 38
Section 7.3...............Selection of Bonds to be Called for Redemption 39
Section 7.4.............................Notice of Redemption or Purchase 39
Section 7.5..........................Bonds Redeemed or Purchased in Part 40
ARTICLE 8..................................PARTICULAR COVENANTS AND PROVISIONS 40
Section 8.1....................................Covenant to Pay the Bonds 40
Section 8.2........Covenants to Perform Obligations Under this Indenture 40
Section 8.3..............................Inspection of the Bond Register 40
Section 8.4.....................Priority of Pledge and Security Interest 41
Section 8.5.....Maintenance of Insurance: Payment of Taxes, Charges etc. 41
Section 8.6 ......................................Maintenance and Repair 41
ARTICLE 9.................................................DEFAULT AND REMEDIES 41
Section 9.1.....................................................Defaults 41
Section 9.2...........................Acceleration and Annulment Thereof 42
Section 9.3...............................................Other Remedies 43
Section 9.4.............................Legal Proceedings by the Trustee 43
Section 9.5.................Discontinuance of Proceedings by the Trustee 43
Section 9.6.............Credit Facility Issuer or Bondholders May Direct
Proceedings 44
Section 9.7....................Limitations on Actions by the Bondholders 44
Section 9.8...Trustee May Enforce Rights Without Possession of the Bonds 44
Section 9.9.......................................Remedies Not Exclusive 45
Section 9.10...................Delays and Omissions Not to Impair Rights 45
Section 9.11...............Application of Moneys in the Event of Default 45
Section 9.12......Trustee and Bondholders Entitled to All Remedies Under
the Florida Law 45
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<PAGE> 4
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Section 9.13........................Trustee May File Claim in Bankruptcy 46
Section 9.14....................................................Receiver 46
ARTICLE 10..............................................CONCERNING THE TRUSTEE 47
Section 10.1....................................Acceptance of the Trusts 47
Section 10.2......................................Trustee to Give Notice 48
Section 10.3...............................Trustee Entitled to Indemnity 49
Section 10.4...............Trustee Not Responsible for Insurance, Taxes,
Execution of this Indenture, Acts of the Issuer
or Application of the Moneys Applied in Accordance
with this Indenture 50
Section 10.5................................................Compensation 50
Section 10.6.................................Trustee to Preserve Records 51
Section 10.7.................................Trustee May Be a Bondholder 51
Section 10.8........................Trustee Not Responsible for Recitals 51
Section 10.9......................... No Responsibility for Recording or
Filing 51
Section 10.10............................Trustee May Require Information 51
Section 10.11...........................Trustee May Rely on Certificates 51
Section 10.12...............................................Trustee Bond 52
Section 10.13............................Segregation of Funds; Interests 52
Section 10.14...............................Qualification of the Trustee 52
Section 10.15.....................Resignation and Removal of the Trustee 52
Section 10.16..........................................Successor Trustee 53
Section 10.17.................................................Co-Trustee 54
Section 10.18...................................Notice to Moody's or S&P 55
ARTICLE 11.........................EXECUTION OF INSTRUMENTS BY THE BONDHOLDERS
AND PROOF OF OWNERSHIP OF THE BONDS 56
Section 11.1.................Execution of Instruments by the Bondholders
and Proof of Ownership of the Bonds 56
Section 11.2.................................Preservation of Information 56
ARTICLE 12..........................................THE REMARKETING AGENT; THE
TENDER AGENT; THE PLACEMENT AGENT 57
Section 12.1.......................................The Remarketing Agent 57
Section 12.2 ...........................................The Tender Agent 58
Section 12.3.........................................The Placement Agent 58
Section 12.4.....................................................Notices 58
ARTICLE 13..........................................AMENDMENTS AND SUPPLEMENTS 59
Section 13.1..................... Amendments and Supplements Without the
Bondholders' Consent 59
Section 13.2.............Amendments With the Bondholders' and the Credit
Facility Issuer's Consent 60
Section 13.3................Supplemental Indentures Affecting the Rights
of the Credit Facility Issuer 60
Section 13.4................Trustee Authorized to Join in Amendments and
Supplements; Reliance on Counsel 61
ARTICLE 14..........................................DEFEASANCE; OTHER PAYMENTS 61
Section 14.1..................................................Defeasance 61
Section 14.2...................Deposit of Funds for Payment of the Bonds 62
Section 14.3.............................Effect of Purchase of the Bonds 63
ARTICLE 15............................................MISCELLANEOUS PROVISIONS 63
Section 15.1..............Covenants of the Issuer to Bind its Successors 63
Section 15.2.....................................................Notices 63
Section 15.3 .........Trustee as the Paying Agent and the Bond Registrar 64
Section 15.4.................................Rights Under this Indenture 64
Section 15.5...........................Form of Certificates and Opinions 65
</TABLE>
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<PAGE> 5
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Section 15.6................................................Severability 65
Section 15.7...........................................State Law Governs 65
Section 15.8 ..............Payments Due on Days Other Than Business Days 65
Section 15.9...................................Execution in Counterparts 65
</TABLE>
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<PAGE> 6
-------------------------------------------------------------
TRUST INDENTURE
-------------------------------------------------------------
This TRUST INDENTURE, dated as of June 1, 1999, between FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as the Owner Trustee under the SRI Realty Trust 1998-1 the "Issuer")
and FIRST UNION NATIONAL BANK, a national banking association, having a
corporate trust office in Nashville, Tennessee, as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Issuer proposes to issue and sell $5,200,000 in aggregate
principal amount of its Taxable Variable Rate Demand Bonds, Series 1999 (the
"Bonds") pursuant to this Indenture to (i) finance the costs of the
acquisition, installation, construction and equipping of a manufacturing
facility located in Stockton, California (the "Project") and (ii) finance
certain additions; and
WHEREAS, the Issuer agrees to make payments sufficient to pay the
principal and purchase price of, and redemption premium (if any) and interest
on, the Bonds as the same become due and payable and to pay administrative
expenses in connection with the Bonds; and
WHEREAS, the Issuer and First Union National Bank, a national banking
association (the "Bank"), have entered into a Credit Agreement, dated as of
February 1, 1999 (the "Credit Agreement"), pursuant to which the Bank has
agreed to issue its irrevocable direct-pay letter of credit, dated the date of
the delivery of the Bonds (the "Letter of Credit"), in favor of the Trustee,
for the account of the Issuer obligating the Bank to pay the Trustee upon draws
made by the Trustee in accordance with the terms thereof, up to (i) an amount
equal to the aggregate principal amount of the Bonds then Outstanding
(hereinafter defined) to be used by the Trustee (a) to pay the principal of
such Bonds whether at maturity, upon redemption, acceleration or otherwise, and
(b) to pay the portion of the purchase price equal to the principal amount of
any such Bonds delivered to the Tender Agent (hereinafter defined) for purchase
plus (ii) an amount equal to up to one hundred and twenty (120) days accrued
interest on the Bonds at an assumed interest rate of fifteen percent (15%) per
annum (which is the maximum interest rate to be borne by the Bonds), to be used
by the Trustee to pay accrued interest on the Bonds and to pay the portion of
the purchase price of tendered Bonds equal to the accrued interest, if any, on
any such Bonds, and pursuant to which the Issuer has agreed to reimburse the
Bank for all amounts drawn by the Trustee under the Letter of Credit, together
with interest on all such amounts and to pay to the Bank certain fees and
expenses for issuing the Letter of Credit; and
WHEREAS, the Issuer will lease the Project to Sterile Recoveries, Inc.,
a Florida corporation (the "Company"), pursuant to a Lease Agreement, dated as
of February 1, 1999 (the "Lease Agreement"), whereby the Company will pay
rental amounts sufficient to pay the
<PAGE> 7
principal and purchase price of, and redemption premium (if any) and interest
on, the Bonds, any reimbursement amounts of the Issuer under the Credit
Agreement and other amounts as determined under the Lease Agreement; and
WHEREAS, in addition to the Letter of Credit, as security for the
payment of the Bonds, the Issuer has agreed to assign and pledge to the
Trustee, as its interests may appear, all right, title and interest of the
Issuer in all money and securities at any time on deposit in, in transit to or
credited to any account or Fund created hereunder, including without limitation
the Project Fund and the Bond Fund and Revenues (as hereinafter defined); and
WHEREAS, all things necessary to make the Bonds, when authenticated by
the Trustee and issued and delivered as provided in this Indenture, the legal,
valid, binding and enforceable obligations of the Issuer, according to the
import thereof, and to create a valid assignment and pledge of the Trust Estate
to the payment of the principal of, and the redemption premium (if any) and the
interest on, the Bonds and performed, and the execution, issuance and delivery
of the Bonds, subject to the terms hereof, have in all respects been
authorized; and
WHEREAS, the Trustee, as its interests may appear, has accepted the
trusts created by this Indenture and in evidence thereof has joined in the
execution hereof, and
WHEREAS, the Issuer has determined that the Bonds to be issued
hereunder shall be substantially in the form contained in Exhibit C, with such
variations, omissions and insertions as are required or permitted by this
Indenture; and
NOW, THEREFORE, in consideration of the premises, of the acceptance by
the Trustee of the trusts hereby created, and of the purchase and acceptance of
the Bonds by the Bondholders, and also for and in consideration of the sum of
One Dollar to the Issuer in hand paid by the Trustee at or before the execution
and delivery of this Indenture, the receipt of which is hereby acknowledged,
and for the purpose of fixing and declaring the terms and conditions upon which
the Bonds are to be issued, delivered, secured and accepted by the Bondholders
and any and all other persons who shall from time to time be or become owners
thereof, and in order to secure the payment of the Bonds at any time issued and
outstanding hereunder and the interest thereon according to their tenor,
purport and effect, and in order to secure the performance and observance of
all the covenants, agreements and conditions therein and herein contained;
THE ISSUER DOES HEREBY PLEDGE AND ASSIGN, and grant a security interest
unto the Trustee and its successors and assigns, as its interests may appear,
forever, to have and to hold, for the benefit of the owners of the Bonds all
right, title and interest of the Issuer presently owned or hereafter acquired
in and to the following (collectively, the "Trust Estate"):
(a) All money and securities at any time on deposit in, in
transit to or credited to any account or Fund created hereunder,
including without limitation the Project Fund and the Bond Fund; and
-2-
<PAGE> 8
(b) Revenues (as hereinafter defined);
and it is so mutually agreed and covenanted by and between the parties hereto
for the equal and proportionate benefit and security of the Bondholders without
preference, priority or distinction as to lien or otherwise, except as
hereinafter provided, of any one Bond over any other Bond, by reason of
priority in the issue, sale or negotiation thereof or otherwise, for the
benefit of the Bondholders and as security for the fulfillment of the
obligations of the Issuer hereunder;
TO HAVE AND TO HOLD the same forever, subject, however, to the
exceptions, reservations and matters therein and herein recited but IN TRUST,
nevertheless, for the benefit and security of the owners from time to time of
the Bonds delivered hereunder and issued by the Issuer and outstanding or, to
the extent set forth herein, for the benefit of the Credit Facility Issuer, so
long as a Credit Facility is in place in respect of the Bonds;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Trust Estate pledged and assigned to it under this
Indenture shall have ceased, terminated and become void in accordance with
Article 14 hereof, the principal of and interest on the Bonds and any other
obligations arising hereunder shall have been paid to the Bondholders pursuant
to Article 14 hereof, then, this Indenture and all covenants, agreements and
other obligations of the Issuer hereunder shall cease, terminate and be void,
and thereupon the Trustee shall cancel and discharge this Indenture and execute
and deliver to the Issuer such instruments in writing as shall be required to
evidence the discharge hereof, otherwise, this Indenture shall be and remain in
full force and effect.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly declared, that
the Bonds issued and secured hereunder are to be issued and delivered and the
Trust Estate and other revenues and funds herein pledged and assigned are to be
dealt with and disposed of under, upon and subject to the terms, conditions,
stipulations, covenants, agreements, trusts, uses and purposes as hereinafter
expressed, and the Issuer has agreed and covenanted, and does hereby agree and
covenant, with the Trustee and with the owners of said Bonds, as follows, that
is to say:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. The following words and terms as used in this
Indenture shall have the following meanings unless some other meaning is
plainly intended:
"Alternate Credit Facility" shall mean an irrevocable direct pay
letter of credit, insurance policy or similar credit enhancement or support
facility for the benefit of the Trustee, the terms of which Alternate Credit
Facility shall, in all respects material to the Bondholders, be the same
-3-
<PAGE> 9
(except for the term of such Alternate Credit Facility) as the Credit Facility
that is replaced by such Alternate Credit Facility as set forth in Section 6.3
hereof.
"Authenticating Agent" shall mean the Trustee and any agent,
designated and appointed pursuant to Section 2.7 hereof.
"Available Moneys" shall mean:
(a) with respect to any payment date occurring during any
period that the Bonds are entitled to the benefit of a Credit
Facility,
(i) any moneys which have been paid to the Trustee by the
Issuer or any General Partner of the Issuer (including moneys
transferred from the Project Fund pursuant to Section 4.1
hereof and which have been on deposit with the Trustee for at
least one hundred and twenty-seven (127) days during and prior
to which no Event of Bankruptcy shall have occurred, and the
proceeds from the investment of such moneys after such moneys
have become Available Moneys), and
(2) moneys on deposit with the Trustee representing
proceeds from the resale by the Remarketing Agent of Bonds to
persons other than the Issuer or any General Partner of the
Issuer as described in Article 3 hereof, which, in each case,
were at all times since their deposit with the Trustee held in
a separate and segregated account or accounts or sub-account or
sub-accounts in which no moneys which were not Available Moneys
were at any time held, and the proceeds from the investment
thereof, and
(3) moneys drawn under a Credit Facility which in each case
were at all times since their deposit with the Trustee held in
a separate and segregated account or accounts or sub-account or
sub-accounts in which no moneys (other than those drawn under a
Credit Facility) were at any time held; and
(b) with respect to any payment date not occurring during a
period that the Bonds are entitled to the benefit of a Credit
Facility, any moneys furnished to the Trustee and the proceeds from
the investment thereof.
"Bank" shall mean (1) First Union National Bank, a national banking
association, as the issuer of the Letter of Credit, and its successors and
assigns; and (2) any Substitute Bank.
"Bank Account" shall mean the account of that name established in the
Bond Purchase Fund pursuant to Section 3.2 hereof.
"Bond" or "Bonds" shall mean SRI Realty Trust 1998-1 Taxable Variable
Rate Demand Bonds, Series 1999, issued by the Issuer under this Indenture.
-4-
<PAGE> 10
"Bond Fund" shall mean the trust fund so designated which is
established pursuant to Section 5.2(a) hereof.
"Bond Purchase Fund" shall mean the trust fund so designated which is
established pursuant to Section 3.2 hereof.
"Bond Register" shall have the meaning provided in Section 2.4 hereof.
"Bond Registrar" shall mean the Bond Registrar as designated in
Section 2.4 hereof.
"Bondholder" or "Bondholders" or "owner" or "owners" shall mean the
initial owner or owners and any future owner or owners of the Bond or Bonds as
registered on the books and records of the Bond Registrar pursuant to Section
2.4 hereof.
"Book Entry Agreement" shall have the meaning provided in Section 2.14
hereof.
"Business Day" means a day on which (a) banks located in the State of
Florida and the State of North Carolina are not required or authorized by law
or executive order to close for business, and (b) The New York Stock Exchange
is not closed.
"Calculation Period" shall mean the period from and including the day
following the Determination Date of each week (even if not a Business Day) to
and including the following Determination Date; provided, that if the
Determination Date at the end of a Calculation Period is a Regular Record Date,
such Calculation Period will extend until the Business Day following such
Determination Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference herein to any specific provision of the Code shall be deemed to
include a reference to any successor provision to such provision and to any
Regulations issued or proposed under or with respect to such provision.
"Conversion Date" shall mean that Business Day elected by the Issuer
in accordance with Section 2.2(e) hereof as the effective date of conversion of
the interest rate on the Bonds from the Variable Rate to the Fixed Rate, which
date shall be an Interest Payment Date.
"Costs of the Project" shall mean all costs and allowances for the
acquisition, construction, installation and equipping of the Project which
include, but are not limited to, all capital costs of the Project, including
the following:
(i) the acquisition, construction, installation of the Project,
including the acquisition of all machinery and equipment;
(ii) preparation of the plans and specifications for the
Project (including any preliminary study or plan of the Project or any
aspect thereof), any labor, services,
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materials and supplies used or furnished in the construction of the
Project, the construction and installation necessary to provide
utility services or other services and all real and tangible personal
property deemed necessary by the Company in connection with the
Project;
(iii) the fees for architectural, engineering, supervisory and
consulting services in connection with construction of the Project;
(iv) to the extent they shall not be paid by a contractor, the
premiums of all insurance and surety and performance bonds required to
be maintained in connection with the construction of the Project;
(v) any fees and expenses incurred in connection with
construction, perfection and protection of title to the Project;
(vi) interest prior to and during the period until completion
of construction of the Project; and
(vii) any costs of issuing the Bonds or costs associated with
the completion of the Project.
"Counsel" shall mean an attorney or firm of attorneys acceptable to
the Trustee (who may, but need not be, counsel to the Issuer).
"Credit Agreement" shall mean the Credit Agreement dated as of
February 1, 1999 between the Bank and the Issuer as the same may be amended
from time to time and filed with the Trustee, and any agreement of the Issuer
with a Credit Facility Issuer setting forth the obligations of the Issuer to
such Credit Facility Issuer arising out of any payments under a Credit Facility
and which provides that it shall be deemed to be a Credit Agreement for the
purpose of this Indenture.
"Credit Facility" shall mean the Letter of Credit or any Alternate
Credit Facility delivered to the Trustee pursuant to Article 6 hereof.
"Credit Facility Account" shall mean the account of that name
established in the Bond Fund pursuant to Section 5.2 hereof.
"Credit Facility Issuer" shall mean the Bank with respect to the
Letter of Credit and the institution issuing any Alternate Credit Facility.
"Defaulted Interest" has the meaning provided in Section 2.8 hereof.
"Determination Date" shall mean Wednesday of each week or if Wednesday
is not a Business Day then the next succeeding Business Day.
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"DTC" means The Depository Trust Company, or any successor thereto.
"Event of Bankruptcy" shall mean a petition by or against the Issuer
under any bankruptcy act or under any similar act which may be enacted which
shall have been filed (other than bankruptcy proceedings instituted by the
Issuer against third parties) unless such petition shall have been dismissed
and such dismissal shall be final and not subject to appeal.
"Event of Default" shall mean any of the events specified in Section
9.1 hereof to be an Event of Default.
"Fixed Rate" shall mean the fixed annual rate of interest on the Bonds
determined by the Placement Agent pursuant to Section 2.2(e) hereof. If, for
any reason, the Fixed Rate is held to be invalid or unenforceable by a court of
competent jurisdiction, the Fixed Rate shall be equal to ten percent (10%) per
annum.
"Fixed Rate Period" shall mean the period during which the Fixed Rate
is in effect, which shall be the period beginning on the Conversion Date and
ending on the Maturity Date.
"Governmental Obligations" shall mean:
(i) direct obligations of the United States of America for the
full and timely payment of which the full faith and credit of the
United States of America is pledged,
(ii) obligations issued by a Person controlled or supervised by
and acting as an instrumentality of the United States of America, the
full and timely payment of which is unconditionally guaranteed as a
full faith and credit obligation of the United States of America, and
(iii) securities or receipts evidencing ownership interests in
obligations or specified portions (such as principal or interest) of
obligations described in clause (i) or (ii) above the full and timely
payment of which securities, receipts or obligations is
unconditionally guaranteed by the United States of America, which
obligations, securities or receipts are not subject to redemption
prior to maturity at less than par at the option of anyone other than
the holder thereof.
"Indenture" shall mean this Indenture as amended or supplemented at
the time in question.
"Initial Interest Rate" shall mean the initial rate of interest of
5.25% per annum on the Bonds.
"Initial Rate Period" shall mean from and including the Original
Delivery Date to and including July 7, 1999.
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"Interest Payment Date" shall mean the first Business Day of each
February, May, August and November commencing on August, 1999 and ending on the
Maturity Date or the Conversion Date. After the Conversion Date, the Interest
Payment Date shall mean the first Business Day of each February and November
until the principal of and interest on the Bonds shall have been paid in full
or provision shall have been made thereof.
"Investment Obligations" shall mean:
(a) any Government Obligations;
(b) any bonds or other obligations of the United States of
America which as to principal and interest constitute direct
obligations of the United States of America, or any obligations of
subsidiary corporations of the United States of America fully
guaranteed as to payment by the United States of America;
(c) obligations of the Federal Land Bank;
(d) obligations of the Federal Home Loan Bank;
(e) obligations of the Federal Intermediate Credit Bank;
(f) bonds or obligations issued by any public housing agency or
municipal corporation in the United States, which such bonds or
obligations are fully secured as to the payment of both principal and
interest by a pledge of annual contributions under an annual
contributions contract or contracts with the United States government,
or project notes issued by any public housing agency, urban renewal
agency, or municipal corporation in the United States which are fully
secured as to payment of both principal and interest by a requisition,
loan, or payment agreement with the United States government;
(g) certificates of deposit of national or state banks located
within the State which have deposits insured by the Federal Deposit
Insurance Corporation and certificates of deposit of Federal savings
and loan associations and state building and loan associations located
within the State which have deposits insured by the Federal Deposit
Insurance Corporation (including the certificates of deposit of any
bank, savings and loan association or building and loan association
acting as depository, custodian or trustee for any proceeds of the
Bonds);
(h) interest-bearing savings accounts (including those of the
Trustee), interest bearing certificates of deposit or interest-bearing
time deposits or any other investments constituting direct obligations
of any bank which has deposits insured by the Federal Deposit
Insurance Corporation; provided that such accounts, certificates of
deposits, time deposits, or investments are either (a) insured by the
Federal Deposit Insurance
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<PAGE> 14
Corporation, or (b) secured by the deposit with any national or state
bank located within the State of any Government Obligations;
(i) short term obligations of corporations organized under the
laws of any state with assets exceeding $500,000,000 if (i) such
obligations are rated within the two (2) highest categories
established by Moody's and S&P and which mature no later than one
hundred eighty (180) days from the date of purchase and (ii) the
purchases do not exceed ten percent (10%) of such corporation's
outstanding obligations;
(j) money market funds registered under the Investment Company
Act of 1940, as amended, provided that the portfolio of any such money
market fund is limited to Government Obligations, funds of the Trustee
and/or to agreements to purchase Government Obligations; and
(k) repurchase agreements with respect to obligations included
in subsections (a) through f) above and any other investments to the
extent at the time permitted by then applicable law for the investment
of public funds.
"Issuer" shall mean First Security Bank, National Association, a
national banking association, not individually, but solely as Owner Trustee of
SRI Realty Trust 1998-1 organized and existing pursuant to the laws of the
State of Utah and any successors or assigns.
"Issuer Representative" shall mean the officer, director, employee or
agent of the Issuer designated in writing.
"Letter of Credit" shall mean the irrevocable direct pay letter of
credit, dated the date of delivery of the Bonds in the amount of $5,460,000
issued by the Bank in favor of the Trustee as beneficiary, with an initial term
of approximately 3 years.
"LIBOR Rate" shall mean, for any period, an interest rate per annum
(based on a 360-day year) determined by the Remarketing Agent or its designee
to be the rate or the arithmetic mean of rates (rounded upward, if necessary,
to the nearest one-sixteenth (1/16) of one percentage point of the rate per
annum) for deposits in immediately available and freely transferable dollars of
the United States of America that appears on Telerate Screen, page 3747, as
published daily by the British Bankers Association Interest Settlement Rates
(or another comparable international financial data service satisfactory to the
Remarketing Agent, or its designee, in its discretion, if Telerate no longer
publishes such rates) and that is offered by first class banks in the London
interbank market to the offices of the Remarketing Agent or its designee at
10:00 a.m. on the applicable Determination Date.
"Majority of the Bondholders" shall mean the owners of a majority of
the aggregate principal amount of the Outstanding Bonds.
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"Maturity Date" shall mean February 1, 2014, unless the maturity of
the Bonds shall be accelerated by the Trustee pursuant to Section 9.2 hereof,
in which case the "Maturity Date" of the Bonds shall be the date set forth in
the notice of acceleration from the Trustee to the Issuer pursuant to Section
9.2 of hereof.
"Maximum Rate" means the lower of either (i) 10% per annum or (ii) the
highest rate permitted by law.
"Moody's" shall mean Moody's Investors Service, Inc. a Delaware
corporation, its successors and assigns, and, if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "Moody's" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the Trustee, with
the consent of the Issuer and the Credit Facility Issuer.
"Optional Retention Notice" shall mean a notice of the owner of a Bond
to the Trustee in the form attached to the Bond as Exhibit A.
"Optional Tender Notice" shall mean a notice from the owner of a Bond
to the Tender Agent in the form attached to the Bond as Exhibit B.
"Original Delivery Date" shall mean July 1, 1999.
"Outstanding" in connection with Bonds shall mean, as of the time in
question, all Bonds authenticated and delivered under the Indenture, except:
(i) Bonds theretofore canceled or required to be canceled
under Section 2.12 hereof,
(ii) Bonds which are deemed to have been paid in accordance
with Article 14 hereof, and
(iii) Bonds in substitution for which other Bonds have been
authenticated and delivered pursuant to Article 2 hereof.
In determining whether the owners of a requisite aggregate principal amount of
Bonds Outstanding have concurred in any request, demand, authorization,
direction, notice, consent or waiver under the provisions hereof, Bonds which
are held by or on behalf of the Issuer (unless all of the outstanding Bonds are
then owned by the Issuer) or an Affiliate of the Issuer (as defined below)
shall be disregarded for the purpose of any such determination. For the purpose
of this paragraph, an "Affiliate" of any specified entity shall mean any other
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified entity and "control", when used
with respect to any specific entity, shall mean the power to direct the
management and policies of such entity, directly or indirectly, whether through
the ownership of
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voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Overdue Rate" shall mean the prime rate of the Trustee, plus two
percent per annum, or the maximum contract rate permitted by law, whichever is
lower.
"Paying Agent" shall mean the Trustee and its successors as provided
in Section 15.3 hereof.
"Payment of the Bonds" shall mean payment of (i) the principal of and
interest on the Bonds in accordance with their terms whether through payment at
maturity, upon acceleration or prepayment, (ii) all amounts due as expenses or
otherwise under the Indenture, and (iii) any and all other liabilities or
obligations arising under the Indenture, in any case, payment in such a manner
that all such amounts due and owing with respect to the Bonds shall have been
paid.
"Payment Date" shall have the meaning set forth in Section 5.2(d)
hereof.
"Placement Agent" shall mean the securities dealer, bank or trust
company which is designated by the Issuer with the consent of the Credit
Facility Issuer and which will agree to establish the Preliminary Fixed Rate
and to use its best efforts to arrange for the sale of Tendered Bonds on the
Conversion Date, all as more particularly described in Section 2.2(e) hereof.
"Pledge Agreement" shall mean the Pledge Agreement of even date
herewith by the Issuer to the Bank, and any amendments or supplements thereof.
"Preliminary Fixed Rate" shall mean the rate of interest determined by
the Placement Agent prior to the Conversion Date to be that rate which, in the
sole judgment of the Placement Agent based on prevailing market conditions, is
the minimum rate necessary for the Placement Agent to arrange for the sale at
par of all of the Bonds for which the Placement Agent would be so required to
arrange for the sale on the Conversion Date pursuant to Section 2.2(e) hereof.
"Principal Office" of the Trustee or Bond Registrar shall mean the
office at which, at the time in question, its corporate trust business with
respect to the Bonds is principally conducted.
"Project Fund" shall mean the trust fund so designated which is
established pursuant to Section 4.1 hereof.
"Regular Record Date" shall mean:
(i) in respect of any Interest Payment Date during the Variable
Rate Period, the close of business on the Business Day immediately
preceding each such Interest Payment Date, and
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(ii) in respect of any Interest Payment Date during the Fixed
Rate Period, the fifteenth (15th) day (whether or not a Business Day)
of the calendar month immediately preceding each such Interest Payment
Date.
"Remarketing Account" shall mean the account of that name established
in the Bond Purchase Fund pursuant to Section 3.2 hereof.
"Remarketing Agent" shall mean First Union Capital Markets Corp. and
its successors as provided in Section 12.1 hereof.
"Remarketing Agreement" shall mean the Remarketing Agreement of even
date herewith between the Issuer and the Remarketing Agent and any amendments
and supplements thereof.
"Requisite Bondholders" shall mean the owners of more than two-thirds
(2/3) in aggregate principal amount of the Outstanding Bonds.
"Responsible Officer" when used with respect to the Trustee shall mean
the chairman or vice chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer, any assistant trust officer, the controller, any assistant
controller or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers of banking
institutions with trust powers and also shall mean, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Revenues" shall mean:
(i) all amounts payable to the Trustee with respect to the
principal or redemption price of, or interest on the Bonds (a) by the
Issuer or (b) by the Credit Facility Issuer under a Credit Facility,
and
(ii) investment income with respect to any moneys held by the
Trustee in the Bond Fund.
"Security interest" or "security interests" refers to the security
interests created herein and shall have the meaning set forth in the U.C.C.
"S&P" shall mean Standard & Poor's, a division of McGraw-Hill
Companies, Inc., a New York corporation, its successors and assigns, and, if
such corporation shall be dissolved or liquidated or shall no longer perform
the functions of a securities rating agency, "S&P" shall be deemed to refer to
any other nationally recognized securities rating agency designated by the
Trustee, with the consent of the Issuer and the Credit Facility Issuer.
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"Special Record Date" shall mean for purpose of payment of Defaulted
Interest on the Bonds, the date fixed by the Trustee pursuant to Section 2.8
hereof.
"State" shall mean the State of Florida.
"Substitute Bank" shall mean a commercial bank or savings and loan
association which has issued a Substitute Letter of Credit.
"Substitute Letter of Credit" shall mean a letter of credit delivered
to the Trustee in accordance with section 6.3(c) of this Indenture, issued by
the Bank or a Substitute Bank, replacing any existing Letter of Credit and with
substantially identical payment terms and conditions to the Letter of Credit
being replaced.
"Tender Agent" shall mean First Union National Bank and its successors
as provided in Section 12.2 hereof.
"Tender Agency Agreement" shall mean the Tender Agency Agreement of
even date herewith among the Issuer, the Trustee and the Tender Agent and any
amendments and supplements thereof.
"Tendered Bonds" shall mean those Bonds tendered or deemed tendered by
the owners for purchase pursuant to an Optional Tender Notice or on the
Conversion Date.
"Trustee" shall mean First Union National Bank, a national banking
association, and its successor in the trust hereunder. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing hereunder, the
Trustee shall perform all of the duties of the Trustee under this Indenture and
all references to the Trustee shall mean the Trustee.
"U.C.C." means the Uniform Commercial Code of the State.
"Undelivered Bond" shall mean:
(i) any Bond for which an Optional Tender Notice has been given
pursuant to Section 2.3 hereof and which has not been delivered to the
Tender Agent on the date specified for purchase, and
(ii) any Bond which has not been delivered to the Trustee for
redemption or purchase on any mandatory redemption or purchase date or
the Conversion Date if, with respect to Bonds to be delivered on the
Conversion Date, the owner thereof has not provided the Trustee with
the Optional Retention Notice; provided that in either case the
Trustee has on hand and available on such date funds sufficient to
purchase or redeem said Bond.
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"Variable Rate" shall mean a variable interest rate established after
the Initial Rate Period as the rate of interest determined by the Remarketing
Agent on and as of each Determination Date as the minimum rate of interest
necessary, in the reasonable judgment of the Remarketing Agent, taking into
account market conditions prevailing on the Determination Date, to enable the
Remarketing Agent to arrange for the sale of all of the Bonds on the
Determination Date in the secondary market at a price equal to the principal
amount thereof (plus interest accrued to the date of settlement). The Variable
Rate shall not exceed the Maximum Rate. If the Remarketing Agent fails to
certify such rate, the Variable Rate for the next succeeding Calculation Period
or Periods until thereafter certified by the Remarketing Agent shall remain the
same as that most recently established and certified by the Remarketing Agent
until thereafter certified by the Remarketing Agent or adjusted as set forth in
the next succeeding sentence. If the Remarketing Agent fails to certify such
rate for the Bonds for four consecutive Calculation Periods, the rate for the
Bonds for each Calculation Period thereafter (if none is certified by the
Remarketing Agent) to be determined by the Trustee shall be a rate equal to the
30 day LIBOR Rate. If, for any reason, the Variable Rate is not determined as
described above or is held to be invalid or unenforceable by a court of
competent jurisdiction for any period, the interest rate for each such period
shall be equal to ten percent (10%) per annum.
"Variable Rate Period" shall mean that period during which a Variable
Rate is in effect on the Bonds.
"Variable Rate Purchase Date" shall mean while the Bonds bear interest
at the Variable Rate, any Business Day (prior to and upon the effective date of
the Fixed Interest Rate) on which the Bonds may be tendered for purchase at the
option of the owner thereof in accordance with Section 2.3 hereof.
SECTION 1.2 RULES OF CONSTRUCTION.
(a) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders. Unless the
context shall otherwise indicate, the words "Bondowner", "Bondholder",
"Bondholder of Record" and "person" shall include the plural as well as the
singular number; the word "person" shall include any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof, and the word "Bondholder" when used herein with respect to
the Bonds shall mean the registered owner of any of the Bonds.
(b) Words importing the redemption or calling for redemption of the
Bonds shall not be deemed to refer to or connote payment of Bonds at their
stated maturity.
(c) The Table of Contents, captions and headings in this Indenture are
for convenience only and in no way limit the scope or intent of any provision
or section of this Indenture.
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(d) All references herein to particular articles or sections are
references to articles or sections of this Indenture unless some other
reference is indicated.
(e) All references herein to the Code or any particular provision or
section thereof shall be deemed to refer to any successor, or successor
provision or section, thereof, as the case maybe. All references herein to time
shall be prevailing Eastern time.
ARTICLE 2
THE BONDS
SECTION 2.1 AMOUNT, TERMS, AND ISSUANCE OF THE BONDS.
(a) The Bonds shall be limited to $5,200,000 in aggregate principal
amount and shall contain substantially the terms recited in the form of Bond in
Exhibit C and as set forth in this Indenture. No Bonds may be issued under this
Indenture except in accordance with this Article 2. No additional bonds shall
be issued under this Indenture.
(b) The Bonds may bear such endorsement or legend satisfactory to
the Trustee as may be required to conform to usage or law with respect thereto,
including the imposition of CUSIP or other identifying numbers.
(c) Upon satisfaction of the conditions set forth in Section 2.13
hereof, the Issuer shall issue the Bonds, and the Trustee shall, at the
Issuer's request, authenticate the Bonds and deliver them as specified in the
request.
SECTION 2.2 DESIGNATION, DENOMINATIONS, MATURITY DATE AND INTEREST RATES
OF THE BONDS.
