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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NO. 000-20997
STERILE RECOVERIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Florida 59-3252632
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(State of Incorporation) (IRS Employer Identification No.)
28100 U.S. HIGHWAY19 NORTH, SUITE 201, CLEARWATER, FLORIDA 33761
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (727) 726-4421
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 - 5,676,794
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of the Common Stock on
March 4, 1999, as reported on the Nasdaq National Market, was approximately
$20,917,640. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded because these persons might be considered to be affiliates. This
determination of affiliate status is not necessarily conclusive for other
purposes.
The Registrant had outstanding 5,676,794 shares of Common Stock as of
March 4, 1999.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement for the 1999 Annual Meeting of
Shareholders to be held on May 19, 1999 is incorporated by reference in Part
III of this report to the extent stated herein.
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STERILE RECOVERIES, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
<TABLE>
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SECTION PAGE
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PART I
Item 1: Business 1
Item 2: Properties 7
Item 3: Legal Proceedings 8
Item 4: Submission of Matters to a Vote of Security Holders 8
PART II
Item 5: Market for the Registrant's Common Equity and Related
Shareholder Matters 9
Item 6: Selected Financial Data 10
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7A: Quantitative and Qualitative Disclosures About Market Risk 18
Item 8: Financial Statements and Supplementary Data 20
Item 9: Changes In and Disagreements With Accountants On
Accounting and Financial Disclosure 40
PART III
Item 10: Directors and Executive Officers of the Registrant 40
Item 11: Executive Compensation 40
Item 12: Security Ownership of Certain Beneficial Owners
and Management 40
Item 13: Certain Relationships and Related Transactions 40
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 41
SIGNATURES 45
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PART I
ITEM 1. BUSINESS
Sterile Recoveries, Inc. ("SRI" or the "Company") provides hospitals
and surgery centers with a comprehensive surgical procedure-based daily
delivery service. The foundations of this service are SRI's reusable surgical
products, including gowns, towels, drapes and basins, and its daily delivery
and retrieval of these products for each customer. The Company complements its
reusable products with cost-effective disposable accessory packs to provide a
comprehensive offering for surgical procedures. SRI believes its superior
quality reusable products and its service solutions, including direct delivery
to its customers' departments, differentiate SRI from its competitors.
In 1998, the Company introduced its new service, Surgical Express(TM),
which uses its daily delivery and retrieval service as a foundation to provide
customers an expanded program of products and services. Surgical Express is an
outsourced Surgical Case Cart Management Program, which the Company expects
will reduce hospital and surgery center processing costs and their investment
in surgical products. The Company expects the expansion of this direct
manufacturer to surgical suite program will include management of reusable and
disposable products, including instrumentation.
At nine regional facilities, SRI collects, sorts, cleans, inspects,
packages, sterilizes, and delivers its reusable products on a just-in-time
basis. SRI offers an integrated "closed-loop" reprocessing service which 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 which is liquid and bacterial
resistant.
The Company currently serves a growing customer base of over 370
hospitals and surgery centers located in 23 states, including Duke University
Medical Center (Durham), Henry Ford Hospital (Detroit), Johns Hopkins Medical
Center (Baltimore), St. Luke's Episcopal Hospital (Houston), Jackson Memorial
Hospital (Miami), IHC Hospitals, Inc. (Salt Lake City), and Hospital of the
Good Samaritan (Los Angeles). None of the foregoing customers individually
accounts for a material portion of the Company's revenues. The Company
maintains agreements to supply two group purchasing organizations. Through an
existing Purchase Agreement of Standard Textile Co., Inc. with VHA, Inc., the
Company offers its reusable products service to VHA members. The Company's
agreement with Hospital Services Corporation of America designates the Company
as an approved vendor of reusable surgical products to HSCA's hospital and
surgery center members.
The Company believes that Surgical Express is a superior and
competitively priced alternative to a full disposable program, other
procedure-based surgical supply programs, and operating an in-house reusable
program for surgical products. The Company's delivery service offers savings to
hospitals by reducing or eliminating the following costly steps associated with
the disposable or in-house alternatives: (i) disposing of biohazardous wastes,
(ii) carrying an inventory of disposable surgical products, and (iii) in-house
processing of reusable surgical products. In addition to these cost savings,
the Company's liquidproof and liquid resistant gowns offer surgeons and
surgical staff enhanced protection against transmission of blood-borne
pathogens, including the HIV and hepatitis viruses. Also, the Company's
reusable gowns are made with a breathable surgical fabric, which is designed
for superior comfort during long procedures.
The Company's Surgical Express Program offers its customers disposable
accessory packs containing smaller surgical items which are not reusable, such
as needles, syringes, and tubing. The Company believes the flexibility it
offers its customers by combining reusable surgical gowns, towels, drapes, and
basins with disposable products has improved the Company's competitive position
in the marketplace.
SRI purchased a portion of the assets of its business from Amsco
Sterile Recoveries, Inc. ("Amsco Sterile"), an indirect wholly-owned subsidiary
of Amsco International, Inc., on July 31, 1994 (the "Acquisition").
* GORE(R) Surgical Barrier Fabric is a registered trademark of W.L.
Gore & Associates, Inc.
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THE MARKET
The United States health care system includes approximately 7,400
acute care hospitals, over 2,750 freestanding surgery centers, and a variety of
other health care facilities. According to industry sources, approximately 31
million surgical procedures were performed at hospitals and surgery centers in
1998. The Company believes that between $100-$150 of surgical products service
revenues, including $40-$50 from reusable products, can be realized from a
typical surgical procedure.
In the 1980's, hospitals began using custom procedure trays because of
their convenience, a trend which continued to grow until recently. A custom
procedure tray typically contains, in disposable form, most of the sterile
products used in a particular surgical or other medical procedure. According to
industry sources, total sales of custom procedure trays in the United States
were an estimated $1.5 billion in 1995. However, the Company believes that
custom procedure trays have several shortcomings relative to reusable products,
including costs associated with excessive product content, storage, handling,
and waste disposal, and the working capital requirements required to carry
product inventory.
Most hospitals which converted to custom procedure trays eliminated
the in-house personnel and equipment necessary to process reusable surgical
products. Furthermore, hospitals using in-house facilities are increasingly
unwilling to support those personnel and capital requirements. With the growth
of managed care, many hospitals and surgery centers are seeking significant
cost reduction solutions. The Company believes that a service which provides
daily delivery of substantially better quality surgical products without any
capital investment by the hospital, thereby reducing employee and space needs,
should become an attractive managed care option for hospitals.
The following developments have created a market opportunity for SRI's
Surgical Express Program:
Continued Pressure on Hospitals to Contain Cost and Raise
Productivity. With the growth of managed care, economic constraints continue to
require hospitals to become more efficient by limiting capital investments and
reducing staff and costs. Hospitals are continually seeking to decrease their
cost of operations including supplies and waste disposal. SRI offers a service
which eliminates the need for in-house inventory or processing facilities or
the process costs associated with stocking and discarding disposable products.
Concern Regarding the Transmission of Infectious Diseases. The health
care industry confronts daily the risk of transmission of infectious diseases
through cross-infections. These concerns have increased the desirability of
surgical barrier fabrics that protect surgeons and surgical staff from patient
liquids. SRI's liquidproof gown prevents liquid and viral strike-through in
critical areas during surgical procedures involving higher risk. The Company's
standard gown is specially designed to resist liquid and bacterial
strike-through in most other surgical procedures.
Concern Regarding the Handling and Disposal of Biohazardous Waste. The
disposal of large volumes of infectious and hazardous waste generated by the
health care industry continues to attract increased public awareness. The
increased burdens on hospitals generating biohazardous waste due to
restrictions on incineration and access to dump sites give a competitive
advantage to reprocessing systems, such as SRI's, which replace disposable
surgical products with reusable surgical products. The SRI reprocessing system
substantially reduces biohazardous waste and its impact on the environment.
Increased Outsourcing of Hospital Functions That Do Not Involve
Patient Care. Hospitals with significant staff, capital and space dedicated to
in-house processing of reusable surgical products are increasingly outsourcing
this function to more efficient outside providers. This trend is consistent
with the overall industry focus on efficiency and improved patient care.
Surgical Express allows hospitals to outsource to SRI the ownership and
reprocessing of surgical products, and inventory management of complementary
disposable products as well.
STRATEGY
The Company's objective is to continue its growth and become a leading
provider of reusable surgical products and related delivery and retrieval
services to hospitals and surgery centers. The Company's principal strategies
for achieving this objective are as follows:
Leverage Infrastructure With Increased Penetration in Existing
Markets. The Company believes its existing facilities currently operate at
approximately 65% of their aggregate annual revenue capacity, allowing it to
add a substantial amount of sales without the need for significant additional
capital expenditures for equipment or new facilities. To obtain increased
operating leverage and expand profit margins, the Company intends to grow its
customer base within its existing markets and focus on expanding its
relationships with existing customers by servicing additional surgical
procedures and by expanding its Surgical Express Program.
Accelerate the Sales Process. The Company believes that its service
solutions address many of the requirements of hospitals to reduce total costs
of operations required by the ongoing effort of hospitals to reduce costs and
improve efficiencies.
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More importantly, SRI's Surgical Express Program shows the total value of its
services in reducing product expenditures, supply chain process costs,
biohazardous waste, and instrument costs when its programs are fully
implemented.
Expand National and Regional Agreements. To date, the Company's
service agreements are primarily with individual hospitals. Management
continues to believe that there is a trend toward group purchasing among
hospitals, and has also seen parallel development of independent delivery
networks. These small regional buying groups believe they can negotiate and
control their product supply relatively better than large group purchasing
organizations. SRI maintains agreements to supply national group purchasing
organizations VHA, Inc. and Health Services Corporation of America (see
"Business--Group Purchasing Agreements"). To address these consolidations,
management intends to offer its Surgical Express Program to individual
hospitals and to national and regional hospital groups.
Add Facilities in Selected Markets. SRI currently services customers
in 23 states through nine regional facilities. SRI serves several large
metropolitan areas through highway transport and satellite depots supported by
a regional facility. To expand geographically, the Company expects to build
additional facilities when needed in markets previously served by highway
transport, including Stockton, California and Chattanooga, Tennessee in 1999.
From each new facility, SRI will be able to serve new metropolitan areas which
were previously too far from an existing regional facility. The Company
believes this strategy of incremental geographic expansion will allow the
Company to operate these new facilities profitably by beginning operations with
an existing customer base.
Decentralize Operations to Facilities. The Company operates each of
its facilities on a stand alone basis, with a vice president/general manager
responsible for one or more facilities accountable to senior management for
sales, service, operations and profitability within the facility's market area.
The Company believes individual vice presidents/general managers with
operational experience in local markets are best suited to respond to local
business opportunities with overall direction and support from the Company's
corporate staff. The Company's incentive compensation plan provides
compensation awards for the vice presidents/general managers and certain key
production, customer service and sales employees based on individual and
facility performance, as well as overall Company performance. Each vice
president/general manager also participates in the Company's stock option plan.
Utilize Operational Knowledge. The Company's management gained
substantial knowledge in operating Amsco Sterile's facilities. Amsco Sterile
invested approximately $100 million during the period from 1991 to 1994,
allowing management to implement innovative techniques and processes. As a
result, when the Company acquired these facilities, management had developed a
high degree of expertise in operations and was ready to capitalize upon Amsco
Sterile's development efforts. The Company continues to utilize this expertise
to provide superior products and services at a competitive cost.
DELIVERY, RETRIEVAL AND REPROCESSING SYSTEM
SRI's Surgical Express procedure-based service can deliver everything
required for a surgical procedure, including reusable packs, disposable
accessory packs, single sterile items, and instrumentation. Following a
procedure, the hospital discards the small amount of disposable products and
places the soiled reusable products into SRI's lockable carts.
SRI's closed-loop reprocessing service picks up soiled reusable
surgical products from its customers and sorts, cleans, inspects, packages,
sterilizes, and redelivers the products. In one trip, SRI's trucks deliver
clean carts of sterilized surgical products to the hospital or surgical center
and retrieve carts containing soiled products and return them to its facility
for reprocessing. The specially designed aluminum carts hold sterile products,
lock to maintain security and sterilization, conveniently roll for delivery
within the hospital and convert into hampers to hold soiled products after the
procedure. The customer avoids the need to maintain secondary stock locations
and the costs of either reprocessing reusable products or stocking and
discarding disposable products.
Upon return to SRI's facility, the contents of the soiled carts are
sorted in a decontamination area. Soiled fabric products are routed through an
automated washing and drying process that delivers clean, dry, and
decontaminated products to a pack room where they are carefully inspected for
damage, repaired if necessary, folded and assembled into packs. The packs are
steam sterilized, sorted, and combined with complementary disposable products
for delivery to the customer. SRI separately cleans, dries, and decontaminates
its carts, stainless steel basins, and other hard reusable products through
special automatic tunnel washers before redelivery. Processing through the
facility occurs in three to five days.
Because the Company's ability to manage its amortization expense
depends on maintaining its sewn goods' useful lives, SRI closely monitors its
reprocessing to ensure longevity. SRI uses a bar coding system to track its
reusable surgical products' status, history, and number of uses. SRI continues
to improve its operating processes, building on Amsco Sterile's substantial
investments of time and money to initially develop those operations.
The growth of SRI's business reflects its products' appeal, its
service quality, and general customer resistance to change when the SRI system
is in place. SRI also believes its direct relationship with hospital staff has
been important in attracting and
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retaining customers. Many of SRI's competitors use a distributor system which
introduces an intermediary between the competition and their customers which
SRI believes adds costs.
The Company's sales process for new customers is typically six to
twelve months in duration from initial contact to a 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. Conversely, the Company's high
service level, quality products, and customer resistance to change favors its
retention of existing customers.
SRI bills its customers weekly for the previous week's deliveries
under service contracts or purchase orders. Consistent with industry custom,
these contracts generally are cancellable by either party with 90 days' notice,
and customers may unilaterally reduce their use of the Company's services under
such contracts without penalty. The Company does not have any order backlog
because its products are generally delivered daily in response to customer
orders.
PRODUCTS
SRI's principal reusable surgical products are its liquidproof and
liquid resistant surgical gowns, towels, drapes, and stainless steel basin
sets. SRI offers these products in a variety of packs configured to the
hospital's specific needs. Packs are comprised of various combinations of
gowns, absorbent towels, liquidproof backtable covers, mayo stand covers, and
stainless components.
The Company's liquidproof gown has GORE(R) Surgical Barrier Fabric in
critical areas to provide protection for procedures which present a higher risk
of liquid strike-through and provide more comfort. This protection is critical
to SRI's customers given current concerns of doctors, staff, and regulatory
authorities regarding transmission of blood-borne pathogens, including the HIV
and hepatitis viruses. The Company's liquid resistant gown is made of an
advanced microfiber polyester fabric designed to resist liquid and bacterial
strike-through in most surgical procedures. All of SRI's gowns and drapes offer
the wearer both comfort and breathability, combined with a high level of
protection from liquid penetration that SRI believes is superior to that
offered by disposable products.
SRI contracts with third-party vendors for the weaving of microfiber
fabric and the cutting and sewing of garments, wraps and drapes. The Company in
August 1998 signed a ten-year sales and manufacturing agreement with Standard
Textile Co., Inc., under which Standard Textile will manufacture the bulk of
SRI's reusable textile products with fabric provided by W.L. Gore and other
textile suppliers. The other components of the Company's products are currently
available at reasonable costs from a variety of suppliers. To complement its
reusable surgical products, the Company offers disposable accessory packs
containing smaller surgical products, such as needles, syringes, and tubing.
The Company develops these packs with its customers' cooperation to assure a
desirable and cost effective product mix. SRI purchases the products from major
manufacturers, assembles the products in packs, arranges for ethylene oxide
sterilization by a third party, and delivers them to customers on its carts
with its reusable products.
EMPLOYEES
As of December 31, 1998, SRI employed approximately 1,025 people,
consisting of approximately 39 persons in management, administration and
finance at its corporate office and approximately 986 people in various
positions at the Company's facilities. The Company's employees are not covered
by a collective bargaining agreement, and the Company considers its employee
relations to be good.
GROUP PURCHASING AGREEMENTS
The Company maintains separate agreements that will allow members of
VHA, Inc. and Health Services Corporation of America to choose SRI's reusable
surgical products service. The agreements do not involve purchase commitments,
but the Company expects that its relationships with these purchasing
organizations will facilitate its sales efforts with member hospitals and
surgery centers.
COMPETITION
SRI competes with sellers of both reusable and disposable gowns,
drapes, utensils, and other products for surgical procedures. The market is
dominated by disposables, especially custom procedure trays. SRI believes it is
the leading provider of high quality reusable surgical gowns and drapes, and
that with its Surgical Express Program, SRI can effectively compete with
suppliers of disposable custom procedure trays.
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Unlike SRI, many of SRI's competitors can offer full national coverage
and have much greater resources than the Company. The Company's principal
competitors are the Convertors division of Allegiance Corporation, which has a
substantial market share, and Maxxim Medical Inc..
The Company competes based primarily on price, service, quality,
process improvement, and its ability to save its customers waste disposal
costs. The changing healthcare environment in recent years has led to
increasingly intense competition among health care suppliers based on price,
service, and product performance. Hospitals are seeking cost reductions in
response to pressure from governments, insurance companies, and health
maintenance organizations. The Company believes its high degree of expertise in
operations significantly assists it in offering a superior product at a
competitive cost. In addition, hospitals are increasingly seeking buying
leverage by purchasing in integrated networks. SRI believes that competitive
pressure in these areas will continue.
REGULATION
Substantially all of the Company's products and services are subject
to extensive government regulation in the United States by federal, state and
local governmental agencies, including the Food and Drug Administration (the
"FDA"), the Department of Transportation ("DOT"), and the Occupational Safety
and Health Administration ("OSHA").
The Company's reusable products are subject to regulation as medical
devices by the FDA, which regulates the development, production, distribution,
and promotion of medical devices in the United States. Various states in which
the Company does business also regulate medical devices. Pursuant to the
Federal Food Drug and Cosmetics Act (the "FDA Act"), the Company's medical
devices are subject to general controls regarding FDA inspections of
facilities, "Current Good Manufacturing Practices ("CGMPs")," labeling,
maintenance of records, and filings with the FDA. To the extent required, the
Company has obtained FDA pre-market approval of its devices under Section
510(k) of regulations issued under the FDA Act, which provides for FDA approval
on an expedited basis for products shown to be substantially equivalent to
devices legally marketed before enactment of the FDA Act. Products must be
produced in registered establishments and be manufactured in accordance with
CGMPs, as defined under the FDA Act. The CGMP requirements have recently been
substantially revised and incorporated into what is now known as the "Quality
System Regulation" (21 CFR Part 820). Since they were first issued on June 1,
1997, the focus of most routine FDA inspections has been compliance with these
new regulations. In addition, the Company's medical devices must be
periodically listed with the FDA and its labeling and promotional activities
are subject to scrutiny by the FDA and, in certain instances, by the Federal
Trade Commission. The Medical Device Reporting ("MDR") regulation obligates the
Company to provide information to the FDA on injuries alleged to have been
associated with the use of a product or in connection with certain product
failures which could cause serious injury or death. If the Company fails to
comply with the applicable provisions of the FDA Act, the FDA can institute
proceedings to detain or seize products, enjoin future violations, impose
product labeling restrictions or enforce product recalls or withdrawals from
the market.
SRI and its hospital customers also must comply with regulations of
OSHA, including the blood-borne pathogen rule requiring that "universal
precautions" be observed to minimize exposure to blood and other bodily fluids.
To comply with these requirements, SRI's employees wear protective gear in
handling soiled linens in the facility's decontamination area. Properly used,
SRI's products allow its hospital customers to protect their employees in
compliance with these regulations. The Company must comply with local
regulations governing the discharge of water used in its operations. SRI uses
local licensed contractors to dispose of any biohazardous waste generated by
the hospital and received by SRI and therefore does not need to obtain permits
for biohazardous waste disposal. The Company must comply with DOT and OSHA
regulations governing the transportation of hazardous materials, which concern,
among other things, labeling, marketing, placarding, using proper containers,
and reporting discharges. The Company complies with these regulations by
putting soiled products in marked liquidproof bags and locked, marked transfer
carts. Sterilization of the Company's disposable accessory packs is provided
under contract by a third-party. The use of ethylene oxide by that third-party
in the sterilization of the Company's disposable accessory packs is subject to
regulation by OSHA and the Environmental Protection Agency.
In addition to the foregoing, other federal, state and local
regulatory authorities, including those enforcing laws which relate to the
environment, fire hazard control, and working conditions, have jurisdiction to
take actions which could have a material adverse effect on the Company. SRI
makes expenditures from time to time to comply with environmental regulations,
but does not expect any material capital expenditures for environmental
compliance in 1999 or 2000.
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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: (i) projections of revenue, earnings, capital structure, and
other financial items, (ii) statements of the plans and objectives of
the Company and its management, (iii) statements of future economic
performance, and (iv) 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. SRI'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. SRI'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. See
"Business--The Market."
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. To adequately service a new customer, SRI typically makes an investment
in new reusable surgical products and carts of approximately 50% of the
projected new annual revenue from the customer. SRI is currently spending
between $4.5 and $5.0 million for each of its new reprocessing facilities,
including two new facilities in Stockton, California and Chattanooga, Tennessee
that will open in the third quarter of 1999, and which will be financed under
lease financing arrangements. Additionally, the Company expects to spend
approximately $3.0 million in late 1999 for expansion and equipment in its
Cincinnati facility. The Company's inability to obtain adequate capital could
have a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Note G of Notes to Consolidated Financial Statements."
Dependence on a Significant Customer and Market Consolidation. During
1998, Columbia/HCA Healthcare Corporation ("Columbia") hospitals, with which
the Company currently does business, accounted for approximately 12% of SRI's
sales, compared to 11% in 1997. Although each Columbia hospital currently makes
its purchasing decisions on an individual basis, and no single hospital
accounted for more than 3% of the Company's sales, the Company believes the
executive management of Columbia has the ability to influence the selection of
particular vendors. The loss of a substantial portion of the Columbia
hospitals' business could 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 SRI 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.
Competition. The Company's business is highly competitive. 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. See "Business--Competition."
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. SRI 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, SRI 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
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number of uses proves to be shorter than SRI's current estimates, SRI'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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview" and "Note B of Notes to Consolidated Financial
Statements."
Recent Acquisition 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.
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.
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, 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.
ITEM 2:PROPERTIES
SRI operates nine processing facilities of approximately 20,000 to
32,000 square feet each in Baltimore, Cincinnati, Dallas, Detroit, Houston, Los
Angeles, Raleigh, Salt Lake City, and Tampa. Each facility contains a uniform
set of computerized and fully automated heavy washers, dryers, and sterilizers
to achieve consistent cleaning and sterilization cycles for reusable surgical
products. The Company uses standard operating procedures at each facility, and
regularly implements at all facilities efficiencies which are developed and
tested at one location.
The Company's properties and the major markets which they serve are
summarized below. All the properties are leased, with the exception of the
Cincinnati and Houston processing facilities. SRI believes its existing
facilities adequately serve its current requirements.
-7-
<PAGE> 10
<TABLE>
<CAPTION>
SQUARE FEET
FACILITY AND LOCATION (APPROX.) LEASE EXPIRATION(1) SELECTED MARKETS SERVED
- --------------------- ----------- ------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Processing facilities:
Baltimore, Maryland 32,000 July 31, 2002 Baltimore, Philadelphia, Richmond,
Washington, D.C., New Jersey
Cincinnati, Ohio 20,000 Owned Columbus, Akron, Cincinnati,
Louisville, Lexington
Dallas, Texas 31,000 March 31, 2002 Dallas, Oklahoma City, Tulsa,
Memphis
Detroit, Michigan 23,000 September 30, 2002 Chicago, Detroit, Milwaukee,
Toledo, Flint, Ann Arbor, Champaign
Houston, Texas 30,000 Owned Houston, San Antonio, Austin,
Alabama, Louisiana
Los Angeles, California 30,400 November 30, 2002 San Diego, Sacramento, Los
Angeles, San Francisco, Arizona
Raleigh, North Carolina 31,500 April 30, 2002 Atlanta, South Carolina, North Carolina
Salt Lake City, Utah 24,000 November 30, 2003 Utah, Idaho
Tampa, Florida 29,000 January 25, 2002 Tampa, Miami, Orlando,
Jacksonville, Gainesville, Ocala,
Ft. Myers
Depots:
Atlanta, Georgia 2,500 June 30, 2000 -
Chicago, Illinois 3,200 November 30, 2001 -
Miami, Florida 4,000 January 31, 2000 -
San Francisco, California 6,000 May 31, 1999 -
San Marcos, Texas 3,600 September 30, 2000 -
Warehouses:
Cincinnati, Ohio 18,500 April 30, 2001 -
Long Beach, California 3,300 July 31, 2000 -
Salt Lake City, Utah 5,500 Month to Month -
Ypsilanti, Michigan 15,500 June 30, 1999 -
Disposable products facility:
Orlando, Florida 18,500 February 28, 1999 -
Corporate office:
Clearwater, Florida 10,000 October 31, 2001 -
</TABLE>
(1) Excludes renewal options in the leases which range from one to 10
years.
ITEM 3:LEGAL PROCEEDINGS
Neither the Company nor any of its property is subject to any
litigation or other legal proceeding expected to have a material effect on the
Company or its business.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1998.
-8-
<PAGE> 11
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's Common Stock trades publicly on The Nasdaq National
Market tier of the Nasdaq Stock Market under the symbol "STRC." The table below
sets forth the high and low bid quotations for the Company's Common Stock from
July 18, 1996 (the date on which trading commenced on the Nasdaq National
Market) through December 31, 1997. These bid prices represent prices between
dealers without adjustment for retail mark-ups, mark-downs, or commissions and
may not necessarily represent actual transactions.
COMMON STOCK PRICE RANGE
<TABLE>
<CAPTION>
1997
----
<S> <C> <C>
First Quarter $ 19.125 $ 15.125
Second Quarter $ 19.000 $ 16.625
Third Quarter $ 19.500 $ 14.375
Fourth Quarter $ 17.125 $ 13.875
1998
----
First Quarter $ 17.500 $ 14.375
Second Quarter $ 19.750 $ 17.000
Third Quarter $ 17.000 $ 8.750
Fourth Quarter $ 12.875 $ 7.875
</TABLE>
The Company has never declared or paid cash dividends on its Common
Stock. The Company currently expects that its earnings will be retained for
development and expansion, and does not anticipate paying dividends on its
Common Stock in the foreseeable future. Financial covenants in the Company's
credit facility prohibit the payment of cash dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Notes to Consolidated
Financial Statements." On March 9, 1999, there were approximately 66 holders of
record of the Common Stock.
On August 31, 1998, the Company acquired from Standard Textile Co.,
Inc. all the stock of Repak Surgical Enterprises, Inc. ("Repak") in exchange
for 566,667 shares of its convertible Series A Preferred Stock. The Series A
Preferred Stock is convertible by its holder at any time into the same number
of shares of the Company's Common Stock. Under certain conditions, including
the Company's Common Stock having an average closing trading price of $18.00
per share for a specified time period, the Preferred Stock is mandatorily
convertible into the Company's Common Stock. The Company's issuance of the
Series A Preferred Stock to Standard Textile Co., Inc. was exempt from
registration requirements under Section 4(2) of the Securities Act of 1933.
-9-
<PAGE> 12
ITEM 6: SELECTED FINANCIAL DATA
The following table contains certain selected financial data and is
qualified by the more detailed Consolidated Financial Statements and Notes
thereto included elsewhere in this report. The selected financial data for the
years ended December 31, 1998, December 31, 1997, December 31, 1996, December
31, 1995 and the five-months ended December 31, 1994, have been derived from
the Company's audited financial statements. The selected financial data
(statement of income data only) set forth below for the seven months ended July
31, 1994 have been derived from audited financial statements of Amsco Sterile
(the predecessor company). The Balance Sheet data as of July 31, 1994 has been
derived from the unaudited balance sheet of Amsco Sterile exclusive of notes
thereto, which include all adjustments that Amsco Sterile considers necessary
for a fair presentation of its results of operation and financial position for
the period presented. The following information should be read in conjunction
with the Consolidated Financial Statements and Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this report.
<TABLE>
<CAPTION>
Predecessor
Sterile Recoveries, Inc. Company(1)
----------------------------------------------------------- -----------
Five Seven
Years Ended Months Months
---------------------------------------------- Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, July 31,
1998 1997 1996 1995 1994 1994
-------- -------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues $ 52,318 $ 39,854 $ 32,168 $ 25,320 $ 9,285 $ 12,069
Cost of revenues 35,334 26,286 21,764 17,659 6,550 14,091
-------- -------- -------- -------- -------- --------
Gross profit (loss) 16,984 13,568 10,404 7,661 2,735 (2,022)
Distribution expenses 3,788 3,150 3,000 2,801 1,032 1,309
Selling and administrative expenses 7,065 5,924 4,734 3,975 2,162 7,375
-------- -------- -------- -------- -------- --------
Income (loss) from operations 6,131 4,494 2,670 885 (459) (10,706)
Interest expense (income), net 52 (142) 648 1,489 735 4,791
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes 6,079 4,636 2,022 (604) (1,194) (15,497)
Income tax expense(2) 2,393 1,835 190 -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) $ 3,686 $ 2,801 1,832 $ (604) $ (1,194) $(15,497)
======== ======== ======== ======== ======== ========
Dividends on preferred stock 67
--------
Net income available for common shareholders $ 3,619
========
UNAUDITED PRO FORMA INFORMATION (2):
Historical net income (loss) $ 2,022 $ (604) $ (1,194)
Pro forma income tax expense 778 -- --
-------- -------- --------
Pro forma net income (loss) $ 1,244 $ (604) $ (1,194)
======== ======== ========
Historical (1998 and 1997 only) and pro forma
net income per common share, basic $ 0.64 $ 0.50 $ 0.29 $ (0.20) $ (0.40)
======== ======== ======== ======== ========
Historical (1998 and 1997 only) and pro forma
net income per common share, diluted $ 0.61 $ 0.48 $ 0.28 $ (0.20) $ (0.40)
======== ======== ======== ======== ========
Weighted average common shares outstanding,
basic 5,662 5,637 4,300 3,094 3,000
======== ======== ======== ======== ========
Weighted average common shares outstanding,
diluted 6,019 5,862 4,491 3,094 3,000
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Reusable surgical products, net $ 14,705 $ 10,034 $ 6,915 $ 4,924 $ 4,867 $ 32,836
Total assets 43,620 27,546 25,006 13,493 13,388 67,651
Total indebtedness 3,698 -- 1,000 10,891 11,942 115,841
Shareholders' equity (deficit) 35,122 24,348 20,756 214 (182) (50,293)
</TABLE>
-10-
<PAGE> 13
STERILE RECOVERIES, INC.
SELECTED FINANCIAL DATA - (CONTINUED)
(1) The table covers periods before and after the Company acquired its
business from Amsco Sterile on July 31, 1994. A comparison of the
Company's operating results for the periods after the Acquisition to
the operating results before the Acquisition is not meaningful. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations--Overview."
(2) As an S Corporation for federal income tax purposes, the Company had
not been subject to income tax until the date of its initial public
offering, at which time the Company became a C Corporation. On a pro
forma basis, assuming the Company had been subject to income tax for
all periods presented, the Company would not have recognized any
corporate income tax expense prior to 1996. See "Notes B and H of
Notes to Consolidated Financial Statements".
-11-
<PAGE> 14
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and the Notes thereto included
elsewhere in this report. This discussion and analysis contains trend analysis
and might contain forward-looking statements. These statements are based on
current expectations and actual results might differ materially. Among the
factors that could cause actual results to vary are those described in this
"Overview" section and in "Business - Certain Considerations."
OVERVIEW
The Company's revenues are derived from providing hospitals and
surgery centers with reusable gowns, towels, drapes, and basins for use in
surgical procedures through a daily comprehensive surgical procedure-based
delivery and retrieval system, and also from the sale of disposable surgical
products that supplement its reusable surgical product service. The Company's
revenue growth is primarily affected by the number of customers, the number and
type of surgical procedures it services for each customer, and the pricing by
type of surgical pack.
As of December 31, 1998, the Company believes its facilities operated
at approximately 65% of their estimated aggregate annual revenue capacity of
approximately $90 million at current prices. Estimated annual revenue capacity
is based on the Company's estimate of revenues that would be derived from the
full utilization of the facilities at current prices and without addition of
equipment. Variations in maximum revenue potential by facility result from
differences in product mix and pricing for each facility. The Company's ability
to use this excess revenue capacity will depend on its success in substantially
increasing its volume of business. A primary strategy of the Company is to
increase its operating leverage by expanding revenues within existing markets.
The Company amortizes its reusable surgical products on a per-use
basis, based on estimates of the products' useful lives. SRI's purchase of used
reusable surgical products in the Acquisition at approximately 17% of Amsco
Sterile's net book value has resulted in lower amortization expense since the
Acquisition. Since the Acquisition, the Company's purchases of new reusable
surgical products at current replacement cost have gradually increased its
amortization expense and the Company expects this trend to continue in the
future. However, the Company's current replacement cost is substantially less
than Amsco Sterile's original cost due to significantly improved sourcing of
fabrics. See "Business--Certain Considerations - Increasing Replacement and
Amortization Costs" and "Note B of Notes to Consolidated Financial Statements."
The Company completed its initial public offering (the "Offering") of
2,150,000 shares of its Common Stock (including shares sold in the
overallotment) in July and August 1996. The net proceeds of the Offering
received by the Company after payment of expenses were $17.9 million, of which
approximately $11 million was used to retire its acquisition debt and working
capital facility.
On August 31, 1998, the Company acquired all the shares of stock of
RePak, a wholly owned subsidiary of Standard Textile Co., Inc., in exchange for
566,667 shares of its convertible Series A Preferred Stock. From a facility in
the Cincinnati area, RePak provides the Ohio and Michigan markets with reusable
surgical product services similar to the Company's reprocessing service. In the
twelve months ended December 31, 1997, RePak had annual revenues of
approximately $8.3 million from its reusable surgical products reprocessing
service. The Company also purchased the RePak facility's real estate for $1.5
million cash from affiliates of Standard Textile. See "Note C of Notes to
Consolidated Financial Statements."
Before its initial public offering, the Company was an S Corporation
for state and federal income tax purposes and not subject to corporate income
taxes. Upon completion of its initial public offering, the Company's S
Corporation status terminated and the Company became subject to corporate
income taxes. See "Notes B and H of Notes to Consolidated Financial
Statements."
-12-
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the
percentage of revenues represented by certain items reflected in the statements
of operations of the Company.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Revenues 100.0% 100.0% 100.0%
Cost of revenues 67.5 66.0 67.7
----- ----- -----
Gross profit 32.5 34.0 32.3
Distribution expenses 7.2 7.8 9.3
Selling and administrative expenses 13.6 14.9 14.7
----- ----- -----
11.7 11.3 8.3
Income from operations
Interest expense (income), net 0.1 (0.3) 2.0
----- ----- -----
Income before income taxes 11.6 11.6 6.3
Income tax expense 4.6 4.6 0.6
----- ----- -----
Net income 7.0% 7.0% 5.7
===== ===== =====
Pro forma information:
Historical income before income taxes 6.3%
Pro forma income tax expense 2.4
-----
Pro forma net income 3.9%
=====
</TABLE>
-13-
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Revenues increased $12.5 million, or 31.3%, to $52.3 million in 1998
from $39.9 million in 1997. The revenue increases were attributable in roughly
equal amounts to new customers and increased revenues from current customers in
addition to the RePak acquisition.
Gross Profit
Gross profit increased $3.4 million, or 25.2%, to $17.0 million in
1998 from $13.6 million in 1997. As a percentage of revenues, gross profit
decreased to 32.5% in 1998 from 34.0% in 1997. The decline in gross profit
percentage is largely attributable to higher amortization and shrinkage expense
of reusable surgical products.
Distribution Expenses
Distribution expenses increased $638,000 or 20.3%, to $3.8 million in
1998 from $3.2 million in 1997. As a percentage of revenues, distribution
expenses decreased to 7.2% in 1998 from 7.8% in 1997. The improvement in
distribution expenses as a percentage of revenues resulted primarily from
efficiencies derived from delivering more volume over existing routes and from
adding routes and equipment at a slower pace than revenue growth.
Selling and Administrative Expenses
Selling and administrative expenses increased $1.1 million, or 19.3%,
to $7.0 million in 1998 from $5.9 million in 1997. As a percentage of revenues,
selling and administrative expenses decreased to 13.6% in 1998 from 14.9% in
1997. Expenses increased in support of increased revenues and the acquisition
of RePak. Improvement in selling and administrative expenses as a percentage of
revenues resulted primarily from the Company's continuing ability to leverage
administrative costs over more revenues.
Interest Expense (Income), Net
Interest income changed from $142,000 in 1997 to interest expense of
$52,000 in 1998, primarily due to borrowings under the Company's revolving
credit facility.
Income Before Income Tax Expense
As a result of the foregoing, the Company's income before taxes
increased to $6.1 million in 1998, from $4.6 million in 1997. As a percentage
of revenues, income before taxes was 11.6% of revenues in both 1998 and 1997.
Income Tax Expense
Income tax expense increased $558,000 to $2.4 million in 1998 from
$1.8 million in 1997. The Company's effective tax rate is 39.4% for 1998 and
39.6% for 1997.
Net Income Per Share
The Company recorded a historical net income per share of $0.61 on a
diluted basis, and $0.64 on a basic per share basis for 1998, compared with
$0.48 for diluted and $0.50 for basic per share net income in 1997.
-14-
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues
Revenues increased $7.7 million, or 23.9%, to $39.9 million in 1997
from $32.2 million in 1996. The revenue increases for the period were
attributable to the activities of the Company's sales force, which was
increased by 45% during 1997. The revenue increases for the period were
achieved equally from new customers and increased revenues from current
customers.
Gross Profit
Gross profit increased $3.2 million, or 30.4%, to $13.6 million in
1997 from $10.4 million in 1996. As a percentage of revenues, gross profit
increased to 34.0% in 1997 from 32.3% in 1996. The improvement in gross profit
is largely attributable to increased revenues, labor efficiencies and the
economies of scale associated with spreading fixed costs over increased
revenues. These favorable factors were partially offset by higher amortization
expense of reusable surgical products as the Company supplements the products
purchased in the Acquisition with products purchased at current higher
replacement cost. Increased revenues from relatively lower margin disposable
surgical products also offset some of the efficiency gains.
Distribution Expenses
Distribution expenses increased $150,000 or 5.0%, to $3.2 million in
1997 from $3.0 million in 1996. As a percentage of revenues, distribution
expenses decreased to 7.8% in 1997 from 9.3% in 1996. The improvement in
distribution expenses as a percentage of revenues resulted primarily from
efficiencies derived from delivering more volume over existing routes, from
adding additional routes and equipment at a slower pace than revenue growth,
and from a renegotiated truck leasing contract.
Selling and Administrative Expenses
Selling and administrative expenses increased $1.2 million, or 25.1%,
to $5.9 million in 1997 from $4.7 million in 1996. As a percentage of revenues,
selling and administrative expenses increased to 14.9% in 1997 from 14.7% in
1996. This increase was largely attributable to the Company increasing its
sales force by 45% and hiring staff to manage anticipated revenue growth.
Interest Expense (Income), Net
Interest expense (income) changed from interest expense of $648,000 in
1996 to interest income of $142,000 in 1997, primarily due to the elimination
of the acquisition debt to Amsco Sterile repaid from the Offering proceeds, and
the interest and other income earned from investing excess cash.
Income Before Income Tax Expense
As a result of the foregoing, the Company's income before taxes
increased to $4.6 million in 1997, from $2.0 million in 1996. As a percentage
of revenues, income before taxes in 1997 was 11.6% of revenues compared to 6.3%
in 1996.
-15-
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
Historical Income Tax Expense
Income tax expense increased $1.6 million in 1997 from $190,000 in
1996. The Company's effective tax rate increased to 39.6% in 1997 from 9.4% in
1996. During 1996, the Company changed from an S Corporation to a C Corporation
for Federal income tax purposes. The lower effective tax rate in 1996 reflects
the recording of a deferred tax asset and the benefit from the allocation of
the year's earnings between the C Corporation and the S Corporation.
See "Note J of Notes to Consolidated Financial Statements."
Pro Forma Income Tax Expense
Pro forma income tax expense for 1996 reflects the statutory rate of
38.5% as if the Company had been treated as a C Corporation for the entire
year.
Net Income Per Share
The Company recorded a historical net income per share of $0.48 on a
diluted basis, and $0.50 on a basic per share basis for 1997, compared with
$0.28 for diluted and $0.29 for basic pro forma per share net income in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been cash flows from
operations, sales of its debt and equity securities, including the Offering,
operating leases for facilities and distribution vehicles, and borrowings under
its working capital loan and lease financing facilities.
The Company's positive cash flow from operating activities was $8.6
million in 1998, compared to $3.9 million in 1997. The increase in cash from
operating activities from 1997 to 1998 resulted primarily from increased net
income before amortization, shrinkage, and depreciation expense, and improved
accounts payable and inventory management.
The Company used approximately $4.0 million more net cash in investing
activities in 1998 than in 1997. To support sales growth, the Company made
capital expenditures in 1998 for equipment of $3.3 million and for reusable
surgical products of $7.8 million compared to $2.8 million for equipment and
$5.7 million for reusable surgical products in 1997. These expenditures were
funded from proceeds of the Offering, cash provided by operating activities,
and borrowings under the Company's working capital facility.
The Company continues to increase its expenditures for 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 50% of the
projected first year revenue from the customer. The Company estimates capital
expenditures for new carts and reusable surgical products will be approximately
$750,000 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 $1.3 million in 1999 for equipment upgrades and
maintenance to increase the aggregate capacity of its facilities. Additionally,
the Company spent approximately $1.2 million in 1998 and expects to spend an
additional $300,000 in 1999 for new technology software and related hardware.
-16-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
The Company is adding two reprocessing facilities which will begin
production in the third quarter of 1999. The estimated cost of each facility is
expected to be between $4.5 to $5.0 million, which will be financed through the
lease financing agreement described below. In addition, the Company expects to
spend approximately $3.0 million in the fourth quarter of 1999 for building
expansion and equipment at its Cincinnati facility. See "Note G of Notes to
Consolidated Financial Statements."
The Company had approximately $3.7 million outstanding on December 31,
1998 under its $15.0 million revolving credit facility with First Union
National Bank. No borrowings were outstanding on December 31, 1997. Pursuant to
amendments effective February 24, 1999, the facility is secured by
substantially all of SRI's assets and its maturity date extended from August
1999 to December 2001. The facility's interest rate was previously 190 basis
points over LIBOR, declining to a 175 basis point margin as of October 15,
1998. As amended, the facility's interest rate varies between 100 and 150 basis
points over LIBOR (5.09% as of December 31, 1998), depending on the Company's
leverage. The amendments also increased required tangible net worth from
$20,745,000 through December 31, 1998 and $23,745,000 thereafter to $29.0
million plus 75% of quarterly positive net income earned after September 30,
1998. The facility restricts the Company's payment of dividends, acquisition
transactions, additional indebtedness, and encumbering of assets.
As of February 1, 1999, the Company secured a $10.0 million lease
financing agreement to provide financing for land, building, and equipment for
future reprocessing facilities. The lease financing margins are substantially
the same as under the Company's credit facility. Under the agreement, the
lessor purchases land, pays for the facility's construction and equipment
costs, and leases to the Company for three years the completed facility. 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 original cost of each leased facility. The Company
will account for these leases as operating leases. The Company anticipates that
it will occupy these facilities and begin making lease payments for them in the
third quarter of 1999.
As of December 31, 1998, the Company had cash of approximately
$172,000. The Company believes that this cash balance, its cash flow 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. In the longer term, the Company expects its capital requirements
will be substantial and will depend on its growth and opportunities. The
Company expects to fund additional capital expenditures from a combination of
internal cash flow, its credit facility, and other capital sources. See
"Business - Certain Considerations--Need for Capital."
Year 2000 Compliance
The Company has developed and is implementing a comprehensive program
to address year 2000 issues pertaining to both information technology and
non-information technology systems. The program consists of identification,
compliance, and post-implementation phases, and considers the effect of the
year 2000 on the Company's internal systems, customers, products and services,
as well as on its suppliers and other critical business partners.
The Company is currently implementing enterprise-wide software that is
year 2000 compliant which will replace the existing financial and operational
systems. In conjunction with the software project, the Company has and will
incur internal staff costs, consulting and other expenses for infrastructure
and facilities enhancements to prepare its computer systems and applications
for this implementation. The Company does not expect year 2000 related expense
to materially impact its financial position. As of December 31, 1998, the
Company had spent $1.2 million of the expected $1.5 million in total
expenditures related to the Company's software implementation project. The
Company expects completion of its internal year 2000 programs by the end of the
third quarter of 1999.
-17-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (CONTINUED)
In addition, the Company has initiated communications, which include
solicitation of written responses to questionnaires and follow-up meetings,
with critical suppliers and other business partners to determine the extent to
which any year 2000 issues affecting such third parties will affect the
Company. There can be no guarantee that such external parties will achieve year
2000 compliance on a timely basis, and failure by such significant external
parties to achieve compliance could have a material adverse affect on the
Company.
The Company has not yet obtained information sufficient to quantify
the potential effects of possible internal and external year 2000
non-compliance, to determine the likely worst case scenarios or to develop
contingency plans to deal with such scenarios. However, as the Company
completes its year 2000 project during the third quarter of 1999, the
appropriate contingency plans will be developed, and implementation will begin
if deemed necessary by the Company. There can be no assurances that the
Company's internal and external contingency plans, once developed, will
substantially reduce the risk of year 2000 non-compliance. A significant
interruption in the Company's business due to a year 2000 non-compliance issue
could have a material adverse effect on the Company's financial position,
operations and liquidity.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any material market risk sensitive financial
instruments.
-18-
<PAGE> 21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Sterile Recoveries, Inc.
We have audited the accompanying consolidated balance sheets of
Sterile Recoveries, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Sterile Recoveries, Inc., as of December 31, 1998 and 1997, and the results of
its consolidated operations and cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Tampa, Florida
February 26, 1999
-19-
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
STERILE RECOVERIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
========-----------------------------====
1998 1997 1996
======== ========= ========
<S> <C> <C> <C>
Revenues $ 52,318 $ 39,854 $ 32,168
Cost of revenues 35,334 26,286 21,764
-------- --------- --------
Gross profit 16,984 13,568 10,404
Distribution expenses 3,788 3,150 3,000
Selling and administrative expenses 7,065 5.924 4,734
-------- --------- --------
Income from operations 6,131 4.494 2,670
Interest expense (income), net 52 (142) 648
-------- --------- --------
Income before income taxes 6,079 4,636 2,022
Income tax expense 2,393 1,835 190
-------- --------- --------
Net income $ 3,686 $ 2,801 $ 1,832
======== ========= ========
Dividends on preferred stock 67 -- --
-------- --------- --------
Net income available for common
shareholders $ 3,619 $ 2,801 $ 1,832
======== ========= ========
Historical net income per common
share - basic $ 0.64 $ 0.50 $ 0.43
======== ========= ========
Historical net income per common
share - diluted $ 0.61 $ 0.48 $ 0.41
======== ========= ========
Unaudited pro forma information
Historical income before income taxes $ 2,022
Pro forma income tax expense 778
Pro forma net income $ 1,244
========
Pro forma net income per common share - basic $ 0.29
========
Pro forma net income per common share - diluted 0.28
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-20-
<PAGE> 23
STERILE RECOVERIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash $ 172 $ 380
Accounts receivable, net 7,580 6,016
Inventories 2,324 1,979
Prepaid expenses and other assets 1,670 1,203
Reusable surgical products 14,705 10,034
Property, plant and equipment, net 12,042 7,253
Goodwill, net 5,127 521
Deferred tax asset -- 160
-------- --------
Total assets $ 43,620 $ 27,546
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable to bank $ 3,698 $ --
Accounts payable 2,898 1,603
Employee related accrued expenses 974 926
Other accrued expenses 786 669
Deferred tax liability 142 --
-------- --------
Total liabilities 8,498 3,198
Commitments and contingencies -- --
Shareholders' equity
Preferred stock--authorized 5,000,000 shares of $.001
par value; 566,667 and 0 shares issued and outstanding,
respectively 1 --
Common stock--authorized 30,000,000 shares of $.001
par value; issued and outstanding 5,664,794 and
5,659,894 shares, respectively 6 6
Additional paid-in capital 27,321 20,167
Retained earnings 7,794 4,175
-------- --------
Total shareholders' equity 35,122 24,348
-------- --------
Total liabilities and shareholders' equity $ 43,620 $ 27,546
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-21-
<PAGE> 24
STERILE RECOVERIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Retained
----------------------- -------------------- Paid-In Earnings
Shares Amount Shares Amount Capital (Deficit) Total
--------- -------- ------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 3,225,807 $ 3 -- $ -- $ 2,009 $(1,798) $ 214
Issuance of common stock for cash 51,282 -- -- -- 300 -- 300
Acquisition of Surgipro 90,000 1 -- -- 526 -- 527
Initial Public Offering, net 2,150,000 2 -- -- 17,926 -- 17,928
Corp Shareholder Distribution -- -- -- -- (52) -- (52)
Recapitalization of Company for change
from S Corporation to C Corporation -- -- -- -- (1,340) 1,340 --
Exercise of stock options 4,100 -- -- -- 7 -- 7
Net income -- -- -- -- -- 1,832 1,832
--------- -------- ------- ------- -------- ------- --------
BALANCE AT DECEMBER 31, 1996 5,521,189 6 -- -- 19,376 1,374 20,756
Conversion of note payable 128,205 -- -- -- 750 -- 750
Exercise of stock options 10,500 -- -- -- 41 -- 41
Net income -- -- -- -- -- 2,801 2,801
--------- -------- ------- ------- -------- ------- --------
BALANCE AT DECEMBER 31, 1997 5,659,894 6 -- -- 20,167 4,175 24,348
Exercise of stock options 4,900 -- -- -- 15 -- 15
Acquisition of RePak Surgical Enterprises, Inc. -- -- 566,667 1 7,139 -- 7,140
Dividend on preferred stock -- -- -- -- -- (67) (67)
Net income -- -- -- -- -- 3,686 3,686
--------- -------- ------- ------- -------- ------- --------
BALANCE AT DECEMBER 31, 1998 5,664,794 $ 6 566,667 $ 1 $ 27,321 $ 7,794 $ 35,122
========= ======== ======= ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
-22-
<PAGE> 25
STERILE RECOVERIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net income $ 3,686 $ 2,801 $ 1,832
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,067 689 512
Amortization of reusable surgical products 2,910 2,015 1,293
Provision for reusable surgical products shrinkage 1,523 606 422
Deferred income taxes 409 57 (217)
Change in assets and liabilities (net of business combinations)
Accounts receivable (878) (763) (1,800)
Inventories (326) (739) (728)
Prepaid expenses and other assets (404) (673) (94)
Accounts payable 852 243 71
Other accrued expenses (219) (295) 439
------- ------- -------
Net cash provided by operating activities 8,620 3,941 1,730
------- ------- -------
Cash flows from investing activities
Purchases of property, plant, and equipment (3,303) (2,811) (1,261)
Purchases of reusable surgical products (7,810) (5,740) (3,705)
Payment for acquisition of business, net of cash acquired (1,428) -- 6
------- ------- -------
Net cash used in investing activities (12,541) (8,551) (4,960)
------- ------- -------
Cash flows from financing activities
Proceeds from convertible demand notes -- -- 1,000
Net change in notes payable to bank 3,698 -- (1,810)
Payments on acquisition debt -- -- (9,081)
Payments on related party debt -- (250) (167)
Net proceeds from issuance of common stock 15 41 18,235
------- ------- -------
Net cash provided by (used in) financing activities 3,713 (209) 8,177
------- ------- -------
Increase (decrease) in cash (208) (4,819) 4,947
Cash and cash equivalents at beginning of period 380 5,199 252
------- ------- -------
Cash and cash equivalents at end of period $ 172 $ 380 $ 5,199
======= ======= =======
Supplemental cash flow information
Cash paid for interest $ 69 $ 67 $ 697
======= ======= =======
Cash paid for income taxes $ 2,202 $ 1,870 $ 96
======= ======= =======
Conversion of Convertible Demand Note into
128,205 shares of common stock $ -- $ 750 $ --
======= ======= =======
Supplemental schedule of non-cash investing activities
Acquisition of businesses
Fair value of assets acquired $ 9,330 $ -- $ 986
Cash received (paid) (1,428) -- 6
Common stock issued -- -- (526)
Preferred stock issued (7,140) -- --
------- ------- -------
Liabilities incurred or assumed $ 762 $ -- $ 466
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE> 26
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--DESCRIPTION OF ORGANIZATION AND BUSINESS
Sterile Recoveries, Inc. ("SRI" or the "Company") was incorporated in
June 1994 in Florida to acquire all of the assets of its predecessor, AMSCO
Sterile Recoveries, Inc. on July 31, 1994. The Company's corporate office is
located in Clearwater, Florida. On August 31, 1998, in a transaction accounted
for under the purchase method, the Company acquired Repak Surgical Enterprises,
Inc. ("Repak"), a wholly-owned subsidiary of Standard Textile Co., Inc.
("Standard Textile"), which provides reusable surgical product services similar
to the Company's reprocessing services. The financial statements include the
accounts of the Company and RePak and eliminate all significant intercompany
balances and transactions.
SRI provides hospitals and surgery centers in 23 states with a
comprehensive surgical procedure-based delivery and retrieval service for
reusable gowns, towels, drapes and basins, and additionally, provides
disposable products necessary for surgery. At nine regional facilities, SRI
collects, sorts, cleans, inspects, packages, sterilizes, and delivers its
reusable products on a just-in-time basis. On February 26, 1996, the Company
acquired Surgipro, Inc. ("Surgipro"), which became its disposable products
division, to expand its revenues from disposable accessory packs containing
small surgical items such as needles and sutures. Disposable products allow the
Company to offer its new service, Surgical Express(TM), which uses its daily
delivery and retrieval service as a foundation to provide customers an expanded
program of products and services. Surgical Express is an outsourced Surgical
Case Cart Management Program, which the Company expects will reduce hospital
and surgery center processing costs and their investment in surgical products.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statement presentation
The Company operates on a 52-53 week fiscal year ending the Sunday
nearest December 31. The financial statements reflect the Company's year-end as
December 31 for presentation purposes.
Use of estimates in financial statements
In preparing financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company has no
cash equivalents for any of the periods presented.
-24-
<PAGE> 27
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Collectibility of accounts receivable
The Company grants credit to customers who meet pre-established credit
requirements. The Company does not require collateral when trade credit is
granted to customers. Credit losses have been less than $35,000 for each period
presented herein. The allowance for doubtful accounts at December 31, 1998 and
1997 is $50,000 and $39,000, respectively.
Inventories
Inventories consisting principally of consumables, supplies, and
disposable surgical products are stated at the lower of cost or market, with
cost being determined on the first-in, first-out method.
Reusable surgical products
Reusable surgical products are stated at historical cost, net of
amortization. The products are amortized on a basis similar to the units of
production method. Estimated useful lives are based on the estimated total
number of available uses for each product. The expected total available usage
for its products using the three principal fabrics (accounting for 85% of its
products) are 75, 100, and 125 uses based on several factors including studies
performed by management. Based on current reusable product turnover, the
expected total available usage equates to a time period of approximately three
to seven years. The estimates, however, are subject to revision if actual
experience differs from the estimated available uses. Accumulated amortization
at December 31, 1998 and 1997 approximates $6,250,000 and $4,130,000,
respectively.
The Company has experienced minor amounts of shrinkage, with actual
shrinkage currently approximately 1.5% of revenues. As of December 31, 1998 and
1997, the Company has established a reserve for shrinkage of approximately
$450,000 and $195,000 respectively, to account for the estimated amount of
product at customer locations which will not be returned to the Company. The
Company will continue to evaluate, at least quarterly, the actual shrinkage
experience and will review the shrinkage provision if deemed necessary.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets, or the term of the
related leases for leasehold improvements, if less than the useful lives.
Accelerated methods are used for tax purposes.
Goodwill
Goodwill from the acquisition of Surgipro and RePak is stated at cost
less accumulated amortization using the straight-line method over 20 years for
Surgipro and over 30 years for RePak.
Impairment of long-lived and intangible assets
On a quarterly basis, the Company evaluates the projected undiscounted
cash flows of each business unit to determine, when indicators of impairment
are present, whether or not there has been permanent impairment of its
long-lived assets, and accrues expenses for the amount, if any, determined to
be permanently impaired. No impairment exists for all years presented.
-25-
<PAGE> 28
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Revenues
Revenues are recognized as the agreed upon services are delivered,
generally daily. The Company's revenues are principally generated from service
agreements with varying terms of one to three years, which are cancellable by
either party, generally with a 90-day notice. All reusable surgical products
provided to a customer under these agreements are used by the customer, but
remain the Company's property.
Income taxes
When it completed its initial public offering in July 1996, the
Company terminated its S Corporation status and became subject to corporate
income taxes. Accordingly, income taxes are presented on a historical basis for
1998 and 1997. Pro forma taxes are presented for 1996 using an effective rate
of 38.5%.
Fair value of financial instruments
The carrying amounts of cash, receivables, payables, accrued expenses
and notes payable approximate fair value because of the short-term nature of
these items.
Earnings per common share
The Company follows Statement of Financial Accounting Standards No.
128 (SFAS No. 128), "Earnings Per Share", which became effective for financial
statements issued after December 15, 1997. SFAS No. 128 eliminates primary and
fully dilutive net income per common share and replaces them with basic and
diluted net income per common share.
Accounting for Stock-Based Compensation
The Company follows the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," as it relates to employment awards.
It applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its plans and does not recognize
compensation expense for its stock-based compensation plans other than for
restricted stock.
New Accounting Pronouncements Adopted in the Current Year
SFAS No. 130, "Reporting Comprehensive Income," is effective for
fiscal years beginning after December 15, 1997. This Statement establishes
standards for reporting and displaying comprehensive income and its components
in a full set of general-purpose financial statements. The new rule requires
that the Company (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. The Company's
adoption of SFAS No. 130 in 1998 did not affect the Company's financial
statement presentation.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," is effective for fiscal years beginning after December 15, 1997.
This Statement supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise," and amends SFAS No. 94, "Consolidation of All
Majority-Owned Subsidiaries." This Statement requires annual financial
statements to disclose information about products and services, geographic
areas and major customers based on a management approach, along with interim
reports. The management approach requires disclosing financial and descriptive
information about an enterprises's reportable operating segments based on
reporting information the way management organizes the segments for making
business decisions and assessing performance. It also eliminates the
requirement to disclose additional information about subsidiaries that were not
consolidated. The Company's adoption of SFAS No. 131 in 1998 affects only the
Company's disclosure information and not its results of operations.
-26-
<PAGE> 29
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has adopted Statement of Position 98-1, (SOP 98-1),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This SOP segments an internal use software project into stages
and accounts for the project's costs based on the stage in which the costs are
incurred. Specified costs for each application development stage are
capitalized if the preliminary project stage is complete, management authorized
the project, and completion of the project is probable. Capitalizable costs of
internal-use software projects consist of (1) external direct costs of
materials and services used to develop or purchase internal-use software, (2)
payroll and payroll-related costs for time spent directly on the project by
employees directly associated with the internal-use software project, and (3)
interest costs incurred during the development of internal use software. The
Company's adoption of this pronouncement did not materially impact its
financial statements. The Company's policy was to capitalize internal-use
software costs, accordingly, the Company capitalized approximately $1.2 million
in 1998, which is included in property, plant and equipment. The Company
expects to spend an additional $300,000 in 1999 for its internal-use software
project. On its completion of this project, the Company will amortize these
costs over five years.
NOTE C--BUSINESS COMBINATIONS
On August 31, 1998, the Company acquired the stock of RePak from
Standard Textile. Standard Textile received in the transaction 566,667 shares
of the Company's Series A Preferred Stock, which is convertible by its holder
at any time into the same number of shares of the Company's Common Stock. Under
certain conditions, including the Company's Common Stock having an average
closing trading price of $18.00 per share for a specified time period, the
Series A Preferred Stock is mandatorily convertible into the Company's Common
Stock. The Series A Preferred Stock accrues a 2% dividend, payable quarterly,
until the earlier of September 2004 or the date that it is converted into
Common Stock. The Series A Preferred Stock was valued at $7,140,000 by an
independent business valuation firm at the time the transaction closed. 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
includes RePak's operating results in the Company's operating results since
September 1, 1998. Of the approximately $8.6 million total costs it incurred to
complete the acquisition, the Company allocated approximately $4.7 million to
tangible assets, assumed approximately $760,000 in liabilities, and allocated
approximately $4.7 million to goodwill. Goodwill will be amortized over thirty
years based upon various factors, including historical and projected operating
results.
The following unaudited pro forma financial information assumes the
purchase had occurred at the beginning of the respective periods after the
effect of certain pro forma adjustments including, among others, adjustments to
reflect amortization of goodwill. The pro forma information is presented for
informational purposes only and may not be indicative of actual results had the
purchase occurred at the beginning of the respective periods.
<TABLE>
<CAPTION>
YEARS ENDED
-----------
DECEMBER 31, DECEMBER 31,
1998 1997
---- ----
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Revenues $ 58,262 $ 48,145
Net income $ 4,017 $ 3,151
Net income available for common shareholders $ 3,813 $ 2,947
Net income per common share - basic $ 0.67 $ 0.52
Net income per common share - diluted $ 0.63 $ 0.49
</TABLE>
-27-
<PAGE> 30
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE D--PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ------------
IN YEARS 1998 1997
-------- ---- ----
<S> <C> <C> <C>
Land -- $ 429,460 $ 17,426
Buildings 40 1,457,772 357,694
Leasehold improvements & signs 2-18 1,852,780 1,530,812
Machinery and equipment 3-12 8,486,522 6,042,063
Office furniture, equipment & computers 3-10 2,537,910 1,044,154
------------ -----------
14,764,444 8,992,149
Less: Accumulated depreciation and
amortization 2,722,608 1,739,644
------------ -----------
$ 12,041,836 $ 7,252,505
============ ===========
</TABLE>
During 1998, 1997 and 1996, depreciation expense totaled approximately
$984,000, $660,000 and $488,000, respectively.
NOTE E-LINE OF CREDIT
The Company had approximately $3.7 million outstanding on December 31,
1998 under its $15.0 million revolving credit facility with First Union
National Bank. No borrowings were outstanding on December 31, 1997. Pursuant to
amendments effective February 24, 1999, the facility is secured by
substantially all of SRI's assets and its maturity date extended from August
1999 to December 2001. The facility's interest rate was previously 190 basis
points over LIBOR, declining to a 175 basis point margin as of October 15,
1998. As amended, the facility's interest rate varies between 100 and 150 basis
points over LIBOR (5.09% as of December 31, 1998), depending on the Company's
leverage. The amendments also increased required tangible net worth from
$20,745,000 through December 31, 1998 and $23,745,000 thereafter to $29.0
million plus 75% of quarterly positive net income earned after September 30,
1998. The facility restricts the Company's payment of dividends, acquisition
transactions, additional indebtedness, and encumbering of assets.
-28-
<PAGE> 31
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE F-NOTES PAYABLE
In March 1996, the Company borrowed $1,000,000 from a director
pursuant to an 8.5% Convertible Demand Promissory Note, of which $750,000 was
convertible to Common Stock at $5.85 per share. The holder converted the
convertible portion of this note on February 24, 1997 into 128,205 shares of
common stock. The Company concurrently repaid the remaining $250,000 balance of
the note. The Company incurred interest expense related to the demand note of
$13,000 and $71,000, respectively, for the years ended December 31, 1997 and
1996.
Total interest expense and related fees for 1998, 1997 and 1996 was
approximately $100,000, $67,000 and $829,000, respectively.
NOTE G--COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases offices, facilities, office equipment, and
distribution vehicles under non-cancelable operating leases with terms ranging
from one year to nine years. The office and processing facility leases contain
various renewal options and escalating payments. At present, the Company
intends to exercise certain aspects of these renewal options when the initial
term expires. The vehicle leases contain contingent rentals based on mileage.
Future minimum lease payments as of December 31, 1998 under leases in
excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
1999 $ 1,819,000
2000 1,752,000
2001 1,539,000
2002 868,000
2003 232,000
Thereafter 50,000
-----------
Total $ 6,260,000
===========
</TABLE>
Rental expense for the years ended December 31, 1998, 1997 and 1996
totaled $1,701,000, $1,571,000, and $1,960,000 (including contingent rentals of
approximately $237,000, $211,000, and $228,000), respectively.
As of February 1, 1999, the Company secured a $10.0 million lease
financing agreement to provide financing for land, building, and equipment for
future reprocessing facilities. The lease financing margins are substantially
the same as under the Company's revolving line of credit. Under the agreement,
the lessor purchases land, pays for the facility's construction and equipment
costs, and leases to the Company for three years the completed facility. 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 original costs on the leased facility. The Company
will account for these leases as operating leases. Construction of two
facilities that will be financed under this agreement started in the first
quarter of 1999 at a cost of $4.5 to $5.0 million for each facility. The
Company anticipates that it will occupy these facilities and begin making lease
payments for them in the third quarter of 1999.
-29-
<PAGE> 32
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Purchase Agreement with Standard Textile
In conjunction with the RePak acquisition, the Company signed a
procurement agreement with Standard Textile under which the Company agreed to
purchase 80% of its reusable surgical products from Standard Textile. The
Company's management believes that Standard Textile's prices are and will be
comparable to prices available from other vendors. A significant percentage of
the Company's business is dependent on its ability to obtain a key component of
its liquid-proof surgical products from one principal vendor. Standard's
President and Chief Executive Officer became a director of the Company on
August 31, 1998.
Legal Proceedings
Neither the Company nor any of its property is subject to any
litigation or other legal proceedings expected to have a material effect on the
Company or its business.
Management Incentive Plan
The Company has a Management Incentive Plan, the incentives of which
are based on various performance factors and are adjusted to reflect the
Company's overall performance as determined by the Board of Directors. Payment
of the cash incentives is made at the end of the second month after the end of
the incentive year. The participant must still be an employee of the Company at
that time. Approximately $212,000, $295,000 and $375,000 of estimated
incentives were recognized during the years ended December 31, 1998, 1997 and
1996, respectively.
Management Employment Agreements
The Company has approved employment agreements with four executives in
which each person would receive severance pay equal to two years of base salary
in the event that the executive or employee is terminated following a change in
control of the Company.
Year 2000
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company and its business
partners will not be fully determinable until the Year 2000 and thereafter. If
Year 2000 modifications are not properly completed either by the Company or
entities with which the Company conducts business, the Company's revenues and
financial condition could be adversely impacted.
NOTE H--INCOME TAX
HISTORICAL INCOME TAXES
In accordance with the provisions of the Internal Revenue Code, upon
the completion of its initial public offering and conversion to a C Corporation
in 1996, a portion of the income earned after the conversion was allocated to
the S Corporation. As a result of this allocation, the effective rate for
calculating income taxes was lower than the statutory rates. In addition,
accounting rules require the establishment of deferred taxes for all existing
temporary differences in the basis of the Company's assets and liabilities for
income and financial reporting purposes at the date of conversion to a C
Corporation. The Company recorded deferred tax assets of approximately $200,000
at the date of conversion.
-30-
<PAGE> 33
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The provision for income taxes for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- ---------
<S> <C> <C> <C>
Income taxes currently payable $ 1,984,000 $ 1,778,000 $ 407,000
Deferred income tax expense (benefit) 409,000 57,000 (217,000)
----------- ----------- ---------
Income tax expense $ 2,393,000 $ 1,835,000 $ 190,000
=========== =========== =========
</TABLE>
Reconciliation of the federal statutory income tax rate of 34.0% to
the effective income tax rate for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal 4 .6 4.5 4.5
Net earnings allocated to the S Corporation period -- -- (21.3)
Deferred tax asset previously not recognized -- -- (10.7)
Other, net .8 1.1 2.9
---- ---- ----
39.4% 39.69 9.4%
==== ===== ====
</TABLE>
Deferred tax asset and liability components resulting from the
differences between accounting for financial statement purposes and purposes
pursuant to SFAS No. 109 are as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Inventory $ 367,000 $ 93,000
Health insurance reserve 60,000 55,000
Vacation pay accrual 88,000 58,000
Other 57,000 33,000
--------- ---------
572,000 239,000
Deferred tax liabilities:
Depreciation (463,000) (79,000)
Software development costs (251,000) --
--------- ---------
Net deferred income tax asset (liability) $(142,000) $ 160,000
========= =========
</TABLE>
During 1998, the Company acquired RePak which included a deferred tax
asset of approximately $107,000.
PRO FORMA INCOME TAXES
In conjunction with the completion of its initial public offering in
1996, the Company terminated its S Corporation status. For pro forma income tax
purposes, the S Corporation's cumulative net operating losses as of December
31, 1995 of approximately $1.6 million will not be used to reduce pro forma
income tax expense in 1996. For 1996, the Company chose to recognize income tax
expense using an effective rate of 38.5% of historical income before income
taxes.
-31-
<PAGE> 34
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Reconciliation of the income tax expense (benefit) calculated using
the federal statutory income tax rate of 34% to the income tax expense recorded
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
1996
---------
<S> <C>
Federal income taxes at statutory rate $ 687,000
State income taxes, net of federal benefit 91,000
---------
Income tax expense $ 778,000
=========
</TABLE>
NOTE I--SHAREHOLDERS' EQUITY
Common Stock
Subject to preferences which might be applicable to the Company's
outstanding Preferred Stock, the holders of the Common Stock are entitled to
receive dividends when, as, and if declared from time to time by the Board of
Directors out of funds legally available. In the event of liquidation,
dissolution, or winding-up of the Company, holders of the Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
subject to prior distribution rights of any Preferred Stock then outstanding.
The Common Stock has no preemptive or conversion rights and is not subject to
call or assessment by the Company. There are no redemption or sinking fund
provisions applicable to the Common Stock.
On July 24, 1996, the Company completed its initial public offering of
2,000,000 shares of its Common Stock priced at $9.50 per share. The net
proceeds of this offering, after deducting commissions of approximately
$1,330,000 and approximately $1,100,000 in expenses, were approximately
$16,570,000. In addition, the underwriters on August 9, 1996 exercised their
overallotment option to purchase 150,000 additional shares of the Company's
Common Stock. Proceeds to the Company of the underwriters' purchase of shares
pursuant to their exercise of the overallotment option were $1,325,250 after
commissions. The Company used approximately $11,000,000 of the proceeds to
retire debt.
Preferred Stock
The Company is authorized to issue 5,000,000 shares of Preferred
Stock, $.001 par value per share. The Board of Directors has the authority,
without any further vote or action by the Company's shareholders, to issue
Preferred Stock in one or more series and to fix the number of shares,
designations, relative rights (including voting rights), preferences, and
limitations of those series to the full extent now or hereafter permitted by
Florida law.
On August 31, 1998, the Company acquired from Standard Textile all the
stock of Repak. Standard Textile received in this transaction 566,667 shares of
the Company's Series A Preferred Stock, which is convertible by its holder at
any time into the same number of shares of the Company's Common Stock. Under
certain conditions, including the Company's Common Stock having an average
closing trading price of $18.00 per share for a specified time period, the
Series A Preferred Stock is mandatorily convertible into the Company's Common
Stock. The Series A Preferred Stock accrues a 2% dividend, payable quarterly,
until the earlier of September 2004 or the date that it is converted into
Common Stock.
-32-
<PAGE> 35
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE J--STOCK OPTIONS
The Company maintains three stock option plans, the 1995 Stock Option
Plan, the 1996 Non-Employee Director Plan, and the 1998 Stock Option Plan.
The 1995 Stock Option Plan
The 1995 Stock Option Plan provides employees with incentive or
non-qualified options to purchase up to 700,000 shares of Common Stock. On
December 21, 1995, the Company granted non-qualified stock options covering a
total of 94,000 shares of Common Stock to various employees at an exercise
price of $5.85 per share. The exercise price represented the estimated fair
value of the Company's Common Stock at the time of the grant, as approved by
the Board of Directors based upon various factors including an independent
third-party firm's valuation. None of the options vested until completion of
the Company's initial public offering, and are then vested ratably over the
four-year period following the completed offering. Since the offering, the
Company has granted 575,500 options under this Plan. The options vest ratably
over five years from the date of the grant. All outstanding options vest upon a
change in control of the company. Options granted under the Employee Plan
expire no later than ten years after the date granted or sooner in the event of
death, disability, retirement or termination of employment. Included in these
options are options to purchase 140,000 shares issued to an employee who is
also a director and an officer of the Company.
The 1998 Stock Option Plan
The 1998 Stock Option Plan provides employees with incentive or
non-qualified options to purchase up to 300,000 shares of Common Stock. As of
December 31, 1998, no options had been granted under this plan. The terms of
the options granted under the 1998 plan may not exceed ten (10) years beyond
the grant date or sooner in the event of death, disability, retirement or
termination of employment.
The Non-Employee Plan
The Non-Employee Plan provides for the grant of non-qualified stock
options to purchase up to 100,000 shares of Common Stock to members of the
Board of Directors who are not employees of the Company. At the completion of
its initial public offering, each non-employee director was granted options to
purchase 4,000 shares of Common Stock for each full remaining year of the
director's term. Thereafter, on the date on which a new non-employee director
is first elected or appointed, he will automatically be granted options to
purchase 4,000 shares of Common Stock for each year of his initial term, and
will be granted options to purchase 4,000 shares of Common Stock for each year
of any subsequent term to which he is elected. All options become exercisable
ratably over the director's term and have an exercise price equal to the fair
market value of the Common Stock on the date of grant. As of December 31, 1998,
options to purchase 40,000 shares have been granted under this Plan.
Other Stock Options
In October 1995, in conjunction with a financial consulting
arrangement with an individual who has become a director and an officer of the
Company, the Company granted the individual a non-qualified stock option for
66,000 shares of its Common Stock at an exercise price of $4.43 a share which
were exercisable as follows: (1) 22,000 shares upon the completion of an
interim financing (completed in March 1996); and (2) 44,000 at the completion
of an initial public offering. The exercise price was determined by the Board
of Directors to approximate the estimated fair value of the Company's Common
Stock at the date of grant based on various factors, including the Company's
history of operating losses.
-33-
<PAGE> 36
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On May 2, 1996, the Company issued to a recently appointed director an
option to purchase 7,500 shares of the Company's Common Stock for $8.00 per
share, which vested one-third on completion of the Company's initial public
offering, one-third at the 1997 annual meeting of shareholders, and one-third
at the 1998 annual meeting of shareholders.
On November 21, 1997, the Company issued to an officer and director an
option to purchase 20,000 shares of the Company's Common Stock for $15.06 per
share, which vests ratably over five years.
If the Company had elected to recognize compensation expense based
upon the fair value at the grant date for awards under these plans consistent
with the methodology prescribed by SFAS 123, the Company's net income and
earnings per share would be reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C> <C>
Net income As reported $ 3,686 $ 2,801 $ 1,244
Pro forma $ 2,991 $ 2,390 $ 1,069
Basic net income per share As reported $ 0.64 $ 0.50 $ 0.29
Pro forma $ 0.52 $ 0.43 $ 0.25
Diluted net income per share As reported $ 0.61 $ 0.48 $ 0.28
Pro forma $ 0.50 $ 0.41 $ 0.24
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Binomial options-pricing model with the following weighted-average assumptions
used for grants in 1998, 1997 and 1996, respectively, no dividend yield for all
years, expected volatility of 53, 48 and 32 percent; risk-free interest rates
of 6.0, 6.5 and 5.6 percent, and expected lives of 4.0, 4.1 and 3.8 years. The
weighted average fair value of options granted during the years ended December
31, 1998, 1997 and 1996 are $7.89, $7.09 and $3.56, respectively.
-34-
<PAGE> 37
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the status of the Company's fixed stock option plan as of December
31, 1998, 1997 and 1996, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
------ --------
<S> <C> <C>
Outstanding as of December 31, 1995 172,500 $ 4.96
Granted 258,000 $ 9.64
Exercised (4,100) $ 1.71
Forfeited (2,400) $ 5.85
-------
Outstanding as of December 31, 1996 424,000 $ 7.83
Granted 252,500 $ 16.45
Exercised (10,500) $ 3.94
Forfeited (34,800) $ 10.96
-------
Outstanding as of December 31, 1997 631,200 $ 11.17
Granted 132,500 $ 17.26
Exercised (4,900) $ 2.98
Forfeited (55,800) $ 13.26
-------
Outstanding as of December 31, 1998 703,000 $ 12.21
=======
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable stock options:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
RANGE OF NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE
- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$ 4.43 - 5.85 140,000 6.6 $ 5.18
$ 5.86 - 9.50 212,000 7.2 $ 9.45
$ 9.51 - 17.50 251,500 8.4 $ 16.16
$ 17.51 - 19.00 99,500 9.3 $ 18.00
EXERCISABLE SHARES
- ------------------
$ 4.43 - 5.85 112,800 $ 5.02
$ 5.86 - 9.50 98,500 $ 9.39
$ 9.51 - 17.50 52,100 $ 16.10
---------
263,400 $ 8.85
</TABLE>
At December 31, 1997 and 1996, exercisable options totaled 156,400 and
95,700 at weighted average exercise prices of $6.46 and $4.47, respectively.
-35-
<PAGE> 38
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE K--WEIGHTED AVERAGE COMMON SHARES
Historical and pro forma net income per common share is computed by
dividing historical and pro forma net income by the basic and diluted weighted
average number of shares of common stock outstanding. For 1996 pro forma net
income includes a pro forma provision for income taxes assuming the Company had
been subject to income taxes during the period it was an S Corporation for
income tax purposes. 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>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
BASIC
Numerator:
Net income $ 3,686,000 $ 2,801,000 $ 1,832,000
Less effect of dividends of preferred stock (67,000) -- --
----------- ----------- -----------
Net income available to common
shareholder $ 3,619,000 $ 2,801,000 $ 1,832,000
=========== =========== ===========
Denominator:
Weighted average shares outstanding 5,662,000 5,637,007 4,300,000
=========== =========== ===========
Net income per common share - basic $ 0.64 $ 0.50 $ 0.43
=========== =========== ===========
DILUTED
Numerator:
Net income $ 3,686,000 $ 2,801,000 $ 1,832,000
=========== =========== ===========
Denominator:
Weighted average shares outstanding 5,662,000 5,637,000 4,300,000
Effect of dilutive securities:
Employee stock options 172,000 212,000 141,000
Convertible preferred stock 185,000 -- --
Convertible notes -- 13,000 50,000
----------- ----------- -----------
6,019,000 5,862,000 4,491,000
=========== =========== ===========
Net income per common share - diluted $ 0.61 $ 0.48 $ 0.41
=========== =========== ===========
</TABLE>
Options to purchase 371,000 and 186,500 shares of common stock were
not included for all or a portion of the 1998 and 1997 computation of diluted
net income per common share, respectively, as the options' exercise price were
greater than the average market price of the common shares and therefore the
effect would be anti-dilutive.
-36-
<PAGE> 39
STERILE RECOVERIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE L-RELATED PARTY TRANSACTIONS
SRI paid $24,000, $76,000 and $56,000 in 1998, 1997 and 1996 to a
company to design and supply the components for water reclamation systems for
six SRI facilities. The company providing these services to SRI is owned by a
director and shareholder of SRI.
During 1998, 1997 and 1996, the Company paid approximately $76,000,
$20,000, and $207,000, respectively, to the Company's corporate law firm. One
member of the firm when the services were rendered is a shareholder of the
Company.
During 1998, the Company paid approximately $127,000 to a company for
the purchase of reusable surgical products. This company is owned and managed
by a director and shareholder of SRI.
-37-
<PAGE> 40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL SCHEDULE
Board of Directors
Sterile Recoveries, Inc.
In connection with our audit of the financial statements of Sterile
Recoveries, Inc., referred to in our report dated February 26, 1999, which is
included in this annual report on SEC Form 10-K for the year ended December 31,
1998, we have also audited Schedule II for the years ended December 31, 1996,
1997 and 1998. In our opinion, this schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
Tampa, Florida
February 26, 1999
-38-
<PAGE> 41
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
STERILE RECOVERIES, INC.
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------- ---------- ---------- ----------- ---------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
DESCRIPTION OF PERIO EXPENSES (DESCRIBE) OF PERIOD
- -------------------------------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996: $ 21,000 $ 34,000 $ (20,000)(1) $ 35,000
Year ended December 31, 1997: $ 35,000 $ 36,000 $ (32,000)(1) $ 39,000
Year ended December 31, 1998: $ 39,000 $ 11,607 $ (607)(1) $ 50,000
Reserve for inventory shrinkage:
Year ended December 31, 1996: $ 100,000 $ 422,000 $ (387,000)(1) $ 135,000
Year ended December 31, 1997: $ 135,000 $ 606,000 $ (546,000)(2) $ 195,000
Year ended December 31, 1998: $ 195,000 $ 1,523,000 $(1,268,000)(2) $ 450,000
</TABLE>
- ---------------------
(1) Write-offs of uncollectible accounts
(2) Write-offs of reusable products
-39-
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item concerning the Company's
executive officers and directors is incorporated by reference to the
information set forth under the captions "Proposal No. 1: Election of
Directors" and "Other Information" in the Company's Proxy Statement for the
1999 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the information set forth under the caption "Executive Officer Compensation" in
the Company's Proxy Statement for the 1999 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by reference to
the information set forth under the caption "Other Information" in the
Company's Proxy Statement for the 1999 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the information set forth under the caption "Certain Relationships" in the
Company's Proxy Statement for the 1999 Annual Meeting of Shareholders.
-40-
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The Company did not file a report on Form 8-K during the last quarter
of 1998.
EXHIBITS
The following exhibits are filed as part of this report:
-41-
<PAGE> 44
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C>
2.1(1) Asset Purchase Agreement dated July 31, 1994, between the Company and Amsco Sterile
Recoveries, Inc.
2.2(1) Agreement and Plan of Merger dated as of February 26, 1996, between Surgipro, Inc. and
the Company.
2.3(1) Articles of Merger dated as of February 26, 1996, between Surgipro, Inc. and the
Company.
2.4(6) Acquisition Agreement dated as of August 31, 1998, among the
Company, Standard Textile Co., Inc., and Repak Surgical
Enterprises, Inc.
3.1(1) Restated Articles of Incorporation of the Company.
3.2(1) Bylaws of the Company.
3.3(6) First Amendment to Restated Articles of Incorporation dated as of August 31, 1998, of the
Company (for Series A Preferred Stock).
4.1(1) Specimen certificate for Common Stock of the Company.
4.2 Trust Indenture dated as of February 1, 1999, between First Union National Bank and the
Industrial Development Board of Hamilton County, Tennessee.
10.1(1) 1995 Stock Option Plan, as amended, of the Company.
10.2(1) Form of Stock Option Agreement between the Company and participants under the 1995
Stock Option Plan.
10.3(1) Form of Indemnity Agreement between the Company and each of its executive officers.
10.4(1) Form of Registration Rights Agreement executed in connection with the private placement
of Common Stock.
10.5(3) Employment Agreement between the Company and each of Messrs. Isel, Peterson,
Boosales and Martin:
(a) Isel
(b) Peterson
(c) Boosales
(d) Martin
10.6(1) Lease Agreement dated August 16, 1991, between Coastal 2920
Corporation and Amsco Sterile Recoveries, Inc., as amended
and assigned to the Company.
10.7(1) Lease dated August 28, 1992, among Winchester Homes, Inc. and Weyerhaeuser Real
Estate Company and Amsco Sterile Recoveries, Inc., as assigned to the Company.
</TABLE>
-42-
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- --------------------
<S> <C>
10.8(1) Texas Industrial Net Lease dated March 19, 1992, between the Trustees of the Estate of
James Campbell, Deceased, and Amsco Sterile Recoveries, Inc., as assigned to the
Company.
10.9(1) Lease dated March 30, 1992, between Walter D'Aloisio and Amsco Sterile Recoveries,
Inc., as assigned to the Company.
10.10(1) Standard Industrial Lease -- Multi-Tenant (American Industrial Real Estate Association)
dated February 24, 1992, between Borstein Enterprises and Amsco Sterile Recoveries,
Inc., as assigned to the Company.
10.11(1) Carolina Central Industrial Center Lease dated April 22,
1992, between Industrial Development Associates and Amsco
Sterile Recoveries, Inc., as assigned to the Company.
10.12(1) Lease Agreement dated September 2, 1993, between Price Pioneer Company, Ltd., and
Amsco Sterile Recoveries, Inc., as assigned to the Company.
10.13(1) Service Center Lease dated December 4, 1991, between QP One Corporation and Amsco
Sterile Recoveries, Inc., as assigned to the Company.
10.14(1) Lease Agreement dated January 31, 1996, between Florida
Conference Association of Seventh-Day Adventists and
Surgipro, Inc., as assigned to the Company.
10.15(1) Stock Option Agreement dated as of October 18, 1996, between Bertram T. Martin, Jr.
and the Company.
10.16(3) Stock Option Agreement dated as of May 2, 1996, between James M. Emanuel and the
Company.
10.17(1) 1996 Non-Employee Director Stock Option Plan of the Company.
10.18(3) Retention Agreements between the Company and each of Messrs. Isel, Peterson, Boosales
and Martin:
(a) Isel
(b) Peterson
(c) Boosales
(d) Martin
10.19(4) Amendments No. 2 and 3 to the 1995 Stock Option Plan of the Company.
10.20(5) Stock Option Agreement dated November 21, 1997, between Bertram T. Martin, Jr. and
the Company.
10.21(5) Corporate Service Agreement dated October 21, 1997, between Standard Textile Co., Inc.
and the Company.
10.22(5) Corporate Service Agreement dated October 31, 1997, between Health Services
Corporation of America and the Company.
10.23(5) 1998 Stock Option Plan of the Company.
</TABLE>
-43-
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<S> <C>
10.24(6) Registration Rights Agreement dated August 31, 1998, between the Company and
Standard Textile Co., Inc.
10.25(7) Procurement Agreement dated August 31, 1998, between the Company and Standard
Textile Co., Inc.
10.26 Promissory Note dated as of February 24, 1999, executed by the Company in favor of
First Union National Bank.
10.27 Credit Agreement dated as of February 24, 1999, between the Company and First Union
National Bank (Revolving Line of Credit).
10.28 Security Agreement dated as of February 1, 1999, between the Company and First Union
National Bank (Revolving Line of Credit).
10.29 Participation Agreement dated as of February 1, 1999, among
the Company, First Union National Bank, and First Security
Bank, National Association (lease facility).
10.30 Credit Agreement dated as of February 1, 1999, between First
Security Bank, National Association and First Union National
Bank (lease facility).
10.31 Lease Agreement dated as of February 1, 1999, between the Company and First Security
Bank, National Association.
23.1 Consent of Grant Thornton LLP.
27 Financial Data Schedules (for SEC use only).
</TABLE>
- --------------------------
(1) Incorporated by reference to the Registration Statement on Form S-1
filed by the Registrant on May 15, 1996.
(2) Incorporated by reference to Amendment No. 2 to the Registration
Statement on Form S-1 filed by the Registrant on July 15, 1996.
(3) Incorporated by reference to Amendment No. 3 to the Registration
Statement on Form S-1 filed by the Registrant on July 18, 1996.
(4) Incorporated by reference to the Annual Report on Form 10-K for the
1996 year filed by the Registrant on March 24, 1997.
(5) Incorporated by reference to the Annual Report on Form 10-K for the
1997 year filed by the Registrant on March 30, 1998.
(6) Incorporated by reference to the Current Report on Form 8-K dated
August 31, 1998, and filed by the Registrant on September 8, 1998.
(7) Incorporated by reference to the Quarterly Report on Form 10-Q for
the 1998 third quarter filed by the Registrant on November 13, 1998.
-44-
<PAGE> 47
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
AND 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.
BY: /s/ RICHARD T. ISEL
Richard T. Isel
Chairman of the Board
Dated: March 23, 1999
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE ACT OF
1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF
THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard T. Isel Chairman, Chief Executive Officer March 23, 1999
- -------------------------------------------- and Director
Richard T. Isel
/s/ Bertram T. Martin, Jr. President, Chief Operating Officer March 23, 1999
- -------------------------------------------- and Director
Bertram T. Martin
/s/ Wayne R. Peterson Executive Vice President and March 23, 1999
- -------------------------------------------- Director
Wayne R. Peterson
/s/ James T. Boosales Executive Vice President, March 23, 1999
- -------------------------------------------- Chief Financial Officer and
James T. Boosales Director
/s/ James M. Emanuel Director March 23, 1999
- --------------------------------------------
James M. Emanuel
/s/ Lee R. Kemberling Director March 23, 1999
- --------------------------------------------
Lee R. Kemberling
/s/ Gary L. Heiman Director March 23, 1999
- --------------------------------------------
Gary L. Heiman
</TABLE>
-45-
<PAGE> 1
EXHIBIT 4.2
TRUST INDENTURE
----------------
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY
OF HAMILTON, TENNESSEE,
as Issuer,
and
FIRST UNION NATIONAL BANK,
as Trustee
-----------------------------------------
securing
$4,500,000
THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF
HAMILTON, TENNESSEE INDUSTRIAL DEVELOPMENT REVENUE BONDS
(STERILE RECOVERIES, INC. PROJECT), TAXABLE SERIES 1999
----------------
DATED AS OF FEBRUARY 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
THE BONDS
Section 2.1 Amount, Terms, and Issuance of the Bonds. . . . . . . . . . . . . . . . . . . . 18
Section 2.2 Designation, Denominations, Maturity Date and Interest Rates of the Bonds . . . 19
Section 2.3 Optional Tender Provisions of the Bonds . . . . . . . . . . . . . . . . . . . . 23
Section 2.4 Registered Bonds Required: Bond Registrar and Bond Register . . . . . . . . . . 24
Section 2.5 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.6 Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.7 Authentication; Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . 26
Section 2.8 Payment of Principal and Interest; Interest Rights Preserved. . . . . . . . . . 26
Section 2.9 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.10 Mutilated, Destroyed, Lost, Stolen or Undelivered Bonds . . . . . . . . . . . . 28
Section 2.11 Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.12 Cancellation of Surrendered Bonds . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.13 Conditions of Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.14 Book Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE III
PURCHASE AND REMARKETING OF TENDERED BONDS
Section 3.1 Remarketing of Tendered Bonds . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.2 Purchase of Bonds Delivered to the Tender Agent . . . . . . . . . . . . . . . . 33
Section 3.3 Delivery of Purchased Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 3.4 Delivery of the Proceeds of the Sale of Remarketed Bonds. . . . . . . . . . . . 35
Section 3.5 No Remarketing After Certain Events . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.6 Conversion of Series 1999 Bonds to Tax-Exempt Series Bonds. . . . . . . . . . . 35
</TABLE>
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ARTICLE IV
PROJECT FUND
Section 4.1 Creation of and Deposits to the Project Fund. . . . . . . . . . . . . . . . . . 37
Section 4.2 Payments from the Project Fund. . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.3 Trustee May Rely on Requisitions. . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.4 Completion Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.5 Transfers to the Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.6 Trustee's Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.7 Disposition of Balance in Project Fund. . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V
REVENUES AND APPLICATION THEREOF
Section 5.1 Revenues to be Paid Over to Trustee . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.2 The Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.3 Revenues to Be Held for All Bondholders; Certain Exceptions . . . . . . . . . . 41
Section 5.4 Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI
DEPOSITORIES OF MONEYS; SECURITY FOR DEPOSITS AND INVESTMENT O
Section 6.1 Security for Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.2 Investment of Moneys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.3 The Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VII
REDEMPTION OR PURCHASE OF THE BONDS
Section 7.1 Redemption or Purchase Dates and Prices . . . . . . . . . . . . . . . . . . . . 46
Section 7.2 Lessee to Direct Optional Redemption. . . . . . . . . . . . . . . . . . . . . . 48
Section 7.3 Selection of Bonds to be Called for Redemption. . . . . . . . . . . . . . . . . 48
Section 7.4 Notice of Redemption or Purchase. . . . . . . . . . . . . . . . . . . . . . . . 49
Section 7.5 Bonds Redeemed or Purchased in Part . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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ARTICLE VIII
PARTICULAR COVENANTS AND PROVISIONS
Section 8.1 Covenant to Pay the Bonds; Bonds Limited Obligations of the Issuer. . . . . . . 50
Section 8.2 Covenants to Perform Obligations Under this Indenture . . . . . . . . . . . . . 50
Section 8.3 Covenant to Perform Obligations Under the Lease Agreement . . . . . . . . . . . 51
Section 8.4 Trustee May Enforce the Issuer's Rights Under the Lease Agreement . . . . . . . 51
Section 8.5 Covenant Against Arbitrage. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.6 Inspection of the Bond Register . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.7 Priority of Pledge and Security Interest. . . . . . . . . . . . . . . . . . . . 52
Section 8.8 Maintenance of Insurance: Payment of Taxes, Charges, Etc. . . . . . . . . . . . 52
Section 8.9 Maintenance and Repair. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.10 Insurance and Condemnation Proceeds . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.11 Actions on Behalf of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 8.12 No Lien on the Project in Favor of the Trustee or the Issuer;
Quitclaim Transfer of Right, Title and Interest in the Project. . . . . . . . . 53
ARTICLE IX
DEFAULT AND REMEDIES
Section 9.1 Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.2 Acceleration and Annulment Thereof. . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.3 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.4 Legal Proceedings by the Trustee. . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.5 Discontinuance of Proceedings by the Trustee. . . . . . . . . . . . . . . . . . 56
Section 9.6 Credit Facility Issuer or Bondholders May Direct Proceedings. . . . . . . . . . 56
Section 9.7 Limitations on Actions by the Bondholders . . . . . . . . . . . . . . . . . . . 56
Section 9.8 Trustee May Enforce Rights Without Possession of the Bonds. . . . . . . . . . . 57
Section 9.9 Remedies Not Exclusive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 9.10 Delays and Omissions Not to Impair Rights . . . . . . . . . . . . . . . . . . . 57
Section 9.11 Application of Moneys in the Event of Default . . . . . . . . . . . . . . . . . 57
Section 9.12 Trustee and Bondholders Entitled to All Remedies Under the Act. . . . . . . . . 58
Section 9.13 Trustee May File Claim in Bankruptcy. . . . . . . . . . . . . . . . . . . . . . 58
Section 9.14 Receiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 9.15 Subrogation Rights of Credit Facility Issuer. . . . . . . . . . . . . . . . . . 59
</TABLE>
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ARTICLE X
CONCERNING THE TRUSTEE
Section 10.1 Acceptance of the Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.2 Trustee to Give Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.3 Trustee Entitled to Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 62
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. . . . . . . . . . . . . . . . 63
Section 10.5 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.6 Trustee to Preserve Records . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.7 Trustee May Be a Bondholder . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.8 Trustee Not Responsible for Recitals. . . . . . . . . . . . . . . . . . . . . . 64
Section 10.9 No Responsibility for Recording or Filing . . . . . . . . . . . . . . . . . . . 64
Section 10.10 Trustee May Require Information . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 10.11 Trustee May Rely on Certificates. . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.12 Trustee Bond. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.13 Segregation of Funds; Interests . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.14 Qualification of the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.15 Resignation and Removal of the Trustee. . . . . . . . . . . . . . . . . . . . . 66
Section 10.16 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.17 Co-Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 10.18 Notice to Moody's or S&P. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE XI
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 . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 11.2 Preservation of Information . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XII
THE REMARKETING AGENT, THE
TENDER AGENT AND THE PLACEMENT AGENT
Section 12.1 The Remarketing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.2 The Tender Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.3 The Placement Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
</TABLE>
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ARTICLE XIII
AMENDMENTS AND SUPPLEMENTS
Section 13.1 Amendments and Supplements Without the Bondholders' Consent . . . . . . . . . . 72
Section 13.2 Amendments With the Bondholders' and the Credit
Facility Issuer's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 13.3 Supplemental Indentures Affecting the Rights of the
Credit Facility Issuer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 13.4 Amendment of the Lease Agreement. . . . . . . . . . . . . . . . . . . . . . . . 74
Section 13.5 Amendment of the Lease Agreement Requiring the
Consent of the Credit Facility Issuer . . . . . . . . . . . . . . . . . . . . . 75
Section 13.6 Amendment of the Credit Facility. . . . . . . . . . . . . . . . . . . . . . . . 75
Section 13.7 Trustee Authorized to Join in Amendments and Supplements;
Reliance on Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE XIV
DEFEASANCE; OTHER PAYMENTS
Section 14.1 Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 14.2 Deposit of Funds for Payment of the Bonds . . . . . . . . . . . . . . . . . . . 77
Section 14.3 Effect of Purchase of the Bonds . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 Covenants of the Issuer to Bind its Successors. . . . . . . . . . . . . . . . . 78
Section 15.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 15.3 Trustee as the Paying Agent and the Bond Registrar. . . . . . . . . . . . . . . 80
Section 15.4 Rights Under this Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 15.5 Form of Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . 80
Section 15.6 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 15.7 Covenants of Issuer Not Covenants of Officials Individually . . . . . . . . . . 81
Section 15.8 No Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 15.9 No Liability of County, Officers, Etc.. . . . . . . . . . . . . . . . . . . . . 82
Section 15.10 Limited Liability of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 15.11 State Law Governs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 15.12 Payments Due on Days Other Than Business Days . . . . . . . . . . . . . . . . . 83
Section 15.13 Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 15.14 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
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EXHIBIT A: Form of Notice of Conversion . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT B: DTC Blanket Issuer Letter of Representations . . . . . . . . . . . . . . . . . .
EXHIBIT C-1: Form of Taxable Series 1999 Bond . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT C-2: Form of Tax-Exempt Series Bond . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT D: Description of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT E: Requisition and Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
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<PAGE> 8
TRUST INDENTURE
This TRUST INDENTURE, dated as of February 1, 1999 (this "INDENTURE"),
by and between THE INDUSTRIAL DEVELOPMENT BOARD OF THE COUNTY OF HAMILTON,
TENNESSEE, a public non-profit corporation, organized and existing under the
laws of the State of Tennessee (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 has been established and created pursuant to the
provisions of Chapter 53 of Title 7 of Tennessee Code Annotated, as amended
(the "ACT") and is authorized to acquire real property and interests therein,
buildings and other improvements thereon, and to sell or lease the same as
herein more particularly described; and
WHEREAS, in furtherance of the public purpose for which the Issuer was
created, the Issuer proposes to issue $4,500,000 in aggregate principal amount
of its Industrial Development Revenue Bonds (Sterile Recoveries, Inc. Project),
Taxable Series 1999 (the "SERIES 1999 BONDS") pursuant to this Indenture to
finance, in whole or in part, the cost of the acquisition, construction,
installation and equipping of an industrial facility to be used for the
manufacture and reprocessing of medical products (the "PROJECT") to be located
in Hamilton County, Tennessee as more fully set forth in Exhibit D hereto and a
portion of the costs of issuance of the Bonds, and to lease the Project to
First Security Bank, National Association, as the Owner Trustee under SRI
Realty Trust 1998-1 (the "LESSEE"), which will in turn lease the Project to
Sterile Recoveries, Inc., a Florida corporation; and
WHEREAS, the Lessee shall have the option under the Indenture to
convert the Series 1999 Bonds to the herein defined Tax-Exempt Series Bonds
upon the satisfaction of certain conditions (the Series 1999 Bonds and the
Tax-Exempt Series Bonds are hereinafter referred to as the "Bonds"); and
WHEREAS, the Issuer and the Lessee will enter into a Lease Agreement,
dated as of February 1, 1999 (the "LEASE AGREEMENT"), pursuant to which the
Lessee will agree to make payments sufficient to pay the principal and Purchase
Price (hereinafter defined) of, 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, including certain costs of issuance; and
WHEREAS, it has been determined that the estimated amount necessary to
finance the cost of the acquisition, renovation, construction, installation and
equipping of the Project, including necessary expenses incidental to the
issuance of the Series 1999 Bonds, will require the issuance, sale and delivery
of Bonds in the aggregate principal amount of $4,500,000 as hereinafter
provided; and
<PAGE> 9
WHEREAS, the Lessee and First Union National Bank, a national banking
association (the "BANK"), have entered into a Credit Agreement, dated as of
February 1, 1999 (the "REIMBURSEMENT AGREEMENT"), pursuant to which the Bank
has agreed, among other things, to issue its irrevocable direct-pay letter of
credit, dated the date of the delivery of the Series 1999 Bonds (the "LETTER OF
CREDIT"), in favor of the Trustee, for the account of the Lessee obligating the
Bank to pay to 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
to pay (a) the principal of such Bonds whether at maturity, upon redemption,
acceleration or otherwise and (b) 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 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 (x) accrued interest
on the Bonds and (y) 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
Lessee 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, as security for the payment of the Bonds, the Issuer has
agreed to assign and pledge to the Trustee, all right, title and interest of
the Issuer in (i) the Lease Agreement (except the Issuer Reserved Rights
(hereinafter defined)), (ii) 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, but excluding
the Rebate Fund, and (iii) 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 limited obligations of the Issuer, according to
the import thereof, and to create a valid assignment and pledge of the Revenues
to the payment of the principal and Purchase Price of, redemption premium, if
any, and the interest on, the Bonds and a valid assignment of certain of the
rights, title and interest of the Issuer in the Lease Agreement, have been done
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 Issuer has determined that the Bonds to be issued
hereunder shall be substantially in the form contained in Exhibit C-1 and that
the Tax-Exempt Series Bonds to issued hereunder shall be substantially in the
form contained in Exhibit C-2, in each case, 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
2
<PAGE> 10
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, 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) The Lease Agreement (as the same may from time to time be
supplemented or amended), including, but not limited to, all payments
of principal and interest due and to become due under the Lease
Agreement whether made at their respective due dates or as prepayments
permitted or required by the Lease Agreement together with full power
and authority, in the name of the Issuer or otherwise, to demand,
receive, enforce or collect any or all of the foregoing, to endorse or
execute any checks or other instruments or orders, to file any claims
and to take any action the Trustee may deem necessary or advisable in
connection therewith, and the Issuer hereby irrevocably appoints the
Trustee as attorney-in-fact for the Issuer for such purposes, which
appointment is coupled with an interest and is irrevocable; provided,
however, that the Issuer shall continue to have all the rights,
together with the Trustee, contained in the following sections of the
Lease Agreement (collectively, the "ISSUER RESERVED RIGHTS"):
(i) Section 6.4 (pertaining to the Issuer's
non-exclusive right to receive payment for certain advances);
(ii) Section 7.1 (pertaining to the Issuer's right of
access to the Project and certain records);
(iii) Section 7.5 (pertaining to the Issuer's right to
receive payment for certain costs and expenses);
(iv) Section 7.6 (pertaining to the Issuer's right to
certain indemnities);
(v) Section 7.7 (pertaining to the Issuer's right to
indemnification);
(vi) Section 7.8 (pertaining to the Issuer's right to
request and provide certain information);
3
<PAGE> 11
(vii) Section 8.1 (pertaining to the Issuer's right to
consent or withhold consent to assignment of rights of the
Lessee under the Lease Agreement or lease or sale of the
Project);
(viii) Section 9.5 (pertaining to the Issuer's right to
reimbursement of expenses incurred upon a default); and
(ix) Section 12.5 (pertaining to the Issuer's right to
receive notices);
(b) 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, but
excluding the Rebate Fund; and
(c) 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;
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 XIV hereof, the principal of, premium, if any, and interest on the
Bonds and any other obligations arising hereunder shall have been paid to the
Bondholders or shall have been provided for by the Lessee pursuant to Article
XIV 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 and the Lessee 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.
4
<PAGE> 12
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. All words and terms defined in Article I of
the Lease Agreement shall have the same meanings in this Indenture, unless
otherwise specifically defined herein. In addition, the following words and
terms as used in this Indenture shall have the following meanings unless some
other meaning is plainly intended:
"ACT" means, Chapter 53 of Title 7 of Tennessee Code Annotated.
"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
(except for the term of such Alternate Credit Facility) as or better than 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.
"AUTHORIZED INVESTMENTS" means (i) direct or indirect obligations of
the State or any municipality, instrumentality or political subdivision
thereof, or the United States of America or any instrumentality thereof or (ii)
obligations, the full and timely payment of the principal and interest of which
are directly and unconditionally guaranteed by the State or the United States
of America or (iii) bankers' acceptances of, or certificates of deposit issued
by, or time deposits or other banking arrangements or deposits with the Bank or
the Trustee with a rating of investment grade at all times by Moody's and S&P
or (iv) commercial paper of any Person other than any Related Person which has
been classified for rating purposes by Moody's as Prime-1 and by S&P as A-1 or
(v) commercial paper of the Bank or (vi) money market funds or other mutual
funds with at least $2 billion in assets and which invest exclusively in assets
described in (i) or (ii) above.
"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:
(A) any moneys which have been paid to the Trustee by the
Lessee (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 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;
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<PAGE> 13
(B) moneys on deposit with the Trustee representing proceeds
from the resale by the Remarketing Agent of Bonds to persons
other than the Issuer or the Lessee as described in Article III
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 only
moneys that were Available Moneys were at any time held, and the
proceeds from the investment thereof;
(C) moneys drawn under a Credit Facility that 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. The Trustee may presume that no Event of
Bankruptcy has occurred unless notified in writing to the contrary by
the Lessee, the Credit Facility Issuer or the owners of not less than
twenty-five percent (25%) in aggregate principal amount of Bonds
Outstanding.
"BANK" shall mean (a) First Union National Bank, a national banking
association, as the issuer of the Letter of Credit, and its successors and
assigns; and (b) 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 the Series 1999 Bonds and the Tax-Exempt
Series Bonds.
"BOND COUNSEL" shall mean the firm of Bass, Berry & Sims PLC, or its
successors appointed by the Issuer. If the Trustee determines, in its sole
discretion, that the Issuer has failed to appoint a successor, "BOND COUNSEL"
shall mean a firm of attorneys of nationally recognized standing in matters
pertaining to the tax-exempt nature of interest on bonds issued by states and
their political subdivisions, duly admitted to the practice of law before the
highest court of any state of the United States of America.
"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.
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"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 each of the
cities in which the principal office of the Trustee, the Credit Facility Issuer
and the Remarketing Agent is located 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.
"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 Lessee
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.
"COUNSEL" shall mean an attorney or firm of attorneys acceptable to
the Trustee (who may, but need not be, counsel to the Issuer or the Lessee).
"CREDIT FACILITY" shall mean the Letter of Credit or any Alternate
Credit Facility delivered to the Trustee pursuant to Article VI 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 (i) the Bank with respect to the
Letter of Credit or (ii) 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.
"DETERMINATION OF TAXABILITY" shall be defined as and shall be deemed
to have occurred on the first to occur of the following:
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<PAGE> 15
(i) on the date when the Lessee or Sterile Recoveries,
Inc., as the case may be, files any statement, supplemental
statement or other tax schedule, return or document which
discloses that an Event of Taxability shall have in fact
occurred; and
(ii) on the date when any Bondholder or former Bondholder
notifies the Lessee, Sterile Recoveries, Inc., or the Trustee
that it has received a written opinion of Bond Counsel to the
effect that an Event of Taxability shall have occurred unless,
within one (1) year after receipt by the Lessee or Sterile
Recoveries, Inc. of such notification from the Trustee, any
Bondholder or any former Bondholder, the Lessee or Sterile
Recoveries, Inc. shall obtain and deliver to the Trustee a
favorable ruling or determination letter issued to or on behalf
of the Lessee or Sterile Recoveries, Inc. by the Commissioner or
any District Director of Internal Revenue (or any other
government official exercising the same or a substantially
similar function from time to time) to the effect that, after
taking into consideration such facts as form the basis for the
opinion that an Event of Taxability has occurred, an Event of
Taxability shall not have occurred;
(iii) on the date when the Lessee or Sterile Recoveries,
Inc., as the case may be, shall be advised in writing by the
Commissioner or any District Director of Internal Revenue (or
any other government official or agent exercising the same or a
substantially similar function from time to time) that, based
upon filings of the Lessee or Sterile Recoveries, Inc., as the
case may be, or upon any review or audit of the Lessee or
Sterile Recoveries, Inc., as the case may be, or upon any other
ground whatsoever, an Event of Taxability shall have occurred;
(iv) on the date when the Lessee shall receive notice in
writing from any Bondholder or former Bondholder, or from the
Trustee, that the Internal Revenue Service (or any other
government agency exercising the same or a substantially similar
function from time to time) has assessed as includable in the
gross income of any Bondholder or former Bondholder the interest
on such Bondholder's or former Bondholder's Bonds due to the
occurrence of an Event of Taxability;
provided, however, no Determination of Taxability shall be deemed to have
occurred under subparagraph (iii) or (iv) hereof unless the Lessee or Sterile
Recoveries, Inc., as the case may be, has been afforded the opportunity, at its
expense, to contest any such assessment or unfavorable ruling and, further, no
Determination of Taxability shall be deemed to have occurred until such
contest, if made, has been finally determined.
"DTC" means The Depository Trust Company, or any successor thereto.
"DTC PARTICIPANT" or "DTC PARTICIPANTS" means securities brokers and
dealers, trust companies and clearing corporations that have access to the DTC
system either directly or through other DTC Participants.
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<PAGE> 16
"EVENT OF BANKRUPTCY" shall mean a petition by or against the Lessee
or 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 Lessee or the Issuer against third parties) unless such
petition shall have been dismissed within 90 days 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.
"EVENT OF TAXABILITY" shall mean a change in law or fact or the
interpretation thereof, or the occurrence or existence of any fact, event or
circumstance (including, without limitation, the issuance of obligations or the
incurring of capital expenditures in excess of those permitted by Section
144(a)(4) of the Code, or the taking of any action by the Lessee or Sterile
Recoveries, Inc., or the failure to take any action by the Lessee or Sterile
Recoveries, Inc., or the making by the Lessee or Sterile Recoveries, Inc. of a
misrepresentation herein or in any certificate required to be given in
connection with the issuance, sale or delivery of the Tax-Exempt Series Bonds)
which has the effect of causing the interest paid or payable on any Tax-Exempt
Series Bond to become includable in the gross income of any Bondholder or
former Bondholder of any Tax-Exempt Series Bond other than a Bondholder or
former Bondholder who is or was a "substantial user" or "related person" (as
defined in the Code).
"FINANCING BANK" shall mean First Union National Bank, a national
banking association, as the Lender and the Holder under the Participation
Agreement and any successor or permitted assignee.
"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 the Maximum Rate then
in effect.
"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
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<PAGE> 17
(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 securities, receipts or
obligations are not subject to redemption prior to maturity at
less than par at the option of anyone other than the holder
thereof.
"HOLDER" shall have the meaning provided in Appendix A to the
Participation Agreement.
"INDENTURE" shall mean this Indenture as amended or supplemented from
time to time.
"INITIAL INTEREST RATE" shall mean a variable rate of interest as
determined by the Remarketing Agent on the date of the issuance of the Bonds.
"INITIAL RATE PERIOD" shall mean from and including the Original
Delivery Date to and including March 3, 1999.
"INTEREST PAYMENT DATE" shall mean (i) the first Business Day of each
February, May, August and November commencing on the first Business Day of May,
1999 and ending on the Maturity Date, (ii) the Conversion Date and (iii) the
Maturity Date.
"ISSUER" shall mean the (i) The Industrial Development Board of the
County of Hamilton, Tennessee, a public non-profit corporation, organized and
existing under the laws of the State of Tennessee, its successors and assigns,
and (ii) any local governmental body resulting from or surviving any
consolidation or merger to which the Issuer or its successors may be a party.
"ISSUER RESERVED RIGHTS" shall have the meaning set forth in the
recitals hereto.
"LEASE AGREEMENT" shall mean the Lease Agreement of even date herewith
between the Issuer and the Lessee and any amendments or supplements thereof
permitted by this Indenture.
"LENDER" shall have the meaning provided in Appendix A to the
Participation Agreement.
"LESSEE" shall mean First Security Bank, National Association, as
Owner Trustee under SRI Realty Trust 1998-1 and its successors or assigns and
any surviving, resulting or transferee corporations or other entities.
"LESSEE'S REPRESENTATIVE" shall mean such persons as, at the time, are
designated to act on behalf of the Lessee by written certificate furnished to
the Trustee and to the Issuer containing the specimen signature of each such
person and signed on behalf of (i) the Lessee by a vice-president or any trust
officer of First Security Bank, National Association, in its capacity as Owner
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<PAGE> 18
Trustee under the SRI Realty Trust 1998-1 and (ii) Sterile Recoveries, Inc. by
its Executive Vice President.
"LETTER OF CREDIT" shall mean the irrevocable direct pay letter of
credit, dated the date of delivery of the Bonds in the amount of $4,725,000
issued by the Bank in favor of the Trustee as beneficiary, with an initial term
of approximately three (3) years, subject to any extensions thereof.
"MAJORITY OF THE BONDHOLDERS" shall mean the owners of a majority of
the aggregate principal amount of the Outstanding Bonds.
"MANDATORY TAX-EXEMPT CONVERSION REDEMPTION DATE" shall mean the
Business Day that the Series 1999 Bonds are to be converted to the Tax-Exempt
Series Bonds.
"MATURITY DATE" mean the first Business Day of February, 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 hereof.
"MAXIMUM RATE" shall, in the case of the Series 1999 bonds, mean the
lesser of 10% or the maximum contract rate of interest permitted by the laws of
the State, and in the case of the Tax-Exempt Series Bonds, mean the lesser of
8% or the maximum contract rate of interest permitted by the laws of the State.
"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 Lessee and the Credit Facility Issuer.
"NET PROCEEDS," when used with respect to (i) any insurance proceeds
or (ii) any award resulting from, or other amount received in connection with,
eminent domain, means the gross proceeds from such proceeds, award or other
amount, less all expenses (including attorneys' fees) incurred in the
realization thereof.
"OPTIONAL RETENTION NOTICE" shall mean a notice of the owner of a Bond
to the Trustee as described in Sections 2.2(e) and 7.1(d) hereof regarding
retention of the Bonds after a conversion of the interest rate.
"OPTIONAL TENDER NOTICE" shall mean a notice from the owner of a Bond
to the Tender Agent as described in Sections 2.3 and 3.1 hereof regarding the
optional tender of the Bonds by the owners.
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"ORIGINAL DELIVERY DATE" shall mean February 24, 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 XIV hereof; and
(iii) Bonds in substitution for which other Bonds have
been authenticated and delivered pursuant to Article II 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 Lessee (unless all of the outstanding Bonds are
then owned by the Lessee) or an Affiliate of the Lessee (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 voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"PARTICIPATION AGREEMENT" shall mean the Participation Agreement dated
as of February 1, 1999 among Sterile Recoveries, Inc., the Lessee and the
Financing Bank, as the Lender and the Holder.
"PAYING AGENT" shall mean the Trustee and its successors as provided
in Section 15.3 hereof.
"PAYMENT DATE" shall have the meaning set forth in Section 5.2(d)
hereof.
"PERSON" or "PERSONS" means an individual, partnership, corporation,
limited liability company, trust or unincorporated organization, and a
government or agency as political subdivision or branch thereof.
"PLACEMENT AGENT" shall mean the securities dealer, bank or trust
company which is designated by the Lessee with the consent of the Credit
Facility Issuer, which is responsible for the initial placement of the Bonds
and which will agree to establish the Preliminary Fixed Rate and
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<PAGE> 20
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 Lessee to the Bank, and any amendments or supplements thereof.
"PLEDGED REVENUES" means and shall include the payments required to be
made by the Lessee under the Lease Agreement except payments to be made to the
Trustee for services rendered as Trustee under the Indenture and as Bond
Registrar and Paying Agent for the Bonds and except for expenses,
indemnification and other payments required to be made pursuant to Sections 7.5
and 7.6 of the Lease Agreement.
"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 fixed rate of interest 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" shall mean the financing, in whole or in part, of the
acquisition, construction, installation and equipping of an industrial facility
consisting of the following: (i) approximately 4.7 acres of land located at
6024 Century Oaks Drive, Chattanooga, Hamilton County, Tennessee, and any other
interests, easements or other rights therein (the "LAND"); (ii) an
approximately 50,000 square foot facility, and any other rights therein or
improvements made thereto, located on the Land (the "BUILDING" and, together
with the Land, the "REAL PROPERTY"); and (iii) related equipment and machinery
to be installed on or in the Real Property, and any interests therein (the
"EQUIPMENT"), all as more fully set forth on Exhibit D.
"PROJECT FUND" shall mean the trust fund so designated which is
established pursuant to Section 4.1 hereof.
"PURCHASE DATE" has the meaning set forth in Section 3.2 herein.
"PURCHASE PRICE" means an amount equal to 100% of the principal amount
of any Bonds tendered or deemed tendered for purchase pursuant to Section 3.2
and 3.3 of the Indenture, plus accrued interest thereon, if any, to the
Purchase Date.
"REBATE FUND" shall mean the trust fund so designated which is
established pursuant to Section 5.4 hereof.
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"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
(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.
"REIMBURSEMENT AGREEMENT" shall mean the Credit Agreement of even date
herewith by and between the Lessee and the Bank, as the same may be amended
from time to time and filed with the Trustee, and any agreement of the Lessee
with a Credit Facility Issuer setting forth the obligations of the Lessee 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 Reimbursement Agreement for
the purpose of this Indenture.
"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 among the Lessee, Sterile Recoveries, Inc. and the Remarketing
Agent and any amendments and supplements thereof.
"REPAYMENTS ACCOUNT" shall mean the account of that name established
in the Bond Fund pursuant to Section 5.2 hereof.
"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.
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"REVENUES" shall mean:
(i) all amounts payable to the Trustee with respect to
the principal of, redemption premium, if any, or interest on the
Bonds (a) by the Lessee under the Lease Agreement, (b) by the
Credit Facility Issuer under a Credit Facility and (c) by
transfer from the Project Fund pursuant to Section 4.1 hereof,
and
(ii) investment income with respect to any moneys held by
the Trustee in the Project Fund and 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.
"SERIES 1999 BONDS" shall mean The Industrial Development Board of the
County of Hamilton, Tennessee Revenue Bonds (Sterile Recoveries, Inc. Project)
Taxable Series 1999, issued by the Issuer under this Indenture.
"S&P" shall mean Standard & Poor's Ratings Services, a division of The
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 Lessee and the Credit
Facility Issuer.
"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 Tennessee.
"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.
"SYNTHETIC LEASE FINANCING DEFAULT" shall have the meaning specified
for the term "Default" as provided in Appendix A to the Participation
Agreement.
"SYNTHETIC LEASE FINANCING EVENT OF DEFAULT" shall have the meaning
specified for the term "Event of Default" as provided in Appendix A to the
Participation Agreement.
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<PAGE> 23
"TAX-EXEMPT SERIES BONDS" shall mean The Industrial Development Board
of the County of Hamilton, Tennessee Revenue Bonds (Sterile Recoveries, Inc.
Project) Tax-Exempt Series.
"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 Lessee, the Trustee and the Tender Agent and any
amendments and supplements thereof and thereto.
"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.
"U.C.C." means the Uniform Commercial Code of the State of Tennessee.
"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.
"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 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 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 sentences. If the Remarketing Agent fails to certify such
rate for the Series 1999 Bonds for four consecutive Calculation Periods, the
rate for the Series 1999 Bonds for each Calculation Period thereafter (if
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<PAGE> 24
none is certified by the Remarketing Agent) to be determined by the Trustee
shall be a rate equal to the 30 day LIBOR Rate. "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 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 Trustee, 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. In the
event the Remarketing Agent fails to certify such rate for the Tax-Exempt
Series Bonds for four (4) consecutive Calculation Periods for the Bonds, such
rate for the Tax-Exempt Series Bonds for each Calculation Period thereafter (if
none is certified by the Remarketing Agent) shall be ninety percent (90%) of
the yield for United States Treasury bills maturing approximately thirty (30)
days after the Determination Date for such Calculation Period as published by
The Wall Street Journal on such Determination Date (or the next preceding
Business Day on which The Wall Street Journal is published if The Wall Street
Journal is not published on the Determination Date) (or, if The Wall Street
Journal is no longer published, then any reasonably equivalent financial
publication selected by the Remarketing Agent) (or the next Business Day on
which such other publication is published if not published on the Determination
Date). 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 the Maximum Rate then in effect.
"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.
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(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.
(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 may be.
(f) All references herein to time shall be prevailing Eastern
time.
ARTICLE II
THE BONDS
SECTION 2.1 AMOUNT, TERMS, AND ISSUANCE OF THE BONDS.
(a) The Bonds shall be limited to $4,500,000 in aggregate
principal amount. The Series 1999 Bonds shall contain substantially the terms
recited in the form of Series 1999 Bond in Exhibit C-1 and as set forth in this
Indenture. The Tax-Exempt Series Bonds shall contain substantially the terms
recited in the form of Tax-Exempt Series Bond contained in Exhibit C-2 and as
set forth in this Indenture. No Bonds may be issued under this Indenture except
in accordance with this Article II or Section 3.6 hereof. No additional bonds
shall be issued under this Indenture.
(b) The Issuer may cause a copy of the text of the opinion of
Bond Counsel delivered in connection with the issuance of the Bonds to be
printed on or attached to any of the Bonds. 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.
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SECTION 2.2 DESIGNATION, DENOMINATIONS, MATURITY DATE AND INTEREST
RATES OF THE BONDS.
(a) DESIGNATION, DENOMINATIONS, MATURITY DATE. The Bonds shall
be designated "$4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds (Sterile Recoveries,
Inc. Project), Taxable Series 1999." At the option of the Lessee, the Series
1999 Bonds may be converted to Tax-Exempt Series Bonds pursuant to Section 3.6
hereof. 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. 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 VII hereof, on the first Business Day of February, 2014. The Bonds
shall be numbered from "1" consecutively upwards prefixed by the letter "R."
(b) INTEREST RATES. The Bonds shall bear interest at the
applicable rate provided below. On each Interest Payment Date, interest accrued
through the day immediately preceding such Interest Payment Date shall be
payable by the Lessee. 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. Anything herein to the
contrary notwithstanding, in no event shall the interest rate borne by the
Bonds exceed the maximum contract rate of interest permitted by the laws of the
State.
(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 Lessee 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 Lessee, 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.
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(e) FIXED RATE: CONVERSION TO FIXED RATE.
(1) The Lessee 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 Lessee with the provisions of this Section 2.2(e). The
Fixed Rate shall be established after delivery by the Lessee to
the Issuer, the Trustee, the Credit Facility Issuer, the Tender
Agent and the Remarketing Agent of:
(A) 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, and
(B) an opinion of Bond Counsel addressed to the Trustee
and the Issuer that the establishment of a Fixed Rate is
authorized and permitted under this Indenture and, if the
Bonds are then the Tax-Exempt Series Bonds, will not, in and
of itself, cause interest on the Bonds to be includable in
the gross income of the owners thereof for federal income
tax purposes. Such notice and opinion must be delivered not
less than thirty (30) nor more than sixty (60) days prior to
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 Lessee 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 which shall be in
the form of the Notice of Conversion attached hereto 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 Section 2.3 hereof,
(C) state the Preliminary Fixed Rate,
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(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 after the Conversion Date,
(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 the delivery by the Lessee to the Trustee
of a letter from Bond Counsel dated as of the Conversion
Date confirming the opinion received pursuant to the notice
is a condition precedent to a conversion to a Fixed Rate,
and
(I) 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 delivery by the Lessee to the Trustee of a letter
from Bond Counsel confirming the opinion required prior to the
notification described above on such Conversion Date is a
condition precedent to any such conversion. In the event the
Lessee fails to deliver to the Trustee the letter of Bond
Counsel referred to in the preceding sentence, such conversion
shall not take effect, and the Bonds shall continue to bear
interest at the Variable Rate.
(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 and accrued interest to the
Conversion Date on such Bonds, and such Bonds shall no longer be
entitled to the benefits of this Indenture, except for the
purpose of payment of the Purchase Price therefor. Payment of
the Purchase Price of any such Bonds shall be made only upon the
presentment and surrender of such
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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.
(8) On or before the Conversion Date, all Bonds shall be
presented to the Trustee for stamping thereon of the legend:
"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." And, if applicable: "There
is not a Credit Facility in effect."
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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 Lessee) shall 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, if the owner of such Bond delivers to the Tender Agent, and the
Tender Agent actually receives, 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 a.m. 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 a.m. on the Variable Rate Purchase Date,
such Undelivered Bond shall be 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 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.