(a) DESIGNATION, DENOMINATIONS, MATURITY DATE. The Bonds shall be
designated "$5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand
Bonds, Series 1999." The Bonds shall be issuable as fully registered Bonds in
the denominations of $100,000 or any integral multiple of $5,000 in excess
thereof, provided that if less than One Hundred Thousand Dollars ($100,000)
principal amount of Bonds is outstanding one Bond shall be issued in such
smaller denomination; and provided further, that if as a result of redemption
pursuant to Article 7 hereof the unredeemed portion of a redeemed Bond shall be
less than $100,000 a replacement Bond in the amount of such unredeemed portion
may be issued. All Bonds shall bear the date of their authentication, shall
bear interest from the most recent date to which interest has been paid or duly
provided for, or, if authenticated on an Interest Payment Date, from that date,
or, if no interest has been paid or duly provided for, from the date of
authentication, and shall mature, subject to prior redemption as provided in
Article 7 hereof, on February 1, 2014. The Bonds shall be numbered from "1"
consecutively upwards prefixed by the letter "R".
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(b) INTEREST RATES. The Bonds shall bear interest at the applicable
rate provided below. On each Interest Payment Date, interest accrued through
and including the day immediately preceding such Interest Payment Date shall be
payable by the Issuer. While the Bonds bear interest at a Variable Rate
interest on the Bonds shall be computed on the basis of a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as applicable, for the
number of days actually elapsed. From and including the Conversion Date, and
thereafter, interest on the Bonds shall be computed on the basis of a three
hundred sixty (360) day year for the number of days actually elapsed.
(c) INITIAL INTEREST RATE. For the Initial Rate Period, the Bonds
shall bear interest at the Initial Interest Rate.
(d) VARIABLE RATE. Following the Initial Rate Period and until the
Conversion Date, the Bonds shall bear interest at the Variable Rate. During the
Variable Rate Period, the Remarketing Agent shall determine the interest rate
for the Bonds on each Determination Date. The Remarketing Agent shall give
telephonic notice on the Determination Date to the Trustee and the Issuer of
the interest rate to be in effect for the following Calculation Period. The
determination of the Variable Rate by the Remarketing Agent shall be conclusive
and binding upon the Bondholders, the Issuer, the Trustee, the Tender Agent and
the Remarketing Agent. Any owner may request the Variable Rate in effect from
time to time with respect to the Bonds from the Trustee or the Remarketing
Agent.
(e) FIXED RATE: CONVERSION TO FIXED RATE.
(1) The Issuer at the written direction of the Company has a
one-time option to convert the interest rate payable on the Bonds
from the Variable Rate to the Fixed Rate effective on an Interest
Payment Date following compliance by the Issuer with the provisions
of this Section 2.2(e). The Fixed Rate shall be established after
delivery by the Issuer to the Trustee, the Credit Facility Issuer,
the Tender Agent and the Remarketing Agent of a notice to the
effect that the interest rate on the Bonds shall become fixed on
the Conversion Date specified in such notice, which notice shall
designate the Placement Agent and shall state that a Credit
Facility will not be in effect after the Conversion Date.
(2) At least twenty-five (25) days prior to the proposed
Conversion Date, the Placement Agent shall determine the
Preliminary Fixed Rate as of such date and shall notify the Trustee
and the Issuer of the Preliminary Fixed Rate by telephone,
telecopier, telex, telegram or other telecommunication device and
upon request, shall confirm such notice in writing.
(3) Upon receipt of notice of the Preliminary Fixed Rate, the
Trustee shall, as soon as practicable (but in no event more than
two (2) Business Days thereafter), mail, in the name of the Issuer,
a notice to the owners of the Bonds
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which shall be in the form of the Notice of Conversion attached to
this Indenture as Exhibit A and which shall:
(A) state that the interest rate on the Bonds is being
converted to the Fixed Rate effective on the Conversion Date
and specify the Conversion Date,
(B) state that after the tenth (10th) day preceding the
Conversion Date, the owners shall not be entitled to deliver
Bonds for purchase pursuant to the Optional Tender Provisions
of Section 2.3 hereof,
(C) state the Preliminary Fixed Rate,
(D) state that depending on market conditions, the
Fixed Rate may be higher but in no event lower than the
Preliminary Fixed Rate,
(E) state that payment of the Bonds will not be
supported by a Credit Facility,
(F) state that the rating on the Bonds (if any) may be
reduced or withdrawn on the Conversion Date,
(G) state that all owners who desire to retain such
Bonds must deliver an Optional Retention Notice to the
Trustee by the tenth (10th) day preceding the Conversion Date
(or the next succeeding Business Day if such date is not a
Business Day) or be deemed to have tendered their Bonds for
purchase and must deliver the Bonds to the Trustee on or
before the Conversion Date to be stamped with the legend
contained in Section 2.2(e)(8) hereof,
(H) state that in order to receive payment of the
purchase price of any Bond which is deemed to have been
tendered, the owner of such Bond must deliver such Bond to a
specified office of the Tender Agent before 10:00 a.m.
(prevailing Eastern time) on the Conversion Date.
(4) The Issuer shall provide a Credit Facility in support of
the Bonds to be converted to a Fixed Rate on or prior to the
Conversion Date. Such Credit Facility and an opinion of counsel
providing for the enforceability of such Credit Facility shall be
provided to the Trustee, and such Credit Facility shall have
amounts available thereunder to pay the aggregate principal amount
of the Bonds then Outstanding plus an amount of interest based on
actual rates on the Bonds for at least 200 days.
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(5) Any owner of Bonds to be converted to a Fixed Rate not
providing the Trustee with the Optional Retention Notice shall be
deemed to have tendered its Bonds to the Tender Agent. Said owner
shall not be entitled to any payment (including any interest to
accrue subsequently to the Conversion Date) other than the purchase
price for such Bonds which shall be equal to the unpaid principal
amount of such Bonds, and any such Bonds shall no longer be
entitled to the benefits of this Indenture, except for the purpose
of payment of the purchase price therefor and interest payable on
the Conversion Date. Payment of the purchase price of any such
Bonds shall be made only upon the presentment and surrender of such
Bonds to the Tender Agent. Upon request, the Trustee shall provide
the Tender Agent with the address set forth on the Bond Register
for such owner. The Trustee shall notify the Bond Registrar of all
Bonds with respect to which the Trustee has not received Optional
Retention Notices, which Bonds shall be deemed to be tendered for
purchase on the Conversion Date. In the case of any Bond deemed
tendered, the Issuer shall cause to be executed, and the Trustee
shall authenticate and deliver to the new owner as provided in
Section 3.1 hereof, a new Bond of like date and tenor in lieu of
and in substitution for such Bond deemed to be tendered.
(6) On the Conversion Date, the Fixed Rate shall be
established as follows:
(A) if any of the Bonds have been tendered or deemed
tendered for purchase, then:
(i) if the Placement Agent shall have arranged
for the sale of any or all Tendered Bonds at a price
equal to the principal amount thereof, the Fixed Rate
shall be equal to the interest rate or rates at which
such Bonds were sold by the Placement Agent, provided
that all Tendered Bonds shall be sold at par and at a
rate greater than or equal to the Preliminary Fixed
Rate; or
(ii) if the Placement Agent shall have arranged
for the sale of none of the Tendered Bonds, the Fixed
Rate shall be equal to the Preliminary Fixed Rate; or
(B) if all owners of the Bonds elect to retain such
Bonds, the Fixed Rate shall be equal to the Preliminary Fixed
Rate.
(7) On the Conversion Date, the Placement Agent shall give
written notice to the Trustee of the Fixed Rate and the Trustee
shall give notice of the same as soon as practicable (but in no
event more than two (2) Business Days thereafter) to the owners of
Bonds being converted to bear the Fixed Rate.
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(8) On or before the Conversion Date, all Bonds shall be
presented to the Trustee for stamping thereon of the legend:
"Effective __________, _________, the interest rate on this
Bond has been fixed at ____% per annum in accordance with the
provisions of this Bond and Section 2.2(e) of the Indenture.
There is not a Credit Facility in effect."
All expenses incurred in connection with the Trustee's stamping of
the aforementioned legend on the Bonds shall be paid by the Issuer.
SECTION 2.3 OPTIONAL TENDER PROVISIONS OF THE BONDS.
(a) While the Bonds bear interest at the Variable Rate, any Bond or
portion thereof in an authorized denomination (other than a Bond registered in
the name of the Issuer) shall be purchased on the demand of the owner thereof,
on any Business Day until 10 days prior to the Conversion Date at a purchase
price equal to one hundred percent (100%) of the principal amount thereof plus
interest accrued to the date of purchase, if the owner of such Bond delivers to
the Tender Agent at its address filed with the Trustee an Optional Tender
Notice at least seven (7) days prior to the Variable Rate Purchase Date
specified in such Optional Tender Notice.
(b) Any Optional Tender Notice delivered pursuant to the preceding
subsection shall automatically constitute: (1) an irrevocable offer to sell
such Bond on the Variable Rate Purchase Date at a price equal to one hundred
percent (100%) of the principal amount of such Bond plus interest accrued to
the Variable Rate Purchase Date; and (2) an irrevocable authorization and
instruction to the Bond Registrar to effect transfer of such Bond to the
purchaser thereof on the Variable Rate Purchase Date. No purchase of Bonds
pursuant to the provisions of this Section 2.3 shall be deemed a redemption
thereof.
(c) Any owner who delivers an Optional Tender Notice pursuant to
this Section 2.3 shall deliver such Bond to the Tender Agent, at its address
filed with the Trustee, not less than five (5) days prior to the Variable Rate
Purchase Date specified in the aforesaid Optional Tender Notice; provided,
however, that any Bond owner which is an investment company registered under
the Investment Company Act of 1940 may deliver Bonds owned by it to the Tender
Agent at its address filed with the Trustee, at or prior to 10:00 am. on the
Variable Rate Purchase Date. All Bonds delivered to the Tender Agent pursuant
to this Section 2.3 must be duly endorsed for transfer in blank in form
satisfactory to the Trustee.
(d) If a Bondholder who gives the Optional Tender Notice shall fail
to deliver the Bond or Bonds identified in the Optional Tender Notice to the
Tender Agent at or prior to 10:00 am. on the Variable Rate Purchase Date, such
Undelivered Bond shall be deemed purchased and shall cease to accrue interest
on such Variable Rate Purchase Date and the owner thereof shall thereafter be
entitled only to payment of the purchase price therefor and not to the benefits
of this Indenture, and the Issuer, to the extent permitted by law, shall
execute and the
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Trustee or the Authenticating Agent shall authenticate and deliver a substitute
Bond or Bonds in lieu of the Undelivered Bond and the Bond Registrar shall
register such Bond in the name of the purchaser or purchasers thereof pursuant
to Section 2.5 hereof. The Tender Agent shall notify the Trustee and the Bond
Registrar of any Undelivered Bonds. The Trustee shall (1) notify the
Remarketing Agent of such Undelivered Bonds and (2) place a stop transfer
against such Undelivered Bonds until the Undelivered Bonds are properly
delivered to the Tender Agent. Payment of the purchase price of any such
Undelivered Bonds shall be made only upon the presentment and surrender of such
Bonds to the Tender Agent. Upon notice of such delivery, the Bond Registrar
shall make any necessary adjustment to the Bond Register.
(e) Notwithstanding anything to the contrary contained herein, the
rights of the owners to tender Bonds pursuant to this Section 2.3 shall cease
immediately and without further notice from and including the date payment of
the Bonds is accelerated following an Event of Default pursuant to Article 9
hereof.
SECTION 2.4 REGISTERED BONDS REQUIRED: BOND REGISTRAR AND BOND REGISTER.
(a) All Bonds shall be issued in fully registered form. The Bonds
shall be registered upon original issuance and upon subsequent transfer or
exchange as provided in this Indenture.
(b) The Issuer hereby appoints First Union National Bank as its
Bond Registrar in respect of the Bonds. Any person other than the Trustee
undertaking to act as Bond Registrar shall first execute a written agreement,
in form satisfactory to the Trustee, to perform the duties of a Bond Registrar
under this Indenture, which agreement shall be filed with the Trustee and the
Tender Agent.
(c) The Bond Registrar shall act as registrar and transfer agent
for the Bonds. There shall be kept at an office of the Bond Registrar a
register (herein sometimes referred to as the "Bond Register") in which,
subject to such reasonable regulations as the Issuer, the Trustee or the Bond
Registrar may prescribe, there shall be provisions for the registration of the
Bonds and for the registration of transfers of the Bonds. The Issuer shall
cause the Bond Registrar to designate, by a written notification to the
Trustee, a specific office location (which may be changed from time to time,
upon similar notification) at which the Bond Register is kept. In the absence
of a specific designation by the Bond Registrar, the corporate trust office of
the Trustee in Nashville, Tennessee shall be deemed such office in respect of
the Bonds for which the Trustee is acting as Bond Registrar.
SECTION 2.5 TRANSFER AND EXCHANGE.
(a) Upon surrender for transfer of any Bond at the office of the
Bond Registrar, the Issuer shall execute and the Trustee or its Authenticating
Agent shall authenticate and deliver in the name of the transferee or
transferees, on or more new fully registered Bonds of authorized denomination
for the aggregate principal amount which the new owner is entitled to
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receive; provided that if moneys for the purchase of such Bond have been
provided pursuant to a draw under the Credit Facility, such Bond shall not be
transferable to any one other than the Issuer or its assignee or pledgee.
Except for transfers in connection with the purchase of Bonds pursuant to
Section 2.3 hereof and the remarketing thereof pursuant to Section 2.3 hereof
and the remarketing thereof pursuant to Article 3, which shall be effected at
the corporate trust office of the Tender Agent in Nashville, Florida, Bonds
shall be surrendered for transfer at the corporate trust office of the Trustee
in Nashville, Florida. Also, the Issuer shall execute and the Trustee or its
Authenticating Agent shall authenticate and deliver Bonds in lieu of
Undelivered Bonds.
(b) Bonds may be exchanged for other Bonds of any other authorized
denomination, of a like aggregate principal amount, upon surrender of the Bonds
to be exchanged at the principal corporate trust office of the Bond Registrar
or Trustee; provided, however, that in connection with the purchase of Bonds
tendered for purchase and the remarketing thereof pursuant to Article 3 hereof,
Bonds may be exchanged at the principal office of the Tender Agent, or any
office of any agent designated by the Trustee. Whenever any Bonds are so
surrender for exchange, the Issuer shall execute, and the Trustee or its
Authenticating Agent shall authenticate and deliver, the Bonds which the
Bondholder making the exchange is entitled to receive.
(c) All Bonds presented for transfer, exchange, redemption or
payment (if so required by the Issuer, the Bond Registrar or the Trustee) shall
be accompanied by a written instrument or instruments of transfer or
authorization for exchange, in form satisfactory to the Bond Registrar, which
may include a signature guarantee, duly executed by the owner or by his
attorney duly authorized in writing.
d) No service charge shall be made to a Bondholder for any exchange
or transfer of Bonds, but the Issuer or the Bond Registrar may require payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto.
(e) Except in connection with the purchase of Bonds pursuant to
Section 2.3 hereto and the remarketing thereof pursuant to Article 3 hereof,
neither the Issuer nor any Bond Registrar on behalf of the Issuer shall be
required to issue, transfer or exchange any Bond selected for redemption in
whole or in part.
(f) New Bonds delivered upon transfer or exchange shall be valid
obligations of the Issuer, evidencing the same debt as the Bond surrendered,
shall be secured by this Indenture and shall be entitled to all of the security
and benefits hereof to the same extent as the Bonds surrendered.
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SECTION 2.6 EXECUTION.
(a) The Bonds shall be executed by the manual or facsimile
signature of an Issuer Representative, the seal of the Issuer shall be affixed,
imprinted, lithographed or reproduced thereon and the same shall be attested by
the manual or facsimile signature of an officer of the Issuer.
(b) Bonds executed as above provided may be issued and shall, upon
request of the Issuer, be authenticated by the Trustee or the Authenticating
Agent, notwithstanding that any officer signing such Bonds or whose facsimile
signature appears thereon shall have ceased to hold office at the time of
issuance or authentication or shall not have held office at the date of the
Bond.
SECTION 2.7 AUTHENTICATION: AUTHENTICATING AGENT.
(a) No Bond shall be valid for any purpose until the Trustee's
Certificate of Authentication thereon shall have been duly executed as provided
in this Indenture, and such authentication shall be conclusive proof that such
Bond has been duly authenticated and delivered under this Indenture and that
the owner thereof is entitled to the benefit of the trust hereby created
subject to the provisions of Section 2.3(d) and Article 14 hereof.
(b) If the Bond Registrar is other than the Trustee, the Trustee
may appoint the Bond Registrar as an Authenticating Agent with the power to act
on the Trustee's behalf and subject to its direction in the authentication and
delivery of Bonds in connection with transfers and exchanges under Section 2.5
hereof, and the authentication and delivery of Bonds by an Authenticating Agent
pursuant to this Section shall, for all purposes of this Indenture, be deemed
to be the authentication and delivery "by the Trustee". The Trustee shall,
however, itself authenticate all Bonds upon their initial issuance. The
Authenticating Agent may authenticate Bonds in substitution for Undelivered
Bonds. The Authenticating Agent shall be entitled to reasonable compensation
from the Issuer for its services.
(c) Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent shall be the successor of
the Authenticating Agent hereunder, if such successor corporation is otherwise
eligible as a Bond Registrar under Section 2.4 hereof, without the execution or
filing of any further document on the part of the parties hereto or the
Authenticating Agent or such successor corporation.
(d) Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Trustee, the Issuer and the Remarketing
Agent. The Trustee may at any time terminate the agency of any Authenticating
Agent by giving written notice of termination to such Authenticating Agent and
the Issuer. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be
eligible
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under this Section, the Trustee may promptly appoint a successor Authenticating
Agent, shall give written notice of any such appointment to the Issuer, and
shall mail notice of any such appointment to all owners of Bonds as the names
and addresses of such owners appear on the Bond Register.
SECTION 2.8 PAYMENT OF PRINCIPAL AND INTEREST; INTEREST RIGHTS PRESERVED.
(a) The principal and redemption price of any Bond shall be
payable, upon surrender of such Bond, at the office of the Trustee or other
paying agent appointed pursuant to this Indenture. Interest on each Interest
Payment Date shall be payable by check, mailed on the Interest Payment Date to
the address of the person entitled thereto on the Regular Record Date or, if
applicable, the Special Record Date, as such address shall appear in the Bond
Register. While the Bonds bear interest at a Variable Rate, interest shall also
be payable by wire transfer to the account of a member bank of the Federal
Reserve System of any owner of Bonds in the aggregate principal amount of
$1,000,000 or more at the written request (identifying such account by number)
of such owner received by the Trustee at least ten (10) days prior to the
Regular Record Date or Special Record Date.
(b) Interest on any Bond which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the person
in whose name that Bond is registered at the close of business on the Regular
Record Date for such interest.
(c) Any interest on any Bond which is payable, and is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the owner
of such Bonds on the relevant Regular Record Date solely by virtue of such
registered owner having been such record owner on the Regular Record Date, and
such Defaulted Interest shall be paid, pursuant to Section 9.11 hereof, to the
person in whose name the Bond is registered at the close of business on a
Special Record Date to be fixed by the Trustee, such date to be not more than
fifteen (15) nor less than ten (10) days prior to the date of proposed payment.
The Trustee shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first class postage
prepaid, to each Bondholder, at its address as it appears in the Bond Register,
not less than ten (10) days prior to such Special Record Date.
(d) Subject to the foregoing provisions of this Section 2.8, each
Bond delivered under this Indenture, upon transfer of or exchange for or in
lieu of any other Bond shall carry the rights to interest accrued and unpaid,
and to accrue, as such other Bond.
All payments of principal and redemption price of and interest on the
Bonds, whether upon redemption, acceleration, maturity or otherwise, shall be
made first, pursuant to draws under the Credit Facility in accordance with its
terms on the dates when due; second, from Available Moneys on deposit with the
Trustee and not held in trust for the benefit of the owners of the Bonds
pursuant to the provisions of Article 14 hereof, and then from other collected
funds available to the Trustee hereunder for such payments.
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SECTION 2.9 PERSONS DEEMED OWNERS. The Issuer, the Trustee, the Bond
Registrar and the Authenticating Agent may deem and treat the person in whose
name any Bond is registered as the absolute owner thereof (whether or not such
Bond shall be overdue and notwithstanding any notation of ownership or other
writing thereon made by anyone other than the Issuer, the Trustee, the Bond
Registrar or the Authenticating Agent) for the purpose of receiving payment of
or on account of the principal of (and premium, if any, on), and (subject to
Section 2.8 hereof) interest on such Bond, and for all other purposes, and
neither the Issuer, the Trustee, the Bond Registrar, nor the Authenticating
Agent shall be affected by any notice to the contrary. All such payments so
made to any such registered owner, or upon his order, shall be valid and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Bond.
SECTION 2.10 MUTILATED, DESTROYED, LOST, STOLEN OR UNDELIVERED BONDS.
(a) If any Bond shall become mutilated, the Issuer shall execute,
and the Trustee or its Authenticating Agent shall thereupon authenticate and
deliver, a new Bond of like tenor and denomination in exchange and substitution
for the Bond so mutilated, but only upon surrender to the Trustee of such
mutilated Bond for cancellation, and the Issuer and the Trustee may require
reasonable indemnity therefor. If any Bond shall be reported lost, stolen or
destroyed, evidence as to the loss, theft or destruction thereof shall be
submitted to the Issuer and the Trustee; and if such evidence shall be
satisfactory to both and indemnity satisfactory to both shall be given, the
Issuer shall execute, and thereupon the Trustee or its Authenticating Agent
shall authenticate and deliver, a new Bond of like tenor and denomination. The
cost of providing any substitute Bond under the provisions of this Section
shall be borne by the Bondholder for whose benefit such substitute Bond is
provided. If any such mutilated, lost, stolen or destroyed Bond shall have
matured or be about to mature, the Issuer may, with the consent of the Trustee,
pay to the owner the principal amount of such Bond upon the maturity thereof
and the compliance with the aforesaid conditions by such owner, without the
issuance of a substitute Bond therefor.
(b) The Issuer shall execute and the Trustee or its Authenticating
Agent shall authenticate and deliver a substitute Bond in lieu of each
Undelivered Bond.
(c) Every substituted Bond issued pursuant to this Section 2.10
shall constitute an additional contractual obligation of the Issuer, whether or
not the Bond alleged to have been destroyed, lost or stolen shall be at any
time enforceable by anyone, and shall be entitled to all of the benefits of
this Indenture equally and proportionately with any and all other Bonds duly
issued hereunder.
(d) All Bonds shall be held and owned upon the express condition
that the foregoing provisions are, to the extent permitted by law, exclusive
with respect to the replacement or payment of mutilated, destroyed, lost,
stolen or Undelivered Bonds and shall preclude any and all other rights or
remedies.
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SECTION 2.11 TEMPORARY BONDS. Pending preparation of definitive Bonds, or
by agreement with the purchasers of all Bonds, the Issuer may issue, and, upon
its request, the Trustee shall authenticate, in lieu of definitive Bonds one or
more temporary printed or typewritten Bonds of substantially the tenor recited
above in any denomination authorized under Section 2.2 hereof. Upon request of
the Issuer, the Trustee shall authenticate definitive Bonds in exchange for and
upon surrender of an equal principal amount of temporary Bonds. Until so
exchanged, temporary Bonds shall have the same rights, remedies and security
hereunder as definitive Bonds.
SECTION 2.12 CANCELLATION OF SURRENDERED BONDS. Bonds surrendered for
payment, redemption, transfer or exchange and Bonds surrendered to the Trustee
by the Issuer for cancellation shall be canceled by the Trustee and a
certificate evidencing such cancellation shall be furnished by the Trustee to
the Issuer. Bonds purchased pursuant to Section 2.3 hereof shall not be
surrendered Bonds and, unless otherwise specifically provided in this
Indenture, shall be Outstanding Bonds.
SECTION 2.13 CONDITIONS OF ISSUANCE.
(a) Prior to or simultaneously with the authentication and delivery
of the Bonds by the Trustee, the Trustee shall have received notice that the
conditions for the issuance of the Letter of Credit as set forth in Article 7
of the Credit Agreement have been satisfied and there shall be filed with the
Trustee such documents, certificates and opinions as the Trustee may require,
including, the following: (i) A copy, certified by the Issuer Representative,
of written evidence of the Issuer authorizing the issuance of the Bonds,
awarding the Bonds and directing the authentication and delivery of the Bonds
to or upon the order of the purchaser(s) therein named upon payment of the
purchase price therein set forth.
(1) Executed counterparts of this Indenture, the Letter of
Credit, the Credit Agreement, the Tender Agency Agreement and the
Remarketing Agreement.
(2) An opinion of Counsel to the Issuer to the effect that the
execution and delivery of the Indenture, the Credit Agreement, the
Remarketing Agreement and the Tender Agency Agreement have been
duly authorized by the Issuer, that the Indenture, the Credit
Agreement, the Remarketing Agreement and the Tender Agency
Agreement have been duly executed and delivered by the Issuer, and
that the Indenture, the Credit Agreement, the Remarketing Agreement
and the Tender Agency Agreement, assuming due authorization,
execution and delivery thereof by the other parties thereto, if
any, are valid, binding and enforceable against the Issuer in
accordance with their terms, subject to the qualification that
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and by the exercise of judicial
discretion in accordance with general equitable principles.
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(3) An opinion of Counsel to the Issuer, to the effect that the
issuance of the Bonds has been duly and validly authorized by the
Issuer, that all conditions precedent to the delivery of the Bonds
have been fulfilled and that the Bonds are valid and binding
agreements of the Issuer enforceable in accordance with their
terms, subject to the qualification that enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally
and by the exercise of judicial discretion in accordance with
general equitable principles.
(4) A written request and authorization of the Issuer addressed
to the Trustee directing the Trustee to authenticate and deliver
the Bonds.
(5) Such other documents as the Trustee may reasonably require.
(b) When the documents mentioned in paragraphs (1) through (5) of
subsection (a) of this Section shall have been filed with the Trustee and when
the Bonds shall have been executed as required by this Indenture, the Trustee
shall authenticate the Bonds and deliver them to or upon the order of the party
so designated by the Issuer, but only upon payment to the Trustee for the
account of the Issuer of the purchase price of the Bonds. The Trustee shall be
entitled to rely conclusively upon such resolution or resolutions, or document
approved thereby, as to the name of the purchasers and the amount of such
purchase price.
(c) Simultaneously with the delivery of the Bonds, the Trustee
shall apply the proceeds of the Bonds in accordance with Article 4 of this
Indenture.
SECTION 2.14 BOOK ENTRY. The Issuer shall enter into an agreement (the
"Book Entry Agreement") with DTC, or any successor thereto, or other securities
depository, and make such other provision and perform such further acts as are
necessary or appropriate to provide for the distribution of the Bonds in
book-entry form.
Neither the Issuer, the Trustee, nor the Paying Agent will have any
responsibility or obligations to the DTC Participants, DTC Indirect
Participants (as each is defined in the Book Entry Agreement) or the beneficial
owners with respect to (i) the accuracy of any records maintained by DTC or any
DTC Participant or DTC Indirect Participant; (ii) the payment by DTC or any DTC
Participant or DTC Indirect Participant of any amount due to any beneficial
owner in respect of the principal amount or redemption price of or interest on
the Bonds; (iii) the delivery by DTC or any DTC Participant or DTC Indirect
Participant of any notice to any beneficial owner that is required or permitted
to be given to bondholders under the terms of the Indenture; (iv) the selection
of the beneficial owners to receive payment in the event of any partial
redemption of the Bonds; or (v) any consent given or other action taken by DTC
as registered owner.
The Trustee shall issue Bonds directly to beneficial owners of Bonds upon
receipt by it of a written listing of all beneficial owners of the Bonds, such
listing to include the name, address
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and taxpayer identification number of each such beneficial owner of the Bonds,
other than DTC, or its nominee, in the event that:
(1) DTC determines not to continue to act as securities
depository for the Bonds; or
(2) The Trustee has advised DTC at the request of the Issuer of
the Issuer's determination that DTC is incapable of discharging its duties; or
(3) The Issuer determines that it is in its best interest not
to continue the book-entry system or that the interests of the beneficial
owners of the Bonds might be adversely affected if the book-entry system is
continued.
Upon occurrence of the events described in (1) or (2) above, the Issuer
shall attempt to locate another qualified securities depository.
In the event the Issuer makes the determination noted in (3) above, or if
the Issuer fails to locate another qualified securities depository to replace
DTC upon occurrence of the events described in (1) or (2) above, the Trustee
shall mail a notice to DTC for distribution to the beneficial owners of the
Bonds stating that DTC will no longer serve as securities depository, whether a
new securities depository will or can be appointed, the procedures for
obtaining such Bonds and the provisions of this Indenture which govern the
Bonds including, but not limited to, provisions regarding authorized
denominations, transfer and exchange, principal and interest payment and other
related matters.
ARTICLE 3
PURCHASE AND REMARKETING OF TENDERED BONDS
SECTION 3.1 REMARKETING OF TENDERED BONDS.
(a) Not later than the close of business on the date the Tender
Agent receives an Optional Tender Notice, the Tender Agent shall notify the
Remarketing Agent, the Trustee and the Issuer by telephone, telex or
telecopier, confirmed in writing if requested, specifying the Variable Rate
Purchase Date and the aggregate principal amount of Bonds to be purchased on
such Variable Rate Purchase Date.
(b) Not later than the close of business on the ninth (9th) day
prior to the Conversion Date, the Trustee shall notify the Placement Agent and
the Issuer by telephone, telex or telecopier, confirmed in writing if
requested, specifying the aggregate principal amount of Bonds tendered or
deemed tendered for mandatory purchase on the Conversion Date.
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(c) Except as provided in subsection (d) below and Section 3.5
hereof, upon receipt by the Remarketing Agent of notice from the Tender Agent
pursuant to Section 3.1(a) hereof and by the Placement Agent of notice from the
Trustee pursuant to Section 3.1(b) hereof, the Remarketing Agent or the
Placement Agent, as the case may be, shall use its best efforts to arrange for
the sale, at par plus accrued interest, if any, of such Bonds tendered or
deemed tendered for settlement on the Variable Rate Purchase Date or the
Conversion Date, respectively. At or before 3:00 p.m. on the Business Day
immediately preceding the Variable Rate Purchase Date or the Conversion Date,
the Remarketing Agent or the Placement Agent, respectively, shall give notice
by telephone, telecopier or telex, promptly confirmed in writing if requested,
to the Trustee and the Tender Agent specifying the principal amount of such
Bonds, if any, to be placed by it and to the Trustee the names, addresses,
denominational breakdown of the Bonds and social security numbers or other tax
identification numbers of the proposed purchasers thereof.
(d) Notwithstanding the provisions of subsection (c) above, any
Bond purchased pursuant to the terms of this Indenture from the date notice of
redemption or conversion is given shall not be remarketed except to a buyer who
agrees at the time of such purchase to tender such Bond for redemption or
purchase on the redemption or purchase date.
(e) During the Variable Rate Period, the Remarketing Agent shall
continue to use its best efforts to arrange for the sale, at the best price
available, but not less than the principal amount thereof plus accrued
interest, of any Bonds purchased with moneys advanced under the Credit Facility
pursuant to Section 3.2(a)(2) hereof, provided that Bonds purchased with moneys
advanced under the Credit Facility shall not be released for delivery to the
purchasers unless the Credit Facility has been reinstated by the amount drawn
thereunder to pay the purchase price for such Bonds and the Trustee has
received the executed reinstatement certificate required to be delivered by
such Credit Facility Issuer. The Trustee agrees to advise the Tender Agent
immediately upon receipt of such reinstatement certificate.
SECTION 3.2 PURCHASE OF BONDS DELIVERED TO THE TENDER AGENT.
(a) There is hereby established with the Tender Agent a "Bond
Purchase Fund" out of which the purchase price for Bonds tendered for purchase
on a Variable Rate Purchase Date, the Conversion Date or on such other date on
which Bonds are remarketed shall be paid. There are hereby established in the
Bond Purchase Fund two separate and segregated accounts, to be designated the
"Remarketing Account" and the "Bank Account". Funds received from purchasers of
Tendered Bonds (other than the Issuer or the Credit Facility Issuer) shall be
deposited by the Remarketing Agent or the Placement Agent, as the case may be,
in the Remarketing Account. At or prior to 10:00 am. on each Variable Rate
Purchase Date or the Conversion Date, the Remarketing Agent or the Placement
Agent, as the case may be, shall deliver to the Tender Agent for deposit in the
Remarketing Account of the Bond Purchase Fund immediately available funds,
payable to the order of the Tender Agent, in an amount equal to the purchase
price of the Bonds to be delivered to the Tender Agent that have been
remarketed by the Remarketing Agent or placed by the Placement Agent as
specified in the notice delivered pursuant to Section 3.1(c) hereof. Funds, if
any, drawn by the Trustee under the Credit Facility
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pursuant to Section 3.2(b) below in an amount equal to the aggregate purchase
price of Bonds tendered for purchase less the amount available in the
Remarketing Account shall, at the direction of the Trustee, be delivered by the
Credit Facility Issuer to the Tender Agent for deposit in the Bank Account of
the Bond Purchase Fund. On each Variable Rate Purchase Date and on the
Conversion Date, the Tender Agent shall effect the purchase, but only from the
funds listed below, of such Bonds from the owners thereof at a purchase price
equal to the principal amount thereof, plus interest accrued, if any, to the
date of purchase and such payment shall be made in immediately available funds.
Funds from the payment of such purchase price shall be derived from the
following sources in the order of priority indicated:
(1) proceeds of the remarketing of such Bonds pursuant to
Section 3.1(c) hereof which constitute Available Moneys;
(2) moneys furnished by the Trustee to the Tender Agent
representing proceeds of a drawing by the Trustee under the Credit
Facility; and
(3) any other moneys available for such purposes.
(b) The Tender Agent shall advise the Trustee by telex or
telecopier and shall advise the Credit Facility Issuer and the Issuer by
telephone, in each case, no later than 10:30 a.m. on each Variable Rate
Purchase Date or the Conversion Date, as the case may be, of the amount of any
drawing under the Credit Facility necessary to make full and timely payments
hereunder. The Trustee shall promptly (and in no event later than 11:00 a.m.)
take all action necessary to draw on the Credit Facility the specified amount.
All amounts received by the Trustee from a drawing under the Credit Facility
shall be transferred to the Tender Agent and held by the Tender Agent in the
Bank Account pending application of such moneys as provided in this Article 3.
Immediately after drawing on the Credit Facility, the Trustee shall provide to
the Tender Agent such funds referred to in paragraph (2) of Section 3.2(a)
prior to the time the Tender Agent is required to apply such funds to effect
the purchase of Bonds and shall notify the Tender Agent promptly after receipt
of notice from the Credit Facility Issuer reinstating the Credit Facility. The
Remarketing Agent shall deliver funds from the sale of Bonds by no later than
2:00 p.m. on the Variable Rate Purchase Date or the Conversion Date, held by
the Credit Facility Issuer as pledgee of the Issuer pursuant to Section 3.1(e)
hereof to the Tender Agent for deposit in the Remarketing Account, which funds
shall be promptly paid by the Tender Agent on behalf of the Issuer to the
Credit Facility Issuer as reimbursement under the Credit Agreement. The Tender
Agent shall notify the Trustee of any such reimbursement, and the Trustee shall
promptly deliver to the Credit Facility Issuer any reinstatement certificate
and the form of transfer certificate required by the Credit Facility.
SECTION 3.3 DELIVERY OF PURCHASED BONDS.
(a) Bonds purchased shall be delivered as follows:
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(1) Bonds placed by the Remarketing Agent or the Placement
Agent pursuant to Section 3.1 hereof shall be delivered by the
Tender Agent to the Remarketing Agent or the Placement Agent, as
the case may be, on behalf of the purchasers thereof.
(2) Bonds purchased with moneys described in Section
3.2(a)(2) shall be delivered to the Credit Facility Issuer as
pledgee of the Issuer pursuant to the terms of the Credit Agreement
and the Pledge Agreement or the Credit Facility Issuer designee.
(3) Bonds purchased with excess moneys transferred from the
Project Fund to the Bond Fund pursuant to Section 4.5 hereof or
with draws under the Credit Facility for which the Credit Facility
Issuer has been reimbursed with such excess moneys from the Project
Fund shall be canceled by the Trustee.
(b) Except as otherwise set forth herein, Bonds delivered as
provided in this Section 3.3 shall be registered by the Bond Registrar in the
manner directed by the recipient thereof.
(c) In the event that any Bond to be delivered to the Tender Agent
is not delivered by the owner thereof properly endorsed for transfer on or
prior to the Variable Rate Purchase Date or the Conversion Date, as the case
may be, and there has been irrevocably deposited with the Tender Agent an
amount sufficient to pay the purchase price thereof, which amount may be held
by the Tender Agent in a non-interest bearing account, the Issuer shall execute
and the Trustee or its Authenticating Agent shall authenticate and deliver a
substitute Bond in lieu of the Undelivered Bond and the Bond Registrar shall
register such Bond in the name of the purchaser thereof. Thereafter, interest
on such Undelivered Bond shall cease to accrue, and the holder thereof shall be
entitled only to payment of the purchase price therefor and not to the benefits
of the Indenture.
(d) Notwithstanding the foregoing, Bonds purchased with funds
identified in Section 3.2(a)(2) hereof shall be held by the Credit Facility
Issuer or the Tender Agent and shall not be delivered to subsequent purchasers
thereof or any other person until (i) the Trustee has received notice in
writing from the Credit Facility Issuer that the Credit Facility has been
reinstated to the extent of the purchase price of such Bonds and interest
thereon and (ii) the Trustee has notified the Tender Agent of such
reinstatement.
SECTION 3.4 DELIVERY OF THE PROCEEDS OF THE SALE OF REMARKETED BONDS. The
proceeds of the placement of the Bonds by the Remarketing Agent of any Bonds
delivered to the Tender Agent or by the Placement Agent of Bonds on the
Conversion Date shall be paid first, to the tendering Bondholders of such
Bonds; second, to the Credit Facility Issuer, to the extent of any amounts
drawn under the Credit Facility in connection with the payment of the purchase
price for such Bonds and not reimbursed to the Credit Facility Issuer as of the
time of sale of such Bonds; and third, to the Issuer.
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SECTION 3.5 NO REMARKETING AFTER CERTAIN EVENTS. Anything in this
Indenture to the contrary notwithstanding, there shall be no remarketing of
Bonds pursuant to this Article 3 after the Conversion Date or the principal of
the Bonds shall have been accelerated pursuant to Section 9.2 hereof.
ARTICLE 4
PROJECT FUND
SECTION 4.1 CREATION OF AND DEPOSITS TO THE PROJECT FUND.
(a) A special fund is hereby created and designated "SRI Realty
Trust 1998-1 Taxable Variable Rate Demand Bonds, Series 1999 Project Fund" (the
"Project Fund") to the credit of which such deposits shall be made as are
required by the provisions of this Indenture. Any moneys received by the Issuer
or by the Trustee as trustee under this Indenture from any source for payment
of the Costs of the Project, including all proceeds of the sale of the Bonds,
shall be deposited to the credit of the Project Fund.
(b) The moneys in the Project Fund shall be held by the Trustee in
trust and, subject to the provisions of Section 4.5 and 9.2 of this Indenture,
shall be applied to the payment of the Cost of the Project and, pending such
application, shall be and are hereby made subject to a lien and charge in favor
of the owners of the Bonds issued and outstanding under this Indenture and for
the further security of such owners until paid out or transferred as herein
provided.
SECTION 4.2 PAYMENTS FROM THE PROJECT FUND.
(a) Payment of the Cost of the Project shall be made from the
Project Fund. All payments from the Project Fund shall be subject to the
provisions and restrictions set forth in this Article, and the Issuer covenants
that it will not cause to be paid from the Project Fund any sums except in
accordance with such provisions and restrictions. Such payments shall be made
by the Trustee upon receipt of an appropriately completed requisition and
certificate, signed by the Company Representative and approved by the Credit
Facility Issuer (substantially in the form of the Requisition and Certificate
attached hereto as Exhibit "B" and hereby deemed incorporated herein) stating
to whom the payment described is to be made and the purpose, in reasonable
detail, for which the obligation to make such payment was incurred and
including, if such requisition and certificate comprises an item for payment
for labor or to contractors, buildings or materialmen, a paragraph in the form
of the last paragraph of the attached form of requisition and certificate.
(b) The Trustee is authorized and directed to apply the moneys in
the Project Fund in accordance herewith but only upon receipt of the
requisitions required by this Section 4.2, duly executed by the person and in
the manner provided for herein.
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(c) Interest earnings on the funds deposited in the Project Fund
shall be transferred to the Repayments Account of the Bond Fund.
SECTION 4.3 TRUSTEE MAY RELY ON REQUISITIONS. All requisitions in the
form provided by Section 4.2 hereof and all other statements, orders,
certifications and approvals received by the Trustee, as required by this
Article as conditions of payment from the Project Fund, may be conclusively
relied upon by the Trustee, and shall be retained by the Trustee as provided in
Section 4.6, subject at all reasonable times to examination by the Company, the
Issuer, any Bondholder and the agents and representatives thereof.
SECTION 4.4 TRANSFERS TO THE BOND FUND. In the event that the Issuer
should elect to prepay the Bonds or that the Trustee shall declare the Bonds to
be due and payable pursuant to Section 9.2 hereof, the Trustee shall, without
further authorization, forthwith transfer any balance remaining in the Project
Fund to the Bond Fund.
SECTION 4.5 TRUSTEE'S RECORDS. The Trustee shall maintain adequate
records for a period of at least three (3) years after the Completion Date
pertaining to all disbursements from the Project Fund. After the Completion
Date, the Trustee shall deliver to the Company, and the Issuer upon request a
final accounting.
ARTICLE 5
AMOUNTS AND APPLICATION THEREOF
SECTION 5.1 AMOUNTS TO BE PAID OVER TO TRUSTEE. The Issuer hereby
covenants to (i) pay directly to the Trustee, all amounts due on the Bonds and
the Indenture and (ii) to cause payments under the Credit Facility with respect
to the principal or redemption price of or interest on the Bonds to be paid to
the Trustee.
SECTION 5.2 THE BOND FUND.
(a) There is hereby established with the Trustee a special fund to
be designated "SRI Realty Trust 1998-1 Taxable Variable Rate Demand Bonds,
Series 1999 Bond Fund" (the "Bond Fund"), the moneys in which, in accordance
with Section 5.2(c) hereof, the Trustee shall apply to (1) the principal or
redemption price of Bonds as they mature or become due, upon surrender thereof,
and (2) the interest on Bonds as it becomes payable. There are hereby
established with the Trustee within the Bond Fund two separate and segregated
accounts, to be designated the "Repayments Account" and the "Credit Facility
Account".
(b) There shall be deposited into the various accounts of the Bond
Fund from time to time the following:
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(1) into the Repayments Account, moneys received by the
Trustee under and pursuant to the provisions of this Indenture. All
amounts deposited in the Repayments Account shall be segregated and
held, with the earnings thereon, separate and apart from other
funds in the Bond Fund until such amounts become Available Moneys.
At such time as funds deposited in the Repayments Account become
Available Moneys, they may be commingled with other Available
Moneys in the Repayments Account; and
(2) into the Credit Facility Account, all moneys drawn by the
Trustee under the Credit Facility to pay principal or redemption
price (excluding any premium) of the Bonds and interest on the
Bonds.
(c) Except as provided in Section 9.11 hereof, moneys in the Bond
Fund shall be used solely for the payment of the principal or redemption price
of the Bonds and interest on the Bonds from the following source or sources but
only in the following order of priority:
(1) moneys held in the Credit Facility Account, provided that
in no event shall moneys held in the Credit Facility Account be
used to pay any amounts due on Bonds which are held by or for the
Issuer, including without limitation, Bonds pledged to the Credit
Facility Issuer, or to pay any portion of the redemption premium
required pursuant to Section 7.1(a)(2) hereof, and
(2) moneys held in the Repayments Account to the extent such
amounts qualify as Available Moneys (except with respect to moneys
paid on Bonds that are held by or for the Issuer, including without
limitation, Bonds pledged to the Credit Facility Issuer, which
moneys need not qualify as Available Moneys).
(d) Not later than 10:00 A.M. on the third (3rd) Business Day
preceding the date on which principal or redemption price of or interest on the
Bonds is due and payable whether by acceleration, maturity or on an Interest
Payment Date (the "Payment Date"), the Trustee shall have notified the Issuer
and the Credit Facility Issuer of the amounts of principal and interest due on
the Bonds on the Payment Date. Not later than 9:30 A.M. on each Payment Date,
the Trustee shall present a draft or drafts under the Credit Facility in the
amounts due and payable on the Bonds. Such funds shall be wired by the Credit
Facility Issuer to the Trustee to be credited to the Credit Facility Account
and payments due under the Bonds shall be made by the Trustee in accordance
with Section 2.8 and Section 5.2(c) hereof. Following such payment to the
Bondholders, the Trustee shall, on behalf of the Issuer, promptly pay moneys on
deposit in the Repayments Account in an amount equal to the amounts of such
drawing or drawings to the Bank as Credit to the Credit Facility Issuer under
the terms of the Credit Agreement. If no amounts are owed by the Issuer to the
Credit Facility Issuer under the Credit Agreement, any amounts remaining in the
Repayments Account on the Business Day immediately following a Payment Date
shall be paid to the Issuer upon request with the consent of the Credit
Facility Issuer.
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SECTION 5.3 AMOUNTS TO BE HELD FOR ALL BONDHOLDERS; CERTAIN EXCEPTIONS.
Revenues shall, until applied as provided in this Indenture, be held by the
Trustee in trust for the benefit of the owners of all Outstanding Bonds, except
that any portion of the Revenues representing principal or redemption price of
any Bonds, and interest on any Bonds previously matured or called for
redemption in accordance with Article 7 of this Indenture, shall be held for
the benefit of the owners of such Bonds only.
ARTICLE 6
DEPOSITARIES OF MONEYS; SECURITY FOR
DEPOSITS AND INVESTMENT OF FUNDS
SECTION 6.1 SECURITY FOR DEPOSITS. All moneys deposited with the Trustee
under the provisions of this Indenture shall be held in trust and applied only
in accordance with the provisions of this Indenture and shall not be subject to
lien (other than the lien created hereby) or attachment by any creditor of the
Trustee or the Issuer.
SECTION 6.2 INVESTMENT OF MONEYS.
(a) At the written request and the direction of the Issuer
Representative, moneys held for the credit of the Project Fund and the Bond
Fund (including any amount therein) shall be invested and reinvested by the
Trustee in Investment Obligations which shall mature not later than the
respective dates when the moneys held for the credit of said funds will be
required for the purposes intended, provided that moneys held in the Credit
Facility Account of the Bond Fund shall be invested and reinvested by the
Trustee only in Governmental Obligations which shall mature not later than the
date on which such moneys will be required to be paid; provided further that
such investments shall only be made at the written direction of the Issuer
Representative. The Trustee shall be entitled to rely on written instruction
from the Issuer Representative. Under no circumstances whatsoever shall the
Trustee be liable to the Issuer or any holder for any claims, demands, damages,
liabilities, losses, costs or expenses resulting therefrom or in any way
connected therewith, so long as the Trustee acts only in accordance with the
written directions of the Issuer as provided hereunder.
(b) Obligations so purchased as an investment of moneys in any such
fund or account shall be deemed at all times to be a part of such fund or
account, and the interest accruing thereon and any profit realized from such
investment shall be credited to such fund or account, and any loss resulting
from such investment shall be charged to such fund or account. The Trustee
shall sell at market price or present for redemption any obligation so
purchased whenever it shall be necessary so to do in order to provide cash to
meet any payment or transfer from any such fund or account. Neither the Trustee
nor the Issuer shall be liable or responsible for loss resulting from any such
investment or the sale of any such investment made pursuant to the terms of
this Section.
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(c) For the purpose of the Trustee's determination of the amount on
deposit to the credit of any such fund or account, obligations in which moneys
in such fund or account have been invested shall be valued at the lower of cost
or market.
(d) The Trustee may make any and all investments permitted by this
Section through its own bond or investment department, unless otherwise
directed in writing by the Issuer Representative.
SECTION 6.3 THE CREDIT FACILITY.
(a) INITIAL LETTER OF CREDIT.
(1) The Letter of Credit shall be a direct pay letter of
credit and shall provide for direct payments to or upon the order
of the Trustee as hereinafter set forth and shall be the
irrevocable obligation of the Bank to pay to or upon the order of
the Trustee, upon request and in accordance with the terms thereof,
an amount of up to $5,460,000 of which (A) $5,200,000 shall support
the payment of principal of the Bonds when due and that portion of
the purchase price corresponding to principal of Tendered Bonds not
remarketed on any Variable Rate Purchase Date or sold on the
Conversion Date, and (B) $260,000 shall support the payment of up
to one hundred and twenty (120) days' interest at an assumed rate
of fifteen percent (15%) per annum (which is the maximum rate of
interest borne by the Bonds) on the Bonds when due and that portion
of the purchase price corresponding to interest on Tendered Bonds
not remarketed on any Variable Rate Purchase Date or sold on the
Conversion Date.
(2) The Letter of Credit shall terminate automatically on the
earliest of (A) the date on which a drawing under the Letter of
Credit has been honored upon the maturity or acceleration of the
Bonds or redemption of all the Bonds, (B) the day on which the
Credit Facility Issuer receives the notice of the conversion from
the Issuer following the Conversion Date, (C) the date on which the
Bank receives notice from the Trustee that an Alternate Credit
Facility is substituted for the Letter of Credit and is in effect,
(D) the date on which the Bank receives notice from the Trustee
that there are no longer any Bonds Outstanding and (E) the
"Expiration Date" stated in the Letter of Credit as it may be
extended pursuant to the terms thereof.
(3) The Bank's obligation under the Letter of Credit may be
reduced to the extent of any drawing thereunder, subject to
reinstatement as provided therein. The Letter of Credit shall
provide that, with respect to a drawing by the Trustee solely to
pay interest on the Bonds on any Interest Payment Date, if the
Trustee shall not have received from the Bank within ten (10) days
from the date of such drawing a notice by telecopier, by telex or
in writing that the Bank has not been reimbursed, the Trustee's
right to draw under the Letter of Credit
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with respect to the payment of interest shall be reinstated on or
before the eleventh (11th) calendar day following such drawing in
an amount equal to such drawing. With respect to any other drawing
by the Trustee, the amount available under the Letter of Credit for
payment of the purchase price of the Bonds and the principal and
interest on the Bonds shall be reinstated in an amount equal to any
such drawing but only to the extent' that the Bank is reimbursed in
accordance with the terms of the Credit Agreement for the amounts
so drawn and the Bank delivers a notice to the Trustee reinstating
the Letter of Credit in such amount.
(4) The Letter of Credit shall provide that if, in accordance
with the terms of the Indenture, the Bonds shall become or be
declared immediately due and payable pursuant to any provision of
the Indenture, the Trustee shall be entitled to draw on the Letter
of Credit to the extent that the amounts are available thereunder
to pay the aggregate principal amount of the Bonds then Outstanding
plus an amount of interest not to exceed one hundred and twenty
(120) days.
(5) Upon the termination of the Letter of Credit, the Trustee
shall return the Letter of Credit to the Bank, marked "CANCELED" on
its face.
(b) EXPIRATION. Unless an Alternate Credit Facility has been
provided to the Trustee in accordance with Section 6.3(c) hereof at least
twenty (20) days before the Interest Payment Date immediately preceding the
fifteenth (15th) day prior to the expiration date of a Credit Facility or
unless the interest rate payable on the Bonds has been converted from the
Variable Rate to the Fixed Rate pursuant to Section 2.2 hereof, the Trustee
shall call the Bonds for redemption in accordance with the Section 7.1 (c)(1)
hereof. If at any time there shall cease to be any Bonds Outstanding hereunder,
the Trustee shall promptly surrender the then current Credit Facility to the
Credit Facility Issuer for cancellation. The Trustee shall comply with the
procedures set forth in the Credit Facility relating to the termination
thereof.
(c) ALTERNATE CREDIT FACILITIES. While the Bonds bear interest at
the Variable Rate or at the Fixed Rate, the Issuer may, at its option, provide
for the delivery to the Trustee of an Alternate Credit Facility. The Alternate
Credit Facility shall have terms in all respects material to the owners of the
Bonds the same as the Credit Facility being replaced and shall be in form
acceptable to the Trustee and the Tender Agent. On or prior to the date of
delivery of an Alternate Credit Facility to the Trustee, the Issuer shall
furnish to the Trustee:
(1) an opinion of Counsel stating that the delivery of such
Alternate Credit Facility to the Trustee is authorized under this
Indenture and complies with the terms hereof and that such
Alternate Credit Facility is enforceable against the Credit
Facility Issuer thereof in accordance with its terms, and
(2) if the Bonds are rated by Moody's or S&P, written
evidence from Moody's, if the Bonds are rated by Moody's, and from
S&P, if the Bonds are rated by S&P, in each case to the effect that
such rating agency has reviewed the
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proposed Alternate Credit Facility and that the substitution of the
proposed Alternate Credit Facility for the then current Credit
Facility will not, by itself, result in:
(A) a permanent withdrawal of its rating of the Bonds,
or
(B) a reduction of the then current rating of the Bonds,
or if the Bonds are not rated by Moody's or S&P, written evidence
(or such other evidence satisfactory to the Trustee in its sole
discretion) that the obligations of the bank or institution issuing
the proposed Alternate Credit Facility substantially equivalent in
term to the remaining term of the Bonds are rated by Moody's or S&P
in the same category as the obligations of substantially equivalent
term of the bank or institution which issued the Credit Facility
being replaced.
The Trustee shall then accept such Alternate Credit Facility and surrender the
previously held Credit Facility to the previous Credit Facility Issuer for
cancellation promptly on or before the fifteenth (15th) day after the Alternate
Credit Facility becomes effective, but not later than the fifteenth (15th) day
following the last Interest Payment Date or Conversion Date covered by the
Credit Facility to be canceled.
(d) NOTICES OF SUBSTITUTION OR REPLACEMENT OF CREDIT FACILITY.
(1) The Trustee shall, at least twenty (20) days prior to the
proposed replacement date of a Credit Facility with an Alternate
Credit Facility, give notice thereof by mail to the owners of the
Bonds, which notice shall include the identity of the issuer
thereof and the rating, if any, to be assigned to the Bonds by
Moody's or S&P following the effective date of such Alternate
Credit Facility or, if the Bonds are not then rated by Moody's or
S&P, then the rating assigned by Moody's or S&P to the obligations
of the issuer of such Alternate Credit Facility substantially
equivalent in term to the remaining term of the Bonds.
(2) The Trustee shall promptly give notice of any replacement
of the Credit Facility to the Issuer, the Tender Agent and the
Remarketing Agent.
ARTICLE 7
REDEMPTION OR PURCHASE OF THE BONDS
SECTION 7.1 REDEMPTION OR PURCHASE DATES AND PRICES. The Bonds shall be
subject to redemption, and, in certain instances, to purchase, prior to
maturity in the amounts, at the times and in the manner provided in this
Article 7. Payments of the redemption price or the purchase price of any Bond
shall be made only upon the surrender to the Trustee or its agent, as directed,
of any Bond so redeemed or purchased.
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(a) OPTIONAL REDEMPTION.
(1) Optional Redemption During Variable Rate Period. While
the Bonds bear interest at the Variable Rate, the Bonds shall be
subject to redemption, upon the written direction of the Issuer,
with the consent of the Credit Facility Issuer, which consent shall
not be unreasonably withheld, on any Interest Payment Date and on
the Conversion Date in whole or in part, at a redemption price of
one hundred percent (100%) of the principal amount thereof, without
premium, plus interest accrued to the redemption date.
(2) Optional Redemption With Premium During Fixed Rate
Period. While the Bonds bear interest at the Fixed Rate, the Bonds
shall be subject to redemption upon the written direction of the
Issuer, in whole on any date, or in part on any Interest Payment
Date, occurring on or after the dates set forth below, at the
redemption prices (expressed as percentages of principal amount to
be redeemed) set forth below plus interest accrued to the
redemption date as follows:
<TABLE>
<CAPTION>
Commencement of
Redemption Period Redemption Price
----------------- ----------------
<S> <C>
The Business Day four 103% declining by
(4) years from 1/2% on each succeeding
the Conversion Date anniversary date of the
first day of the
redemption period until
reaching 100% and thereafter
at 100%
</TABLE>
(b) MANDATORY PURCHASE ON CONVERSION DATE. The Bonds shall be
subject to mandatory purchase in whole on the Conversion Date at a
purchase price equal to one hundred percent (100%) of the principal
amount thereof, without premium, plus interest accrued, if any, thereon
to the date of purchase, on the Conversion Date; provided that there
shall not be so purchased (1) Bonds or portions thereof in authorized
denominations with respect to which the Trustee shall have received
Optional Retention Notices from the owners thereof, and (2) Bonds issued
in exchange for or upon the registration of transfer of Bonds or portions
thereof in authorized denominations referred to in (1) above. Purchases
under this Section 7.1(b) shall be in accordance with Section 2.2(e)
hereof.
SECTION 7.2 ISSUER TO DIRECT OPTIONAL REDEMPTION. The Issuer shall direct
the Trustee in writing to call Bonds for optional redemption. Such direction
from the Issuer to the Trustee shall be given at least forty-five (45) days but
not more than sixty (60) days prior to the redemption date or such shorter
period as shall be acceptable to the Trustee. So long as a Credit Facility is
then held by the Trustee, the Trustee shall only call Bonds for optional
redemption if it
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has Available Moneys in the Repayments Account of the Bond Fund or has been
notified by the Credit Facility Issuer that it will receive moneys pursuant to
the Credit Facility, in the aggregate, sufficient to pay the redemption price
of the Bonds to be called for redemption, plus accrued interest thereon. No
optional redemptions shall be effected at the option of the Issuer during the
Variable Rate Period under this Article 7 without the prior written consent of
the Credit Facility Issuer.
SECTION 7.3 SELECTION OF BONDS TO BE CALLED FOR REDEMPTION. Except as
otherwise provided herein or in the Bonds, if less than all the Bonds are to be
redeemed, the particular Bonds to be called for redemption shall be selected in
the following order of priority: first, Bonds pledged to the Bank pursuant to
the Pledge Agreement, second, Bonds owned by the Issuer and third, Bonds
selected by any random or other method determined by the Trustee in its sole
discretion to be fair and reasonable. The Trustee shall treat any Bond of a
denomination greater than One Hundred Thousand Dollars ($100,000) as
representing that number of separate Bonds each of the denomination of the
minimum denomination of One Hundred Thousand Dollars ($100,000) or any integral
multiple of Five Thousand Dollars ($5,000) in excess thereof as the Trustee
shall so determine.
SECTION 7.4 NOTICE OF REDEMPTION OR PURCHASE.
(a) When required to redeem or purchase Bonds under any provision
of this Article 7, or when directed to do so by the Issuer, the Trustee shall
cause notice of the redemption or purchase to be given not more than sixty (60)
days and not less than thirty (30) days prior to the redemption or purchase
date by mailing a copy of all notices of redemption or purchase by first class
mail, postage prepaid, to all registered owners of Bonds to be redeemed or
purchased at their addresses shown on the Bond Register. Failure to mail any
such notice or defect in the mailing thereof in respect of any Bond shall not
affect the validity of the redemption or purchase of any other Bond. Notices of
redemption or purchases shall also be mailed to the Remarketing Agent and the
Credit Facility Issuer, if any. Any such notice shall be given in the name of
the Issuer, shall identify the Bonds to be redeemed or purchased (and, in the
case of partial redemption or purchase of any Bonds, the respective principal
amounts thereof to be redeemed or purchased), shall specify the redemption or
purchase date, and shall state that on the redemption or purchase date, the
redemption or purchase price of the Bonds called for redemption or purchase
will be payable at the principal corporate trust office of the Trustee, or in
the case of mandatory redemptions or purchase pursuant to Section 7.1(b) hereof
at the office of the Trustee's Paying Agent, if any, and that from that date
interest will cease to accrue. The Trustee may use "CUSIP" numbers in notices
of redemption or purchase as a convenience to Bondholders, provided that any
such notice shall state that no representation is made as to the correctness of
such numbers either as printed on the Bonds or as contained in any notice of
redemption or purchase and that reliance may be placed only on the
identification numbers containing the prefix established under the Indenture.
(b) If at the time of mailing of notice of any optional redemption
the Issuer shall not have deposited with the Trustee moneys sufficient to
redeem all the Bonds called for
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<PAGE> 45
redemption, such notice may state that it is conditional on the deposit of
Available Moneys with the Trustee not later than the redemption date, and such
notice shall be of no effect unless such moneys are so deposited.
(c) Upon redemption of less than all of the Bonds, the Trustee
shall furnish to the Credit Facility Issuer a notice in the form specified by
the Credit Facility Issuer to reduce the coverage provided by the Credit
Facility and upon redemption of all of the Bonds, the Trustee shall surrender
the Credit Facility to the Credit Facility Issuer for cancellation.
SECTION 7.5 BONDS REDEEMED OR PURCHASED IN PART. Any Bond which is to be
redeemed or purchased only in part shall be surrendered at a place stated in
the notice provided for in Section 7.4 hereof (with due endorsement by, or a
written instrument of transfer in form satisfactory to the Trustee duly
executed by, the owner thereof or his attorney duly authorized in writing), and
the Issuer shall execute and the Trustee or its Authenticating Agent shall
authenticate and deliver to the owner of such Bond without service charge, a
new Bond or Bonds, of any authorized denomination as requested by such owner in
an aggregate principal amount equal to and in exchange for the unredeemed and
unpurchased portion of the principal of the Bond so surrendered.
ARTICLE 8
PARTICULAR COVENANTS AND PROVISIONS
SECTION 8.1 COVENANT TO PAY THE BONDS. The Issuer covenants that it will
use the Credit Facility to promptly pay the principal of and interest on and
other amounts payable under the Bonds at the places, on the dates and in the
manner provided herein and in the Bonds according to the true intent and
meaning thereof. THE OBLIGATIONS OF THE ISSUER HEREUNDER SHALL BE NONRECOURSE.
SECTION 8.2 COVENANTS TO PERFORM OBLIGATIONS UNDER THIS INDENTURE. The
Issuer covenants that it will faithfully perform at all times any and all
covenants, undertakings, stipulations and provisions contained in this
Indenture, in the Bonds executed and delivered hereunder and in all proceedings
of the Issuer pertaining thereto. The Issuer covenants that it is duly
authorized to issue the Bonds and to enter into this Indenture, to pledge the
payments under the Indenture and other Revenues in the manner and to the extent
herein set forth; and that all action on its part for the issuance of the Bonds
issued hereunder and the execution and delivery of this Indenture has been duly
and effectively taken; and that the Bonds in the hands of the owners thereof
are and will be the valid and binding obligations of the Issuer according to
the tenor and import thereof.
SECTION 8.3 INSPECTION OF THE BOND REGISTER. At reasonable times and upon
reasonable regulations established by the Bond Registrar, the Bond Register may
be inspected and copied by and at the expense of the Issuer.
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SECTION 8.4 PRIORITY OF PLEDGE AND SECURITY INTEREST. The pledge herein
made of the Trust Estate and the security interest created herein with respect
thereto constitutes a first and prior pledge of, and a security interest in,
the Trust Estate. Said pledge and security interest shall at no time be
impaired directly or indirectly by the Issuer or the Trustee, and the Trust
Estate shall not otherwise be pledged and, no persons shall have any rights
with respect thereto.
SECTION 8.5 MAINTENANCE OF INSURANCE: PAYMENT OF TAXES, CHARGES ETC. The
Issuer shall maintain insurance on its properties as is customary for its
business and to pay all lawful taxes, assessments and charges at any time
levied or assessed upon it or its properties; provided, however, that nothing
contained in this Section shall require the maintenance of such insurance or
the payment of any such taxes, assessments or charges if the same are not
required to be maintained or paid under the provisions of the Credit Agreement
or the Lease Agreement.
SECTION 8.6 MAINTENANCE AND REPAIR. The Issuer agrees that, until Payment
of the Bonds shall be made, it will at its own expense, (1) keep its properties
in as reasonably safe condition as its operations shall permit, (2) make or
cause to be made from time to time all necessary repairs thereto and renewals
and replacements thereof and otherwise keep its properties in good repair and
in good operating condition, and (3) not permit or suffer others to commit a
nuisance on or about its properties. The Issuer shall pay or cause to be paid
all costs and expenses of operation and maintenance of its properties.
ARTICLE 9
DEFAULT AND REMEDIES
SECTION 9.1 DEFAULTS. Each of the following events is hereby declared to
be an "Event of Default":
(a) Payment of interest on any of the Bonds shall not be made when
the same shall become due; or
(b) Payment of the principal or redemption price of any of the
Bonds shall not be made when the same shall become due, whether at maturity or
upon call for redemption or otherwise; or
(c) The Trustee receives written notice from the Credit Facility
Issuer that an Event of Default under the Credit Agreement has occurred and has
not been waived; or
(d) The Trustee receives notice in writing from the Credit Facility
Issuer that the Credit Facility Issuer has not been reimbursed for a drawing on
or before the close of business on the tenth (10th) calendar day following a
drawing under such Credit Facility to pay interest on the Bonds and that the
interest portion of the Credit Facility will not be reinstated for the amount
so drawn; or
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(e) Payment of the purchase price of any Bond tendered pursuant to
Section 2.3 hereof is not made when payment is due; or
(f) The Issuer shall fail to duly and punctually perform any of the
covenants, conditions, agreements and provisions contained in the Bonds or in
this Indenture on the part of the Issuer to be performed other than as referred
to in the preceding subsections of this Section.
SECTION 9.2 ACCELERATION AND ANNULMENT THEREOF.
(a) Subject to the requirement that, so long as the Credit Facility
Issuer is performing under the Credit Facility, the consent of the Credit
Facility Issuer to any acceleration must be obtained in the case of an Event of
Default described in subsections (c) or (f) of Section 9.1 hereof, upon the
occurrence of an Event of Default, the Trustee may, and upon (1) the written
request of the Credit Facility Issuer, or (2) the occurrence of an Event of
Default described in subsection (a), (b), (c), (d) or (e) of Section 9.1
hereof, the Trustee shall, by notice to the Issuer, declare the entire unpaid
principal of and interest on the Bonds due and payable; and upon such
declaration, the said principal, together with interest accrued thereon, shall
become payable immediately at the place of payment provided therein, anything
in the Indenture or in the Bonds to the contrary notwithstanding. The Trustee
shall not be permitted to request receipt of indemnity to its satisfaction
prior to such declaration of acceleration. Upon the occurrence of any
acceleration hereunder, the Trustee, to the extent it has not already done so,
shall immediately draw upon the Credit Facility to the extent permitted by the
terms thereof. Interest on the Bonds shall cease to accrue upon receipt by the
Trustee of funds drawn under the Credit Facility.
(b) Immediately after any acceleration because of the occurrence of
an Event of Default under Sections 9.1(a), (b), (c), (d), (e), or (f), the
Trustee shall (immediately, and in no event within two Business Days
thereafter) notify in writing the Issuer and the Credit Facility Issuer of the
occurrence of such acceleration, immediately, and in no event later than two
(2) Business Days thereafter. Within five (5) days of the occurrence of any
acceleration hereunder, the Trustee shall notify by first class mail, postage
prepaid, the owners of all Bonds Outstanding of the occurrence of such
acceleration.
(c) If, after the principal of the Bonds has become due and
payable, all arrears of interest upon the Bonds are paid by the Issuer, and the
Issuer also pays the outstanding fees and expenses of the Trustee and the
reasonable charges of the Bondholders, including reasonable attorneys' fees,
then, and in every such case, the Credit Facility Issuer or a Majority of the
Bondholders by written notice to the Issuer and to the Trustee, may annul such
acceleration and its consequences, and such annulment shall be binding upon the
Trustee and upon all owners of Bonds issued hereunder; provided, however, that
the Trustee shall not annul any declaration without the written consent of the
Credit Facility Issuer unless such acceleration has resulted from the failure
of the Credit Facility Issuer to honor a proper draw for payment under the
Credit Facility. Notwithstanding the foregoing, the Trustee shall not annul any
acceleration which has resulted from an Event of Default under Section 9.1(d)
hereof unless the Credit Facility has been
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reinstated in accordance with its terms to an amount equal to the principal
amount of the Bonds Outstanding plus one hundred and twenty (120) days'
interest accrued thereon, and the Trustee has received written notice of such
reinstatement from the Credit Facility Issuer. The Trustee shall forward a copy
of any notice from Bondholders received by it pursuant to this paragraph to the
Issuer.
SECTION 9.3 OTHER REMEDIES. If any Event of Default occurs and is
continuing, the Trustee, before or after the principal of the Bonds becomes
immediately due and payable, may enforce each and every right granted to it
under the Indenture and any supplements or amendments thereto. In exercising
such rights and the rights given the Trustee under this Article 9, the Trustee
shall take such action as, in the judgment of the Trustee applying the
standards described in Section 10.1 hereof, would best serve the interests of
the Bondholders.
SECTION 9.4 LEGAL PROCEEDINGS BY THE TRUSTEE.
If any Event of Default has occurred and is continuing, the Trustee in
its direction may, and upon the written request of the Credit Facility Issuer
or the owners of not less than a Majority of the aggregate principal amount of
the Outstanding Bonds and receipt of indemnity to its satisfaction shall, in
its own name:
(1) By mandamus, or other suit, action or proceeding at law or in
equity, enforce all rights of the Bondholders hereunder;
(2) Bring suit upon the Bonds, the Credit Facility (but only to the
extent the Credit Facility Issuer shall have wrongfully dishonored
drawings made in strict conformity with the terms hereof); and
(3) By action or suit in equity seek to enjoin any acts or things
which may be unlawful or in violation of the rights of the Bondholders.