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(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 IX 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 shall designate one or more persons to act as
"Bond Registrar" for the Bonds, provided that the Bond Registrar appointed for
the Bonds shall be either the Trustee or a person which would meet the
requirements for qualification as a successor trustee imposed by Section 10.15
hereof. 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, one or more new fully registered Bonds of authorized denomination
for the aggregate principal amount which the new owner is entitled to 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 Lessee 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 Article III, which
shall be effected at the corporate trust office of the Tender Agent in
Nashville, Tennessee, Bonds shall be surrendered for transfer at the corporate
trust office of the Trustee in Nashville, Tennessee. Also,
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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 III 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 surrendered 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 hereof and the remarketing thereof pursuant to Article III 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.
SECTION 2.6 EXECUTION.
(a) The Bonds shall be executed by the manual or facsimile
signature of the Chairman or Vice Chairman of the Issuer and the same shall be
attested by the manual or facsimile signature of the Secretary or the Acting
Secretary 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.
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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 XIV 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 Lessee 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, the Remarketing Agent
and the Lessee. The Trustee may at any time terminate the agency of any
Authenticating Agent by giving written notice of termination to such
Authenticating Agent, the Issuer and the Lessee. 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 under this Section, the Trustee
may promptly appoint a successor Authenticating Agent, shall give written
notice of any such appointment to the Issuer and the Lessee, 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 of, and redemption premium, if any, on 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
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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 that 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 that 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 of, redemption premium, if any, 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 XIV hereof, and then from other
collected funds available to the Trustee hereunder for such payments.
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
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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.
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.
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SECTION 2.12 CANCELLATION OF SURRENDERED BONDS. Bonds surrendered for
payment, redemption, transfer or exchange and Bonds surrendered to the Trustee
by the Issuer or by the Lessee for cancellation shall be canceled by the
Trustee and a certificate evidencing such cancellation shall be furnished by
the Trustee to the Issuer and the Lessee. 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 VII of the Reimbursement Agreement have been satisfied and there shall
be filed with the Trustee such documents, certificates and opinions as Trustee
may require, including, the following:
(1) A copy, certified by the Secretary or Acting Secretary
of the Issuer, of the resolution or resolutions of the Issuer
authorizing the issuance of the Series 1999 Bonds, awarding the
Series Bonds and directing the authentication and delivery of
the Series 1999 Bonds to or upon the order of the purchaser(s)
therein named upon payment of the Purchase Price therein set
forth.
(2) Executed counterparts of this Indenture, the Lease
Agreement, the Letter of Credit, Reimbursement Agreement, the
Tender Agency Agreement and the Remarketing Agreement.
(3) An opinion of Counsel for the Issuer, to the effect that
the execution and delivery of the Lease Agreement and this
Indenture have been duly authorized by the Issuer, that the
Lease Agreement and this Indenture are in substantially the
forms so authorized and have been duly executed by the Issuer
and that, assuming proper authorization and execution of this
Indenture by the Trustee and of the Lease Agreement by the
Lessee, the Lease Agreement and this Indenture are the valid and
binding agreements of the Issuer enforceable in accordance with
their respective 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) An opinion of Counsel to the Lessee to the effect that
the execution and delivery of the Lease Agreement, the
Reimbursement Agreement, the Remarketing Agreement and the
Tender Agency Agreement have been duly authorized by the Lessee,
that the Lease Agreement, the Reimbursement Agreement, the
Remarketing Agreement and the Tender Agency Agreement have been
duly executed and delivered by the Lessee, and that the Lease
Agreement, the Reimbursement Agreement, the Remarketing
Agreement and
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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 Lessee 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.
(5) An opinion of Bond Counsel, to the effect that the
issuance of the Series 1999 Bonds has been duly and validly
authorized by the Issuer, 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.
(6) Evidence satisfactory to the Trustee of compliance by
the Lessee with the insurance requirements of Section 6.3 of the
Lease Agreement.
(7) A written request and authorization of the Issuer
addressed to the Trustee directing the Trustee to authenticate
and deliver the Series 1999 Bonds.
(8) Such other documents as the Trustee may reasonably
require.
(b) When the documents mentioned in paragraphs (1) through (8)
of subsection (a) of this Section shall have been filed with the Trustee and
when the Series 1999 Bonds shall have been executed as required by this
Indenture, the Trustee shall authenticate the Series 1999 Bonds and deliver
them to or upon the order of the purchaser(s) named in the resolution mentioned
in paragraph (1) thereof, but only upon payment to the Trustee for the account
of the Issuer of the Purchase Price of the Series 1999 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 Series 1999 Bonds in accordance with Article IV
of this Indenture.
SECTION 2.14 BOOK ENTRY. The Issuer shall enter into an agreement in
substantially the form attached hereto as Exhibit B (the "BOOK ENTRY AGREEMENT")
with the Paying Agent and 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 Lessee, the Trustee, nor the Paying Agent will
have any responsibility or obligations to the DTC Participants, DTC Indirect
Participants (as each is defined
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in the Book Entry Agreement contained as Exhibit B hereto) 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 of, redemption premium, if any, 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
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 Lessee
of the Lessee's determination that DTC is incapable of
discharging its duties; or
(3) the Issuer determines that it is in the best interest of
the Lessee not to continue the book-entry system (and the Lessee
provides written approval of such determination) 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
Lessee shall attempt to locate another qualified securities depository.
In the event the Issuer makes the determination noted in (3) above, or
if the Lessee 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.
The Trustee reserves the right to initially issue the Bonds directly
to the beneficial owners of the Bonds if the Trustee receives an opinion of
Bond Counsel that determines that use of the book entry system would cause the
interest on the Bonds to be included in gross income of the bondholders for
federal income tax purposes pursuant to Section 103 of the Code, if applicable.
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ARTICLE III
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 Lessee 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 Lessee 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.
(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 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.
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SECTION 3.2 PURCHASE OF BONDS DELIVERED TO THE TENDER AGENT.
(a) There is hereby established with the Tender Agent, as agent
for the Trustee, a "The Industrial Development Board of the County of Hamilton,
Tennessee Industrial Development Revenue Bonds (Sterile Recoveries, Inc.
Project), Bond Purchase Fund" (the "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 Lessee or the Credit Facility Issuer) shall be transferred by the
Remarketing Agent or the Placement Agent, as the case may be, to the Trustee
for deposit in the Remarketing Account. At or prior to 10:00 a.m. 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 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 in coordination with the Trustee 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 for 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 which constitute Available Moneys; and
(3) any other Available 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 Lessee 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
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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 III. The Trustee shall
provide to the Tender Agent the 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 held
by the Credit Facility Issuer as pledgee of the Lessee 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 Lessee to the
Credit Facility Issuer as reimbursement under the Reimbursement 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:
(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 Lessee pursuant to the terms of the Reimbursement
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.
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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 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.
SECTION 3.4 DELIVERY OF THE PROCEEDS OF THE SALE OF REMARKETED BONDS.
The proceeds from the sale by the Remarketing Agent of 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 Lessee.
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 III after the Conversion Date or the principal
of the Bonds shall have been accelerated pursuant to Section 9.2 hereof.
SECTION 3.6 CONVERSION OF SERIES 1999 BONDS TO TAX-EXEMPT SERIES
BONDS. The Lessee shall have the option to convert the Series 1999 Bonds to
Tax-Exempt Series Bonds upon the satisfaction of the following conditions:
(a) Not later than forty (40) days prior to the Mandatory
Tax-Exempt Conversion Redemption Date, the Lessee shall provide the Trustee,
the Remarketing Agent, the Tender Agent, the Bank and the Issuer, the
following:
(i) written notice of the Lessee's election to convert the
Series 1999 Bonds to Tax-Exempt Series Bonds, specifying the
date of such conversion.
(ii) an opinion of Bond Counsel to the effect that the
interest on the Tax-Exempt Series Bonds to be issued will be
excludable from gross income for federal income tax purposes.
(iii) evidence of a private activity bond allocation from
the Tennessee Department of Economic and Community Development
in an amount at least equal to the principal amount of the
Tax-Exempt Series Bonds.
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(iv) evidence from the Bank that the Letter of Credit will
remain in effect and will be sufficient to cover the principal
of and interest (up to 120 days at an assumed interest rate of
15%) on the Tax-Exempt Series Bonds.
(b) At least thirty (30) days prior to the Mandatory Tax-Exempt
Conversion Redemption Date, the Trustee will provide notice in the manner
provided in Section 7.4 hereof, notice to each Owner of the Series 1999 Bonds
that on the proposed Mandatory Tax-Exempt Conversion Redemption Date, the
Series 1999 Bonds will be redeemed with a draw under the Letter of Credit for
principal and accrued interest to the Mandatory Tax-Exempt Conversion
Redemption Date. If any of the conditions to issue the Tax-Exempt Series Bonds
are not satisfied, the Series 1999 Bonds will be remarketed by the Remarketing
Agent on the Mandatory Tax-Exempt Conversion Redemption Date as Series 1999
Bonds. No owner of a Series 1999 Bond will have the right to retain his or her
Series 1999 bond on or after the Mandatory Tax-Exempt Conversion Redemption
Date as provided in this Section 3.6.
(c) Not later than two (2) Business Days prior to the Mandatory
Tax-Exempt Conversion Redemption Date, the Remarketing Agent shall provide the
Trustee, the Lessee and the Bank notice of the initial rate of interest for the
Tax-Exempt Bonds. The Lessee shall be responsible to pay any costs associated
with the issuance of the Tax-Exempt Series Bonds from its own funds.
(d) On or before 10:00 a.m., prevailing Eastern time, on
Mandatory Tax-Exempt Conversion Redemption Date, the Trustee shall be in
receipt of the following:
(i) a fully executed Tax Certificate of the Lessee and
Sterile Recoveries, Inc.;
(ii) a completed IRS Form 8038 duly executed by the
Issuer;
(iii) a Bond Counsel opinion in the form described in
paragraph (a)(ii) above;
(iv) such other certificates required by Bond Counsel, the
Issuer, the Bank or the Trustee;
(v) an offering document relating to the Tax-Exempt Series
Bonds;
(vi) a written request and authorization of the Issuer
addressed to the Trustee directing the Trustee to authenticate
and deliver the Tax-Exempt Series Bonds;
(vii) opinions of counsel to the Issuer, the Lessee and
the Bank, as necessary in the reasonable judgment of Bond
Counsel;
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(viii) evidence from the Bank that the Letter of Credit
will remain in effect and will be sufficient to cover the
principal of and interest (up to 120 days at an assumed interest
rate of 15%) on the Tax-Exempt Series Bonds; and
(ix) such other documents and certificates deemed necessary
by the Bond Counsel.
ARTICLE IV
PROJECT FUND
SECTION 4.1 CREATION OF AND DEPOSITS TO THE PROJECT FUND.
(a) A special fund is hereby created and designated "The
Industrial Development Board of the County of Hamilton, Tennessee Industrial
Development Revenue Bonds (Sterile Recoveries, Inc. Project), Taxable 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 Cost of the Project, including all proceeds of
the sale of the Bonds and insurance and condemnation proceeds as provided in
the Lease Agreement, 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 (i) the Cost of the Project and
(ii), in an amount not to exceed 2% of the original aggregate principal amount
of the Bonds, cost of issuance of the Bonds 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 Lessee's Representative (substantially in the form
of the Requisition and Certificate attached hereto as Exhibit "E" 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
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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.
(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 Lessee, the
Bank, the Issuer, any Bondholder and the agents and representatives thereof.
SECTION 4.4 COMPLETION DATE. The establishment of the Completion Date
and the disposition of moneys then held for the credit of the Project Fund
shall be in accordance with Sections 4.3 and 4.4 of the Lease Agreement,
respectively.
SECTION 4.5 TRANSFERS TO THE BOND FUND. In the event that the Lessee
should elect or be required to prepay the rentals pursuant to Section 10.1,
Section 10.2, or Section 10.3 of the Lease Agreement 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 4.6 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 Lessee, and the Issuer upon request a
final accounting.
SECTION 4.7 DISPOSITION OF BALANCE IN PROJECT FUND. When the Project
shall have been completed and the Trustee shall have received a certificate of
the Lessee's Representative stating the Completion Date and what items of the
Cost of the Project, if any, have not been paid, and for the payment of which
money should be reserved, any funds remaining after the Trustee has reserved
funds for unpaid items shall be deposited in the Bond Fund and applied by the
Trustee at the written direction of the Lessee as soon thereafter as
practicable, (a) to the purchase of Bonds at such price and upon such terms and
conditions as the Lessee may direct or to the reimbursement of the Credit
Facility Issuer for draws under the Credit Facility to purchase Bonds, or (b)
to the redemption of the Bonds, on the first redemption date occurring after
the Completion Date at the applicable optional or mandatory redemption price or
to reimburse the Credit Facility Issuer for draws under the Credit Facility to
redeem bonds, or (c) provided that, if the Bonds are then the
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Tax-Exempt Series Bonds, the Trustee shall have received an opinion of Bond
Counsel that such deposit shall not cause interest on the Bonds to be
includable in gross income for Federal income tax purposes under Section 103 of
the Code, such amounts may be transferred to the Bond Fund for payment of
maturing principal of or interest on any of the Bonds or to reimburse the
Credit Facility Issuer for draws under the Credit Facility for such payment.
ARTICLE V
REVENUES AND APPLICATION THEREOF
SECTION 5.1 REVENUES TO BE PAID OVER TO TRUSTEE. The Issuer has
caused the Revenues from the Lease Agreement payments to be paid directly to
the Trustee. If, notwithstanding these arrangements, the Issuer receives any
payments under the Lease Agreement or on account of a Credit Facility with
respect to the principal of, redemption premium, if any, or interest on the
Bonds, the Issuer shall immediately pay over the same to the Trustee to be held
as Revenues.
SECTION 5.2 THE BOND FUND.
(a) There is hereby established with the Trustee a special fund
to be designated "The Industrial Development Board of the County of Hamilton,
Tennessee Industrial Development Revenue Bonds (Sterile Recoveries, Inc.
Project), 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 of and
redemption premium, if any, on the 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:
(1) into the Repayments Account, moneys received by the
Trustee under and pursuant to the provisions of this Indenture
or any of the provisions of the Lease Agreement, when
accompanied by written directions from the person depositing
such moneys that such moneys are to be paid into such account of
the Bond Fund, which shall include the interest earnings on the
Project Fund deposited as required by Section 4.2(c) hereof. 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
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(2) into the Credit Facility Account, all moneys drawn by
the Trustee under the Credit Facility to pay principal (whether
at maturity, upon redemption, acceleration or otherwise)
(excluding redemption premium) 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 and redemption
premium, if any, 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 Lessee, 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 Lessee,
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 of, redemption premium, if any, or
interest on the Bonds is due and payable (the "PAYMENT DATE"), the Trustee
shall have notified the Lessee and the Credit Facility Issuer of the amounts of
principal of, premium, if any, and interest due on the Bonds on the Payment
Date. Not later than 11:00 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 and immediately deposited by the Trustee in 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 Lessee, 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 reimbursement to the Credit Facility
Issuer under the terms of the Reimbursement Agreement. If no amounts are owed
by the Lessee to the Credit Facility Issuer under the Reimbursement Agreement,
any amounts remaining in the Repayments Account on the Business Day immediately
following a Payment Date shall be paid to the Lessee upon request with the
consent of the Credit Facility Issuer.
(e) Except as provided in the following sentence, the Bond Fund
shall be depleted at least once each year, except for a reasonable carryover
amount (not to exceed the greater of one year's earnings on the Bond Fund or
one-twelfth (1/12th) of annual debt service). Any money deposited in the Bond
Fund shall be spent within a thirteen (13) month period beginning on the date
of deposit, and any amount received from investment of money held in the Bond
Fund shall be spent within a one (1) year period beginning on the date of
receipt. Any amounts remaining in the Bond Fund after payment in full of the
principal of, redemption premium, if any, and interest
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<PAGE> 48
on the Bonds (or provisions for payment thereof) shall be paid to the Lessee at
the written request of the Lessee therefor or as otherwise required by law;
provided, that if any payments have been received by the Trustee under the
Credit Facility in connection with such payment of the Bonds, any remaining
amounts shall be paid to the Credit Facility Issuer to the extent of such
payments.
SECTION 5.3 REVENUES 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 of,
redemption premium, if any, and interest on any Bonds previously matured or
called for redemption in accordance with Article VII of this Indenture, shall
be held for the benefit of the owners of such Bonds only.
SECTION 5.4 REBATE FUND. In the event the Lessee provides for the
deposit of amounts from time to time for rebate to the United States of America
pursuant to the Lease Agreement, the Trustee is hereby authorized to create a
special fund to be designated as the "REBATE FUND." The Rebate Fund shall be
held separate and apart from all other funds under this Indenture and shall not
be subject to the lien and pledge granted hereunder for the benefit of
Bondholders. The Trustee shall remit money deposited in the Rebate Fund to the
United States or otherwise as directed in writing by the Lessee. All moneys
deposited in the Rebate Fund shall be held and invested at the sole direction
of the Lessee. In making investments hereunder, or in selling or disposing of
investments as required hereby, the Trustee shall have no duty or
responsibility to independently verify compliance with Sections 148(d) and
148(f) of the Code and the regulations promulgated thereunder and the Trustee
and the Issuer shall be fully protected in relying solely upon the written
directions of the Lessee as aforesaid. Under no circumstances whatsoever shall
the Trustee be liable to the Issuer, the Lessee or any holder for any loss of
tax-exempt status of the Bonds, or 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 Lessee as provided hereunder and in accordance with its other
obligations hereunder. Neither the Trustee nor the Issuer shall be responsible
for any losses in the investment of money in the Rebate Fund made at the
direction of the Lessee.
ARTICLE VI
DEPOSITORIES 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 or the Lease Agreement shall be
held in trust and applied only in accordance with the provisions of this
Indenture and the Lease Agreement and shall not be subject to lien (other than
the lien created hereby) or attachment by any creditor of the Trustee, the
Issuer or the Lessee.
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<PAGE> 49
SECTION 6.2 INVESTMENT OF MONEYS.
(a) At the request and the direction of the Lessee's
Representative (confirmed in writing), 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 Authorized Investments 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 investment shall only be made at the direction of the
Lessee's Representative. The Trustee shall be entitled to rely on instruction
from the Lessee's Representative. In making investments hereunder, or in
selling or disposing of investments as required hereby, the Trustee shall have
no duty or responsibility to independently verify compliance with Sections
148(d) and 148(f) of the Code and the regulations promulgated thereunder and
the Trustee shall be fully protected in relying solely upon the written
directions of the Lessee as aforesaid. Under no circumstances whatsoever shall
the Trustee be liable to the Issuer, the Lessee or any holder for any loss of
tax-exempt status of the Bonds, or 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 Lessee as provided hereunder and in accordance with its other
obligations 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 (except as provided in
Section 4.2(c)), 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.
(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 Lessee's Representative.
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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 $4,725,000 of which (A) $4,500,000
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) $225,000 shall support
the payment of up to one hundred 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
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 "STATED 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 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 Reimbursement
Agreement for the amounts so drawn and the Bank delivers a
notice to the Trustee reinstating the Letter of Credit in such
amount.
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<PAGE> 51
(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 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 in accordance with Section 6.3(c) hereof at least thirty (30) days
before the Interest Payment Date immediately preceding the fifteenth (15th) day
prior to the Stated 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)(2) 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, the Lessee 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 Lessee shall furnish to the
Trustee:
(1) an opinion of Counsel stating that the delivery of such
Alternate Credit Facility to the Credit Facility 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 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,
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<PAGE> 52
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;
provided, however, if the Lessee provides the Trustee with an
opinion of Bond Counsel that a change in the then current rating
on the Bonds or a change in the Credit Facility Issuer to a bank
or institution the obligations of which are rated in a different
category than those obligations of equivalent term of the issuer
of the Credit Facility being replaced will not adversely affect
the exclusion of the interest on the Bonds from gross income
from federal tax purposes, then such evidence need not be
provided, but the Lessee shall instead provide the Trustee with
written evidence (or such other evidence as shall be
satisfactory to the Trustee) that (i) the commercial paper of
the bank or institution issuing the proposed Alternate Credit
Facility is rated P-3 or higher by Moody's or A-3 or higher by
S&P, and (ii) the Issuer has consented to the proposed Alternate
Credit Facility.
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 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 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.
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ARTICLE VII
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 VII. 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.
(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,
given at the request of the Lessee, with the consent of the
Credit Facility Issuer, 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, given at the request of the Lessee, 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 (4) years 103% declining by 1/2% on
from the Conversion Date each succeeding anniversary
date of the first Business
day of the redemption
period until reaching 100%
and thereafter at 100%
</TABLE>
(b) EXTRAORDINARY OPTIONAL REDEMPTION DUE TO CASUALTY OR EMINENT
DOMAIN.
(1) The Bonds may be redeemed as a whole or in part by the
Issuer at any time at the written direction of the Lessee, at a
redemption price equal to one hundred percent (100%) of the
principal amount thereof plus interest accrued thereon to the
redemption date, without premium, under any of the following
conditions, the existence of which shall be certified to the
Trustee by the Lessee's Representative:
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<PAGE> 54
(A) The Project shall have been damaged or destroyed to
such extent that the amount of Net Proceeds of insurance
exceeds $50,000 and the Lessee elects not to rebuild the
Project or fails to so elect within ninety (90) days of
receipt by the Trustee of such Net Proceeds; or
(B) Title to, or the temporary use of, all of the
Project or any substantial portion thereof shall have been
taken by Eminent Domain and the amount of Net Proceeds from
such taking exceeds $50,000 and the Lessee elects not to
replace the property so taken or fails so to elect within
ninety (90) days of receipt by the Trustee of such Net
Proceeds.
(2) Such redemption shall occur on the next Interest Payment
Date occurring not less than thirty (30) days following the
expiration of such 90-day period referred to in paragraph (1) of
this Section 7.1(b).
(c) MANDATORY REDEMPTION.
(1) Determination of Taxability. The Tax-Exempt Series Bonds
shall be subject to mandatory redemption in whole on any date at
a redemption price equal to one hundred percent (100%) of the
principal amount thereof plus accrued interest to the redemption
date which shall not be more than one hundred eighty (180) days
following the receipt by the Trustee of a written notice of a
Determination of Taxability.
(2) Failure to Provide Alternate Credit Facility. The Bonds
shall be subject to mandatory redemption during the Variable
Rate Period at one hundred percent (100%) of the principal
amount thereof, without premium, plus interest accrued, if any,
thereon to the date of redemption, on the Interest Payment Date
occurring closest to but not after fifteen (15) days prior to
the date of expiration of the then current Credit Facility,
unless an Alternate Credit Facility has been provided in
accordance with Article VI hereof.
(3) Excess Moneys in Project Fund. The Bonds shall be
subject to mandatory redemption in whole or in part on any date
from excess moneys in the Project Fund or from moneys drawn
under the Credit Facility for which the Credit Facility Issuer
has been reimbursed from such excess moneys in accordance with
the provisions of Section 4.4 of the Lease Agreement, at a price
equal to 100% of the principal amount thereof, without premium,
plus accrued interest to the redemption date, provided such
redemption date shall be no more than 60 days following the date
of transfer of moneys to the Bond Fund from the Project Fund.
(4) Tax-Exempt Conversion. The Series 1999 Bonds shall be
subject to mandatory redemption in whole on the Mandatory
Tax-Exempt Conversion Redemption
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<PAGE> 55
Date at a redemption price equal to one hundred percent (100%)
of the principal amount thereof plus accrued interest to the
redemption date.
(d) 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 above.
(e) PURCHASE IN LIEU OF REDEMPTION. The Bonds are subject to
optional call and purchase in whole prior to the Conversion Date on any
Interest Payment Date upon the written direction of the Issuer, given at the
request of the Lessee, which purchase may be in lieu of redemption, from moneys
deposited with the Trustee sufficient for payment of 100% of the principal
amount due upon such call together with accrued interest on the Bonds to the
call date.
SECTION 7.2 LESSEE TO DIRECT OPTIONAL REDEMPTION. The Issuer shall
direct the Trustee in writing to call Bonds for optional redemption when and
only when it shall have been notified by the Lessee to do so and the Lessee has
notified the Trustee in writing that the Lessee has made or intends to make a
corresponding prepayment under the Lease Agreement. 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
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 Lessees during the
Variable Rate Period under this Article VII 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 Lessee; 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.
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SECTION 7.4 NOTICE OF REDEMPTION OR PURCHASE.
(a) When required to redeem or purchase Bonds under any
provision of this Article VII, 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 twenty (20) 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 purchases pursuant
to Section 7.1(c)(2) or 7.1(d) 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) With respect to any notice of redemption or purchase of
Bonds in accordance with Section 7.1(c)(2) hereof, such notice shall also
specify the date of the expiration of the term of the Credit Facility.
(c) 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 redemption, such notice may state
that it is conditional on the deposit of Available Moneys (or in the case of
purchase pursuant to Section 7.1(e), moneys) with the Trustee not later than
the redemption date, and such notice shall be of no effect unless such moneys
are so deposited.
(d) 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.
(e) Purchases under Section 7.1(d) hereof shall be in accordance
with Section 2.2(e) hereof.
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<PAGE> 57
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 VIII
PARTICULAR COVENANTS AND PROVISIONS
SECTION 8.1 COVENANT TO PAY THE BONDS; BONDS LIMITED OBLIGATIONS OF
THE ISSUER.
(a) The Issuer covenants that it will promptly pay the principal
of, redemption premium, if any, and interest on 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. Such principal, redemption premium, if any, and
interest are payable solely from the payments made by the Lessee under the
Lease Agreement and other Revenues.
(b) The Bonds shall not be general obligations of the Issuer but
limited and special obligations payable solely from the amounts payable under
the Lease Agreement and other amounts specifically pledged therefor under this
Indenture, and shall be a valid claim of the respective Owners thereof only
against the designated accounts of the Bond Fund and other moneys held by the
Trustee and the amounts payable under the Lease Agreement or otherwise pledged
therefor, which amounts are hereby pledged, assigned and otherwise secured for
the equal and ratable payment of the Bonds and shall be used for no other
purpose than to pay the principal of , premium, if any, and interest on the
Bonds, except as may be otherwise expressly authorized in this Indenture. The
Bonds do not constitute an indebtedness of the Issuer or a loan of credit
thereof within the meaning of any constitutional or statutory provisions.
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 and will faithfully observe and perform at all
times any and all covenants, undertakings, stipulations and provisions of the
Lease Agreement on its part to be observed or performed. The Issuer covenants
that it is duly authorized under the Constitution and laws of the State,
including particularly and without limitation the Act, to issue the Bonds
authorized hereby and to enter into this Indenture, to pledge the payments
under the Lease Agreement and other Revenues in the manner and to the extent
herein set forth, and to
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<PAGE> 58
assign its interest in the Lease Agreement to the Trustee; 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 COVENANT TO PERFORM OBLIGATIONS UNDER THE LEASE
AGREEMENT. Subject to the provisions of Section 8.4 of this Article, the Issuer
covenants and agrees that it will not suffer, permit or take any action or do
anything or fail to take any action or fail to do anything which may result in
the termination or cancellation of the Lease Agreement so long as any Bond is
Outstanding; that it will punctually fulfill its obligations and will require
the Lessee to perform punctually its duties and obligations under the Lease
Agreement; that it will not execute or agree to any change, amendment or
modification of or supplement to the Lease Agreement or this Indenture except
by a supplement or an amendment duly executed by the Issuer and the Lessee with
the approval of the Trustee and upon the further terms and conditions set forth
in Article VIII of this Indenture; that it will not agree to any abatement,
reduction, abrogation, waiver, diminution or other modification in any manner
or to any extent whatsoever of the obligation of the Lessee to pay the lease
payments and to meet its other obligations as provided in the Lease Agreement;
and that it will promptly notify the Trustee in writing of any actual or
alleged Event of Default under the Lease Agreement, whether by the Lessee or
the Issuer, and will further notify the Trustee at least thirty (30) days
before the proposed date of effectiveness of any proposed termination or
cancellation of the Lease Agreement.
SECTION 8.4 TRUSTEE MAY ENFORCE THE ISSUER'S RIGHTS UNDER THE LEASE
AGREEMENT. The Lease Agreement, a duly executed counterpart of which has been
filed with the Trustee, sets forth the covenants and obligations of the Issuer
and the Lessee, including a provision in Section 12.9 thereof that subsequent
to the issuance of the Bonds and prior to Payment of the Bonds (as defined in
the Lease Agreement) the Lease Agreement may not be effectively amended,
changed, modified, altered or terminated except as provided in Article VIII of
this Indenture, and reference is hereby made to the Lease Agreement for a
detailed statement of said covenants and obligations of the Lessee under the
Lease Agreement, and the Issuer agrees that the Trustee, subject to the
provisions of the Lease Agreement and this Indenture reserving to the Issuer
the Issuer Reserved Rights and respecting actions by the Trustee in its name or
in the name of the Issuer, may enforce all rights of the Issuer and all
obligations of the Lessee under and pursuant to the Lease Agreement for and on
behalf of the Bondholders whether or not the Issuer is in default hereunder.
SECTION 8.5 COVENANT AGAINST ARBITRAGE. The Issuer covenants and
agrees that it will not make or authorize any use, and directs the Trustee not
to make or permit any use, of the proceeds of the Bonds which would cause any
Bond to be an "arbitrage bond" within the meaning of Section 148 of the Code
and the applicable regulations promulgated from time to time thereunder, and
further covenants that it will observe and not violate the requirements of
Section 148 of the Code and any such applicable regulations to the extent
necessary so that the interest on the Bonds will not cease to be excluded from
the gross income of the recipients thereof for federal income tax purposes by
reason of such use of proceeds; provided that (i) neither the Issuer nor the
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Trustee shall be liable for any investment of moneys under this Indenture made
at the direction of the Lessee's Representative and (ii) the Issuer shall not
be liable for any investment of moneys under this Indenture made by the Trustee
made in contravention of the directors of the Issuer; provided further, that
the Issuer shall have no affirmative obligation to undertake any investigation
into investments made by the Trustee.
SECTION 8.6 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 Lessee but
only if the Bond Registrar is furnished with opinion of Counsel to the effect
that such inspection is lawfully permitted.
SECTION 8.7 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, except as provided herein and
in the Lease Agreement, no persons shall have any rights with respect thereto.
SECTION 8.8 MAINTENANCE OF INSURANCE: PAYMENT OF TAXES, CHARGES, ETC.
Pursuant to the provisions of 6.3 and 6.4 of the Lease Agreement and Section
4.3 of the Reimbursement Agreement, the Lessee has agreed to maintain certain
insurance and to pay all lawful taxes, assessments and charges at any time
levied or assessed upon or against the Project, or any part thereof, which
might impair or prejudice the lien afforded by this Indenture as to the Trust
Estate; 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 Lease Agreement.
SECTION 8.9 MAINTENANCE AND REPAIR. Pursuant to the provisions of
Section 6.1 of the Lease Agreement, the Lessee has agreed at its own expense to
cause the Project to be maintained, preserved and kept in good condition,
repair and working order, and that it will, from time to time, cause to be made
all needed repairs so that the Project shall at all times be kept in good
condition and repair, and that the Lessee may, at its own expense, make, from
time to time, additions, modifications and improvements to the Project under
the terms and conditions set forth in the Lease Agreement.
SECTION 8.10 INSURANCE AND CONDEMNATION PROCEEDS. Reference is hereby
made to Section 6.7 of the Lease Agreement whereunder it is provided that under
certain circumstances the respective Net Proceeds of insurance and condemnation
awards (or Net Proceeds from a sale in lieu of condemnation) are to be paid to
the Trustee and deposited in separate trust accounts (but not in the Bond Fund)
and to be disbursed and paid out as therein provided. The Trustee hereby
accepts and agrees to perform the duties and obligations as therein specified.
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SECTION 8.11 ACTIONS ON BEHALF OF THE LESSEE. Subject to the proviso
to this sentence, but notwithstanding any other provision of this Indenture or
any related document, (a) all decisions which are to be made and all actions
which are to be taken, in each case by the Lessee pursuant to this Indenture or
any related document, shall be made or taken (or cause to be made or taken) by
Sterile Recoveries, Inc., (b) all notices and communications which are to be
delivered to the Lessee pursuant to this Indenture or any related document
shall also be delivered concurrently to Sterile Recoveries, Inc. and the
Financing Bank and (c) all notices and communications which are to be delivered
by the Lessee pursuant to this Indenture or any related document shall be
delivered by Sterile Recoveries, Inc. and copies thereof shall also be
delivered concurrently to the Financing Bank; provided, notwithstanding the
foregoing, (x) the rights of Sterile Recoveries, Inc. referenced in Section
8.11(a) shall automatically terminate upon the Financing Bank giving notice to
the Trustee and the Issuer at the addresses set forth in Section 15.2 of this
Indenture (or any other address which is subsequently designated by either such
party to the Financing Bank in writing) of the occurrence of any Synthetic
Lease Financing Default or Synthetic Lease Financing Event of Default and (y)
thereafter, the Issuer and the Trustee agree that the Financing Bank shall
exercise all such rights on behalf of the Lessee; but, provided further that
Sterile Recoveries, Inc. shall again have the rights referenced in Section
8.11(a) if any such Synthetic Lease Financing Default or Synthetic Lease
Financing Event of Default has been cured within the applicable cure period or
waived.
SECTION 8.12 NO LIEN ON THE PROJECT IN FAVOR OF THE TRUSTEE OR THE
ISSUER; QUITCLAIM TRANSFER OF RIGHT, TITLE AND INTEREST IN THE PROJECT.
Notwithstanding any other provision of this Indenture or any related document,
(a) each of the Trustee and the Issuer hereby confirms that, except for nominal
title held by the Issuer, neither the Trustee nor the Issuer currently is (and
at no time shall become) the beneficiary of any lien, mortgage, pledge,
security interest, encumbrance, option or charge of any kind on or with respect
to the Project and (b) upon the request of the Lessee (or the Financing Bank on
behalf of the Lessee), the Issuer and the Trustee each shall promptly issue in
favor of the Lessee a quitclaim deed and bill of sale (in substantially the
same form of the Deed referenced in Section 10.5 of the Lease Agreement) upon
the full payment of all Outstanding Bonds (or provisions for payment thereof
having been made in accordance with the provisions of this Indenture).
ARTICLE IX
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
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(b) Payment of the principal of or redemption premium, if any,
on 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) An "Event of Default" under the Lease Agreement shall have
occurred and not have been waived; or
(d) The Trustee receives written notice from the Credit Facility
Issuer that an Event of Default under the Reimbursement Agreement has occurred
and has not been waived; or
(e) The Trustee receives notice by telecopier, by telex or 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
(f) Payment of the Purchase Price of any Bond tendered pursuant
to Section 2.3 hereof is not made when payment is due; or
(g) 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;
provided, however, that no failure specified in subsections (c) or (g) of this
Section 9.1 shall constitute an Event of Default until written notice
specifying such failure and requiring the same to be remedied shall have been
given to the Lessee and the Issuer by the Trustee, which may give notice in its
discretion and shall give such notice at the written direction of the owners of
not less than twenty-five percent (25%) in aggregate principal amount of Bonds
Outstanding, and the Lessee and the Issuer shall have had thirty (30) days
after receipt of such notice to correct said failure and shall not have
corrected said failure within the applicable period, provided, however, that if
the Issuer or Lessee as the case may be, is diligently and continuously
pursuing a cure or correction of such failure but has been unable to affect
such cure within the aforementioned thirty (30) day period, the Trustee shall
extend such period to allow for the same to be remedied.
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 (g) 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
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subsection (a), (b), (d), (e) or (f) 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), (d), (e), (f) or (g), the
Trustee shall (immediately, and in no event within two Business Days
thereafter) notify in writing the Issuer, the Lessee and the Credit Facility
Issuer of the occurrence of such acceleration. 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 Lessee, and the
Lessee also performs all other things in respect to which it may have been in
default under the Lease Agreement and pays the reasonable charges of the
Trustee and 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(e)
hereof unless the Credit Facility has been reinstated in accordance with its
terms to an amount equal to the principal amount of the Bonds Outstanding plus
one hundred 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 Lessee.
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 Lease Agreement and any supplements or amendments thereto. In
exercising such rights and the rights given the Trustee under this Article IX,
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.
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SECTION 9.4 LEGAL PROCEEDINGS BY THE TRUSTEE.
(a) 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 twenty-five percent (25%) in
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.
(b) If an Event of Default under Section 9.1(c) occurs and is
continuing, the Trustee in its discretion may, and upon the written request of
the owners of not less than twenty-five percent (25%) in aggregate principal
amount of the Outstanding Bonds and receipt of indemnity to its satisfaction
shall, enforce each and every right granted to it under the Lease Agreement.
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 Lessee, 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.
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;
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(2) the owners of not less than twenty-five percent (25%) in
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
of, redemption premium, if any, 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 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 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 IX 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 IX
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
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paragraph (3) below with respect to the principal of (but not redemption
premium) and interest accrued on, Bonds other than Bonds held by or for the
Lessee:
(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 its 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 of, premium, if any, and
interest on the Bonds, and in case such moneys shall be
insufficient to pay the same in full, then to payment of
principal of, redemption premium, if any, 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 Lessee 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 ACT. It is the purpose of this Article IX to provide such remedies to the
Trustee and the Bondholders as may be lawfully granted under the provisions of
the Act, but should any remedy herein granted be held unlawful, the Trustee and
the Bondholders shall nevertheless be entitled to every remedy provided by the
Act. It is 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, the Lessee or any
other obligor upon the Lease Agreement or the Bonds or to property of the
Issuer, the Lessee, 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 Lessee
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
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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 moneys 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 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 under the Lease Agreement and
assigned to the Trustee under this Indenture 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.
SECTION 9.15 SUBROGATION RIGHTS OF CREDIT FACILITY ISSUER. The Credit
Facility Issuer shall be subrogated to the rights possessed under this
Indenture by the owners of the Bonds, to the extent the Credit Facility is
drawn upon and the amount of such drawing is not subsequently reimbursed to the
Credit Facility Issuer. For purposes of the subrogation rights of the Credit
Facility Issuer hereunder, (i) any reference herein to the owners of the Bonds
shall mean the Credit Facility Issuer, (ii) any principal of or interest on the
Bonds paid with money collected pursuant to the Credit Facility shall be deemed
to be unpaid hereunder, and (iii) the Credit Facility Issuer may exercise any
rights it would have hereunder as the owner of the Bonds. The subrogation
rights granted to the Credit Facility Issuer in this Indenture are not intended
to be exclusive of any
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other remedy or remedies available to the Credit Facility Issuer, and such
subrogation rights shall be cumulative and shall be in addition to every other
remedy given hereunder, under the Reimbursement Agreement or under any other
instrument or agreement with respect to the reimbursement of moneys paid by the
Credit Facility Issuer under the Credit Facility or with respect to the
security for the obligations of the Lessee under the Reimbursement Agreement,
and every other remedy now or hereafter existing at law or in equity or by
statute.
ARTICLE X
CONCERNING THE TRUSTEE
SECTION 10.1 ACCEPTANCE OF THE TRUSTS. The Trustee hereby represents
and warrants to the Issuer (for the benefit of the Lessee and the Bondholders
as well as the Issuer) 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 Trustee would exercise or use under the facts and circumstances in the
conduct of its 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.
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(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 any part of
the Project or collecting any insurance moneys, or for the validity of the
execution hereof by the Issuer or of any 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 or on the
part of the Lessees under the Lease Agreement, except as hereinafter set forth;
but the Trustee may require of the Issuer or the Lessee 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 negligent action, its own 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
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 10.3 and 10.4 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 V or failure by the Issuer or the Lessee to file with the Trustee any
document required by this Indenture or the Lease Agreement to be so filed,
unless the Trustee shall be notified of such default by the Issuer or by the
holders of 25% in 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.
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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.
(c) Promptly upon receipt of notice of the occurrence of a
Determination of Taxability, the Trustee shall give notice thereof to the
Lessee, the Issuer, the Bondholders and former Bondholders and to the Credit
Facility Issuer.
SECTION 10.3 TRUSTEE ENTITLED TO INDEMNITY.
(a) The Lessee shall indemnify the Trustee and its officers,
directors and employees against any loss, liability or expense incurred by any
thereof arising out of or in connection with the acceptance or administration
of its duties under this Indenture, except as set forth in subsection (b)
below. The Trustee shall notify the Lessee promptly of any claim for which it
may seek indemnity. Except where the Lessee is the claimant, the Lessee shall
defend the claim, and the Trustee shall cooperate in the defense. The Trustee
may have separate counsel, and the Lessee shall pay the reasonable fees and
expenses of such counsel.
(b) The Lessee shall not be obligated to reimburse any expense
or to indemnify against any loss or liability incurred by the Trustee through
negligence or bad faith.
(c) To secure the Lessee'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 Lease Agreement 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 of, redemption
premium, if any, and interest on the Bonds and of the Purchase
Price of Bonds tendered at the option of the owners thereof or
purchased by the Lessee in lieu of redemption,
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(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,
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.
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 Lessee, 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 have no 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 depository 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 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.
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SECTION 10.5 COMPENSATION. The Issuer shall use its best efforts to
cause the Lessee to pay to the Trustee a total annual fee of $4,100 each year
during the term hereof and reasonable out-of-pocket expenses in accordance with
Section 7.5 of the Lease Agreement. In computing such compensation, the parties
shall not be limited by any law on the compensation of an express trust. If the
Lessee 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 Project in the custody of the Trustee shall be open at all
reasonable times to the inspection of the Issuer, the Credit Facility Issuer
and the Lessee and their agents and representatives; provided, however, that
inspection of the bond registration books shall be permitted only in accordance
with Section 8.6 hereof.
SECTION 10.7 TRUSTEE MAY BE A BONDHOLDER. The institution acting as
Trustee under this Indenture, and its directors, officers, employees or agents,
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 be under
no responsibility for the correctness of the same.
SECTION 10.9 NO RESPONSIBILITY FOR RECORDING OR FILING. The Trustee
shall be under no obligation to see to the recording or filing of this
Indenture, the Lease Agreement, 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 9.2 hereof, the obligations of the
Trustee to make payments on the Bonds when due, and the obligations of the
Trustee 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
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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 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 the Lease Agreement or 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 be under no 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 BBB/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
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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 10.16
hereof.
(b) The Trustee may resign at any time by giving written notice
thereof to the Issuer and the Lessee. 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 (i) at any time by an instrument
or instruments in writing to the Trustee, with copies to the Issuer and the
Lessee, signed by a Majority of the Bondholders or by their attorneys, legal
representatives or agents and delivered to the Trustee, the Issuer and the
Lessee (such instruments to be effective only when received by the Trustee) and
(ii) at anytime by an instrument in writing from the Lessee delivered to the
Trustee, with the consent of the Issuer and the Bank.
(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 Lessee 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 or the Lessee 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 with the approval of the Lessee 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 Lessee and the resigning or
removed Trustee, the
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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 and approved by the Lessee. If no successor Trustee
shall have been so appointed by the Issuer and approved by the Lessee or a
Majority of the Bondholders 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 the resignation and removal of the Trustee and the 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.
SECTION 10.16 SUCCESSOR TRUSTEE.
(a) Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to its predecessor, and also to the Issuer and the
Lessee, 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 fully and certainly
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.
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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 Lessee. 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 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 are, 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,
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(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, the Lease Agreement,
or the Reimbursement Agreement.
ARTICLE XI
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 11.1 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.
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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.
ARTICLE XII
THE REMARKETING AGENT, THE
TENDER AGENT AND 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, the Trustee and the
Lessee, 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, the
Credit Facility Issuer and the Lessee 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, the Tender Agent and the Lessee, may resign. The Remarketing Agent may
be removed at any time by the Lessee with the consent of the Issuer and the
Bank, by written notice signed by the Lessee delivered to the Trustee, the
Remarketing Agent, the Credit Facility Issuer and the Tender Agent. Upon
resignation or removal of the Remarketing Agent, the Lessee, with the consent
of the Issuer, shall appoint a substitute Remarketing Agent meeting the
qualifications of Section 12.1(c) above.
(e) In the event that the Lessee 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,
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shall not be required to sell Bonds or determine the interest rate on the Bonds
pursuant to Section 2.2 hereof.
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, the Trustee and the Lessee, 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 of 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, the Remarketing Agent and the Lessee, 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 Lessee with the consent of the Issuer, by
written notice signed by the Lessee 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
Lessee, with the consent of the Issuer, shall appoint a substitute Tender Agent
meeting the qualifications of Section 12.2(b) above.
(d) In the event that the Lessee 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 dealer 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 XIII
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 Lessee and the Credit Facility Issuer, if a Credit Facility is in effect
(and no Event of 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;
(g) to amend the administrative provisions hereof to accommodate
the provisions of an Alternate Credit Facility; and
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(h) to change or modify any provisions of the Indenture (other
than as specified in Section 13.2 hereof) which in the judgment of the Trustee
are not to the material prejudice of any Bondholder.
Notwithstanding the foregoing, prior to the making of any
amendment or supplement as described in the preceding paragraph, the Lessee
shall provide the Trustee, and during the Variable Rate Period (if no Event of
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
(2) an opinion of Bond Counsel to the effect that, if the
Bonds are then the Tax-Exempt Series Bonds, such amendment or
supplement will not adversely affect the exclusion of the
interest on the Bonds from the gross income of the recipients
thereof for federal income tax purposes, and, unless the Trustee
shall have otherwise given its consent to such amendment or
supplement, to the further effect that such amendment or
supplement will not otherwise adversely affect the interests of
the Bondholders.
SECTION 13.2 AMENDMENTS WITH THE BONDHOLDERS' AND THE CREDIT FACILITY
ISSUER'S CONSENT.
(a) This Indenture may be amended pursuant to Section 13.2 from
time to time, except with respect to:
(1) the principal of, redemption premium, if any, 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 XIII,
by a supplemental indenture authorized by a resolution of the Issuer filed with
the Trustee and consented to by the Credit Facility Issuer if a Credit Facility
is in effect (and no Event of Default has occurred and is continuing under the
Credit Facility) and by the Lessee.
(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 Event of Default has occurred and is
continuing under the Credit Facility), the Lessee and the Issuer.
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(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 Lessee shall provide the Trustee, and during the Variable
Rate Period (if no Event of 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
(2) an opinion of Bond Counsel to the effect that such
amendment or supplement will not adversely affect the exclusion
of the interest on the Bonds from the gross income of the
recipients thereof for federal income tax purposes, and, unless
the Trustee shall have otherwise given its consent to such
amendment or supplement, to the further effect that such
amendment or supplement will not otherwise adversely affect the
interests of the Bondholders.
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 XIII which in the judgment of the
Credit Facility Issuer if a Credit Facility is in effect (and no Event of
Default has occurred and is continuing under the Credit Facility) materially
and 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.
SECTION 13.4 AMENDMENT OF THE LEASE AGREEMENT.
(a) The Lessee and the Issuer may amend the Lease Agreement, but
only with the consent of the Credit Facility Issuer (if no default has occurred
and is continuing under the Credit Facility) during the Variable Rate Period;
provided that prior to making any amendment, the Lessee 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) copy of the proposed amendment, and
(2) an opinion of Bond Counsel to the effect that such
amendment will not adversely affect the exclusion of the
interest on the Bonds from the gross income of the recipients
thereof for federal income tax purposes, and, unless the Trustee
shall have otherwise given its consent to such amendment, to the
further effect that such amendment will not otherwise adversely
affect the interests of the Bondholders.
Notwithstanding the foregoing, the Issuer and the Lessee may amend the Lease
Agreement 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 Bond Counsel specified in
paragraph (2) above.
(b) If the Lessee proposes to amend the Lease Agreement in such
a manner as would materially and adversely affect the interests of the
Bondholders, the Trustee shall notify
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Bondholders of the proposed amendment and may consent thereto with the consent
of at least a Majority of the Bondholders which would be affected by the action
proposed to be taken; provided, that the Trustee shall not, without the
unanimous consent of the owners of all Bonds then Outstanding, consent to any
amendment which would:
(1) decrease the amounts payable under the Lease Agreement,
(2) change the due date of lease payments corresponding with
payment of principal of or interest on the Bonds or change any
of the prepayment provisions of the Lease Agreement, or
(3) change Section 5.6 of the Lease Agreement.
SECTION 13.5 AMENDMENT OF THE LEASE AGREEMENT REQUIRING THE CONSENT OF
THE CREDIT FACILITY ISSUER. Anything herein to the contrary notwithstanding,
any amendment, change or modification of the Lease Agreement 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) materially
and 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 of such amendment, change or modification.
SECTION 13.6 AMENDMENT OF THE CREDIT FACILITY. The initial Credit
Facility may be amended to such extent as shall be necessary to obtain a rating
of the Bonds from Moody's or S&P provided that such amendment or supplement
will not adversely affect the interests of the Bondholders. The Trustee shall
notify the Bondholders and the Issuer of any proposed amendment of the Credit
Facility which would materially and adversely affect the interests of the
Bondholders and may consent thereto with the consent of the Issuer, which
consent shall not be unreasonably withheld, and the consent of at least a
Majority of the Bondholders which would be affected by the action proposed to
be taken; provided, that the Trustee shall not, without the unanimous consent
of the owners of all Bonds then Outstanding, consent to any amendment which
would decrease the amount payable under the Credit Facility or reduce the term
of the Credit Facility.
SECTION 13.7 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 XIII 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.
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ARTICLE XIV
DEFEASANCE; OTHER PAYMENTS
SECTION 14.1 DEFEASANCE.
(a) When the principal of, redemption premium, if any, and
interest on all Bonds issued hereunder shall 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 the Lessee 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 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 XIV shall not be
remarketed but shall be canceled by the Trustee.
(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 the Trustee shall have received an opinion of Bond Counsel to the effect
that such deposit will not affect the exclusion of the interest on any of the
Bonds from the gross income of the recipients thereof for federal income tax
purposes (e.g. by causing any of the Bonds to be classified as an "arbitrage
bond" within the meaning of Section 148 of the Code), and provided further,
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 three hundred sixty-six (366) 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,
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including Purchase Price payments for Bonds tendered at the option of the
owners or purchased by the Lessee 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 premium, if any, Purchase Price (if
applicable) 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 of, or redemption premium, if any, on 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 XIV 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 of,
redemption premium, if any, Purchase Price (if applicable) and interest on the
Bonds, 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 Lessee 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, the Lessee 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 of and redemption premium, if any, on 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 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.
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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 XV
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 on 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, the Lessee 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:
If to the Issuer:
The Industrial Development Board of the County
of Hamilton, Tennessee
c/o Ross Schram, III
Suite 500, First Tennessee Building
701 Market Street
Chattanooga, Tennessee 37402-4800
Attention: Chairman
Telephone: (423) 265-2214
Telecopy: (423) 266-1842
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If to the Trustee:
First Union National Bank
150 Fourth Avenue, North, TN 1327
Nashville, Tennessee 37219
Attention: Corporate Trust Group
Telephone: (615) 251-9294
Telecopy: (615) 251-9364
If to the Lessee:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Van T. Orton,
Vice President
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
with copies to:
Sterile Recoveries, Inc.
28100 US Highway 19N, Suite 201
Clearwater, Florida 33761
Attention: James T. Boosales
Telephone: (813) 726-4421
Telecopy: (813) 726-8037
and the Bank
If to the Bank:
First Union National Bank
c/o First Union Capital Markets Group
DC 6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Christy Lee Foster,
Capital Markets Services
Telephone: (704) 383-5398
Telecopy: (704) 383-7989
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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 to the other shall also be given
to the Lessee.
(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 Lessee and the agents and representatives thereof.
(d) The Issuer, the Trustee, the Lessee 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 or the Lease Agreement.
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 Lessee 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 Lessee and the
owners from time to time of the Bonds issued hereunder.
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 or the Lessee to the Trustee shall be deemed to have
been signed by the proper party or parties if signed by the Issuer
Representative or the Lessee's Representative, respectively, and the Trustee
may accept and rely upon a certificate signed by the Issuer Representative as
to any action taken by the Issuer and by the Lessee's Representative as to any
action taken by the Lessee.
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
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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 COVENANTS OF ISSUER NOT COVENANTS OF OFFICIALS
INDIVIDUALLY. All covenants, stipulations, obligations and agreements of the
Issuer contained in this Indenture shall be deemed to be covenants,
stipulations, obligations and agreements of the Issuer to the full extent
permitted by the Constitution and laws of the State. No covenant, stipulation,
obligation or agreement contained herein shall be deemed to be a covenant,
stipulation, obligation or agreement of any present or future officer, member,
agent or employee of the Issuer in his individual capacity, and no officer of
the Issuer executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof. No officer, agent or employee of the Issuer shall incur any personal
liability in acting or proceeding or in not acting or not proceeding in
accordance with the terms of this Indenture.
SECTION 15.8 NO PERSONAL LIABILITY. No recourse shall be had for the
enforcement of any obligation, promise or agreement of the Issuer contained
herein or in the Bonds or other documents to which the Issuer is a party or for
any claim based hereon or thereon or otherwise in respect hereof or thereof
against any director, member, officer, agent, attorney or employee, as such, in
his/her individual capacity, past, present or future, of the Issuer or of any
successor entity, either directly or through the Issuer or any successor
entity, under or by reason of any of the obligations, promises or agreements
entered into in the Bonds or between the Issuer and the Trustee, whether herein
contained or to be implied herefrom as being supplemental hereto; and all
personal liability of that character against every such director, member,
officer, agent, attorney and employee is, by the execution of this Indenture
and as a condition of, and as part of the consideration for, the execution of
this Indenture, expressly waived and released.
The Bonds shall be limited obligations of the Issuer. The Bonds and
the interest thereon and redemption premium, if any, shall not be deemed to
constitute or create an indebtedness, liability or obligation of the Issuer,
the State or any political subdivision or agency thereof within the meaning of
any State constitutional provision or statutory limitation or a pledge of the
faith the credit or the taxing power of the State or any such political
subdivision or agency. The Bonds and the interest thereon are payable solely
from and secured by the Trust Estate, including the moneys available to be
drawn by the Trustee under the Letter of Credit that may be in effect from time
to time to support payments due on or with respect to the Bonds, all as
described in and subject to limitations set forth in this Indenture, for the
equal and ratable benefit of the Holders, from time to time, of the Bonds.
Nothing in the Bonds or in the Indenture or the proceedings of the Issuer to
create a debt of the Issuer, the State, or any political subdivision thereof
within the meaning of any constitutional or statutory provision of the State.
No member, director or officer, agent, attorney or employee of the Issuer,
including any person executing the Indenture or the Bonds, shall be liable
personally on the Bonds or subject to any personal liability for any reason
relating to the issuance of the Bonds. The Bonds and interest due thereon shall
not be a general obligation,
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debt or liability of the Issuer and do not constitute or give rise to any
pecuniary liability or charge against the general credit of the Issuer.
No recourse shall be had for the enforcement of any obligation,
promise or agreement of the Issuer contained herein or in the Bonds or the
other documents to which the Issuer is a party or for any claim based hereon or
thereon or otherwise in respect hereof or thereof against any director, member,
officer, agent, attorney or employee, as such, in his/her individual capacity,
past, present or future, of the Issuer or of any successor entity, either
directly or through the Issuer or any successor entity whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise. No personal liability whatsoever shall
attach to, or be incurred by, any member, officer, agent, attorney or employee
as such, past, present or future, of the Issuer or of any successor entity,
either directly or through the Issuer or any successor entity, under or by
reason of any of the obligations, promises or agreements entered into in the
Bonds or between the Issuer and the Trustee, whether herein contained or to be
implied herefrom as being supplemental hereto; and all personal liability of
that character against every such direct, member, officer, agent, attorney and
employee is, by the extension of this Indenture and as a condition of, and as
part of the consideration for, the execution of this Indenture, expressly
waived and released.
SECTION 15.9 NO LIABILITY OF COUNTY, OFFICERS, ETC. Hamilton County,
Tennessee, its officials and agents, shall not in any event be liable for the
performance of any pledge, mortgage, obligation or agreement of any kind
whatsoever herein or in any of the Bonds, and none of the agreements or
obligations of the Issuer contained in this Indenture or in the Bonds or
otherwise shall be construed to constitute an indebtedness of Hamilton County,
Tennessee or its officials or agents, within the meaning of any constitutional
or statutory provision whatsoever.
SECTION 15.10 LIMITED LIABILITY OF THE ISSUER. Notwithstanding
anything to the contrary, any liability for payment of money and any other
liability or obligation which the Issuer may incur under the Bonds, this
Indenture, the Lease Agreement or the Placement Agreement shall not constitute
a general obligation of the Issuer but shall constitute limited obligations of
the Issuer payable solely from and enforced only against the Trust Estate. No
recourse shall be had for the enforcement of any obligation, promise or
agreement of the Issuer contained herein or in the Bonds or the Lease Agreement
to which the Issuer is a party or for any claim based hereon or thereon or
otherwise in respect hereof or thereof against any director, member, officer,
agent, attorney or employee, as such, in his individual capacity, past, present
or future, of the Issuer or of any successor entity, either directly or through
the Issuer or any successor entity whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty otherwise. No personal liability whatsoever shall attach to, or be
incurred by, any director, member, officer, agent, attorney or employee as
such, past, present or future, of the Issuer or of any successor entity, either
directly or through the Issuer or any successor entity, under or by reason of
any of the obligations, promises or agreements entered into in the Bonds or
between the Issuer and the Trustee, whether herein contained or to be implied
herefrom as being supplemental hereto; and to all personal liability of that
character against every such
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director, member, officer, agent, attorney and employee is, by the execution of
this Indenture and as a condition of, and as part of the consideration for, the
execution of this Indenture, expressly waived and released.
SECTION 15.11 STATE LAW GOVERNS. This Indenture shall be governed by
and construed in accordance with the laws of the State.
SECTION 15.12 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 15.13 THIRD-PARTY BENEFICIARIES. Notwithstanding any other
provision of this Indenture or any related document, the Issuer and the Trustee
each agree that the Lessee and the Financing Bank, as the Lender and the
Holder, are each third-party beneficiaries of this Indenture, as permitted
under Tennessee law.
SECTION 15.14 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.
[Execution pages follow.]
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IN WITNESS WHEREOF, the Issuer has caused this Indenture to be
executed in its name and on its behalf by its Chairman and its Acting
Secretary; 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.
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY OF HAMILTON, TENNESSEE
By: /s/ Chairman
-----------------------------------
Chairman
By: /s/ Secretary
-----------------------------------
Acting Secretary
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ Authorized Officer
-----------------------------------
Title:
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EXHIBIT A
Form of Notice of Conversion
[Name and Address of Owner]
Re: $4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds (Sterile
Recoveries, Inc. Project), Taxable Series 1999 or Tax-Exempt
Series Bonds
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 February 1, 1999,
between The Industrial Development Board of the County of Hamilton, Tennessee
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):
The Conversion Date is ____________________.
1. The Placement Agent is First Union Capital Markets, a division of
Wheat First Securities, Inc., One First Union Center, TW8, 301
South College Street, Charlotte, North Carolina 28288-0600.
2. 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.
3. The address of the Tender Agent is as follows:
First Union National Bank
150 Fourth Avenue, North, TN 1327
Nashville, Tennessee 37219
Attention: Corporate Trust Department
4. After the tenth day preceding the Conversion Date, you will not
be entitled to tender any Bond for purchase.
5. 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.
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6. Interest on any Bond will be payable only to (but not including)
the Conversion Date.
7. The delivery by the Lessee to the Trustee of a letter from Bond
Counsel confirming the opinion received pursuant to this
notification is a condition precedent to a conversion to a Fixed
Rate. In the event that the Lessee fails to deliver to the
Trustee the letter of Bond Counsel herein referred to, the
conversion of interest on the Bonds to the Fixed Rate shall not
take effect and the Bonds shall continue to bear interest at the
Variable Rate.
8. The Preliminary Fixed Rate is _____________
9. Depending on market conditions, the Fixed Rate may be higher but
in no event lower than the Preliminary Fixed Rate.
10. After the Conversion Date, payment on the Bonds will not be
supported by a Credit Facility.
11. The rating on the Bonds (if any) may be reduced or withdrawn on
the Conversion Date.
12. All owners of Bonds 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) of the Indenture.
Dated 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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EXHIBIT B
DTC Blanket Issuer Letter of Representations
(see attached)
B-1
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EXHIBIT C-1
Form of Taxable Series 1999 Bond
THE INDUSTRIAL DEVELOPMENT BOARD OF THE
COUNTY OF HAMILTON, TENNESSEE
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(STERILE RECOVERIES, INC. PROJECT), TAXABLE SERIES 1999
CUSIP NO. __________________
No. R-1
Registered Owner: Cede & Co.
Principal Amount: $______________
Maturity Date: First Business Day of February, 2014
Initial Interest Rate: ______%
Interest Payment Dates: The first Business Day of each February, May, August
and November, commencing the first Business Day of
May __, 1999, and ending on the Maturity Date, the
Conversion Date (hereinafter defined) and the Maturity
Date.
Original Delivery Date: _____________________
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
C-1-1
<PAGE> 96
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.
THE BONDS SHALL NOT BE GENERAL OBLIGATIONS OF THE ISSUER BUT LIMITED
AND SPECIAL OBLIGATIONS PAYABLE SOLELY FROM THE AMOUNTS PAYABLE UNDER THE LEASE
AGREEMENT AND OTHER AMOUNTS SPECIFICALLY PLEDGED THEREFOR UNDER THE INDENTURE,
AND SHALL BE A VALID CLAIM OF THE RESPECTIVE OWNERS THEREOF ONLY AGAINST THE
DESIGNATED ACCOUNTS OF THE BOND FUND AND OTHER MONEYS HELD BY THE TRUSTEE AND
THE AMOUNTS PAYABLE UNDER THE LEASE AGREEMENT OR OTHERWISE PLEDGED THEREFOR,
WHICH AMOUNTS ARE HEREBY PLEDGED, ASSIGNED AND OTHERWISE SECURED FOR THE EQUAL
AND RATABLE PAYMENT OF THE BONDS AND SHALL BE USED FOR NO OTHER PURPOSE THAN TO
PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, EXCEPT AS MAY
BE OTHERWISE EXPRESSLY AUTHORIZED IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE
AN INDEBTEDNESS OF THE ISSUER OR A LOAN OF CREDIT THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY PROVISIONS.