SECTION 9.5 DISCONTINUANCE OF PROCEEDINGS BY THE TRUSTEE.
If any proceeding commenced by the Trustee on account of any Event of
Default is discontinued or is determined adversely to the Trustee, then, the
Credit Facility Issuer, the Issuer, the Trustee and the Bondholders shall be
restored to their former positions and rights hereunder as though no
proceedings had been commenced.
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SECTION 9.6 CREDIT FACILITY ISSUER OR BONDHOLDERS MAY DIRECT PROCEEDINGS.
Anything to the contrary in this Indenture notwithstanding, either the
Credit Facility Issuer if a Credit Facility is in effect (and no default has
occurred and is continuing under the Credit Facility), or a Majority of the
Bondholders, if there is no Credit Facility in effect, shall have the right,
after furnishing indemnity satisfactory to the Trustee, to direct the method
and place of conducting all remedial proceedings by the Trustee hereunder,
provided that such direction shall not be in conflict with any rule of law or
with this Indenture or unduly prejudice the rights of minority Bondholders.
SECTION 9.7 LIMITATIONS ON ACTIONS BY THE BONDHOLDERS.
(a) No Bondholder shall have any right to bring suit on the Credit
Facility. No Bondholder shall have any right to pursue any other remedy
hereunder unless:
(1) the Trustee shall have been given written notice of an
Event of Default;
(2) the owners of not less than a Majority of the aggregate
principal amount of the Outstanding Bonds shall have requested the
Trustee, in writing, to exercise the powers hereinabove granted or
to pursue such remedy in its or their name or names;
(3) the Trustee shall have been offered indemnity
satisfactory to it against costs, expenses and liabilities, except
that no offer of indemnification shall be required for a
declaration of acceleration under Section 9.2 hereof or for a
drawing under the Credit Facility;
(4) the Trustee shall have failed to comply with such request
within a reasonable time; and
(5) prior to the Conversion Date, the Credit Facility Issuer
has failed to honor a proper draw request under the Credit
Facility.
(b) Notwithstanding the foregoing provisions of subsection (a) of
this Section 9.7 or any other provision of this Indenture, the obligation of
the Issuer shall be absolute and unconditional to pay hereunder, but solely
from the Revenues and other funds pledged under this Indenture, the principal
or redemption price of, and interest on, the Bonds to the respective owners
thereof on the respective due dates thereof, and nothing herein shall affect or
impair the right of action, which is absolute and unconditional, of such owners
to enforce such payment.
SECTION 9.8 TRUSTEE MAY ENFORCE RIGHTS WITHOUT POSSESSION OF THE Bonds.
All rights under this Indenture and the Bonds may be enforced by the Trustee
without the possession of any Bonds or the production thereof at the trial or
other proceedings relative thereto, and any
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proceedings instituted by the Trustee shall be brought in its name for the
ratable benefit of the owners of the Bonds.
SECTION 9.9 REMEDIES NOT EXCLUSIVE. No remedy herein conferred is
intended to be exclusive of any other remedy or remedies, and subject to the
Credit Agreement, each remedy is in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute.
SECTION 9.10 DELAYS AND OMISSIONS NOT TO IMPAIR RIGHTS. No delays or
omission in respect of exercising any right or power accruing upon any default
shall impair such right or power or be a waiver of such default, and every
remedy given by this Article 9 may be exercised from time to time and as often
as may be deemed expedient.
SECTION 9.11 APPLICATION OF MONEYS IN THE EVENT OF DEFAULT.
(a) Any moneys received by the Trustee under this Article 9 shall
be applied in the following order; provided that any moneys received by the
Trustee from a drawing under the Credit Facility shall be applied to the extent
permitted by the terms thereof only as provided in paragraph (3) below with
respect to the principal of, and interest accrued on, Bonds other than Bonds
held by or for the Issuer:
(1) To the payment of the reasonable costs of the Trustee,
including counsel fees and any disbursements of the Trustee, with
interest thereon from the date of payment at the Overdue Rate, and
their reasonable compensation; and
(2) To the payment of reasonable costs and expenses of the
Issuer, including counsel fees, incurred in connection with the
Event of Default; and
(3) To the payment of principal or redemption price (as the
case may be) and interest on the Bonds, and in case such moneys
shall be insufficient to pay the same in full, then to payment of
principal or redemption price and interest ratably, without
preference or priority of one over another or of any installment of
interest over any other installment of interest.
(b) The surplus, if any, shall be paid to the Issuer or the person
lawfully entitled to receive the same as a court of competent jurisdiction may
direct; provided that, if the Trustee has received payments on the Credit
Facility following the Event of Default, the surplus shall be paid to the
Credit Facility Issuer to the extent of such payments.
SECTION 9.12 TRUSTEE AND BONDHOLDERS ENTITLED TO ALL REMEDIES UNDER THE
FLORIDA LAW. It is the purpose of this Article 9 to provide such remedies to
the Trustee and the Bondholders as may be lawfully granted under the laws of
the State subject to the Credit Agreement, but should any remedy herein granted
be held unlawful, the Trustee and the Bondholders shall nevertheless be
entitled to every remedy provided by the laws of the State. It is
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further intended that, insofar as lawfully possible, the provisions of this
Article shall apply to and be binding upon any trustee or receiver appointed
under applicable law.
SECTION 9.13 TRUSTEE MAY FILE CLAIM IN BANKRUPTCY.
(a) In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other similar judicial proceeding relating to the Issuer or any other
obligor upon the Bonds or to property of the Issuer or such other obligor or
the creditors of any of them, the Trustee (irrespective of whether the
principal of the Bonds shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Issuer for the payment of an amount equal to overdue
principal or interest or additional interest) shall be entitled and empowered,
by intervention in such proceedings or otherwise.
(1) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Bonds and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the
Bondholders allowed in such judicial proceeding; and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the
same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by the
Bondholders to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Bondholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 9.11 hereof.
(b) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept, or adopt on behalf of the
Bondholders, any plan of reorganization, arrangement, adjustment or composition
affecting the Bonds or the rights of any Bondholder thereof, or to authorize
the Trustee to vote in respect of the claim of the Bondholders in any such
proceeding.
(c) All attorneys' fees received by the Trustee pursuant to any
right given or action taken under this Indenture shall, after payment of the
costs and expenses of the proceedings resulting in the collection of such
moneys and the fees and expenses of the Trustee, be deposited in the Bond Fund
and applied to the payment of the principal of, redemption premium, if any, and
interest then due and unpaid on the Bonds in accordance with the provisions of
this Indenture.
SECTION 9.14 RECEIVER. Upon the occurrence of an Event of Default and
upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Trustee and of
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the Bondholders under this Indenture, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver or receivers of the amounts
payable hereunder pending such proceedings, with such powers as the court
making such appointment shall confer, whether or not any such amounts payable
shall be deemed sufficient ultimately to satisfy the Bonds.
ARTICLE 10
CONCERNING THE TRUSTEE
SECTION 10.1 ACCEPTANCE OF THE TRUSTS. The Trustee hereby represents and
warrants to the Issuer (for the benefit of the Bondholders) that it is a
national banking association and that it is duly authorized under the laws of
the United States of America to accept and execute trusts of the character
herein set out.
The Trustee accepts and agrees to execute the trusts imposed upon it by
this Indenture, but only upon the terms and conditions set forth in this
Article and subject to the provisions of this Indenture including the following
express terms and conditions, to all of which the parties hereto and the
Bondholders agree:
(a) Except during the continuance of an Event of Default, the
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(c) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers or
employees but shall be answerable for the conduct of the same in accordance
with the standard specified above, and shall be entitled to act upon the
opinion or advice of its Counsel concerning all matters of trust hereof and the
duties hereunder, and may in all cases be reimbursed hereunder for reasonable
compensation paid to all such attorneys, agents, receivers and employees as may
reasonably be employed in connection with the trust hereof. The Trustee may
conclusively rely upon an opinion of counsel and shall not be responsible for
any loss or damage resulting from any action or non-action by it taken or
omitted to be taken in good faith in reliance upon such opinion of counsel.
(d) The Trustee shall not be responsible for any recital herein, or
in the Bonds (except in respect to the authentication certificate of the
Trustee endorsed on the Bonds), or for insuring the Trust Estate, or for the
validity of the execution hereof by the Issuer or of any
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supplements hereto or instruments of further assurance, or for the sufficiency
of the security for the Bonds; and the Trustee shall not be bound to ascertain
or inquire as to the performance or observance of any agreements or conditions
on the part of the Issuer, except as hereinafter set forth; but the Trustee may
require of the Issuer full information and advice as to the performance of the
agreements and conditions aforesaid and as to the condition of the Trust
Estate.
(e) The Trustee shall not be liable in connection with the
performance or nonperformance of its duties under this Indenture except for its
own grossly negligent action, its own grossly negligent failure to act, or its
own willful misconduct, except that:
(1) This subsection shall not be construed to limit the
effect of subsection (a) of this Section 10.1;
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer or Officers of the
Trustee unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of a Majority of the Bondholders
relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee under this Indenture.
(f) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee, including without
limitation Sections 10.2 and 10.3 hereof, shall be subject to the provisions of
this Section 10.1.
SECTION 10.2 TRUSTEE TO GIVE NOTICE.
(a) The Trustee shall not be required to take notice or be deemed
to have notice of any default hereunder, except failure by the Issuer to cause
to be made any of the payments to the Trustee required to be made by Article 5
or failure by the Issuer to file with the Trustee any document required by this
Indenture to be so filed, unless the Trustee shall be notified in writing of
such default by the Issuer or by the holders of a Majority of the aggregate
principal amount of Bonds then Outstanding or unless a responsible corporate
trust officer of the Trustee charged with the responsibility for the management
of the trusts conferred by this Indenture shall have actual knowledge of such
default. All notices or other instruments required by this Indenture to be
delivered to Trustee, must, in order to be effective, be delivered at the
Principal Office of Trustee, and in the absence of such notice so delivered,
Trustee may conclusively assume there is no Default except as aforesaid.
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(b) If a responsible trust officer of the Trustee charged with the
responsibility for the management of the trusts conferred by this Indenture
shall have actual knowledge of any Event of Default continuing hereunder, the
Trustee shall give to all Bondholders and to the Credit Facility Issuer written
notice of all such defaults within thirty (30) days after receipt of such
information.
SECTION 10.3 TRUSTEE ENTITLED TO INDEMNITY.
(a) The Issuer shall indemnify the Trustee and its officers,
directors and employees against any loss, liability, claims, damages, costs and
expenses incurred by any thereof arising out of or in connection with the
acceptance or administration of their duties under this Indenture, except as
set forth in subsection (b) below. The Trustee shall notify the Issuer promptly
of any claim for which it may seek indemnity. Except where the Issuer is the
claimant, the Issuer shall defend the claim, and the Trustee shall cooperate in
the defense. The Trustee may have counsel, and the Issuer shall pay the
reasonable fees and expenses of such counsel.
(b) The Issuer shall not be obligated to reimburse any expense or
to indemnify against any loss or liability incurred by the Trustee through
gross negligence or bad faith.
(c) To secure the Issuer's payment obligations in this Section, the
Trustee shall have a lien prior to the lien of the Trustee for the benefit of
the owners of the Bonds on all money or property held or collected by the
Trustee, except for amounts drawn under the Credit Facility as to which the
Trustee shall have no such lien. Such obligations shall survive the
satisfaction and discharge of this Indenture.
(d) When the Trustee incurs expenses or renders services after an
Event of Default, the expenses and compensation for the services are intended
to constitute expenses of administration under any applicable bankruptcy law.
(e) The Trustee may, nevertheless, begin suit, or appear in and
defend suit, or do anything else in its judgment proper to be done by it as
such Trustee, without indemnity, and in such case the Issuer shall reimburse
the Trustee from funds available therefor under the Indenture for all costs and
expenses, outlays and counsel fees and other reasonable disbursements properly
incurred in connection therewith; provided, however, that the Trustee shall:
(1) make all payments hereunder of principal and redemption
price of and interest on the Bonds and of the purchase price of
Bonds tendered at the option of the owners thereof or purchased by
the Issuer in lieu of redemption,
(2) accelerate the Bonds when required to do so hereunder
other than at the direction of the Bondholders, and
(3) draw on the Credit Facility when required to do so
hereunder,
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each without the necessity of the Bondholders providing security or indemnity
to the Trustee. If the Issuer shall fail to make reimbursement, the Trustee may
reimburse itself from any moneys in its possession under the provisions of this
Indenture (other than amounts drawn under the Credit Facility) and shall be
entitled with respect thereto to a preference over the Bonds. The provisions of
this Section 10.3 shall survive termination of this Indenture as well as the
resignation or removal of the Trustee.
SECTION 10.4 TRUSTEE NOT RESPONSIBLE FOR INSURANCE, TAXES, EXECUTION OF
THIS INDENTURE, ACTS OF THE ISSUER OR APPLICATION OF THE
MONEYS APPLIED IN ACCORDANCE WITH THIS INDENTURE.
(a) The Trustee shall not be under any obligation to effect or
maintain insurance or to renew any policies of insurance or to inquire as to
the sufficiency of any policies of insurance carried by the Issuer, or to
report, or make or file claims or proof of loss for, any loss or damage insured
against or which may occur, or to keep itself informed or advised as to the
payment of any taxes or assessments, or to require any such payment to be made.
The Trustee shall not have responsibility in respect of the validity,
sufficiency, due execution or acknowledgment of this Indenture or any
supplements thereto or instruments of further assurance or the validity or
sufficiency of the security provided hereunder or in respect of the validity of
the Bonds or the due execution or issuance thereof. The Trustee shall not be
under any obligation to see that any duties herein imposed upon any party other
than itself, or any covenants herein contained on the part of any party other
than itself to be performed, shall be done or performed, and the Trustee shall
be under no liability for failure to see that any such duties or covenants are
so done or performed.
(b) The Trustee shall not be liable or responsible because of the
failure of the Issuer or of any of its employees or agents to make any
collections or deposits or to perform any act herein required of the Issuer or
because of the loss of any moneys arising through the insolvency or the act or
default or omission of any other depositary in which such moneys shall have
been deposited under the provisions of this Indenture. The Trustee shall not be
responsible for the application of any of the proceeds of the Bonds or any
other moneys deposited with it and paid out, withdrawn or transferred hereunder
if such application, payment, withdrawal or transfer shall be made in
accordance with the provisions of this Indenture. The Trustee shall not be
responsible or liable for any loss suffered in connection with any investment
of funds made by it in accordance with Section 6.2 hereof.
(c) The permissive right of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the Trustee shall not be
answerable for other than its gross negligence or willful misconduct. The
immunities and exemptions from liability of the Trustee hereunder shall extend
to the directors, officers, employees and agents of the Trustee.
SECTION 10.5 COMPENSATION. Subject to the provisions of any contracts
relating to the compensation of the Trustee, the Issuer shall pay to the
Trustee as administrative expenses its reasonable fees, charges and
out-of-pocket expenses. In computing such compensation, the parties
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shall not be limited by any law on the compensation of an express trust. If the
Issuer shall fail to make any payment required by this Section 10.5, the
Trustee may, but shall be under no obligation to, make such payment from any
moneys in its possession under the provisions of this Indenture and shall be
entitled to a preference therefor over the Bonds hereunder; provided that no
payments under this Section 10.5 shall be made with moneys drawn under the
Credit Facility. When the Trustee incurs expenses or renders services after an
Event of Default, the expenses and compensation for the services are intended
to and shall constitute expenses of administration under any applicable
bankruptcy law.
SECTION 10.6 TRUSTEE TO PRESERVE RECORDS. All records and files
pertaining to the Bonds the custody of the Trustee shall be open at all
reasonable times to the inspection of the Issuer, the Credit Facility Issuer,
and their agents and representatives.
SECTION 10.7 TRUSTEE MAY BE A BONDHOLDER. The institution acting as
Trustee under this Indenture, and directors, officers, employees or agents of
the Trustee, may in good faith buy, sell, own, hold and deal in the Bonds
issued under and secured by this Indenture, and may join in the capacity of a
Bondholder in any action which any Bondholder may be entitled to take with like
effect as if such institution were not the Trustee under this Indenture. To the
extent permitted by law, such institution may also receive tenders and purchase
in good faith Bonds from itself, including any department, affiliate or
subsidiary, with like effect as if it were not the Trustee.
SECTION 10.8 TRUSTEE NOT RESPONSIBLE FOR RECITALS. Except for the
authentication of the Bonds by the Trustee, the recitals, statements and
representations contained herein and in the Bonds shall be taken and construed
as made by and on the part of the Issuer and not by the Trustee, and, except
for the authentication of the Bonds by the Trustee, the Trustee shall not be
under any responsibility for the correctness of the same.
SECTION 10.9 NO RESPONSIBILITY FOR RECORDING OR FILING. The Trustee shall
not be under any obligation to see to the recording or filing of this
Indenture, any financing statements or any other instrument or otherwise to the
giving to any person of notice of the provisions hereof or thereof.
SECTION 10.10 TRUSTEE MAY REQUIRE INFORMATION. Except for the obligations
of the Trustee under Section 10.1 hereof, the obligations of the Trustee to
make payments on the Bonds when due, and to draw under the Credit Facility as
required hereunder, anything contained in this Indenture to the contrary
notwithstanding, the Trustee shall have the right, but shall not be required,
to demand, as a condition of any action by the Trustee, in respect of the
authentication of any Bonds, the withdrawal of any cash, the release of any
property, or any action whatsoever within the purview of this Indenture, any
showings, certificates, opinions, appraisals or other information, or corporate
action or evidence thereof, in addition to that required by the terms hereof.
SECTION 10.11 TRUSTEE MAY RELY ON CERTIFICATES. The Trustee shall be
protected and shall incur no liability in acting or proceeding, or in not
acting or not proceeding, in good faith and
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in accordance with the terms of this Indenture, upon any ordinance, resolution,
order, notice, request, consent, waiver, certificate, statement, instrument,
opinion, affidavit, requisition, bond or other paper or document which it shall
in good faith believe to be genuine and to have been adopted or signed by the
proper board or person or to have been prepared and furnished pursuant to any
of the provisions of this Indenture, or upon the written opinion of any
attorney, engineer, accountant or other expert believed by it to be qualified
in relation to the subject matter, and the Trustee shall not be under any duty
to make any investigation or inquiry as to any statements contained or matters
referred to in any such instrument. Any action taken by the Trustee pursuant to
this Indenture upon the request or authority or consent of any person who at
the time of making such request or giving such authority or consent is the
owner of any Bond shall be conclusive and binding upon all future owners of the
same Bond and upon Bonds issued in exchange therefor or in place thereof.
SECTION 10.12 TRUSTEE BOND. The Trustee shall not be required to give any
bond or surety in respect to the execution of its rights and obligations
hereunder.
SECTION 10.13 SEGREGATION OF FUNDS; INTERESTS. All moneys received by the
Trustee shall, until used or applied or invested as herein provided, be held in
trust in the manner and for the purposes for which they were received but need
not be segregated from other funds except to the extent required by this
Indenture or law. The Trustee shall not be under any liability for interest on
any moneys received hereunder.
SECTION 10.14 QUALIFICATION OF THE TRUSTEE. There shall at all times be a
Trustee hereunder which shall be an association or a corporation organized and
doing business under the laws of the United States of America or of any state,
authorized under such laws and the applicable laws of the State to exercise
corporate trust powers and act as Bond Registrar hereunder, having a combined
capital and surplus of at least Fifty Million Dollars ($50,000,000), and
subject to supervision or examination by federal or state authority. If such
association or corporation is not a commercial bank or trust company, it shall
also have a rating by Moody's (if the Bonds are then rated by Moody's) of BAA
3/P3 or higher, or by S&P (if the Bonds are then rated by S&P) of Baa/A3 or
higher or shall otherwise be approved in writing by Moody's or S&P, as the case
may be. If such association or corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section
10.14, the combined capital and surplus of such association or corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section 10.14, it
shall resign immediately in the manner and with the effect specified in Section
10.15 hereof.
SECTION 10.15 RESIGNATION AND REMOVAL OF THE TRUSTEE.
(a) No resignation or removal of the Trustee and no appointment of
a successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 10.14 hereof.
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(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within thirty (30) days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by an instrument or
instruments in writing to the Trustee, with copies to the Issuer, signed by a
Majority of the Bondholders or by their attorneys, legal representatives or
agents and delivered to the Trustee and the Issuer (such instruments to be
effective only when received by the Trustee).
(d) If at any time:
(1) the Trustee shall cease to be eligible under Section
10.14 hereof and shall fail to resign after written request
therefor by the Issuer or by a Majority of the Bondholders, or
(2) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
the property of the Trustee shall be appointed or any public
officer shall take charge or control of the Trustee or of the
property or affairs for the purpose of rehabilitation, conservation
or liquidation of the Trustee,
then, in any such case, the Issuer may remove the Trustee, or any Bondholder
may petition any court of competent jurisdiction for the removal of the
Trustee, and the appointment of a successor.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Issuer shall promptly appoint a successor. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by act of the Majority of the Bondholders
delivered to the Issuer and the resigning or removed Trustee, the successor
Trustee so appointed shall forthwith upon its acceptance of such appointment,
become the successor Trustee, and supersede the successor Trustee appointed by
the Issuer. If no successor Trustee shall have been so appointed by the Issuer
and accepted appointment in the manner hereinafter provided, any Bondholder, if
he has been a bona fide owner of a Bond for at least six (6) months, may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(f) The Issuer shall cause the successor Trustee to give notice of
each resignation and each removal of the Trustee and each appointment of a
successor Trustee by mailing written notice of such event by first class mail,
postage prepaid, to each Bondholder. Each notice shall include the name and
address of the principal corporate trust office of the successor Trustee.
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SECTION 10.16 SUCCESSOR TRUSTEE.
(a) Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Issuer, an
instrument in writing accepting such appointment hereunder, and thereupon and
upon transfer of the Credit Facility to the successor Trustee, such successor
Trustee without any further act, shall become fully vested with all the rights,
immunities, powers and trusts, and subject to all the duties and obligations,
of its predecessor; but such predecessor shall, nevertheless, on the written
request of its successor or of the Issuer and upon payment of the expenses,
charges and other disbursements of such predecessor which are payable pursuant
to the provisions of Section 10.5 hereof, execute and deliver an instrument
transferring to such successor Trustee all the rights, immunities, powers and
trusts of such predecessor hereunder; and every predecessor Trustee shall
deliver all property and moneys held by it hereunder to its successor, subject,
nevertheless, to its preference, if any, provided for in Sections 10.3 and 10.5
hereof. Should any instrument in writing from the Issuer be required by any
successor Trustee for more full and certain vesting in such Trustee the rights,
immunities, powers and trusts hereby vested or intended to be vested in the
predecessor Trustee, any such instrument in writing shall and will, on request,
be executed, acknowledged and delivered by the Issuer. The resignation of any
Trustee and the instrument or instruments removing any Trustee and appointing a
successor hereunder, together with all other instruments provided for in this
Article, shall be filed and/or recorded by the successor Trustee in each
recording office where this Indenture and the financing statements have been
filed and/or recorded.
(b) Notwithstanding any of the foregoing provisions of this
Article, any bank or trust company having power to perform the duties and
execute the trusts of this Indenture and otherwise qualified to act as Trustee
hereunder with or into which the bank or trust company acting as Trustee may be
merged or consolidated, or to which the assets and business of such bank or
trust company may be sold, shall be deemed the successor of the Trustee;
provided, however, that any sale of trust assets, if any, other than as part of
all other assets of the bank or trust company being sold shall be deemed a
resignation pursuant to Section 10.15 hereof.
SECTION 10.17 CO-TRUSTEE. It is the purpose of this Indenture that there
shall be no violation of any law of any jurisdiction denying or restricting the
right of certain banking corporations or associations to transact business as
trustee as contemplated herein in such jurisdiction. It is recognized that in
case of litigation under this Indenture and in particular in case of the
enforcement of the security interest contained in this Indenture upon the
occurrence of an Event of Default, it may be necessary that the Trustee appoint
an additional individual or institution as a separate Trustee or Co-Trustee,
which shall be satisfactory to the Issuer. The following provisions of this
Section 10.17 are adapted to these ends:
(a) In the event of the incapacity or lack of authority of the
Trustee by reason of any present or future law of any jurisdiction to exercise
any of the rights, powers and trusts herein granted to the Trustee or to hold
title to or a security interest in the Trust Estate or to take any other action
which may be necessary or desirable in connection therewith, each and every
remedy, power, right, claim, demand, cause of action, immunity, estate, title,
interest and lien expressed or intended by this Indenture to be exercised by or
vested in or conveyed to the Trustee with respect
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thereto shall be exercisable by and vest in such separate Trustee or Co-Trustee
but only to the extent necessary to enable the separate Trustee or Co-Trustee
to exercise such rights, powers and trusts, and every covenant and obligation
necessary to the exercise thereof shall run to and be enforceable by such
separate Trustee or Co-Trustee.
(b) Should any deed, conveyance or instrument in writing from the
Issuer be required by the separate Trustee or Co-Trustee so appointed by the
Trustee in order to more fully and certainly vest in and confirm to it such
properties, rights, powers, trusts, duties and obligations any and all such
deeds, conveyances and instruments shall, on request, be executed, acknowledged
and delivered by the Issuer. In case any separate Trustee or Co-Trustee or a
successor to either, shall die, be dissolved, become incapable of action,
resign or be removed, all the estates, properties, rights, powers, trusts,
duties and obligations of such separate Trustee or Co-Trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a new Trustee or successor to such separate Trustee or
Co-Trustee.
SECTION 10.18 NOTICE TO MOODY'S OR S&P. At any time during which the
Bonds are rated by Moody's or S&P, the Trustee, to the extent it has knowledge
of the following, shall notify Moody's or S&P, as applicable, promptly of:
(a) any change in the Trustee,
(b) the expiration or termination of the Credit Facility during the
Variable Rate Period or the provision of an Alternate Credit Facility in
accordance with the terms of this Indenture,
(c) a change in the interest rate borne by the Bonds from a
Variable Rate to a Fixed Rate,
(d) the payment of all of the Bonds, or
(e) any material change to this Indenture or the Credit Agreement.
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ARTICLE 11
EXECUTION OF INSTRUMENTS BY THE BONDHOLDERS
AND PROOF OF OWNERSHIP OF THE BONDS
SECTION 11.1 EXECUTION OF INSTRUMENTS BY THE BONDHOLDERS AND PROOF OF
OWNERSHIP OF THE BONDS.
(a) Any request, direction, consent or other instrument in writing
required or permitted by this Indenture to be signed or executed by a
Bondholder may be signed or executed by the Bondholder or its attorneys or
legal representatives. Proof of the execution of any such instrument and of the
ownership of the Bonds shall be sufficient for any purpose of this Indenture
and shall be conclusive in favor of the Trustee with regard to any action taken
by the Trustee under such instrument if made in the following manner:
The fact and date of the execution by any person of any such
instrument may be proved by the verification of any officer in any
jurisdiction who, by the laws thereof, has power to take affidavits
within such jurisdiction, to the effect that such instrument was
subscribed and sworn to before him, or by an affidavit of a witness to
such execution, and where such execution is by an officer of a
corporation or association or a member of a partnership on behalf of such
corporation, association or partnership, such verification or affidavit
shall also constitute sufficient proof of his authority.
(b) Nothing contained in this Section 11.l shall be construed as
limiting the Trustee to such proof, it being intended that the Trustee may
accept any other evidence of the matters herein stated which may be sufficient.
Any request or consent of a Bondholder shall bind every future owner of the
Bond(s) to which such request or consent pertains or any Bond(s) issued in lieu
thereof in respect of anything done by the Trustee pursuant to such request or
consent.
(c) Notwithstanding any of the foregoing provisions of this Section
11.1, the Trustee shall not be required to recognize any person as an owner of
Bonds or to take any action at such owner's request unless the Bonds shall be
deposited with the Trustee.
SECTION 11.2 PRESERVATION OF INFORMATION. The Trustee shall preserve in
the Bond Register, in as current a form as is reasonably practicable, the name
and address of each Bondholder received by the Trustee in its capacity as Bond
Registrar.
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ARTICLE 12
THE REMARKETING AGENT; THE
TENDER AGENT; THE PLACEMENT AGENT
SECTION 12.1 THE REMARKETING AGENT.
(a) The Issuer hereby appoints First Union Capital Markets Corp.,
with its corporate office in Charlotte, North Carolina, as Remarketing Agent
under this Indenture. The Remarketing Agent and any successor Remarketing
Agent, by written instrument delivered to the Issuer and the Trustee, shall
accept the duties and obligations imposed on it under this Indenture and the
Remarketing Agreement.
(b) In addition to the other obligations imposed on the Remarketing
Agent hereunder, the Remarketing Agent shall agree to keep such books and
records in connection with its activities as Remarketing Agent hereunder as
shall be consistent with prudent industry practice and make such books and
records available for inspection by the Issuer, the Trustee and the Credit
Facility Issuer at all reasonable times.
(c) The Remarketing Agent shall at all times be a member of the
National Association of Securities Dealers, Inc. and registered as a Municipal
Securities Dealer under the Securities Exchange Act of 1934, as amended, or a
national banking association or a bank or a trust company, in each case
authorized by law to perform its obligations hereunder.
(d) If at any time the Remarketing Agent is unable or unwilling to
act as Remarketing Agent, the Remarketing Agent, upon thirty (30) Business
Days' prior written notice to the Issuer, the Trustee, the Credit Facility
Issuer and the Tender Agent, may resign. The Remarketing Agent may be removed
at any time by the Issuer, by written notice signed by the Issuer delivered to
the Trustee, the Remarketing Agent, the Credit Facility Issuer and the Tender
Agent. Upon resignation or removal of the Remarketing Agent, the Issuer, shall
appoint a substitute Remarketing Agent meeting the qualifications of Section
12.1(c) above.
(e) In the event that the Issuer shall fail to appoint a successor
Remarketing Agent, upon the resignation or removal of the Remarketing Agent or
upon its dissolution, insolvency or bankruptcy, the Trustee may, but is not
required to, appoint a Remarketing Agent or may itself act as Remarketing Agent
until the appointment of a successor Remarketing Agent in accordance with this
Section 12.1; provided, however, that the Trustee, in its capacity as
Remarketing Agent, shall not be required to sell Bonds or determine the
interest rate on the Bonds pursuant to Section 2.2 hereof.
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SECTION 12.2 THE TENDER AGENT.
(a) The Issuer hereby appoints as Tender Agent under this Indenture
First Union National Bank, which agent has a corporate trust office in
Nashville, Tennessee. The Tender Agent and any successor Tender Agent, by
written instrument delivered to the Issuer, and the Trustee, shall accept the
duties and obligations imposed on it under this Indenture.
(b) The Tender Agent shall at all times be a member of the National
Association of Securities Dealers, Inc. having a capitalization of at least
Fifteen Million Dollars ($15,000,000) and a rating by Moody's (if the Bonds are
then rated by Moody's) of BAA 3/P3 or higher or a national banking association
or a bank or a trust company having capital and surplus of at least
$50,000,000, in each case authorized by law to perform its obligations
hereunder.
(c) If at any time the Tender Agent is unable or unwilling to act
as Tender Agent, the Tender Agent, upon sixty (60) days' prior written notice
to the Issuer, the Trustee, and the Remarketing Agent, may resign; provided,
however, that in no case shall such resignation become effective until the
appointment of a successor Tender Agent. The Tender Agent may be removed at any
time by the Issuer, by written notice signed by the Issuer delivered to the
Trustee, the Remarketing Agent, the Credit Facility Issuer and the Tender
Agent; provided, however, that in no case shall such removal become effective
until the appointment of a successor Tender Agent. Upon resignation or removal
of the Tender Agent, the Issuer, shall appoint a substitute Tender Agent
meeting the qualifications of Section 12.2(b) above.
(d) In the event that the Issuer shall fail to appoint a successor
Tender Agent, upon the resignation or removal of the Tender Agent or upon its
dissolution, insolvency or bankruptcy, the Trustee may at its discretion, but
is not required to, act as Tender Agent until the appointment of a successor
Tender Agent in accordance with this Section 12.2.
SECTION 12.3 THE PLACEMENT AGENT. The Placement Agent shall be a member
of the National Association of Securities Dealers, Inc. and registered as a
Municipal Securities Dealers under the Securities Exchange Act of 1934, as
amended, or a national banking association or a bank or trust company, in each
case authorized by law to perform its obligations described in Section 2.2(e)
hereof.
SECTION 12.4 NOTICES. The Trustee shall, within thirty (30) days of the
resignation or removal of the Remarketing Agent or the Tender Agent or the
appointment of the Placement Agent or a successor Remarketing Agent or a
successor Tender Agent, give notice thereof by first class mail, postage
prepaid, to the owners of the Bonds.
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ARTICLE 13
AMENDMENTS AND SUPPLEMENTS
SECTION 13.1 AMENDMENTS AND SUPPLEMENTS WITHOUT THE BONDHOLDERS' CONSENT.
This Indenture may be amended or supplemented at any time and from time to
time, without the consent of the Bondholders, but with the consent of the
Issuer and the Credit Facility Issuer, if a Credit Facility is in effect (and
no default has occurred and is continuing under the Credit Facility), by a
supplemental indenture authorized by a resolution of the Issuer filed with the
Trustee, for one or more of the following purposes:
(a) to add additional covenants of the Issuer or to surrender any
right or power herein conferred upon the Issuer;
(b) for any purpose not inconsistent with the terms of this
Indenture or to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture which shall not adversely affect the interests of
the owners of the Bonds;
(c) to permit the Bonds to be converted during the Variable Rate
Period to certificateless securities or securities represented by a master
certificate held in trust, ownership of which, in either case, is evidenced by
book entries on the books of the Bond Registrar, for any period of time;
(d) to permit the appointment of a Co-Trustee under this Indenture;
(e) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the Trust Indenture Act of 1939, as amended, or under any
similar federal statute hereafter enacted, and to add to this Indenture such
other provisions as may be expressly permitted by the Trust Indenture Act of
1939, as amended;
(f) except as otherwise provided in Section 13.2 hereof, to modify,
eliminate or add to the provisions of this Indenture to such extent as shall be
necessary to obtain a rating of the Bonds from Moody's or S&P; and
(g) to amend the administrative provisions hereof to accommodate
the provisions of an Alternate Credit Facility.
Notwithstanding the foregoing, prior to the making of any amendment or
supplement as described in the preceding paragraph, the Issuer shall provide
the Trustee, and during the Variable Rate Period (if no default has occurred
and is continuing under the Credit Facility) the Credit Facility Issuer, with:
(1) a copy of the proposed amendment or supplement, and
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(2) an opinion of counsel to the effect that such amendment
or supplement will not adversely affect the interests of the
Bondholders.
Notwithstanding the foregoing, the Indenture may be amended or supplemented as
provided in this Section 13.1 to such extent as may be necessary to obtain a
rating of the Bonds from Moody's or S&P without providing the opinion of
counsel specified in paragraph (2) above.
SECTION 13.2 AMENDMENTS WITH THE BONDHOLDERS' AND THE CREDIT FACILITY
ISSUER'S CONSENT.
(a) This Indenture may be amended from time to time, except with
respect to:
(1) the principal, redemption price, purchase price, or
interest payable upon any Bonds,
(2) the Interest Payment Dates, the dates of maturity or the
redemption or purchase provisions of any Bonds, and
(3) this Article 13,
by a supplemental indenture authorized by the Issuer filed with the Trustee and
consented to by the Credit Facility Issuer if a Credit Facility is in effect
(and no default has occurred and is continuing under the Credit Facility), by
the Issuer and approved by a Majority of the Bondholders which would be
affected by the action proposed to be taken.
(b) This Indenture may be amended with respect to the matters
enumerated in paragraphs (1) through (3) of subsection (a) of this Section with
the unanimous consent of all Bondholders, the Credit Facility Issuer if a
Credit Facility is in effect (and no default has occurred and is continuing
under the Credit Facility) and the Issuer.
(c) Notwithstanding the foregoing provisions of this Section 13.2,
prior to the making of any amendment or supplement as described in this Section
13.2, the Issuer shall provide the Trustee, and during the Variable Rate Period
(if no default has occurred and is continuing under the Credit Facility) the
Credit Facility Issuer, with a copy of the proposed amendment or supplement.
Notwithstanding the foregoing, the Indenture may be amended or supplemented as
provided in this Section 13.2 to such extent as may be necessary to obtain a
rating of the Bonds from Moody's or S&P.
SECTION 13.3 SUPPLEMENTAL INDENTURES AFFECTING THE RIGHTS OF THE CREDIT
FACILITY ISSUER. Anything herein to the contrary notwithstanding, a
supplemental indenture under this Article 13 which in the judgment of the
Credit Facility Issuer if a Credit Facility is in effect (and no default has
occurred and is continuing under the Credit Facility) adversely affects the
rights of the Credit Facility Issuer shall not become effective unless or until
the Credit Facility Issuer shall have consented to the execution and delivery
thereof.
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SECTION 13.4 TRUSTEE AUTHORIZED TO JOIN IN AMENDMENTS AND SUPPLEMENTS;
RELIANCE ON COUNSEL. The Trustee is authorized to join with the Issuer in the
execution and delivery of any supplemental indenture or amendment permitted by
this Article 13 and in so doing shall be fully protected by an opinion of
Counsel that such supplemental indenture or amendment is so permitted and has
been duly authorized by the Issuer and that all things necessary to make it a
valid and binding agreement have been done; provided that certain amendments
may, by agreement between the Trustee and the Credit Facility Issuer, require
the prior consent of the Credit Facility Issuer.
ARTICLE 14
DEFEASANCE; OTHER PAYMENTS
SECTION 14.1 DEFEASANCE.
(a) When the principal or redemption price (as the case may be) of,
and interest on all Bonds issued hereunder have been paid, including without
limitation the purchase price for Bonds tendered under Section 2.2 hereof, or
provision has been made for payment of the same, together with the compensation
of the Trustee and all other sums payable hereunder by the Issuer, the right,
title and interest of the Trustee in and to the Trust Estate and the security
interests shall thereupon cease, and the Trustee, on written demand of the
Issuer, shall release this Indenture and the security interests and shall
execute such documents to evidence such release as may be reasonably required
by the Issuer and shall turn over to, or to such person, body or authority as
may be entitled to receive the same all balances then held by the Trustee
hereunder; provided, that, if any payments have been received by the Trustee
derived from draws by the Trustee under the Credit Facility in connection with
such release, such balances shall be paid to the Credit Facility Issuer to the
extent of such payments. If payment or provision therefor is made with respect
to less than all of the Bonds, the particular Bonds (or portion thereof) for
which provision for payment shall have been considered made shall be selected
by lot by the Trustee and thereupon the Trustee shall take similar action for
the release of this Indenture with respect to such Bonds. Notwithstanding
anything to the contrary contained herein, Bonds purchased at the option of the
owners thereof with moneys held by the Trustee pursuant to this Article 14
shall not be remarketed but shall be canceled by the Trustee. PROVIDED,
HOWEVER, THE BONDS ARE NOT SUBJECT TO DEFEASANCE UNDER ARTICLE 14 WHILE THE
BONDS BEAR INTEREST AT THE VARIABLE RATE.
(b) Provision for the payment of Bonds shall be deemed to have been
made when the Trustee holds in the Bond Fund, in trust and irrevocably set
aside exclusively for such payment, (1) moneys sufficient to make such payment
provided that if a Credit Facility is then held by the Trustee, such moneys
shall constitute Available Moneys or (2) noncallable Governmental Obligations
maturing as to principal and interest in such amounts and at such times as will
provide sufficient moneys without reinvestment to make such payment; provided
that if a Credit Facility is then held by the Trustee, such Governmental
Obligations shall have been on deposit with the Trustee in a separate and
segregated account for a period of one hundred twenty-
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seven (127) days during and prior to which no Event of Bankruptcy has occurred
or which Governmental Obligations were purchased with Available Moneys.
(c) No Bonds in respect of which a deposit under subsection (b)
above has been made shall be deemed paid within the meaning of this Article
unless the Trustee is satisfied that the amounts deposited are sufficient to
make all payments that might become due on the Bonds, including purchase price
payments for Bonds tendered at the option of the owners or purchased by the
Issuer in lieu of redemption, if any. Notwithstanding the foregoing, no
delivery to the Trustee under this subsection (c) shall be deemed a payment of
any Bonds which are to be redeemed prior to their stated maturity until such
Bonds shall have been irrevocably called or designated for redemption on a date
thereafter on which such Bonds may be redeemed in accordance with the
provisions of this Indenture or the Issuer shall have given the Trustee, in
form satisfactory to the Trustee, irrevocable instructions to give notice of
redemption. Neither the obligations nor moneys deposited with the Trustee
pursuant to this Section shall be withdrawn or used for any purpose other than,
and shall be segregated and held in trust for, the payment of the principal of,
redemption price of, purchase price if applicable of, and interest on the Bonds
with respect to which such deposit has been made. In the event that such moneys
or obligations are to be applied to the payment of principal or redemption
price of any Bonds more than sixty (60) days following the deposit thereof with
the Trustee, the Trustee shall mail a notice stating that such moneys or
obligations have been deposited and identifying the Bonds for the payment of
which such moneys or obligations are being held to all owners of such Bonds at
their addresses shown on the Bond Register.
(d) Anything in Article 14 to the contrary notwithstanding, if
moneys or Governmental Obligations have been deposited or set aside with the
Trustee pursuant to this Article for the payment of the principal or redemption
price, including purchase price if applicable, of the Bonds and the interest
thereon and such moneys or Governmental Obligations do not constitute Available
Moneys, no amendment to the provisions of this Article shall be made without
the consent of the owner of each of the Bonds affected thereby.
(e) Notwithstanding the foregoing, those provisions relating to the
purchase of Bonds upon the demand of any Bondholders, the maturity of Bonds,
interest payments and dates thereof, and the dates, premiums and notice
requirements for optional and mandatory redemption or purchase and the
Trustee's remedies with respect thereto, and provisions relating to exchange,
transfer and registration of Bonds, replacement of mutilated, destroyed, lost
or stolen Bonds, the safekeeping and cancellation of Bonds, non- presentment of
Bonds, the holding of moneys in trust and repayments to the Issuer or the
Credit Facility Issuer from the Bond Fund and the duties of the Trustee in
connection with all of the foregoing and the fees, expenses and indemnities of
the Trustee, shall remain in effect and shall be binding upon the Trustee, the
Issuer and the Bondholders notwithstanding the release and discharge of the
lien of this Indenture.
SECTION 14.2 DEPOSIT OF FUNDS FOR PAYMENT OF THE BONDS. If the principal
or redemption price of any Bonds to become due, either at maturity or by call
for redemption or otherwise, together with all interest accruing thereon to the
due date, has been paid or provision
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therefor made in accordance with Section 14.1 hereof, all interest on such
Bonds shall cease to accrue on the due date and all liability of the Issuer
with respect to such Bonds shall likewise cease, except as hereinafter
provided. Thereafter the owners of such Bonds shall be restricted exclusively
to the funds so deposited for any claim of whatsoever nature with respect to
such Bonds, and the Trustee shall hold such funds in trust for such owners.
SECTION 14.3 EFFECT OF PURCHASE OF THE BONDS. No purchase of Bonds
pursuant to Section 3.3 hereof shall be deemed to be a payment or redemption of
such Bonds or any portion thereof and such purchase will not operate to
extinguish or discharge the indebtedness evidenced by such Bonds.
ARTICLE 15
MISCELLANEOUS PROVISIONS
SECTION 15.1 COVENANTS OF THE ISSUER TO BIND ITS SUCCESSORS. In the event
of the dissolution of the Issuer, all of the covenants, stipulations,
obligations and agreements contained in this Indenture by or in behalf of or
for the benefit of the Issuer shall bind or inure to the benefit of the
successor or successors of the Issuer from time to time and any officer, board,
commission, authority, agency or instrumentality to whom or to which any power
or duty affecting such covenants, stipulations, obligations and agreements
shall be transferred by or in accordance with law, and the term "Issuer" as
used in this Indenture shall include such successor or successors.
SECTION 15.2 NOTICES.
(a) Any notice, demand, direction, request or other instrument
authorized or required by this Indenture to be given or filed with the Issuer,
the Trustee or the Credit Facility Issuer shall be in writing and shall be
deemed given or filed for all purposes of this Indenture when delivered by hand
delivery, sent via overnight courier service or mailed by first class mail,
postage prepaid, registered or certified mail, addressed as follows:
(1) if to the Issuer, First Security Bank, National
Association, 79 South Main Street, 3rd Floor, Salt Lake City, Utah
84111;
with a copy to Sterile Recoveries, Inc., 28100 U.S.
Highway 19N, Suite 201, Clearwater, Florida 33074
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(2) if to the Trustee, to First Union National Bank, 150 4th
Avenue North, 2nd Floor, Nashville, Tennessee 37219, Attention:
Corporate Trust Department;
(3) if to any successor Trustee or Co-Trustee, addressed to
it at its principal corporate trust office, Attention:
Corporate Trust Department;
(4) if to the Bank, to First Union National Bank, 100 South
Ashley Drive, Suite 1000, Tampa, Florida 33602;
(5) if to any Credit Facility Issuer (other than the Bank),
addressed to it at its principal office,
and if sent by telegraph, telegram report of delivery requested, or telecopy,
addressed as above, at the time and date appearing on the report of delivery.
Notwithstanding the foregoing, the delivery of Bonds, Optional Tender Notices,
or Optional Retention Notices to the Trustee or Tender Agent if made by
telegraph, telegram or telecopy, must be made by delivery of the hard copy by
overnight delivery on the date of delivery of such telegraph, telegram or
telecopy and shall not be effective until actual receipt thereof by the Trustee
or the Tender Agent, as the case maybe.
(b) A duplicate copy of each notice or other communication given
hereunder by either the Issuer or the Trustee shall also be given to the other
party by the Issuer.
(c) All documents received by the Trustee under the provisions of
this Indenture, or photographic copies thereof, shall be retained in its
possession until this Indenture shall be released in accordance with the
provisions of the Indenture, subject at all reasonable times to the inspection
of the Issuer and the agents and representatives thereof.
(d) The Issuer, the Trustee and the Credit Facility Issuer may, by
notice given hereunder, designate any further or different addresses to which
subsequent notices, certificates or other communications shall be sent.
SECTION 15.3 TRUSTEE AS THE PAYING AGENT AND THE BOND REGISTRAR. The
Trustee is hereby designated and agrees to act as Paying Agent and Bond
Registrar for and in respect of the Bonds and any amounts received under the
Credit Facility.
SECTION 15.4 RIGHTS UNDER THIS INDENTURE. Except as herein otherwise
expressly provided, nothing in this Indenture expressed or implied is intended
or shall be construed to confer upon any person, firm or corporation other than
the parties hereto, the Issuer and the owners of the Bonds issued under and
secured by this Indenture, any benefit of this Indenture or any provisions
hereof, this Indenture and all its provisions being intended to be and being
for the sole and exclusive benefit of the parties hereto, the Issuer and the
owners from time to time of the Bonds issued hereunder.
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SECTION 15.5 FORM OF CERTIFICATES AND OPINIONS. Except as otherwise
provided in this Indenture, any request, notice, certificate or other
instrument from the Issuer to the Trustee shall be deemed to have been signed
by the proper party or parties if signed by the Issuer Representative.
SECTION 15.6 SEVERABILITY. In case any one or more of the provisions of
this Indenture or of the Bonds issued hereunder shall for any reason be held to
be illegal or invalid, such illegality or invalidity shall not affect any other
provisions of this Indenture or of the Bonds, but this Indenture and the Bonds
shall be construed and enforced as if such illegal or invalid provision had not
been contained therein. In case any covenant, stipulation, obligation or
agreement of the Issuer contained in this Indenture or in the Bonds shall for
any reason be held to be in violation of law, then such covenant, stipulation,
obligation or agreement of the Issuer shall be given effect to the full extent
permitted by law.
SECTION 15.7 STATE LAW GOVERNS This Indenture shall be governed by and
construed in accordance with the laws of the State.
SECTION 15.8 PAYMENTS DUE ON DAYS OTHER THAN BUSINESS DAYS. In any case
where the date of maturity of interest on or principal of the Bonds or the date
fixed for redemption of the Bonds shall be in the city of payment a day other
than a Business Day, then payment of interest or principal need not be made on
such date but may be made on the next succeeding Business Day with the same
force and effect as if made on the date of maturity or the date fixed for
redemption, provided that interest shall accrue for the period of any such
extension.
SECTION 15.9 EXECUTION IN COUNTERPARTS. This Indenture may be executed in
multiple counterparts, each of which shall be regarded for all purposes as an
original, and such counterparts shall constitute but one and the same
instrument, and no one counterpart of which need be executed by all parties.
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IN WITNESS WHEREOF, the Issuer has caused this Indenture to be executed
in its name and on its behalf by an officer of the managing general partner of
the Issuer, and the Trustee has caused this Indenture to be executed in its
name and on its behalf by a vice president or trust officer, all as of the date
and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely, as Owner Trustee of SRI Realty
Trust 1998-1
By: __________________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By: _________________________________
Caroline Oakes
Title:
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EXHIBIT A
NOTICE OF CONVERSION
[Name and Address of Owner]
Re: $5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand
Bonds, Series 1999
The undersigned officer of First Union National Bank, as Trustee with
respect to the captioned Bonds, pursuant to the provisions of Section 2.2(e) of
that certain Trust Indenture (the "Indenture"), dated as of June 1, 1999,
between SRI Realty Trust 1998-1 and the Trustee, hereby notifies you that the
interest rate borne by the captioned Bonds shall be converted from the Variable
Rate to the Fixed Rate, as follows (capitalized terms used herein shall have
the meanings provided in the Indenture):
1. The Conversion Date is ____________________
2. The Placement Agent is First Union Capital Markets.
3. All Owners of Bonds are required to tender their Bonds on the
Conversion Date to the Tender Agent, at the address set forth
below, for purchase on the Conversion Date. In the event any owner
of Bonds shall fail to tender such owner's Bonds for purchase on
the Conversion Date, such Bonds shall be deemed to have been
tendered for purchase on the Conversion Date.
4. The address of the Tender Agent is as follows:
First Union National Bank
150 4th Avenue North, 2nd Floor
Nashville, Tennessee 37219
Attention: Corporate Trust Department
5. After the tenth day preceding the Conversion Date, you will not be
entitled to tender any Bond for purchase pursuant to the Optional
Tender Provisions of Section 2.3 of the Indenture.
6. In order to receive payment of the purchase price of any Bond which
is deemed to have been tendered, you must deliver such Bond to the
office of the Tender Agent shown above before 10:00 a.m.
(prevailing Eastern time) on the Conversion Date.
7. Interest on any Bond will be payable only to (but not including)
the Conversion Date.
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8. Depending on market conditions, the Fixed Rate may be higher but in
no event lower than the Preliminary Fixed Rate.
9. After the Conversion Date, payment on the Bonds will be supported
by a Credit Facility and the provider of such Credit Facility is
____________________.
10. The rating on the Bonds (if any) may be reduced or withdrawn on the
Conversion Date.
11. All owners of Bonds who desire to retain such Bonds must deliver
an Optional Retention Notice (the form of which is attached as
Exhibit A to the Bond) to the Trustee by the tenth (10th) day
preceding the Conversion Date (or the next succeeding Business
Day if such date is not a Business Day) or be deemed to have
tendered their Bonds for purchase and must deliver the Bonds to
the Trustee on or before the Conversion Date to be stamped with
the legend contained in Section 2.2(e)(8) of the Indenture.
This _____ day of __________,
FIRST UNION NATIONAL BANK,
as Trustee
___________________________________________
Title:
A copy of this Notice has been delivered to the Tender Agent at the address
above.
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<PAGE> 74
EXHIBIT "B"
$ ________ No. _________
REQUISITION AND CERTIFICATE
______________, ____
First Union National Bank, as Trustee
150 4th Avenue North, 2nd Floor
Nashville, Tennessee 37219
Attention: Corporate Trust Department
Re: $5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand
Bonds, Series 1999
Ladies and Gentlemen:
On behalf of SRI Realty Trust 1998-1 (the "Issuer"), I hereby
requisition, from the Project Fund representing the proceeds of the sale of the
$5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand Bonds, Series
1999 and dated June ___, 1999 (the "Bonds"), in accordance with the Trust
Indenture (the "Indenture"), dated as of June 1, 1999, from the Issuer to you
the sum of $__________________ from the Project Fund to be used to pay to the
payees the amounts designated on the schedule attached hereto.
Issuer Representative
APPROVED BY:___________________________________
Authorized Officer of FIRST UNION NATIONAL BANK
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SCHEDULE TO REQUISITION AND CERTIFICATE NO. ____
Payee Item Amount
- ----- ---- ------
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<PAGE> 76
EXHIBIT C
[Form of Bond]
CUSIP ____
[The legend in the two paragraphs immediately following shall appear so long as
the Book-Entry System described in Section 2.14 of the Indenture has not been
discontinued.]
THE ISSUER HAS ESTABLISHED A BOOK ENTRY SYSTEM OF REGISTRATION FOR THIS BOND.
EXCEPT AS SPECIFICALLY PROVIDED OTHERWISE IN THE INDENTURE, CEDE & CO., AS
NOMINEE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), WILL
BE THE REGISTERED OWNER AND WILL HOLD THIS BOND ON BEHALF OF EACH BENEFICIAL
OWNER HEREOF. BY ACCEPTANCE OF A CONFIRMATION OF PURCHASE, DELIVERY OR
TRANSFER, EACH BENEFICIAL OWNER OF THIS BOND SHALL BE DEEMED TO HAVE AGREED TO
SUCH ARRANGEMENT. CEDE & CO., AS REGISTERED OWNER OF THIS BOND, MAY BE TREATED
AS THE OWNER OF IT FOR ALL PURPOSES.
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE
TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THIS BOND MAY BE TENDERED FOR PURCHASE AS DESCRIBED HEREIN. DELIVERY OF AN
OPTIONAL TENDER NOTICE WITH RESPECT TO THIS BOND CONSTITUTES AN IRREVOCABLE
OFFER TO SELL THIS BOND ON THE DATE SPECIFIED THEREIN AND IS BINDING ON
SUBSEQUENT OWNERS OF THIS BOND. IN THE EVENT THE OWNER OF THIS BOND FAILS TO
DELIVER THIS BOND TO THE TENDER AGENT ON THE SPECIFIED DATE, THE OWNER HEREOF
SHALL THEREAFTER BE ENTITLED ONLY TO PAYMENT OF THE PURCHASE PRICE AND NOT TO
THE BENEFITS OF THE INDENTURE. THIS BOND ALSO IS SUBJECT TO MANDATORY TENDER
AND PURCHASE AS DESCRIBED HEREIN.
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND IT MAY NOT BE TRANSFERRED NOR MAY THE EXTENT OF ITS REGISTRATION BE
REDUCED, WITHOUT OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AND THE ISSUER
REFERRED TO IN THIS BOND TO THE EFFECT THAT SUCH TRANSFER OR CHANGE IN THE
EXTENT OF REGISTRATION WILL NOT VIOLATE APPLICABLE SECURITIES LAWS.
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SRI REALTY TRUST 1998-1
TAXABLE VARIABLE RATE DEMAND BONDS, SERIES 1999
CUSIP NUMBER:___________ No. R___
Registered Owner: ________________________
Principal Amount: ________________________
Maturity Date: _______________________
Initial Interest Rate: _________%
Interest Payment Dates: The first Business Day of each February, May, August
and November commencing the first Business Day of
August, 1999, and ending on the Maturity Date, the
Conversion Date (hereinafter defined) and the Maturity
Date.
Original Delivery Date: _________________
First Security Bank, National Association, not individually, but solely
as Owner Trustee of SRI Realty Trust 1998-1 (herein called the "Issuer"), for
value received, hereby promises to pay (but only from the sources hereinafter
mentioned) to the Registered Owner set forth above, or registered assigns, the
Principal Amount set forth above on the Maturity Date set forth above and to
pay (but only from the sources hereinafter mentioned) interest thereon from the
Interest Payment Date immediately preceding the Date of Authentication endorsed
hereon, unless this Bond is authenticated on an Interest Payment Date in which
event it will bear interest from such date or unless it is authenticated prior
to the first Business Day of June, 1999, in which event it will bear interest
from the Date of Authentication, payable on each Interest Payment Date, until
payment of said principal sum has been made or provided for, at the rate or
rates per annum set forth below. Principal and interest and premium, if any,
will be paid in any coin or currency of the United States of America which, at
the time of payment, is legal tender for the payment of public and private
debts. Interest will be paid by check mailed on the Interest Payment Date to
the person in whose name this Bond is registered at the close of business on
the Regular Record Date (as hereinafter defined) immediately preceding such
Interest Payment Date; provided, however, that interest will also be payable by
wire transfer to the account at a member bank of the Federal Reserve System of
any registered owner of Bonds in the aggregate principal amount of One Million
Dollars ($1,000,000) or more at the written request (identifying such account
by number)
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of such owner received by the Trustee (as hereinafter defined) on or before the
Regular Record Date. While the Bonds bear interest at the Variable Rate (as
hereinafter defined), the Regular Record Date will be the close of business on
the Business Day immediately preceding each Interest Payment Date. While the
Bonds bear interest at the Fixed Rate (as hereinafter defined), the Regular
Record Date will be the fifteenth (15th) day of the calendar month immediately
preceding each Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the owner on such
Regular Record Date, and may be paid to the person in whose name this Bond is
registered at the close of business on a Special Record Date (as defined in the
Indenture (hereinafter defined)) for the payment of such defaulted interest to
be fixed by the Trustee, or may be paid at any time in any other lawful manner,
all as more fully provided in the Indenture. Principal and redemption price
will be paid upon surrender of this Bond at the corporate trust office of First
Union National Bank, as trustee (said banking institution and any successor
trustee or co-trustee under the Indenture being herein called the "Trustee"),
in Nashville, Tennessee. Payment of the purchase price of Bonds purchased as
described herein will be paid, upon surrender of such Bonds, at the office of
First Union National Bank in Nashville, Tennessee (in such capacity, herein
called the "Tender Agent").
This Bond and the issue of which it is a part and the purchase price
thereof, the premium, if any, and interest thereon are obligations of the
Issuer payable by the Issuer from the revenues and receipts derived from the
Indenture, which revenues and receipts have been pledged and assigned to the
Trustee to secure payment thereof and from amounts received pursuant to the
Credit Facility (as hereinafter defined).
This Bond is one of the Bonds of a duly authorized issue of variable rate
bonds of the Issuer in the aggregate principal amount of $5,200,000 and
designated SRI Realty Trust 1998-1 Taxable Variable Rate Demand Bonds, Series
1999 (the "Bonds").
The Bonds have been issued for the purpose of (i) financing the cost of
the acquisition, construction, installation and equipping of a facility (the
"Project") and (ii) financing certain costs of issuing the Bonds.
The Bonds are issued under and pursuant to a Trust Indenture, dated as of
June 1, 1999 (said Trust Indenture, together with all such supplements and
amendments thereto as therein permitted, being herein called the "Indenture"),
among the Issuer and the Trustee. An executed counterpart of the Indenture is
on file at the principal corporate trust office of the Trustee. Reference is
hereby made to the Indenture for the provisions, among others, with respect to
the custody and application of the proceeds of the Bonds; the collection and
disposition of Revenues; a description of the funds charged with and pledged to
the payment of the principal of and interest on and any other amounts payable
under the Bonds; the nature and extent of the security; the terms and
conditions under which the Bonds are or may be issued; and the rights, duties
and obligations of the Issuer and of the Trustee and the rights of the owners
of the Bonds, and, by the acceptance of this Bond, the owner hereof assents to
all of the provisions of the Indenture.
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The Issuer has agreed to use the proceeds of the Bonds to the Project,
and the Issuer has agreed to make payments, bearing interest at a rate or rates
and payable at times corresponding to the principal amount of, installments of
principal of, interest rates on and due dates of the Bonds. As security for the
payment of the Bonds, all right, title and interest of the Issuer in (a) all
money and securities at any time on deposit in, in transit to or credited to
any account or Fund created under the Indenture, including without limitation
the Project Fund and the Bond Fund (as defined in the Indenture) and (b)
Revenues (as defined in the Indenture), have been assigned to the Trustee under
the Indenture and pledged to the payment of the principal of, and the
redemption premium (if any) and the interest on, the Bonds.
Reference to the Indenture is hereby made for a description of the
aforesaid Bond Fund which is charged with, and pledged to, the payment of the
principal of, and the redemption premium (if any) and the interest on, the
Bonds, the nature and extent of the security, the rights, duties and
obligations of the Issuer and the Trustee, the rights of the owners of the
Bonds, the terms and conditions under and upon the occurrence of which the
Indenture may be modified and the terms and conditions under and upon the
occurrence of which the lien of the Indenture may be defeased as to this Bond
prior to the maturity or redemption date hereof, to all of the provisions of
which the owner hereof, by the acceptance of this Bond, assents.
Credit Facility. The Issuer has entered into a Letter of Credit and
Reimbursement Agreement, dated as of February 1, 1999 (herein called the
"Credit Agreement"), between First Union National Bank (in such capacity,
herein called the "Bank") and the Issuer.
Pursuant to the Credit Agreement, the Issuer has caused a Letter of
Credit issued by the Bank (herein called the "Letter of Credit"; such Letter of
Credit and any extensions or renewals thereof or any amendment thereto and any
Alternate Credit Facility (as hereinafter defined) referred to herein as the
"Credit Facility") to be delivered to the Trustee. The Trustee will be entitled
under the Letter of Credit to draw up to an amount of $5,460,000 of which (a)
$5,200,000 will be available for the payment of principal or that portion of
the purchase price corresponding to principal of the Bonds and (b) $260,000
will support the payment of up to one hundred and twenty (120) days' interest
or that portion of the purchase price corresponding to interest on the Bonds at
an assumed rate of fifteen percent (15%) per annum, which is the maximum rate
of interest borne by the Bonds. Subject to the provisions of the Indenture, the
Issuer is required during the Variable Rate Period to provide an alternate
credit facility with terms and provisions substantially the same as those of
the Letter of Credit (an "Alternate Credit Facility") prior to the termination
of Letter of Credit. During the Variable Rate Period unless the Letter of
Credit or the then current Alternate Credit Facility is replaced prior to its
expiration in accordance with the terms of the Indenture, this Bond will become
subject to mandatory redemption as provided in the Indenture.
Source of Funds. The principal of, premium (if any) and interest on the
Bonds are payable solely from the payments under the Indenture and from any
other moneys held by the Trustee under the Indenture for such purpose,
including, with respect to principal and interest only, moneys drawn by the
Trustee under the Letter of Credit or Alternate Credit Facility for the benefit
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of the Bondholders (the Bank as the issuer of the Letter of Credit and the
institution issuing any Alternate Credit Facility are herein called the "Credit
Facility Issuer"). Except as otherwise specified in the Indenture, this Bond is
entitled to the benefits of the Indenture equally and ratably both as to
principal (and redemption and purchase price) and interest with all other Bonds
issued under the Indenture.
INTEREST RATES
Initial Interest Rate.
The Bonds will bear interest from the Original Delivery Date
specified above to June __, 1999 at the Initial Interest Rate.
Variable Rate.
After June __, 1999, and prior to (and including) the Conversion
Date (hereinafter defined), the Bonds will bear interest at a rate equal to a
floating rate established as hereinafter provided (herein called the "Variable
Rate"). The Variable Rate will be equal to the rate of interest certified in
writing to the Trustee by First Union Capital Markets Corp. as remarketing
agent for the Bonds (herein, with its successors in such capacity, called the
"Remarketing Agent") on and as of each Wednesday (or the next succeeding
Business Day (as defined in the Indenture) if such Wednesday is not a Business
Day) (herein called the "Determination Date") as the minimum rate of interest
necessary, in the judgment of the Remarketing Agent taking into account market
conditions prevailing on the Determination Date, to enable the Remarketing
Agent to arrange for the sale of all of the Bonds on the Determination Date in
the secondary market at a price equal to the principal amount thereof (plus
interest accrued to the date of settlement). If the Remarketing Agent fails to
certify such rate, the Variable Rate for the next Calculation Period or Periods
(hereinafter defined) until thereafter certified by the Remarketing Agent will
remain the same as that most recently established and certified by the
Remarketing Agent. If the Remarketing Agent fails to certify such rate for the
Bonds for four consecutive Calculation Periods, the rate for the Bonds for each
Calculation Period thereafter (if none is certified by the Remarketing Agent)
shall be a rate equal to the 30 day LIBOR Rate. If, for any reason, the
Variable Rate is not determined as described above or is held to be invalid or
unenforceable by a court of competent jurisdiction for any period, the interest
rate for each such period shall be equal to ten percent (10%) per annum. For
purposes hereof, "Calculation Period" shall mean the period from and including
the day following the Determination Date of each week (even if not a Business
Day) to and including the following Determination Date; provided that if during
the Variable Rate Period the Determination Date at the end of such Calculation
Period is a Regular Record Date, such Calculation Period will extend until the
Business Day following such Determination Date. "LIBOR Rate" shall mean, for
any period, an interest rate per annum (based on a 360-day year) determined by
the Trustee or its designee to be the rate or the arithmetic mean of rates
(rounded upward, if necessary, to the nearest one-sixteenth (1/16) of one
percentage point of the rate per annum) for deposits in immediately available
and freely transferable dollars of the United States of
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America that appears on Telerate Screen, page 3747, as published daily by the
British Bankers Association Interest Settlement Rates (or another comparable
international financial data service satisfactory to the Remarketing Agent, or
its designee, in its discretion, if Telerate no longer publishes such rates)
and that is offered by first class banks in the London interbank market to the
offices of the Trustee or its designee at 10:00 a.m. on the applicable
Determination Date. Interest prior to the Conversion Date (hereinafter defined)
will be computed on the basis of a three hundred sixty-five (365) or three
hundred sixty-six (366) day year, as applicable, for the number of days
actually elapsed, and will be payable on each Interest Payment Date.
Fixed Rate.
(a) The interest rate on this Bond will be converted to the Fixed Rate
upon an election by the Issuer pursuant to the Indenture to convert the rate of
interest on all Bonds then outstanding from the Variable Rate to the Fixed Rate
(herein called the "Fixed Rate Election"), on any Interest Payment Date by
giving written notice, accompanied by the items described in Section 2.2(e) of
the Indenture, to the Issuer, the Trustee, the Credit Facility Issuer, the
Tender Agent and the Remarketing Agent, which notice will specify, among other
things, the name and address of the Placement Agent which has agreed to use its
best efforts to arrange for the sale of any Bonds to be tendered or deemed
tendered for purchase on the Conversion Date (herein called the "Placement
Agent"). At least twenty-five (25) days prior to the Conversion Date, the
Placement Agent will determine a rate (the "Preliminary Fixed Rate") which will
be the minimum rate of interest on the Bonds determined by the Placement Agent
to be the fixed annual rate of interest (for the period beginning on the
Conversion Date and ending on the Maturity Date) necessary, in the judgment of
the Placement Agent taking into account market conditions prevailing on the
date such rate is determined, to enable the Placement Agent to arrange for the
sale of all of the Bonds in the secondary market at a price equal to the
principal amount thereof if the Bonds were tendered for purchase on the
Conversion Date. The Placement Agent will promptly notify the Trustee in
writing of the Preliminary Fixed Rate.
(b) As soon after the receipt of notice from the Placement Agent of the
Preliminary Fixed Rate as practicable (but in no event more than two (2)
Business Days thereafter) a notice will be mailed by the Trustee to each
registered owner of Bonds stating, among other things, (1) the Preliminary
Fixed Rate, (2) that, depending on market conditions, the Fixed Rate may be
higher but in no event will be lower than the Preliminary Fixed Rate, (3) the
Conversion Date, (4) that after the tenth (10th) day preceding the Conversion
Date, the owner will not be entitled to tender this Bond for purchase pursuant
to the Optional Tender Provisions of Section 2.3 of the Indenture as described
below, (5) that payment of this Bond will not be supported by an Alternate
Credit Facility after the Conversion Date, (6) that the rating on the Bonds (if
at such time there is a rating in effect on the Bonds) may be reduced or
withdrawn on the Conversion Date, (7) that unless such registered owner
delivers to the Trustee a notice (an "Optional Retention Notice") in the form
attached hereto as Exhibit A at least ten days prior to the Conversion Date,
this Bond will be deemed tendered for purchase on the Conversion Date, (8) that
in order to receive payment of the purchase price of any Bond which is deemed
to have been tendered, the registered owner of such Bond must deliver such Bond
to the office of the Tender Agent before 10:00 a.m. on the
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Conversion Date specifying such address, and (9) that interest on any Bond
deemed to have been tendered will be payable only to (but not including) the
Conversion Date.
(c) Upon the Conversion Date stated in such notice, the Fixed Rate to be
borne by the Bonds for the period beginning on the Conversion Date until the
Maturity Date or prior redemption of the Bonds (the "Fixed Rate"), will be
determined as follows:
(1) if any of the Bonds have been tendered or deemed tendered for
purchase (herein called the "Tendered Bonds"), then:
(A) if the Placement Agent shall have arranged for the sale of
any or all of the Tendered Bonds, at a price equal to the principal
amount thereof, the Fixed Rate will be equal to the interest rate at
which all such Bonds were sold by the Placement Agent, provided that
all such Bonds will be sold at a rate greater than or equal to the
Preliminary Fixed Rate; and
(B) if the Placement Agent shall have arranged for the sale of
none of the Tendered Bonds, the Fixed Rate will be equal to the
Preliminary Fixed Rate; or
(2) if all owners of the outstanding Bonds elect to retain such
Bonds, the Fixed Rate will be equal to the Preliminary Fixed Rate.