THIS BOND AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A
DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF TENNESSEE OR ANY
POLITICAL SUBDIVISION THEREOF, INCLUDING HAMILTON COUNTY, TENNESSEE. HAMILTON
COUNTY, TENNESSEE SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THIS BOND, OR FOR THE PERFORMANCE
OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER HEREIN
OR INDEBTEDNESS BY THE ISSUER, AND NEITHER THIS BOND NOR ANY OF THE ISSUER'S
AGREEMENTS OR OBLIGATIONS DESCRIBED HEREIN OR OTHERWISE SHALL BE CONSTRUED OR
CONSTITUTE AN INDEBTEDNESS OF HAMILTON COUNTY, TENNESSEE, WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER.
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.
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The Industrial Development Board of the County of Hamilton, Tennessee
(herein called the "ISSUER"), a public non-profit corporation, organized and
existing under the laws of the State of Tennessee, 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, 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 while the Bonds (as hereinafter
defined) bear interest at the Variable Rate (as hereinafter defined) 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) 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 of and redemption premium, if
any, 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 is issued under and pursuant to the Constitution and laws of
the State of Tennessee (the "STATE"), particularly the provisions of Chapter 53
of Title 7 of Tennessee Code Annotated (the "ACT").
This Bond and the issue of which it is a part and the Purchase Price
thereof, the premium, if any, and interest thereon are limited obligations of
the Issuer payable by the Issuer solely from the revenues and receipts derived
from the Lease Agreement (as hereinafter defined), which revenues and receipts
have been pledged and assigned to the Trustee to secure payment thereof
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and from amounts received pursuant to the Credit Facility (as hereinafter
defined). This Bond and the interest hereon will not constitute an indebtedness
or a charge against the general credit or assets of the Issuer within the
meaning of any constitutional provision or statutory limitation and shall never
constitute nor give rise to any pecuniary liability of the Issuer, but will be
a limited obligation of the Issuer payable solely from the revenues and other
funds pledged therefor and will not be payable from any assets or funds of the
Issuer other than the revenues and other funds pledged therefor, and neither
the faith and credit nor the taxing power of the State or any political
subdivision or any agency thereof is pledged to the payment of the principal of
or the interest on this Bond.
This Bond is one of the Bonds of a duly authorized issue of variable
rate industrial revenue bonds of the Issuer in the aggregate principal amount
of $4,500,000 and designated The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds (Sterile Recoveries,
Inc. Project), Taxable Series 1999 (the "BONDS").
The Bonds have been issued for the purpose of financing the
acquisition, construction, installation and equipping of an industrial facility
(herein called the "PROJECT") and to pay a portion of the costs of issuing the
Bonds.
The Bonds are issued under and pursuant to a Trust Indenture, dated as
of February 1, 1999 (said Trust Indenture, together with all such supplements
and amendments thereto as therein permitted, being herein called the
"INDENTURE"), between 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.
The Issuer has entered into a Lease Agreement, dated as of February 1,
1999 (herein called the "LEASE AGREEMENT"), with First Security Bank, National
Association, as Owner Trustee under SRI Realty Trust 1998-1 (the "LESSEE"),
under which the Issuer has agreed to use the proceeds of the Bonds to provide
financing for the acquisition, construction, installation and equipping of
certain manufacturing buildings and facilities directly related or ancillary
thereto and to pay a portion of the costs of issuing the Bonds, and in
consideration therefor, the Lessee has agreed to make lease payments in
installments, 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. The Lease Agreement also provides
for the payment by the Lessee of certain fees and expenses of the Issuer and
the Trustee, and the Lease Agreement further obligates the Lessee (d) to pay
the cost of maintaining the Project in good repair in all material respects and
keeping the same properly insured and (e) to maintain a Credit Facility (as
hereinafter defined)
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<PAGE> 99
during the period of time the Bonds bear interest at the Variable Rate (herein
called the "VARIABLE RATE PERIOD").
As security for the payment of the Bonds, all right, title and
interest of the Issuer in (a) the Lease Agreement (except certain Issuer
Reserved Rights defined in the Indenture); (b) 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), but excluding the Rebate Fund (as defined
in the Indenture); and (c) 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. The Project shall not otherwise constitute any part of the security for
the payment of 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, the Lessee and the Trustee, the rights of the owners
of the Bonds, the terms and conditions under and upon the occurrence of which
the Indenture and the Lease Agreement 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 Lessee has entered into a Credit Agreement, dated
as of February 1, 1999 (herein called the "REIMBURSEMENT AGREEMENT"), by and
between the Lessee and First Union National Bank (in such capacity, herein
called the "BANK").
Pursuant to the Reimbursement Agreement, the Lessee 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
$4,725,000 of which (a) $4,500,000 will be available for the payment of
principal or that portion of the Purchase Price corresponding to principal of
the Bonds and (b) $225,000 will support the payment of up to one hundred 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 Lessee 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.
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<PAGE> 100
Source of Funds. The principal of, premium (if any) and interest on
the Bonds are payable solely from lease payments under the Lease Agreement 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
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 March 3, 1999 at the Initial Interest Rate.
Variable Rate. The Bonds will initially bear interest from the
Original Delivery Date (as defined in the Indenture) through March 3, 1999 at
the Initial Interest Rate stated thereon as determined in accordance with the
Indenture. Thereafter, prior to and including the Conversion Date, the Bonds
will bear interest at a floating rate determined weekly by the Remarketing
Agent as set forth below (the "VARIABLE RATE"). The Variable Rate will be equal
to the rate of interest certified to the Trustee by the Remarketing Agent on
and as of each Wednesday (or the next Business Day if such Wednesday is not a
Business Day) (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 in the secondary market on
the Determination Date at a price equal to the principal amount thereof (plus
accrued interest to the date of settlement). 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. "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 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 Trustee, 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. 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 the Maximum Rate (as defined in the Indenture) then in
effect. While the Bonds bear interest at a Variable Rate, interest on the Bonds
shall be computed on the basis of a year of 365 or 366 days, as applicable, for
the number of days actually elapsed and shall be payable on each Interest
Payment Date.
C-1-6
<PAGE> 101
Fixed Rate. (a) The interest rate on this Bond will be converted to
the Fixed Rate upon an election by the Lessee 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 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 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 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:
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<PAGE> 102
(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 the
Maximum Rate (as defined in the Indenture) then in effect.
(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 Lessee, the Trustee, the Trustee,
the Remarketing Agent, the Placement Agent, the Tender Agent and the Credit
Facility Issuer.
No Usury. Anything herein to the contrary notwithstanding, in no event
shall the interest rate borne by the Bonds exceed the maximum contract rate of
interest permitted by the laws of the State.
REDEMPTION OF BONDS
(a) Optional Redemption. While the Bonds bear interest at the
Variable Rate, the Bonds will be subject to redemption upon the written
direction of the Issuer, given at the request of the Lessee, 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, given
at the request of the Lessee, in whole on any date, or in part on any Interest
Payment Date, occurring on or after the dates set forth
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<PAGE> 103
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:
Commencement of
Redemption Period Redemption Price
----------------- ----------------
The Business Day four (4) 103% declining by 1/2% on each
years from the Conversion succeeding anniversary date of the
Date first day of the redemption period
until reaching 100% and thereafter
at 100%
(c) The Bonds will be subject to redemption upon the written
direction of the Issuer, given at the request of the Lessee, at any time in
whole or in part at a redemption price equal to one hundred percent (100%) of
the principal amount thereof plus interest accrued to the redemption date in
the event of damage, destruction or condemnation of the Project, all as more
fully described in Section 7.1(b) of the Indenture.
Mandatory Redemption. (a) The Bonds will be subject to mandatory
redemption in whole on the Mandatory Tax-Exempt Conversion Redemption Date (as
defined in the Indenture) at a redemption price equal to one hundred percent
(100%) of the principal amount thereof plus accrued interest to the redemption
date.
(b) During the Variable Rate Period, the Bonds will be subject
to mandatory redemption in whole on the Interest Payment Date occurring closest
to but not after fifteen (15) days prior to the date of expiration of the then
current Credit Facility unless prior to such date an Alternate Credit Facility
has been provided in accordance with the Indenture, at a redemption price or
Purchase Price equal to one hundred percent (100%) of the principal amount
thereof, without premium, plus interest accrued to the redemption date.
(c) The Bonds are subject to redemption without premium from
proceeds of the Bonds not used to complete the Project or from moneys drawn
under the Credit Facility for which the Credit Facility Issuer is reimbursed
from such excess proceeds in accordance with the provisions of the Indenture,
which redemption date shall be no more than sixty (60) days following the date
of transfer of moneys to the Bond Fund established under the Indenture from the
Project Fund established under the Indenture.
Purchase in Lieu of Redemption. The Bonds are subject to optional call
and purchase in whole prior to the Conversion Date on any Interest Payment Date
upon the written direction of the Issuer, given at the request of the Lessee,
which purchase may be in lieu of redemption, from moneys deposited with the
Trustee sufficient for payment of 100% of the principal amount due upon such
call together with accrued interest on the Bonds to the call date.
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<PAGE> 104
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 twenty (20) 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
Lessee 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 the payment of 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 Lessee and third, Bonds selected by any
random or other method determined by the Trustee in its sole discretion.
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 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
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<PAGE> 105
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 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 LESSEE, 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,
Nashville, Tennessee as Tender Agent. The Tender Agent may be changed at any
time by the Lessee with the consent of the Issuer and 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. 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, provided that transfers in connection with the remarketing hereof will be
made at the corporate trust office of the Trustee in Nashville, Tennessee,
accompanied by a
C-1-11
<PAGE> 106
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 LESSEE 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 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 Lease Agreement and 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.
No recourse shall be had for the enforcement of any obligation,
promise or agreement of the Issuer contained herein or other documents to which
the Issuer is a party or for any claim based hereon or thereon or otherwise in
respect hereof or thereof against any director, member, officer, agent,
attorney or employee, as such, in his/her individual capacity, past, present or
future, of the Issuer or of any successor entity, either directly or through
the Issuer or any successor entity, under or by reason of any of the
obligations, promises or agreements entered into in this Bond or between the
Issuer and the Trustee; and all personal liability of that character against
every such director, member, officer, agent, attorney and employee is, by the
execution of the Indenture and as a condition of, and as part of the
consideration for, the execution of this Indenture, expressly waived and
released.
Notwithstanding anything to the contrary, any liability for payment of
money and any other liability or obligation which the Issuer may incur under
this Bond shall not constitute a general obligation of the Issuer but shall
constitute limited obligations of the Issuer payable solely from and enforced
only against the Trust Estate. No recourse shall be had for the enforcement of
any obligation, promise or agreement of the Issuer contained herein or in the
Bonds or the Lease Agreement to which the Issuer is a party or for any claim
based hereon or thereon or otherwise
C-1-12
<PAGE> 107
in respect hereof or thereof against any director, member, officer, agent,
attorney or employee, as such, in his individual capacity, past, present or
future, of the Issuer or of any successor entity, either directly or through
the Issuer or any successor entity whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty otherwise. No personal liability whatsoever shall attach to, or be
incurred by, any director, member, officer, agent, attorney or employee as
such, past, present or future, of the Issuer or of any successor entity, either
directly or through the Issuer or any successor entity, under or by reason of
any of the obligations, promises or agreements entered into in this Bond or
between the Issuer and the Trustee, whether herein contained or to be implied
herefrom as being supplemental hereto; and to all personal liability of that
character against every such director, member, officer, agent, attorney and
employee is, by the execution of the Indenture and as a condition of, and as
part of the consideration for, the execution of the Indenture, expressly waived
and released.
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 Tennessee.
Tennessee Code Annotated Sections 7-53-305(a) and 67-5-205(a), as
amended, provide that this Bond and the income therefrom shall be exempt from
all taxes in the State of Tennessee. Other provisions of the Tennessee Code
Annotated indicate, however, that the Bond and/or interest thereon may be
subject to Tennessee inheritance, transfer and gift taxes and to the Tennessee
corporate excise and franchise taxes.
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-1-13
<PAGE> 108
IN WITNESS WHEREOF, The Industrial Development Board of the County of
Hamilton, Tennessee has caused this Bond to be executed with the manual
signatures of its Chairman and its Acting Secretary, all as of _______________.
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY OF HAMILTON, TENNESSEE
By:
-----------------------------------
Chairman
Attest:
-------------------------------
Acting Secretary
C-1-14
<PAGE> 109
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:
----------------------------------
Authorized Representative
Date of Authentication:
--------------
C-1-15
<PAGE> 110
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: Signature(s) must be guaranteed by a member
firm of a Medallion Program acceptable to the
Trustee.
C-1-16
<PAGE> 111
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 January 1, 1999 (the "Indenture") between the
Trustee and The Industrial Development Board of the
County of Hamilton, Tennessee
Attention: Corporate Trust Department
Re: $4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds
(Sterile Recoveries, Inc. Project), Taxable Series 1999
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 not be supported by an Alternate Credit Facility after the Conversion
Date, (ii) the rating on the Bonds, if any, may be reduced or withdrawn after
the Conversion Date, and (iii) after the tenth day preceding he 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 Fourth Avenue, North, TN 1327, 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.
C-1-17
<PAGE> 112
Name of Bondholder:
------------------------------
(Type or Print)
Signature:
---------------------------------------
Guaranteed by:
-----------------------------------
Name of Institution:
-----------------------------
Date:
--------------------------------------------
[End of Exhibit A to Form of Bond]
C-1-18
<PAGE> 113
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 January 1, 1999 (the "Indenture") between the
Trustee and The Industrial Development Board of the
County of Hamilton, Tennessee
Attention: Corporate Trust Department
Re: $4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds
(Sterile Recoveries, Inc. Project), Taxable Series 1999
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 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 the 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 it if 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.
C-1-19
<PAGE> 114
7. The undersigned hereby undertakes to deliver the Bonds to you, as
Tender Agent, at 150 Fourth Avenue, North, TN 1327, 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 A to Form of Bond]
C-1-20
<PAGE> 115
EXHIBIT C-2
Form of Tax-Exempt Series Bond
THE INDUSTRIAL DEVELOPMENT BOARD OF THE
COUNTY OF HAMILTON, TENNESSEE
INDUSTRIAL DEVELOPMENT REVENUE BONDS
(STERILE RECOVERIES, INC. PROJECT), TAX-EXEMPT SERIES
CUSIP NO.
------------------
No. R-1
Registered Owner: Cede & Co.
Principal Amount: $
-----------------
Maturity Date: First Business Day of ,
---------------- ------
Initial Interest Rate: %
-------
Interest Payment Dates: The first Business Day of each February, May, August
and November commencing the first Business Day of
_______________, ____, and ending on the Maturity
Date, the Conversion Date (hereinafter defined) and
the Maturity Date.
Original Delivery Date:
-----------------------
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
C-2-1
<PAGE> 116
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.
THE BONDS SHALL NOT BE GENERAL OBLIGATIONS OF THE ISSUER BUT LIMITED
AND SPECIAL OBLIGATIONS PAYABLE SOLELY FROM THE AMOUNTS PAYABLE UNDER THE LEASE
AGREEMENT AND OTHER AMOUNTS SPECIFICALLY PLEDGED THEREFOR UNDER THE INDENTURE,
AND SHALL BE A VALID CLAIM OF THE RESPECTIVE OWNERS THEREOF ONLY AGAINST THE
DESIGNATED ACCOUNTS OF THE BOND FUND AND OTHER MONEYS HELD BY THE TRUSTEE AND
THE AMOUNTS PAYABLE UNDER THE LEASE AGREEMENT OR OTHERWISE PLEDGED THEREFOR,
WHICH AMOUNTS ARE HEREBY PLEDGED, ASSIGNED AND OTHERWISE SECURED FOR THE EQUAL
AND RATABLE PAYMENT OF THE BONDS AND SHALL BE USED FOR NO OTHER PURPOSE THAN TO
PAY THE PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST ON THE BONDS, EXCEPT AS MAY
BE OTHERWISE EXPRESSLY AUTHORIZED IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE
AN INDEBTEDNESS OF THE ISSUER OR A LOAN OF CREDIT THEREOF WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY PROVISIONS.
THIS BOND AND THE INTEREST THEREON SHALL NOT BE DEEMED TO CONSTITUTE A
DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF TENNESSEE OR ANY
POLITICAL SUBDIVISION THEREOF, INCLUDING HAMILTON COUNTY, TENNESSEE. HAMILTON
COUNTY, TENNESSEE SHALL NOT IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THIS BOND, OR FOR THE PERFORMANCE
OF ANY PLEDGE, MORTGAGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER HEREIN
OR INDEBTEDNESS BY THE ISSUER, AND NEITHER THIS BOND NOR ANY OF THE ISSUER'S
AGREEMENTS OR OBLIGATIONS DESCRIBED HEREIN OR OTHERWISE SHALL BE CONSTRUED OR
CONSTITUTE AN INDEBTEDNESS OF HAMILTON COUNTY, TENNESSEE, WITHIN THE MEANING OF
ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER.
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.
C-2-2
<PAGE> 117
The Industrial Development Board of the County of Hamilton, Tennessee
(herein called the "ISSUER"), a public non-profit corporation, organized and
existing under the laws of the State of Tennessee, 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, 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 while the Bonds (as hereinafter
defined) bear interest at the Variable Rate (as hereinafter defined) 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) 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 of and redemption premium, if
any, 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 is issued under and pursuant to the Constitution and laws of
the State of Tennessee (the "STATE"), particularly the provisions of Chapter 53
of Title 7 of Tennessee Code Annotated (the "ACT").
This Bond and the issue of which it is a part and the Purchase Price
thereof, the premium, if any, and interest thereon are limited obligations of
the Issuer payable by the Issuer solely from the revenues and receipts derived
from the Lease Agreement (as hereinafter defined), which revenues and receipts
have been pledged and assigned to the Trustee to secure payment thereof
C-2-3
<PAGE> 118
and from amounts received pursuant to the Credit Facility (as hereinafter
defined). This Bond and the interest hereon will not constitute an indebtedness
or a charge against the general credit or assets of the Issuer within the
meaning of any constitutional provision or statutory limitation and shall never
constitute nor give rise to any pecuniary liability of the Issuer, but will be
a limited obligation of the Issuer payable solely from the revenues and other
funds pledged therefor and will not be payable from any assets or funds of the
Issuer other than the revenues and other funds pledged therefor, and neither
the faith and credit nor the taxing power of the State or any political
subdivision or any agency thereof is pledged to the payment of the principal of
or the interest on this Bond.
This Bond is one of the Bonds of a duly authorized issue of variable
rate industrial revenue bonds of the Issuer in the aggregate principal amount
of $_____________ and designated The Industrial Development Board of the County
of Hamilton, Tennessee Industrial Development Revenue Bonds (Sterile
Recoveries, Inc. Project), Tax-Exempt Series (the "BONDS").
The Bonds have been issued for the purpose of financing the
acquisition, construction, installation and equipping of an industrial facility
(herein called the "PROJECT") and to pay a portion of the costs of issuing the
Bonds.
The Bonds are issued under and pursuant to a Trust Indenture, dated as
of February 1, 1999 (said Trust Indenture, together with all such supplements
and amendments thereto as therein permitted, being herein called the
"INDENTURE"), between 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.
The Issuer has entered into a Lease Agreement, dated as of February 1,
1999 (herein called the "LEASE AGREEMENT"), with First Security Bank, National
Association, as Owner Trustee under SRI Realty Trust 1998-1 (the "LESSEE"),
under which the Issuer has agreed to use the proceeds of the Bonds to provide
financing for the acquisition, construction, installation and equipping of
certain manufacturing buildings and facilities directly related or ancillary
thereto and to pay a portion of the costs of issuing the Bonds, and in
consideration therefor, the Lessee has agreed to make lease payments in
installments, 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. The Lease Agreement also provides
for the payment by the Lessee of certain fees and expenses of the Issuer and
the Trustee, and the Lease Agreement further obligates the Lessee (a) to pay
the cost of maintaining the Project in good repair in all material respects and
keeping the same properly insured and (b) to maintain a Credit Facility (as
hereinafter defined)
C-2-4
<PAGE> 119
during the period of time the Bonds bear interest at the Variable Rate (herein
called the "VARIABLE RATE PERIOD").
As security for the payment of the Bonds, all right, title and
interest of the Issuer in (a) the Lease Agreement (except certain Issuer
Reserved Rights defined in the Indenture); (b) 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), but excluding the Rebate Fund (as defined
in the Indenture); and (c) 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. The Project shall not otherwise constitute any part of the security for
the payment of 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, the Lessee and the Trustee, the rights of the owners
of the Bonds, the terms and conditions under and upon the occurrence of which
the Indenture and the Lease Agreement 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 Lessee has entered into a Credit Agreement, dated
as of February 1, 1999 (herein called the "REIMBURSEMENT AGREEMENT"), by and
between the Lessee and First Union National Bank (in such capacity, herein
called the "BANK").
Pursuant to the Reimbursement Agreement, the Lessee 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
$4,725,000 of which (a) $4,500,000 will be available for the payment of
principal or that portion of the Purchase Price corresponding to principal of
the Bonds and (b) $225,000 will support the payment of up to one hundred 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 Lessee 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.
C-2-5
<PAGE> 120
Source of Funds. The principal of, premium (if any) and interest on
the Bonds are payable solely from lease payments under the Lease Agreement 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
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 _______________ at the Initial Interest Rate.
Variable Rate. The Bonds will initially bear interest from the
Original Delivery Date (as defined in the Indenture) through
_____________________ at the Initial Interest Rate stated thereon as determined
in accordance with the Indenture. Thereafter, prior to and including the
Conversion Date, the Bonds will bear interest at a floating rate determined
weekly by the Remarketing Agent as set forth below (the "VARIABLE RATE"). The
Variable Rate will be equal to the rate of interest certified to the Trustee by
the Remarketing Agent on and as of each Wednesday (or the next Business Day if
such Wednesday is not a Business Day) (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 in the
secondary market on the Determination Date at a price equal to the principal
amount thereof (plus accrued interest to the date of settlement). In the event
the Remarketing Agent fails to certify such rate for four (4) consecutive
Calculation Periods for the Bonds, such rate for the Bonds for each Calculation
Period thereafter (if none is certified by the Remarketing Agent) shall be
ninety percent (90%) of the yield for United States Treasury bills maturing
approximately thirty (30) days after the Determination Date for such
Calculation Period as published by The Wall Street Journal on such
Determination Date (or the next preceding Business Day on which The Wall Street
Journal is published if The Wall Street Journal is not published on the
Determination Date) (or, if The Wall Street Journal is no longer published,
then any reasonably equivalent financial publication selected by the
Remarketing Agent) (or the next Business Day on which such other publication is
published if not published on the Determination Date). 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 the Maximum Rate (as defined in the
Indenture) then in effect. While the Bonds bear interest at a Variable Rate,
interest on the Bonds shall be computed on the basis of a year of 365 or 366
days, as applicable, for the number of days actually elapsed and shall be
payable on each Interest Payment Date.
C-2-6
<PAGE> 121
Fixed Rate. (d) The interest rate on this Bond will be converted
to the Fixed Rate upon an election by the Lessee 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 of the Preliminary Fixed Rate.
(e) 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 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 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.
(f) 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:
C-2-7
<PAGE> 122
(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.
(g) 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 the
Maximum Rate (as defined in the Indenture) then in effect.
(h) 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 Lessee, the Trustee, the
Remarketing Agent, the Placement Agent, the Tender Agent and the Credit
Facility Issuer.
No Usury. Anything herein to the contrary notwithstanding, in no event
shall the interest rate borne by the Bonds exceed the maximum contract rate of
interest permitted by the laws of the State.
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, given at the request of the Lessee, 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, given
at the request of the Lessee, in whole on any date, or in part on any Interest
Payment Date, occurring on or after the dates set forth
C-2-8
<PAGE> 123
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:
Commencement of
Redemption Period Redemption Price
----------------- ----------------
The Business Day four (4) 103% declining by 1/2% on each
years from the Conversion succeeding anniversary date of the
Date first day of the redemption period
until reaching 100% and thereafter
at 100%
(c) The Bonds will be subject to redemption upon the written
direction of the Issuer, given at the request of the Lessee, at any time in
whole or in part at a redemption price equal to one hundred percent (100%) of
the principal amount thereof plus interest accrued to the redemption date in
the event of damage, destruction or condemnation of the Project, all as more
fully described in Section 7.1(b) of the Indenture.
Mandatory Redemption (a). The Bonds will be subject to mandatory
redemption in whole on any date at a redemption price equal to one hundred
percent (100%) of the principal amount thereof plus accrued interest to the
redemption date within one hundred eighty (180) days after receipt by the
Trustee of a written notice of a Determination of Taxability (as defined in the
Lease Agreement).
(b) During the Variable Rate Period, the Bonds will be subject
to mandatory redemption in whole on the Interest Payment Date occurring closest
to but not after fifteen (15) days prior to the date of expiration of the then
current Credit Facility unless prior to such date an Alternate Credit Facility
has been provided in accordance with the Indenture, at a redemption price or
Purchase Price equal to one hundred percent (100%) of the principal amount
thereof, without premium, plus interest accrued to the redemption date.
(c) The Bonds are subject to redemption without premium from
proceeds of the Bonds not used to complete the Project or from moneys drawn
under the Credit Facility for which the Credit Facility Issuer is reimbursed
from such excess proceeds in accordance with the provisions of the Indenture,
which redemption date shall be no more than sixty (60) days following the date
of transfer of moneys to the Bond Fund established under the Indenture from the
Project Fund established under the Indenture.
Purchase in Lieu of Redemption. The Bonds are subject to optional call
and purchase in whole prior to the Conversion Date on any Interest Payment Date
upon the written direction of the Issuer, given at the request of the Lessee,
which purchase may be in lieu of redemption, from moneys deposited with the
Trustee sufficient for payment of 100% of the principal amount due upon such
call together with accrued interest on the Bonds to the call date.
C-2-9
<PAGE> 124
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 twenty (20) 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
Lessee 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 the payment of 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 Lessee and third, Bonds selected by any
random or other method determined by the Trustee in its sole discretion.
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 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
C-2-10
<PAGE> 125
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 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 LESSEE, 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 Lessee with
the consent of the Issuer and 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. 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, provided that transfers in connection with the remarketing hereof will be
made at the corporate trust office of the Trustee in Nashville, Tennessee,
accompanied by a
C-2-11
<PAGE> 126
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 LESSEE 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 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 Lease Agreement and 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.
No recourse shall be had for the enforcement of any obligation,
promise or agreement of the Issuer contained herein or other documents to which
the Issuer is a party or for any claim based hereon or thereon or otherwise in
respect hereof or thereof against any director, member, officer, agent,
attorney or employee, as such, in his/her individual capacity, past, present or
future, of the Issuer or of any successor entity, either directly or through
the Issuer or any successor entity, under or by reason of any of the
obligations, promises or agreements entered into in this Bond or between the
Issuer and the Trustee; and all personal liability of that character against
every such director, member, officer, agent, attorney and employee is, by the
execution of the Indenture and as a condition of, and as part of the
consideration for, the execution of this Indenture, expressly waived and
released.
Notwithstanding anything to the contrary, any liability for payment of
money and any other liability or obligation which the Issuer may incur under
this Bond shall not constitute a general obligation of the Issuer but shall
constitute limited obligations of the Issuer payable solely from and enforced
only against the Trust Estate. No recourse shall be had for the enforcement of
any obligation, promise or agreement of the Issuer contained herein or in the
Bonds or the Lease Agreement to which the Issuer is a party or for any claim
based hereon or thereon or otherwise
C-2-12
<PAGE> 127
in respect hereof or thereof against any director, member, officer, agent,
attorney or employee, as such, in his individual capacity, past, present or
future, of the Issuer or of any successor entity, either directly or through
the Issuer or any successor entity whether by virtue of any constitutional
provision, statute or rule of law, or by the enforcement of any assessment or
penalty otherwise. No personal liability whatsoever shall attach to, or be
incurred by, any director, member, officer, agent, attorney or employee as
such, past, present or future, of the Issuer or of any successor entity, either
directly or through the Issuer or any successor entity, under or by reason of
any of the obligations, promises or agreements entered into in this Bond or
between the Issuer and the Trustee, whether herein contained or to be implied
herefrom as being supplemental hereto; and to all personal liability of that
character against every such director, member, officer, agent, attorney and
employee is, by the execution of the Indenture and as a condition of, and as
part of the consideration for, the execution of the Indenture, expressly waived
and released.
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 Tennessee.
Tennessee Code Annotated Sections 7-53-305(a) and 67-5-205(a), as
amended, provide that this Bond and the income therefrom shall be exempt from
all taxes in the State of Tennessee. Other provisions of the Tennessee Code
Annotated indicate, however, that the Bond and/or interest thereon may be
subject to Tennessee inheritance, transfer and gift taxes and to the Tennessee
corporate excise and franchise taxes.
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-2-13
<PAGE> 128
IN WITNESS WHEREOF, The Industrial Development Board of the County of
Hamilton, Tennessee has caused this Bond to be executed with the manual
signatures of its Chairman and its Secretary, all as of _______________.
THE INDUSTRIAL DEVELOPMENT BOARD OF
THE COUNTY OF HAMILTON, TENNESSEE
By:
-----------------------------------
Chairman
Attest:
-------------------------------
Secretary
C-2-14
<PAGE> 129
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:
----------------------------------
Authorized Representative
Date of Authentication:
---------------
C-2-15
<PAGE> 130
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: Signature(s) must be guaranteed by a member
firm of a Medallion Program acceptable to the
Trustee.
C-2-16
<PAGE> 131
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 January 1, 1999 (the "Indenture") between the
Trustee and The Industrial Development Board of the
County of Hamilton, Tennessee
Attention: Corporate Trust Department
Re: $4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds
(Sterile Recoveries, Inc. Project), Tax-Exempt Series
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 not be supported by an Alternate Credit Facility after the Conversion
Date, (i) the rating on the Bonds, if any, may be reduced or withdrawn after
the Conversion Date, and (iii) after the tenth day preceding he 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 Fourth Avenue, North, TN 1327, 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.
C-2-17
<PAGE> 132
Name of Bondholder:
------------------------------
(Type or Print)
Signature:
---------------------------------------
Guaranteed by:
-----------------------------------
Name of Institution:
-----------------------------
Date:
--------------------------------------------
[End of Exhibit A to Form of Bond]
C-2-18
<PAGE> 133
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 January 1, 1999 (the "Indenture") between the
Trustee and The Industrial Development Board of the
County of Hamilton, Tennessee
Attention: Corporate Trust Department
Re: $4,500,000 The Industrial Development Board of the County of
Hamilton, Tennessee Industrial Development Revenue Bonds
(Sterile Recoveries, Inc. Project), Tax-Exempt Series
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 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 the 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 it if 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.
C-2-19
<PAGE> 134
7. The undersigned hereby undertakes to deliver the Bonds to you, as
Tender Agent, at 150 Fourth Avenue, North, TN 1327, 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]
C-2-20
<PAGE> 135
EXHIBIT D
Description of Project
Legal Description of the Property
ALL that certain plot, piece or parcel of land situate, lying and
being in Hamilton County, Tennessee, bounded and described as follows:
(to be supplied)
Description of Equipment
All equipment, machinery, and items of personal property acquired,
constructed and installed and/or to be acquired, constructed and installed in
connection with the completion of the Project located at 6024 Century Oaks
Drive, Chattanooga, Tennessee, and purchased with the proceeds of The
Industrial Development Board of the County of Hamilton, Tennessee's Industrial
Development Revenue Bonds (Sterile Recoveries, Inc. Project), Taxable Series
1999.
D-1
<PAGE> 136
EXHIBIT E
REQUISITION CERTIFICATE
TO: FIRST UNION NATIONAL BANK, as Trustee
FROM: STERILE RECOVERIES, INC. (agent for the Lessee)
SUBJECT: LEASE AGREEMENT DATED AS OF FEBRUARY 1, 1999
This represents Requisition Certificate No. _______ in the total
amount of $___________ for payment of those Costs of the Project detailed in
the schedule attached.
The undersigned does certify that:
1. All of the expenditures for which moneys are requested hereby
represent proper Costs of the Project, have not been included in a previous
Requisition Certificate and have been properly recorded on the Lessee's books.
2. The moneys requested thereby are not greater than those necessary
to meet obligations due and payable or to reimburse the company for funds
actually advanced for Costs of the Project. The moneys requested do not include
retention or other moneys not yet due or earned under construction contracts.
3. After payment of moneys hereby requested, there will remain
available to the Lessee sufficient funds to complete the Project substantially
in accordance with the plans.
4. At least 95% of the sum of the payment herein requested form the
bond proceeds and all other payments from the proceeds of the Bonds heretofore
made have been used to finance the acquisition, renovation, construction,
renovation or improvement of land and buildings, all of which property other
than land is of a character subject to the allowance for depreciation under
Section 167 of the Code, all of which costs for such property or land were
first incurred subsequent to September 25, 1998, and no more than 5% of the sum
of the payment herein requested from the bond proceeds, and no more than 2% of
the sum for payment of costs of issuance, and all other payments from the
proceeds of the Bonds heretofore made from the bond proceeds has been or will
be used, directly or indirectly as working capital or to finance inventory or
issuance costs.
5. The Lessee is not in default under the Lease Agreement or the
Reimbursement Agreement and nothing has occurred to the knowledge of the Lessee
that would prevent the performance of its obligations under the Lease Agreement
or the Reimbursement Agreement.
E-1
<PAGE> 137
Executed this _________ day of ________________, _____.
STERILE RECOVERIES, INC.
By:
----------------------------------
Its:
Approved by First Union National Bank
(as the "Bank")
By:
----------------------------------
Title:
E-2
<PAGE> 1
EXHIBIT 10.26
REVOLVING NOTE
$15,000,000.00 February 24, 1999
FOR VALUE RECEIVED, the undersigned, STERILE RECOVERIES, INC., a
Florida corporation (the "Borrower"), hereby promises to pay to the order of
FIRST UNION NATIONAL BANK (the "Lender"), at the times, at the place and in the
manner provided in the Credit Agreement hereinafter referred to, the principal
sum of up to Fifteen Million and 00/100 Dollars ($15,000,000.00), or, if less,
the aggregate unpaid principal amount of all Revolving Loans disbursed by the
Lender under the Credit Agreement referred to below, together with interest at
the rates as in effect from time to time with respect to each portion of the
principal amount hereof, determined and payable as provided in the Credit
Agreement.
This Revolving Note is one of the Revolving Notes referred to in, and
is entitled to the benefits of, the Credit Agreement of dated as of February
__, 1999 (as amended, modified or otherwise supplemented from time to time, the
"Credit Agreement"), by and between the Borrower, the Guarantors party thereto,
the Lender and the other financial institutions party thereto and First Union
National Bank as Agent and the other Credit Documents referenced therein. The
Credit Agreement contains, among other things, provisions for the time, place
and manner of payment of this Revolving Note, the determination of the interest
rate borne by and fees payable in respect of this Revolving Note, acceleration
of the payment of this Revolving Note upon the happening of certain stated
events and the mandatory repayment of this Revolving Note under certain
circumstances.
The Borrower agrees to pay on demand all costs of collection,
including reasonable attorneys, fees, if any part of this Revolving Note,
principal or interest, is collected after maturity with the aid of an attorney.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived.
THIS REVOLVING CREDIT NOTE IS MADE AND DELIVERED IN THE STATE OF
FLORIDA AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF FLORIDA.
<PAGE> 2
IN WITNESS WHEREOF, the Borrower has caused this Revolving Note to be
executed under seal by its duly authorized officers as of the day and year
first above written.
STERILE RECOVERIES, INC.
By: /S/ JAMES T. BOOSALES
-----------------------------------
Name: James T. Boosales
---------------------------------
Title: EVP
--------------------------------
<PAGE> 1
EXHIBIT 10.27
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
dated as of February 24, 1999,
among
STERILE RECOVERIES, INC.
as Borrower,
CERTAIN SUBSIDIARIES OF THE BORROWER
as Guarantors,
THE LENDERS FROM TIME TO TIME
PARTY HERETO,
as Lenders,
and
FIRST UNION NATIONAL BANK,
as Agent
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.1 Definitions..................................................................................1
SECTION 1.2 Accounting Terms and Determinations.........................................................16
SECTION 1.3 Other Definitional Terms....................................................................17
ARTICLE II CREDIT FACILITY.......................................................................................17
SECTION 2.1 Revolving Loans.............................................................................17
SECTION 2.2 Procedure for Advances of Revolving Loans...................................................17
SECTION 2.3 Repayment of Revolving Loans................................................................19
SECTION 2.4 Revolving Note..............................................................................19
SECTION 2.5 Swingline Loan Subfacility..................................................................19
SECTION 2.6 Procedure for Advances of Swingline Loans...................................................20
SECTION 2.7 Repayment of Swingline Loans................................................................20
SECTION 2.8 Swingline Note..............................................................................21
SECTION 2.9 Prepayments of the Loans....................................................................21
SECTION 2.10 Termination and Reduction of Revolving Commitments.........................................23
SECTION 2.11 Termination Date...........................................................................23
SECTION 2.12 Use of Proceeds............................................................................23
ARTICLE III GENERAL LOAN PROVISIONS..............................................................................23
SECTION 3.1 Interest....................................................................................23
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans....................................25
SECTION 3.3 Fees........................................................................................26
SECTION 3.4 Manner of Payment...........................................................................26
SECTION 3.5 Changed Circumstances.......................................................................27
SECTION 3.6 Indemnity...................................................................................29
SECTION 3.7 Capital Requirement.........................................................................29
SECTION 3.8 Taxes.......................................................................................29
SECTION 3.9 Sharing of Payments.........................................................................31
SECTION 3.10 Pro Rata Treatment.........................................................................31
ARTICLE IV [Reserved]............................................................................................32
ARTICLE V CLOSING: CONDITIONS OF CLOSING AND BORROWING...........................................................32
SECTION 5.1 Conditions to Closing and Initial Loans.....................................................32
SECTION 5.2 Conditions to All Loans.....................................................................35
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE BORROWER........................................................35
SECTION 6.1 Representations and Warranties..............................................................35
SECTION 6.2 Survival of Representations and Warranties, Etc.............................................42
ARTICLE VII FINANCIAL INFORMATION AND NOTICES....................................................................42
SECTION 7.1 Financial Statements and Projections........................................................42
SECTION 7.2 Officer's Compliance Certificate............................................................43
SECTION 7.3 Notice of Litigation and Other Matters......................................................43
SECTION 7.4 Accuracy of Information.....................................................................44
ARTICLE VIII AFFIRMATIVE COVENANTS...............................................................................45
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 8.1 Preservation of Corporate Existence and Related Matters.....................................45
SECTION 8.2 Maintenance of Property.....................................................................45
SECTION 8.3 Insurance...................................................................................45
SECTION 8.4 Accounting Methods and Financial Records....................................................45
SECTION 8.5 Payment and Performance of Obligations......................................................46
SECTION 8.6 Compliance With Laws, Approvals and Agreements..............................................46
SECTION 8.7 Environmental Management....................................................................46
SECTION 8.8 Compliance with ERISA.......................................................................47
SECTION 8.9 Conduct of Business.........................................................................47
SECTION 8.10 Visits and Inspections.....................................................................47
SECTION 8.11 Year 2000 Compatibility....................................................................47
SECTION 8.12 Material Contracts.........................................................................47
SECTION 8.13 Further Assurances.........................................................................48
SECTION 8.14 Security Interests.........................................................................48
SECTION 8.15 Additional Guarantors......................................................................48
ARTICLE IX FINANCIAL COVENANTS...................................................................................49
SECTION 9.1 Minimum Consolidated Net Worth..............................................................49
SECTION 9.2 Consolidated Leverage Ratio.................................................................49
SECTION 9.3 Fixed Charge Coverage Ratio................................................................49
ARTICLE X NEGATIVE COVENANTS.....................................................................................49
SECTION 10.1 Limitations on Debt........................................................................49
SECTION 10.2 Limitations on Liens.......................................................................50
SECTION 10.3 Limitations on Loans, Advances, Investments and Acquisitions...............................51
SECTION 10.4 Limitations on Mergers and Liquidation.....................................................51
SECTION 10.5 Limitations on Sale of Assets..............................................................51
SECTION 10.6 Transactions with Affiliates...............................................................52
SECTION 10.7 Certain Accounting Changes.................................................................52
SECTION 10.8 No Restricted Payments.....................................................................52
SECTION 10.9 [Intentionally Omitted]....................................................................52
SECTION 10.10 Additional Negative Pledges...............................................................52
SECTION 10.11 Sale and Leaseback........................................................................52
SECTION 10.12 Licenses, Etc.............................................................................53
SECTION 10.13 Limitations...............................................................................53
SECTION 10.14 Amendments; Payments and Prepayments of Subordinated Debt.................................53
ARTICLE XI DEFAULT AND REMEDIES..................................................................................53
SECTION 11.1 Events of Default..........................................................................53
SECTION 11.2 Remedies...................................................................................56
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc............................................56
SECTION 11.4 Crediting of Payments and Proceeds.........................................................57
ARTICLE XII THE AGENT............................................................................................57
SECTION 12.1 Appointment of Agent.......................................................................57
SECTION 12.2 Nature of Duties of Agent..................................................................57
SECTION 12.3 Lack of Reliance on Agent..................................................................58
SECTION 12.4 Certain Rights of the Agent................................................................58
SECTION 12.5 Reliance by Agent..........................................................................58
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 12.6 Indemnification of Agent...................................................................59
SECTION 12.7 The Agent in its Individual Capacity.......................................................59
SECTION 12.8 Holders of Notes...........................................................................59
SECTION 12.9 Successor Agent............................................................................59
SECTION 12.10 Actions with Respect to Defaults..........................................................60
SECTION 12.11 Delivery of Information...................................................................60
ARTICLE XIII MISCELLANEOUS.......................................................................................61
SECTION 13.1 Notices....................................................................................61
SECTION 13.2 Governing Law..............................................................................62
SECTION 13.3 Arbitration; Consent to Jurisdiction and Service of Process................................62
SECTION 13.4 Waiver of Jury Trial.......................................................................63
SECTION 13.5 Reversal of Payments.......................................................................63
SECTION 13.6 Injunctive Relief..........................................................................64
SECTION 13.7 [Reserved].................................................................................64
SECTION 13.8 Successors and Assigns; Participations.....................................................64
SECTION 13.9 Payment of Expenses; Indemnification.......................................................67
SECTION 13.10 Amendments, Waivers and Consents..........................................................68
SECTION 13.11 Information...............................................................................68
SECTION 13.12 Performance of Duties.....................................................................69
SECTION 13.13 Nonliability of Agent and Lenders.........................................................69
SECTION 13.14 All Powers Coupled with Interest..........................................................69
SECTION 13.15 Survival of Indemnities...................................................................69
SECTION 13.16 Titles and Captions.......................................................................70
SECTION 13.17 Severability of Provisions................................................................70
SECTION 13.18 Counterparts..............................................................................70
SECTION 13.19 Term of Agreement.........................................................................70
ARTICLE XIV GUARANTY.............................................................................................70
Section 14.1 The Guaranty...............................................................................70
Section 14.2 Bankruptcy.................................................................................71
Section 14.3 Nature of Liability........................................................................71
Section 14.4 Independent Obligation.....................................................................72
Section 14.5 Authorization..............................................................................72
Section 14.6 Reliance...................................................................................72
Section 14.7 Waiver.....................................................................................72
Section 14.8 Limitation on Enforcement..................................................................73
Section 14.9 Confirmation of Payment....................................................................74
</TABLE>
iii
<PAGE> 5
EXHIBITS
- --------
Exhibit A Form of Assignment and Acceptance
Exhibit B-1 Form of Revolving Note
Exhibit B-2 Form of Swingline Note
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Conversion/Continuation
Exhibit E Form of Officer's Compliance Certificate
Exhibit F Form of Joinder Agreement
SCHEDULES
- ---------
Schedule 1.1A Lenders and Commitments
Schedule 1.1B Sweep Plus Loan/Investment Services Description
Schedule 5.1 Corporate Structure
Schedule 6.1(p) Debt, Contingent Obligations and Liens
Schedule 6.1(w) Collateral Locations; Offices
Schedule 6.1(x) Fictitious Business Names
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Credit Agreement", or this "Agreement"),
dated as of February 24, 1999, is by and among STERILE RECOVERIES, INC., a
Florida corporation (the "Borrower"), certain Subsidiaries of the Borrower from
time to time party hereto (the "Guarantors"), each of those financial
institutions identified as Lenders on Schedule 1.1A hereto (together with each
of their successors and assigns, referred to individually as a "Lender" and,
collectively, as the "Lenders"), and FIRST UNION NATIONAL BANK ("First Union"),
acting in the manner and to the extent described in Article XII hereof (in such
capacity, the "Agent").
STATEMENT OF PURPOSE
The Borrower has requested, and the Lenders have agreed, to extend a
revolving credit facility to the Borrower in the aggregate principal amount of
up to $15,000,000 on the terms and conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
The following terms when used in this Agreement shall have the meanings
assigned to them below:
"Additional Credit Party" shall mean each Person that becomes a Guarantor
by execution of a Joinder Agreement in accordance with Section 8.15.
"Adjusted LIBOR Rate" means for any LIBOR Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) determined by the Agent to be equal to the quotient obtained by
dividing (a) the LIBOR Rate for such LIBOR Loan for such Interest Period by (b)
a percentage equal to one hundred percent (100%) minus the Adjusted LIBOR Rate
Reserve Percentage for such LIBOR Loan for such Interest Period.
"Adjusted LIBOR Rate Reserve Percentage" means, for the Interest Period
for each LIBOR Loan comprising part of the same borrowing (including
conversions, extensions and renewals), the percentage applicable two (2)
Business Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other marginal
reserve requirement) for a
<PAGE> 7
member bank of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including "eurocurrency liabilities" (as
such term is used in Regulation D), or with respect to any other category of
liabilities which includes deposits by reference to which the interest rate on
LIBOR Loans is determined, having a term equal to the Interest Period for which
such Adjusted LIBOR Rate Reserve Percentage is determined.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. The term "control"
means (a) the power to vote ten percent (10%) or more of the securities or
other equity interests of a Person having ordinary voting power, or (b) the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agent" means First Union as provided in the preamble to this Credit
Agreement or any successor to First Union.
"Agent's Office" means the office of Agent specified in or determined in
accordance with the provisions of Section 13.1.
"Agreement" means this Credit Agreement, as amended or supplemented from
time to time.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.
"Applicable Margin" means for LIBOR Loans, LIBOR Market Index Swingline
Loans and Base Rate Loans, the appropriate applicable percentages corresponding
to the Consolidated Leverage Ratio in effect as of the most recent Calculation
Date as shown below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Applicable Margin for
LIBOR Loans and LIBOR
Market Index Swingline Applicable Margin for Base
Tier Levels Consolidated Leverage Ratio Loans Rate Loans
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I < 1.0 : 1.0 1.0% 0.0%
-
- -------------- --------------------------------------------------------------------------------------
II > 1.0 : 1.0 < 2.0 : 1.0 1.25% 0.25%
-
- -----------------------------------------------------------------------------------------------------
III > 2.0 : 1.0 1.50% 0.50%
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Margin shall be determined and adjusted quarterly on the date
(each a "Calculation Date") five Business Days after the date on which the
Agent receives the quarterly officer's certificate provided by the Borrower in
accordance with the provisions of Section 7.2; provided, however, that (i) the
initial Applicable Margin shall be based on Tier Level I (as shown
2
<PAGE> 8
above) and shall remain at Tier Level I until delivery of the Borrower's
audited financial statements for December 31, 1998 and, thereafter, the Tier
Level shall be determined by the then current Consolidated Leverage Ratio, and
(ii) if the Borrower fails to provide the officer's certificate to the Agent
for any fiscal quarter as required by and within the time limits set forth in
Section 7.2, the Applicable Margins from the applicable date of such failure
shall be based on Tier Level III until five Business Days after an appropriate
officer's certificate is provided, whereupon the Tier Level shall be determined
by the then current Consolidated Leverage Ratio. Except as set forth above,
each Applicable Margin shall be effective from one Calculation Date until the
next Calculation Date.
"Asset Disposition" means the disposition of any or all of the assets
(including without limitation the Capital Stock of a Subsidiary) of the
Borrower or any of its Subsidiaries whether by sale, lease, transfer or
otherwise. The term "Asset Disposition" shall not include (a) any Equity
Issuance, (b) the sale of inventory in the ordinary course of business or (c)
the sale or other disposition of assets no longer necessary in the business of
the Borrower or any Subsidiary of the Borrower so long as the net proceeds
received from such sales or other dispositions during the term of this Credit
Agreement are not in excess of $100,000.
"Assignment and Acceptance" means an assignment and acceptance entered
into by an assigning Lender and an assignee Lender, accepted by the Agent, in
accordance with Section 13.8, in the form attached hereto as Exhibit A.
"Base Rate" means, for any day, the rate per annum equal to the higher of
(a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and
(b) the Prime Rate in effect on such day. If for any reason the Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Agent to obtain sufficient
quotations in accordance with the terms hereof, the Base Rate shall be
determined without regard to clause (i) of the first sentence of this
definition until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change in
the Prime Rate or Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
Base Rate plus the Applicable Margin.
"Borrower" means Sterile Recoveries, Inc., a Florida corporation, in its
capacity as borrower hereunder.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest or any other amounts with respect to, any LIBOR Loan, any day that is
a Business
3
<PAGE> 9
Day described in clause (a) and that is also a day on which commercial banks in
London are open for international business (including dealings in Dollar
deposits in the London interbank market).
"Capital Asset" means, with respect to the Borrower and its Subsidiaries,
any asset that should, in accordance with GAAP, be classified and accounted for
as a capital asset on a consolidated balance sheet of the Borrower and its
Subsidiaries.
"Capital Lease" means, with respect to the Borrower and its Subsidiaries,
any lease of any property that should, in accordance with GAAP, be classified
and accounted for as a capital lease on a consolidated balance sheet of the
Borrower and its Subsidiaries.
"Capital Stock" means (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than one
year from the date of acquisition, (ii) time deposits or certificates of
deposit of any commercial bank incorporated under the laws of the United States
or any state thereof, of recognized standing having capital and unimpaired
surplus in excess of $1,000,000,000 and whose short-term commercial paper
rating at the time of acquisition is at least A-1 or the equivalent thereof by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or at
least P-1 or the equivalent thereof by Moody's Investors Service, Inc. (any
such bank, an "Approved Bank"), with such deposits or certificates having
maturities of not more than one year from the date of acquisition, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) above entered into
with any Approved Bank, (iv) commercial paper or finance company paper issued
by any Person incorporated under the laws of the United States or any state
thereof and rated at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's Investors Service, Inc., and in each case
maturing not more than one year after the date of acquisition, and (v)
investments in money market funds that are registered under the Investment
Company Act of 1940, which have net assets of at least $1,000,000,000 and at
least 85% of whose assets consist of securities and other obligations of the
type described in clauses (i) through (iv) above. All such Cash Equivalents
must be denominated solely for payment in Dollars.
"Change in Control" means (a) any "person" or "group" of persons (within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as
amended) other than Richard T. Isel, Wayne R. Peterson, James T. Boosales and
Bertram T. Martin, Jr. shall have acquired beneficial ownership, directly or
indirectly, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over 20% or
more of the votes attributable to the voting stock of the Borrower; or (b)
individuals who at the beginning of any
4
<PAGE> 10
period of twenty-four (24) consecutive calendar months were directors of the
Borrower (together with any new directors whose election by the board of
directors of the Borrower or whose nomination for election by the shareholders
of the Borrower was approved by a vote of a least two-thirds of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the board of directors of the
Borrower then in office.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Collateral" means, collectively, the Collateral as defined in the
Security Agreement and the Pledged Collateral as defined in the Pledge
Agreement.
"Collateral Agent" means First Union National Bank, in its capacity as
collateral agent for the Lenders and the ELLF Lenders under the Pledge
Agreement and the Security Agreement.
"Commitment" means the Revolving Commitment and the Swingline Commitment.
"Commitment Fee" means the fee required to be paid to the Agent for the
benefit of the Lenders at the end of each calendar quarter as partial
compensation for extending the Revolving Committed Amount to the Borrower,
calculated in accordance with Section 3.3(b).
"Consolidated" means, when used with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries or any other
Person, such statements or items on a consolidated basis in accordance with
applicable principles of consolidation under GAAP.
"Consolidated EBITDA" means, with respect to the Borrower and its
Subsidiaries, for any period of determination, (a) Consolidated Net Income for
such period, plus (b) the sum of the following to the extent deducted in the
determination of Consolidated Net Income: (i) Consolidated Interest Expense,
(ii) income and franchise taxes and (iii) depreciation and amortization
expense, in each case determined in accordance with GAAP for such period.
"Consolidated Interest Expense" means, for any period of determination,
the gross interest expense of the Borrower and its Subsidiaries (including any
amount attributable to interest in respect of payments under Capital Leases and
any net amount payable under any Hedging Agreement), all determined for such
period on a Consolidated basis in accordance with GAAP.
"Consolidated Leverage Ratio" means, as of the last day of each fiscal
quarter of the Borrower, the ratio of Funded Debt of the Borrower and its
Subsidiaries (computed as of the last day of such fiscal quarter) to
Consolidated EBITDA (computed for the four fiscal quarter period then ending).
5
<PAGE> 11
"Consolidated Net Income" means, for any period of determination with
respect to the Borrower and its Subsidiaries, net income on a consolidated
basis determined in accordance with GAAP applied on a consistent basis, but
excluding for purposes of determining the Consolidated Leverage Ratio and the
Fixed Charge Coverage Ratio, any extraordinary gains or losses and related tax
effects thereon. Except as expressly provided otherwise, the applicable period
shall be for the four consecutive quarters ending as of the date of
determination.
"Consolidated Net Worth" means, at any date of determination for the
Borrower and its Subsidiaries, shareholders' equity or net worth as determined
in accordance with GAAP.
"Consolidated Rental Expense" means, for any period, rental expense under
Operating Leases of the Borrower and its Subsidiaries on a consolidated basis
for such period, as determined in accordance with GAAP.
"Consolidated Scheduled Funded Debt Payments" means, as of the end of each
fiscal quarter of the Borrower and its Subsidiaries, for the Borrower and its
Subsidiaries on a consolidated basis, the sum of all scheduled payments of
principal on Funded Debt for the applicable period ending on such date
(including the principal component of payments due on Capital Leases during the
twelve month period ending on such date); it being understood that Scheduled
Funded Debt Payments shall not include voluntary prepayments or the mandatory
prepayments required pursuant to this Agreement.
"Contingent Obligation" means, at any date of determination, any
obligation, contingent or otherwise, of the Borrower or any of its Subsidiaries
pursuant to which such Person has directly or indirectly guaranteed any Debt or
other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
any such Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement condition or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); provided, that the term Contingent Obligation shall not
include endorsements for collection or deposit in the ordinary course of
business.
"Credit Documents" means, collectively, this Agreement, the Notes, the
Pledge Agreement, the Security Agreement, each Joinder Agreement, any Hedging
Agreement executed by a Lender and each other document, instrument and
agreement executed and delivered to a Lender by any Credit Party in connection
with this Agreement or otherwise referred to herein or contemplated hereby, all
as may be amended, modified or otherwise supplemented from time to time.
"Credit Parties" means, collectively, the Borrower and the Guarantors.
6
<PAGE> 12
"Debt" means, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the
ordinary course of business), (d) all obligations of such Person issued or
assumed as the deferred purchase price of property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Debt of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any Lien
on, or payable out of the proceeds of production from, property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (g) all Contingent Obligations of any such Person, (h) the
principal portion of all obligations of such Person under Capital Leases, (i)
all obligations of such Person under Hedging Agreements, (j) the maximum amount
of all standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all drafts
drawn thereunder (to the extent unreimbursed), (k) all preferred Capital Stock
issued by such Person and required by the terms thereof to be redeemed, or for
which mandatory sinking fund payments are due, prior to the Maturity Date, (l)
the principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product to which such Person is a party, where such transaction is considered
borrowed money indebtedness for tax purposes but is classified as an operating
lease in accordance with GAAP, and (m) the Debt of any partnership or
unincorporated joint venture in which such Person is legally obligated or has a
reasonable expectation of being liable with respect thereto (excluding, for
purposes hereof, the Debt of any such partnership or unincorporated joint
venture which is not majority-owned by such Person as of the Closing Date until
such time, if ever, that such entity becomes majority-owned by such person).
"Debt Issuance" means the issuance of any Debt for borrowed money by the
Borrower or any of its Subsidiaries (other than Debt permitted by Section
10.1).
"Default" means any of the events specified in Section 11.1 which with the
passage of time, the giving of notice, or both, would constitute an Event of
Default.
"Default Rate" means the interest rate applicable to the Loans after the
occurrence and during the continuance of an Event of Default as described in
Section 3.1(c).
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
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"ELLF Lenders" means the lenders, holders and other Financing Parties from
time to time party to the ELLF Participation Agreement.
"ELLF Operative Agreements" means the ELLF Participation Agreement and
each of the other "Operative Agreements" as such term in defined in Appendix A
to the ELLF Participation Agreement.
"ELLF Participation Agreement" means that certain Participation Agreement
dated as of the date hereof among the Borrower, as the construction agent and
the lessee, First Security Bank, National Association, as owner trustee, the
lenders identified therein as lenders and the lenders identified therein as
holders.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six (6)
years been maintained for the employees of the Borrower or any current or
former ERISA Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health, natural resources or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation, removal or
remediation of Hazardous Materials or liability resulting from the release or
threatened release of Hazardous Materials into the environment. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (33 U.S.C. ss. 1251 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 201 et seq.), the Clean Air Act (42 U.S.C.
ss. 7401 et. seq.), the Toxic substances control Act (15 U.S.C. ss. 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), the Federal
Insecticide, Fungicide and Rodentizide Act (7 U.S.C. ss. 136 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. ss. 11001 et
seq., as amended), the Environmental Protection Agency's regulations relating
to underground storage tanks (40 C.F.R. Parts 280 and 281), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), analogous state
statutes and the rules and regulations promulgated under the foregoing, as such
statutes may be amended or supplemented from time to time as well as the common
law as it pertains to Hazardous Materials.
"Equity Issuance" means any issuance by the Borrower or any of its
Subsidiaries to any Person which is not a Credit Party of (a) shares of its
Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to the
conversion of any debt securities to equity. The term "Equity Issuance" shall
not include any Asset Disposition.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or supplemented from time to
time.
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<PAGE> 14
"ERISA Affiliate" means any Person who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified as an Event of
Default in Section 11.1.
"Excluded Asset Disposition" means the sale, transfer, lease or other
disposition of assets described in clauses (a) and (b) of Section 10.5.
"Existing Debt" means the aggregate loans in the amount of up to
$15,000,000 made by First Union to the Borrower under the Loan Agreement dated
as of October 15, 1996.
"FDIC" means the Federal Deposit Insurance Corporation, or any successor
thereto.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average of the quotations
for such day on such transactions received by the Agent from three Federal
Funds brokers of recognized standing selected by it.
"Fees" means the Commitment Fee and any other fees payable to the Agent or
the Lenders pursuant to the Credit Documents.
"Financing Parties" shall have the meaning assigned thereto in Appendix A
to the ELLF Participation Agreement.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on December 31.
"Fixed Charge Coverage Ratio" means, as of the end of each fiscal quarter
of the Borrower and its Subsidiaries for the twelve month period ending on such
date, the ratio of (a) the sum of (i) Consolidated EBITDA for the applicable
period plus (ii) Consolidated Rental Expense for the applicable period to (b)
the sum of (i) Consolidated Interest Expense for the applicable period (but
only to the extent paid in cash) plus (ii) Consolidated Scheduled Funded Debt
Payments for the applicable period plus (iii) Consolidated Rental Expense for
the applicable period plus (iv) income and franchise taxes for the applicable
period plus (v) dividends paid by the Borrower for the applicable period.
"Foreign Lender" shall have the meaning given to such term in Section
3.8(a).
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<PAGE> 15
"Funded Debt" means, with respect to any Person, without duplication, (i)
all Debt of such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, or upon which
interest payments are customarily made, (iii) all purchase money Indebtedness
(including for purposes hereof, indebtedness and obligations described in
clauses (c) and (d) of the definition of "Debt") of such Person, including
without limitation the principal portion of all obligations of such Person
under Capital Leases, (iv) all Contingent Obligations of such Person with
respect to Funded Debt of another Person, (v) the maximum available amount of
all standby letters of credit or acceptances issued or created for the account
of such Person, (vi) all Funded Debt of another Person secured by a Lien on any
Property of such Person, whether or not such Funded Debt has been assumed,
provided that for purposes hereof the amount of such Funded Debt shall be
limited to the greater of (A) the amount of such Funded Debt as to which there
is recourse to such Person and (B) the fair market value of the property which
is subject to the Lien, (vii) the outstanding attributed principal amount under
any securitization transaction, and (viii) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which such Person is a
party, where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with GAAP
(including, without limitation, the principal portion of all obligations due
and owing under the ELLF Operative Agreements. The Funded Debt of any Person
shall include the Funded Debt of any partnership or joint venture in which such
Person is a general partner or joint venturer, but only to the extent to which
there is recourse to such Person for the payment of such Funded Debt.
"GAAP" means generally accepted accounting principles, as recognized by
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, maintained an a consistent basis for the Borrower
and its Subsidiaries throughout the period indicated and consistent with the
prior financial practice of the Borrower and its Subsidiaries.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guarantor" shall mean any of the Subsidiaries of the Borrower identified
as a "Guarantor" on the signature pages hereto and the Additional Credit
Parties which execute a Joinder Agreement, together with their successors and
permitted assigns.
"Guaranty" shall mean the guaranty given by the Guarantors pursuant to
Article XIV.
"Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic,
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<PAGE> 16
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health, natural resources or the
environment and are or become regulated by any Governmental Authority, (c) the
presence of which require investigation, removal or remediation under any
Environmental Law or common law, (d) the discharge or emission or release of
which requires a permit or license under any Environmental Law or other
Governmental Approval, (e) which constitute a nuisance, a trespass or pose a
health or safety hazard to persons, plants, animals or neighboring properties
either currently or in the past or in the future, (f) which contain, without
limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances or waste,
crude oil nuclear fuel, natural gas or synthetic gas, or (g) which are
materials described in clauses (a) through (f) above and are contained in or
intended for containment in underground or aboveground storage tanks, whether
empty, filled or partially filled with any such substances.
"Hedging Agreement" means any agreement with respect to an interest rate
swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Borrower or any of its
Subsidiaries under any agreement executed in connection with any Debt, and any
confirming letter executed pursuant to such hedging agreement, all as amended
or supplemented from time to time.
"Interest Period" has the meaning assigned thereto in Section 3.1(b).
"Joinder Agreement" shall mean a Joinder Agreement substantially in the
form of Exhibit F, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 8.14.
"Lenders" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"LIBOR Loan" means any Revolving Loan bearing interest at a rate based
upon the Adjusted LIBOR Rate plus the Applicable Margin.
"LIBOR Market Index Swingline Loan" means any Swingline Loan bearing
interest at a rate based upon the LIBOR Market Index Rate plus the Applicable
Margin.
"LIBOR Market Index Rate" means for any day, the rate for one month Dollar
deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on
such day, or if such day is not a Business Day, then the immediately preceding
Business Day (or if not so reported then as determined by the Swingline Lender
from another recognized source or interbank quotation).
"LIBOR Rate" means, for any LIBOR Loan for any Interest Period therefor,
the rate per annum appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period. If for any
reason such rate is not available, the term "LIBOR Rate" shall mean, for any
LIBOR Loan
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<PAGE> 17
for any Interest Period therefor, the rate per annum appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars
at approximately 11:00 a.m. (London time) two (2) Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one (1) rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person's assets shall be deemed to be
subject to a Lien if such Person has acquired or holds such assets subject to
the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.
"Loan" means any Revolving Loan or any Swingline Loan (including any LIBOR
Market Index Swingline Loan) made to the Borrower hereunder.
"Material Adverse Effect" means a material adverse effect on (i) the
properties, business, operations, condition (financial or otherwise)
liabilities or capitalization of the Borrower and its Subsidiaries, taken as a
whole, (ii) the ability of any Credit Party to pay and perform its obligations
under this Agreement or any other Credit Document executed in connection
herewith or any credit agreement executed in replacement hereof, or (iii) the
validity or enforceability of any such Credit Documents or the rights and
remedies of the Lender thereunder, in each case as determined by the Agent in
its reasonable discretion.
"Material Contract" means any contract or other arrangement (other than
the Credit Documents), whether written or oral, to which the Borrower or any of
its Subsidiaries is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could have a Material
Adverse Effect.
"Maturity Date" means February 28, 2002.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six (6)
years.
"Net Cash Proceeds" means the aggregate cash proceeds received by the
Borrower and its Subsidiaries in respect of any Asset Disposition, Equity
Issuance or Debt Issuance, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and (b) taxes paid or payable as a result thereof; it being
understood that "Net Cash Proceeds" shall include, without limitation, any cash
received upon the sale or other disposition of any non-cash consideration
received by the Borrower and its Subsidiaries in any Asset Disposition, Equity
Issuance or Debt Issuance.
"Notes" means the Revolving Notes and the Swingline Note.
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<PAGE> 18
"Notice of Borrowing" has the meaning assigned thereto in Section 2.2(a)
and Section 2.6(a).
"Notice of Conversion/Continuation" has the meaning assigned thereto in
Section 3.2.
"Obligations" means the Loans, any other loans and advances or extensions
of credit made or to be made by any Lender to the Borrower pursuant to this
Credit Agreement, together with interest thereon (including interest which
would be payable as post-petition interest in connection with any bankruptcy or
similar proceeding) and all indebtedness, fees, liabilities and obligations
which may at any time be owing by the Borrower to any Lender in each case
pursuant to this Credit Agreement or any other Credit Document, whether now in
existence or incurred by the Borrower from time to time hereafter, whether
unsecured or secured by pledge, Lien upon or security interest in any of the
Credit Parties' assets or property or the assets or property of any other
Person, whether such indebtedness is absolute or contingent, joint or several,
matured or unmatured, direct or indirect and whether the Borrower is liable to
such Lender for such indebtedness as principal, surety, endorser, guarantor or
otherwise. Obligations shall also include any other indebtedness owing to any
Lender by the Borrower under this Credit Agreement and the other Credit
Documents, the Borrower's liability to any Lender pursuant to this Credit
Agreement as maker or endorser of any promissory note or other instrument for
the payment of money, the Borrower's liability to any Lender pursuant to this
Credit Agreement or any other Credit Document under any instrument of guaranty
or indemnity, or arising under any guaranty, endorsement or undertaking which
any Lender may make or issue to others for the Borrower's account pursuant to
this Credit Agreement, and all liabilities and obligations owing from the
Borrower to any Lender, or any affiliate of a Lender, arising under Hedging
Agreements entered into for the purpose of hedging interest rate risk under
this Credit Agreement and the other Credit Documents.
"Officer's Compliance Certificate" has the meaning assigned thereto in
Section 7.2.
"Operating Lease" means, as applied to any Person, any lease (including,
without limitation, leases which may be terminated by the lessee at any time)
of any property (whether real, personal or mixed) which is not a Capital Lease
other than any such lease in which that Person is the lessor.
"Other Taxes" has the meaning assigned thereto in Section 3.8(c).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliates or (b) has at any time within the preceding six (6) years been
maintained for the employees of the Borrower or any of its current or former
ERISA Affiliates.
"Permitted Liens" has the meaning assigned thereto in Section 10.2.
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"Person" means an individual, corporation, partnership, limited liability
company, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof
specifically listed herein.
"Pledge Agreement" means the Pledge Agreement dated as of the date hereof
entered into by the Credit Parties in favor of the Collateral Agent, as
amended, modified or otherwise supplemented from time to time.
"Prime Rate" means, at any time, the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect at its
principal office in Charlotte, North Carolina. The parties hereto acknowledge
that the rate so announced by the Agent as its Prime Rate is an index or base
rate and shall not necessarily be the lowest or best rate charged to its
customers or other banks.
"Purchase Money Debt" means any Debt incurred by a Person for all or any
part of the deferred purchase price of property or services acquired by such
Person (including obligations in respect of Capital Leases).
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Reportable Event" means any reportable event as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to an Employee
Benefit Plan.
"Required Lenders" means, at any time, Lenders which are then in
compliance with their obligations hereunder (as determined by the Agent) and
holding in the aggregate at least 51% of (i) the Revolving Commitments (and
participation interests therein) or (ii) if the Commitments have been
terminated, the outstanding Loans and participation interests.
"Restricted Payment" means (a) any cash dividend or other cash
distribution, direct or indirect, on account of any ownership interest or
shares of any class of Capital Stock of the Borrower or any of its
Subsidiaries, as the case may be, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any ownership interest or shares
of any class of Capital Stock of the Borrower or any of its Subsidiaries now or
hereafter outstanding by the Borrower or any of its Subsidiaries, as the case
may be, except for any redemption, retirement, sinking funds or similar payment
payable solely in such shares of that class of stock or in any class of stock
junior to that class, (c) any cash payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire any ownership interest or shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding, or (d) any payment to any Affiliate of the Borrower except to the
extent expressly permitted in this Agreement.
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"Revolving Commitment" means, with respect to each Lender, the commitment
of such Lender in an aggregate principal amount at any time outstanding of up
to such Lender's Revolving Commitment Percentage of the Revolving Committed
Amount to make Revolving Loans in accordance with the provisions of Section
2.1.
"Revolving Commitment Percentage" means, for any Lender, the percentage
identified as its Revolving Commitment Percentage on Schedule 1.1A, as such
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 13.8.
"Revolving Committed Amount" means the aggregate revolving credit line
extended by the Lenders to the Borrower for Revolving Loans pursuant to and in
accordance with the terms of this Credit Agreement, in an amount up to
$15,000,000, as such revolving credit line may be reduced from time to time in
accordance with Sections 2.6.
"Revolving Loans" means the revolving credit loans made by the Lender to
the Borrower pursuant to Section 2.1.
"Revolving Notes" means the promissory notes of the Borrower in favor of
each of the Lenders evidencing the Revolving Loans provided pursuant to Section
2.1, individually or collectively, as appropriate, as such promissory notes may
be amended, modified, restated, supplemented, extended, renewed or replaced
from time to time.
"Security Agreement" means the Security Agreement dated as of the date
hereof entered into by the Credit Parties in favor of the Collateral Agent, as
amended, modified or otherwise supplemented from time to time.
"Solvent" means, as to the Borrower and its Subsidiaries at any date of
determination, that the Borrower and its Subsidiaries, taken as a whole, (a)
have capital sufficient to carry on their business and transactions and all
business and transactions in which they engage and are able to pay their debts
as they mature, (b) own property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay their
probable liabilities (including contingencies) and (c) do not have debts or
liabilities beyond their ability to pay such debts or liabilities as they
mature.
"Subsidiary" means as to any Person, any other Person of which more than
fifty percent (50%) of the outstanding capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other managers of such other Person is at the time, directly or
indirectly, owned by or the management is otherwise controlled by such first
Person (irrespective of whether, at the time, capital stock or other ownership
interests of such other Person shall have or might have voting power by reason
of the happening of any contingency).
"Sweep Plus Arrangement" means the Sweep Plus Loan/Investment Services
Description attached hereto as Schedule 1.1B or any similar arrangement between
the Borrower and the Swingline Lender by which Swingline Loans may be advanced
and deposited from time to time
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into a specified account with the Swingline Lender and which deposits may be
applied to repay the Swingline Loans outstanding hereunder.
"Swingline Commitment" means the commitment of the Swingline Lender to
make Swingline Loans in an aggregate principal amount at any time outstanding
up to the Swingline Committed Amount and the commitment of the Lenders to
purchase participation interests in the Swingline Loans up to their respective
Revolving Commitment Percentage as provided in Section 2.7(b), as such amounts
may be reduced from time to time in accordance with the provisions hereof.
"Swingline Committed Amount" means $2,000,000.
"Swingline Lender" means First Union National Bank.
"Swingline Loan" means a swingline revolving loan made by the Swingline
Lender pursuant to the provisions of Section 2.5.
"Taxes" shall have the meaning assigned thereto in Section 3.8(a).
"Termination Date" means the earliest of the dates referred to in Section
2.11.
"Unused Revolving Committed Amount" means, for any period, the amount by
which (a) the then applicable Revolving Committed Amount exceeds (b) the daily
average for such period of the outstanding aggregate principal amount of all
Revolving Loans.
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary in which
all of the shares of Capital Stock are owned or controlled, directly or
indirectly, by the Borrower and/or one or more of its Wholly-Owned
Subsidiaries.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section
7.1, consistent with the financial statements as of September 30, 1998);
provided, however, if (a) the Borrower shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Agent or the Required Lenders shall so object in writing within 60 days
after delivery of such financial statements, then such calculations shall be
made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been
made.
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SECTION 1.3 OTHER DEFINITIONAL TERMS.
Terms not otherwise defined herein which are defined in the Uniform
Commercial Code as in effect in the State of Florida (the "Code") shall have
the meanings given them in the Code. All capitalized terms defined in this
Credit Agreement shall have the defined meanings when used in this Credit
Agreement, the Notes and the other Credit Documents or any certificate, report
or other document made or delivered pursuant to this Credit Agreement. Unless
otherwise specified, references to any times herein shall refer to Eastern
Standard time or, if then in effect, Eastern Daylight time.
ARTICLE II
CREDIT FACILITY
SECTION 2.1 REVOLVING LOANS.
(a) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties set forth herein, each Lender
agrees to make Revolving Loans to the Borrower from time to time from the
Closing Date through but not including the Termination Date as requested by the
Borrower in accordance with the terms of Section 2.2; provided, that the sum of
the aggregate principal amount of all outstanding Revolving Loans (after giving
effect to any amount requested) plus the aggregate principal amount of all
outstanding Swingline Loans shall not exceed the Revolving Committed Amount then
in effect. Subject to the terms and conditions hereof, the Borrower may borrow,
repay and reborrow Revolving Loans hereunder until the Termination Date.
(b) No Lender shall be obligated at any time to make available to the
Borrower its Revolving Commitment Percentage of any requested Revolving Loan if
such amount plus its Revolving Commitment Percentage of all Revolving Loans then
outstanding would exceed such Lender's Revolving Commitment at such time. The
aggregate balance of Revolving Loans outstanding shall not at any time exceed
the Revolving Committed Amount.
SECTION 2.2 PROCEDURE FOR ADVANCES OF REVOLVING LOANS.
(a) Requests for Borrowing.
(i) Each request for borrowings hereunder shall be made by notice in
the form attached hereto as Exhibit C from the Borrower to the Agent (the
"Notice of Borrowing"), given not later than 11:00 a.m. (A) on the Business
Day on which the proposed borrowing is requested to be made for Revolving
Loans that will be Base Rate Loans and (B) three Business Days prior to the
date of the requested borrowing of Revolving Loans that will be LIBOR
Loans; provided, however, that no LIBOR Loans shall be available to the
Borrower until the third Business Day after the Closing Date. Each Notice
of Borrowing shall be given by either telecopy, telex or cable setting
forth
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(1) the requested date of such borrowing, (2) the aggregate amount of such
requested borrowing, (3) whether such Revolving Loans will be Base Rate
Loans or LIBOR Loans, and if appropriate, the applicable Interest Period
and (4) certification by the Borrower that it has complied in all respects
with Article V, all of which shall be specified in such manner as is
necessary to comply with all limitations on Revolving Loans outstanding
hereunder. Each Notice of Borrowing shall be irrevocable by and binding on
the Borrower. Each Loan shall be in a minimum principal amount of $500,000
and integral multiples of $250,000 in excess thereof (or the remaining
amount of the Revolving Committed Amount, if less); provided that no more
than 5 LIBOR Loans shall be outstanding hereunder at any one time.
Revolving Loans may be repaid and reborrowed in accordance with the
provisions hereof.
The Agent shall give to each Lender prompt notice (but in no event
later than 2:00 P.M. on the date of the Agent's receipt of notice from the
Borrower) of each Notice of Borrowing by telecopy, telex or cable (other
than any Notice of Borrowing which will be funded by the Agent in
accordance with subsection (d)(ii) below). No later than 3:00 P.M. on the
date on which a borrowing is requested to be made pursuant to the
applicable Notice of Borrowing, each Lender will make available to the
Agent at the address of the Agent set forth in Section 13.1, in
immediately available funds, its Revolving Commitment Percentage of such
borrowing requested to be made. Unless the Agent shall have been notified
by any Lender prior to the date of borrowing that such Lender does not
intend to make available to the Agent its portion of the borrowing to be
made on such date, the Agent may assume that such Lender will make such
amount available to the Agent on such date of borrowing and the Agent may,
in reliance upon such assumption, make available the amount of the
borrowing to be provided by such Lender. Upon fulfillment of the
conditions set forth in Article V for such borrowing, the Agent will make
such funds available to the Borrower at the account specified by the
Borrower in such Notice of Borrowing.
(ii) If the amounts described in subsection (a)(i) of this Section
2.2 are not in fact made available to the Agent by a Lender (such Lender
being hereinafter referred to as a "Defaulting Lender") and the Agent has
made such amount available to the Borrower, the Agent shall be entitled to
recover such corresponding amount on demand from such Defaulting Lender.
If such Defaulting Lender does not pay such corresponding amount forthwith
upon the Agent's demand therefor, the Agent shall promptly notify the
Borrower and the Borrower shall immediately (but in no event later than
five Business Days after such demand) pay such corresponding amount to the
Agent. The Agent shall also be entitled to recover from such Defaulting
Lender and the Borrower, (A) interest on such corresponding amount in
respect of each day from the date such corresponding amount was made
available by the Agent to the Borrower to the date such corresponding
amount is recovered by the Agent, at a rate per annum equal to either (1)
if paid by such Defaulting Lender, the overnight Federal Funds Rate or (2)
if paid by the Borrower, the then applicable rate of interest, calculated
in accordance with Section 3.1, plus (B) in each case, an amount equal to
any costs (including legal expenses) and losses incurred as a result of
the failure of such Defaulting Lender to provide such amount as provided
in this
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Credit Agreement. Nothing herein shall be deemed to relieve any Lender
from its obligation to fulfill its commitments hereunder or to prejudice
any rights which the Borrower may have against any Lender as a result of
any default by such Lender hereunder, including, without limitation, the
right of the Borrower to seek reimbursement from any Defaulting Lender for
any amounts paid by the Borrower under clause (B) above on account of such
Defaulting Lender's default.
(iii) The failure of any Lender to make the Revolving Loan to be made
by it as part of any borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Revolving Loan on the date of
such borrowing, but no Lender shall be responsible for the failure of any
other Lender to make the Revolving Loan to be made by such other Lender on
the date of any borrowing.
(iv) Each Lender shall be entitled to earn interest at the then
applicable rate of interest, calculated in accordance with Article III, on
outstanding Revolving Loans which it has funded to the Agent from the date
such Lender funded such Revolving Loan to, but excluding, the date on
which such Lender is repaid with respect to such Revolving Loan.
SECTION 2.3 REPAYMENT OF REVOLVING LOANS.
The Borrower shall repay the outstanding principal amount of all Revolving
Loans on the Termination Date, if not sooner repaid, together with (i) all
accrued but unpaid interest thereon to but not including the date of repayment,
and (ii) all other amounts due under the Credit Documents.
SECTION 2.4 REVOLVING NOTE.
The Revolving Loans and the obligation of the Borrower to repay such
Revolving Loans, together with interest and all other fees, charges and other
amounts due thereon or in connection therewith, shall be evidenced by the
Revolving Note which shall be substantially in the form attached as Exhibit
B-1.
SECTION 2.5 SWINGLINE LOAN SUBFACILITY.
(a) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties set forth herein, the
Swingline Lender agrees to make Swingline Loans to the Borrower from time to
time from the Closing Date through but not including the Termination Date as
requested by the Borrower in accordance with the terms of Section 2.6;
provided, that (i) the aggregate principal amount of all outstanding Swingline
Loans (after giving effect to any amount requested) shall not exceed the
Swingline Committed Amount and (ii) the aggregate principal amount of all
outstanding Revolving Loans plus the aggregate principal amount of all
outstanding Swingline Loans (after giving effect to any amount requested) shall
not exceed the Revolving Committed Amount then in effect. Subject to the terms
and conditions hereof, the Borrower may borrow, repay and reborrow Swingline
Loans hereunder until the Termination Date.
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(b) The Swingline Lender shall not be obligated at any time to make
available to the Borrower any Swingline Loan if the amount of such Loan plus
the outstanding amount of all Revolving Loans advanced by such Lender would
exceed such Lender's Revolving Commitment at such time. The aggregate balance
of Swingline Loans outstanding shall not at any time exceed the Swingline
Committed Amount.
SECTION 2.6 PROCEDURE FOR ADVANCES OF SWINGLINE LOANS.
(a) Except as set forth in subsection (b) below, each request for
borrowings hereunder shall be made by notice in the form attached hereto as
Exhibit C from the Borrower to the Agent (the "Notice of Borrowing"), given not
later than 11:00 a.m. on the Business Day on which the proposed borrowing is
requested to be made. Each Notice of Borrowing shall be given by either
telecopy, telex or cable setting forth (1) the requested date of such
borrowing, (2) the aggregate amount of such requested borrowing, (3) whether
such Swingline Loans will be Base Rate Loans or LIBOR Market Index Swingline
Loans and (4) certification by the Borrower that it has complied in all
respects with Article V, all of which shall be specified in such manner as is
necessary to comply with all limitations on Swingline Loans outstanding
hereunder. Each Notice of Borrowing shall be irrevocable by and binding on the
Borrower. Each Swingline Loan requested pursuant to this subsection (a) shall
be in a minimum principal amount of $50,000 and integral multiples of $50,000
in excess thereof (or the remaining amount of the Revolving Committed Amount,
if less). Swingline Loans may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Borrowings of Swingline Loans hereunder may be made from time to
time into a specified demand deposit account with the Swingline Lender pursuant
to the Sweep Plus Arrangement. Each such borrowing shall be deemed a
reaffirmation by the Borrower that the representations and warranties set forth
in Article VI are true and correct in all material respects as of the date of
such borrowing. Unless otherwise specified to the Swingline Lender by the
Borrower in writing, all Swingline Loans made pursuant to this subsection (b)
shall consist of LIBOR Market Index Swingline Loans. Each Swingline Loan
requested pursuant to this subsection (b) shall be in such minimum amounts, if
any, provided in the Sweep Plus Arrangement.
SECTION 2.7 REPAYMENT OF SWINGLINE LOANS.
(a) Unless repaid sooner in accordance with the Sweep Plus
Arrangement, the principal amount of all Swingline Loans shall be due and
payable in full on the earlier of (i) the maturity date agreed to by the
Swingline Lender and the Borrower with respect to such Loan (which maturity
date shall not be a date more than 30 Business Days from the date of advance
thereof) or (ii) the Termination Date. The Borrower shall repay the outstanding
principal amount of all Swingline Loans on the Termination Date, if not sooner
repaid, together with (i) all accrued but unpaid interest thereon to but not
including the date of repayment, and (ii) all other amounts due under the
Credit Documents.
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(b) The Swingline Lender may, at any time, in its sole discretion, by
written notice to the Borrower and the Lenders, demand repayment of its
Swingline Loans by way of a Revolving Loan advance, in which case the Borrower
shall be deemed to have requested a Revolving Loan advance comprised solely of
Base Rate Loans in the amount of such Swingline Loans; provided, however, that
any such demand shall be deemed to have been given one Business Day prior to
the Termination Date and on the date of the occurrence of any Event of Default
described in Section 11.1 and upon acceleration of the indebtedness hereunder
and the exercise of remedies in accordance with the provisions of Section 11.2.
Each Lender hereby irrevocably agrees to make its pro rata share of each such
Revolving Loan in the amount, in the manner and on the date specified in the
preceding sentence notwithstanding (I) the amount of such borrowing may not
comply with the minimum amount for advances of Revolving Loans otherwise
required hereunder, (II) whether any conditions specified in Section 5.2 are
then satisfied, (III) whether a Default or an Event of Default then exists,
(IV) failure of any such request or deemed request for Revolving Loan to be
made by the time otherwise required hereunder, (V) whether the date of such
borrowing is a date on which Revolving Loans are otherwise permitted to be made
hereunder or (VI) any termination of the Commitments relating thereto
immediately prior to or contemporaneously with such borrowing. In the event
that any Revolving Loan cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the commencement
of a proceeding under the U.S. Bankruptcy Code with respect to the Borrower or
any other Credit Party), then each Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date and
prior to such purchase) from the Swingline Lender such participation interests
in the outstanding Swingline Loans as shall be necessary to cause each such
Lender to share in such Swingline Loans ratably based upon its Revolving
Commitment Percentage of the Revolving Committed Amount (determined before
giving effect to any termination of the Commitments pursuant to Section 2.10),
provided that (A) all interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the respective
participation interest is funded and (B) at the time any purchase of
participation interests pursuant to this sentence is actually made, the
purchasing Lender shall be required to pay to the Swingline Lender, to the
extent not paid to the Swingline Lender by the Borrower in accordance with the
terms of Section 3.1(d), interest on the principal amount of participation
interests purchased for each day from and including the day upon which such
borrowing would otherwise have occurred to but excluding the date of payment
for such participation interests, at the rate equal to the Federal Funds Rate.
SECTION 2.8 SWINGLINE NOTE.
The Swingline Loans and the obligation of the Borrower to repay such
Swingline Loans, together with interest and all other fees, charges and other
amounts due thereon or in connection therewith, shall be evidenced by the
Swingline Note which shall be substantially in the form attached as Exhibit
B-2.
SECTION 2.9 PREPAYMENTS OF THE LOANS.
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(a) Voluntary Prepayments. The Loans may be prepaid in whole or in
part without premium or penalty, except as provided in Section 3.6. Each
prepayment of Revolving Loans shall be in a minimum principal amount of
$500,000, and in integral multiples of $250,000. Each prepayment of Swingline
Loans shall be in a minimum principal amount of $50,000, and integral multiples
of $50,000, provided that in the case of Swingline Loans made pursuant to the
Sweep Plus Arrangement, prepayments shall be in such minimum amounts, if any,
provided by the Sweep Plus Arrangement.
(b) Mandatory Prepayments.
(i) If at any time the sum of the aggregate principal
amount of outstanding Revolving Loans outstanding plus the
aggregate principal amount of outstanding Swingline Loans
outstanding shall exceed the Revolving Committed Amount, the
Borrower shall immediately prepay the outstanding principal
balance on the Revolving Loans in an amount sufficient to
eliminate such excess.
(ii) If at any time the sum of the aggregate principal
amount of outstanding Swingline Loans outstanding shall exceed
the Swingline Committed Amount, the Borrower shall immediately
prepay the outstanding principal balance on the Swingline Loans
in an amount sufficient to eliminate such excess.
(iii) Asset Dispositions. Immediately upon the occurrence
of any Asset Disposition, the Borrower shall prepay the
Revolving Loans in an aggregate amount equal to the Net Cash
Proceeds of such Asset Disposition (such prepayment to be
applied as set forth in clause (vi) below).
(iv) Debt Issuances. Immediately upon receipt by the
Borrower or any of its Subsidiaries of proceeds from any Debt
Issuance, the Borrower shall prepay the Revolving Loans in an
aggregate amount equal to 100% of the Net Cash Proceeds of such
Debt Issuance to the Lenders (such prepayment to be applied as
set forth in clause (vi) below).
(v) Issuances of Equity. Immediately upon receipt by the
Borrower or any of its Subsidiaries of proceeds from any Equity
Issuance, the Borrower shall prepay the Revolving Loans in an
aggregate amount equal to 100% of the Net Cash Proceeds of such
Equity Issuance to the Lenders (such prepayment to be applied as
set forth in clause (v) below).
(vi) Application of Mandatory Prepayments. Prepayments
with respect to Revolving Loans shall be applied first to Base
Rate Loans and then to LIBOR Loans in direct order of Interest
Period maturities. Prepayments with respect to Swingline Loans
shall be applied first to Base Rate Loans and then to Swingline
Loans bearing interest at the LIBOR Market Index Rate. All
prepayments under this Section 2.9(b) shall be subject to
Section 3.6.
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SECTION 2.10 TERMINATION AND REDUCTION OF REVOLVING COMMITMENTS.
(a) Voluntary Reductions. The Revolving Commitments may be terminated
or permanently reduced in whole or in part by the Borrower upon five (5)
Business Days' prior written notice to the Agent, provided that (i) after
giving effect to any voluntary reduction, the aggregate amount of
outstanding Revolving Loans shall not exceed the aggregate Revolving
Committed Amount, as reduced, and (ii) partial reductions shall be in a
minimum principal amount of $2,500,000, and in integral multiples thereof.
The Agent shall promptly notify each affected Lender of receipt by the
Agent of any notice from the Borrower pursuant to this Section.
(b) General. The Borrower shall pay to the Agent for the account of
the Lenders in accordance with the terms of Section 3.3(b), on the date of
each termination or reduction of the Revolving Committed Amount, the
Commitment Fee accrued through the date of such termination or reduction
on the amount of the Revolving Committed Amount so terminated or reduced.
SECTION 2.11 TERMINATION DATE.
The Revolving Commitment shall terminate on the earliest of (i) the
Maturity Date, (ii) the date of permanent reduction of the Revolving Commitment
in whole by the Borrower pursuant to Section 2.10, and (iii) the date of
termination by the Agent at the request of the Required Lenders pursuant to
Section 11.2(a) (the "Termination Date").
SECTION 2.12 USE OF PROCEEDS.
The Borrower shall use the proceeds of the Loans for working capital,
capital expenditures and for other general corporate purposes, including
acquisitions permitted hereunder.
ARTICLE III
GENERAL LOAN PROVISIONS
SECTION 3.1 INTEREST.
(a) Interest Rate Options. Subject to the provisions of this Section
3.1, at the election of the Borrower in accordance with Article II, (i) the
unpaid principal balance of any Revolving Loan shall bear interest at (A) the
Base Rate plus the Applicable Margin or (B) the Adjusted LIBOR Rate plus the
Applicable Margin and (ii) the unpaid balance of any Swingline Loan shall bear
interest at the (A) Base Rate plus the Applicable Margin or (B) the LIBOR
Market Index Rate plus the Applicable Margin. Any Revolving Loan as to which
the Borrower has not duly specified an interest rate as provided herein shall
be deemed a Base Rate Loan. Except as set forth in Section 2.6 (b), any
Swingline Loan as to which the Borrower has not duly specified an interest rate
as provided herein shall be deemed a Base Rate Loan.
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(b) Interest Periods.
(i) In connection with each LIBOR Loan, the Borrower, by giving
notice at the times described in Sections 2.2 and 3.2, shall elect an
interest period (each, an "Interest Period") to be applicable to such
Loan, which Interest Period shall be a period of one (1) month, three (3)
months or six (6) months; provided that:
(A) each Interest Period shall commence on the date of advance
of or conversion to any LIBOR Loan and, in the case of immediately
successive Interest Periods, each successive Interest Period shall
commence on the date on which the next preceding Interest Period
expires;
(B) if any Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided, that if any Interest Period would
otherwise expire an a day that is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(C) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the relevant calendar
month at the end of such Interest Period; and
(D) no Interest Period shall extend beyond the Termination Date
and there shall be no more than 5 different Interest Periods in
effect at any time.
(c) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrower shall no longer have the option to request
LIBOR Loans, (ii) all outstanding LIBOR Loans shall bear interest at a rate per
annum two percent (2%) in excess of the rate then applicable to LIBOR Loans
until the end of the applicable Interest Period and thereafter at a rate equal
to two percent (2%) in excess of the rate then applicable to Base Rate Loans
and (iii) all outstanding Base Rate Loans and LIBOR Market Index Swingline
Loans shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to Base Rate Loans. To the extent permitted
by law, interest shall continue to accrue on the Notes after the filing by or
against the Borrower of any petition seeking any relief in bankruptcy or under
any act or law pertaining to insolvency or debtor relief, whether state,
federal or foreign.
(d) Interest Payment and Computation. Subject to the provisions of Section
3.1(c), interest on the Revolving Loans shall be payable (i) for Base Rate
Loans, quarterly in arrears as of the end of each calendar quarter and (ii) for
LIBOR Loans, on the last day of the applicable Interest Period (and with
respect to any LIBOR Loan with an Interest Period of 6 months, on the date 3
months after the making of such LIBOR Loan and on the last day of the
applicable Interest
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Period). Subject to the provisions of Section 3.1(c), interest on the Swingline
Loans shall be payable (i) on the maturity date agreed to by the Swingline
Lender pursuant to Section 2.7(a) with respect to such Loan and (ii) with
respect to Swingline Loans made pursuant to the Sweep Plus Arrangement, in
accordance with the Sweep Plus Arrangement. The interest rates hereunder for
all Loans shall be calculated based on a 360 day year for the actual number of
days elapsed.
(e) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Notes charged
or collected pursuant to the terms of this Agreement or pursuant to the Notes
exceed the highest rate permissible under any Applicable Law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that any Lender has charged or
received interest hereunder in excess of the highest applicable rate, the rate
in effect hereunder shall automatically be reduced to the maximum rate
permitted by Applicable Law and such Lender shall, at its option, promptly
refund to the Borrower any interest received by such Lender in excess of the
maximum lawful rate or apply such excess to the principal balance of the
Obligations. It is the intent hereof that the Borrower not pay or contract to
pay, and that the Lenders not receive or contract to receive, directly or
indirectly in any manner whatsoever, interest in excess of that which may be
paid by the Borrower under Applicable Law.
SECTION 3.2 NOTICE AND MANNER OF CONVERSION OR CONTINUATION OF LOANS.
The Borrower shall have the option to (a) convert at any time all or any
portion of its outstanding Base Rate Loans (other than Swingline Loans) in a
principal amount equal to $1,000,000 or any whole multiple of $250,000 in
excess thereof into one or more LIBOR Loans (so long as there are no more than
5 LIBOR Loans outstanding at any one time), or (b) upon the expiration of any
Interest Period, (i) convert all or any part of such outstanding LIBOR Loans
into Base Rate Loans or (ii) continue such LIBOR Loans as LIBOR Loans;
provided, that no outstanding Loan may be continued as, or converted into, a
LIBOR Loan when any Event of Default has occurred and is continuing. Whenever
the Borrower desires to convert or continue Loans as provided above, the
Borrower shall give the Agent irrevocable prior written notice in the form
attached as Exhibit D (a "Notice of Conversion/Continuation") not later than
11:00 a.m. on the same Business Day as, in the case of a Loan being converted
into or continued as a Base Rate Loan, and three (3) Business Days before, in
the case of a Loan being converted into or continued as a LIBOR Loan, the day
on which a proposed conversion or continuation of such Loan is to be effective
specifying (A) the Loans to be converted or continued and the amount thereof,
(B) in the case of any LIBOR Loans to be converted or continued, the last day
of the Interest Period therefor and the Interest Period to be applicable to the
converted or continued Loans and (C) the effective date of the conversion or
continuation (which shall be a Business Day). The Agent shall give each Lender
notice as promptly as practicable of any such proposed extension or conversion
affecting any Revolving Loan.
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SECTION 3.3 FEES.
(a) The Borrower shall pay to the Agent all fees payable to the Agent on
the Closing Date and from time to time thereafter.
(b) In consideration of the Revolving Commitments of the Lenders
hereunder, the Borrower agrees to pay to the Agent for the account of each
Lender a fee (the "Commitment Fee") on the Unused Revolving Committed Amount
computed at a per annum rate (based on a year of 360 days) for each day during
the applicable Commitment Fee Calculation Period (hereinafter defined) at a
rate equal to 0.25%. The Commitment Fee shall commence to accrue on the Closing
Date and shall be due and payable in arrears on the last business day of each
March, June, September and December (and any date that the Revolving Committed
Amount is reduced as provided in Section 2.10, or the Maturity Date) for the
immediately preceding quarter (or portion thereof) (each such quarter or
portion thereof for which the Commitment Fee is payable hereunder being herein
referred to as an "Commitment Fee Calculation Period"), beginning with the
first of such dates to occur after the Closing Date. For purposes of
computation of the Commitment Fee, Swingline Loans shall not be counted toward
or considered usage under the Revolving Committed Amount.
SECTION 3.4 MANNER OF PAYMENT.
Each payment by the Borrower on account of the principal of or interest on
the Loans or of any fee, commission or other amounts payable to the Lenders
under this Agreement or the Notes shall be made not later than 2:00 P.M. on the
date specified for payment under this Agreement to the Agent at its address
referred to in Section 13.1, in Dollars, in immediately available funds and
shall be made without any set-off, counterclaim or deduction whatsoever. Any
payment received after such time but before 5:00 P.M. on such day shall be
deemed a payment on such date for the purposes of Section 11.1, but for all
other purposes shall be deemed to have been made on the next succeeding
Business Day. Any payment received after 5:00 P.M. shall be deemed to have been
made on the next succeeding Business Day for all purposes. Subject to Section
3.1(b)(i)(B), if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day and such extension of time
shall in such case be included in computing any interest if payable along with
such payment.
As soon as practicable after the Agent receives payment from the Borrower,
the Agent will cause to be distributed like funds relating to the payment of
principal, interest, or Fees (other than amounts payable to the Agent to
reimburse the Agent for fees and expenses payable solely to it) or expenses
payable to the Agent and the Lenders in accordance with Section 13.9, ratably
(except in the case of Swingline Loans) to the Lenders, and like funds relating
to the payment of any other amounts payable to such Lender, in each case to be
distributed and applied in accordance with the terms of Section 3.10.
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SECTION 3.5 CHANGED CIRCUMSTANCES.
(a) Circumstances Affecting LIBOR Rate or LIBOR Market Index Rate
Availability. If prior to the first day of any Interest Period, (i) the Agent
shall have determined in good faith (which determination shall be conclusive
and binding upon the Borrower absent manifest error) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Rate for such Interest Period, (ii) the
Agent has received notice from the Required Lenders that the LIBOR Rate
determined or to be determined for such Interest Period will not adequately and
fairly reflect the cost to such Lenders of making or maintaining their LIBOR
Loans during such Interest Period, or (iii) Dollar deposits in the principal
amounts of the LIBOR Loans to which such Interest Period is to be applicable
are not generally available in the London interbank market, the Agent shall
give telecopy or telephonic notice thereof to the Borrower and the Lenders as
soon as practicable thereafter, and will also give prompt written notice to the
Borrower when such conditions no longer exist. If such notice is given (i) any
LIBOR Loans requested to be made on the first day of such Interest Period shall
be made as Base Rate Loans, (ii) any Revolving Loans that were to have been
converted on the first day of such Interest Period to or continued as LIBOR
Loans shall be converted to or continued as Base Rate Loans and (iii) each
outstanding LIBOR Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Base Rate Loans. Until such notice has been
withdrawn by the Agent, no further LIBOR Loans shall be made or continued as
such, nor shall the Borrower have the right to convert Base Rate Loans to LIBOR
Loans.
Notwithstanding any other provision of this Agreement, if (i) the
Swingline Lender shall reasonably determine (which determination shall be
conclusive and binding absent manifest error) that, by reason of circumstances
affecting the relevant market, reasonable and adequate means do not exist for
ascertaining the LIBOR Market Index Rate, or (ii) the Swingline Lender shall
reasonably determine (which determination shall be conclusive and binding
absent manifest error) that the LIBOR Market Index Rate does not adequately and
fairly reflect the cost of funding LIBOR Market Index Swingline Loans, the
Swingline Lender shall forthwith give telephone notice of such determination,
confirmed in writing, to the Borrower, and thereafter the right to request
LIBOR Market Index Swingline Loans shall be suspended until such time as the
conditions giving rise to such notice shall no longer exist. In the event LIBOR
Market Index Swingline Loans are not available on account of operation of this
Section, the Swingline Lender will endeavor to provide an alternative index or
reference rate which will provide a similar interest rate based on historical
data.
(b) Laws Affecting LIBOR Rate Availability. Notwithstanding any other
provision herein, if the adoption of or any change in any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or a court
or other governmental authority or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain LIBOR Loans as contemplated by this Credit Agreement, (i) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Agent (which notice shall be withdrawn whenever such circumstances no
longer exist), (ii) the commitment of such Lender hereunder to make LIBOR
Loans, continue LIBOR Loans as such and convert a Base Rate Loan to LIBOR Loans
shall forthwith be canceled and, until such time
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as it shall no longer be unlawful for such Lender to make or maintain LIBOR
Loans, such Lender shall then have a commitment only to make a Base Rate Loan
when a LIBOR Loan is requested and (iii) such Lender's Revolving Loans then
outstanding as LIBOR Loans, if any, shall be converted automatically to Base
Rate Loans on the respective last days of the then current Interest Periods
with respect to such Revolving Loans or within such earlier period as required
by law. If any such conversion of a LIBOR Loan occurs on a day which is not the
last day of the then current Interest Period with respect thereto, the Borrower
shall pay to such Lender such amounts, if any, as may be required pursuant to
Section 3.5(c).
(c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Lender with any request or directive (whether or not having the force of law)
of such Governmental Authority, central bank or comparable agency:
(i) shall subject any Lender to any tax, duty or other charge with
respect to the Notes or shall change the basis of taxation of payments to
such Lender of the principal of or interest on the Notes or any other
amounts due under this Agreement in respect thereof (except for changes in
the rate of tax on the net income of such Lender imposed by the
jurisdiction in which such Lender is organized or is or should be
qualified to do business or the Lender's office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System but excluding any reserve included in the Adjusted LIBOR
Rate Reserve Percentage), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or
credit extended by any Lender or shall impose on any Lender or the foreign
exchange and interbank markets any other condition affecting the Notes;
and the result of any of the foregoing is to increase the costs to any Lender
of maintaining any LIBOR Loan or to reduce the yield or amount of any sum
received or receivable by such Lender under this Agreement or under the Notes
in respect of a LIBOR Loan then such Lender shall promptly notify the Borrower
of such fact and demand compensation therefor and, within fifteen (15) days
after such notice by such Lender, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduction. Such Lender will promptly notify the Borrower of any event
of which it has knowledge which will entitle it to compensation pursuant to
this Section 3.5(c); provided, that such Lender shall incur no liability
whatsoever to the Borrower in the event it fails to do so. A certificate of the
Lender setting forth the basis for determining such amount or amounts necessary
to compensate the Lender shall be forwarded to the Borrower and shall be
conclusively presumed to be correct absent manifest error.
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SECTION 3.6 INDEMNITY.
The Borrower hereby indemnifies the Lenders against any loss or expense
which may result directly and primarily from any Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain any Loan (a) as a consequence of any failure by the Borrower to make
any payment when due in connection with a LIBOR Loan, (b) due to any failure of
the Borrower to borrow on a date specified therefor in a Notice of Borrowing,
Notice of Conversion/Continuation or (c) due to any payment, prepayment or
conversion of any LIBOR Loan on a date other than the last day of the Interest
Period therefor. A certificate of such Lender setting forth the basis for
determining such amount or amounts necessary to compensate the Lender shall be
forwarded to the Borrower and shall be conclusively presumed to be correct
absent manifest error.
SECTION 3.7 CAPITAL REQUIREMENT.
If either (a) the introduction of, or any change in, or in the
interpretation of, any Applicable Law or (b) compliance with any guideline or
request from any central bank or comparable agency or other Governmental
Authority (whether or not having the force of law), has or would have the
effect of reducing the rate of return on the capital of, or has affected or
would affect the amount of capital required to be maintained by, any Lender or
any corporation controlling any Lender as a consequence of, or with reference
to the Revolving Commitment of any Lender and other commitments of this type,
below the rate which such Lender or such other corporation could have achieved
but for such introduction, change or compliance, then within five (5) Business
Days after written demand by such Lender, the Borrower shall pay to such Lender
from time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate
as to such amounts submitted to the Borrower by such Lender shall be
conclusively presumed to be correct, absent manifest error.
SECTION 3.8 TAXES.
(a) Payments Free and Clear. Any and all payments by the Borrower
hereunder or under the Notes to or for the benefit of any Lender shall be made
free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholding, and all liabilities
with respect thereto, excluding, in the case of each such Lender and the Agent,
income and franchise taxes imposed by the jurisdiction under the laws of which
such Lender or the Agent is organized or is or should be qualified to do
business or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable hereunder or under
the Notes to or for the benefit of any Lender or the Agent, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 3.8) such Lender or the Agent, as the case may be, receives an
amount equal to the amount it would have received had no such deductions been
made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall
pay
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the full amount deducted to the relevant taxing authority or other authority
in accordance with applicable law and (iv) the Borrower shall deliver to such
Lender or the Agent, as the case may be, evidence of such payment to te
relevant taxing authority or other authority in the manner provided in Section
3.8(e); provided, however, that the Borrower shall be under no obligation to
increase the sum payable to any Lender not organized under the laws of the
United States or a state thereof (a "Foreign Lender") by an amount equal to the
amount of the United States tax required to be withheld under United States law
from the sums paid to such Foreign Lender, if such withholding is caused by the
failure of such Foreign Lender to be engaged in the active conduct of a trade
or business in the United States or all amounts of interest and fees to be paid
to such Foreign Lender hereunder are not effectively connected with such trade
or business within the meaning of United States Treasury Regulation
1.1441-4(a).
(b) Each Foreign Lender agrees that it will deliver to the Borrower and
the Agent (i) two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 or successor applicable form(s), as the case may be,
and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form(s). Each such Lender also agrees to deliver to the Borrower and the Agent
two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms or other manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower, and such extensions or renewals
thereof as may reasonably be requested by the Borrower or the Agent, unless in
any such case an event (including, without limitation, any change in treaty,
law or regulation) has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender so advises the Borrower and the Agent. Such
Lender shall certify (A) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Credit Agreement without deduction or
withholding of any United States federal income taxes and (B) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax.
(c) Stamp and Other Taxes. In addition, the Borrower shall pay any present
or future stamp, registration, recordation or documentary taxes or any other
similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to this Agreement, the
Loans, the other Credit Documents, or the perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes").
(d) Indemnity. The Borrower shall indemnify each Lender and the Agent for
the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 3.8) paid by such Lender or the Agent and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Agent makes written demand therefor.
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(e) Evidence of Payment. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes paid on behalf of the Agent or any Lender, the
Borrower shall furnish to the Agent or any such Lender, at its address referred
to in Section 13.1, the original or a certified copy of a receipt evidencing
payment thereof or other evidence of payment satisfactory to the Agent or any
such Lender.
(f) Survival. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 3.8 shall survive the payment in full of the
Obligations and the termination of this Agreement.
SECTION 3.9 SHARING OF PAYMENTS.
If any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off or otherwise) on account of the
Revolving Loans made by it in excess of its pro rata share of such payment as
provided for in this Credit Agreement, such Lender shall forthwith purchase
from the other Lenders such participations in the Revolving Loans made by them
as shall be necessary to cause such purchasing Lender to share such excess
payment with all Lenders in accordance with their respective ratable shares as
provided for in this Credit Agreement; provided, however, that if all or any
portion of such excess is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and each such Lender shall
repay to the purchasing Lender the purchase price to the extent of such
recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect to the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 3.9
may, to the fullest extent permitted by law, exercise all of its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.
SECTION 3.10 PRO RATA TREATMENT.
Each Revolving Loan, each payment or prepayment of principal of any
Revolving Loan, each payment of interest on the Revolving Loans, each payment
of the Commitment Fee, each reduction of the Revolving Commitment and each
conversion or extension of any Revolving Loan, shall be allocated pro rata
among the Lenders in accordance with the respective principal amounts of their
outstanding Revolving Loans; provided, however, that the foregoing fees payable
hereunder to the Lenders shall be allocated to each Lender based on such
Lender's Revolving Commitment Percentage.
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ARTICLE IV
[RESERVED]
ARTICLE V
CLOSING: CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 CONDITIONS TO CLOSING AND INITIAL LOANS.
The obligation of the Lenders to make any Revolving Loan hereunder is
subject to the satisfaction of, or waiver of, prior to or concurrently with the
making of such Revolving Loan, the following conditions precedent:
(a) Executed Credit Documents.
Each Credit Document shall have been duly authorized and executed by the
parties thereto, shall be in full force and effect and the Credit Parties shall
have delivered or caused to be delivered original counterparts thereof to the
Agent.
(b) Closing Certificates: etc.,
(i) Officer's Certificate of the Borrower. The Agent shall have
received a certificate from an officer of the Borrower, in form and
substance satisfactory to the Lenders, to the effect that (A) to the best
of his knowledge, all representations and warranties of the Credit Parties
contained in this Agreement and the other Credit Documents are true,
correct and complete; (B) the Credit Parties are not in violation of any
of the covenants contained in this Agreement and the other Credit
Documents; (C) after giving effect to the transactions contemplated by
this Agreement, no Default or Event of Default has occurred and is
continuing; and (D) that the Credit Parties have satisfied each of the
closing conditions described herein.
(ii) Certificates of Secretary or Assistant Secretary of the Credit
Parties. The Agent shall have received a certificate of the secretary or
an assistant secretary of each Credit Party certifying (A) that attached
thereto is a true and complete copy of the charter documents of such
Credit Party and all amendments thereto, certified as of a recent date by
the appropriate Governmental Authority in its jurisdiction of formation;
(B) that attached thereto is a true and complete copy of the bylaws of
such Credit Party, as in effect on the date of such certification; (C)
that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Credit Party authorizing the
execution, delivery and performance of this Agreement and the other Credit
Documents to which it is a party and (D) as to the incumbency and
genuineness of the signature of each officer of such Credit Party
executing the Credit Documents and related documents and certificates to
which it is a party.
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(iii) Certificates of Good Standing and Tax Clearance. The Agent
shall have received certificates as of a recent date of the good standing
of each Credit Party under the laws of its respective jurisdiction of
organization and, to the extent customarily provided by such taxing
authorities and to the extent reasonably available, a certificate of the
relevant taxing authority of its jurisdiction of organization certifying
that such Credit Party has filed required tax returns and owes no
delinquent taxes.
(iv) Opinions of Counsel. The Agent shall have received favorable
opinions of counsel to the Credit Parties addressed to the Lenders, the
Credit Documents and related documents and certificates to which such
Person is a party, the security interests created thereby and such other
matters as the Agent and its counsel shall request.
(c) Consents; No Adverse Claim.
(i) Governmental and Third Party Approvals. All necessary approvals,
authorizations and consents, if required, of any Person and of all
Governmental Authorities and courts having jurisdiction with respect to
the transactions contemplated by this Agreement and the other Credit
Documents shall have been obtained.
(ii) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any Governmental Authority to enjoin, restrain or
prohibit, or to obtain substantial damages in respect of, or which is
related to or arises out of, this Agreement or the other Credit Documents
or the consummation of the transactions contemplated hereby or thereby, or
which, in the Lenders' reasonable discretion, would make it inadvisable to
consummate the transactions contemplated by this Agreement and the other
Credit Documents.
(iii) No Material Adverse Change. Since December 31, 1997, there
shall not have occurred any material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of
the Borrower and its Subsidiaries or any event, condition or state of
facts that will or could be reasonably expected to have a Material Adverse
Effect.
(iv) No Event of Default. No Default or Event of Default shall have
occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The Lenders shall have received the most
recent annual audited and interim unaudited Consolidated financial
statements of the Borrower, and its Subsidiaries or, in the event no such
financial statements are available, such other financial information as
shall be acceptable to the Lenders in their sole discretion.
(ii) Financial Projections. The Lenders shall have received an
opening pro forma balance sheet of the Borrower and its Subsidiaries as of
a recent date giving effect
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to the transactions contemplated herein and demonstrating compliance with
the financial covenants contained herein, together with projected annual
financial statements of the Borrower and its Subsidiaries through December
31, 2001, each in form and substance satisfactory to the Agent.
(iii) Opening Officer's Compliance Certificate. The Lenders shall
have received an Officer's Compliance Certificate demonstrating that the
Borrower and its Subsidiaries are in compliance with the financial
covenants set forth in Article IX as of the Closing Date.
(iv) Payment at Closing. There shall have been paid by the Borrower
to the Agent, the fees, set forth or referenced in Section 3.3 (to the
extent required to be paid on or prior to the Closing Date) and any other
accrued and unpaid fees due hereunder (including, without limitation,
legal fees and expenses).
(e) Collateral Matters. The Agent shall have received:
(i) searches of Uniform Commercial Code filings in the jurisdiction
of the chief executive office of each Credit Party and each jurisdiction
where any Collateral is located or where a filing would need to be made in
order to perfect the Collateral Agent's security interest in the
Collateral, copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than Permitted Liens;
(ii) duly executed UCC financing statements for each appropriate
jurisdiction as is necessary, in the Agent's sole discretion, to perfect
the Collateral Agent's security interest in the Collateral;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Collateral
Agent's security interest in the Collateral;
(iv) all instruments and chattel paper in the possession of the
Credit Parties, together with allonges or assignments as may be necessary
or appropriate to perfect the Collateral Agent's security interest in the
Collateral to the extent required under the Security Agreement and/or the
Pledge Agreement;
(v) duly executed consents as are necessary, in the Agent's sole
discretion, to perfect the Collateral Agent's security interest in the
Collateral; and
(vi) satisfactory evidence that (A) the Collateral Agent, on behalf
of the Lenders, holds a perfected Lien on all Collateral and (B) none of
the Collateral is subject to any other Liens other than Permitted Liens.
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(f) Miscellaneous.
(i) Termination of Existing Debt. Each of the Borrower and its
Subsidiaries shall have paid and satisfied all of its obligations with
respect to the Existing Debt. Evidence of the satisfaction of all such
credit facilities and the documents related thereto shall have been
received and approved by the Agent.
(ii) Evidence of Insurance. The Agent shall have received copies of
insurance policies or certificates of insurance of the Credit Parties
evidencing liability and casualty insurance meeting the requirements set
forth herein and in the other Credit Documents, including, but not limited
to, naming the Agent as sole loss payee and additional insured.
(iii) Corporate Structure. The corporate capital and ownership
structure of the Borrower and its Subsidiaries shall be as described in
Schedule 5.1.
(iv) Other. The Agent shall have received all other documents and
information in connection with the transactions contemplated by this
Agreement as it may reasonably request.
SECTION 5.2 CONDITIONS TO ALL LOANS.
The obligation of the Lenders to make any Loan is subject to the
satisfaction of the following conditions precedent on the relevant borrowing
date:
(a) Continuation of Representations and Warranties. The representations
and warranties contained in Article VI shall be true and correct in all
material respects on and as of such borrowing date with the same effect as if
made on and as of such date (except to the extent such representations and
warranties are expressly made as of a specified date, in which event such
representations and warranties shall be true and correct in all material
respects as of such specified date).
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
SECTION 6.1 REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Credit Agreement and to
make available the credit facilities contemplated hereby, each Credit Party
hereby represents and warrants to the Lenders as of the date hereof, the
Closing Date and on the date of each extension of credit hereunder, as follows:
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(a) Organization; Power; Qualification. Each Credit Party is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, has the power and authority to
own its properties and to carry on its business as now being and hereafter
proposed to be conducted and is duly qualified and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization, except where the
failure to be so qualified and authorized could not reasonably be expected to
have a Material Adverse Effect.
(b) Subsidiaries and Capitalization. As of the date hereof the corporate
ownership and capital structure of the Borrower and its Subsidiaries is as set
forth on Schedule 5.1.
(c) Authorization of Agreement, Credit Documents and Borrowing. Each
Credit Party has the corporate right, power and authority and has taken all
necessary corporate and other action to authorize the execution, delivery and
performance of this Agreement and each of the other Credit Documents to which
it is a party in accordance with their respective terms. This Agreement and
each of the other Credit Documents have been duly executed and delivered by the
duly authorized officers of the Credit Parties, and each such document
constitutes the legal, valid and binding obligation of the Credit Parties party
thereto, enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
state or federal debtor relief laws from time to time in effect which affect
the enforcement of creditors' rights in general and the availability of
equitable remedies.
(d) Compliance of Agreement, Credit Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by each Credit Party of the Credit
Documents to which it is a party, in accordance with their respective terms,
the borrowings hereunder and the transactions contemplated hereby do not and
will not, by the passage of time, the giving of notice or otherwise, (i)
require any Governmental Approval or violate any Applicable Law relating to
such Credit Party, (ii) conflict with, result in a breach of or constitute a
default under the certificate of formation or other organizational documents of
such Credit Party or any material indenture, agreement or other instrument to
which such Person is a party or by which any of its properties may be bound or
any Governmental Approval relating to such Credit Party or (iii) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by such Credit Party other than Liens
arising under the Credit Documents.
(e) Compliance with Law; Governmental Approvals. Each of the Borrower and
its Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to the best of its knowledge, threatened attack by direct or
collateral proceeding and (ii) is in compliance with each Governmental Approval
applicable to it and all other Applicable Laws relating to it or any of its
respective properties, except in each case under clause (i) and (ii) above to
the extent that (A) such requirement or compliance is contested in good faith
by appropriate proceedings or (B) the failure to do so could not reasonably be
expected to have a Material Adverse Effect.
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(f) Tax Returns and Payments. Each of the Borrower and its Subsidiaries
has duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and has paid, or made adequate
provision for the payment of, all federal, state, local and other taxes,
assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except for any such taxes
or charges being contested in good faith by appropriate proceedings. No
Governmental Authority has asserted any Lien or other claim against the
Borrower or any Subsidiary thereof with respect to unpaid taxes which has not
been discharged or resolved. The charges, accruals and reserves on the books of
the Borrower or any of its Subsidiaries in respect of federal, state, local and
other taxes are in the judgment of the Credit Parties adequate, and the Credit
Parties do not anticipate any material additional taxes or assessments for any
year or portion thereof.
(g) Intellectual Property Matters. Each of the Borrower and its
Subsidiaries owns or possesses all lawful rights to use all franchises,
licenses, patents, patent rights or licenses, patent applications, copyrights,
copyright applications, trademarks, trademark rights, trade names, trade name
rights and rights with respect to the foregoing which are necessary in any
material respect to conduct its business. To the knowledge of the Credit
Parties, no event has occurred which permits, or after notice or lapse of time
or both would permit, the revocation or termination of any such rights, and
neither the Borrower nor any Subsidiary thereof is liable to any Person for
infringement under Applicable Law with respect to any such rights as a result
of its business operations.
(h) Environmental Matters.
(i) To the best knowledge of the Credit Parties, the properties of
the Borrower and its Subsidiaries do not contain any Hazardous Materials
in amounts or concentrations which (A) constitute a material violation of
any Environmental Law, or (B) could give rise to material liability under,
applicable Environmental Laws or (C) could trigger investigation, removal,
remediation or other response activities under any Environmental Laws;
(ii) To the best knowledge of the Credit Parties, the properties of
the Borrower and its Subsidiaries, and all operations conducted in
connection therewith, are in compliance with all applicable Environmental
Laws in all material respects and there are no Hazardous Materials at or
under the properties of the Borrower and its Subsidiaries, or such
operations thereon in violation of applicable Environmental Laws or which
could materially interfere with the continued operation of such properties
or which damage or could damage natural resources on such properties in
material violation of any applicable Environmental Laws or materially
impair the fair saleable value thereof;
(iii) Neither the Borrower nor any Subsidiary has received any notice
of material violation, alleged material violation, noncompliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws which remain unresolved with regard to
any of their properties or the operations conducted in
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connection therewith, nor does any Credit Party have knowledge or reason
to believe that any other such notice will be received or is being
threatened;
(iv) To the best knowledge of the Credit Parties, Hazardous Materials
have not been transported or disposed of from the properties of the
Borrower and its Subsidiaries in material violation of, or in a manner or
to a location which could give rise to material liability of the Borrower
or any of its Subsidiaries under, Environmental Laws, nor have any
Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of such properties in material violation of, or in a manner
that could give rise to material liability of the Borrower or any of its
Subsidiaries under, any applicable Environmental Laws;
(v) No judicial proceedings or governmental or administrative action
is pending, or to the best knowledge of the Credit Parties, threatened,
under any Environmental Law to which the Borrower or any Subsidiary
thereof is or will be named as a party with respect to such properties or
operations conducted in connection therewith, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to such properties or such operations;
and
(vi) To the best knowledge of the Credit Parties, there has been no
release or threat of release of Hazardous Materials at or from such
properties, in violation of or in amounts or in a manner that could give
rise to material liability of the Borrower or any of its Subsidiaries
under Environmental Laws.
(i) ERISA. The Borrower and each ERISA Affiliate are in material
compliance with all applicable provisions of ERISA and the regulations and
published interpretations thereunder with respect to all Employee Benefit Plans
except for any required amendments for which the remedial amendment period as
defined in Section 401(b) of the Code has not yet expired. Each Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified, and
each trust related to such plan has been determined to be exempt under Section
501(a) of the Code. No Reportable Event has occurred as to which the Borrower
or any ERISA Affiliate was required to file a report with the PBGC and no
liability (including without limitation any withdrawal liability under Section
4201 of ERISA) has been incurred by the Borrower or any ERISA Affiliate which
remains unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan.
(j) Margin Stock. Neither the Borrower nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as
each such term is defined or used in Regulation U of the Board of Governors of
the Federal Reserve System). No part of the proceeds of any of the Loans will
be used for purchasing or carrying margin stock or for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation T,
U or X of such Board of Governors.
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(k) Government Regulation. Neither the Borrower nor any Subsidiary thereof
is an "investment company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment Company Act of 1940, as
amended) and neither the Borrower nor any Subsidiary thereof is, or after
giving effect to any Loan, will be, subject to regulation under the Public
Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as
amended, or any other Applicable Law which limits its ability to incur or
consummate the transactions contemplated hereby.
(l) Employee Relations. Each of the Borrower and its Subsidiaries has a
stable work force in place and is not party to any collective bargaining
agreement nor has any labor union been recognized as the representative of its
employees. No Credit Party knows of any pending, threatened or contemplated
strikes, work stoppage or other collective labor disputes involving its
employees or those of its Subsidiaries.
(m) Financial Statements. The audited Consolidated balance sheet of the
Borrower and its Subsidiaries as of December 31, 1997, and the related
statements of income and retained earnings and cash flows for the Fiscal Year
then ended and unaudited Consolidated balance sheet of the Borrower and its
Subsidiaries as of September 30, 1998, and related unaudited interim statements
of income and retained earnings and cash flows for the fiscal period then
ended, copies of which have been furnished to the Lenders, fairly present in
all material respects the assets, liabilities and financial position of the
Borrower and its Subsidiaries as at such dates, and the results of the
operations and changes of financial position for the periods then ended. All
such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP except as may be otherwise disclosed
therein or in the notes thereto (subject in the case of the interim statements
to year-end audit adjustments). As of the date hereof (after giving effect to
the repayment of the Existing Debt), except for Debt owed to Lenders, the
Borrower and its Subsidiaries have no Debt, obligation or other unusual forward
or long-term commitment which is not fairly reflected in the foregoing
financial statements or in the notes thereto.
(n) Solvency. As of the Closing Date and after giving effect to each Loan
made hereunder, the Borrower and its Subsidiaries, taken as a whole, will be
Solvent.
(o) Titles to Properties. Each of the Borrower and its Subsidiaries has
such title to the real property owned by it (or a lease of real property) as is
necessary to the conduct of its business and valid and legal title to all of
its personal property and assets reflected on the balance sheets of the
Borrower and its Subsidiaries described in Section 6.1(m) or in any financial
statements hereafter delivered pursuant to Section 7.1, except such assets
which have been disposed of by the Borrower or its Subsidiaries subsequent to
such date in the ordinary course of business or as otherwise expressly
permitted hereunder.
(p) Debt and Liens. Schedule 6.1(p) is a complete and correct list, as of
the date hereof, of each item of Debt of the Borrower and its Subsidiaries in
excess of $100,000 and each Lien securing such Debt, each of which is permitted
under the terms of Sections 10.1 and 10.2,
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respectively. The Borrower and its Subsidiaries have performed and are in
compliance with all of the terms of such Debt and Liens and all instruments and
agreements relating thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would constitute such a
default or event of default on the part of the Borrower or its Subsidiaries
exists with respect to any such Debt or Liens. None of the properties and
assets of the Borrower or any Subsidiary thereof is subject to any Lien, except
for Permitted Liens. Upon the proper filing of financing statements and the
proper recordation of other applicable documents with the appropriate filing or
recordation offices in each of the necessary jurisdictions, the security
interests granted pursuant to the Credit Documents constitute and shall at all
times constitute valid and enforceable first, prior and perfected Liens on the
Collateral (other than Permitted Liens). Each Credit Party is or will be at the
time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer and create a Lien
therein, free and clear of any and all Liens in favor of third parties, except
Permitted Liens. The Credit Parties will at their expense forever warrant and,
at the Agent's request, defend the Collateral from any and all Liens (other
than Permitted Liens) of any third party. The Credit Parties will not, and will
not permit any of their Subsidiaries to, grant, create or permit to exist, any
Lien upon the Collateral, or any proceeds thereof, in favor of any third party
(other than Permitted Liens).