(d) If, for any reason, the Fixed Rate is held to be invalid or
unenforceable by a court of competent jurisdiction, the Fixed Rate will be ten
percent (10%) per annum.
(e) The Fixed Rate will be computed on the basis of a three hundred sixty
(360)-day year, computed for the actual number of days elapsed, and will be
payable on each Interest Payment Date after the Conversion Date until the
principal of, and premium, if any, and interest on the Bonds shall have been
paid in full.
Interest Rate Determination Binding.
The determination of the interest rate on the Bonds by the Remarketing
Agent or Placement Agent, as appropriate, in accordance with the terms of the
Indenture will be conclusive and binding upon the owners of the Bonds, the
Issuer, the Trustee, the Remarketing Agent, the Placement Agent, the Tender
Agent and the Credit Facility Issuer.
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REDEMPTION OF BONDS
Optional Redemption
(a) While the Bonds bear interest at the Variable Rate, the Bonds will be
subject to redemption upon the written direction of the Issuer, with the
consent of the Credit Facility Issuer, on any Interest Payment Date and on the
Conversion Date, in whole or in part, at redemption price equal to one hundred
percent (100%) of the principal amount thereof without premium plus interest
accrued to the redemption date.
(b) While the Bonds bear interest at the Fixed Rate, the Bonds will be
subject to redemption upon the written direction of the Issuer, in whole on any
date, or in part on any Interest Payment Date, occurring on or after the dates
set forth below, at the redemption prices (with a premium expressed as a
percentage of principal amount to be redeemed) set forth below plus interest
accrued to the redemption date as follows:
<TABLE>
<CAPTION>
Commencement of
Redemption Period Redemption Price
----------------- ----------------
<S> <C>
The Business Day four 103% declining by 1/2%
(4) years from the on each succeeding anniversary
Conversion Date date of the first day of the
redemption period until
reaching 100% and thereafter
at 100%
</TABLE>
Notice of Redemption and Selection of Bonds.
Any notice of redemption, identifying the Bonds or portions thereof to be
redeemed, will be given not more than sixty (60) days and not less than thirty
(30) days prior to the redemption date, by mailing a copy of the redemption
notice by first class mail to the owner of each Bond to be redeemed in whole or
in part at the address shown on the Bond Register (as defined in the Indenture)
maintained by the Bond Registrar (as hereinafter described). Notice of optional
redemption may be conditioned upon the deposit of moneys with the Trustee
before the date fixed for redemption and such notice will be of no effect
unless such moneys are so deposited. All Bonds so called for redemption,
including Bonds purchased by the Issuer as provided in the Indenture but not
yet surrendered for payment of the purchase price, will cease to bear interest
on the specified redemption date provided funds for their redemption price and
any accrued interest payable on the specified redemption date are on deposit at
the principal place of payment at that time. If less than all the Bonds are to
be redeemed, the particular Bonds to be called for redemption will be selected
in the following order of priority: first, Bonds pledged to the Credit Facility
Issuer; second, Bonds owned by the Issuer and third, Bonds selected by any
random or other method determined by the Trustee in its sole discretion.
C-8
<PAGE> 84
Mandatory Tender for Purchase Upon Conversion to Fixed Rate.
The Bonds will be subject to mandatory purchase in whole (and not in
part) on the Conversion Date at a purchase price equal to one hundred percent
(100%) of the principal amount thereof plus interest accrued thereon to the
date of purchase; provided that there will not be so purchased (a) Bonds or
portions thereof in authorized denominations which the owners have irrevocably
elected to retain on the Conversion Date in accordance with the Indenture by
the delivery of an Optional Retention Notice in the form attached hereto as
Exhibit A in accordance with the provisions of Section 2.2(e) of the Indenture,
or (b) Bonds issued in exchange for or upon the registration of transfer of
Bonds referred to in clause (a) above.
THE OWNER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES TO THE MANDATORY
PURCHASE OF THIS BOND AS PROVIDED IN THE INDENTURE, AND AGREES THAT THIS BOND
WILL BE PURCHASED ON THE DATE SPECIFIED UPON DEPOSIT WITH THE TRUSTEE OF AN
AMOUNT SUFFICIENT TO PAY THE PURCHASE PRICE HEREOF. THE OWNER OF THIS BOND ALSO
UNDERSTANDS AND AGREES THAT IN THE EVENT THE OWNER FAILS TO DELIVER THIS BOND,
PROPERLY ENDORSED FOR TRANSFER, TO THE TRUSTEE ON THE DATE SPECIFIED, INTEREST
WILL CEASE TO ACCRUE HEREON ON SUCH SPECIFIED DATE AND THE OWNER HEREOF WILL
THEREAFTER BE ENTITLED ONLY TO PAYMENT OF THE PURCHASE PRICE AND NOT TO THE
BENEFIT OF THE INDENTURE.
Purchase at Option of the Owner During Variable Rate Period.
While the Bonds bear interest at the Variable Rate, any Bond or portion
thereof in an authorized denomination will be purchased on the demand of the
owner thereof, on any Business Day at a purchase price equal to one hundred
percent (100%) of the principal amount thereof plus interest accrued to the
date of purchase upon delivery to the Tender Agent of a notice (herein called
an "Optional Tender Notice") in the form attached hereto as Exhibit B
specifying the date on which such Bond will be purchased, which date will be a
Business Day not prior to the seventh (7th) day after the date of delivery of
the Optional Tender Notice. To receive payment of the purchase price, the owner
will be required to deliver such Bond to the Tender Agent, accompanied by an
executed form of assignment and any other instruments of transfer satisfactory
to the Trustee, not less than five (5) days prior to the purchase date
specified in such notice as provided in the Indenture; provided, however, that
any owner which is an investment company registered pursuant to the Investment
Company Act of 1940 may deliver such Bond to the Tender Agent at or prior to
10:00 a.m. on the date of purchase. No purchase of Bonds at the option of the
owner thereof or on the Conversion Date will be deemed to be a payment or
redemption of the Bonds or any portion thereof. Notwithstanding the foregoing,
no owner will have a right to tender such owner's Bond(s) for purchase as
described in this paragraph following acceleration of the payment of the Bonds
pursuant to the terms of the Indenture or after the Conversion Date.
THE OWNER OF THIS BOND, BY ACCEPTANCE HEREOF, AGREES THAT DELIVERY OF THE
WRITTEN NOTICE DESCRIBED IN THE PRECEDING PARAGRAPH
C-9
<PAGE> 85
BY THE OWNER CONSTITUTES AN IRREVOCABLE OFFER TO SELL THIS BOND ON THE DATE
SPECIFIED, AND THAT THIS BOND WILL BE PURCHASED ON SUCH DATE UPON DEPOSIT WITH
THE TENDER AGENT OF AN AMOUNT SUFFICIENT TO PAY THE PURCHASE PRICE HEREOF. THE
OWNER OF THIS BOND ALSO UNDERSTANDS AND AGREES THAT IN THE EVENT THE OWNER
FAILS TO DELIVER THIS BOND, PROPERLY ENDORSED FOR TRANSFER, TO THE TENDER AGENT
ON THE DATE SPECIFIED IN THE NOTICE, THIS BOND WILL BE HELD BY THE OWNER AS
AGENT FOR THE ISSUER, INTEREST WILL CEASE TO ACCRUE HEREON AS OF THE DATE
SPECIFIED IN THE NOTICE AND THE OWNER HEREOF WILL THEREAFTER BE ENTITLED ONLY
TO PAYMENT OF THE PURCHASE PRICE AND NOT TO THE BENEFITS OF THE INDENTURE, AND
THE ISSUER WILL, TO THE EXTENT PERMITTED BY LAW, EXECUTE AND THE TRUSTEE WILL
AUTHENTICATE AND DELIVER A SUBSTITUTE BOND IN LIEU OF THE UNDELIVERED BOND.
Tender Agent.
The Issuer has appointed First Union National Bank as Tender Agent. The
Tender Agent may be changed at any time by the Issuer and with the consent of
the Trustee.
Authorized Denominations.
Subject to the provisions of the Indenture, the Bonds are issuable as
registered Bonds in the denomination of One Hundred Thousand Dollars ($100,000)
or any integral multiple of $5,000 in excess thereof, provided that if less
than $100,000 in principal amount of Bonds is Outstanding (as defined in the
Indenture), one Bond shall be issued in such smaller denomination; and provided
further, that if as a result of redemption pursuant to Article 7 of the
Indenture the unredeemed portion of a redeemed Bond shall be less than
$100,000, a replacement Bond in the amount of such unredeemed portion may be
issued. Subject to the limitations provided in the Indenture and upon payment
of any tax or governmental charge, if any, Bonds may be exchanged for a like
aggregate principal amount of Bonds of other authorized denominations.
Transfer.
This Bond is transferable by the registered owner hereof or his duly
authorized attorney at the corporate trust office of First Union National Bank,
as Bond Registrar, in Nashville, Tennessee, in compliance with the terms and
conditions set forth in the Indenture and upon surrender of this Bond,
accompanied by a duly executed instrument of transfer in form satisfactory to
the Bond Registrar, subject to such reasonable regulations as the Issuer, the
Bond Registrar or the Trustee may prescribe and upon payment of any tax or
other governmental charge incident to such transfer, PROVIDED THAT IF MONEYS
FOR THE PURCHASE OF THIS BOND HAVE BEEN PROVIDED PURSUANT TO A DRAW UNDER THE
CREDIT FACILITY, THIS BOND IS NOT TRANSFERABLE TO ANYONE OTHER THAN THE ISSUER
OR ITS ASSIGNEE OR PLEDGEE. Upon any such transfer, a new Bond or Bonds
registered in the name of the transferee or transferees in denominations
authorized by the Indenture and in the same
C-10
<PAGE> 86
aggregate principal amount as the principal amount of this Bond (and of the
same maturity and bearing interest at the same rate) will be issued to the
transferee. Except as set forth in this Bond and as otherwise provided in the
Indenture, the person in whose name this Bond is registered will be deemed the
owner hereof for all purposes, and the Issuer, the Bond Registrar and the
Trustee will not be affected by any notice to the contrary. The owner of this
Bond will have no right to enforce the provisions of the Indenture or to
institute action to enforce the covenants therein, or to take any action with
respect to any Event of Default under the Indenture or to institute, appear in
or defend any suit or other proceeding with respect thereto, except as provided
in the Indenture.
In certain events, on the conditions, in the manner and with the effect
set forth in the Indenture, the principal of this Bond may become or may be
declared due and payable before the stated maturity hereof, together with the
interest accrued hereon.
Modifications or alterations of the Indenture and any supplement or
amendment thereto may be made only to the extent and in the circumstances
permitted by the Indenture and may be made in certain cases without the consent
of the owners of the Bonds.
Anything herein or in the Indenture to the contrary notwithstanding, the
obligations of the Issuer hereunder will be subject to the limitation that
payment of interest to the owner of this Bond will not be required to the
extent that receipt of any such payment by the owner of this Bond would be
contrary to the provisions of law applicable to such Bond which limits the
maximum rate of interest which may be charged or collected by such owner.
In any case where the date of maturity of interest on or principal of the
Bonds or the date fixed for redemption of the Bonds shall be in the city of
payment a day other than a Business Day, then payment of interest or principal
need not be made on such date but may be made on the next succeeding Business
Day with the same force and effect as if made on the date of maturity or the
date fixed for redemption, provided that interest will accrue for the period of
any such extension.
This Bond will be governed by and construed in accordance with the laws
of the State of Florida.
All acts, conditions and things required to happen, exist and be
performed precedent to and in the issuance of this Bond and the execution of
the Indenture have happened, exist and have been performed as so required.
C-11
<PAGE> 87
IN WITNESS WHEREOF, SRI Realty Trust 1998-1 has caused this Bond to be
executed with the manual or facsimile signature of the Issuer Representative,
all as of June __, 1999.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely, as Owner Trustee of SRI Realty
Trust 1998-1
By: _________________________________
Name:
Title:
C-12
<PAGE> 88
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the series designated therein and issued
under the provisions of the within-mentioned Indenture.
FIRST UNION NATIONAL BANK, as Trustee
By:____________________________________
Its:_____________________________________
Date of Authentication: ____________ ___, 1999
<PAGE> 89
[FORM OF ASSIGNMENT
TO APPEAR ON REVERSE OF BOND]
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
the within bond of the ____________________________ and does hereby constitute
and appoint _________________ ______________ attorney to transfer the said bond
on the books of the within named Issuer, with full power of substitution in the
premises.
Dated:
In the presence of:_________________________________________
Bondholder
Signature Guaranteed: _____________________________
Notice: Signatures must be guaranteed by a member firm of STAMP, SEMP or MSP
signature guarantee medallion programs.
<PAGE> 90
EXHIBIT A
FORM OF BONDHOLDER'S OPTIONAL RETENTION NOTICE
Date:____________
First Union National Bank, as Trustee
(the "Trustee") under the Trust Indenture dated as
of June 1, 1999 (the "Indenture") between the
Trustee and SRI Realty Trust 1998-1
Attention: Corporate Trust Department
Re: $5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand
Bonds, Series 1999, numbered ______ CUSIP ________
1. The undersigned hereby certifies that it is the lawful registered
owner of the Bonds described above.
2. Pursuant to the provisions of the Indenture, the undersigned hereby
irrevocably elect(s) to hold the Bonds, which will bear interest at the Fixed
Rate (as defined in, and to be determined as described in, the Indenture),
effective on the Conversion Date (as defined in the Indenture) specified in the
notice from the Trustee (the "Notice of Conversion").
3. The undersigned hereby acknowledges that it has received the Notice of
Conversion and that it acknowledges, without limitation, that (i) the Bonds
will be supported by an Alternate Credit Facility after the Conversion Date and
the provider of such Alternate Credit Facility is __________, (ii) the rating
on the Bonds, if any, may be reduced or withdrawn after the Conversion Date,
and (iii) after the tenth day preceding the Conversion Date the undersigned
will not be entitled to deliver Bonds for purchase pursuant to Section 2.3 of
the Indenture.
4. The undersigned hereby acknowledges that, even if it fails to deliver
such Bonds as agreed pursuant to paragraph 5 hereof, the Bonds will
nevertheless bear the Fixed Rate effective on the Conversion Date.
5. The undersigned hereby undertakes to deliver the Bonds to First Union
National Bank, as Tender Agent, at its corporate trust office located at 150
4th Avenue North, 2nd Floor in Nashville, Tennessee 37219, Attention: Corporate
Trust Department, to be stamped with the legend set forth in Section 2.2(e) of
the Indenture not later than 10:00 A.M. prevailing Eastern time on the
Conversion Date.
A-1
<PAGE> 91
Name of Bondholder:_____________________________________________________________
(Type or Print)
Signature:______________________________________________________________________
Guaranteed by:__________________________________________________________________
Name of Institution:____________________________________________________________
Date:______________________________________
[End of Exhibit A to Form of Bond]
A-2
<PAGE> 92
EXHIBIT B
FORM OF BONDHOLDER'S OPTIONAL TENDER NOTICE
Date___________
First Union National Bank, as Trustee (the
"Trustee") under the Trust Indenture dated as of June 1,
1999 (the "Indenture") between the Trustee and SRI Realty Trust 1998-1
Attention: Corporate Trust Department
Re: $5,200,000 SRI Realty Trust 1998-1 Taxable Variable Rate Demand
Bonds, Series 1999, numbered ________, CUSIP _________
1. The undersigned hereby certifies that it is the lawful registered
owner of the Bonds described above on the date hereof and that such Bonds are
free and clear of any lien or encumbrance.
2. Pursuant to the provisions of the Indenture, the undersigned hereby
irrevocably request(s) the purchase of the Bonds described above.
3. The date on which the Bonds shall be purchased shall be _________,
____ [Note: This date must be a Business Day (as defined in the Indenture)
which is at least seven days after delivery of this notice to the Tender
Agent].
4. The person or persons to whom or to whose order the proceeds of the
purchase of the Bonds are to be paid is ___________, and the address or
addresses of such payee or payees is
5. The undersigned hereby irrevocably authorizes and instructs the
Trustee or the Bond Registrar (as defined in the Bonds) to effect the transfer
of such Bonds (or any Bond(s) exchanged therefor), upon payment of the purchase
price therefor, to the purchaser(s) thereof, whether or not it delivers such
Bonds as agreed pursuant to paragraph (7) hereof.
6. The undersigned hereby acknowledges that, even if it fails to deliver
such Bonds, the Bonds may nevertheless be purchased pursuant to the Indenture,
and that, in any event, on and after the proposed purchase date set forth in
paragraph 3 hereof, the Bonds will cease to be outstanding for all purposes
under the Indenture, to evidence the indebtedness of the Issuer with respect
thereto and to bear interest.
B-1
<PAGE> 93
7. The undersigned hereby undertakes to deliver the Bonds to you, as
Tender Agent, at 150 4th Avenue North, 2nd Floor, Nashville, Tennessee 37219,
Attention: Corporate Trust Department at least five days prior to the proposed
purchase date set forth in paragraph 3 above duly endorsed in blank for
transfer.
Name of Bondholder:_____________________________________________________________
(Type or Print)
Signature:______________________________________________________________________
Guaranteed by:__________________________________________________________________
Name of Institution:____________________________________________________________
Date:______________________________________
[End of Exhibit B to Form of Bond]
B-2
<PAGE> 1
Exhibit 10.32
[Florida NET LEASE]
LEASE AGREEMENT
THIS LEASE AGREEMENT IS MADE THIS 15 day of - June 1999, between ProLogis
Limited Partnership TV, a Delaware Limited Partnership By: ProLogis IV, Inc. a
Delaware Corporation, as the General Partner ("Landlord"), and the Tenant named
below.
TENANT: STERILE RECOVERIES, INC,
TENANT'S REPRESENTATIVE, Mr. WAYNE PETERSON, EXECUTIVE VICE PRESIDENT
ADDRESS, AND phone no.: 28100 U.S. HIGHWAY 19. SUITE 201
CLEARWATER. FLORIDA 33761
(727) 726-4421 / FAX (727) 725-8037
Premises: That portion of the Building, containing approximately
40,800 rentable square feet, as determined by Landlord,
as shown on Exhibit A.
Project: PLANT CITY DISTRIBUTION CENTER #1 (40,800 SF)
BUILDING: 1802 CORPORATE CENTER LANE. PLANT CITY. FLORIDA 33567
TENANT'S PROPORTIONATE
SHARE
or Project: 100%
TENANT'S PROPORTIONATE
SHARE 100%
of Building:
Lease Term: Beginning on the Commencement Date and ending on the
last day of the 63rd FULL calendar month thereafter.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Commencement Date: AUGUST 1, 1999
Initial Monthly Base Rent: $ 11,492.00
* SEE ADDENDUM ONE, SECTION I
INITIAL ESTIMATED MONTHLY 1. Utilities: $ 0.00
OPERATING EXPENSE PAYMENTS:
(estimates only and subject to 2. Common Area Charges: $ TENANT'S RESPONSIBILITY
adjustment to actual costs and
expenses according to the
provisions of this Lease) 3. Taxes: $ TO BE PAID DIRECTLY BY
TENANT ON AN ANNUAL
BASIS.
4. Insurance: $ 119.00
5. Others: $ 0.00
INITIAL ESTIMATED MONTHLY OPERATING EXPENSE PAYMENTS: $ 119.00
INITIAL MONTHLY SALES TAX: $ 783.74
INITIAL MONTHLY BASE RENT, OPERATING EXPENSE, and
Sales Tax Payments: $ 12,394.74
SECURITY Deposit: $12,394.74*
1 *SEE Addendum One, Section X
Broker: CB Richard Ellis
</TABLE>
Addenda: EXHIBIT A, EXHIBIT B. ADDENDUM ONE, ADDENDUM TWO, ADDENDUM THREE,
ADDENDUM 4, ADDENDUM 5, ADDENDUM 6, AND ADDENDUM SEVEN, ADDENDUM
FOUR, ADDENDUM FIVE, ADDENDUM SIX, AND ADDENDUM SEVEN
1. GRANTING CLAUSE. IN CONSIDERATION OF THE OBLIGATION OF TENANT TO PAY
RENT AS HEREIN PROVIDED AND IN CONSIDERATION OF THE OTHER TERMS, COVENANTS, AND
CONDITIONS HEREOF, LANDLORD LEASES TO TENANT, AND TENANT TAKES FROM LANDLORD,
THE PREMISES, TO HAVE AND TO HOLD FOR THE LEASE TERM, SUBJECT TO THE TERMS,
COVENANTS AND CONDITIONS OF THIS LEASE.
2. ACCEPTANCE or PREMISES. TENANT SHALL ACCEPT THE PREMISES IN ITS
CONDITION AS OF THE COMMENCEMENT DATE, SUBJECT TO ALL APPLICABLE LAWS,
ORDINANCES, REGULATIONS, COVENANTS AND RESTRICTIONS. LANDLORD HAS MADE NO
REPRESENTATION OR WARRANTY AS TO THE SUITABILITY OF THE PREMISES FOR THE
CONDUCT OF TENANT'S BUSINESS, AND TENANT WAIVES ANY IMPLIED WARRANTY THAT THE
PREMISES ARE SUITABLE FOR TENANT'S INTENDED PURPOSES. EXCEPT AS PROVIDED IN
PARAGRAPH 10, IN NO EVENT SHALL LANDLORD HAVE ANY OBLIGATION FOR ANY DEFECTS IN
THE PREMISES OR ANY LIMITATION ON ITS USE. THE TAKING OF POSSESSION OF THE
PREMISES SHALL BE CONCLUSIVE EVIDENCE THAT TENANT ACCEPTS THE PREMISES AND THAT
THE PREMISES WERE IN GOOD CONDITION AT THE TIME POSSESSION WAS TAKEN EXCEPT FOR
ITEMS THAT ARE LANDLORD'S RESPONSIBILITY UNDER PARAGRAPH 10 AND ANY PUNCHLIST
ITEMS AGREED TO IN WRITING BY LANDLORD AND TENANT.
<PAGE> 2
3. Use. The Premises shall be used only for the purpose of receiving,
storing, shipping and selling (but limited to wholesale sales) products,
materials and merchandise made and/or distributed by Tenant and for such other
lawful purposes as may be incidental thereto; Tenant may also use the Premises
for light manufacturing. Tenant shall not conduct or give notice of any
auction, liquidation, or going out of business sale on the Premises. Tenant
will use the Premises in a careful, safe and proper manner and will not commit
waste, overload the floor or structure of the Premises or subject the Premises
to use that would damage the Premises. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise, or vibrations to
emanate from the Premises, or take any other action that would constitute a
nuisance or would disturb, unreasonably interfere with, or endanger Landlord or
any tenants of the Project. Outside storage, including without limitation,
storage of trucks and other vehicles, is prohibited without Landlord's prior
written consent. Tenant, at its sole expense, shall use and occupy the Premises
in compliance with all laws, including, without limitation, the
Americans With Disabilities Act, orders, judgments, ordinances,
regulations, codes, directives, permits, licenses, covenants and restrictions
now or hereafter applicable to the Premises (collectively, "Legal
Requirements"). ' The Premises shall not be used as a place of public
accommodation under the Americans With Disabilities Act or similar state
statutes or local ordinances or any regulations promulgated thereunder, all as
may be amended from time to time. Tenant shall, at its expense, make any
alterations or modifications, within or without the Premises, that are required
by Legal Requirements related to Tenant's use or occupation of the Premises.
Tenant will not use or permit the Premises to be used for any purpose or in any
manner that would void Tenant's or Landlord's insurance, increase the insurance
risk, or cause the disallowance of any sprinkler credits. If any increase in
the cost of any insurance on the Premises or the Project is caused by Tenant's
use or occupation of the Premises, or because Tenant vacates the Premises, then
Tenant shall pay the amount of such increase to Landlord. Any occupation of the
Premises by Tenant prior to the Commencement Date shall be subject to all
obligations of Tenant under this Lease.
4. Base Rent. Tenant shall pay Base Rent in the amount set forth above.
The first month's Base Rent, and the first monthly installment of estimated
Operating Expenses (as hereafter defined) shall be due and payable on the date
hereof, and Tenant promises to pay to Landlord in advance, without demand,
deduction or set-off, monthly installments of Base Rent on or before the first
day of each calendar month succeeding the Commencement Date. Payments of Base
Rent for any fractional calendar month shall be prorated. All payments required
to be made by Tenant to Landlord hereunder shall be payable at such address as
Landlord may specify from time to time by written notice delivered in
accordance herewith. The obligation of Tenant to pay Base Rent and other sums
to Landlord and the obligations of Landlord under this Lease are independent
obligations. Tenant shall have no right at any time to abate, reduce, or
set-off any rent due hereunder except as may be expressly provided in this
Lease. If Tenant is delinquent in any monthly installment of Base Rent or of
estimated Operating Expenses for more than 5 days, Tenant shall pay to Landlord
on demand a late charge equal to 5 percent of such delinquent sum. The
provision for such late charge shall be in addition to all of Landlord's other
rights and remedies hereunder or at law and shall not be construed as a
penalty.
5. SECURITY DEPOSIT. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon each occurrence of an Event of
Default (hereinafter defined), Landlord may use all or part of the Security
Deposit to pay delinquent payments due under this Lease, and the cost of any
damage, injury, expense or liability caused by such Event of Default, without
prejudice to any other remedy provided herein or provided by law. Tenant shall
pay Landlord on demand the amount that will restore the Security Deposit to its
original amount. Landlord's obligation respecting the Security Deposit is that
of a debtor, not a trustee; no interest shall accrue thereon. The Security
Deposit shall be the property of Landlord, but shall be paid to Tenant when
Tenant's obligations under this Lease have been completely fulfilled. Landlord
shall be released from any obligation with respect to the Security Deposit upon
transfer of this Lease and the Premises to a person or entity assuming
Landlord's obligations under this Paragraph 5.
6. OPERATING EXPENSE PAYMENTS. During each month of the Lease Term, on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Proportionate Share (hereinafter defined) of Operating Expenses for
the Project. Payments thereof for any fractional calendar month shall be
prorated. The term "Operating Expenses" means all costs and expenses incurred
by Landlord with respect to the ownership, maintenance, and operation of the
Project including, but not limited to costs of: Taxes (hereinafter defined) and
fees payable to tax consultants and attorneys for consultation and contesting
taxes; insurance; utilities; maintenance, repair and replacement of all
portions of the Project, including without limitation, paving and parking
areas, roads, roofs, alleys, and driveways, mowing, landscaping, exterior
painting, utility lines, heating, ventilation and air conditioning systems,
lighting, electrical systems and other mechanical and building systems; amounts
paid to contractors and subcontractors for work or services performed in
connection with any of the foregoing; charges or assessments of any association
to which the Project is subject; property management fees payable to a property
manager, including any affiliate of Landlord, or if there is no property
manager, an administration fee not to exceed 15 percent of Operating Expenses
payable to Landlord; security services, if any; trash collection, sweeping and
removal; and additions or alterations made by Landlord to the Project or the
Building in order to comply with Legal Requirements (other than those expressly
required herein to be made by Tenant) or that are appropriate to the continued
operation of the Project or the Building as a bulk warehouse facility in the
market area, provided that the cost of additions or alterations that are
required to be capitalized for federal income tax purposes shall be amortized
on a straight line basis over a period equal to the lesser of the useful life
thereof for federal income tax purposes or 10 years. Operating Expenses do not
include costs, or expenses, depreciation or amortization for capital repairs
and capital replacements required to be made by Landlord under Paragraph 10 of
this Lease, debt service under mortgages or ground rent under ground leases,
costs of
<PAGE> 3
restoration to the extent of net insurance proceeds received by Landlord with
respect thereto, leasing commissions, or the costs of renovating space for
tenants. *See Addendum One, Section III.
If Tenant's total payments of Operating Expenses for any year are less
than Tenant's Proportionate Share of actual Operating Expenses for such year,
then Tenant shall pay the difference to Landlord within 30 days after demand,
and if more, then Landlord shall retain such excess and credit it against
Tenant's next payments. For purposes of calculating Tenant's Proportionate
Share of Operating Expenses, a year shall mean a calendar year except the first
year, which shall begin on the Commencement Date, and the last year, which
shall end on the expiration of this Lease. With respect to Operating Expenses
which Landlord allocates to the entire Project, Tenant's "Proportionate Share"
shall be the percentage set forth on the first page of this Lease as Tenant's
Proportionate Share of the Project as reasonably adjusted by Landlord in the
future for changes in the physical size of the Premises or the Project; and,
with respect to Operating Expenses which Landlord allocates only to the
Building. Tenant's "Proportionate Share" shall be the percentage set forth on
the first page of this Lease as Tenant's Proportionate Share of the Building as
reasonably adjusted by Landlord in the future for changes in the physical size
of the Premises or the Building. Landlord may equitably increase Tenant's
Proportionate Share for any item of expense or cost reimbursable by Tenant that
relates to a repair, replacement, or service that benefits only the Premises or
only a portion of the Project or Building that includes the Premises or that
varies with occupancy or use. The estimated Operating Expenses for the Premises
set forth on the first page of this Lease are only estimates, and Landlord
makes no guaranty Or warranty that such estimates will be accurate.
7. UTILITIES. Tenant shall pay for all water, gas, electricity, heat,
light, power, telephone, sewer, sprinkler services, refuse and trash
collection, and other utilities and services used on the Premises, all
maintenance charges for utilities, and any storm sewer charges or other similar
charges for utilities imposed by any governmental entity or utility provider,
together with any taxes, penalties, surcharges or the like pertaining to
Tenant's use of the Premises. Landlord may cause at Tenant's expense any
utilities to be separately metered or charged directly to Tenant by the
provider. Tenant shall pay its share of all charges for jointly metered
utilities based upon consumption, as reasonably determined by Landlord. No
interruption or failure of utilities shall result in the termination of this
Lease or the abatement of rent. Tenant agrees to limit use of water and sewer
for normal restroom use.
8. Taxes." Tenant shall pay all taxes, assessments and governmental
charges (collectively referred to as "Taxes") that accrue against the Project
during the Lease Term. If Tenant fails to pay such Taxes, Landlord may pay such
Taxes and be reimbursed by Tenant upon demand, and such non-payment of Taxes by
Tenant shall constitute an Event of Default under this Lease. Landlord may
contest by appropriate legal proceedings the amount, validity, or application
of any, Taxes or liens thereof. Tenant can request of Landlord, in writing, to
contest Taxes, in which case, Landlord will do so, but Tenant will be
responsible to reimburse Landlord upon demand for the costs incurred in
contesting such Taxes. All capital levies or other taxes assessed or imposed on
Landlord upon the rents payable to Landlord under this Lease and any franchise
tax, any excise, transaction, sales or privilege tax, assessment, levy or
charge measured by or based, in whole or in part, upon such rents from the
Premises and/or the Project or any portion thereof shall be paid by Tenant to
Landlord monthly in estimated installments or upon demand, at the option of
Landlord, as additional rent; provided, however, in no event shall Tenant be
liable for any net income taxes imposed on Landlord unless such net income
taxes are in substitution for any Taxes payable hereunder. If any such tax or
excise is levied or assessed directly against Tenant, then Tenant shall be
responsible for and shall pay the same at such times and in such manner as the
taxing authority shall require. Tenant shall be liable for all taxes levied or
assessed against any personal property or fixtures placed in the Premises,
whether levied or assessed against Landlord or Tenant.
9. INSURANCE. Landlord shall maintain all risk property insurance
covering the full replacement cost of the Building. Landlord may, but is not
obligated to, maintain such other insurance and additional coverages as it may
deem necessary, including, but not limited to, commercial liability insurance
and rent loss insurance. All such insurance shall be included as part of the
Operating Expenses charged to Tenant. The Project or Building may be included
in a blanket policy (in which case the cost of such insurance allocable to the
Project or Building will be determined by Landlord based upon the insurer's
cost calculations). Tenant shall also reimburse Landlord for any increased
premiums or additional insurance which Landlord reasonably deems necessary as a
result of Tenant's use of the Premises.
Tenant, at its expense, shall maintain during the Lease Term: all risk
property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required
by law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 (together with such
additional umbrella coverage as Landlord may reasonably require) for property
damage, personal injuries, or deaths of persons occurring in or about the
Premises. Landlord may from time to time require reasonable increases in any
such limits. The commercial liability policies shall name Landlord as an
additional insured, insure on an occurrence and not a claims-made basis, be
issued by insurance companies which are reasonably acceptable to Landlord, not
be cancelable unless 30 days' prior written notice shall have been given to
Landlord, contain a hostile fire endorsement and a contractual liability
endorsement and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant's policies). Such policies or certificates thereof shall be delivered to
Landlord by Tenant upon commencement of the Lease Term and upon each renewal of
said insurance.
The all risk property insurance obtained by Landlord and Tenant shall
include a waiver of subrogation by the insurers and all rights based upon an
assignment from its insured, against Landlord or Tenant, their officers,
directors, employees, managers, agents, invitees and contractors, in connection
with any loss or damage thereby insured against. Neither party nor its
officers, directors, employees, managers, agents, invitees or contractors
<PAGE> 4
shall be liable to the other for loss or damage caused by any risk coverable by
all risk property insurance, and each party waives any claims against the other
party, and its officers, directors, employees, managers, agents, invitees and
contractors for such loss or damage. The failure of a party to insure its
property shall not void this waiver. Landlord and its agents, employees and
contractors shall not be liable for, and Tenant hereby waives all claims
against such parties for, business interruption and losses occasioned thereby
sustained by Tenant or any person claiming through Tenant resulting from any
accident or occurrence in or upon the Premises or the Project from any cause
whatsoever, including without limitation, damage caused in whole or in part,
directly or indirectly, by the negligence of Landlord or its agents, employees
or contractors.
10. LANDLORD'S REPAIRS. Landlord shall maintain, at its expense, the
structural soundness of the roof, foundation, and exterior walls of the
Building in good repair, reasonable wear and tear and uninsured losses and
damages caused by Tenant, its agents and contractors excluded. The term "walls"
as used in this Paragraph 10 shall not include windows, glass or plate glass,
doors or overhead doors, special store fronts, dock bumpers, dock plates or
levelers or office entries. Tenant shall promptly give Landlord written notice
of any repair required by Landlord pursuant to this Paragraph 10, after which
Landlord shall have a reasonable opportunity to repair.
11. TENANT'S REPAIRS. Tenant, as provided in Paragraph 6, shall maintain
in good repair and condition the parking areas and other common areas of the
Building, including, but not limited to driveways, alleys, landscape and
grounds surrounding the Premises. Subject to Landlord's obligation in Paragraph
S 10 and subject to Paragraphs 9 and 15, Tenant, at its expense, shall repair,
replace and maintain in good condition all portions of the Premises and all
areas, improvements and systems exclusively serving the Premises including,
without limitation, dock and loading areas, truck doors, plumbing, water, and
sewer lines up to points of common connection, fire sprinklers and fire
protection systems, entries, doors, ceilings and roof membrane, windows,
interior walls, and the interior side of demising walls, and heating,
ventilation and air conditioning systems. Such repair and replacements include
capital expenditures and repairs whose benefit may extend beyond the Term.
Heating, ventilation and air conditioning systems and other mechanical and
building systems serving the Premises shall be maintained at Tenant's expense
pursuant to maintenance service contracts entered into by Tenant or, at
Landlord's election, by Landlord. The scope of services and contractors under
such maintenance contracts shall be reasonably approved by Landlord. If Tenant
fails to perform any repair or replacement for which it is responsible,
Landlord may perform such work and be reimbursed by Tenant within 10 days after
demand therefor. Subject to Paragraphs 9 and 15, Tenant shall bear the full
cost of any repair or replacement to any part of the Building or Project that
results from damage caused by Tenant, its agents, contractors, or invitees and
any repair that benefits only the Premises.
12.TENANT-MADE ALTERATIONS AND TRADE FIXTURES. Any alterations,
additions, or improvements made by or on behalf of Tenant to the Premises
("Tenant-Made Alterations") shall be subject to Landlord's prior written
consent. Tenant shall cause, at its expense, all Tenant-Made Alterations to
comply with insurance requirements and with Legal Requirements and shall
construct at its expense any alteration or modification required by Legal
Requirements as a result of any Tenant-Made Alterations. All Tenant-Made
Alterations shall be constructed in a good and workmanlike manner by
contractors reasonably acceptable to Landlord and only good grades of materials
shall be used. All plans and specifications for any Tenant-Made Alterations
shall be submitted to Landlord for its approval. Landlord may monitor
construction of the Tenant-Made Alterations. Tenant shall reimburse Landlord
for its costs in reviewing plans and specifications and in monitoring
construction. Landlord's right to review plans and specifications and to
monitor construction shall be solely for its own benefit, and Landlord shall
have no duty to see that such plans and specifications or construction comply
with applicable laws, codes, rules and regulations. Tenant shall provide
Landlord with the identities and mailing addresses of all persons performing
work or supplying materials, prior to beginning such construction, and Landlord
may post on and about the Premises notices of non-responsibility pursuant to
applicable law. Tenant shall enSURE payment for the completion of all work free
and clear of liens and shall provide certificates of insurance for worker's
compensation and other coverage in amounts and from an insurance company
satisfactory to Landlord protecting Landlord against liability for personal
injury or property damage during construction Upon completion of any
Tenant-Made Alterations, Tenant shall deliver to Landlord sworn statements
setting forth the names of all contractors and subcontractors who did work on
the Tenant-Made Alterations and final lien waivers from all such contractors
and subcontractors. Upon surrender of the Premises, all Tenant-Made Alterations
and any leasehold improvements constructed by Landlord or Tenant shall remain
on the Premises at Landlord's property, except to the extent Landlord's
requires removal at Tenant's expense of any such items or Landlord and Tenant
have otherwise agreed in writing in connection with Landlord's consent to any
Tenant-Made Alterations. Tenant shall repair any damage caused by such removal.
Tenant, at its own cost and expense and without Landlord's prior
approval, may erect such shelves, bins, machinery and trade fixtures
(collectively "Trade Fixtures") in the ordinary course of its business provided
that such items do not alter the basic character of the Premises, do not
overload or damage the Premises, and may be removed without injury to the
Premises, and the construction, erection, and installation thereof complies
with all Legal Requirements and with Landlord's requirements set forth above.
Tenant shall remove its Trade Fixtures and shall repair any damage caused by
such removal.
13. SIGNS. Tenant shall not make any changes to the exterior of the
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows, or door
lettering, placards, decorations, or advertising media of any type which can be
viewed from the exterior of the Premises, without Landlord's prior written
consent. Upon surrender or vacation of the Premises, Tenant shall have removed
all signs and repair, paint, and/or replace the building facia surface to which
its signs are attached. Tenant shall obtain
<PAGE> 5
all applicable governmental permits and approvals for sign and exterior
treatments. All signs, decorations, advertising media, blinds, draperies and
other window treatment or bars or other security installations visible from
outside the Premises shall be subject to Landlord's approval and conform in all
respects to Landlord's requirements.
14. PARKING. Tenant shall be entitled to park in common with other
tenants of the Project in those areas designated for nonreserved parking.
Landlord may allocate parking spaces among Tenant and other tenants in the
Project if Landlord determines that such parking facilities are becoming
crowded. Landlord shall not be responsible for enforcing Tenant's parking
rights against any third parties.
15. RESTORATION. If at any time during the Lease Term the Premises am
damaged by a fire or other casualty, Landlord shall notify Tenant within 60
days after such damage as to the amount of time Landlord reasonably estimates
it will take to restore the Premises. If the restoration time is estimated to
exceed 6 months from the date of damage, either Landlord or Tenant may elect to
terminate this Lease upon notice to the other party given no later than 30 days
after Landlord's notice. If neither party elects to terminate this Lease or if
Landlord estim tes that restoration will take 6 months or is less, then,
subject to receipt of sufficient insurance proceeds, Landlord shall promptly
restore the Premises excluding the improvements installed by Tenant or by
Landlord and paid by Tenant, subject to delays arising from the collection of
insurance proceeds or from Force Majeure events. Tenant at Tenant's expense
shall promptly perform, subject to delays arising from the collection of
insurance proceeds, or from Force Majeure events, all repairs or restoration 10
not required to be done by Landlord and shall promptly re-enter the Premises
and commence doing business in accordance with this Lease. Notwithstanding the
foregoing, either party may terminate this Lease if the Premises are damaged
during the last year of the Lease Term and Landlord reasonably estimates that
it will take more than one month to repair such damage, Tenant shall pay to
Landlord with respect to any-damage to the Premises the amount of the
commercially reasonably deductible under Landlord's insurance policy (CURRENTLY
$10,000) within 10 days after presentment of Landlord's invoice. If the damage
involves the premises of other tenants, Tenant shall pay the portion of the
deductible that the cost of the restoration of the Premises bears to the total
cost of restoration, as determined by Landlord. Base Rent and Operating
Expenses shall be abated for the period of repair and restoration in the
proportion which the area of the Premises, if any, which is not usable by
Tenant bears to the total area of the Premises. 'Such abatement shall be the
sole remedy of Tenant, and except as provided herein, Tenant waives any right
to terminate the Lease by reason of damage or casualty loss.
16. CONDEMNATION. If any part of the Premises or the Project should be
taken for any public or quasi public use under governmental law, ordinance, or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof (a "Taking" or "Taken"), and the Taking would prevent or materially
interfere with Tenant's use of in Landlord's judgment would materially
interfere with or impair its ownership or operation of the Project, then upon
written notice by Landlord this Lease shall terminate and Base Rent shall be
apportioned as of said date. If part of the Premises shall be Taken, and this
Lease is not terminated as provided above, the Base Rent payable hereunder
during the unexpired Lease Term shall be reduced to such extent as may be fair
and reasonable under the circumstances. In the event of any such Taking,
Landlord shall be entitled to receive the entire price or award from any such
Taking without any payment to Tenant, and Tenant hereby assigns to Landlord
Tenant's interest, if any, in such award. Tenant shall have the right, to the
extent that same shall not diminish Landlord's award, to make a separate claim
against the condemning authority (but not Landlord) for such compensation as
may be separately awarded or recoverable by TENANT FOR MERVING EXPENSES AND
DAMAGE a Tenant's Trade, Fixtures, if separate award for. such tagns is made G
Tenant.
17. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written consent,
Tenant shall not assign this Lease or sublease the Premises or any part thereof
or mortgage, pledge, or hypothecate its leasehold interest or grant any
concession or license within the Premises and any attempt to do any of the
foregoing shall be void and of no 4) effect. For purposes of this paragraph, a
transfer of the ownership interests controlling Tenant shall be deemed an
assignment of this Lease unless such ownership interests are publicly traded.
Notwithstanding the above, Tenant may assign or sublet the Premises, or any
part thereof, to any entity controlling Tenant, controlled by Tenant or under
no common control with Tenant (a "Tenant Affiliate"), without the prior written
consent of Landlord. Tenant shall th reimburse Landlord for all of Landlord's
reasonable out-of-pocket expenses in connection with any assignment or
sublease. Upon Landlord's receipt of Tenant's written notice of a desire to
assign or sublet the Premises, or any part ld thereof (other than to a Tenant
Affiliate), Landlord may, by giving written notice to Tenant within 30 days
after receipt of Tenant's notice, terminate this Lease with respect to the
space described in Tenant's notice, as of the date specified in Tenant's notice
for the commencement of the proposed assignment or sublease. Notwithstanding
any assignment or subletting, Tenant and any guarantor or surety of Tenant's
obligations under this Lease shall at all times remain fully responsible and
liable for the payment of the rent and for compliance with all of Tenant's
other obligations under this Lease (regardless of whether Landlord's approval
has beenm obtained for any such assignments or sublettings). In the event that
the rent due and payable by a sublessee or assignee (or a combination of the
rental payable under such sublease or assignment plus any bonus or other
consideration a therefor or incident thereto) exceeds the rental payable under
this Lease, then Tenant shall be bound and obligated to pay Landlord as
additional rent hereunder all such excess rental and other excess consideration
within 10 days following receipt thereof by Tenant. *fifty percent (50%) of If
this Lease be assigned or if the Premises be subleased (whether in whole or in
part) or in the event of the mortgage, pledge, or hypothecation of Tenant's
leasehold interest or grant of any concession or license within the Premises or
if the Premises be occupied in whole or in part by anyone other than Tenant,
then upon a default by Tenant hereunder Landlord may collect rent from the
assignee, sublessee, mortgagee, pledgee, party to whom the leasehold interest
was hypothecated, concessionee or licensee or other occupant and, except to the
extent set forth in
<PAGE> 6
the preceding paragraph, apply the amount collected to the next rent payable
hereunder; and all such rentals collected by Tenant shall be held in trust for
Landlord and immediately forwarded to Landlord. No such transaction or
collection of rent or application thereof by Landlord, however, shall be deemed
a waiver of these provisions or a release of Tenant from the further
performance by Tenant of its covenants, duties, or obligations hereunder.
18. INDEMNIFICATION. EXCEPT FOR THE NEGLIGENCE OF LANDLORD, ITS AGENTS,
EMPLOYEES OR CONTRACTORS, to the extent permitted by law, Tenant agrees to
indemnify, defend and hold harmless Landlord, and Landlord's agents, employees
and contractors! from 'and against any and all losses, liabilities, damages,
costs and expenses (including attorneys' fees) resulting from claims by third
parties for injuries to any person and damage to or theft or misappropriation
or loss of property occurring in or about the Project and arising from the use
and occupancy of the Premises or from any activity, work, or thing done,
permitted or suffered by Tenant in or about the Premises or due to any other
act or omission of Tenant, its subtenants, assignees, invitees, employees,
contractors and agents. The furnishing of insurance required hereunder shall
not be deemed to limit Tenant's obligations under this Paragraph 18.
19. INSPECTION AND ACCESS. Landlord and its agents, representatives, and
contractors may enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any other business purpose. Landlord and Landlord's
representatives may enter the Premises during business hours for the purpose of
showing the Premises to prospective purchasers and, during the last year of the
Lease Term, to prospective tenants. Landlord may erect a suitable sign on the
Premises stating the Premises are available to let or that the Project is
available for sale. Landlord may grant easements, make public dedications,
designate common areas and create restrictions on or about the Premises,
provided that no such easement, dedication, designation or restriction
materially interferes with Tenant's use or occupancy of the Premises. At
Landlord's request, Tenant shall execute such instruments as may be necessary
for such easements, dedications or restrictions.
20. QUIET ENJOYMENT. If Tenant shall perform all of the covenants and
agreements herein required to be performed by Tenant, Tenant shall, subject to
the terms of this Lem, at all times during the Lease Term, have peaceful and
quiet enjoyment of the Premises against any person claiming by, through or
under Landlord.
21. SURRENDER. Upon termination of the Lease Term or earlier termination
of Tenant's right of possession, Tenant shall surrender the Premises to
Landlord in the same condition as received, broom clean, ordinary wear and tear
and casualty loss and condemnation covered by Paragraphs 15 and 16 excepted.
Any Trade Fixtures, Tenant-Made Alterations and property not so removed by
Tenant as permitted or required herein shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense, and Tenant
waives all claims against Landlord for any damages resulting from Landlord's
retention and disposition of such property. All obligations of Tenant hereunder
not fully performed as of the termination of the Lease Term shall survive the
termination of the Lease Term, including without limitation, indemnity
obligations, payment obligations with respect to Operating Expenses and
obligations concerning the condition and repair of the Premises.
22. HOLDING OVER. If Tenant retains possession of the Premises after the
termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any
expansion or renewal option or other similar right or option) shall be
applicable during such holdover period, except that Tenant shall pay Landlord
from time to time, upon demand, as Base Rent for the holdover period, an amount
equal to double the Base Rent in effect on the termination date, computed on a
monthly basis for each month or part thereof during such holding over. All
other payments shall continue under the terms of this Lease. In addition,
Tenant shall be liable for all damages incurred by Landlord as a result of such
holding over. No holding over by Tenant, whether with or without consent of
Landlord, shall operate to extend this Lease except as otherwise expressly
provided, and this Paragraph 22 shall not be construed as consent for Tenant to
retain possession of the Premises.
23. EVENTS OF DEFAULT. Each of the following events shall be an event of
default ("Event of Default by Tenant under this Lease:
(i) Tenant shall fail to pay any installment of Base Rent or any
other payment required herein when due, and such failure shall continue
for a period of 5 days FROM THE DATE SUCH PAYFFIENT WAS DUE
(ii) Tenant or any guarantor or surety of Tenant's obligations
hereunder shall (A) make a general assignment for the benefit of
creditors; (B) commence any case, proceeding or other action seeking to
have an order for relief entered on its behalf as a debtor or to
adjudicate it a bankrupt or insolvent, or :3 seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or
its debts or O seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or of any I substantial part of
its property (collectively a "proceeding for relief"); (C) become the
subject of any S proceeding for relief which is not dismissed within 60
days of its filing or entry; or (D) die or suffer a legal disability (if
Tenant, guarantor, or surety is an individual) or be dissolved or
otherwise fail to maintain its legal existence (if Tenant, guarantor or
surety is a corporation, partnership or other entity).
(iii) Any insurance required to be maintained by Tenant pursuant to
this Lease shall be cancelled or terminated or shall expire or shall be
reduced or materially changed, except, in each case, as permitted in this
Lease.
<PAGE> 7
(iv) Tenant shall not occupy or shall vacate the Premises or shall
fail to continuously operate its business at the Premises for the
permitted use set forth herein, whether or not Tenant is in monetary or
other default under this Lease. *' *(See Addendum One, Section VIII)
(v) Tenant shall attempt or there shall occur any assignment,
subleasing or other transfer of Tenant's interest in or with respect to
this Lease except as otherwise permitted in this Lease.
(vi) Tenant shall fail to discharge any lien placed upon the Premises
in violation of this Lease within 30 days after any such lien or
encumbrance is filed against the Premises.
(vii) Tenant shall fail to comply with any provision of this Lease
other than those specifically referred to in this Paragraph 23, and
except as otherwise expressly provided herein, such default shall
continue for more than 30 days after Landlord shall have given Tenant
written notice of such default.
24. LANDLORD'S REMEDIES. Upon each occurrence of an Event of Default and
so long as such Event of Default shall be continuing, Landlord may at any time
thereafter at its election: terminate this Lease or Tenant's right of
possession (but Tenant shall remain liable as hereinafter provided), and/or
pursue any other remedies at law or in equity. Upon the termination of this
Lease or termination of Tenant's right of possession, it shall be lawful for
Landlord, without formal demand or notice of any kind, to re-enter the Premises
by summary dispossession proceedings or any other action or proceeding
authorized by law and to remove Tenant and all persons and property therefrom.
If Landlord re-enters the Premises, Landlord shall have the right to keep in
place and use, or remove and store, all of the furniture, fixtures and
equipment at the Premises.
If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date
of such termination; the cost of reletting the whole or any part of the
Premises, including without limitation brokerage fees and/or leasing
commissions incurred by Landlord, and costs of removing and storing Tenant's or
any other occupant's property, repairing, altering, remodeling, or otherwise
putting the Premises into condition acceptable to a new tenant or tenants, and
all reasonable expenses incurred by Landlord in pursuing its remedies,
including reasonable attorneys' fees and court costs; and the excess of the
then present value of the Base Rent and other amounts payable by Tenant under
this Lease as would otherwise have been required to be paid by Tenant to
Landlord during the period following the termination of this Lease measured
from the date of such termination to the expiration date stated in this Lease,
over the present value of any net amounts which Tenant establishes Landlord can
reasonably expect to recover by reletting the Premises for such period, taking
into consideration the availability of acceptable tenants and other market
conditions affecting leasing. Such present values shall be calculated at a
discount rate equal to the 90-day U.S. Treasury bill rate at the date of such
termination.
If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may, but shall be under no obligation to, relet the Premises
for the account of Tenant for such rent and upon such terms as shall be
satisfactory to Landlord without thereby releasing Tenant from any liability
hereunder and without demand or notice of any kind to Tenant. For the purpose
of such reletting Landlord is authorized to make any repairs, changes,
alterations, or additions in or to the Premises as Landlord deems reasonably
necessary or desirable. If the Premises are not relet, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the rental reserved in this
Lease for such period or periods, plus the cost of recovering possession of the
Premises (including attorneys' fees and costs of suit), the unpaid Base Rent
and other amounts accrued hereunder at the time of repossession, and the costs
incurred in any attempt by Landlord to relet the Premises. If the Premises are
relet and a sufficient sum shall not be realized from such reletting [after
first deducting therefrom, for retention by Landlord, the unpaid Base Rent and
other amounts accrued hereunder at the time of reletting the cost of recovering
possession (including attorneys' fees and costs of suit), all of the costs and
expense of repairs, changes, alterations, and additions, the expense of such
reletting (including without limitation brokerage fees and leasing commissions)
and the cost of collection of the rent accruing therefrom] to satisfy the rent
provided for in this Lease to be paid, then Tenant shall immediately satisfy
and pay any such deficiency. Any such payments due Landlord shall be made upon
demand therefor from time to time and Tenant agrees that Landlord may file suit
to recover any sums failing due from time to time. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect in
writing to terminate this Lease for such previous breach.
Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, whether by
agreement or by operation of law, it being understood that such surrender
and/or termination can be effected only by the written agreement of Landlord
and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof, and the failure of Landlord at any
time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same. Tenant and Landlord further agree that forbearance or waiver
by Landlord to enforce its rights pursuant to this Lease or at law or in
equity, shall not be a waiver of Landlord's right to enforce one or more of its
rights in connection with any subsequent default. A receipt by Landlord of rent
or other payment with knowledge of the breach of any covenant hereof shall not
be deemed a waiver of such breach, and no waiver by Landlord of any provision
of this Lease shall be deemed to have been made unless expressed in writing and
signed by Landlord. To the greatest extent permitted by law, Tenant waives the
service of notice of Landlord's intention to re-enter as provided for in any
statute, or to institute legal proceedings to that end, and also waives all
right of redemption in case Tenant shall be dispossessed by a judgment or by
warrant of any court or judge. The terms "enter," "re-enter," entry" or
"re-entry," as used in this Lease, are not restricted
<PAGE> 8
to their technical legal meanings. Any reletting of the Premises shall be on
such terms and conditions as Landlord in its sole discretion may determine
(including without limitation a term different than the remaining Lease Term,
rental concessions, alterations and repair of the Premises, lease of less than
the entire Premises to any tenant and leasing any or all other portions of the
Project before reletting the Premises). Landlord shall not be liable, nor shall
Tenant's obligations hereunder be diminished because of, Landlord's failure to
relet the Premises or collect rent due in respect of such reletting
25. TENANT'S REMEDIES/LIMITATION OF LIABILITY. Landlord shall not be in
default hereunder unless Landlord fails to perform any of its obligations
hereunder within 30 days after written notice from Tenant specifying such
failure (unless such performance will, due to the nature of the obligation,
require a period of time in excess of 30 days, then after such period of time
as is reasonably necessary). All obligations of Landlord hereunder shall be
construed as covenants, not conditions; and, except as may be otherwise
expressly provided in this Lease, Tenant may not terminate this I-ease for
breach of Landlord's obligations hereunder. All obligations of Landlord under
this Lease will be binding upon Landlord only during the period of its
ownership of the Premises and not thereafter. The term "Landlord" in this Lease
shall mean only the owner, for the time being of the Premises, and in the event
of the transfer by such owner of its interest in the Premises, such owner shall
thereupon be released and discharged from all obligations of Landlord
thereafter accruing, but such obligations shall be binding during the Lease
Term upon each new owner for the duration of such owner's ownership. Any
liability of Landlord under this Lease shall be limited solely to its interest
in the Project, and in no event shall any personal liability be asserted
against Landlord in connection with this Lease nor shall any recourse be had to
any other property or assets of Landlord.
26. WAIVER OF JURY TRIAL. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY
JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF
THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
27. SUBORDINATION. This Lease and Tenant's interest and rights hereunder
are and shall be subject and subordinate at all times to the lien of any first
mortgage, now existing or hereafter created on or against the Project or the
Premises, and all amendments, restatements, renewals, modifications,
consolidations, refinancing, assignments and extensions thereof, without the
necessity of any further instrument or act on the part of Tenant. Tenant
agrees, at the election of the holder of any such mortgage, to attorn to any
such holder. Tenant agrees upon demand to execute, acknowledge and deliver such
instruments, confirming such subordination and such instruments of attornment
as shall be requested by any such holder. Tenant hereby appoints Landlord
attorney in fact for Tenant irrevocably (such power of attorney being coupled
with an interest) to execute, acknowledge and deliver any such instrument and
instruments for and in the name of the Tenant and to cause any such instrument
to be recorded. Notwithstanding the foregoing, any such holder may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution, delivery or
recording and in that event such holder shall have the same rights with respect
to this Lease as though this Lease had been executed prior to the execution,
delivery and recording of such mortgage and had been assigned to such holder.
The term "mortgage" whenever used in this Lease shall be deemed to include
deeds of trust, security assignments and any other encumbrances, and any
reference to the "holder" of a mortgage shall be deemed to include the
beneficiary under a deed of trust. * *(See Addendum One, Section IX)
28. MECHANIC'S LIENS. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost
or expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease. Tenant shall give Landlord immediate written notice of the placing
of any lien or encumbrance against the Premises and cause such lien or
encumbrance to be discharged within 30 days of the filing or recording
thereof-, provided, however, Tenant may contest such liens or encumbrances as
long as such contest prevents foreclosure of the lien or encumbrance and Tenant
causes such lien or encumbrance to be bonded or insured over in a manner
satisfactory to Landlord within such 30 day period.
29. ESTOPPEL CERTIFICATES. Tenant agrees, from time to time, within 10
days after request of Landlord, to execute and deliver to Landlord, or
Landlord's designee, any estoppel certificate requested by Landlord, stating
that this Lease is in full force and effect, the date to which rent has been
paid, that Landlord is not in default hereunder (or specifying in detail the
nature of Landlord's default), the termination date of this Lease and such
other matters pertaining to this Lease as may be requested by Landlord.
Tenant's obligation to furnish each estoppel certificate in a timely fashion is
a material inducement for Landlord's execution of this Lease. No cure or grace
period provided in this Lease shall apply to Tenant's obligations to timely
deliver an estoppel certificate. Tenant hereby irrevocably appoints Landlord as
its attorney in fact to execute on its behalf and in its name any such estoppel
certificate if Tenant fails to execute and deliver the estoppel certificate
within 10 days after Landlord's written request thereof.
30. ENVIRONMENTAL REQUIREMENTS. Except for Hazardous Material contained
in products used by Tenant in de minimis quantities for ordinary cleaning and
office purposes, Tenant shall not permit or cause any party to bring any
Hazardous Material upon the Premises or transport, store, use, generate,
manufacture or release any
<PAGE> 9
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in
the Premises in strict compliance with all Environmental Requirements and shall
remediate in a manner satisfactory to Landlord any Hazardous Materials released
on or from the Project by Tenant, its agents, employees, contractors,
subtenants or invitees Tenant shall complete and certify to disclosure
statements as requested by Landlord from time to time relating to Tenant's
transportation, storage, use, generation, manufacture, or release of Hazardous
Materials on the Premises. The term "Environmental Requirements" means all
applicable present and future statutes, regulations, ordinances, rules, codes,
judgments, orders or other similar enactments of any governmental authority or
agency regulating or relating to health, safety, or environmental conditions
on, under, or about the Premises or the environment, including without
limitation, the following: the Comprehensive Environmental Response,
Compensation and Liability Act; the Resource Conservation and Recovery Act; and
all state and local counterparts thereto, and any regulations or policies
promulgated or issued thereunder. The term "Hazardous Materials" means and
includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas, or
synthetic gas usable for fuel (or mixtures of natural gas and such synthetic
gas). As defined in Environmental Requirements, Tenant is and shall be deemed
to be the "operator" of Tenant's "facility" and the "owner" of all Hazardous
Materials brought on the Premises by Tenant, its agents, employees, contractors
or invitees and the wastes, by-products, or residues generated, resulting, or
produced therefrom.
Tenant shall indemnify, defend, and hold Landlord harmless from and
against any and all losses (including, without limitation, diminution in value
of the Premises or the Project and loss of rental income from the Project),
claims, demands, actions, suits, damages (including, without limitation,
punitive damages), expenses (including, without limitation, remediation,
removal, repair, corrective action, or cleanup expenses), and costs (including,
without limitation, actual attorneys' fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the Premises or disturbed in breach of the requirements of this Paragraph
30, regardless of whether such removal or management is required by law) which
are brought or recoverable against, or suffered or incurred by Landlord as a
result of any release of Hazardous Materials for which Tenant is obligated to
remediate as provided above or any other breach of the requirements under this
Paragraph 30 by Tenant, its agents, employees, contractors, subterants,
assignees or invitees regardless of whether Tenant had knowledge of such
noncompliance. 'Me obligations of Tenant under this Para.gaph 30 shall survive
any termination of this Lease.
Landlord shall have access to, and a right to perform inspections
and tests of, the Premises to determine Tenant's compliance with Environmental
Requirements, its obligations under this Paragraph 30, or the environmental
condition of the Premises. Access shall be granted to Landlord upon Landlord's
prior notice to Tenant and at such times so as to minimize, so far as may be
reasonable under the circumstances, any disturbance to Tenant's operations.
Such inspections and tests shall be conducted at Landlord's expense, unless
such inspections or tests reveal that Tenant has not complied with any
Environmental Requirement, in which case Tenant shall reimburse Landlord for
the reasonable cost of such inspection and tests. Landlord's receipt of or
satisfaction with any environmental assessment in no way waives any rights that
Landlord holds against Tenant. *(See Addendum One, Section V)
31. RULES AND REGULATIONS. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with all reasonable rules and
regulations at any time or from time to time established by Landlord covering
use of the Premises and the Project. The current rules and regulations are
attached hereto. In the event of any conflict between said rules and
regulations and other provisions of this Lease, the other terms and provisions
of this Lease shall control. Landlord shall not have any liability or
obligation for the breach of any rules or regulations by other tenants in the
Project.
32. Security Service. Tenant acknowledges and agrees that, while Landlord
may patrol the Project, Landlord is not providing any security services with
respect to the Premises and that Landlord shall not be liable to Tenant for,
and Tenant waives any claim against Landlord with respect to, any loss by theft
or any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.
33. Force Majeure. Landlord shall not be held responsible for delays in
the performance of its obligations hereunder when caused by strikes, lockouts,
labor disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, governmental restrictions, governmental
regulations, governmental controls, delay in issuance of permits, enemy or
hostile governmental action, civil commotion, fire or other casualty, and other
causes beyond the reasonable control of Landlord ("Force Majeure").
34. ENTIRE AGREEMENT. This Lease constitutes the complete agreement of
Landlord and Tenant with respect to the subject matter hereof. No
representations, inducements, promises or agreements, oral or written, have
been made by Landlord or Tenant, or anyone acting on behalf of Landlord or
Tenant, which are not contained herein, and any prior agreements, promises,
negotiations, or representations are superseded by this Lease. This Lease may
not be amended except by an instrument in writing signed by both parties
hereto.
35. SEVERABILITY. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this I-ease
shall not be affected thereby. It is also the intention of the parties to this
Lease that in lieu of each clause or provision of this Lease that is illegal,
invalid or unenforceable, there be added, as a part of this Lease, a clause or
provision as similar in terms to such illegal, invalid or unenforceable clause
or provision as may be possible and be legal, valid and enforceable.
<PAGE> 10
36. BROKERS. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this transaction, other than the
broker, if any, set forth on the first page of this Lease, and Tenant agrees to
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.
37. MISCELLANEOUS. (a) Any payments or charges due from Tenant to
Landlord hereunder shall be considered rent for all purposes of this Lease.
(b) If and when included within the term "Tenant," as used in this
instrument, there is more than one person, firm or corporation, each
shall be jointly and severally liable for the obligations of Tenant.
(c) All notices required or permitted to be given under this Lease
shall be in writing and shall be sent by registered or certified mail,
return receipt requested, or by a reputable national overnight courier
service, postage prepaid, or by hand delivery addressed to the parties at
their addresses below, and with a copy sent to Landlord at 14100 East
35th Place, Aurora. Colorado 80011. Either party may by notice given
aforesaid change its address for all subsequent notices. Except where
otherwise expressly provided to the contrary, notice shall be deemed
given upon delivery.
(d) Except as otherwise expressly provided in this Lease or as
otherwise required by law, Landlord retains the absolute right to
withhold any consent or approval.
(e) At Landlord's request from time to time Tenant shall furnish
Landlord with true and complete copies of its most recent annual and
quarterly financial statements prepared by TENANT OR TENANT'S ACCOUNTANTS
AND ANY other financial information or summaries that Tenant typically
provides to its lenders or shareholders.
(f) Neither this Lease nor a memorandum of lease shall be filed by or
on behalf of Tenant in any public record. Landlord may prepare and file,
and upon request by Landlord Tenant will execute, a memorandum of lease.
(g) The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Lease or any exhibits or
amendments hereto.
(h) The submission by Landlord to Tenant of this Lease shall have no
binding force or effect, shall noi constitute an option for the leasing
of the Premises, nor confer any right or impose any obligations upon
either party until execution of this Lease by both parties.
(i) Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise
requires. The captions inserted in this Lease are for convenience only
and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease.
0) Any amount not paid by Tenant within 5 days after its due date in
accordance with the terms of this Lease shall bear interest from such due
date until paid in full at the lesser of the highest rate permitted by
applicable law or 15 percent per year. It is expressly the intent of
Landlord and Tenant at all times to comply with applicable law governing
the maximum rate or amount of any interest payable on or in connection
with this Lease. If applicable law is ever judicially interpreted so as
to render usurious any interest called for under this Lease, or
contracted for, charged, taken, reserved, or received with respect to
this Lease, then it is Landlord's and Tenant's express intent that all
excess amounts theretofore collected by Landlord be credited on the
applicable obligation (or, if the obligation has been or would thereby be
paid in full, refunded to Tenant), and the provisions of this Lease
immediately shall be deemed reformed and the amounts thereafter
collectible hereunder reduced, without the necessity of the execution of
any new document, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder.
(k) Construction and interpretation of this Lease shall be governed
by the laws of the state in which the Project is located, excluding any
principles of conflicts of laws *both *and Landlord's I
(1) Time is of the essence as to the performance of Tenant's
obligations under this Lease.
(in) All exhibits and addenda attached hereto are hereby incorporated
into this Lease and made a part hereof. In the event of any conflict
between such exhibits or addenda and the terms of this Lease, such
exhibits or addenda shall control.
38. Landlord's LIEN/SECURITY INTEREST. Tenant hereby grants Landlord a
security inter mmercial f the Lease constitutes a security agreement, within
the meaning of and pursuant to the Uniform Com 1!, 714 state in which the
Premises are situated as to all of Tenant's property situate in, or u , r d pon
or use in connection with the Premises (except merchandise sold in the ordinary
course of buss) as security for all of Tenant's obligations hereunder,
including, without limitation, the obligati n to pay rent. Such personalty thus
encumbered includes to specifically all trade and other fixm~es s for the
purpose of this Paragraph and inventory, equipment, contract rights, accounts
receivable and the proceeds thereof. in order to perfect such security
interest, Tenant shall execute such financing st file the same at Tenant's
expense at the state and county Uniform Commercial Code filing tatements and
OFFIOFTEN AS Landlord IN ITS DISCRETIO SHALL REQUIRE. mid TENANT HEREBY
IRREVOCABLY APPOINTS LANDLORD ITS AGENT
<PAGE> 11
for the PULP- of executing mid filing SUCH financing statements on Tenant's
BEHALF as Landlord deem NECESSARY Nothing contained in this Lease shall be
construed as a consent on the part of Lessor to subject the e estate of Lessor
to liability under the Flo pressly understood that the Lessor's estate shall
not
39. Radon Gas. Radon is a naturally occurring radioactive gas, that when
it has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
40. Limitation of Liability of Trustees, Shareholders, and Officers of
ProLogis Trust. Any obligation of liability whatsoever of ProLogis Trust, a
Maryland real estate investment trust, which may arise at any time under this
Lease or any obligation or liability which may be incurred by it pursuant to
any other instrument, transaction, or undertaking contemplated hereby shall not
be personally binding upon, nor shall resort for the enforcement thereof be had
to the property of, its trustees, directors, shareholders, officers, employees
or agents, regardless of whether such obligation or liability is in the nature
of contract, tort, or otherwise.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as
of the day and year first above written.
TENANT: LANDLORD:
STERILE RECOVERIES. INC. PROLOGIS LIMITED PARTNERSHIP IV, A
DELAWARE LIMITED PARTNERSHIP BY:
TV, INC. A DELAWARE CORPORATION, AS
THE GENERAL PARTNER
TITLE: V. By:
Name: Paul C. Congleton
Title: Senior Vice President
Address: Address:
28100 U. S. Highway 19, Suite 201 207 D Kelsey Lane
Clearwater, Florida 33761 Tampa, Florida 33619
WITNESS AS TO TENANT: WITNESS AS TO LANDLORD
<PAGE> 12
RULES AND REGULATIONS
The sidewalk, entries, and driveways of the Project shall not be obstructed
by Tenant, or its agents, or used by them for any purpose other than ingress
and egress to and from the Premises. Tenant shall not place any objects,
including antennas, outdoor furniture, etc., in the parking areas,
LANDSCAPED AREAS or other areas outside of its Premises, or on the roof of
the Project.
3. Except for seeing-eye dogs, no animals shall be allowed in the offices,
halls, or corridors in the Project.