(q) Litigation. There are no actions, suits or proceedings pending nor, to
the best knowledge of the Credit Parties, threatened against or in any other
way relating adversely to or affecting the Borrower or any Subsidiary thereof
or any of their respective properties in any court or before any arbitrator of
any kind or before or by any Governmental Authority, that, if adversely
determined, might reasonably be expected to have a Material Adverse Effect.
(r) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a
default or event of default by the Borrower or any Subsidiary thereof under any
judgment, decree or order by which the Borrower or its Subsidiaries or any of
their respective properties may be bound or which would require the Borrower or
its Subsidiaries to make any payment thereunder prior to the scheduled maturity
date therefor.
(s) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of the Credit
Parties and furnished to the Lenders were, at the time the same were so
furnished and taken as a whole, true and correct in all material respects to
the extent necessary to give the recipient a true and accurate knowledge of the
subject matter. The documents and other written information furnished or
written statements made to the Lenders by the Credit Parties in connection with
the negotiation, preparation or execution of this Agreement or any of the
Credit Documents, taken as a whole, do not contain any untrue statement of a
material fact or omit to state a fact necessary in order to make the statements
contained therein not materially misleading. The Credit Parties are not aware
of any facts which it has not disclosed in writing to the Lenders which have a
Material Adverse Effect, or insofar as the Credit Parties can now foresee,
could reasonably be expected to have a Material Adverse Effect.
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(t) Burdensome Provisions. Neither the Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other instrument,
or subject to any corporate or partnership restriction, Governmental Approval
or Applicable Law which is so unusual or burdensome as in the foreseeable
future could be reasonably expected to have a Material Adverse Effect. The
Credit Parties do not presently anticipate that future expenditures needed to
meet the provisions of any statutes, orders, rules or regulations of a
Governmental Authority will be so burdensome as to have a Material Adverse
Effect.
(u) Insurance. The properties of the Borrower and its Subsidiaries are
insured with financially sound and reputable insurance companies in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Borrower and its Subsidiaries operate.
(v) No Material Adverse Change. Since December 31, 1997, there has been no
material adverse change in the business, condition (financial or otherwise),
operations or properties of the Borrower and its Subsidiaries, taken as a
whole, or any event, condition or state of facts that will or could be
reasonably expected to have a Material Adverse Effect.
(w) Locations of Offices, Records and Inventory. Each Credit Party's
principal place of business and chief executive office are set forth in
Schedule 6.1(w) hereto, and the books and records of such Credit Party and all
chattel paper and all records of accounts are located at the principal place of
business and chief executive office of such Credit Party. There is no
jurisdiction in which any Credit Party maintains any Collateral other than
those jurisdictions listed on Schedule 6.1(w). Set forth in Schedule 6.1(w) is
a true, correct and complete list of (i) the address of the chief executive
offices of the Credit Parties and (ii) the address of all offices where records
and books of account of the Credit Parties are kept.
(x) Fictitious Business Names. No Credit Party has used any corporate or
fictitious name during the five (5) years preceding the date hereof, other than
the corporate name shown on its or such Credit Party's Articles or Certificate
of Incorporation or other organizational document and as set forth on Schedule
6.1(x).
(y) Material Contracts. None of the Material Contracts contains provisions
which could have a Material Adverse Effect. All of the Material Contracts are
in full force and effect, and no material defaults currently exist thereunder.
(z) Year 2000 Issue. Any reprogramming and related testing required to
permit the proper functioning of the Credit Parties' computer systems and other
equipment containing embedded microchips in and following the year 2000 will be
completed in all material respects prior to September 1, 1999 (that is, the
Credit Parties will be "Year 2000 Compliant"), and the cost to the Credit
Parties of such reprogramming and testing will not result in a Default or Event
of Default or a Material Adverse Effect. Except for this reprogramming
referenced to in the preceding sentence as may be necessary, the computer and
management information systems and other equipment containing embedded
microchips of the Credit Parties and their Subsidiaries are
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and, with ordinary course upgrading and maintenance, will continue for the term
of this Agreement to be, adequate for the conduct of its business.
SECTION 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the
Credit Documents (including but not limited to any such representation or
warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until payment in full by the Borrower of all principal of and interest on
the Loans and all other amounts due hereunder and under the other Credit
Documents at the time of such payment, and the termination of the Revolving
Commitment, the Credit Parties will furnish or cause to be furnished to the
Agent and the Lenders:
SECTION 7.1 FINANCIAL STATEMENTS AND PROJECTIONS.
(a) Annual Financial Statements. As soon as practicable and in any event
within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting firm reasonably acceptable to the Agent
in accordance with GAAP and, if applicable, containing disclosure of the effect
on the financial position or results of operations of any change in the
application of accounting principles and practices during the year, and
accompanied by a report thereon by such certified public accountants that is
not qualified with respect to scope limitations imposed by the Borrower or any
of its Subsidiaries or with respect to accounting principles followed by the
Borrower or any of its Subsidiaries not in accordance with GAAP.
(b) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of the Borrower and its Subsidiaries as of
the close of such fiscal quarter and unaudited Consolidated statements of
income, retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by the Borrower in accordance with
GAAP and, if applicable,
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containing disclosure of the effect on the financial position or results of
operations of any change in the application of accounting principles and
practices during the period, and certified by the chief financial officer of
the Borrower to present fairly in all material respects the financial condition
of the Borrower and its Subsidiaries as of their respective dates and the
results of operations of the Borrower and its Subsidiaries for the respective
periods then ended, subject to audit and normal year-end adjustments.
(c) Operating Budget and Cash Flow Projections. As soon as practicable and
in any event not later than 30 days prior to the end of each Fiscal Year, an
annual operating budget together with annual cash flow projections of the
Borrower and its Subsidiaries for the upcoming Fiscal Year, each in form and
substance reasonably satisfactory to the Agent.
(d) Other Financial Information. Promptly upon receipt thereof, copies of
all reports, if any, submitted to any Credit Party or its member committee by
its independent public accountants in connection with their auditing function,
including, without limitation, any management report and any management
responses thereto and such other information regarding the operations, business
affairs and financial condition of the Borrower or any of its Subsidiaries as
the Agent or the Required Lenders may reasonably request.
SECTION 7.2 OFFICER'S COMPLIANCE CERTIFICATE.
At each time financial statements are delivered pursuant to Section 7.1(a)
or (b), a certificate of the chief financial officer of the Borrower in the
form of Exhibit E attached hereto (an "Officer's Compliance Certificate"):
(a) stating that such officer has reviewed such financial statements and
such statements fairly present in all material respects the financial condition
of the Borrower and its Subsidiaries as of the dates indicated and the results
of its operations and cash flows for the periods indicated;
(b) stating that to the best of such officer's knowledge, based on a
reasonable examination sufficient to enable him to make an informed statement,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default and its nature, when it occurred, whether it
is continuing and the steps being taken by the Credit Parties with respect to
such Default or Event of Default; and
(c) setting forth as at the end of such fiscal quarter or Fiscal Year, as
the case may be, the calculations required to establish whether or not the
Borrower and its Subsidiaries were in compliance with the financial covenants
set forth in Article IX hereof as at the end of each respective period.
SECTION 7.3 NOTICE OF LITIGATION AND OTHER MATTERS.
(a) Promptly (but in no event later than five (5) days after an officer of
any Credit Party obtains knowledge thereof), telephonic and written notice of:
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(i) the commencement of all proceedings and investigations by or
before any Governmental Authority and all actions and proceedings in any
court or before any arbitrator against or involving the Borrower or any
Subsidiary thereof or any of their respective properties, assets or
businesses which in any such case could reasonably be expected to have a
Material Adverse Effect;
(ii) any notice of any violation received by the Borrower or any
Subsidiary thereof from any Governmental Authority including, without
limitation, any notice of violation of Environmental Laws, which in any
such case could reasonably be expected to have a Material Adverse Effect;
(iii) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against the Borrower or any
Subsidiary thereof which in any such case could reasonably be expected to
have a Material Adverse Effect;
(iv) any Reportable Event or "prohibited transaction", as such term
is defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Employee Benefit Plan or any trust created thereunder
which could reasonably be expected to result in liability of the Borrower
or any ERISA Affiliate in an aggregate amount exceeding $250,000, along
with a description of the nature thereof, what action Credit Parties have
taken, are taking or propose to take with respect thereto and, when known,
any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto; and
(v) any event which (A) makes any of the representations set forth in
Section 6.1 inaccurate in any material respect or (B) could reasonably be
expected to have a Material Adverse Effect.
(b) Promptly upon transmission or receipt thereof, copies of any
filings and registrations with, and reports to or from (A) the Securities
and Exchange Commission, or any successor agency or (B) the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or an successor
agencies.
SECTION 7.4 ACCURACY OF INFORMATION.
All written information, reports, statements and other papers and data
furnished by or on behalf of the Credit Parties to the Lenders (other than
financial forecasts) whether pursuant to this Article VII or any other
provision of this Agreement or any of the other Credit Documents, shall be, at
the time the same is so furnished, and taken as a whole, true and correct in
all material respects to the extent necessary to give the Lenders true and
accurate knowledge of the subject matter based on the Credit Parties' knowledge
thereof.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Until payment in full by the Borrower of all principal of and interest on
the Loans and all other amounts due hereunder and under the other Credit
Documents at the time of such payment, and the termination of the Revolving
Commitment, each Credit Party will, and will cause each of its Subsidiaries to:
SECTION 8.1 PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS.
Except as permitted by Section 10.4, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
necessary to the conduct of its business and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction in which
it is required to be so qualified, except where the failure to be so qualified
and authorized could not reasonably be expected to have a Material Adverse
Effect.
SECTION 8.2 MAINTENANCE OF PROPERTY.
Protect and preserve all properties useful in and material to its
business, including copyrights, patents, trade names and trademarks; maintain
in good working order and condition all buildings, equipment and other tangible
real and personal property; and from time to time make or cause to be made all
renewals, replacements and additions to such property necessary for the conduct
of its business, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 8.3 INSURANCE.
Maintain insurance with financially sound and reputable insurance
companies against such risks and in such amounts as are customarily maintained
by similar businesses and as may be required by Applicable Law, and on the
Closing Date and from time to time thereafter deliver to the Agent, on behalf
of the Lenders, upon its request a detailed list of the insurance then in
effect, stating the names of the insurance companies, the amounts and rates of
the insurance, the dates of the expiration thereof and the properties and risks
covered thereby. The Agent shall be named as loss payee, as its interest may
appear, and/or as additional insured with respect to any such insurance
providing coverage in respect of any Collateral, and each provider of any such
insurance shall agree, by endorsement upon the policy or policies issued by it
or by independent instruments furnished to the Agent, that it will give the
Agent thirty (30) days prior written notice before any such policy or policies
shall be materially altered or canceled, and that no act or default of the
Borrower or any of its Subsidiaries or any other Person shall affect the rights
of the Agent under such policy or policies.
SECTION 8.4 ACCOUNTING METHODS AND FINANCIAL RECORDS.
Maintain a system of accounting, and keep such books, records and accounts
(which shall be true and complete in all material respects) as may be required
or as may be necessary to
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permit the preparation of financial statements in accordance with GAAP and in
material compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 PAYMENT AND PERFORMANCE OF OBLIGATIONS.
Pay and perform all obligations under this Agreement and the other Credit
Documents, and pay or perform (a) all taxes, assessments and other governmental
charges that may be levied or assessed upon it or any of its property and (b)
all other Debt in accordance with its terms (subject to any applicable
subordination provisions); provided, that such Credit Party or such Subsidiary
may contest any item described in clause (a) and (b) of this Section 8.5 in
good faith so long as adequate reserves are maintained with respect thereto in
accordance with GAAP.
SECTION 8.6 COMPLIANCE WITH LAWS, APPROVALS AND AGREEMENTS.
Observe and remain in compliance with all Applicable Laws; maintain in
full force and effect all Governmental Approvals; and observe and remain in
compliance with all material agreements, in each case applicable to the conduct
of its business and in each case except to the extent the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
SECTION 8.7 ENVIRONMENTAL MANAGEMENT.
In addition to and without limiting the generality of Section 8.6, (a)
comply with, and ensure such compliance by all tenants, subtenants and other
occupants of the properties of the Borrower or its Subsidiaries for whatever
reason, if any, with, all applicable Environmental Laws and obtain and comply
with and maintain, and ensure that all tenants, subtenants and other occupants
of such properties for whatever reason obtain and comply with and maintain, any
and all licenses, approvals, notifications, registrations or permits required
by applicable Environmental Laws; (b) promptly conduct and complete, or cause
to be conducted and completed, all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives
of any Governmental Authority regarding Environmental Laws except to the extent
the Credit Party contests in good faith the orders and directives, and (c)
defend, indemnify and hold harmless the Agent, the Lenders, their Subsidiaries,
Affiliates, employees, agents, officers, directors, successors and assigns from
and against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of the Borrower or its Subsidiaries, or the
current, future or former ownership or operation of such properties, activities
thereon and actions taken in relation thereto including, without limitation,
all liability now existing or which may arise in the future as a result of the
release, transportation or disposal of any Hazardous Material from such
properties to or at any location, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
reasonable attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing
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arise out of the gross negligence or willful misconduct of the party seeking
indemnification therefor.
SECTION 8.8 COMPLIANCE WITH ERISA.
In addition to and without limiting the generality of Section 8.6, (a)
comply in all material respects with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to all
Employee Benefit Plans, (b) not take any action or fail to take action the
result of which could be a material liability to the PBGC or to a Multiemployer
Plan, and not participate in any prohibited transaction that could result in
any material civil penalty under ERISA or tax under the Code and (c) furnish to
any Lenders upon any Lender's request such additional information about any
Employee Benefit Plan or Multiemployer Plan as may be reasonably requested by
such Lender.
SECTION 8.9 CONDUCT OF BUSINESS.
Engage only in the business of manufacturing, reprocessing and
distribution of medical products and supplies and in lines of business
reasonably related thereto.
SECTION 8.10 VISITS AND INSPECTIONS.
Permit representatives of the Agent, from time to time, to visit and
inspect its properties; inspect, audit and make extracts from its books,
records and files, including, but not limited to, management letters prepared
by independent accountants; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects; provided, that all
such visits and inspections shall be at reasonable times during ordinary
business hours, with reasonable notice to the Credit Parties and shall be at
the Credit Parties' expense.
SECTION 8.11 YEAR 2000 COMPATIBILITY.
Take all action necessary to assure that its computer based systems and
other equipment containing embedded microchips are able to operate and
effectively process data including dates on and after January 1, 2000, and, at
the reasonable request of the Agent and the Required Lenders, provide
reasonable evidence to the Lenders of such year 2000 compatibility.
SECTION 8.12 MATERIAL CONTRACTS.
Perform, and cause each of its Subsidiaries to perform, each of its
obligations under its Material Contracts, except to the extent the Credit Party
contests in good faith its obligation to perform those obligations.
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SECTION 8.13 FURTHER ASSURANCES.
Make, execute and deliver all such additional and further acts, things,
deeds and instruments as the Agent or the Required Lenders may reasonably
require to document and consummate the transactions contemplated hereby and to
vest completely in and insure the Lenders their rights under this Credit
Agreement, the Notes, and the other Credit Documents.
SECTION 8.14 SECURITY INTERESTS.
(a) Cause all of the Collateral (to the extent deemed material by the
Agent and the Required Lenders) to be subject to a first priority security
interest in favor of the Collateral Agent, for the benefit of the Lenders,
subject to Permitted Liens.
(b) Defend the Collateral against all claims and demands of all Persons at
any time claiming the same or any interest therein. The Credit Parties agree to
comply with the requirements of all state and federal laws in order to grant to
the Collateral Agent a valid and perfected first security interest in the
Collateral. The Collateral Agent is hereby authorized by the Credit Parties to
file any financing statements covering the Collateral whether or not the
applicable Credit Party's signature appears thereon. The Credit Parties agree
to do whatever the Agent may reasonably request, from time to time, by way of:
filing notices of liens, financing statements, fixture filings and amendments,
renewals and continuations thereof; cooperating with the Agent's custodians;
keeping stock records; obtaining waivers from landlords and mortgagees; paying
claims, which might if unpaid, become a Lien (other than a Permitted Lien) on
the Collateral; and performing such further acts as the Agent may reasonably
require in order to effect the purposes of this Agreement and the other Credit
Documents. Any and all fees, costs and expenses of whatever kind and nature
(including any Taxes, reasonable attorneys' fees or costs for insurance of any
kind), which the Agent may incur with respect to the Collateral or the
Obligations: in filing public notices; in preparing or filing documents; making
title examinations or rendering opinions; in protecting, maintaining, or
preserving the Collateral or its interest therein; in enforcing or foreclosing
the Liens hereunder, whether through judicial procedures or otherwise; or in
defending or prosecuting any actions or proceedings arising out of or relating
to its transactions with the Credit Parties under this Agreement or any other
Credit Document, will be borne and paid by the Credit Parties. If same are not
promptly paid by the Credit Parties, the Agent may pay same on the Credit
Parties' behalf, and the amount thereof shall be an Obligation secured hereby
and due to the Agent on demand.
SECTION 8.15 ADDITIONAL GUARANTORS.
Cause each of their domestic Subsidiaries, whether newly formed, after
acquired or otherwise existing, to promptly become a "Guarantor" hereunder by
way of execution of a Joinder Agreement. The guaranty obligations of any such
Additional Credit Party shall be secured by, among other things, the Collateral
of such Additional Credit Party and a pledge of 100% of the Capital Stock of
its domestic Subsidiaries and 65% of the Capital Stock of its foreign
Subsidiaries to the extent that such pledge is permissible under applicable
law. Each Credit Party shall pledge to the Collateral Agent, for the benefit of
the Lenders, 100% of the
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Capital Stock of each of its domestic Subsidiaries and 65% the Capital Stock of
each of its foreign Subsidiaries.
ARTICLE IX
FINANCIAL COVENANTS
Until payment in full by the Borrower of all principal of and interest on
the Loans and all other amounts due hereunder and under the other Credit
Documents at the time of such payment, and the termination of the Revolving
Commitment, the Borrower will not:
SECTION 9.1 MINIMUM CONSOLIDATED NET WORTH.
Permit, at any time, Consolidated Net Worth to be less than the sum of (a)
$34,900,000 plus (b) seventy-five percent (75%) of cumulative Consolidated Net
Income (to the extent positive) for each fiscal quarter occurring after the
Closing Date.
SECTION 9.2 CONSOLIDATED LEVERAGE RATIO.
Permit, as of any fiscal quarter end, the Consolidated Leverage Ratio as
of the last day of each such fiscal quarter of the Borrower and its
Subsidiaries, to exceed 2.5 to 1.0.
SECTION 9.3 FIXED CHARGE COVERAGE RATIO.
Permit, as of any fiscal quarter end for the periods shown below, the
Fixed Charge Coverage Ratio, as of the last day of each such fiscal quarter, to
be less than 2.8 to 1.0.
ARTICLE X
NEGATIVE COVENANTS
Until payment in full by the Borrower of all principal of and interest on
the Loans and all other amounts due hereunder and under the other Credit
Documents at the time of such payment, and the termination of the Revolving
Commitment, the Credit Parties will not and will not permit any of their
Subsidiaries to:
SECTION 10.1 LIMITATIONS ON DEBT.
Create, incur, assume or suffer to exist any Debt except:
(a) the Obligations and the obligations of the Credit Parties under the
ELLF Operative Agreements;
(b) Debt incurred in connection with a Hedging Agreement with a
counterparty and upon terms and conditions reasonably satisfactory to the
Required Lenders;
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(c) Contingent Obligations in favor of the Agent on behalf of the Lenders;
(d) Purchase Money Debt of the Borrower and its Subsidiaries in an
aggregate amount outstanding at any time not to exceed $500,000; and
(e) Debt existing on the Closing Date identified on Schedule 6.1(p).
SECTION 10.2 LIMITATIONS ON LIENS.
Create, incur, assume or suffer to exist, any Lien on or with respect to
any of its assets or properties (including specifically shares of Capital Stock
of any Subsidiary), real or personal, whether now owned or hereafter acquired,
except for the following (collectively, "Permitted Liens"):
(a) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings if adequate reserves are maintained to the extent
required by GAAP;
(c) Liens consisting of deposits or pledges made in the ordinary course of
business (i) in connection with or to secure a payment of, obligations under
workers' compensation, unemployment insurance or similar legislation or (ii) to
secure the performance of letters of credit, bids, tenders, sales contracts,
leases, statutory obligations, surety, appeal and performance bonds and other
similar obligations, in each case not incurred in connection with the borrowing
of money or the payment of the deferred purchase price of property;
(d) Liens constituting encumbrances in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real property,
which in the aggregate are not substantial in amount and which do not, in any
case, materially detract from the value of such property or impair the use
thereof in the ordinary conduct of business;
(e) Liens in favor of the Agent created pursuant to the Credit Documents
and the ELLF Operative Agreements;
(f) Liens securing Purchase Money Debt permitted under Section 10.1(d) in
an amount not to exceed $500,000 at any time outstanding; provided, that the
Lien attaches only to the asset being purchased or leased and does not exceed
100% of the purchase price or fair market value of such asset at the time of
acquisition;
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(g) Liens existing on the Closing Date identified on Schedule 6.1(p); and
(h) attachment, judgment and similar Liens arising in connection with
court proceedings other than any such Lien which would create an Event of
Default under Sections 11.1(j) or 11.1(k).
SECTION 10.3 LIMITATIONS ON LOANS, ADVANCES, INVESTMENTS AND ACQUISITIONS.
Purchase, own, invest in or otherwise acquire, directly or indirectly, any
capital stock, interests in any partnership or joint venture, evidence of Debt
or other obligation or security, substantially all or a portion of the business
or assets of any other Person or any other investment or interest whatsoever in
any other Person; or make or permit to exist, directly or indirectly, any
loans, advances or extensions of credit to, or any investment in cash or by
delivery of property in, any Person; or enter into, directly or indirectly, any
commitment or option in respect of the foregoing except:
(a) loans and advances to employees for reasonable travel, relocation and
business expenses in the ordinary course of business;
(b) deposits for utilities, security deposits, leases and similar prepaid
expenses incurred in the ordinary course of business;
(c) trade accounts created in the ordinary course of business; and
(d) other investments of the Credit Parties not exceeding $1,000,000 per
annum.
SECTION 10.4 LIMITATIONS ON MERGERS AND LIQUIDATION.
Merge, consolidate or enter into any similar combination with any other
Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution).
SECTION 10.5 LIMITATIONS ON SALE OF ASSETS.
Convey, sell, lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation, the sale of any
receivables and leasehold interests and any sale-leaseback or similar
transaction), whether now owned or hereafter acquired, except:
(a) the sale or other disposition of assets no longer necessary in the
business of the Borrower or such Subsidiary;
(b) the sale of inventory in the ordinary course of business; and
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(c) other sales, leases, assignments, transfers or dispositions of
property, business or assets not to exceed $100,000 in the aggregate.
SECTION 10.6 TRANSACTIONS WITH AFFILIATES.
Except as otherwise permitted hereunder, directly or indirectly: (a)
except in accordance with the terms of clause (b) below, subcontract any
operations to any of its Affiliates or enter into any arrangements with its
Affiliates for the provision to any Credit Party of services in the nature of
accounting and legal support, merchandising, catering and other related
services or (b) enter into, or be a party to, any transaction with any of its
Affiliates, except pursuant to the reasonable requirements of its business and
upon fair and reasonable terms that are no less favorable to it than it would
obtain in a comparable arm's length transaction with a Person not its
Affiliate.
SECTION 10.7 CERTAIN ACCOUNTING CHANGES.
Change its Fiscal Year end, or make any material change in its accounting
treatment and reporting practices except for a change required by GAAP or a
change that is permitted by GAAP and disclosed to Lender.
SECTION 10.8 NO RESTRICTED PAYMENTS.
Make a Restricted Payment other than (a) the payments of dividends from
any Subsidiary to the Borrower and (b) payment in each fiscal quarter of up to
$55,000 as dividends on the Borrower's Series A Preferred Stock, in each case
so long as no Default or Event of Default shall exist immediately prior to or
immediately after the making of any such permitted Restricted Payment.
SECTION 10.9 [INTENTIONALLY OMITTED]
SECTION 10.10 ADDITIONAL NEGATIVE PLEDGES.
Create or otherwise suffer to exist or become effective, directly or
indirectly, (a) any prohibition or restriction (including any agreement to
provide equal and ratable security to any other Person in the event a Lien is
granted to or for the benefit of the Lenders) on the creation or existence of
any Lien upon the assets of the Borrower or the Subsidiaries, other than
Permitted Liens or (b) any contractual obligation which may restrict or limit
the Lenders' rights or ability to sell or otherwise dispose of the Collateral
or any part thereof after the occurrence of an Event of Default.
SECTION 10.11 SALE AND LEASEBACK.
Enter into any arrangement, directly or indirectly, whereby such Credit
Party or any of its Subsidiaries shall sell or transfer any property owned by
it to a Person (other than the Borrower or any Subsidiary) in order then or
thereafter to lease such property or lease other property which
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the Borrower or any Subsidiary intends to use for substantially the same
purpose as the property being sold or transferred.
SECTION 10.12 LICENSES, ETC.
Enter into licenses of, or otherwise restrict the use of, any patents,
trademarks or copyrights which would prevent such Person from selling,
transferring, encumbering or otherwise disposing of any such patent, trademark
or copyright.
SECTION 10.13 LIMITATIONS.
Directly or indirectly, create or otherwise cause, incur, assume, suffer
or permit to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Person to (a) pay dividends
or make any other distribution on any of such Person's Capital Stock or (b) pay
any Debt owed to the Borrower, except for encumbrances or restrictions existing
under or by reason of (i) customary non-assignment provisions in any lease
governing a leasehold interest, and (ii) this Agreement and the other Credit
Documents.
SECTION 10.14 AMENDMENTS; PAYMENTS AND PREPAYMENTS OF SUBORDINATED DEBT.
(a) Amend or modify (or permit the modification or amendment of) any of
the terms or provisions of any Debt subordinated to the Obligations or (b)
cancel or forgive, make any voluntary or optional or mandatory payment or
prepayment on, make any payment of interest on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with
respect thereto money or securities before due for the purpose of paying when
due) any subordinated Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. Any Credit Party shall
default in any payment of principal of any Loan or the Notes when and as due
(whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. Any Credit Party shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise)
of interest on any Loan or
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the Notes or the payment of any other Obligations and such amount shall remain
unpaid for a period of five (5) Business Days following the due date thereof.
(c) Misrepresentation. Any representation or warranty made or deemed to be
made by any Credit Party under this Agreement, any Credit Document or any
amendment hereto or thereto, shall at any time prove to have been incorrect or
misleading in any material respect when made or deemed made.
(d) Default in Performance of Certain Covenants. Any Credit Party shall
default in the performance or observance of any covenant or agreement (i)
contained in Sections 7.1, 7.2 or 7.3(a) and such default shall continue
unremedied for a period of ten (10) Business Days or (ii) contained in Sections
8.9, 8.10 or Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any Credit
Party shall default in the performance or observance of any term, covenant,
condition or agreement contained in this Agreement (other than as specifically
provided for otherwise in this Section 11.1) or any other Credit Document and
such default shall continue for a period of thirty (30) days following notice
from the Lenders of its occurrence.
(f) Hedging Agreement. Any termination payment shall be due from any
Credit Party under any Hedging Agreement and such amount is not paid within ten
(10) Business Days after the due date thereof.
(g) Debt Cross-Default. The Borrower or any of its Subsidiaries shall (i)
default in the payment of any Debt (other than the Notes) the aggregate
outstanding amount of which is in excess of $100,000 beyond the period of grace
if any, provided in the instrument or agreement under which such Debt was
created or (ii) default in the observance or performance of any other agreement
or condition relating to any Debt (other than the Notes) the aggregate
outstanding amount of which is in excess of $100,000 or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such Debt
(or a trustee or agent on behalf of such holder or holders) to cause, with the
giving of notice if required, any such Debt to become due prior to its stated
maturity (any applicable grace period having expired).
(h) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii)
consent to or fail to contest in a timely and appropriate manner any petition
filed against it in an involuntary case under such bankruptcy laws or other
laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a
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general assignment for the benefit of creditors or (vii) take any corporate
action for the purpose of authorizing any of the foregoing.
(i) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
commenced against the Borrower or any Subsidiary thereof in any court of
competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for the Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue undismissed or unstayed for a period of sixty (60)
consecutive calendar days, or an order granting the relief requested in such
case or proceeding (including, but not limited to, an order for relief under
such federal bankruptcy laws) shall be entered.
(j) Judgment. A judgment or order for the payment of money which exceeds
$100,000 in amount shall be entered against the Borrower or any of its
Subsidiaries by any court and such judgment or order shall continue
undischarged or unstayed for a period of thirty (30) days.
(k) Attachment. A warrant or writ of attachment or execution or similar
process shall be issued against any property of the Borrower or any of its
Subsidiaries which exceeds $100,000 in value and such warrant or process shall
continue undischarged or unstayed for a period of thirty (30) days.
(l) Noncompliance with Environmental Laws. The Borrower or any of its
Subsidiaries or Affiliates shall be found by any applicable Governmental
Authority to be in violation of or liable under any material requirement of
Environmental Law which could reasonably be expected to have a Material Adverse
Effect unless (i) such finding is being contested in good faith, (ii) adequate
reserves with respect thereto are maintained by such Person in accordance with
GAAP and (iii) there is no violation of the terms and provisions of this
Agreement or any of the other Credit Documents resulting therefrom or arising
with respect thereto.
(m) Change in Control. A Change in Control shall occur.
(n) Validity. Any covenant, agreement or obligation of any party contained
in or evidenced by any of the Credit Documents shall cease to be enforceable in
accordance with its terms, or any party (other than the Agent or the Lenders)
to any Credit Document shall deny or disaffirm its obligations under any of the
Credit Documents, or any Credit Document shall be canceled, terminated, revoked
or rescinded without the express prior written consent of the Agent, or any
action or proceeding shall have been commenced by any Person (other than the
Agent or any Lender) seeking to cancel, revoke, rescind or disaffirm the
obligations of any party to any Credit Document, or any court or other
governmental authority shall issue a judgment, order, decree or ruling to the
effect that any of the obligations of any party to any Credit
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Document are illegal, invalid or unenforceable, or the Liens created under the
Security Agreement or the Pledge Agreements shall cease to be first priority
perfected Liens.
(o) Default Under ELLF Participation Agreement. A "default" or "event of
default" as defined in the ELLF Participation Agreement shall occur.
SECTION 11.2 REMEDIES.
Upon the occurrence of an Event of Default, the Agent shall, upon the
written request of the Required Lenders, and by delivery of written notice to
the Borrower from the Agent, without prejudice to the rights of the Agent, any
Lender or the holder of any Note to enforce its claims against the Borrower:
(a) Acceleration; Termination of Agreement. Declare the principal of and
interest on the Loans, the Notes at the time outstanding, and all other amounts
owed to the Agent and the Lenders under this Agreement or any of the other
Credit Documents and all other Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of the Agent or any Lender of any
kind, all of which are expressly waived, anything in this Agreement or the
other Credit Documents to the contrary notwithstanding, and terminate this
Agreement, the outstanding Revolving Commitment and any right of the Borrower
to request borrowings hereunder; provided, that upon the occurrence of an Event
of Default specified in Section 11.1(h) or (i), this Agreement and the
outstanding Revolving Commitment shall be automatically terminated and all
Obligations shall automatically become due and payable.
(b) Rights of Collection. Exercise all of its other rights and remedies
under this Agreement, the other Credit Documents and Applicable Law, including,
without limitation, all rights of set-off, in order to satisfy all of the
Borrower's Obligations.
SECTION 11.3 RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC.
The enumeration of the rights and remedies of the Agent and the Lenders
set forth in this Agreement is not intended to be exhaustive and the exercise
by the Agent or any Lender of any right or remedy shall not preclude the
exercise of any other rights or remedies, all of which shall be cumulative, and
shall be in addition to any other right or remedy given hereunder or under the
Credit Documents or that may now or hereafter exist in law or in equity or by
suit or otherwise. No delay or failure to take action on the part of the Agent
or any Lender in exercising any right, power or privilege shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the exercise
of any other right, power or privilege or shall be construed to be a waiver of
any Event of Default. No course of dealing between the Credit Parties, the
Agent and the Lenders or their respective agents or employees shall be
effective to change, modify or discharge any provision of this Agreement or any
of the other Credit Documents or to constitute a waiver of any Event of
Default.
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SECTION 11.4 CREDITING OF PAYMENTS AND PROCEEDS.
In the event that the Credit Parties shall fail to pay any of the
Obligations when due and the Obligations have been accelerated pursuant to
Section 11.2, then during the continuance of any such Event of Default all
payments received by the Lenders upon the Notes and the other Obligations and
all net proceeds from the enforcement of the obligations shall be applied first
to all expenses then due and payable by the Credit Parties hereunder, then to
all indemnity obligations then due and payable by the Credit Parties hereunder,
then to all Fees payable to the Agent and the Lenders then due and payable,
then to all facility and other fees and commissions then due and payable, then
to accrued and unpaid interest on the Notes and any termination payments due in
respect of a Hedging Agreement (pro rata in accordance with all such amounts
due), and then to the principal amount outstanding under the Notes, in that
order.
ARTICLE XII
THE AGENT
SECTION 12.1 APPOINTMENT OF AGENT.
(a) Each Lender hereby designates First Union as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of any
Note by the acceptance of a Note or participation shall be deemed irrevocably
to authorize, the Agent to take such action on its behalf under the provisions
of this Credit Agreement and the Notes and any other instruments and agreements
referred to herein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Agent shall hold all payments of principal, interest,
Fees, charges and expenses received pursuant to this Credit Agreement or any
other Credit Document for the ratable benefit of the Lenders. The Agent may
perform any of its duties hereunder by or through its agents or employees.
(b) The provisions of this Article XII are solely for the benefit of the
Agent and the Lenders, and the Credit Parties shall have no rights as a third
party beneficiary of any of the provisions hereof (other than Section 12.9). In
performing its functions and duties under this Credit Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for the Credit Parties.
SECTION 12.2 NATURE OF DUTIES OF AGENT.
The Agent shall have no duties or responsibilities except those expressly
set forth in this Credit Agreement. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its or their
gross negligence or willful misconduct. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of
this Credit Agreement a fiduciary relationship in respect of any Lender; and
nothing in this Credit
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Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Credit Agreement
except as expressly set forth herein.
SECTION 12.3 LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon the Agent, each Lender, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial or other condition and affairs of
the Borrower and the other Credit Parties in connection with the taking or not
taking of any action in connection herewith and (ii) its own appraisal of the
creditworthiness of the Borrower and the Credit Parties, and, except as
expressly provided in this Credit Agreement, the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loans or at any time or
times thereafter.
(b) The Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability,
collectability, priority or sufficiency of this Credit Agreement or the Notes
or the financial or other condition of the Borrower and the other Credit
Parties. The Agent shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Credit Agreement or the Notes, or the financial condition of the Borrower,
or the existence or possible existence of any Default or Event of Default,
unless specifically requested to do so in writing by any Lender.
SECTION 12.4 CERTAIN RIGHTS OF THE AGENT.
The Agent shall have the right to request instructions from the Required
Lenders or, as required, each of the Lenders. If the Agent shall request
instructions from the Required Lenders with respect to any act or action
(including the failure to act) in connection with this Credit Agreement, the
Agent shall be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the Required Lenders,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Lenders.
SECTION 12.5 RELIANCE BY AGENT.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate or
other oral or written communication believed by it to be genuine and correct
and to have been signed, sent or made by the proper person. The Agent may
consult with legal counsel (including counsel for the Credit Parties with
respect to matters concerning the Credit Parties), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
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SECTION 12.6 INDEMNIFICATION OF AGENT.
To the extent the Agent is not reimbursed and indemnified by the Credit
Parties, each Lender will reimburse and indemnify the Agent, in proportion to
its respective Commitment, for and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements) or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in performing its duties hereunder, in any way relating to or
arising out of this Credit Agreement, provided that no Lender shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or willful misconduct.
SECTION 12.7 THE AGENT IN ITS INDIVIDUAL CAPACITY.
With respect to its obligation to lend under this Credit Agreement, the
Loans made by it and the Notes issued to it and all of its rights and
obligations as a Lender hereunder and under the other Credit Documents, the
Agent shall have the same rights and powers hereunder as any other Lender or
holder of a Note or participation interests and may exercise the same as though
it was not performing the duties specified herein; and the terms "Lenders",
"Required Lenders", "holders of Notes", or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, acquire equity
interests in, and generally engage in any kind of banking, trust, financial
advisory or other business with the Credit Parties or any Affiliate of the
Credit Parties as if it were not performing the duties specified herein, and
may accept fees and other consideration from the Credit Parties for services in
connection with this Credit Agreement and otherwise without having to account
for the same with the Lenders.
SECTION 12.8 HOLDERS OF NOTES.
The Agent may deem and treat the payee of any Note as the owner thereof
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with the Agent. Any request, authority
or consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of any
Note or Notes issued in exchange therefor.
SECTION 12.9 SUCCESSOR AGENT.
(a) The Agent may, upon five (5) Business Days' notice to the Lenders and
the Borrower, resign at any time (effective upon the appointment of a successor
Agent pursuant to the provisions of this Section 12.9(a)) by giving written
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right, upon five (5) days' notice, to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within thirty (30)
days after
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the retiring Agent's giving of notice of resignation, then, upon five (5) days'
notice, the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank or a trust company or other financial institution
which maintains an office in the United States, or a commercial bank organized
under the laws of the United States or of any state thereof, or any affiliate
of such bank or trust company or other financial institution which is engaged
in the banking business, having a combined capital and surplus of at least
$500,000,000. Notwithstanding anything herein to the contrary, any successor
Agent (whether appointed by the Required Lenders or the Agent) shall have been
approved in writing by the Borrower (such approval not to be unreasonably
withheld).
(b) Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Credit Agreement. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article XII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Credit Agreement.
SECTION 12.10 ACTIONS WITH RESPECT TO DEFAULTS.
In addition to the Agent's right to take actions on its own accord as
permitted under this Credit Agreement, the Agent shall take such action with
respect to a Default or Event of Default as shall be directed by the Required
Lenders; provided that, until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable and in the best interests of the Lenders.
SECTION 12.11 DELIVERY OF INFORMATION.
The Agent shall not be required to deliver to any Lender originals or
copies of any documents, instruments, notices, communications or other
information received by the Agent from the Borrower, any Subsidiary, the
Required Lenders, any Lender or any other Person under or in connection with
this Credit Agreement or any other Credit Document except (i) as specifically
provided in this Credit Agreement or any other Credit Document and (ii) as
specifically requested from time to time in writing by any Lender with respect
to a specific document instrument, notice or other written communication
received by and in the possession of the Agent at the time of receipt of such
request and then only in accordance with such specific request.
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ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 NOTICES.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing. Any
notice shall be effective if delivered by hand delivery or sent via telecopy,
recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be received by a party hereto (i) on the
date of delivery if delivered by hand or sent by telecopy, (ii) on the next
Business Day if sent by recognized overnight courier service and (iii) on the
third Business Day following the date sent by certified mail, return receipt
requested.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrower or any other Credit Party:
Sterile Recoveries, Inc.
28100 US Highway 19N
Suite 201
Clearwater, Florida 33761
Attn: James T. Boosales
Telephone No.: (813) 726-4421
Telecopy No.: (813) 726-8037
With copies to:
David S. Felman
Hill, Ward & Henderson
Barnett Plaza, Suite 3700
101 East Kennedy Blvd.
Tampa, Florida 33602
Telephone No.: (813) 227-8483
Telephone No.: (813) 221-2900
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If to the Agent:
First Union National Bank
One First Union Center
301 South College Street, MC0735
Fifth Floor
Charlotte, North Carolina 28288-0735
Attn: Paul Solitario
Telephone No.: (704) 374-7109
Telecopy No.: (704) 383-9144
If to any Lender: To the address specified for such Lender on
Schedule 1.1A.
(c) Agent's Office. The Agent hereby designates its office located at the
address set forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrower, as the Agent's
office referred to herein, to which payments due are to be made and at which
Loans will be disbursed.
SECTION 13.2 GOVERNING LAW.
This Agreement, the Notes and the other Credit Documents, unless otherwise
expressly set forth therein, shall be governed by, construed and enforced in
accordance with the laws of the State of Florida, without reference to the
conflicts or choice of law principles thereof.
SECTION 13.3 ARBITRATION; CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
(a) Upon demand of any party hereto, whether made before or after
institution of any judicial action, any dispute, claim or controversy
arising out of or connected herewith or with the Credit Documents
("Disputes") shall be resolved by binding arbitration as provided herein.
Disputes may include, without limitation, tort claims, counterclaims,
claims brought as class actions and claims arising herefrom or from Credit
Documents executed in the future. Arbitration shall be conducted under the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in St. Petersburg, Pinellas
County, Florida, or such other place as agreed to in writing by the
parties. A judgment upon the award may be entered in any court having
jurisdiction, and all decisions shall be in writing. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys
having at least ten years' experience representing parties in secured
lending transactions. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to Hedging
Agreements.
(b) Notwithstanding the preceding binding arbitration provision, the
Agent, on behalf of the Lenders, preserves certain remedies that may be
exercised during a Dispute. The Agent, on behalf of the Lenders, shall
have the right to proceed in any court of proper
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jurisdiction or by self help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale granted
in the Credit Documents or under applicable law, (ii) all rights of self
help including peaceful occupation of real property and collection of
rents, set-off and peaceful possession of personal property, (iii)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment and appointment of receiver, (iv)
when applicable, a judgment by confession of judgment and (v) other
remedies. Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by a party in a
Dispute.
(c) By execution and delivery of this Agreement, each of the parties
hereto accepts, for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction relating to
any arbitration proceedings conducted under the Arbitration Rules in St.
Petersburg, Pinellas County, Florida and irrevocably agrees to be bound by
any final judgment rendered thereby in connection with this Agreement from
which no appeal has been taken or is available. Each of the parties hereto
irrevocably agrees that all process in any such arbitration proceedings or
otherwise may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in Section 13.1(b) herein or at
such other address of which such party shall have been notified pursuant
thereto, such service being hereby acknowledged by each party hereto to be
effective and binding service in every respect. Each party hereto
irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have to the bringing of any such
action or proceeding in any such jurisdiction. Nothing herein shall affect
the right to serve process in any other manner permitted by law.
SECTION 13.4 WAIVER OF JURY TRIAL.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE AGENT, THE LENDERS
AND EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER CREDIT
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 13.5 REVERSAL OF PAYMENTS.
To the extent any Credit Party makes a payment or payments to the Lenders,
which payments or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or federal
law, common law or equitable cause, then, to the extent of such payment repaid,
the Obligations or part thereof intended to be satisfied shall be revived and
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continued in full force and effect as if such payment or proceeds had not been
received by the Lenders.
SECTION 13.6 INJUNCTIVE RELIEF.
The Credit Parties recognize that, in the event the Credit Parties fail to
perform, observe or discharge any of their obligations or liabilities under
this Agreement, any remedy of law may prove to be inadequate relief to the
Agent and the Lenders. Therefore, the Credit Parties agree that the Agent and
the Lenders, at the their option, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
SECTION 13.7 [RESERVED]
SECTION 13.8 SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) The Credit Parties shall not have the right to assign this Credit
Agreement or any interest herein except with the prior written consent of the
Lenders.
(b) Notwithstanding subsection (c) of this Section 13.8, nothing herein
shall restrict, prevent or prohibit any Lender from (i) pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such
Lender from such Federal Reserve Bank or (ii) granting assignments or
participations in such Lender's Loans and/or Commitments hereunder to its
parent company and/or to any affiliate of such Lender or to any existing Lender
or affiliate thereof. Any Lender may make, carry or transfer Loans at, to or
for the account of, any of its branch offices or the office of an affiliate of
such Lender except to the extent such transfer would result in increased costs
to the Borrower.
(c) Each Lender may, with the consent of the Agent and, prior to the
occurrence of an Event of Default hereunder, the Borrower (such consent not to
be unreasonably withheld or delayed), but without the consent of any other
Lender, assign to one or more banks or other financial institutions all or a
portion of its rights and obligations under this Credit Agreement and the
Notes; provided that
(i) for each such assignment, the parties thereto shall execute and
deliver to the Agent, for its acceptance and recording in the Register (as
defined below), an Assignment and Acceptance, together with any Note or
Notes subject to such assignment and a processing and recordation fee of
$3,500 to be paid by the assignee,
(ii) such assignment plus the assignment of such Lender's interest
under the ELLF Participation Agreement, shall be for a minimum aggregate
amount of $5,000,000,
(iii) unless otherwise agreed to by the Borrower and the Agent, such
assigning Lender shall assign to such assignee (A) an identical percentage
of its Commitment (as defined in Appendix A to the ELLF
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Participation Agreement) and (B) an identical percentage of its Holder
Commitment (as defined in Appendix A to the ELLF Participation Agreement);
provided that to the extent an affiliate of any Lender holds any portion
of such Commitment or Holder Commitment, such Lender shall cause such
affiliate to assign to such assignee (C) an identical percentage of its
Commitment (as defined in Appendix A to the ELLF Participation Agreement)
and (D) an identical percentage of its Holder Commitment (as defined in
Appendix A to the ELLF Participation Agreement) and
(iv) if such assignee is a Foreign Lender, all of the requirements of
Section 3.8(b) shall have been satisfied as a condition to such
assignment.
Upon such execution and delivery of the Assignment and Acceptance to the Agent,
from and after the date specified as the effective date in the Assignment and
Acceptance (the "Acceptance Date"), (x) the assignee thereunder shall be a
party hereto, and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, such assignee
shall have the rights and obligations of a Lender hereunder and (y) the
assignor thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (other than any rights it may have pursuant to Section 13.9 which
will survive) and be released from its obligations under this Credit Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Credit
Agreement, such Lender shall cease to be a party hereto).
(d) By executing and delivering an Assignment and Acceptance, the assignee
thereunder confirms and agrees as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Credit
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, the Notes or any other
instrument or document furnished pursuant hereto, (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Credit Parties or the performance or
observance by the Credit Parties of any of their obligations under this Credit
Agreement or any other instrument or document furnished pursuant hereto, (iii)
such assignee confirms that it has received a copy of this Credit Agreement,
together with copies of the financial statements referred to in Section 7.1 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(iv) such assignee will, independently and without reliance upon the Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Credit Agreement,
(v) such assignee appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this Credit Agreement as
are delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the
terms of this Credit Agreement are required to be performed by it as a Lender.
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(e) The Agent shall maintain at its address referred to in Section 13.1 a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Credit Parties,
the Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Credit Agreement. The
Register and copies of each Assignment and Acceptance shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, together with the Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit A hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five (5) Business Days
after its receipt of such notice, the Borrower shall execute and deliver to the
Agent in exchange for the surrendered Note or Notes (which the assigning Lender
agrees to promptly deliver to the Borrower) a new Note or Notes to the order of
the assignee in an amount equal to the Commitment or Commitments assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment or Commitments hereunder, a new Note or Notes to the
order of the assigning Lender in an amount equal to the Commitment or
Commitments retained by it hereunder. Such new Note or Notes shall re-evidence
the indebtedness outstanding under the old Note or Notes and shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the Closing Date and shall otherwise
be in substantially the form of the Note or Notes subject to such assignments.
(g) Each Lender may sell participations (without the consent of the Agent,
the Borrower or any other Lender) to one or more parties in or to all or a
portion of its rights and obligations under this Credit Agreement (including,
without limitation, all or a portion of its Commitments, the Loans owing to it
and the Note or Notes held by it); provided that (i) such Lender's obligations
under this Credit Agreement (including, without limitation, its Commitments to
the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Credit Agreement, (iv) the Borrower, the Agent, and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Credit
Agreement and (v) such Lender shall not transfer, grant, assign or sell any
participation under which the participant shall have rights to approve any
amendment or waiver of this Credit Agreement except to the extent such
amendment or waiver would (A) extend the final Maturity Date or the date for
the payments of any installment of fees or principal or interest of any Loans
in which such participant is participating, (B) reduce the amount of any
installment of principal of the Loans in which such participant is
participating, (C) except as otherwise expressly provided in this Credit
Agreement, reduce the interest rate applicable to the Loans in which such
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participant is participating, or (D) except as otherwise expressly provided in
this Credit Agreement, reduce any Fees payable hereunder.
(h) Each Lender agrees that, without the prior written consent of the
Borrower and the Agent, it will not make any assignment or sell a participation
hereunder in any manner or under any circumstances that would require
registration or qualification of, or filings in respect of, any Loan, Note or
other Obligation under the securities laws of the United States of America or
of any jurisdiction.
(i) In connection with the efforts of any Lender to assign its rights or
obligations or to participate interests, such Lender may disclose any
information in its possession regarding the Borrower.
SECTION 13.9 PAYMENT OF EXPENSES; INDEMNIFICATION.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Agent in connection with (A) the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
special counsel to the Agent and the reasonable fees and expenses of counsel
for the Agent in connection with collateral issues), and (B) any amendment,
waiver or consent relating hereto and thereto including, but not limited to,
any such amendments, waivers or consents resulting from or related to any
work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (ii) the Agent and the Lenders
in connection with enforcement of the Credit Documents and the documents and
instruments referred to therein, including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders. Each Credit Party shall and hereby does
agree to indemnify, defend and hold harmless the Agent and each of the Lenders
and their respective directors, officers, agents, employees and counsel from
and against (a) any and all losses, claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them (except to the extent that it is
finally judicially determined to have resulted from their own gross negligence
or willful misconduct) arising out of or by reason of any litigation,
investigation, claim or proceeding which arises out of or is in any way related
to (i) this Credit Agreement or the transactions contemplated thereby, (ii) any
actual or proposed use by the Borrower of the proceeds of the Loans or (iii)
the Agent's or the Lenders' entering into this Credit Agreement, the other
Credit Documents or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
fees and disbursements of counsel incurred in connection with any such
litigation, investigation, claim or proceeding or any advice rendered in
connection with any of the foregoing and (b) any such losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred in connection with
any remedial or other action taken by the Credit Parties or any of the Lenders
in connection with compliance by the Credit Parties or any of their
Subsidiaries, or any of their respective properties, with any federal, state or
local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines. If and to the extent that the obligations
of any Credit Party hereunder are unenforceable for any reason, the Credit
Parties hereby agree to make
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the maximum contribution to the payment and satisfaction of such obligations
which is permissible under applicable law. The Credit Parties' obligations
hereunder shall survive any termination of this Credit Agreement and the other
Credit Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any other of its obligations set forth
in this Credit Agreement. In addition, the Credit Parties shall, upon demand,
pay to the Agent and any Lender all costs and expenses (including the
reasonable fees and disbursements of counsel and other professionals) paid or
incurred by the Agent or such Lender in (i) enforcing or defending its rights
under or in respect of this Credit Agreement, the other Credit Documents or any
other document or instrument now or hereafter executed and delivered in
connection herewith, (ii) in collecting the Loans and (iii) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
SECTION 13.10 AMENDMENTS, WAIVERS AND CONSENTS.
No amendment or waiver of any provision of any Credit Document nor any
consent to any departure by any Credit Party therefrom, shall be effective
unless the same shall be agreed or consented to in writing by the Required
Lenders, or if the Lenders shall not be parties thereto, by the parties thereto
and consented to by the Required Lenders, and each such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given; provided that no amendment , waiver or consent shall unless in
writing and signed by all the Lenders, do any of the following: (a) increase
the Commitments of the Lenders or subject the Lenders to any additional
obligations, (b) except as otherwise expressly provided in this Credit
Agreement, reduce the principal of, or interest on, any Note or any fees
hereunder, (c) postpone any date fixed for any payment in respect of principal
of, or interest on, any Note or any fees hereunder, (d) change the percentage
of the Commitments, or any minimum requirement necessary for the Lenders or the
Required Lenders to take any action hereunder, (e) amend or waive this Section
13.10, or change the definition of Required Lenders, (f) release any material
portion of the Collateral and (g) change or waive any conditions precedent to
closing contained in Article V and, provided, further, that no amendment,
waiver or consent affecting the rights or duties of the Agent under any Credit
Document shall in any event be effective, unless in writing and signed by the
Agent, in addition to the Lenders required hereinabove to take such action.
Notwithstanding any of the foregoing to the contrary, the consent of the
Borrower shall not be required for any amendment, modification or waiver of the
provisions of Article XII (other than the provisions of Section 12.9). In
addition, the Borrower and the Lenders hereby authorize the Agent to modify
this Credit Agreement by unilaterally amending or supplementing Schedule 1.1A
from time to time in the manner requested by the Borrower, the Agent or any
Lender in order to reflect any assignments or transfers of the Loans as
provided for hereunder; provided, however, that the Agent shall promptly
deliver a copy of any such modification to the Borrower and each Lender.
SECTION 13.11 INFORMATION.
Each Credit Party hereby agrees that the Agent and the Lenders may
exchange any information concerning such Credit Party, including, without
limitation, information relating to the creditworthiness of such Credit Party
in the possession or control of the Agent or the
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Lenders, as the case may be: (i) with any of their respective affiliates,
counsel or other representatives; provided, however, that any such exchange,
and the nature, manner and extent thereof may be limited pursuant to any
written confidentiality agreement governing the obligations of the Agent or the
Lenders or such affiliate, as the case may be, with respect to such
information; provided, further, that neither the Agent nor any of the Lenders
shall in any event furnish any such information to any competitor of the
Borrower or any customer of the Borrower or any Person known by the Agent or
any Lender to be contemplating an acquisition of any Capital Stock or assets of
the Borrower or any agent or affiliate of any of the foregoing, except with the
prior written consent of the Borrower or as required by applicable law or
judicial order; (ii) with any regulatory authority having jurisdiction over any
Lender or (iii) with any other person, in connection with the exercise of the
Lender's rights hereunder or, under any of the other Credit Documents. Each
Credit Party further agrees and consents to the Agent's disclosure of
information relating to this transaction to Gold Sheets and other similar bank
trade publications. Such information will consist of deal terms and other
information customarily found in such publications.
SECTION 13.12 PERFORMANCE OF DUTIES.
The Credit Parties' obligations under this Agreement and each of the
Credit Documents shall be performed by the Credit Parties at their sole cost
and expense.
SECTION 13.13 NONLIABILITY OF AGENT AND LENDERS.
The relationship between the Borrower on the one hand and the Lenders and
the Agent on the other hand shall be solely that of borrower and lender.
Neither the Agent nor any Lender shall have any fiduciary responsibilities to
the Borrower or any other Credit Party. Neither the Agent nor any Lender
undertakes any responsibility to the Credit Parties to review or inform the
Credit Parties of any matter in connection with any phase of the Credit
Parties' business or operations.
SECTION 13.14 ALL POWERS COUPLED WITH INTEREST.
All powers of attorney and other authorizations granted to the Agent or
any Lender and any Persons designated by the Agent or any Lender pursuant to
any provisions of this Agreement or any of the other Credit Documents shall be
deemed coupled with an interest and shall be irrevocable so long as any of the
obligations remain unpaid or unsatisfied or this Agreement has not been
terminated.
SECTION 13.15 SURVIVAL OF INDEMNITIES.
Notwithstanding any termination of this Agreement, the indemnities to
which the Lenders are entitled under the provisions of this Article XIII and
any other provision of this Agreement and the Credit Documents shall continue
in full force and effect and shall protect the Lenders against events arising
after such termination as well as before.
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SECTION 13.16 TITLES AND CAPTIONS.
Titles and captions of Articles, Sections and subsections in this
Agreement are for convenience only, and neither limit nor amplify the
provisions of this Agreement.
SECTION 13.17 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement or any other Credit Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining
provisions hereof or thereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
SECTION 13.18 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and shall be binding upon all
parties, their successors and assigns, and all of which taken together shall
constitute one and the same agreement.
SECTION 13.19 TERM OF AGREEMENT.
This Agreement shall remain in effect from the Closing Date through and
including the date upon which the Borrower has paid in full all principal of
and interest on the Loans and all other amounts due hereunder and under the
other Credit Documents at the time of such payment, and the termination of the
Revolving Commitment. No termination of this Agreement shall affect the rights
and obligations of the parties hereto arising prior to such termination.
ARTICLE XIV
GUARANTY
SECTION 14.1 THE GUARANTY.
In order to induce the Lenders to enter into this Agreement and to extend
credit hereunder and in recognition of the direct benefits to be received by
the Guarantors from the Loans made hereunder, each of the Guarantors hereby
agrees with the Agent and the Lenders as follows: the Guarantor hereby
unconditionally and irrevocably jointly and severally guarantees as primary
obligor and not merely as surety the full and prompt payment when due, whether
upon maturity, by acceleration or otherwise, of any and all indebtedness of the
Borrower to the Agent and the Lenders. If any or all of the indebtedness of the
Borrower to the Agent and the Lenders becomes due and payable hereunder, each
Guarantor unconditionally promises to pay such indebtedness to the Agent and
the Lenders, or order, on demand, together with any and all reasonable expenses
which may be incurred by the Agent or the Lenders in collecting any of the
indebtedness. The word "indebtedness" is used in this Article XIV in its most
comprehensive sense and includes
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any and all advances, debts, obligations and liabilities of the Borrower
arising in connection with this Agreement, any of the other Credit Documents
and any of the ELLF Operative Agreements, in each case, heretofore, now, or
hereafter made, incurred or created, whether voluntarily or involuntarily,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
whether or not such indebtedness is from time to time reduced, or extinguished
and thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
SECTION 14.2 BANKRUPTCY.
Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all indebtedness of the
Borrower to the Lenders whether or not due or payable by the Borrower upon the
occurrence of any of the events specified in Section 11.1(h) or (i), and
unconditionally promises to pay such indebtedness to the Agent for the account
of the Lenders, or order, on demand, in Dollars. Each of the Guarantors further
agrees that to the extent that the Borrower or a Guarantor shall make a payment
or a transfer of an interest in any property to the Agent or any Lender, which
payment or transfer or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, or otherwise is avoided, and/or required to
be repaid to the Borrower or a Guarantor, the estate of the Borrower or a
Guarantor, a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
avoidance or repayment, the obligation or part thereof intended to be satisfied
shall be revived and continued in full force and effect as if said payment had
not been made.
SECTION 14.3 NATURE OF LIABILITY.
The liability of each Guarantor hereunder is exclusive and independent of
any security for or other guaranty of the indebtedness of the Borrower whether
executed by any such Guarantor, any other guarantor or by any other party, and
no Guarantor's liability hereunder shall be affected or impaired by (a) any
direction as to application of payment by the Borrower or by any other party,
or (b) any other continuing or other guaranty, undertaking or maximum liability
of a guarantor or of any other party as to the indebtedness of the Borrower, or
(c) any payment on or in reduction of any such other guaranty or undertaking,
or (d) any dissolution, termination or increase, decrease or change in
personnel by the Borrower, or (e) any payment made to the Agent or the Lenders
on the indebtedness which the Agent or such Lenders repay the Borrower pursuant
to court order in any bankruptcy, reorganization, arrangement, moratorium or
other
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debtor relief proceeding, and each of the Guarantors waives any right to
the deferral or modification of its obligations hereunder by reason of any such
proceeding.
SECTION 14.4 INDEPENDENT OBLIGATION.
The obligations of each Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrower, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other guarantor or the Borrower and whether or
not any other Guarantor or the Borrower is joined in any such action or
actions.
SECTION 14.5 AUTHORIZATION.
Each of the Guarantors authorizes the Agent and each Lender without notice
or demand (except as shall be required by applicable statute and cannot be
waived), and without affecting or impairing its liability hereunder, from time
to time to (a) renew, compromise, extend, increase, accelerate or otherwise
change the time for payment of, or otherwise change the terms of the
indebtedness or any part thereof in accordance with this Agreement, including
any increase or decrease of the rate of interest thereon, (b) take and hold
security from any guarantor or any other party for the payment of this Guaranty
or the indebtedness and exchange, enforce waive and release any such security,
(c) apply such security and direct the order or manner of sale thereof as the
Agent and the Lenders in their discretion may determine and (d) release or
substitute any one or more endorsers, guarantors, the Borrower or other
obligors.
SECTION 14.6 RELIANCE.
It is not necessary for the Agent or the Lenders to inquire into the
capacity or powers of the Borrower or the officers, directors, partners or
agents acting or purporting to act on its behalf, and any indebtedness made or
created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.
SECTION 14.7 WAIVER.
(a) Each of the Guarantors waives any right (except as shall be
required by applicable statute and cannot be waived) to require the Agent
or any Lender to (i) proceed against the Borrower, any other guarantor or
any other party, (ii) proceed against or exhaust any security held from
the Borrower, any other guarantor or any other party, or (iii) pursue any
other remedy in the Agent's or any Lender's power whatsoever. Each of the
Guarantors waives any defense based on or arising out of any defense of
the Borrower, any other guarantor or any other party other than payment in
full of the indebtedness, including without limitation any defense based
on or arising out of the disability of the Borrower, any other guarantor
or any other party, or the unenforceability of the indebtedness or any
part thereof from any cause, or the cessation from any cause of the
liability of the Borrower other than payment in full of the indebtedness.
The Agent or any of the Lenders may, at their election, foreclose on any
security held by the Agent or a
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Lender by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or
remedy the Agent and any Lender may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the indebtedness
has been paid. Each of the Guarantors waives any defense arising out of
any such election by the Agent and each of the Lenders, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Guarantors against the
Borrower or any other party or any security.