4. Tenant shall not disturb the occupants of the Project or adjoining
buildings by the use of any radio or musical instrument or by the making of
loud or improper noises. If Tenant desires telegraphic, telephonic or other
electric connections in the Premises, Landlord or its agent will direct the
electrician as to where and how the wires may be introduced; and, without
such direction, no boring or cutting of wires will be permitted. Any such
installation or connection shall be made at Tenant's expense.
6. Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus in the Premises, except as specifically approved
in the Lease. The use of oil, gas or inflammable liquids for heating,
lighting or any other purpose is expressly prohibited. Explosives or other
articles deemed extra hazardous shall not be brought into the Project.
Parking any type of recreational vehicles is specifically prohibited on or
about the Project. Except for the overnight parking of operative vehicles,
no vehicle of any type shall be stored in the parking areas at any time. In
the event that a vehicle is disabled, it shall be removed within 48 hours.
There shall be no "For Sale" or other advertising signs on or about any
parked vehicle- All vehicles shall be parked in the designated parking
areas in conformity with all signs and other markings. All parking will be
open parking, and no reserved parking, numbering or lettering of individual
spaces will be permitted except as specified by Landlord.
8. Tenant shall maintain the Premises free from rodents, insects and other
pests.
9. Landlord reserves the right to exclude or expel from the Project any person
who, in the judgment of Landlord, is intoxicated or under the influence of
liquor or drugs or who shall in any manner do any act in violation of the
Rules and Regulations of the Project.
10. Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall not be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant by the janitors or any other employee or person. Tenant
shall give Landlord prompt notice of any defects in the water, lawn
sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.
12.Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles, or dumping of
waste or refuse or permit any harmful materials to be placed in any drainage
system or sanitary system in or about the Premises.
13. All moveable trash receptacles provided by the trash disposal firm for the
Premises must be kept in the trash enclosure areas, if any, provided for
that purpose. No auction, public or private, will be permitted on the
Premises or the Project.
15. No awnings shall be placed over the windows in the Premises except with the
prior written consent of Landlord.
16. The Premises shall not be used for lodging, sleeping or cooking or for any
immoral or illegal purposes or for any purpose other than that specified in
the Lease. No gaming devices shall be operated in the Premises. Tenant
shall ascertain from Landlord the maximum amount of electrical current
which can safely be used in the Premises, taking into account the capacity
of the electrical wiring in the Project and the Premises and the needs of
other tenants, and shall not use more than such safe capacity. Landlord's
consent to the installation of electric equipment shall not relieve Tenant
from the obligation not to use more electricity than such safe capacity.
18.Tenant assumes full responsibility for protecting the Premises from theft,
robbery and pilferage.
19.Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary
use of the Premises and shall keep all such machinery free of vibration,
noise and air waves which may be transmitted beyond the Premises.
<PAGE> 13
ADDENDUM ONE
MISCELLANEOUS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED 1999, BETWEEN
PROLOGIS LIMITED PARTNERSHIP TV
AND
STERILE RECOVERIES, INC.
1. MONTHLY BASE RENT SCHEDULE. The monthly Base Rent and Operating Expenses
shall be abated for the first three (3) months of the Lease Term (August
1, 1999 October 31, 1999).
H. Notwithstanding anything contained herein to the contrary, Landlord's
costs relating to its annual roof inspection shall be included as part of
Operating Expenses under Paragraph 6, and Ten shall beobligated for the
payment of its Proportionate Share of such costs thereof.
Ill. Notwithstanding anything contained herein to the contrary, Tenant shall be
responsible for the maintenance, repair and replacement of all portions of
the Building, (including, without limitation, the commonareas of the
Building) and for all costs and expenses related thereto (including,
without limitation, paving and parking areas, roads, roofs, alleys, and
driveways, mowing, landscaping, exterior painting, utility lines, heating,
ventilation and air conditioning systems, lighting, electrical systems and
other mechanical and building systems; amounts paid to contractors and
subcontractors for work or services performed in connection with any of
the foregoing; security services, if any; and trash collection, sweeping
and removal). In the event Tenant does not maintain the foregoing
responsibilities or maintain the commonareas of the Building in a
condition acceptable to Landlord, Landlord shall perform such work, and
all costs related thereto (including, but not limited to, property
management fees) shall be reimbursed to Landlord as Operating Expenses in
accordance with the provisions of this Paragraph 6.
IV. after notice from Landlord to Tenant that such payment was due; provided,
however, that Landlord shall not be obligated to provide written notice of
such failure more than 2 times in any consecutive 12-month period, and the
failure of Tenant to pay any third or subsequent installment of Base Rent
or any other payment required herein when due in any consecutive 12-month
period shall constitute an Event of Default by Tenant under this Lease
without the requirement of notice or opportunity to cure.
V. Notwithstanding anything to the contrary in this Paragraph 30, Tenant
shall have no liability of any kindto Landlord as to Hazardous Materials
on the Premises caused or ]2ermitted by: (i) Landlord, its
agents,employees, contractors or invitees; or (ii) any other * tenants in
the Project or their agents, employees, contractors, subtenants, assignees
or (iii) any other person or entity located outside of the Premises or the
Project.
VI. Landlord will repair, prior to the Commencement Date, at its sole cost and
expense, any roof leaks that may currently exist.
VII. If there are any warranties that are still in place, then the benefit of
those warranties will be assigned to the Tenant.
VII 1. Vacation of Premises. Tenant's vacating of the Premises shall not
constitute an Event of Default if, prior to vacating the Premises, Tenant
has made arrangements reasonably acceptable to Landlord to (a) insure that
Tenant's insurance for the Premises will not be voided or cancelled with
respect to the Premises as a result of such vacancy, (b) insure that the
Premises are secured and not subject to vandalism, and (c) insure that the
Premises will be properly maintained after such vacation. Tenant shall
inspect the Premises at least once each month and report monthly in
writing to Landlord on the condition of the Premises.
IX. Non-Disturbance Agreement. Tenant shall not be obligated to subordinate
the Lease or its interest therein to any future mortgage, deed, of trust
or ground lease on the Project unless concurrently with such subordination
the holder of such mortgage or deed of trust or the ground lessor under
such ground lease agrees not to disturb Tenant's possession of the
Premises under the terms of the Lease in the event such holder or ground
lessor acquires title to the Premises through foreclosure, deed in lieu of
foreclosure or otherwise. Tenant shall be for any FEES or EXPENSES charged
by the holde OF SUCH MORTGAGE or deed of trust in connection with the
granting Of such non disturbance agreemen
X. Security Deposit. Tenant shall not be obligated to submit the Security
Deposit to Landlord until six (6) months prior to the expiration date of
the Lease Term. Should Tenant exercise it Renewal Option(s), per the terms
of Addendum Four, then the submission of the Security Deposit will be
delayed until six (6) months prior to the expiration date of the First or
Second Extension Term, as the case may be.
<PAGE> 14
ADDENDUM TWO
CONSTRUCTION
(ALLOWANCE)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED I 6/15 1999, BETWEEN
PROLOGIS LIMITED PARTNERSHIP TV
and
STERILE RECOVERIES, INC.
(a) Landlord agrees to furnish or perform those items of construction and
those improvements (the 'Tenant improvements") specified below:
Remove building structure in truck court/parking area.
Remove wood fencing and concrete containment walls located outside
the Northwest side of the Building.
Remove interior pipes and repair wall penetrations located along the
Northwest wall of the Building.
Repair uneven section of warehouse floor.
Add additional paved parking area along the Northwest side of the
Building, Landlord shall pay for tile Tenant Improvements up to a maximum
amount of $30,000.00 and Tenant shall pay for the cost of tile Tenant
Improvements in excess of such amount. If tile cost of the Tenant Improvements
is estimated to exceed such amount, such estimated overage shall be paid by
Tenant before Landlord begins construction and a final adjusting payment based
upon the actual costs of tile Tenant Improvements shall be made when the Tenant
Improvements are complete.
(b) If Tenant shall desire any changes, Tenant shall so advise Landlord
in writing and Landlord shall determine whether such changes can be made in a
reasonable and feasible manner. Any and all costs of reviewing any requested
changes, and any and all costs of making any changes to the Tenant Improvements
which Tenant may request and which Landlord may agree to shall be at Tenant's
sole cost and expense and shall be paid to Landlord upon demand and before
execution of (lie change order.
(c) Landlord shall proceed with and complete the construction of the
Tenant Improvements. As soon as such improvements have been substantially
completed, Landlord shall notify Tenant in writing of the date that (lie Tenant
Improvements were Substantially Completed. Such date, unless an earlier date is
specified as tile Commencement Date in this Lease or otherwise agreed it) in
writing between Landlord and Tenant, shall be the "Commencement Date," unless
the completion of such improvements was delayed due to any act or omission of,
or delay caused by, Tenant including, without limitation, Tenant's failure to
approve plans, complete submittals or obtain permits within the time periods
agreed to by the parties or as reasonably required by Landlord, in which case
the Commencement Date shall be the date such improvements would have been
completed but for the delays caused by Tenant, The Ten4nt improvements shall be
deemed substantially completed ("Substantially Completed") when, in the opinion
of the construction manager (whether an employee or agent of Landlord or a
third party construction manager), the Premises are substantially completed
except for punch list items which do not prevent in any material way the use of
the Premises for the purposes for which they were intended. After the
Commencement Date Tenant shall, upon demand, execute and deliver to Landlord a
letter of acceptance of delivery of the Premises.
(d) The failure of Tenant to take possession of or to occupy the Premises
shall not serve to relieve Tenant of obligations arising on the Commencement
Date or delay the payment of rent by Tenant. Subject to applicable ordinances
and building codes governing Tenant's right to occupy or perform in the
Premises, Tenant shall be allowed to install its tenant improvements,
machinery, equipment, fixtures, or other property on the Premises during the
final stages of completion of construction provided that Tenant does not
thereby interfere with the completion of construction or cause any labor
dispute as a result of such installations, and provided further that Tenant
does hereby agree to indemnify, defend, and hold Landlord harmless from any
loss or damage to such property, and all liability, loss, or damage arising
from any injury to tile Project or the property of Landlord, its contractors,
subcontractors, or materialmen, and any death or personal injury to any person
or persons arising out of such installations, whether or not any such loss,
damage, liability, death, or personal injury was caused by Landlord's
negligence. Any such occupancy or performance in the Premises shall be in
accordance with tile provisions governing Tenant-Made Alterations and Trade
Fixtures in the Lease, and shall be subject to Tenant providing to Landlord
satisfactory evidence of insurance for personal injury and property damage
related to such installations and satisfactory evidence of payment arrangements
with respect to installations permitted hereunder. Delay in putting Tenant in
possession of the Premises shall not serve to extend the term of this Lease or
to make Landlord liable for any damages arising therefrom.
(e) Except for incomplete punch list items, Tenant upon tile Commencement
Date shall have and hold the Premises as the same shall then be without any
liability or obligation on the part of Landlord for making any further
alterations or improvements of any kind in or about the Premises.
<PAGE> 15
ADDENDUM THRE
ASSIGNMENT AND SUBLETTING (CONSENT)
ATTACHED TO AND A PART OF THE LEASE
AGREEMENT
DATED 6/15 1222, BETWEEN
PROLOGIS LIMITED PARTNERSHIP IV
and
STERILE RECOVERIES, INC.
(a) Landlord shall not unreasonably withhold its consent to Tenant's
request for permission to assign the Lease or sublease all or part of the
Premises. It shall be reasonable for the Landlord to withhold its consent to
any assignment or sublease in any of the following instances:
(i) The assignee or sublessee does not have a net worth calculated
according to generally accepted accounting principles at least equal to
the greater of the net worth of Tenant immediately prior to such
assignment or sublease or the net worth of the Tenant at the time it
executed the Lease:
(ii) The intended use of the Premises by the assignee or sublessee is
not reasonably satisfactory to Landlord;
(iii) 'Me intended use of the Premises by the assignee or sublessee
would materially increase the pedestrian or vehicular traffic to the
Premises or the Project;
(iv) Occupancy of the Premises by the assignee or sublessee would, in
Landlord's opinion, violate any agreement binding upon Landlord or the
Project with regard to the identity of tenants, usage in the Project, or
similar matters:
(v) The identity or business reputation of the assignee or sublessee
will, in the good faith judgment of Landlord, tend to damage the goodwill
or reputation of the Project;
(vi) The assignment or sublet is to another tenant in the Project and
is at rates which are below those charged by Landlord for comparable
space in the Project; (vii) In the case of a sublease, the subtenant has
not acknowledged that the Lease controls over any inconsistent provision
in the sublease; or (viii)The proposed assignee or sublessee is a
government entity. foregoing criteria shall not exclude any other
reasonable basis for Landlord to refuse its consent to such assignment or
sublease.
(b) Any approved assignment or sublease shall be expressly subject to the
terms and conditions of this Lease.
(c) Tenant shall provide to Landlord all information concerning the
assignee or sublessee as Landlord may request.
(d) Landlord may revoke its consent immediately and without notice if, as
of the effective date of the assignment or sublease, there has occurred and is
continuing any default under the Lease.
(e) Landlord's agreement to not unreasonably withhold its consent shall
only apply to the first assignment or sublease under the Lease.
<PAGE> 16
ADDENDUM FOUR
RENEWAL OPTIONS
(BASEBALL
ARBITRATION)
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED I 6/15 1999, BETWEEN
PROLOGIS LIMITED PARTNERSHIP IV
and
STERILE RECOVERIES INC.
(1) Provided that as of (lie time of tile giving of the First Extension
Notice and tile Commencement Date of the First Extension Term, (x) Tenant is
tile Tenant originally named herein, (y) Tenant actually occupies all of the
Premises initially demised under this Lease and any spice added to tile
Premises, and (z) no Event of Default exists or would exist but for the passage
of time or tile giving of notice, or both; then Tenant shall have the right to
extend die Lease Term for all additional term of 5 years (such additional lei
in is hereinafter called (tic "rim Extension Term") commencing oil the (lay
following the expiration of tile Lease Term (hereinafter referred to as tile
"Commencement Date of the First Extension Term") 'Tenant shall give Landlord
notice (hereinafter called file "First Extension Notice") of its election to
extend the term of [lie Lease Term at least 6 months, but not more than months,
prior to the scheduled expiration date of the Lease Term.
(b) Provided that as of the time of the giving of [lie Second Extension
Notice and the Commencement Date of tile Second Extension Term, (x) Tenant is
the Tenant originally named all of the Premises initially demised under this
Lease and any space added to the Premises, and (z) no Event of Default exists
or would exist but for (lie passage of time or the giving of notice, or both
and provided Tenant his exercised its option for tile First Extension Term;
then Tenant shall have the right to extend the Lease Term additional term of 5
years (such additional term is hereinafter called the "Second Extension Term")
commencing on the (lay following (lie expiration of (lie First Extension Term
(hereinafter referred to as the "Commencement D te of the Second Extension
Term") Tenant shall give Landlord notice (hereinafter called tile "Second
Extension Notice") of its election to extend the term of tile Lease Term at
least A months, but not more than 2 months, prior to tile scheduled expiration
date of (lie First Extension Term.
(c) The Base Rent payable by Tenant to Landlord during tile First
Extension Term shall be the -- -- I of (i) the Base Rent applicable to the last
year of tile initial Lease term and (ii) the then prevail comparable spice in
tile Project and comparable buildings in (lie vicinity of the Projec of tile
Lease, tile length of the renewal term, market escalation.% and life credit
unit. The Rise Rent shall not be reduced by reason of any costs or expenses
saved 1)), Landlord by reason of Landlord's not having to find a new tenant for
such Premises (including, will itation, brokerage commissions, costs of
improvements, rent concessions or lost rental income agreement on such ren dur
g any vacancy period), In the event Landlord and Tenant fail to reach all ntal
rate and execute the Amendment (defined below) at least 0 months prior to (lie
expiration of [tic Lease, then Tenant's exercise of tile renewal option shall
be deemed withdrawn and (lie Lease shall terminate original expi ion d le
$12,682.00 per month.
(d) The Base Rent payable by Tenant to Landlord during the Extension Term
shall be the greater of: First Extension Term.
(i) the Base Refit in effect oil tile expiration or the Lease Term
(if the Base Rent is stated as all annual or other periodic rate,
adjusted for tile length of the Lease Term) and *First Extension Term
(ii) tile Fair Market Refit, as defined and determine([ pursuant to
Paragraphs (e), (f), and (9) t below. n 0 The term "Fair Market Ren shall
in tile Base Rent, expressed as *Second (e) l rent per square foot of
floor area, which Landlord would have received from ]casing file Premises
for the Extension Term to in unaffiliated person which is not then a
tenant in (lie Project, assuming that such space were to be delivered in
"is-is" condition, and liking into account the rental which such other
tenant would most likely have paid For such premises, 11 including market
escalations, provided that Fair Market Rent shall not in any event be
less than tile Base Refit for the Premises as of the expiration of the
Lease Term. Fair Market Refit shall not be reduced by reason of my costs
or expenses saved by Landlord by reason of Landlord's not having to find
a new tenant for the Premises (including w t out inflation brokerage
commissions, cost of improvements necessary to prepare tile spice for
such tenant's occupancy, rent concession, or lost rental income during
any vacancy period). Fair Market Refit means only (lie ill ark ket rate
for tile size rent component defined as Base Refit in the Lease and does
not include reimbursements and payments by Tenant to Landlord with
respect to operating expenses and other items payable or reimbursable by
Tenant under (be Lease. In addition to its obligation to pay Base Rent
(as determined herein), Tenant shall continue to pay and reimburse
Landlord as set forth in file Lease with respect to such operating
expenses and other items with respect to (lie mises during the Extension
Term described below shall be limited of the Base Refit and shall not
affect or otherwise reduce or modify the Tenant's obligation to ply or
reimburse Landlord for such operating expenses and other reimbursable
items.
<PAGE> 17
rm (f)Landlord shall notify Tenant of its determination of the Fair
Market Rent (which shall be made Tein Landlord's -tole discretion and
shall in any event he not less thin the Base Rent in effect as of the
expiration of (R)R Lease Term)* ill Extension Term, and Tenant shall
advise Landlord of any objection within 10 days of -day period shall
constitute Tenant's acceptance of receipt of Landlord's notice. Failure
to respond within file 10 such Fair Market Rent. If Tenant objects,
Landlord and Tenant shall commence negotiations to attempt to agree upon
the Fair Market Rent within 30 days of Landlord's receipt of Tenant's
notice. If (lie parties cannot agree, each faith but without any
obligation to agree, then [lie Lease Term shall not be extended and shall
acting in good fa terminate oil its scheduled termination date and Tenant
shall have no further right hereunder or ally remedy by 0 reason of the
parties' failure to agree unless Tenant or Landlord invokes the
arbitration procedure provided below to determine (lie Fair Market Rent.
(9) Arbitration to determine the Fail- Market Rent shall be in accordance
with the Real Estate Valuation Arbitration Rules of the American Arbitration
Association. Unless otherwise required by state law, arbitration shall be
conducted in the metropolitan area where the Project is located by a single
arbitrator unaffiliated with either party. Either Party may elect to arbitrate
by sending written notice to die other party and the Regional Office of (he
tAmerica., Arbitration Association within 5 days after (he 30-day negotiating
period provided in Paragraph (f) invoking the binding arbitration provisions of
this paragraph. Landlord and Tenant shall each submit to the nv ITS 0arbitrator
their respective proposal of Fair Market Rent.The arbitrator must choose
between the Landlord's proposaland the Tenant's proposal and may not compromise
between the two or select some other amount. Notwithstanding any other
provision herein, the Fair Market Rent determined by the arbitrator shall not
be less (hall, and the -arbitrator shall have no authority to determine a Fair
Market Rent less than, the Base Rent in effect as of xpiration of the Lease
TermThe cost of the arbitration shall be paid by Landlord if the Fair Market
Rent is [hit proposed by Landlord and by Tenant if the Fair Market Rent is that
proposed by Tenant; and shall be borne equally otherwise. If [he arbitrator his
not determined the Fair Market Rent as of the end of th ase Term, Tenant shall
pay 105 percent of the Base Rent in effect under the Lease as of the end of the
Lease Te until the Fair Market Rent is determined as provided herein.Upon such
determination, Landlord and Tenant shall make tile appropriate adjustments to
the payments between them.*First Extension Term 0
(h) The parties consent to the jurisdiction of any appropriate court to
ENFORCE THE ARBITRATION PROVISIONS OF THIS ADDENDUM and to enter judgment upon
the decision of (lie -arbitrator. Te *Terms for the Base Rent as determined
above, Tenant's occupancy of the Premises during the Extension 1 OF shall be on
the same terms and conditions as are in effect immediately prior to the
expiration of file initial Lease Term; provided, however, Tenant shall have no
further right to extend the Lease Term pursuant to this .addendum or to any
allowances, credits or abatements or options to expand, contract, renew or
extend the Lease. *Notices
(j) If Tenant does not send (lie Extension Notice within the period set
forth IN PARAGRAPH (A) Tenant's right to extend the Lease Term shall
automatically terminate. Time is of (lie essence as to the giving of die
Extension Notice and the notice of Tenant's objection wider Paragraph (f)
either the First or Second Extension Terms
(k) Landlord shall have no obligation to refurbish or otherwise improv
(he Premises for the Extension The Premises shall be tendered on the
Commencement Date ofion Ter in "as-is" condition. Fir t and Second Exte sion Te
First and Second Extension Terms
(1) If the Lease is ended for the *Extension Term then Landlord shall
prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto. *
First and Second Extension Terms
(in) If Tenant exercises its right to extend the term of the Lease for
the Extension Extension Term pursuant to Addendum, the term "Lease Term" as
used in file Lease, shall be construed to include, when practicable, (lie
Extension Term except as provided in (j ) above. *First and Second *Terms I
<PAGE> 18
ADDENDUM FIVE
PURCHASE OPTION
ATTACHED TO AND A PA
ART OF THE LEASE AGREEMENT
DATED 6/15 .1999, BETWEEN
PROLOGIS LIMITED PARTNERSHIP IV
AND
STERILE RECOVERIES, INC.
Provided that as of the date of the giving of Teriant's Purchase Option
Notice Landlord's notice (x) Tenant is the Tenkint originally named herem, (y)
Tenant actually occu originally demised kinder this Lease and any premises
added to the Promises, kind (z) no Event of Defauh. or event which but for tire
passage of time or tire giving of notice, or both, would Constitute all Event o
occurred and is confinuing, then subject to still in accordance ivith fire
terms of this Addendum Ten M. lite right and option (the "Purchase Option") to
purchase the Building.* Tenant s hall exercis by delivering written notice
("Purchase, Option Notice,") to Landlord at any tone during the
0 E xh B I Purch The Purchasforth in Landlo cleric to exercise its
Purchase Option tied close on the Premises (see Exhibit B attached hereto add
made a part hereof) within the first (1st) year of the Lease Terin, the
Purchase Price will be set at $1,360,000. The Purchase Price will increase try
four percent (4%) each year thereafter,
2. CLOSING. THE CLOSING SHALL BE CONDUCTED THROUGH AN ESCROW ESTABLISHED
AT A TITLE COMPANY ACCEPTABLE TO BOTH LANDLORD AND TENANT. ALL DELIVERIES SHALL
BE DEPOSITED IN ESCROW AND ALL CLOSING DELIVERIES AND DISBURSEMENTS SHALL BE
MADE THROUGH THE ESCROW. THE CLOSING SHALL OCCUR NO LATER THAN 60 DAYS
FOLLOWING THE EXERCISE OF THE PURCHASE OPTION.
3. INSPECTION. FOR A PERIOD OF 30 DAYS AFTER THE DATE OF TENANT'S
PURCHASE OPTION NOTICE TO LANDLORD, TENANT SHALL BE ENTITLED TO INSPECT THE
PREMISES. TENANT SHALL INDEMNIFY AND DEFEND LANDLORD FOR ANY CLAIM, DAMAGE OR
LIABILITY ARISING OUT OF TENANT'S AND ITS AGENT'S AND CONTRACTOR'S INSPECTION.
TENANT MAY REVOKE ITS ELECTION TO EXERCISE THE PURCHASE OPTION BY NOTICE TO
LANDLORD WITHIN THE 30-DAY PERIOD IF TENANT IS NOT SATISFIED WITH ANY ASPECT OF
THE PREMISES, IN WHICH CASE THIS LEASE SHALL CONTINUE IN FULL FORCE AND EFFECT.
4. TITLE. LANDLORD SHALL CONVEY TO TENANT FEE SIMPLE TITLE TO THE
PREMISES BY SPECIAL WARRANTY DEED (WARRANTING TITLE BY, THROUGH, OR UNDER
LANDLORD, BUT NOT OTHERWISE) SUBJECT ONLY TO ALL MATTERS OF RECORD AND THOSE
MATTERS WHICH A CORRECT SURVEY WOULD SHOW BUT FREE AND CLEAR OF ANY LIENS OR
ANY OTHER EXCEPTIONS CREATED BY, UNDER, OR THROUGH LANDLORD. TENANT SHALL HAVE
THE ABSOLUTE RIGHT TO APPROVE TITLE TO THE PROPERTY, AND IF TITLE IS NOT
SATISFACTORY, TENANT MAY REVOKE ITS ELECTION TO EXERCISE THE PURCHASE OPTION BY
GIVING NOTICE TO LANDLORD (X) WITHIN THE INSPECTION PERIOD IN SUBPARAGRAPH (A)
ABOVE AND, (Y) WITH RESPECT TO ANY TITLE EXCEPTIONS OF WHICH PURCHASER IS
NOTIFIED AFTER SUCH INSPECTION PERIOD BUT BEFORE THE CLOSING, AT ANY TIME
BEFORE THE CLOSING. LANDLORD SHALL ASSIGN TO TENANT ALL ITS RIGHT, TITLE AND
INTEREST IN AND TO ALL CONTRACTS, WARRANTIES, PERMITS, APPROVALS, AND OTHER
INTANGIBLE PROPERTY RELATED TO THE PREMISES EXCEPT FOR ANY TRADENAME OR OTHER
SIMILAR RIGHTS RELATED TO THE PREMISES, WHICH LANDLORD SHALL RETAIN.
5.PRORATIONS. THERE SHALL BE NO PRORATION OF TAXES OR OTHER EXPENSES.
6. LEASE TERMINATION. THE LEASE SHALL BE TERMINATED AS OF THE CLOSING.
ALL RENT AND OTHER PAYMENTS DUE BY TENANT TO LANDLORD UNDER THE LEASE SHALL BE
PRORATED TO THE DATE OF CLOSING AND SHALL BE DEPOSITED INTO THE ESCROW AND
DISBURSED TO LANDLORD AT CLOSING.
7. NO WARRANTY. LANDLORD MAKES NO, AND AT CLOSING TENANT SHALL WAIVE IN
WRITING SATISFACTORY TO LANDLORD ANY, WARRANTY OR REPRESENTATION WITH RESPECT
TO THE PREMISES (OTHER THAN TITLE TO THE PREMISES AS PROVIDED ABOVE) AND SHALL
RELEASE LANDLORD FROM ANY RIGHT OR CLAIMS, KNOWN OR UNKNOWN, WITH RESPECT TO
THE PHYSICAL OR ENVIRONMENTAL CONDITION OF THE PREMISES OR THE COMPLIANCE OF
THE PREMISES WITH APPLICABLE LAW. TENANT IS RELYING ON ITS OWN INSPECTION AND
REVIEW OF THE PREMISES.
8. RISK OF LOSS. RISK OF LOSS SHALL REMAIN WITH LANDLORD, SUBJECT TO
TENANT'S OBLIGATIONS UNDER THE LEASE, UNTIL THE CLOSING. IF ANY CONDEMNATION IS
INSTITUTED OR THREATENED AGAINST THE PREMISES OR THE PREMISES ARE DAMAGED,
EITHER PARTY MAY TERMINATE THE PURCHASE TRANSACTION, AND THE LEASE SHALL REMAIN
IN FULL FORCE AND EFFECT.
<PAGE> 19
9. Tax-Free Exchange. Landlord may conduct the sale as a tax-free
exchange pursuant to Section 1031 of the Internal Revenue Code. Such exchange
shall be conducted through a qualified intermediary, at no cost to Tenant, and
without affecting Landlord's obligations to Tenant. Tenant shall not be
required to take title to any other property in connection with a Section 1031
exchange. Landlord reserves the right to delay closing for up to thirty (30)
days to finalize a 1031 exchange.
10. Exercise is Irrevocable. Tenant's exercise of the Purchase Option is
irrevocable except as provided herein. Time is of the essence.
11. Exercise by Tenant or Tenant Affiliate Only. Only the Tenant
originally named herein or a Tenant Affiliate may exercise this Purchase
Option. The Purchase Option is not assignable except to a Tenant Affiliate to
which the Lease is assigned and shall terminate automatically upon any
termination of the Lease other than as a result of default by Landlord.
Further, no such right is exercisable if as of the date of exercised of the
right or the Closing, the Lease has terminated or an Event of Default or event
("Potential Default") which but for the passage of time or the giving of
notice, or both, would constitute an Event of Default has occurred and is
continuing.
12. Landlord's Right of First Offer If at any time Tenant desires to sell
the Building, d then Tenant, before offering the Building to anyone, shall
offer to Landlord the right to purchase the Building on :3, the same terms and
conditions upon which Tenant intends to offer the Building for sale.
00 SO Such offer shall be made by Tenant to Landlord in a written notice
(hereinafter called the "First Offer Notice") which offer shall designate the
terms which Tenant intends to offer the Building for sale. Landlord may accept
the offer set forth in the First Offer Notice by delivering to Tenant an
acceptance v (hereinafter called " Landlord's Notice") of such offer within 10
business days after delivery by Tenant of the First Offer Notice to Landlord.
Time shall be of the essence with respect to the giving of Landlord's Notice.
If Landlord does not accept (or fails to timely accept) an offer made by Tenant
pursuant to the provisions of this CD Addendum with respect to the purchase of
the Building, Tenant shall be free to sell the Building to anyone on terms
which may be 95% less favorable to Tenant than those offered to Landlord.
t I f T Tenant desires to sell the Building to anyone on terms which are
less than 95% of the purchase price offered to Landlord, then Tenant must
reoffer to Landlord the right to purchase the Building 0 on such terms (the
"Second Offer Notice"). Tenant shall deliver to Landlord the Second Offer
Notice in the same manner as the First Offer Notice. If Landlord does not
accept (or fails to timely accept) the re-offer made by Tenant pursuant to the
provisions of this Addendum with respect to the purchase of the Building,
Landlord shall be deemed to have irrevocably waived all further rights under
this Addendum and Tenant shall be under no further obligation to Landlord with
respect to the sale of the Building by reason of this Addendum.
<PAGE> 20
ADDENDUM SIX
HVAC MAINTENANCE CONTRACT
ATTACHED TO AND A PART OF THE LEASE AGREEMENT
DATED ------ , 1999, BETWEEN
PROLOGIS LIMITED PARTNERSHIP IV
and
STERILE RECOVERIES, INC.
Per Paragraph 11, captioned "TENANT REPAIRS", is revised to include the
following: a.Tenant agrees to ENTER INTO AND maintain through the term of the
Lease, a regularly scheduled preventative maintenance/service contract for
servicing all hot water, heating and air conditioning systems and equipment
within the Premises. The Landlord requires a qualified HVAC contractor perform
this work. A- CERTIFICATE mi.
The service contract MUST becomeWITHIN THIRTY (30) DAYS OF OCCUPANCY, and
service visits should be performed on a quarterly basis. THE CONTRACT should
indicate THE TERM 9 SERVICE (PREFERABLY ONE YEAR). We suggest that you send the
following list to a qualified HVAC contractor to be assured that these items
are included in the maintenance contract:
1) Adjust belt tension;
2) Lubricate all moving parts, as necessary;
3) Inspect and adjust all temperature and safety controls;
4) Check refrigeration system for leaks and operation;
5) Check refrigeration system for moisture;
6) Inspect compressor oil level and crank case heaters;
7) Check head pressure, suction pressure and oil pressure;
8) Inspect air filters and replace when necessary;
9) Check space conditions;
10) Check condensate drains and drain pans and clean, if necessary;
11) Inspect and adjust all valves;
12) Check and adjust dampers;
13) Run machine through complete cycle.
Landlord accepts that Tenant will handle all of its own maintenance and
repair work "in-house" by qualified employees. Tenant will still be obligated
to provide to Landlord on a quarterly basis a written report showing that all
of the above check list items have been addressed.
<PAGE> 21
ADDENDUM SEVEN
MOVE-OUT CONDITIONS
ATTACHED TO AND A PART OF THE LEASE AGREEMENT DATED 6/15 _, 1999, BETWEEN.
PROLOGIS LIMITED PARTNERSHIP IV
and
STERILE RECOVERIES, INC
Per Paragraph 21, Tenant is obligated to check and address, prior to
move-out of the facility, the following items. Landlord expects to receive the
space in a well maintained condition, with normal wear and tear of certain
areas acceptable. The following list is designated to assist you in the
move-out procedures but is not intended to be all inclusive.
All lighting is to be placed into good working order. This includes
replacement of bulbs, ballasts, and lenses as needed.
2. All truck doors and dock levelers should be serviced and placed in
good operating order. This would include the necessary replacement of any
dented truck door panels and adjustment of door tension to insure proper
operation. All door panels which are replaced need to be painted to match the
building standard.
3. All structural steel columns in the warehouse and office should be
inspected for damage. Repairs of this nature should be pre-approved by the
Landlord prior to implementation.
4. Heating/air-conditioning systems should be placed in good working
order, including the necessary replacement of any parts to return the unit to a
well maintained condition. This includes warehouse heaters and exhaust fans.
Upon move-out, Landlord will have an exit inspection performed by a certified
mechanical contractor to determine die condition.
5.All holes in the sheet rock walls should be repaired prior to move-out.
6. The carpets and vinyl tiles should be in a clean condition and should
not have any holes or chips in them. Landlord will accept normal wear on these
items provided they appear to be in a maintained condition. Facilities should
be returned in a clean condition which would include cleaning of the coffee
bar, restroorn areas, windows, and other portions of the space.
8. The warehouse should be in broom clean condition with all inventory
and racking removed. There should be no protrusion of anchors from the
warehouse floor and all holes should be appropriately patched. If
machinery/equipment is removed, the electrical I lines should be properly
terminated at the nearest junction box.
9. All exterior windows with cracks of breakage should be replaced.
10. The Tenant shall provide keys for all locks on the Premises,
including front doors, rear doors, and interior doors.
11. Items that have been added by the Tenant and affixed to the Building
will remain the property of Landlord, unless agreed otherwise. This would
include but is not limited to mini-blinds, air conditioners, electrical, water
heaters, cabinets, flooring, etc. Please note that if modifications have been
made to the space, such as the addition of office areas, Landlord retains the
right to have the Tenant remove these at Tenant's expense.
12. All electrical systems should be left in a safe condition that
conforms to code. Bare wires and dangerous installations should be corrected
prior to move-out.
13. All plumbing fixtures should be in good working order, including the
water heater. Faucets and toilets should not leak.
14. All dock bumpers must be left in place and well secured.
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<SALES> 51,380
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