(b) Each of the Guarantors waives all presentments, demands for
performance, protests and notices, including without limitation notices of
nonperformance, notice of protest, notices of dishonor, notices of
acceptance of this Guaranty, and notices of the existence, creation or
incurring of new or additional indebtedness. Each Guarantor assumes all
responsibility for being and keeping itself informed of the Borrower's
financial condition and assets, and of all other circumstances bearing
upon the risk of nonpayment of the indebtedness and the nature, scope and
extent of the risks which such Guarantor assumes and incurs hereunder, and
agrees that neither the Agent nor any Lender shall have any duty to advise
such Guarantor of information known to it regarding such circumstances or
risks.
(c) Each of the Guarantors hereby agrees it will not exercise any
rights of subrogation which it may at any time otherwise have as a result
of this Guaranty (whether contractual, under Section 509 of the U.S.
Bankruptcy Code, or otherwise) to the claims of the Lenders against the
Borrower or any other guarantor of the indebtedness of the Borrower owing
to the Lenders (collectively, the "Other Parties") and all contractual,
statutory or common law rights of reimbursement, contribution or indemnity
from any Other Party which it may at any time otherwise have as a result
of this Guaranty until such time as the Loans hereunder shall have been
paid and the Commitments have been terminated. Each of the Guarantors
hereby further agrees not to exercise any right to enforce any other
remedy which the Agent and the Lenders now have or may hereafter have
against any Other Party, any endorser or any other guarantor of all or any
part of the indebtedness of the Borrower and any benefit of, and any right
to participate in, any security or collateral given to or for the benefit
of the Lenders to secure payment of the indebtedness of the Borrower until
such time as the Loans hereunder shall have been paid and the Commitments
have been terminated.
SECTION 14.8 LIMITATION ON ENFORCEMENT.
The Lenders agree that this Guaranty may be enforced only by the action of
the Agent acting upon the instructions of the Required Lenders and that no
Lender shall have any right individually to seek to enforce or to enforce this
Guaranty, it being understood and agreed that such rights and remedies may be
exercised by the Agent for the benefit of the Lenders upon the terms of this
Agreement. The Lenders further agree that this Guaranty may not be enforced
against any director, officer, employee or stockholder of the Guarantors.
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SECTION 14.9 CONFIRMATION OF PAYMENT.
The Agent and the Lenders will, upon request after payment of the
indebtedness and obligations which are the subject of this Guaranty and
termination of the commitments relating thereto, confirm to the Borrower, the
Guarantors or any other Person that the such indebtedness and obligations have
been paid and the commitments relating thereto terminated, subject to the
provisions of Section 14.2.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
BORROWER: STERILE RECOVERIES, INC.,
a Florida corporation
By: /s/ James T. Boosales
-----------------------------------
Name: James T. Boosales
Title: EVP
GUARANTOR: REPAK SURGICAL ENTERPRISES, INC.,
an Ohio corporation
By: /s/ James T. Boosales
-----------------------------------
Name: James T. Boosales
Title: EVP
LENDER: FIRST UNION NATIONAL BANK,
individually as a Lender and in
its capacity as Agent
By: /s/ Paul Solitario
-----------------------------------
Name: Paul Solitario
Title: Vice President
<PAGE> 1
EXHIBIT 10.28
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as
of February 24, 1999 among STERILE RECOVERIES, INC., a Florida corporation (the
"Borrower"), the Subsidiaries of the Borrower identified on the signature pages
hereto and each additional Subsidiary of the Borrower which hereinafter becomes
a party hereto by execution of a Joinder Agreement (the "Guarantors" and,
together with the Borrower, the "Obligors") and FIRST UNION NATIONAL BANK, in
its capacity as collateral agent (in such capacity, the "Agent") for the (i)
the Lenders (as defined below) and (ii) the ELLF Lender (as defined below).
RECITALS
WHEREAS, the Lenders have agreed to make loans (the "Loans") to the
Borrower and to issue Letters of Credit pursuant to the terms of that certain
Credit Agreement, dated as of the date hereof (as amended, modified, extended,
renewed or replaced from time to time, the "Credit Agreement"), among the
Borrower, the Guarantors, the Lenders party thereto and First Union National
Bank in its capacity as agent for the Lenders;
WHEREAS, the ELLF Lender has agreed to make extensions of credit to
the Borrower pursuant to the ELLF Documents (as defined below); and
WHEREAS, the Lenders and the ELLF Lender have each required that the
Obligors secure their obligations to the Lenders and the ELLF Lender,
respectively in accordance with the terms of this Security Agreement.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, the following terms which
are defined in the Uniform Commercial Code in effect in the State of
Florida on the date hereof are used herein as so defined: Accounts,
Chattel Paper, Deposit Accounts, Documents, Equipment, Farm Products,
Fixtures, General Intangibles, Instruments, Investment Property,
Inventory and Proceeds. For purposes of this Security Agreement, the
term "Lender" shall include any affiliate of any Lender which has
entered into any Hedging Agreement with the Borrower in respect of the
obligations of the Borrower under the Credit Agreement.
(b) In addition, the following terms shall have the following
meanings:
"Agency Agreement" shall have the meaning assigned thereto in
Appendix A to the Participation Agreement.
<PAGE> 2
"Contracts": all contracts and agreements to which any Obligor
is a party, as each may be amended, supplemented or otherwise modified
from time to time, including, without limitation, (i) all rights of
any Obligor to receive moneys due and to become due to it thereunder
or in connection therewith, (ii) all rights of any Obligor to damages
arising out of or for breach or default in respect thereof and (iii)
all rights of any Obligor to exercise all remedies thereunder.
"Copyright Licenses": any written agreement, naming any Obligor
as licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all
registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations,
recordings and applications in the United States Copyright office
including, without limitation, any thereof referred to in Schedule
1(b) hereto, and (b) all renewals thereof including, without
limitation, any thereof referred to in Schedule 1(b) hereto.
"Credit Agreement Agent" means the Agent (as defined in the
Credit Agreement).
"Credit Documents" means the Credit Documents (as defined in the
Credit Agreement).
"ELLF Lender" means First Union National Bank in its capacity as
a holder and as a lender under the Participation Agreement, as its
successors and assigns.
"ELLF Documents" means the collective reference to the
Participation Agreement, the Lease Agreement, the Agency Agreement,
the Trust Agreement and each of the other Operative Agreements, as
amended and/or modified from time to time.
"Event of Default" means the occurrence of any event or the
existence of any condition which is specified as an "Event of Default"
under the Credit Agreement or the Participation Agreement.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person
exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing.
"Hedging Agreement" means any agreement with respect to an
interest rate swap, collar, cap, floor or a forward rate agreement or
other agreement regarding the hedging of interest rate risk exposure
executed in connection with hedging the interest rate exposure of the
Borrower or any of its Subsidiaries (as defined in the Credit
Agreement) under any agreement executed in connection with any Debt
(as defined in the Credit Agreement),
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and any confirming letter executed pursuant to such hedging agreement,
all as amended or supplemented from time to time.
"Lease Agreement" shall have the meaning assigned thereto in
Appendix A to the Participation Agreement.
"Lenders" means the lenders from time to time party to the
Credit Agreement.
"Operative Agreements" shall have the meaning assigned thereto
in Appendix A to the Participation Agreement.
"Participation Agreement" means that certain Participation
Agreement dated as of February 24, 1999 among the Borrower as
construction agent and lessee, First Security Bank, National
Association, as owner trustee under the SRI Realty Trust 1998-1 and
First Union National Bank, as the lender and holder.
"Patent License": all agreements, whether written or oral,
providing for the grant by or to an Obligor of any right to
manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including,
without limitation, any thereof referred to in Schedule 1(b) hereto,
and (b) all applications for letters patent of the United States or
any other country and all divisions, continuations and
continuations-in-part thereof, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Required Lenders" means at the time of any determination
hereunder, Lenders and the ELLF Lender which are then in compliance
with their obligations under Credit Documents and ELLF Documents
respectively holding in the aggregate at least 66% of the sum of
the Secured Obligations then outstanding.
"Secured Obligations": means a collective reference to the
following:
(a) All unpaid principal of and interest on the Loans (as
defined in the Credit Agreement) and all other obligations and
liabilities of the Obligors to the Credit Agreement Agent and the
Lenders (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided
in the Credit Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to any Obligor, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding),
whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, any notes issued
thereunder, any Hedging Agreement with a Lender or an affiliate of a
Lender to the extent permitted under the Credit Agreement or any other
document made, delivered or given in connection therewith, whether on
account of principal, interest,
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<PAGE> 4
reimbursement obligations, fees, indemnities, costs, expenses or
otherwise (including, without limitation, all fees and disbursements
of counsel to the Credit Agreement Agent or the Lenders that are
required to be paid by the Obligors pursuant to the terms of the
Credit Agreement, any other Credit Document or any Hedging Agreement
with a Lender or an affiliate of a Lender to the extent permitted
under the Credit Agreement);
(b) All obligations, now existing or hereafter arising, owing by
the Obligors and/or any of their affiliates under or pursuant to the
ELLF Documents (including, without limitation, interest accruing
and/or yield at the then applicable rates provided in the ELLF
Documents after the maturity date and interest and/or yield accruing
at the then applicable rates provided in the ELLF Documents after the
filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to any
Obligor, whether or not a claim for post-filing or post-petition
interest in allowed in such proceeding) whether direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection
with the Participation Agreement, the Lease Agreement, the Agency
Agreement, the Trust Agreement, or any of the other Operative
Agreements, whether on account of principal, advanced amounts,
interest, yield, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the ELLF Lender that are required to be
paid by the Obligors pursuant to the terms of the ELLF Documents.
(c) all other indebtedness, liabilities and obligations of any
kind or nature, now existing or hereafter arising, owing by the
Obligors to any Lender or the ELLF Lender, howsoever evidenced,
created, incurred or acquired, whether primary, secondary, direct,
contingent, or joint and several, and
(d) all liabilities arising under Hedging Agreements between the
Borrower and any Lender or an affiliate of a Lender in respect of the
obligations of the Borrower under the Credit Agreement.
"Secured Parties" means the collective reference to the Lenders
and the ELLF Lender.
"Trademark License": means any agreement, written or oral,
providing for the grant by or to an Obligor of any right to use any
Trademark, including, without limitation, any thereof referred to in
Schedule 1(b) hereto.
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade
styles, service marks, logos and other source or business identifiers,
and the goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals
thereof.
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<PAGE> 5
"Trust Agreement" shall have the meaning assigned thereto in
Appendix A to the Participation Agreement.
"Work": any work which is subject to copyright protection
pursuant to Title 17 of the United States Code.
2. Grant of Security Interest in the Collateral. To secure the
prompt payment and performance in full when due, whether by lapse of time,
acceleration or otherwise, of the Secured Obligations, each Obligor hereby
grants to the Agent, for the benefit of the Secured Parties, a continuing
security interest in, and a right to set off against, any and all right, title
and interest of such Obligor in and to the following, whether now owned or
existing or owned, acquired, or arising hereafter (collectively, the
"Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses;
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment;
(h) all Fixtures;
(i) all General Intangibles, including, without limitation, all
rights under the Contracts;
(j) all Instruments;
(k) all Investment Property;
(l) all Inventory;
(m) all Patents;
(n) all Patent Licenses;
(o) all Trademarks;
(p) all Trademark Licenses;
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<PAGE> 6
(q) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks, and related data processing
software (owned by such Obligor or in which it has an
interest) that at any time evidence or contain information
relating to any Collateral or are otherwise necessary or
helpful in the collection thereof or realization thereupon;
(r) to the extent not otherwise included, all other personal
property of such Obligor; and
(s) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Secured Parties, hereby
acknowledge and agree that the security interest created hereby in the
Collateral (i) constitutes continuing collateral security for all of the
Secured Obligations, whether now existing or hereafter arising and (ii) is not
to be construed as an assignment in the nature of a sale of any Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks or Trademark Licenses.
3. Representations and Warranties. Each Obligor hereby represents
and warrants to the Agent, for the benefit of the Secured Parties, that so long
as any of the Secured Obligations remain outstanding or any Credit Document,
ELLF Document or Hedging Agreement is in effect:
(a) Chief Executive Office; Books & Records. Each Obligor's
chief executive office and chief place of business is located at the
location set forth on Schedule 3(a) hereto, and the Borrower keeps its
books and records at such location.
(b) Location of Collateral, Etc. The locations of all Collateral
owned by each Obligor is as shown on Schedule 3(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner of
the Collateral and has the right to pledge, sell, assign or transfer
the same. Each Obligor's legal name is as shown in this Security
Agreement and no Obligor has in the past four months changed its name,
been party to a merger, consolidation or other change in structure or
used any tradename or d/b/a except as set forth in Schedule 3(c)
attached hereto.
(d) Security Interest/Priority. This Security Agreement creates
a valid security interest in favor of the Agent, for the benefit of
the Secured Parties, in the Collateral and, when properly perfected by
filing, shall constitute a valid perfected security interest in the
Collateral, to the extent such security can be perfected by filing
under the UCC, free and clear of all liens and other encumbrances
other than Permitted Liens (as defined in the Credit Agreement).
(e) Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
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<PAGE> 7
(f) Accounts. (i) Each Account of the Obligors and the papers
and documents relating thereto are genuine and in all material
respects what they purport to be, (ii) each Account arises out of (A)
a bona fide sale of goods sold and delivered by such Obligor (or is in
the process of being delivered) or (B) services theretofore actually
rendered by such Obligor to, the account debtor named therein and
(iii) no Account of an Obligor is evidenced by any Instrument or
Chattel Paper unless such Instrument or Chattel Paper has been
theretofore endorsed over and delivered to the Agent.
(g) Copyrights, Patents and Trademarks.
(i) Schedule 1(b) hereto includes all Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses owned by the Obligors in their own names as of the date
hereof.
(ii) To the best of each Obligor's knowledge, each
Copyright, Patent and Trademark of the Borrower is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b) hereto, none of
such Copyrights, Patents and Trademarks is the subject of any
licensing or franchise agreement.
(iv) No holding, decision or judgment has been rendered by
any court, tribunal, agency or other Governmental Authority
which would limit, cancel or question the validity of any
Copyright, Patent or Trademark.
(v) No action or proceeding is pending seeking to limit,
cancel or question the validity of any Copyright, Patent or
Trademark, or which, if adversely determined, would have a
material adverse effect on the value of such Copyright, Patent
or Trademark.
(vi) All applications pertaining to the Copyrights, Patents
and Trademarks of each Obligor have been duly and properly
filed, and all registrations or letters pertaining to such
Copyrights, Patents and Trademarks have been duly and properly
filed and issued, and all of such Copyrights, Patents and
Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in
conflict with the security interest in the Copyrights, Patents
or Trademarks of each Obligor hereunder.
(h) Inventory. No Inventory is held by an Obligor pursuant to
consignment, sale or return, sale on approval or similar arrangement.
4. Covenants. Each Obligor covenants that, so long as any of the
Secured Obligations remain outstanding or any Credit Document, ELLF Document or
Hedging Agreement is in effect, it shall:
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<PAGE> 8
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all liens and other encumbrances other than
Permitted Liens (as defined in the Credit Agreement), and not sell,
exchange, transfer, assign, lease or otherwise dispose of the
Collateral or any interest therein, except in the ordinary course of
business.
(b) Preservation of Collateral. Keep the Collateral in good
order, condition and repair and not use the Collateral in violation of
the provisions of this Security Agreement or any other agreement
relating to the Collateral or any policy insuring the Collateral or
any applicable statute, law, bylaw, rule, regulation or ordinance.
(c) Instruments/Chattel Paper. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any Instrument or Chattel Paper, promptly deliver such Instrument or
Chattel Paper to the Agent, duly endorsed in a manner satisfactory to
the Agent, to be held as Collateral pursuant to this Security
Agreement.
(d) Change in Location. Not, without providing 30 days prior
written notice to the Agent and without filing such amendments to any
previously filed financing statements as the Agent may require, (a)
change the location of its chief executive office and chief place of
business (as well as its books and records) from the locations set
forth on Schedule 3(a) hereto, (b) change the location of its
Collateral from the locations set forth on Schedule 3(b) hereto, or
(c) change its name, be party to a merger, consolidation or other
change in structure or use any tradename or d/b/a.
(e) Inspection. Upon reasonable notice, at such reasonable times
and as often as may be reasonably desired, allow the Agent or its
representatives free access to and right of inspection of the
Collateral.
(f) Perfection of Security Interest. Execute and deliver to the
Agent such agreements, assignments or instruments (including
affidavits, notices, reaffirmations and amendments and restatements of
existing documents, as the Agent may reasonably request) and do all
such other things as the Agent may reasonably deem necessary or
appropriate (i) to assure to the Agent its security interests
hereunder, including (A) such financing statements (including renewal
statements) or amendments thereof or supplements thereto or other
instruments as the Agent may from time to time reasonably request in
order to perfect and maintain the security interests granted hereunder
in accordance with the UCC, (B) with regard to Copyrights, a Notice of
Grant of Security Interest in Copyrights in the form of Schedule
4(f)(i), (C) with regard to Patents, a Notice of Grant of Security
Interest in Patents for filing with the United States Patent and
Trademark Office in the form of Schedule 4(f)(ii) attached hereto and
(D) with regard to Trademarks, a Notice of Grant of Security Interest
in Trademarks for filing with the United States Patent and Trademark
Office in the form of Schedule 4(f)(iii) attached hereto, (ii) to
consummate the transactions contemplated hereby and (iii) to otherwise
protect and assure the Agent of its rights and interests hereunder. To
that end, each Obligor agrees that the Agent may file one or more
financing statements disclosing the Agent's security interest in any
or all of the Collateral without, to
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<PAGE> 9
the extent permitted by law, such Obligor's signature thereon, and
further each Obligor also hereby irrevocably makes, constitutes and
appoints the Agent, its nominee or any other person whom the Agent may
designate, as such Obligor's attorney in fact with full power and for
the limited purpose to sign in the name of such Obligor any such
financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar
documents which in the Agent's reasonable discretion would be
necessary, appropriate or convenient in order to perfect and maintain
perfection of the security interests granted hereunder, such power,
being coupled with an interest, being and remaining irrevocable so
long as the Credit Agreement is in effect or any amounts payable
thereunder or under any other Credit Document, any ELLF Document or
any Hedging Agreement shall remain outstanding. Each Obligor hereby
agrees that a carbon, photographic or other reproduction of this
Security Agreement or any such financing statement is sufficient for
filing as a financing statement by the Agent without notice thereof to
such Obligor wherever the Agent may in its sole discretion desire to
file the same. In the event for any reason the law of any jurisdiction
other than Florida becomes or is applicable to the Collateral of any
Obligor or any part thereof, or to any of the Secured Obligations,
such Obligor agrees to execute and deliver all such instruments and to
do all such other things as the Agent in its sole discretion
reasonably deems necessary or appropriate to preserve, protect and
enforce the security interests of the Agent under the law of such
other jurisdiction (and, if an Obligor shall fail to do so promptly
upon the request of the Agent, then the Agent may execute any and all
such requested documents on behalf of such Obligor pursuant to the
power of attorney granted hereinabove). If any Collateral is in the
possession or control of an Obligor's agents and the Agent so
requests, such Obligor agrees to notify such agents in writing of the
Agent's security interest therein and, upon the Agent's request,
instruct them to hold all such Collateral for its account, on behalf
of the Secured Parties, and subject to the Agent's further
instructions. Each Obligor agrees to mark its books and records to
reflect the security interest of the Agent in the Collateral.
(g) Covenants Relating to Accounts. Not grant or extend the time
for payment of any Account, or compromise or settle any Account for
less than the full amount thereof, or release any person or property,
in whole or in part, from payment thereof, or allow any credit or
discount thereon, other than as normal and customary in the ordinary
course of the Borrower's business.
(h) Covenants Relating to Inventory.
(i) Maintain, keep and preserve the Inventory in good
condition at its own cost and expense.
(ii) Deliver documents of title to the Agent with respect to
any Inventory which is evidenced by a document of title.
(i) Covenants Relating to Copyrights.
(i) Employ each Copyright with such notice of copyright as
may be required by law to secure copyright protection.
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(ii) Not do any act or knowingly omit to do any act whereby
any Copyright may become invalidated and (A) not do any act, or
knowingly omit to do any act, whereby any Copyright may become
injected into the public domain; (B) notify the Agent
immediately if it knows, or has reason to know, that any
Copyright may become injected into the public domain or of any
adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any court or tribunal in the United States or
any other country) regarding an Obligor's ownership of any such
Copyright or its validity; (C) take all necessary steps as it
shall deem appropriate under the circumstances, to maintain and
pursue each application (and to obtain the relevant
registration) and to maintain each registration of each
Copyright owned by an Obligor including, without limitation,
filing of applications for renewal where necessary; and (D)
promptly notify the Agent of any material infringement of any
Copyright of an Obligor of which it becomes aware and take such
actions as it shall reasonably deem appropriate under the
circumstances to protect such Copyright, including, where
appropriate, the bringing of suit for infringement, seeking
injunctive relief and seeking to recover any and all damages for
such infringement.
(iii) Not make any assignment or agreement in conflict with
the security interest in the Copyrights of each Obligor
hereunder.
(j) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any
claim of abandonment for non-use, (B) maintain as in the past
the quality of products and services offered under such
Trademark, (C) employ such Trademark with the appropriate notice
of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Agent, for the ratable benefit of the Secured
Parties, shall obtain a perfected security interest in such mark
pursuant to this Security Agreement, and (E) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly
omit to do any act whereby any Trademark may become invalidated.
(ii) Not do any act, or omit to do any act, whereby any
Patent may become abandoned or dedicated.
(iii) Notify the Agent immediately if it knows, or has
reason to know, that any application or registration relating to
any Patent or Trademark may become abandoned or dedicated, or of
any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country)
regarding an Obligor's ownership of any Patent or Trademark or
its right to register the same or to keep and maintain the same.
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(iv) Whenever an Obligor, either by itself or through an
agent, employee, licensee or designee, shall file an application
for the registration of any Patent or Trademark with the United
States Patent and Trademark Office or any similar office or
agency in any other country or any political subdivision
thereof, such Obligor shall report such filing to the Agent
within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Agent,
an Obligor shall execute and deliver any and all agreements,
instruments, documents and papers as the Agent may request to
evidence the Agent's security interest in any Patent or
Trademark and the goodwill and general intangibles of an Obligor
relating thereto or represented thereby.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in
any other country or any political subdivision thereof, to
maintain and pursue each application (and to obtain the relevant
registration) and to maintain each registration of the Patents
and Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of
incontestability.
(vi) Promptly notify the Agent after it learns that any
Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly sue for
infringement, misappropriation or dilution, to seek injunctive
relief where appropriate and to recover any and all damages for
such infringement, misappropriation or dilution, or take such
other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict with
the security interest in the Patents or Trademarks of each
Obligor hereunder.
(k) New Patents, Copyrights and Trademarks. Promptly provide the
Agent with (i) a listing of all applications, if any, for new
Copyrights, Patents or Trademarks (together with a listing of the
issuance of registrations or letters on present applications), which
new applications and issued registrations or letters shall be subject
to the terms and conditions hereunder, and (ii) (A) with respect to
Copyrights, a duly executed Notice of Security Interest in Copyrights,
(B) with respect to Patents, a duly executed Notice of Security
Interest in Patents, (C) with respect to Trademarks, a duly executed
Notice of Security Interest in Trademarks or (D) such other duly
executed documents as the Agent may request in a form acceptable to
counsel for the Agent and suitable for recording to evidence the
security interest in the Copyright, Patent or Trademark which is the
subject of such new application.
(l) Insurance. Have and maintain at all times the insurance
coverage set forth in the Credit Agreement. All insurance proceeds
shall be subject to the lien of the Agent
11
<PAGE> 12
hereunder. The Agent shall be named as loss payee and additional
insured on all casualty and liability policies of such Obligor.
(m) Equipment. At all times, maintain its Equipment in good
working order and in compliance with all applicable safety standards.
5. Special Provisions Relating to Accounts. Anything herein to the
contrary notwithstanding, each of the Obligors shall remain liable under each
of the Accounts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to each such Account. Neither the Agent nor any
Secured Party shall have any obligation or liability under any Account (or any
agreement giving rise thereto) by reason of or arising out of this Security
Agreement or the receipt by the Agent or any Secured Party of any payment
relating to such Account pursuant hereto, nor shall the Agent or any Secured
Party be obligated in any manner to perform any of the obligations of an
Obligor under or pursuant to any Account (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Account (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
6. Special Provisions Regarding Inventory. Unless and until an
Event of Default occurs and is continuing and the Agent instructs the Obligors
otherwise, each Obligor may, without further consent or approval of the Agent,
use, consume, sell, lease and exchange the Inventory in the ordinary course of
its business as presently conducted, whereupon, in the case of a sale or
exchange, the security interest created hereby in the Inventory so sold or
exchanged (but not in any proceeds arising from such sale or exchange) shall
cease immediately without any further action on the part of the Agent.
7. Advances by Secured Parties. On failure of any Obligor to
perform any of the covenants and agreements contained herein, the Agent may, at
its sole option and in its sole discretion, perform the same and in so doing
may expend such sums as the Agent may reasonably deem advisable in the
performance thereof, including, without limitation, the payment of any
insurance premiums, the payment of any taxes, a payment to obtain a release of
a lien or potential lien, reasonable expenditures made in defending against any
adverse claim and all other reasonable expenditures which the Agent or the
Secured Parties may make for the protection of the security hereof or which
they may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in the Credit Agreement. No
such performance of any covenant or agreement by the Agent or the Secured
Parties on behalf of the Borrower, and no such advance or expenditure therefor,
shall relieve the Obligors of any default under the terms of this Security
Agreement or the other Credit Documents, the ELLF Documents or any Hedging
Agreement. The Agent or any Secured Party may make any payment hereby
authorized in accordance with any bill, statement or estimate procured from the
12
<PAGE> 13
appropriate public office or holder of the claim to be discharged without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by an
Obligor in appropriate proceedings and against which adequate reserves are
being maintained in accordance with GAAP.
8. Events of Default. The occurrence of an event which under the
Credit Agreement would constitute an Event of Default shall be an Event of
Default hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default
and during continuation thereof, the Agent shall have, in addition to
the rights and remedies provided herein, in the Credit Documents, in
the ELLF Documents, in the Hedging Agreements or by law (including,
but not limited to, the rights and remedies set forth in the Uniform
Commercial Code of the jurisdiction applicable to the affected
Collateral), the rights and remedies of a secured party under the UCC
(regardless of whether the UCC is the law of the jurisdiction where
the rights and remedies are asserted and regardless of whether the UCC
applies to the affected Collateral), and further, the Agent may, with
or without judicial process or the aid and assistance of others, (i)
enter on any premises on which any of the Collateral may be located
and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any
such premises, (iii) require the Obligors to assemble and make
available to the Agent at the expense of the Obligors any Collateral
at any place and time designated by the Agent which is reasonably
convenient to both parties, (iv) remove any Collateral from any such
premises for the purpose of effecting sale or other disposition
thereof, and/or (v) without demand and without advertisement, notice,
hearing or process of law, all of which each of the Obligors hereby
waives to the fullest extent permitted by law, at any place and time
or times, sell and deliver any or all Collateral held by or for it at
public or private sale, by one or more contracts, in one or more
parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to
all other sums due the Agent and the Secured Parties with respect to
the Secured Obligations, the Obligors shall pay to the Agent and each
of the Secured Parties all reasonable documented costs and expenses
incurred by the Agent or any such Secured Party, including, but not
limited to, reasonable attorneys' fees and court costs, in obtaining
or liquidating the Collateral, in enforcing payment of the Secured
Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Secured Parties or the
Obligors concerning any matter arising out of or connected with this
Security Agreement or the Collateral or the Secured Obligations,
including without limitation any of the foregoing arising in, arising
under or related to a case under the United States Bankruptcy Code. To
the extent the rights of notice cannot be legally waived hereunder,
each Obligor agrees that any requirement of reasonable notice shall be
met if such notice is personally served on or mailed, postage prepaid,
to the Borrower in accordance with the provisions of the Credit
Agreement at least 10 days before the time of sale or other event
giving rise to the requirement of such notice.
13
<PAGE> 14
The Agent shall not be obligated to make any sale or other disposition
of the Collateral regardless of notice having been given. To the
extent permitted by law, any Secured Party may be a purchaser at any
such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to
any such sale. Subject to the provisions of applicable law, the Agent
may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of
such sale, and such sale may, without further notice, to the extent
permitted by law, be made at the time and place to which the sale was
postponed, or the Agent may further postpone such sale by announcement
made at such time and place.
(b) Access. In addition to the rights and remedies hereunder,
upon the occurrence of an Event of Default and during the continuance
thereof, the Agent shall have the right to take physical possession of
any and all of the Collateral and anything found therein, the right
for that purpose to enter without legal process and without breach of
the peace any premises where the Collateral may be found (provided
such entry be done lawfully), and the right to maintain such
possession on such Obligor's premises (each Obligor hereby agreeing to
lease warehouses and storage facilities to the Agent or its designee
if the Agent so requests) or to remove the Collateral or any part
thereof to such other places as the Agent may desire. Upon the
occurrence of any Event of Default and at any time thereafter, unless
and until such Event of Default has been waived by the Agent with the
consent of each Secured Party or the Required Lenders as provided in
the Credit Agreement or the ELLF Documents, or cured to the
satisfaction of the Secured Parties, the Obligors shall, upon the
Agent's demand, assemble the Collateral and make it available to the
Agent at a place reasonably designated by the Agent. If the Agent
exercises its right to take possession of the Collateral, the Obligors
shall also at their expense perform any and all other steps reasonably
requested by the Agent to preserve and protect the security interest
hereby granted in the Collateral, such as placing and maintaining
signs indicating the security interest of the Agent, appointing
overseers for the Collateral and maintaining inventory records.
(c) Nonexclusive Nature of Remedies. Failure by the Agent or the
Secured Parties to exercise any right, remedy or option under this
Security Agreement, any other Credit Document, any ELLF Document, any
Hedging Agreement or as provided by law, or any delay by the Agent or
the Secured Parties in exercising the same, shall not operate as a
waiver of any such right, remedy or option. No waiver hereunder shall
be effective unless it is in writing, signed by the party against whom
such waiver is sought to be enforced and then only to the extent
specifically stated, which in the case of the Agent and the Secured
Parties shall only be granted as provided herein. To the extent
permitted by law, neither the Agent, the Secured Parties, nor any
party acting as attorney for the Agent or the Secured Parties, shall
be liable hereunder for any acts or omissions or for any error of
judgment or mistake of fact or law other than their gross negligence
or willful misconduct hereunder. The rights and remedies of the Agent
and the Secured Parties under this Security Agreement shall be
cumulative and not exclusive of any other right or remedy which the
Agent or the Secured Parties may have.
14
<PAGE> 15
(d) Retention of Collateral. Upon the occurrence and during the
continuance of an Event of Default, the Agent may, after providing the
notices required by Section 9-505(2) of the UCC or otherwise complying
with the requirements of applicable law of the relevant jurisdiction,
to the extent the Agent is in possession of any of the Collateral,
retain the Collateral in satisfaction of the Secured Obligations.
Unless and until the Agent shall have provided such notices, however,
the Agent shall not be deemed to have retained any Collateral in
satisfaction of any Secured Obligations for any reason.
10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the
Agent, and each of its designees or agents, as attorney-in-fact of
such Obligor, irrevocably and with power of substitution, with
authority to take any or all of the following actions upon the
occurrence and during the continuance of an Event of Default:
(i) to demand, collect or settle, compromise, adjust,
give discharges and releases, all as the Agent may reasonably
determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought
and, in connection therewith, give such discharge or release as
the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an
Obligor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments
or documents evidencing payment, shipment or storage of the
goods giving rise to the Collateral on behalf of and in the name
of such Obligor, or securing, or relating to the Collateral;
(v) sell, assign, transfer, make any agreement in respect
of, or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services which have given rise
thereto, as fully and completely as though the Agent were the
absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary
in order to perfect and maintain the security interests and
liens granted in this Security Agreement
15
<PAGE> 16
and in order to fully consummate all of the transactions
contemplated therein;
(viii) institute any foreclosure proceedings that the Agent
may deem appropriate; and
(ix) do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient
in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall
be irrevocable for so long as any of the Secured Obligations remain
outstanding or any Credit Document, any ELLF Document or any Hedging
Agreement is in effect. The Agent shall be under no duty to exercise
or withhold the exercise of any of the rights, powers, privileges and
options expressly or implicitly granted to the Agent in this Security
Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in
its individual capacity or its capacity as attorney-in-fact except
acts or omissions resulting from its gross negligence or willful
misconduct. This power of attorney is conferred on the Agent solely to
protect, preserve and realize upon its security interest in the
Collateral.
(b) Performance by the Agent of Obligations. If any Obligor
fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection
therewith shall be payable by the Obligors on a joint and several
basis pursuant to Section 11 hereof.
(c) Assignment by the Agent. The Agent may, from time to time,
assign the Secured Obligations and any portion thereof and/or the
Collateral and any portion thereof, to a successor Agent appointed
pursuant to the terms of the Credit Documents and ELLF Documents, and
the assignee shall be entitled to all of the rights and remedies of
the Agent under this Security Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of
reasonable care to assure the safe custody of the Collateral while
being held by the Agent hereunder, the Agent shall have no duty or
liability to preserve rights pertaining thereto, it being understood
and agreed that the Obligors shall be responsible for preservation of
all rights in the Collateral, and the Agent shall be relieved of all
responsibility for the Collateral upon surrendering it or tendering
the surrender of it to the Obligors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Agent accords its own property,
which shall be no less than the treatment employed by a reasonable and
prudent agent in the industry, it being understood that the Agent
shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the
Collateral.
16
<PAGE> 17
11. Application of Proceeds. Upon the occurrence of and during the
continuance of an Event of Default, the Proceeds and avails of the Collateral
at any time received by the Agent shall, when received by the Agent in cash or
its equivalent, be applied as follows: first, to all reasonable costs and
expenses of the Agent (including without limitation, reasonable attorneys' fees
and expenses) incurred in connection with the implementation and/or enforcement
of this Security Agreement; second, to the payment of any fees owed to the
Credit Agreement Agent or the ELLF Lender; third, to all costs and expenses of
the Secured Parties (including without limitation reasonable attorneys' fees
and expenses) incurred in connection with the implementation and/or enforcement
of this Security Agreement and/or any of the other Credit Documents and the
Operative Agreements; fourth, to the Secured Parties, ratably, in accordance
with the respective amounts of the Secured Obligations constituting the then
aggregate unpaid principal amount of the Loans, together with all accrued and
unpaid interest thereon at such time and the Secured Obligations constituting
the then aggregate unpaid principal amount and/or advanced amounts owing
pursuant to the ELLF Documents together with all accrued and unpaid interest
and/or yield thereon at such time; fifth, to all other amounts payable with
respect to the Secured Obligations; and sixth, to the payment of the surplus,
if any, to whoever may be lawfully entitled to receive such surplus. The
Obligors shall remain liable to the Agent and the Lenders on a joint and
several basis for any deficiency.
12. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Secured Parties, all of which
costs and expenses shall constitute Secured Obligations hereunder.
13. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in
every respect and shall remain in full force and effect so long as any
of the Secured Obligations remain outstanding or any Credit Document,
any ELLF Document or Hedging Agreement is in effect or any amounts
payable thereunder or under any other Credit Document shall remain
outstanding (other than any obligations with respect to the
indemnities and the representations and warranties set forth in the
Credit Documents or the ELLF Documents). Upon such payment and
termination, this Security Agreement shall be automatically terminated
and, the Agent shall, upon the request and at the expense of the
Obligors, forthwith release all of its liens and security interests
hereunder and shall execute and deliver all UCC termination statements
and/or other documents reasonably requested by the Obligors evidencing
such termination. Notwithstanding the foregoing all releases and
indemnities provided hereunder shall survive termination of this
Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment,
in whole or in part, of any of the Secured Obligations is rescinded or
must otherwise be restored or returned by the Agent or
17
<PAGE> 18
any Secured Party as a preference, fraudulent conveyance or otherwise
under any bankruptcy, insolvency or similar law, all as though such
payment had not been made; provided that in the event payment of all
or any part of the Secured Obligations is rescinded or must be
restored or returned, all reasonable costs and expenses (including
without limitation, any reasonable legal fees and disbursements)
incurred by the Agent or any Secured Party in defending and enforcing
such reinstatement shall be deemed to be included as a part of the
Secured Obligations.
14. Amendments; Waivers; Modifications. This Security Agreement and
the provisions hereof may not be amended, waived, modified, changed, discharged
or terminated except by a written instrument executed by the Obligors and the
Agent; provided, that the Agent may not enter into any such amendment, waiver,
supplement or modification without the prior written consent of the Required
Lenders.
15. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Secured Parties hereunder, to the benefit of
the Agent and the Secured Parties and their successors and assigns; provided,
however, that none of the Obligors may assign its rights or delegate its duties
hereunder without the prior written consent of the Secured Parties. To the
fullest extent permitted by law, each Obligor hereby releases the Agent and
each Secured Party and their respective successors and assigns, from any
liability for any act or omission relating to this Security Agreement or the
Collateral, except for any liability arising from the gross negligence or
willful misconduct of the Agent, or such Secured Party, or its officers,
employees or agents.
16. Notices. All notices required or permitted to be given under
this Security Agreement shall be in made in writing and delivered to the
parties hereto at the addresses specified below:
if to any Obligor:
Sterile Recoveries, Inc.
------------------------
------------------------
if to the Agent:
First Union National Bank
------------------------
------------------------
17. Counterparts. This Security Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
18
<PAGE> 19
18. Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning
or construction of any provision of this Security Agreement.
19. Governing Law; Submission to Jurisdiction; Venue; Arbitration.
THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF FLORIDA. THE PROVISIONS OF THE CREDIT AGREEMENT RELATING
TO SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
20. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH OBLIGOR HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF THIS SECURITY AGREEMENT, THE CREDIT DOCUMENTS, THE
ELLF DOCUMENTS OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR
THERETO.
21. Severability. If any provision of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
22. Entirety. This Security Agreement, the other Credit Documents,
the ELLF Document and the Hedging Agreements represent the entire agreement of
the parties hereto and thereto, and supersede all prior agreements and
understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Credit Documents, the ELLF Documents, the
Hedging Agreements or the transactions contemplated herein and therein.
23. Survival. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents, the ELLF Documents and the Hedging Agreements and
the making of the Loans.
24. Other Security. To the extent that any of the Secured
Obligations are now or hereafter secured by property other than the Collateral
(including, without limitation, real property and securities owned by an
Obligor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Secured Parties shall have the right to proceed against such
other property, guarantee or endorsement upon the occurrence of any Event of
Default, and the Agent and the Secured Parties shall have the right, in their
sole discretion, to determine which rights, security, liens, security interests
or remedies the Agent and the Secured Parties shall at any time pursue,
relinquish, subordinate, modify or take with respect thereto, without in any
way modifying or affecting any of them or any of the Agent's and the Secured
Parties' rights or the Secured Obligations under this Security Agreement, under
any other of the Credit Documents, the ELLF Documents or under any Hedging
Agreement.
19
<PAGE> 20
25. Rights of Required Lenders. All rights of the Agent hereunder,
if not exercised by the Agent, may be exercised by the Required Lenders.
26. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several
liability hereunder in consideration of the financial accommodation to
be provided by the Lenders under the Credit Agreement and the ELLF
Lender under the ELLF Documents, for the mutual benefit, directly and
indirectly, of each of the Obligors and in consideration of the
undertakings of each of the Obligors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby
irrevocably and unconditionally accepts, not merely as a surety but
also as a co-debtor, joint and several liability with the other
Obligors with respect to the payment and performance of all of the
Secured Obligations arising under this Security Agreement, the other
Credit Documents, the ELLF Documents and the Hedging Agreements, it
being the intention of the parties hereto that all the Secured
Obligations shall be the joint and several obligations of each of the
Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained
herein, in any other of the Credit Documents or in any Hedging
Agreement, the obligations of each Guarantor hereunder shall be
limited to an aggregate amount equal to the largest amount that would
not render such obligations subject to avoidance under Section 548 of
the United States Bankruptcy Code or any comparable provisions of any
applicable state law.
20
<PAGE> 21
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: STERILE RECOVERIES, INC.
a Florida corporation
By: /s/ James T. Boosales
-----------------------------------
Name: James T. Boosales
---------------------------------
Title: EVP
--------------------------------
GUARANTORS: REPAK SURGICAL ENTERPRISES, INC.,
an Ohio corporation
By: /s/ James T. Boosales
-----------------------------------
Name: James T. Boosales
---------------------------------
Title: EVP
--------------------------------
AGENT: FIRST UNION NATIONAL BANK,
as Agent
By: /s/ Paul Solitario
-----------------------------------
Name: Paul Solitario
---------------------------------
Title: Vice President
--------------------------------
<PAGE> 22
SCHEDULE 1(b)
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
Mark Application/Registration No. Filing/Registration Date
- ---- ---------------------------- ------------------------
<S> <C> <C>
Sterile Recoveries, Inc. 75/282,128 4/28/97
SRI 75/282,127 4/28/97
Repak 1,533,180 4/4/89
Repak 1,573,840 12/26/89
</TABLE>
- ------------------------
The Borrower expects to file an application for the following trademarks within
30 days:
Surgical Express
Surgex
<PAGE> 23
SCHEDULE 3(a)
CHIEF EXECUTIVE OFFICE
28100 U.S. Highway 19 N.
Suite 201
Clearwater, Florida 34621
<PAGE> 24
SCHEDULE 3(b)
LOCATIONS OF COLLATERAL
See Schedule 6.1(w) to the Credit Agreement. The Obligors' carts and reusable
surgical products circulate continuously between the Obligors' facilities and
their customers' locations.
<PAGE> 25
SCHEDULE 3(c)
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF
TRADENAMES OR D/B/A'S
See Schedule 6.1(x) to the Credit Agreement.
<PAGE> 26
SCHEDULE 4(f)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
February 24, 1999 as the same may be amended, modified, extended or restated
from time to time, the "Security Agreement") by and between the Obligors party
thereto (the "Obligors") and First Union National Bank, as agent (the "Agent")
for the Secured Parties referenced therein (the "Secured Parties"), the
undersigned Obligor has granted a continuing security interest in and
continuing lien upon, the copyrights and copyright applications shown below to
the Agent for the ratable benefit of Secured Parties:
COPYRIGHTS
-----------------------
Date of
Copyright No. Description of Copyright Copyright
------------- ------------------------ ---------
Copyright Applications
------------------------
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
- ---------------- ------------------------ -----------------
The Obligors and the Agent hereby acknowledge and agree that the
security interest in the foregoing copyrights and copyright applications (i)
may only be terminated in accordance with the terms of the Security Agreement
and (ii) is not to be construed as an assignment of any copyright or copyright
application.
<PAGE> 27
Very truly yours,
[OBLIGOR]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 28
SCHEDULE 4(f)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
February 24, 1999 (the "Security Agreement") by and between the Obligors party
thereto (the "Obligors") and First Union National Bank, as agent (the "Agent")
for the Secured Parties referenced therein (the "Secured Parties"), the
undersigned Obligor has granted a continuing security interest in and
continuing lien upon, the patents and patent applications shown below to the
Agent for the ratable benefit of the Secured Parties:
PATENTS
---------------------------
Description of Patent Date of
Patent No. Item Patent
---------- --------------------- -------
Patent Applications
---------------------------
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
- ---------------- --------------------- --------------
The Obligors and the Agent hereby acknowledge and agree that the
security interest in the foregoing patents and patent applications (i) may only
be terminated in accordance with the terms of the Security Agreement and (ii)
is not to be construed as an assignment of any patent or patent application.
<PAGE> 29
Very truly yours,
[OBLIGOR]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 30
SCHEDULE 4(f)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of
February 24, 1999 (the "Security Agreement") by and between the Obligors party
thereto (the "Obligors") and First Union National Bank, as agent (the "Agent")
for the Secured Parties referenced therein (the "Secured Parties"), the
undersigned Obligor has granted a continuing security interest in and
continuing lien upon, the trademarks and trademark applications shown below to
the Agent for the ratable benefit of the Secured Parties:
TRADEMARKS
------------------------------
Description of Trademark Date of
Trademark No. Item Trademark
------------- ------------------------ ---------
Trademark Applications
------------------------------
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
- ---------------- ------------------------ -----------------
The Obligors and the Agent hereby acknowledge and agree that the
security interest in the foregoing trademarks and trademark applications (i)
may only be terminated in accordance with the terms of the Security Agreement
and (ii) is not to be construed as an assignment of any trademark or trademark
application.
<PAGE> 31
Very truly yours,
[OBLIGOR]
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Acknowledged and Accepted:
FIRST UNION NATIONAL BANK,
as Agent
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
2
<PAGE> 1
EXHIBIT 10.29
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
Dated as of February 1, 1999
among
STERILE RECOVERIES, INC.,
as the Construction Agent and as the Lessee,
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner Trustee
under the SRI Realty Trust 1998-1,
and
FIRST UNION NATIONAL BANK,
as the Lender and the Holder
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. THE LOANS...........................................................................................1
SECTION 2. HOLDER ADVANCES.....................................................................................1
SECTION 3. SUMMARY OF TRANSACTIONS.............................................................................2
3.1. Operative Agreements..............................................................................2
3.2. Property Purchase.................................................................................2
3.3. Construction of Improvements; Commencement of Basic Rent..........................................2
SECTION 4. THE CLOSINGS........................................................................................3
4.1. Initial Closing Date..............................................................................3
4.2. Initial Closing Date; Property Closing Dates; Acquisition Advances; Construction Advances.........3
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT; REPORTING REQUIREMENTS ON COMPLETION DATE;
THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.............................................3
5.1. General...........................................................................................3
5.2. Procedures for Funding............................................................................4
5.3. Conditions Precedent for the Lessor and the Bank Relating to the Initial Closing Date,
the Issuance of Letters of Credit and the Advance of Funds for the Acquisition of a Property......6
5.4. Conditions Precedent for the Lessor and the Bank Relating to the Advance of Funds
after the Acquisition Advance....................................................................10
5.5. Additional Reporting and Delivery Requirements on Completion Date and on
Construction Period Termination Date.............................................................12
5.6. The Construction Agent Delivery of Construction Budget Modifications.............................12
5.7. Restrictions on Liens............................................................................12
5.8. Payments.........................................................................................13
5.9. Non-Ratable Holder Advances, Obligations to Issue Letters of Credit and Loans....................13
5.10. Consent of the Bank to Requests for Funding in Connection with Transactions
Evidenced by Bond Documents......................................................................13
5.11. Filing Copies....................................................................................13
SECTION 6. REPRESENTATIONS AND WARRANTIES.....................................................................14
6.1. Representations and Warranties of the Borrower...................................................14
6.2. Representations and Warranties of the Lessee.....................................................14
SECTION 7. PAYMENT OF CERTAIN EXPENSES........................................................................17
7.1. Transaction Expenses.............................................................................17
7.2. Brokers' Fees....................................................................................18
7.3. Certain Fees and Expenses........................................................................18
7.4. Commitment Fee...................................................................................18
SECTION 8. OTHER COVENANTS AND AGREEMENTS.....................................................................19
8.1. Cooperation with the Construction Agent or the Lessee............................................19
8.2. Covenants of the Owner Trustee and the Bank......................................................19
8.3. Lessee Covenants, Consent and Acknowledgment.....................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
8.4. Allocation of Certain Payments...................................................................22
8.5. Grant of Easements, etc..........................................................................22
8.6. Appointment by the Bank and the Owner Trustee....................................................23
8.7. Collection and Allocation of Payments and Other Amounts..........................................23
8.8. Release of Properties, etc.......................................................................24
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT...............................................................24
9.1. The Construction Agent's and the Lessee's Credit Agreement Rights................................24
9.2. The Construction Agent's and the Lessee's Trust Agreement Rights.................................25
SECTION 10. TRANSFER OF INTEREST...............................................................................26
10.1. Restrictions on Transfer.........................................................................26
10.2. Effect of Transfer...............................................................................26
SECTION 11. INDEMNIFICATION....................................................................................26
11.1. General Indemnity................................................................................26
11.2. General Tax Indemnity............................................................................27
11.3. Increased Costs, Illegality, etc.................................................................30
11.4. Funding/Contribution Indemnity...................................................................32
SECTION 12. MISCELLANEOUS......................................................................................33
12.1. Survival of Agreements; Third Party Beneficiaries................................................33
12.2. Notices..........................................................................................33
12.3. Counterparts.....................................................................................34
12.4. Terminations, Amendments, Waivers, Etc.; Unanimous Vote Matters..................................34
12.5. Headings, etc....................................................................................35
12.6. Parties in Interest..............................................................................35
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; VENUE; ARBITRATION..............35
12.8. Severability.....................................................................................37
12.9. Liability Limited................................................................................37
12.10. Rights of the Lessee.............................................................................38
12.11. Further Assurances...............................................................................38
12.12. Calculations under Operative Agreements..........................................................39
12.13. [Intentionally Left Blank];......................................................................39
12.14. Financial Reporting/Tax Characterization.........................................................39
12.15. Set-off..........................................................................................39
</TABLE>
EXHIBITS
A - Form of Requisition - Sections 4.2, 5.2, 5.3 and 5.4
B - Form of Outside Counsel Opinion for the Lessee - Section 5.3(j)
C - Form of Officer's Certificate - Section 5.3(w)
D - Form of Secretary's Certificate - Section 5.3(x)
ii
<PAGE> 4
E - Form of Officer's Certificate - Section 5.3(z)
F - Form of Secretary's Certificate - Section 5.3(aa)
G - Form of Outside Counsel Opinion for the Owner Trustee - Section 5.3(bb)
H - Form of Outside Counsel Opinion for the Lessee - Section 5.3(cc)
I - Form of Officer's Certificate - Section 5.5
J - Description of Material Litigation - Section 6.2(d)
Appendix A - Rules of Usage and Definitions
iii
<PAGE> 5
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT dated as of February 1, 1999 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Agreement") is by and among STERILE RECOVERIES, INC., a Florida
corporation (the "Lessee" or the "Construction Agent"); FIRST SECURITY BANK,
NATIONAL ASSOCIATION, a national banking association, not individually (in its
individual capacity, the "Trust Company"), except as expressly stated herein,
but solely as the Owner Trustee under the SRI Realty Trust 1998-1 (the "Owner
Trustee", the "Borrower" or the "Lessor"); and FIRST UNION NATIONAL BANK, a
national banking association, as lender and holder (together with its
successors and assigns, "Bank"). Capitalized terms used but not otherwise
defined in this Agreement shall have the meanings set forth in Appendix A
hereto.
In consideration of the mutual agreements herein contained and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto hereby agree as follows:
SECTION 1. THE LOANS.
Subject to the terms and conditions of this Agreement and the other
Operative Agreements and in reliance on the representations and warranties of
each of the parties hereto contained herein or made pursuant hereto, the Bank
has agreed to make Loans to the Lessor or issue Letters of Credit for the
account of the Lessor from time to time in an aggregate principal amount of up
to the aggregate amount of the Commitments in order for the Lessor to acquire
the Properties (or a leasehold interest in such Properties pursuant to one or
more Head Leases) and certain Improvements, to develop and construct certain
Improvements in accordance with the Agency Agreement and the terms and
provisions hereof and for the other purposes described herein, and in
consideration of the receipt of proceeds of the Loans or the issuance of the
Letters of Credit, as the case may be, the Lessor will issue the Notes.
Pursuant to Section 5 of this Agreement and Section 2 of the Credit Agreement,
the Loans shall be made from time to time to the Lessor and the Letters of
Credit shall be issued from time to time for the account of the Lessor at the
request of the Construction Agent in consideration for the Construction Agent
agreeing for the benefit of the Lessor, pursuant to the Agency Agreement, to
acquire the Properties (or a leasehold interest in such Properties pursuant to
one or more Head Leases), to acquire the Equipment, to construct certain
Improvements and to cause the Lessee to lease the Properties, each in
accordance with the Agency Agreement and the other Operative Agreements. The
Loans and Letters of Credit and the obligations of the Lessor under the Credit
Agreement shall be secured by the Collateral.
SECTION 2. HOLDER ADVANCES.
Subject to the terms and conditions of this Agreement (including without
limitation Section 5.9) and the other Operative Agreements and in reliance on
the representations and warranties of each of the parties hereto contained
herein or made pursuant hereto, on each date
<PAGE> 6
Advances are requested to be made in accordance with Section 5 hereof, the Bank
shall make a Holder Advance to the Lessor with respect to the SRI Realty Trust
1998-1 in an amount in immediately available funds such that the aggregate of
all Holder Advances on such date shall be three percent (3%) of the amount of
the Requested Funds on such date; provided, that the Bank shall not be
obligated for any Holder Advance in excess of the Available Holder Commitment.
Subject to Section 5.9, no prepayment or any other payment with respect to any
Advance shall be permitted such that the Holder Advance with respect to such
Advance is less than three percent (3%) of the outstanding amount of such
Advance, except in connection with termination or expiration of the Term or in
connection with the exercise of remedies relating to the occurrence of a Lease
Event of Default.
SECTION 3. SUMMARY OF TRANSACTIONS.
3.1. OPERATIVE AGREEMENTS.
On the date hereof, each of the respective parties hereto and thereto
shall execute and deliver this Agreement, the Lease, each applicable Ground
Lease, the Agency Agreement, the Credit Agreement, the Notes, the Trust
Agreement, the Certificates, the Security Agreement, each applicable Mortgage
Instrument, each applicable Bond Document, each applicable LOC Document and
such other documents, instruments, certificates and opinions of counsel as
agreed to by the parties hereto.
3.2. PROPERTY PURCHASE.
On each Property Closing Date and subject to the terms and conditions of
this Agreement (a) the Bank will make a Holder Advance in accordance with
Sections 2 and 5 of this Agreement and the terms and provisions of the Trust
Agreement, (b) the Bank will make Loans or issue one or more Letters of Credit
in accordance with Sections 1 and 5 of this Agreement and the terms and
provisions of the Credit Agreement, (c) the Lessor will purchase and acquire
good and marketable title to, lease pursuant to a Head Lease or ground lease
pursuant to a Ground Lease, the applicable Property, each to be within an
Approved State, identified by the Construction Agent, in each case pursuant to
a Deed, Bill of Sale, Ground Lease or Head Lease, as the case may be, and grant
the Bank a lien on such Property by execution of the required Security
Documents, (d) the Bank, the Lessee and the Lessor shall execute and deliver a
Lease Supplement relating to such Property and (e) the Term shall commence with
respect to such Property.
3.3. CONSTRUCTION OF IMPROVEMENTS; COMMENCEMENT OF BASIC RENT.
Construction Advances will be made with respect to particular Improvements
to be constructed and with respect to ongoing Work regarding the Equipment and
construction of particular Improvements, in each case, pursuant to the terms
and conditions of this Agreement, the Agency Agreement and the other Operative
Agreements. The Construction Agent will act as a construction agent on behalf
of the applicable Development Authority (if any) and the Lessor respecting the
Work regarding the Equipment, the construction of such Improvements and the
2
<PAGE> 7
expenditures of the Construction Advances related to the foregoing. The
Construction Agent shall promptly notify the Lessor upon Completion of the
Improvements and the Lessee shall commence to pay Basic Rent as of the Rent
Commencement Date.
SECTION 4. THE CLOSINGS.
4.1. INITIAL CLOSING DATE.
All documents and instruments required to be delivered on the Initial
Closing Date shall be delivered at the offices of Moore & Van Allen, PLLC,
Charlotte, North Carolina, or at such other location as may be determined by
the Lessor, the Bank and the Lessee.
4.2. INITIAL CLOSING DATE; PROPERTY CLOSING DATES; ACQUISITION
ADVANCES; CONSTRUCTION ADVANCES.
The Construction Agent shall deliver to the Bank a requisition (together
with invoices for, or other reasonably satisfactory evidence of, any
Transaction Expenses and other fees, expenses and disbursements referred to in
Section 7.1 that are to be paid with the applicable Advance, a "Requisition"),
in the form attached hereto as EXHIBIT A or in such other form as is reasonably
satisfactory to the Bank in connection with (a) the Transaction Expenses and
other fees, expenses and disbursements payable, pursuant to Section 7.1, by the
Lessor and (b) each Acquisition Advance pursuant to Section 5.3 and (c) each
Construction Advance pursuant to Section 5.4.
SECTION 5. FUNDING OF ADVANCES; CONDITIONS PRECEDENT;
REPORTING REQUIREMENTS ON COMPLETION DATE;
THE LESSEE'S DELIVERY OF NOTICES; RESTRICTIONS ON LIENS.
5.1. GENERAL.
(a) To the extent funds have been advanced by the Bank to the Lessor
as Loans and as Holder Advances or any Letter of Credit has been issued in
favor of any Bond Trustee in connection with the financing of any Property
contemplated by the Operative Agreements, the Lessor will use such funds
or the issuance of any such Letter of Credit from time to time in
accordance with the terms and conditions of this Agreement and the other
Operative Agreements (i) at the direction of the Construction Agent to
acquire (or to cause the applicable Development Authority to acquire for
lease pursuant to one or more Head Leases) the Properties in accordance
with the terms of this Agreement, the Agency Agreement and the other
Operative Agreements, (ii) to make Advances to the Construction Agent to
permit the acquisition, testing, engineering, installation, development,
construction, modification, design, and renovation, as applicable, of the
Properties (or components thereof) in accordance with the terms of the
Agency Agreement and the other Operative Agreements, and (iii) to pay
Transaction Expenses, fees, expenses and other disbursements payable by
the Lessor under Section 7.1.
3
<PAGE> 8
(b) In lieu of the payment of interest on the Loans and Holder Yield
on the Holder Advances on any Scheduled Interest Payment Date with respect
to any Property during the period prior to the Rent Commencement Date with
respect to such Property, (i) each Loan shall automatically be increased
by the amount of interest accrued and unpaid on such Loan for such period
(except to the extent that at any time such increase would cause such Loan
to exceed the Available Commitment, in which case the Lessee shall pay
such excess amount to the Bank in immediately available funds on the date
the Available Commitment was exceeded), and (ii) each Holder Advance shall
automatically be increased by the amount of Holder Yield accrued and
unpaid on such Holder Advance for such period (except to the extent that
at any time such increase would cause the Holder Advance to exceed the
Available Holder Commitment, in which case the Lessee shall pay such
excess amount to the Bank in immediately available funds on the date the
Available Holder Commitment of such Holder was exceeded). Such increases
in a Loan and a Holder Advance shall occur without any disbursement of
funds by any Person. If not otherwise paid with Loan proceeds, the LOC
Reimbursement Amounts (x) prior to the Completion Date for each Property,
as applicable, shall accrue in accordance with Section 2.3(a) of the
Credit Agreement and (y) after the Completion Date for each Property, as
applicable, shall be payable in accordance with Sections 2.3(a) and 2.12
of the Credit Agreement.
5.2. PROCEDURES FOR FUNDING.
(a) The Construction Agent shall designate the date for Advances and
the date for issuance of Letters of Credit hereunder in accordance with
the terms and provisions hereof and of the other Operative Agreements;
provided, however, it is understood and agreed that no more than two (2)
Advances (excluding any conversion and/or continuation of any Loans or
Holder Advances and excluding Loans made to reimburse the Bank for draws
on Letters of Credit) may be requested during any calendar month. Not less
than (i) three (3) Business Days prior to the Initial Closing Date and
(ii) three (3) Business Days prior to the date on which any Acquisition
Advance or Construction Advance is to be made or any Letter of Credit is
to be issued, the Construction Agent shall deliver to the Bank (A) with
respect to the Initial Closing Date, each Acquisition Advance and the
issuance of each Letter of Credit, a Requisition as described in Section
4.2 hereof (including without limitation a legal description of the Land,
if any, a schedule of the Improvements, if any, and a schedule of the
Equipment, if any, acquired or to be acquired on such date or with respect
to which any such Letter of Credit is issued, each of the foregoing in a
form reasonably acceptable to the Bank) and (B) with respect to each
Construction Advance but not regarding Property for which Letters of
Credit have been issued, a Requisition identifying (among other things)
the Property to which such Construction Advance relates.
(b) Each Requisition shall: (i) be irrevocable, (ii) request funds in
an amount that is not in excess of the total aggregate of the Available
Commitments plus the Available Holder Commitments at such time or
otherwise request a Letter of Credit, and
4
<PAGE> 9
(iii) except with regard to any Requisition submitted in connection with a
Property for which a Letter of Credit is requested, request that the Bank
make Holder Advances and Loans to the Lessor for the payment of
Transaction Expenses, Property Acquisition Costs (in the case of an
Acquisition Advance) or other Property Costs (in the case of a
Construction Advance) that have previously been incurred or are to be
incurred on the date of such Advance to the extent such were not subject
to a prior Requisition, in each case as specified in the Requisition.
(c) Subject to the satisfaction of the conditions precedent set forth
in Sections 5.3 or 5.4, as applicable, and subject to Section 5.9, on each
Property Closing Date or (in connection with Advances which do not relate
to Letters of Credit) the date on which the Construction Advance is to be
made, as applicable, (i) the Bank shall at Lessee's request, either (A)
make Loans to the Lessor in an aggregate amount equal to ninety-seven
percent (97%) of the Requested Funds up to an aggregate principal amount
equal to the aggregate of the Available Commitments or (B) issue Letters
of Credit in favor of the applicable Bond Trustee specified in any
Requisition up to an aggregate principal amount equal to the aggregate of
the Available Commitments, (ii) except in connection with Advances to
reimburse the Bank for draws on Letters of Credit, the Bank shall make a
Holder Advance based on its Holder Commitment in an amount such that the
aggregate of all Holder Advances at such time shall be three percent (3%)
of the balance of the Requested Funds specified in such Requisition, up to
the aggregate advanced amount equal to the Available Holder Commitments;
and (iii) the total amount of such Loans and Holder Advances made on such
date shall (x) be used by the Lessor to pay Property Costs including
Transaction Expenses within three (3) Business Days of the receipt by the
Lessor of such Advance or (y) be advanced by the Lessor on the date of
such Advance to the Construction Agent or the Lessee to pay Property
Costs, as applicable. Notwithstanding that the Operative Agreements state
that Advances shall be directed to the Lessor, each Advance shall in fact
be directed to the Construction Agent (for the benefit of the Lessor) and
applied by the Construction Agent (for the benefit of the Lessor) pursuant
to the requirements imposed on the Lessor under the Operative Agreements;
provided, Letters of Credit shall be issued and Loans made to reimburse
the Bank for draws on Letters of Credit in accordance with the applicable
provisions of the Credit Agreement and such amounts shall not be directed
to the Construction Agent.
(d) With respect to an Advance obtained by the Lessor to pay for
Property Costs and/or Transaction Expenses or other costs payable under
Section 7.1 hereof and not expended by the Lessor for such purpose on the
date of such Advance, such amounts shall be held by the Lessor (or the
Bank on behalf of the Lessor) until the applicable closing date or, if
such closing date does not occur within three (3) Business Days of the
date of the Lessor's receipt of such Advance, shall be applied regarding
the applicable Advance to repay the Loans for (or LOC Reimbursement
Amounts, if any) and the Holder Advances and, subject to the terms hereof,
and of the Credit Agreement and the Trust Agreement, shall remain
available for future Advances. Any such amounts held by the Lessor (or the
Bank on behalf of the Lessor) shall be subject to the lien of the Security
Agreement.
5
<PAGE> 10
(e) All Operative Agreements which are to be delivered to the Lessor
shall be delivered to the Bank, on behalf of the Lessor, and such items
(except for Notes, Certificates, Bills of Sale, the Ground Leases, the
Head Leases and chattel paper originals, with respect to which in each
case there shall be only one original) shall be delivered with originals
sufficient for the Lessor and the Bank. All other items which are to be
delivered to the Lessor shall be delivered to the Bank, on behalf of the
Lessor, and such other items shall be held by the Bank. To the extent any
such other items are requested in writing from time to time by the Lessor,
the Bank shall provide a copy of such item. In addition, all items
described in Sections 5.3, 5.4 or 5.5 shall be delivered by the Bank or
other appropriate party to the applicable Development Authority and/or
Bond Trustee, to the extent expressly required by any Bond Document.
(f) Notwithstanding the completion of any closing under this
Agreement pursuant to Sections 5.3 or 5.4, each condition precedent in
connection with any such closing may be subsequently enforced by the Bank
(unless such has been expressly waived in writing by the Bank).
5.3. CONDITIONS PRECEDENT FOR THE LESSOR AND THE BANK RELATING TO THE
INITIAL CLOSING DATE, THE ISSUANCE OF LETTERS OF CREDIT AND THE
ADVANCE OF FUNDS FOR THE ACQUISITION OF A PROPERTY.
The obligations (i) on the Initial Closing Date of the Lessor and the Bank
to enter into the transactions contemplated by this Agreement, including
without limitation the obligation to execute and deliver the applicable
Operative Agreements to which each is a party on the Initial Closing Date, (ii)
on the Initial Closing Date of the Bank to make Holder Advances and Loans in
order to pay Transaction Expenses, fees, expenses and other disbursements
payable by the Lessor under Section 7.1 of this Agreement, (iii) on each date
requested by the Lessee of the Bank to issue Letters of Credit under Section
2.12 of the Credit Agreement and (iv) on a Property Closing Date for the
purpose of providing funds to the Lessor necessary to pay the Transaction
Expenses, fees, expenses and other disbursements payable by the Lessor under
Section 7.1 of this Agreement and to acquire (or lease pursuant to one or more
Head Leases) or ground lease a Property (an "Acquisition Advance"), in each
case (with regard to the foregoing Sections 5.3(i), (ii), (iii) and (iv)) are
subject to the satisfaction or waiver of the following conditions precedent on
or prior to the Initial Closing Date or the applicable Property Closing Date,
as the case may be (to the extent such conditions precedent require the
delivery of any agreement, certificate, instrument, memorandum, legal or other
opinion, appraisal, commitment, title insurance commitment, lien report or any
other document of any kind or type, such shall be in form and substance
reasonably satisfactory to the Bank and, to the extent required by the
applicable Bond Documents, the applicable Bond Trustee; notwithstanding the
foregoing, the obligations of each party shall not be subject to any conditions
contained in this Section 5.3 which are required to be performed by such
party):
(a) the correctness of the representations and warranties of the
parties to the Operative Agreements contained herein, in each of the other
Operative Agreements and
6
<PAGE> 11
each certificate delivered pursuant to any Operative Agreement (including
without limitation the Incorporated Representations and Warranties) on
each such date;
(b) the performance by the parties to the Operative Agreements of
their respective agreements contained herein and in the other Operative
Agreements to be performed by them on or prior to each such date;
(c) The Bank shall have received a fully executed counterpart copy of
the Requisition, appropriately completed;
(d) [Reserved];
(e) the Construction Agent shall have delivered to the Bank a good
standing certificate for the Construction Agent in the state where each
such Property is located, the Deed with respect to the Land and existing
Improvements (if any), a copy of the Ground Lease (if any), a copy of the
Head Lease and each of the other Bond Documents respecting such Property
(if any), and a copy of the Bill of Sale with respect to the Equipment (if
any), respecting such of the foregoing as are being acquired (or leased
pursuant to any Head Lease) or ground leased on each such date with the
proceeds of the Loans and Holder Advances or which have been previously
acquired (or leased pursuant to any Head Lease) or ground leased with the
proceeds of the Loans and Holder Advances;
(f) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Advance requested by each such Requisition;
(g) the Construction Agent shall have delivered to the Bank title
insurance commitments to issue policies respecting each such Property,
with such endorsements as the Bank deems necessary, in favor of the Lessor
and the Bank from a title insurance company acceptable to the Bank, but
only with such title exceptions thereto as are acceptable to the Bank;
(h) the Construction Agent shall have delivered to the Bank an
environmental site assessment respecting each such Property prepared by an
independent recognized professional acceptable to the Bank and evidencing
no pre-existing environmental condition with respect to which there is
more than a remote risk of loss;
(i) the Construction Agent shall have delivered to the Bank a survey
(with a flood hazard certification) respecting each such Property prepared
by (i) an independent recognized professional acceptable to the Bank and
(ii) in a manner and including such information as is required by the
Bank;
7
<PAGE> 12
(j) unless such an opinion has previously been delivered with respect
to a particular state, the Construction Agent shall have caused to be
delivered to the Bank a legal opinion in the form attached hereto as
EXHIBIT B or in such other form as is reasonably acceptable to the Bank,
prepared by counsel acceptable to the Bank;
(k) the Construction Agent shall have caused to be delivered to the
Bank a Mortgage Instrument (in such form as is acceptable to the Bank),
Lessor Financing Statements and Lender Financing Statements respecting
each such Property, all fully executed and in recordable form;
(l) the Lessee shall have delivered to the Bank with respect to each
such Property a Lease Supplement and a memorandum (or short form lease)
regarding the Lease and such Lease Supplement in the form attached to the
Lease as EXHIBIT B or in such other form as is acceptable to the Bank and
suitable for recording;
(m) with respect to each Acquisition Advance, the sum of the
Available Commitment plus the Available Holder Commitment (after deducting
the Unfunded Amount, if any, and after giving effect to the Acquisition
Advance) will be sufficient to pay all amounts payable therefrom;
(n) if any such Property is subject to a Ground Lease, the
Construction Agent shall have caused a lease memorandum (or short form
lease) to be delivered to the Bank for such Ground Lease and, if requested
by the Bank, a landlord waiver and a mortgagee waiver (in each case, in
such form as is acceptable to the Bank);
(o) counsel (acceptable to the Bank) for the ground lessor of each
such Property subject to a Ground Lease shall have issued to the Lessor
and the Bank its opinion;
(p) the Construction Agent shall have delivered to the Bank a
preliminary Construction Budget for each such Property, if applicable;
(q) the Construction Agent shall have provided evidence to the Bank
of insurance with respect to each such Property as provided in the Lease;
(r) the Construction Agent shall have caused an Appraisal regarding
each such Property to be provided to the Bank from an appraiser
satisfactory to the Bank;
(s) the Construction Agent shall cause (i) Uniform Commercial Code
lien searches, tax lien searches and judgment lien searches regarding the
Lessee and each applicable Development Authority, if any, to be conducted
(and copies thereof to be delivered to the Bank) in such jurisdictions as
determined by the Bank by a nationally recognized search company
acceptable to the Bank and (ii) the liens referenced in such lien searches
which are objectionable to the Bank to be either removed or otherwise
handled in a manner satisfactory to the Bank;
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(t) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements and/or documents related thereto shall have been paid or
provisions for such payment shall have been made to the satisfaction of
the Bank;
(u) each of the Operative Agreements to be entered into on such date
shall have been duly authorized, executed and delivered by the parties
thereto, and shall be in full force and effect, and the Bank shall have
received a fully executed copy of each of the Operative Agreements (except
for the Bonds, as to which a specimen copy may be furnished);
(v) since the date of the most recent audited financial statements
(as delivered pursuant to the requirements of the Lessee Credit Agreement)
of the Lessee, there shall not have occurred any event, condition or state
of facts which shall have or could reasonably be expected to have a
Material Adverse Effect, other than as specifically contemplated by the
Operative Agreements;
(w) as of the Initial Closing Date only, the Bank shall have received
an Officer's Certificate, dated as of the Initial Closing Date, of the
Lessee in the form attached hereto as EXHIBIT C or in such other form as
is acceptable to the Bank
(x) as of the Initial Closing Date only, the Bank shall have received
(i) a certificate of the Secretary or an Assistant Secretary of the
Lessee, dated as of the Initial Closing Date, in the form attached hereto
as EXHIBIT D or in such other form as is acceptable to the Bank and (ii) a
good standing certificate (or local equivalent) from the respective states
where the Lessee is incorporated and where the principal place of business
of the Lessee is located;
(y) as of the Initial Closing Date only, there shall not have
occurred any material adverse change in the consolidated assets,
liabilities, operations, business or condition (financial or otherwise) of
the Lessee from that set forth in the most recent audited consolidated
financial statements of the Lessee which have been provided to the Bank;
(z) as of the Initial Closing Date only, the Bank shall have received
an Officer's Certificate of the Lessor dated as of the Initial Closing
Date in the form attached hereto as EXHIBIT E or in such other form as is
acceptable to the Bank;
(aa) as of the Initial Closing Date only, the Bank shall have
received (i) a certificate of the Secretary, an Assistant Secretary, Trust
Officer or Vice President of the Trust Company in the form attached hereto
as EXHIBIT F or in such other form as is acceptable to the Bank and (ii) a
good standing certificate from the Office of the Comptroller of the
Currency;
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(bb) as of the Initial Closing Date only, counsel for the Lessor
acceptable to the Bank shall have issued to the Lessee and the Bank its
opinion in the form attached hereto as EXHIBIT G or in such other form as
is reasonably acceptable to the Bank;
(cc) as of the Initial Closing Date only, the Construction Agent
shall have caused to be delivered to the Bank a legal opinion in the form
attached hereto as EXHIBIT H or in such other form as is acceptable to the
Bank from counsel acceptable to the Bank;
(dd) respecting any Property subject to a Head Lease, the Bank shall
have received a memorandum regarding such Head Lease in form acceptable to
the Bank and otherwise suitable for recording;
(ee) respecting any Property subject to Bond Documents, counsel for
each of the applicable Bond Trustee (if represented by counsel) and the
applicable Development Authority shall have issued to the Lessee, the
Lessor and the Bank its opinion in form and substance reasonably
acceptable to the Bank;
(ff) respecting any Property subject to a Head Lease, the
Construction Agent shall have delivered from the applicable Development
Authority an Agency Agreement Joinder in the form attached as Exhibit A to
the Agency Agreement, appointing the Construction Agent as construction
agent for such Development Authority to be named as Lessor under such Head
Lease;
(gg) respecting any Property subject to Bond Documents, the
conditions to closing the transactions contemplated by the Bond Documents
respecting such Property shall have been satisfied; and
(hh) evidence of payment to the applicable Financing Parties of the
fees payable on such date, including without limitation the annual letter
of credit commission pursuant to Section 2.12(f) of the Credit Agreement.
5.4. CONDITIONS PRECEDENT FOR THE LESSOR AND THE BANK RELATING TO THE
ADVANCE OF FUNDS AFTER THE ACQUISITION ADVANCE.
The obligations of the Bank to make Holder Advances and Loans in
connection with all requests for Advances subsequent to the acquisition of a
Property (and to pay the Transaction Expenses, fees, expenses and other
disbursements payable by the Lessor under Section 7.1 of this Agreement in
connection therewith) are subject to the satisfaction or waiver of the
following conditions precedent (to the extent such conditions precedent require
the delivery of any agreement, certificate, instrument, memorandum, legal or
other opinion, appraisal, commitment, title insurance commitment, lien report
or any other document of any kind or type, such shall be in form and substance
satisfactory to the Bank, in its reasonable discretion; notwithstanding the
foregoing, the obligations of each party shall not be subject to any conditions
contained in this Section 5.4 which are required to be performed by such
party):
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(a) the correctness on such date of the representations and
warranties of the parties to any Operative Agreement contained herein, in
each of the other Operative Agreements and in each certificate delivered
pursuant to any Operative Agreement (including without limitation the
Incorporated Representations and Warranties);
(b) the performance by the parties to any Operative Agreement of
their respective agreements contained herein and in the other Operative
Agreements to be performed by them on or prior to each such date;
(c) the Bank shall have received a fully executed counterpart of the
Requisition, appropriately completed;
(d) based upon the applicable Construction Budget which shall satisfy
the requirements of this Agreement, the Available Commitments and the
Available Holder Commitment (after deducting the Unfunded Amount) will be
sufficient to complete the Improvements;
(e) there shall not have occurred and be continuing any Default or
Event of Default under any of the Operative Agreements and no Default or
Event of Default under any of the Operative Agreements will have occurred
after giving effect to the Construction Advance requested by the
applicable Requisition;
(f) the title insurance policy delivered in connection with the
requirements of Section 5.3(g) shall provide for (or shall be endorsed to
provide for) insurance in an amount at least equal to the maximum total
Property Cost indicated by the Construction Budget referred to in
subparagraph (d) above and there shall be no title change or exception
objectionable to the Bank;
(g) the Construction Agent shall have delivered to the Bank copies of
the Plans and Specifications for the applicable Improvements;
(h) all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of the Operative
Agreements shall have been paid or provisions for such payment shall have
been made to the satisfaction of the Bank;
(i) since the date of the most recent audited Financial Statements
(as such term is defined in the Lessee Credit Agreement) of the Lessee,
there shall not have occurred any event, condition or state of facts which
shall have or could reasonably be expected to have a Material Adverse
Effect, other than as specifically contemplated by the Operative
Agreements; and
(j) in the opinion of the Bank and its counsel, the transactions
contemplated by the Operative Agreements do not and will not subject the
Lessor or the Bank to any adverse regulatory prohibitions, constraints,
penalties or fines.
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5.5. ADDITIONAL REPORTING AND DELIVERY REQUIREMENTS ON COMPLETION DATE AND
ON CONSTRUCTION PERIOD TERMINATION DATE.
On or prior to the Completion Date for each Property, the Construction
Agent shall deliver to the Bank an Officer's Certificate in the form attached
hereto as EXHIBIT I or in such other form as is acceptable to the Bank.
Furthermore, on or prior to the Completion Date for each Property, the
Construction Agent shall deliver or cause to be delivered to the Bank (unless
previously delivered to the Bank) originals of the following, each of which
shall be in form and substance acceptable to the Bank, in its reasonable
discretion: (v) a title insurance endorsement regarding the title insurance
policy delivered in connection with the requirements of Section 5.3(g), but
only to the extent such endorsement is necessary to provide for insurance in an
amount at least equal to the maximum total Property Cost and, if endorsed, the
endorsement shall not include a title change or exception objectionable to the
Bank; (w) an as-built survey for such Property, (x) insurance certificates
respecting such Property as required hereunder and under the Lease Agreement,
and (y) if requested by the Bank, amendments to the Lessor Financing Statements
executed by the appropriate parties. In addition, on the Completion Date for
such Property the Construction Agent covenants and agrees that the recording
fees, documentary stamp taxes or similar amounts required to be paid in
connection with the related Mortgage Instrument shall have been paid in an
amount required by applicable law, subject, however, to the obligations of the
Bank to fund such costs to the extent required pursuant to Section 7.1.
5.6. THE CONSTRUCTION AGENT DELIVERY OF CONSTRUCTION BUDGET MODIFICATIONS.
The Construction Agent covenants and agrees to deliver to the Bank each
month notification of any modification to any Construction Budget regarding any
Property if such modification increases the cost to construct such Property;
provided no Construction Budget may be increased unless (a) the title insurance
policies referenced in Section 5.3(g) are also modified or endorsed, if
necessary, to provide for insurance in an amount that satisfies the
requirements of Section 5.4(f) of this Agreement and (b) after giving effect to
any such amendment, the Construction Budget remains in compliance with the
requirements of Section 5.4(d) of this Agreement.
5.7. RESTRICTIONS ON LIENS.
On each Property Closing Date, the Construction Agent shall cause each
Property acquired by the Lessor or any applicable Development Authority on such
date to be free and clear of all Liens except those referenced in Sections
6.2(c)(ii) and 6.2(c)(iii). On each date a Property is either sold to a third
party in accordance with the terms of the Operative Agreements or, pursuant to
Section 22.1(a) of the Lease Agreement, retained by the Lessor, the Lessee
shall cause such Property to be free and clear of all Liens (other than Lessor
Liens and such other Liens that are expressly set forth as title exceptions on
the title commitment issued under Section 5.3(g) with respect to such Property,
to the extent such title commitment has been approved by the Bank).
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5.8. PAYMENTS.
All payments of principal, interest, Holder Advances, Holder Yield, LOC
Reimbursement Amounts and other amounts to be made by the Construction Agent or
the Lessee under this Agreement or any other Operative Agreements (excluding
Excepted Payments which shall be paid directly to the party to whom such
payments are owed) shall be made to the Bank at the office designated by the
Bank from time to time in Dollars and in immediately available funds, without
setoff, deduction, or counterclaim. Subject to the definition of "Interest
Period" in Appendix A attached hereto, whenever any payment under this
Agreement or any other Operative Agreements shall be stated to be due on a day
that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time in such case shall be included in the
computation of interest, Holder Yield and fees payable pursuant to the
Operative Agreements, as applicable and as the case may be.
5.9. NON-RATABLE HOLDER ADVANCES, OBLIGATIONS TO ISSUE LETTERS OF
CREDIT AND LOANS.
Upon the request of the Lessee but only with the prior consent of the Bank
not to be unreasonably withheld, (a) Holder Advances may be more or less than
three percent (3%) of the amount of the Requested Funds on any date and (b) the
Bank (as the Lender) may issue Letters of Credit and extend Loans such that the
Bank (as the Lender) may be responsible for more or less than ninety-seven
percent (97%) of the Letters of Credit or the Requested Funds on any date;
provided, however, in no event shall the aggregate amount of outstanding Holder
Advances constitute less than three percent (3%) of the sum of (x) the
aggregate amount of Holder Advances then outstanding, (y) the aggregate amount
of Loans then outstanding and (z) the aggregate amount of Letters of Credit
then outstanding.
5.10. CONSENT OF THE BANK TO REQUESTS FOR FUNDING IN CONNECTION WITH
TRANSACTIONS EVIDENCED BY BOND DOCUMENTS.
The Lessee shall not request or accept any funding in connection with any
Property pursuant to any Bond Documents unless the Bank has given its prior
written consent to any such funding, such consent not to be unreasonably
withheld or delayed.
5.11 FILING COPIES.
The Bank agrees, within fifteen (15) days after the Initial Closing Date,
to provide or cause its counsel to provide a diskette containing copies of the
Participation Agreement, the Lease, the Credit Agreement, the Security
Agreement, the Agency Agreement, the Trust Agreement, each Note and each Holder
Certificate executed and delivered on the Initial Closing Date in order to
facilitate the Lessee's obligations to comply with its filing requirements
under applicable securities laws.
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SECTION 6. REPRESENTATIONS AND WARRANTIES.
6.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
Effective as of the Initial Closing Date, and the date of each Advance and
the date of issuance of each Letter of Credit, the Trust Company in its
individual capacity and as the Borrower, as indicated, represents and warrants
(in addition to any representations or warranties made in any Officer's or
Secretary's Certificate delivered pursuant hereto, which representations and
warranties are incorporated herein by reference) to each of the other parties
hereto that the execution, delivery and performance of each Operative Agreement
to which it is or will be a party, either in its individual capacity or
(assuming due authorization, execution and delivery of the Trust Agreement by
the Bank) as the Owner Trustee, as the case may be, has been duly authorized by
all necessary action on its part and neither the execution and delivery
thereof, nor the consummation of the transactions contemplated thereby, nor
compliance by it with any of the terms and provisions thereof (i) does or will
require any approval or consent of any trustee or holders of any of its
indebtedness or obligations, (ii) does or will contravene any Legal Requirement
relating to its banking or trust powers, (iii) does or will contravene or
result in any breach of or constitute any default under, or result in the
creation of any Lien upon any of its property under, (A) its charter or
by-laws, or (B) any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other agreement or
instrument to which it is a party or by which it or its properties may be bound
or affected, which contravention, breach, default or Lien under clause (B)
would materially and adversely affect its ability, in its individual capacity
or as the Owner Trustee, to perform its obligations under the Operative
Agreements to which it is a party or (iv) does or will require any Governmental
Action by any Governmental Authority regulating its banking or trust powers.
The Owner Trustee further reaffirms its representations and warranties under
each Bond Document and agrees that each and every representation and warranty
made therein and in any certificate or other document executed and delivered in
connection therewith is true and accurate as of the date hereof.
6.2. REPRESENTATIONS AND WARRANTIES OF THE LESSEE.
Effective as of the Initial Closing Date, the date of each Advance, the
date of issuance of each Letter of Credit and the Rent Commencement Date, the
Lessee represents and warrants to each of the other parties hereto that:
(a) The Lessee has delivered to the Bank the financial statements and
other reports referred to in Article VII of the Lessee Credit Agreement;
(b) The execution and delivery by the Lessee of this Agreement and
the other applicable Operative Agreements as of such date and the
performance by the Lessee of its respective obligations under this
Agreement and the other applicable Operative Agreements are within the
corporate powers of the Lessee, have been duly authorized by all necessary
corporate action on the part of the Lessee (including without limitation
any necessary shareholder action), have been duly executed and delivered,
have received all necessary governmental approval, and do not and will not
(i) violate any Legal
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Requirement which is binding on the Lessee or any of its Subsidiaries,
(ii) contravene or conflict with, or result in a breach of, any provision
of the Articles of Incorporation, By-Laws or other organizational
documents of the Lessee or any of its Subsidiaries or of any agreement,
indenture, instrument or other document which is binding on the Lessee or
any of its Subsidiaries or (iii) result in, or require, the creation or
imposition of any Lien (other than pursuant to the terms of the Operative
Agreements) on any asset of the Lessee or any of its Subsidiaries;
(c) (i) This Agreement and the other applicable Operative Agreements,
executed prior to and as of such date by the Lessee, constitute the legal,
valid and binding obligation of the Lessee, as applicable, enforceable
against the Lessee, in accordance with their terms. The Lessee has
executed the various Operative Agreements required to be executed by the
Lessee as of such date;
(ii) The Security Documents create, as security for the Obligations
(as such term is defined in the Security Agreement), valid and enforceable
security interests in, and Liens on, all of the Collateral, in favor of
the Bank, and such security interests and Liens are subject to no other
Liens other than Liens that are expressly set forth as title exceptions on
the title commitment issued under Section 5.3(g) with respect to the
applicable Property, to the extent such title commitment has been approved
by the Bank. Upon recordation of the Mortgage Instrument in the real
estate recording office identified by the Construction Agent or the
Lessee, the Lien created by the Mortgage Instrument in the real property
described therein shall be a perfected first priority mortgage Lien on
such real property (or, in the case of a Ground Lease or a Head Lease, the
leasehold estate under such Ground Lease or Head Lease) in favor of the
Bank. To the extent that the security interests in the portion of the
Collateral comprised of personal property can be perfected by filing in
the filing offices identified by the Construction Agent or the Lessee,
upon filing of the Lender Financing Statements in such filing offices, the
security interests created by the Security Agreement shall be perfected
first priority security interests in such personal property in favor of
the Bank; and
(iii) The Lease Agreement creates, as security for the obligations of
the Lessee under the Lease Agreement, valid and enforceable security
interests in, and Liens on, each Property leased thereunder, in favor of
the Lessor, and such security interests and Liens are subject to no other
Liens other than Liens that are expressly set forth as title exceptions on
the title commitment issued under Section 5.3(g) with respect to the
applicable Property, to the extent such title commitment has been approved
by the Bank. Upon recordation of the memorandum of the Lease Agreement and
the memorandum of a Ground Lease or Head Lease (or, in either case, a
short form lease) in the real estate recording office identified by the
Construction Agent or the Lessee, the Lien created by the Lease Agreement
in the real property described therein shall be a perfected first priority
mortgage Lien on such real property (or, in the case of a Ground Lease or
Head Lease, the leasehold estate under such Ground Lease or Head Lease) in
favor of the Bank. To the extent that the security interests in the
portion of any Property comprised of personal property can be perfected by
the filing in the filing offices identified by the
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Construction Agent or the Lessee upon filing of the Lessor Financing
Statements in such filing offices, a security interest created by the
Lease Agreement shall be perfected first priority security interests in
such personal property in favor of the Lessor, which rights pursuant to
the Lessor Financing Statements are assigned to the Bank;
(iv) each Head Lease creates a valid and good and marketable
leasehold interest in each Property to be acquired with the proceeds of
Bonds by the applicable Development Authority;
(d) There are no material actions, suits or proceedings pending or,
to our knowledge, threatened against the Lessee in any court or before any
Governmental Authority (nor shall any order, judgment or decree have been
issued or proposed to be issued by any Governmental Authority to set
aside, restrain, enjoin or prevent the full performance of any Operative
Agreement or any transaction contemplated thereby) that (i) concern any
Property or the Lessee's interest therein, (ii) question the validity or
enforceability of any Operative Agreement to which the Lessee is a party
or the overall transaction described in the Operative Agreements to which
the Lessee is a party or (iii) have or could reasonably be expected to
have a Material Adverse Effect; provided, for purposes of disclosure, the
Lessee has described the litigation set forth on EXHIBIT J;
(e) No Governmental Action by any Governmental Authority or other
authorization, registration, consent, approval, waiver, notice or other
action by, to or of any other Person pursuant to any Legal Requirement,
contract, indenture, instrument or agreement or for any other reason is
required to authorize or is required in connection with (i) the execution,
delivery or performance of any Operative Agreement, (ii) the legality,
validity, binding effect or enforceability of any Operative Agreement,
(iii) the acquisition, ownership, construction, completion, occupancy,
operation, leasing or subleasing of any Property or (iv) any Advance, in
each case, except those which have been obtained and are in full force and
effect;
(f) Upon the execution and delivery of each Lease Supplement to the
Lease, (i) the Lessee will have unconditionally accepted the Property
subject to the Lease Supplement and will have a valid and subsisting
leasehold or subleasehold interest in such Property, subject only to the
Permitted Liens, and (ii) no offset will exist with respect to any Rent or
other sums payable under the Lease;
(g) Except as otherwise contemplated by the Operative Agreements, the
Construction Agent shall not use the proceeds of any Holder Advance or
Loan for any purpose other than the purchase and/or lease of the
Properties, the acquisition, installation and testing of the Equipment,
the construction of Improvements and the payment of Transaction Expenses
and the fees, expenses and other disbursements referenced in Section 7.1
of this Agreement, in each case which accrue prior to the Rent
Commencement Date with respect to a particular Property;
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(h) All information heretofore or contemporaneously herewith
furnished by the Lessee or its Subsidiaries to the Bank or the Owner
Trustee for purposes of or in connection with this Agreement and the
transactions contemplated hereby is, and all information hereafter
furnished by or on behalf of the Lessee or its Subsidiaries to the Bank or
the Owner Trustee pursuant hereto or in connection herewith will be, true
and accurate in every material respect on the date as of which such
information is dated or certified, and such information, taken as a whole,
does not and will not omit to state any material fact necessary to make
such information, taken as a whole, not misleading;
(i) The principal place of business, chief executive office and
office of the Construction Agent and the Lessee where the documents,
accounts and records relating to the transactions contemplated by this
Agreement and each other Operative Agreement are kept are located at 28100
US Highway 19N, Suite 201, Clearwater, Florida 33761;
(j) The representations and warranties of the Lessee set forth in any
of the Operative Agreements (including the Incorporated Representations
and Warranties) are true and correct in all material respects on and as of
each such date as if made on and as of such date. The Lessee is in all
material respects in compliance with its obligations under the Operative
Agreements and there exists no Default or Event of Default under any of
the Operative Agreements which is continuing and which has not been cured
within any cure period expressly granted under the terms of the applicable
Operative Agreement or otherwise waived in accordance with the applicable
Operative Agreement. No Default or Event of Default will occur under any
of the Operative Agreements as a result of, or after giving effect to, the
Advance requested by the Requisition on the date of each Advance; and
(k) As of each Property Closing Date, the date of each subsequent
Advance and the Rent Commencement Date only, no portion of any Property is
located in an area identified as a special flood hazard area by the
Federal Emergency Management Agency or other applicable agency, or if any
such Property is located in an area identified as a special flood hazard
area by the Federal Emergency Management Agency or other applicable
agency, then flood insurance has been obtained for such Property in
accordance with Section 14.2(b) of the Lease and in accordance with the
National Flood Insurance Act of 1968, as amended
SECTION 7. PAYMENT OF CERTAIN EXPENSES.
7.1. TRANSACTION EXPENSES.
(a) Assuming no Default or Event of Default shall have occurred and
be continuing, the Lessor agrees to pay, or cause to be paid, all
Transaction Expenses and all commissions and fees referenced in Section
2.12(f) of the Credit Agreement; provided, however, the Lessor shall pay
such amounts described in this Section 7.1(a) only if (i) such amounts are
properly described in a Requisition delivered in accordance with the
Operative Agreements, and (ii) funds are made available by the Bank in
connection with
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such Requisition in an amount sufficient to allow such payment. The Lessee
agrees to timely pay all amounts referred to in this Section 7.1(a) to the
extent not paid by the Lessor.
(b) [INTENTIONALLY LEFT BLANK];
(c) All fees payable pursuant to the Operative Agreements shall be
calculated on the basis of a year of three hundred sixty (360) days for
the actual days elapsed.
7.2. BROKERS' FEES.
The Lessee agrees to pay or cause to be paid any and all brokers' fees, if
any, including without limitation any interest and penalties thereon, which are
payable in connection with the transactions contemplated by this Agreement and
the other Operative Agreements.
7.3. CERTAIN FEES AND EXPENSES.
The Lessee agrees to pay or cause to be paid (a) the initial and annual
Owner Trustee's fee and any Bond Trustee's initial or annual fee and all
reasonable expenses of the Owner Trustee, any Bond Trustee and any co-trustees
(including without limitation reasonable counsel fees and expenses) or any
successor owner trustee, bond trustee and/or co-trustee, for acting as the
owner trustee, bond trustee or co-trustee under the Trust Agreement or any
other Operative Agreement, (b) all reasonable costs and expenses incurred by
the Lessee, the Bank, any Development Authority, any Bond Trustee or the Lessor
in entering into any Lease Supplement and any future amendments, modifications,
supplements, restatements and/or replacements with respect to any of the
Operative Agreements, whether or not such Lease Supplement, amendments,
modifications, supplements, restatements and/or replacements are ultimately
entered into, or giving or withholding of waivers of consents hereto or
thereto, which have been requested by the Lessee, the Bank, any Development
Authority, any Bond Trustee or the Lessor, (c) all reasonable costs and
expenses incurred by the Lessee, the Bank, any Development Authority, any Bond
Trustee or the Lessor in connection with any exercise of remedies under any
Operative Agreement or any purchase of any Property by the Construction Agent,
the Lessee or any third party and (d) all reasonable costs and expenses
incurred by the Lessee, the Bank, any Development Authority, any Bond Trustee
or the Lessor in connection with any transfer or conveyance of any Property or
leasehold interest therein, whether or not such transfer or conveyance is
ultimately accomplished.
7.4. COMMITMENT FEE.
During the Commitment Period, the Lessee agrees to pay or to cause to be
paid to the Bank, an annual commitment fee (the "Commitment Fee") equal to the
product of (a) the sum of the average daily Available Commitment during the
Commitment Period plus the average daily Available Holder Commitment during the
Commitment Period multiplied by (b) a rate per annum equal to twenty-five one
hundredths of one percent (0.25%). Such Commitment Fee shall be payable
quarterly in arrears on each Commitment Fee Payment Date. If all
or a portion of any
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such Commitment Fee shall not be paid when due, such overdue amount shall bear
interest, payable by the Lessee on demand, at a rate per annum equal to the ABR
plus two percent (2%) from the date of such non-payment until such amount is
paid in full (as well as before judgment).
SECTION 8. OTHER COVENANTS AND AGREEMENTS.
8.1. COOPERATION WITH THE CONSTRUCTION AGENT OR THE LESSEE.
The Bank and the Lessor (at the direction of the Bank) shall, at the
expense of and to the extent reasonably requested by the Construction Agent or
the Lessee (but without assuming additional liabilities on account thereof and
only to the extent such is acceptable to the Bank and the Lessor (at the
direction of the Bank) in its reasonable discretion, cooperate with the
Construction Agent or the Lessee in connection with the Construction Agent or
the Lessee satisfying its covenant obligations contained in the Operative
Agreements including without limitation at any time and from time to time,
promptly and duly executing and delivering any and all such further
instruments, documents and financing statements (and continuation statements
related thereto).
8.2. COVENANTS OF THE OWNER TRUSTEE AND THE BANK.
Each of the Owner Trustee and the Bank hereby agrees that so long as this
Agreement is in effect:
(a) Neither the Owner Trustee (in its trust capacity or in its
individual capacity) nor the Bank will create or permit to exist at any
time, and each of them will, at its own cost and expense, promptly take
such action as may be necessary duly to discharge, or to cause to be
discharged, all Lessor Liens on the Properties attributable to it;
provided, however, that the Owner Trustee and the Bank shall not be
required to so discharge any such Lessor Lien while the same is being
contested in good faith by appropriate proceedings diligently prosecuted
so long as such proceedings shall not materially and adversely affect the
rights of the Lessee under the Lease and the other Operative Agreements or
involve any material danger of impairment of the Liens of the Security
Documents or of the sale, forfeiture or loss of, and shall not interfere
with the use or disposition of, any Property or title thereto or any
interest therein or the payment of Rent;
(b) Without prejudice to any right under the Trust Agreement of the
Owner Trustee to resign (subject to requirement set forth in the Trust
Agreement that such resignation shall not be effective until a successor
shall have agreed to accept such appointment), or the Bank's rights under
the Trust Agreement to remove the institution acting as the Owner Trustee,
each of the Owner Trustee and the Bank hereby agrees with the Lessee (i)
not to terminate or revoke the trust created by the Trust Agreement except
as permitted by Article VIII of the Trust Agreement, (ii) not to amend,
supplement, terminate or revoke or otherwise modify any provision of the
Trust Agreement in such a manner as to adversely affect the rights of any
such party without the prior written
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consent of such party and (iii) to comply with all of the terms of the
Trust Agreement, the nonperformance of which would adversely affect such
party;
(c) The Owner Trustee or any successor may resign or be removed by
the Bank as the Owner Trustee, a successor Owner Trustee may be appointed
and a corporation may become the Owner Trustee under the Trust Agreement,
only in accordance with the provisions of Article IX of the Trust
Agreement and, with respect to such appointment, with the consent of the
Lessee (so long as there shall be no Lease Event of Default that shall
have occurred and be continuing), which consent shall not be unreasonably
withheld or delayed;
(d) The Owner Trustee, in its capacity as the Owner Trustee under the
Trust Agreement, and not in its individual capacity, shall not contract
for, create, incur or assume any Indebtedness, or enter into any business
or other activity or enter into any contracts or agreements, other than
pursuant to or under the Operative Agreements;
(e) The Bank will not instruct the Owner Trustee to take any action
in violation of the terms of any Operative Agreement;
(f) Neither the Bank nor the Owner Trustee shall (i) commence any
case, proceeding or other action with respect to the Owner Trustee under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, arrangement,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (ii) seek appointment of a receiver,
trustee, custodian or other similar official with respect to the Owner
Trustee or for all or any substantial benefit of the creditors of the
Owner Trustee; and neither the Bank nor the Owner Trustee shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in this paragraph;
(g) The Owner Trustee shall give prompt notice to the Lessee and the
Bank if the Owner Trustee's principal place of business or chief executive
office, or the office where the records concerning the accounts or
contract rights relating to any Property are kept, shall cease to be
located at 79 South Main Street, Salt Lake City, Utah 84111, or if it
shall change its name; and
(h) The Owner Trustee shall take or refrain from taking such actions
and grant or refrain from granting such approvals with respect to the
Operative Agreements and/or relating to any Property in each case as
directed in writing by the Bank.
8.3. LESSEE COVENANTS, CONSENT AND ACKNOWLEDGMENT.
(a) The Lessee acknowledges and agrees that the Owner Trustee,
pursuant to the terms and conditions of the Security Agreement and the
Mortgage Instruments, shall create Liens respecting the various personal
property, fixtures and real property described therein in favor of the
Bank. The Lessee hereby irrevocably consents to the creation,
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perfection and maintenance of such Liens. The Lessee shall, to the extent
reasonably requested by any of the other parties hereto, cooperate with
the other parties in connection with their covenants herein or in the
other Operative Agreements and shall from time to time duly execute and
deliver any and all such future instruments, documents and financing
statements (and continuation statements related thereto) as any other
party hereto may reasonably request.
(b) The Lessor hereby instructs the Lessee, and the Lessee hereby
acknowledges and agrees, that until such time as the Loans and the Holder
Advances are paid in full and the Liens evidenced by the Security
Agreement and the Mortgage Instruments have been released (i) any and all
Rent (excluding Excepted Payments which shall be payable to any other
Person as appropriate) and any and all other amounts of any kind or type
under any of the Operative Agreements due and owing or payable to any
Person shall instead be paid directly to the Bank (excluding Excepted
Payments which shall be payable to any other Person as appropriate) or as
the Bank may direct from time to time for allocation in accordance with
Section 8.7 hereof, (ii) all rights of the Lessor under the Lease shall be
exercised by the Bank and (iii) the Lessee shall cause all notices,
certificates, financial statements, communications and other information
which are delivered, or are required to be delivered, to the Lessor, to
also be delivered at the same time to the Bank.
(c) The Lessee shall not consent to or permit any amendment,
supplement or other modification of the terms or provisions of any
Operative Agreement except in accordance with Section 12.4 of this
Agreement.
(d) The Lessee hereby covenants and agrees that, except for amounts
payable as Basic Rent, any and all payment obligations (including without
limitation LOC Reimbursement Amounts but subject to the provisions of
Section 2.3(a) of the Credit Agreement regarding accrual of such amounts
until the Completion Date for each Property, as applicable) owing from
time to time under the Operative Agreements by any Person to the Bank or
any other Person shall (without further action) be deemed to be
Supplemental Rent obligations payable by the Lessee. Without limitation,
such obligations of the Lessee shall include without limitation
arrangement fees, administrative fees, unused fees, breakage costs,
indemnities, trustee fees and transaction expenses incurred by the parties
hereto in connection with the transactions contemplated by the Operative
Agreements.
(e) At any time the Lessor or the Bank is entitled under the
Operative Agreements to possession of a Property or any component thereof,
each of the Construction Agent and the Lessee hereby covenants and agrees,
at its own cost and expense, to assemble and make the same available to
the Bank (on behalf of the Lessor).
(f) The Lessee hereby covenants and agrees that Advances for items
other than Land and Improvements respecting any individual parcel of
Property shall at no time
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constitute in excess of fifty percent (50%) of the aggregate Advances
respecting such parcel of Property funded at such time under the Operative
Agreements.
(g) The Lessee hereby covenants and agrees that it shall give prompt
notice to the Bank if the Lessee's principal place of business or chief
executive office, or the office where the records concerning the accounts
or contract rights relating to any Property are kept, shall cease to be
located at 28100 US Highway 19N, Suite 201, Clearwater, Florida 33761 or
if it shall change its name.
(h) The Lessee shall promptly notify the Bank, or cause the Bank to
be promptly notified, upon the Lessee gaining knowledge of the occurrence
of any Default or Event of Default which is continuing at such time. In
any event, such notice shall be provided to the Bank within ten (10) days
of when the Lessee gains such knowledge.
(i) Lessee shall take all action necessary to assure that Lessee's
computer based systems are able to operate and effectively process data
including dates on and after January 1, 2000. At the request of the Bank,
Lessee shall provide the Bank assurance acceptable to the Bank of Lessee's
Year 2000 compatibility.
(j) Lessee shall perform any and all obligations of Lessor under, and
cause Lessor to otherwise remain in full compliance with, the terms and
provisions of each Ground Lease, if any.
(k) The Lessee shall, on or before the first day of each fiscal
quarter of the Lessee, furnish to the Bank a written notice setting forth
the Lessee's calculation, in reasonable detail, of the Consolidated
Leverage Ratio for the immediately preceding fiscal quarter of the Lessee.
8.4. ALLOCATION OF CERTAIN PAYMENTS.
Except for Excepted Payments, the parties hereto acknowledge and agree
that all payments due and owing by the Lessee to the Lessor under the Lease or
any of the other Operative Agreements shall be made by the Lessee directly to
the Bank as more particularly provided in Section 8.3 hereof. The Lessor, the
Bank and the Lessee acknowledge the terms of Section 8.7 of this Agreement
regarding the allocation of payments and other amounts made or received from
time to time under the Operative Agreements and agree, that all such payments
and amounts are to be allocated as provided in Section 8.7 of this Agreement.
8.5. GRANT OF EASEMENTS, ETC.
The Bank hereby agrees that, so long as no Event of Default shall have
occurred and be continuing, the Owner Trustee shall, from time to time at the
request of the Lessee (and with the prior consent of the Bank), in connection
with the transactions contemplated by the Agency Agreement, the Lease or the
other Operative Agreements, (i) grant easements and other rights in
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the nature of easements with respect to any Property, (ii) release existing
easements or other rights in the nature of easements which are for the benefit
of any Property, (iii) execute and deliver to any Person any instrument
appropriate to confirm or effect such grants or releases, and (iv) execute and
deliver to any Person such other documents or materials in connection with the
acquisition, development, construction, testing or operation of any Property,
including without limitation reciprocal easement agreements, construction
contracts, operating agreements, development agreements, plats, replats or
subdivision documents; provided, that each of the agreements referred to in
this Section 8.5 shall be of the type normally executed by the Lessee in the
ordinary course of the Lessee's business and shall be on commercially
reasonable terms so as not to diminish the value of any Property in any
material respect.
8.6. APPOINTMENT BY THE BANK AND THE OWNER TRUSTEE.
The Bank is appointed to provide notices under the Operative Agreements on
behalf of the Owner Trustee (as determined by the Bank, in its reasonable
discretion), to receive notices under the Operative Agreements on behalf of the
Owner Trustee and (subject to Sections 8.5 and 9.2) to take such other action
under the Operative Agreements on behalf of the Owner Trustee as the Bank shall
determine in its reasonable discretion from time to time. The Bank hereby
accepts such appointments. Further, the Bank shall be entitled to take such
action on behalf of the Owner Trustee as is delegated to the Bank under any
Operative Agreement (whether express or implied) as may be reasonably
incidental thereto. The parties hereto hereby agree to the provisions contained
in this Section 8.6.
8.7. COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
(a) The Lessee has agreed pursuant to Section 5.8 and otherwise in
accordance with the terms of this Agreement to pay to (i) the Bank any and
all Rent (excluding Excepted Payments) and any and all other amounts of
any kind or type under any of the Operative Agreements due and owing or
payable to any Person and (ii) each Person as appropriate the Excepted
Payments.
(b) Payments and other amounts received by the Bank from time to time
in accordance with the terms of subparagraph (a) shall be applied and
allocated by the Bank first, to the payment of interest on the Loans and
thereafter the principal of the Loans which is due and payable on such
date; second, to the payment of accrued Holder Yield with respect to the
Holder Advances and thereafter the portion of the Holder Advances which is
due on such date; and third, if no Default or Event of Default is in
effect, any excess shall be paid to such Person or Persons as the Lessee
may designate.
(c) Upon the termination of the Commitments and the payment in full
of the Loans and all other amounts owing by the Owner Trustee hereunder or
under any Credit Document and the payment in full of all amounts owing to
the Holder and the Owner Trustee under the Trust Agreement, any moneys
remaining with the Bank shall be returned to the Lessee or such other
Person or Persons as the Lessee may designate. In the event of an
Acceleration it is agreed that, prior to the application and allocation of
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amounts received by the Bank in the order described in Section 8.7(b)
above, any such amounts shall first be applied and allocated to the
payment of (i) any and all sums advanced by the Bank in order to preserve
the Collateral or to preserve its Lien thereon, (ii) the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the Bank
of its rights under the Security Documents, together with reasonable
attorneys' fees and expenses and court costs and (iii) any and all other
amounts reasonably owed to the Bank under or in connection with the
transactions contemplated by the Operative Agreements (including without
limitation any accrued and unpaid administration fees).
8.8. RELEASE OF PROPERTIES, ETC.
If the Lessee shall at any time purchase any Property (or Lessor's
leasehold interest in such Property under any Head Lease) pursuant to the
Lease, or the Construction Agent shall purchase any Property (or Lessor's
leasehold interest in such Property under any Head Lease) pursuant to the
Agency Agreement, or if any Property (or Lessor's leasehold interest in such
Property under any Head Lease) shall be sold in accordance with Article XXII of
the Lease, then, upon satisfaction by the Owner Trustee of its obligation to
prepay the Loans, Holder Advances and all other amounts owing to the Bank under
the Operative Agreements, the Bank shall release such Properties (or Lessor's
leasehold interests in such Properties under any Head Leases) from the Liens
created by the Security Documents to the extent of its interest therein. In
addition, upon the termination of the Commitments and the Holder Commitments
and the payment in full of the Loans, the Holder Advances and all other amounts
owing by the Owner Trustee and the Lessee hereunder or under any other
Operative Agreement, the Bank shall release all of the Properties (or Lessor's
leasehold interests in such Properties under any Head Leases) from the Liens
created by the Security Documents to the extent of its interest therein. Upon
request of the Owner Trustee following any such release, the Bank shall, at the
sole cost and expense of the Lessee, execute and deliver to the Owner Trustee
and the Lessee such documents as the Owner Trustee or the Lessee shall
reasonably request to evidence such release.
SECTION 9. CREDIT AGREEMENT AND TRUST AGREEMENT.
9.1. THE CONSTRUCTION AGENT'S AND THE LESSEE'S CREDIT AGREEMENT
RIGHTS.
Notwithstanding anything to the contrary contained in the Credit
Agreement, the Bank, the Lessee and the Owner Trustee hereby agree that, prior
to the occurrence and continuation of any Default or Event of Default, the
Construction Agent or the Lessee, as the case may be, shall have the following
rights:
(a) the right to designate an account to which amounts funded under
the Operative Agreements shall be credited pursuant to Section 2.3(a) of
the Credit Agreement;
(b) the right to terminate or reduce the Commitments pursuant to
Section 2.5(a) of the Credit Agreement;
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(c) the right to exercise the conversion and continuation options
pursuant to Section 2.7 of the Credit Agreement;
(d) the right to receive any notice and any certificate, in each case
issued pursuant to Section 2.11(a) of the Credit Agreement;
(e) the right to cause Letters of Credit to be issued pursuant to
Section 2.12 of the Credit Agreement;
(f) the right to consent to any assignment by the Bank to which the
Lessor has the right to consent pursuant to Section 9.8 of the Credit
Agreement; and
(g) the right to act on behalf of the Owner Trustee, in its capacity
as the lessee under any Head Lessee, in connection with the acquisition,
construction, development and equipping of any Property pursuant to and in
accordance with the Operative Agreements and, in addition thereto, the
right to exercise other rights of the Owner Trustee under any Head Lease
upon not less than thirty (30) days prior written notice from the Lessee
to the Bank unless the Bank in its sole discretion objects to such
exercise of rights.
9.2. THE CONSTRUCTION AGENT'S AND THE LESSEE'S TRUST AGREEMENT
RIGHTS.
Notwithstanding anything to the contrary contained in the Trust Agreement,
the Lessee, the Owner Trustee and the Bank hereby agree that, prior to the
occurrence and continuation of any Default or Event of Default, the
Construction Agent or the Lessee, as the case may be, shall have the following
rights:
(a) the right to exercise the conversion and continuation options
pursuant to Section 3.8 of the Trust Agreement;
(b) the right to receive any notice and any certificate, in each case
issued pursuant to Section 3.9(a) of the Trust Agreement;
(c) the right to exercise the removal options contained in Section
9.1 of the Trust Agreement; provided, however, that no removal of the
Owner Trustee and appointment of a successor Owner Trustee by the Holder
pursuant to Section 9.1 of the Trust Agreement shall be made without the
prior written consent (not to be unreasonably withheld or delayed) of the
Lessee.
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SECTION 10. TRANSFER OF INTEREST.
10.1. RESTRICTIONS ON TRANSFER.
The Bank may assign or transfer all of its interest hereunder and under
the other Operative Agreements in accordance with Section 9.8 of the Credit
Agreement. The Bank may, directly or indirectly, assign, convey or otherwise
transfer all of its right, title or interest in or to the Trust Estate or the
Trust Agreement with the prior written consent of the Lessee (which consent
shall not be unreasonably withheld or delayed) and in accordance with the terms
of Section 11.8(b) of the Trust Agreement. The Owner Trustee may, subject to
the rights of the Lessee under the Lease and the other Operative Agreements and
to the Lien of the applicable Security Documents but only with the prior
written consent of the Bank (which consent may be withheld by the Bank in its
sole discretion) and (provided, no Default or Event of Default has occurred and
is continuing) with the consent of the Lessee, directly or indirectly, assign,
convey, appoint an agent with respect to enforcement of, or otherwise transfer
any of its right, title or interest in or to any Property, the Lease, the Trust
Agreement and the other Operative Agreements (including without limitation any
right to indemnification thereunder), or any other document relating to a
Property or any interest in a Property as provided in the Trust Agreement and
the Lease. The provisions of the immediately preceding sentence shall not apply
to the obligations of the Owner Trustee to transfer Property to the Lessee or a
third party purchaser pursuant to Article XXII of the Lease upon payment for
such Property in accordance with the terms and conditions of the Lease. The
Lessee may not assign any of the Operative Agreements or any of their
respective rights or obligations thereunder or with respect to any Property in
whole or in part to any Person without the prior written consent of the Bank
and the Lessor.
10.2. EFFECT OF TRANSFER.
From and after any transfer effected in accordance with this Section 10,
the transferor shall be released, to the extent of such transfer, from its
liability hereunder and under the other documents to which it is a party in
respect of obligations to be performed on or after the date of such transfer;
provided, however, that any transferor shall remain liable hereunder and under
such other documents to the extent that the transferee shall not have assumed
the obligations of the transferor thereunder. Upon any transfer by the Owner
Trustee or the Bank as above provided, any such transferee shall assume the
obligations of the Owner Trustee or the Bank, as the case may be.
Notwithstanding any transfer of all or a portion of the transferor's interest
as provided in this Section 10, the transferor shall be entitled to all
benefits accrued and all rights vested prior to such transfer including without
limitation rights to indemnification under any such document.
SECTION 11. INDEMNIFICATION.
11.1. GENERAL INDEMNITY.
Whether or not any of the transactions contemplated hereby shall be
consummated, the Indemnity Provider hereby assumes liability for and agrees to
defend, indemnify and hold
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harmless each Indemnified Person on an After Tax Basis from and against any
Claims, which may be imposed on, incurred by or asserted against an Indemnified
Person by any third party, including without limitation Claims arising from the
negligence of an Indemnified Person (but not to the extent such Claims arise
from the gross negligence or willful misconduct of such Indemnified Person
itself, as determined by a court of competent jurisdiction, as opposed to gross
negligence or willful misconduct imputed to such Indemnified Person) in any way
relating to or arising or alleged to arise out of the execution, delivery,
performance or enforcement of this Agreement, the Lease or any other Operative
Agreement or on or with respect to any Property or any component thereof,
including without limitation Claims in any way relating to or arising or
alleged to arise out of (a) the financing, refinancing, purchase, acceptance,
rejection, ownership, design, construction, refurbishment, development,
delivery, acceptance, nondelivery, leasing, subleasing, possession, use,
occupancy, operation, maintenance repair, modification, transportation,
condition, sale, return, repossession (whether by summary proceedings or
otherwise), or any other disposition of any Property or any part thereof,
including without limitation the acquisition, holding or disposition of any
interest in the Property, lease or agreement comprising a portion of any
thereof; (b) any latent or other defects in any Property or any portion thereof
whether or not discoverable by an Indemnified Person or the Indemnity Provider;
(c) a violation of Environmental Laws, Environmental Claims or other loss of or
damage to any property or the environment relating to the Property, the Lease,
the Agency Agreement or the Indemnity Provider; (d) the Operative Agreements,
or any transaction contemplated thereby; (e) any breach by the Indemnity
Provider of any of its representations or warranties under the Operative
Agreements to which the Indemnity Provider is a party or failure by the
Indemnity Provider to perform or observe any covenant or agreement to be
performed by it under any of the Operative Agreements; (f) the transactions
contemplated hereby or by any other Operative Agreement, in respect of the
application of Parts 4 and 5 of Subtitle B of Title I of ERISA; (g) personal
injury, death or property damage, including without limitation Claims based on
strict or absolute liability in tort; and (h) any fees, expenses and/or other
assessments by any business park or any other applicable entity with oversight
responsibility for the applicable Property. The Indemnity Provider shall be
permitted to contest or respond to any Claim subject to this Section 11.1 with
the prior written consent of the Indemnified Person, which consent shall not be
unreasonably withheld or delayed.
The Indemnity Provider agrees to pay as Supplemental Rent any and all
indemnification amounts with respect to which the Borrower is otherwise
obligated pursuant to Section 2.12 of the Credit Agreement.
The Construction Agent and the Lessee waive and agree not to assert any
defense alleging that the Owner Trustee or any Development Authority is the
owner of any Property or portion thereof.
11.2. GENERAL TAX INDEMNITY.
(a) The Indemnity Provider shall pay and assume liability for, and
does hereby agree to indemnify, protect and defend each Property and all
Indemnified Persons, and hold them harmless against, all Impositions
(including without limitation Impositions
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for which the Owner Trustee becomes liable under any Bond Document whether
by way of indemnity or otherwise) on an After Tax Basis, and all payments
pursuant to the Operative Agreements shall be made free and clear of and
without deduction for any and all present and future Impositions.
(b) Notwithstanding anything to the contrary in Section 11.2(a)
hereof, the following shall be excluded from the indemnity required by
Section 11.2(a):
(i) Taxes (other than Taxes that are, or are in the nature of,
sales, use, rental, value added, transfer or property taxes) that are
imposed on a Indemnified Person (other than the Lessor, the Owner
Trustee and the Trust) by the United States federal government that
are based on or measured by the net income (including without
limitation taxes based on capital gains and minimum taxes) of such
Person; provided, that this clause (i) shall not be interpreted to
prevent a payment from being made on an After Tax Basis if such
payment is otherwise required to be so made;
(ii) Taxes (other than Taxes that are, or are in the nature of,
sales, use, rental, value added, transfer or property taxes) that are
imposed on any Indemnified Person (other than the Lessor, the Owner
Trustee and the Trust) by any state or local jurisdiction or taxing
authority within any state or local jurisdiction and that are based
upon or measured by the net income (including without limitation
taxes based on capital gains and minimum taxes) of such Person;
provided that such Taxes shall not be excluded under this
subparagraph (ii) to the extent such Taxes would have been imposed
had the location, possession or use of any Property in, the location
or the operation of the Lessee in, or the Lessee's making payments
under the Operative Agreements from, the jurisdiction imposing such
Taxes been the sole connection between such Indemnified Person and
the jurisdiction imposing such Taxes; provided, further, that this
clause (ii) shall not be interpreted to prevent a payment from being
made on an After Tax Basis if such payment is otherwise required to
be so made;
(iii) any Tax to the extent it relates to any act, event or
omission that occurs after the termination of the Lease and
redelivery or sale of the Property (or any interest therein under any
Head Lease) in accordance with the terms of the Lease (but not any
Tax that relates to such termination, redelivery or sale and/or to
any period prior to such termination, redelivery or sale); and
(iv) any Taxes which are imposed on an Indemnified Person as a
result of the gross negligence or willful misconduct of such
Indemnified Person itself, as determined by a court of competent
jurisdiction (as opposed to gross negligence or willful misconduct
imputed to such Indemnified Person), but not Taxes imposed as a
result of ordinary negligence of such Indemnified Person;
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(c) Subject to the terms of Section 11.2(f), the Indemnity
Provider shall pay or cause to be paid all Impositions directly to
the taxing authorities where feasible and otherwise to the
Indemnified Person, as appropriate, and the Indemnity Provider shall
at its own expense, upon such Indemnified Person's reasonable
request, furnish to such Indemnified Person copies of official
receipts or other satisfactory proof evidencing such payment.
(d) The Indemnity Provider shall be responsible for preparing
and filing any real and personal property or ad valorem tax returns
in respect of each Property and any other tax returns required for
the Owner Trustee respecting the transactions described in the
Operative Agreements. In case any other report or tax return shall be
required to be made with respect to any obligations of the Indemnity
Provider under or arising out of subsection (a) and of which the
Indemnity Provider has knowledge or should have knowledge, the
Indemnity Provider, at its sole cost and expense, shall notify the
relevant Indemnified Person of such requirement and (except if such
Indemnified Person notifies the Indemnity Provider that such
Indemnified Person intends to prepare and file such report or return)
(A) to the extent required or permitted by and consistent with Legal
Requirements, make and file in the Indemnity Provider's name such
return, statement or report; and (B) in the case of any other such
return, statement or report required to be made in the name of such
Indemnified Person, advise such Indemnified Person of such fact and
prepare such return, statement or report for filing by such
Indemnified Person or, where such return, statement or report shall
be required to reflect items in addition to any obligations of the
Indemnity Provider under or arising out of subsection (a), provide
such Indemnified Person at the Indemnity Provider's expense with
information sufficient to permit such return, statement or report to
be properly made with respect to any obligations of the Indemnity
Provider under or arising out of subsection (a). Such Indemnified
Person shall, upon the Indemnity Provider's request and at the
Indemnity Provider's expense, provide any data maintained by such
Indemnified Person (and not otherwise available to or within the
control of the Indemnity Provider) with respect to each Property
which the Indemnity Provider may reasonably require to prepare any
required tax returns or reports.
(e) As between the Indemnity Provider on one hand, and the Bank
on the other hand, the Indemnity Provider shall be responsible for,
and the Indemnity Provider shall indemnify and hold harmless the Bank
(without duplication of any indemnification required by subsection
(a)) on an After Tax Basis against, any obligation for United States
or foreign withholding taxes or similar levies, imposts, charges,
fees, deductions or withholdings (collectively, "Withholdings")
imposed in respect of the interest payable on the Notes, Holder Yield
payable on the Certificates or with respect to any other payments
under the Operative Agreement (all such payments being referred to
herein as "Exempt Payments" to be made without deduction, withholding
or set off) (and, if the Bank receives a demand for such payment from
any taxing authority or a Withholding is otherwise required with
respect to any Exempt Payment, the Indemnity Provider shall discharge
such demand on behalf of the Bank.
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If the Bank or any of its Affiliates files a consolidated tax
return (or equivalent) and subsequently receives the benefit in any
country of a tax credit or an allowance resulting from U.S. Taxes
with respect to which it has received a payment of an additional
amount under this Section 11.2(e), the Bank will pay to the Indemnity
Provider such part of that benefit as in the opinion of the Bank will
leave it (after such payment) in a position no more and no less
favorable than it would have been in if no additional payment had
been required to be paid, provided always that (i) the Bank will be
the sole judge of the amount of any such benefit and of the date on
which it is received, (ii) the Bank will have the absolute discretion
as to the order and manner in which it employs or claims tax credits
and allowances available to it and (iii) the Bank will not be obliged
to disclose to the Borrower any information regarding its tax affairs
or tax computations. For the purposes of this Section 11.2(e), "U.S.
Taxes" shall mean any present or future tax, assessment or other
charge or levy imposed by or on behalf of the United States of
America or any taxing authority thereof or therein.
(f) If a written Claim is made against any Indemnified Person or
if any proceeding shall be commenced against such Indemnified Person
(including without limitation a written notice of such proceeding),
for any Impositions, the Indemnity Provider shall be permitted to
contest such Claim with the written consent of the Indemnified
Person, which consent shall not be unreasonably withheld or delayed;
provided, however, that the Indemnity Provider shall have the right
to conduct and control such contest only if such contest involves a
Tax other than a Tax on net income of the Indemnified Person and can
be pursued independently from any other proceeding involving a Tax
liability of such Indemnified Person.
11.3. INCREASED COSTS, ILLEGALITY, ETC.
(a) If, due to either (i) the introduction of or any change in
or in the interpretation of any law or regulation or (ii) the
compliance with any guideline or request hereafter adopted,
promulgated or made by any central bank or other governmental
authority (whether or not having the force of law), there shall be
any increase in the cost to the Bank of agreeing to make or making,
funding or maintaining Advances or issuing Letters of Credit, then
the Lessee shall from time to time, upon demand by the Bank, pay to
the Bank additional amounts sufficient to compensate the Bank for
such increased cost. A certificate as to the amount of such increased
cost, submitted to the Lessee by the Bank, shall be conclusive and
binding for all purposes, absent manifest error.
(b) If the Bank determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law, but
in each case promulgated or made after the date hereof) affects or
would affect the amount of capital required or expected to be
maintained by the Bank or any corporation controlling the Bank and
that the amount of such capital is increased by or based upon the
existence of the Bank's commitment to make Advances or to issue
Letters of Credit and other commitments of this type or upon the
Advances, then, upon demand by the Bank, the Lessee shall pay to the
Bank, from time to time as
30
<PAGE> 35
specified by the Bank, additional amounts sufficient to compensate
the Bank or such corporation in the light of such circumstances, to
the extent that the Bank reasonably determines such increase in
capital to be allocable to the existence of the Bank's commitment to
make such Advances or to issue such Letters of Credit. A certificate
as to such amounts submitted to the Lessee by the Bank shall be
conclusive and binding for all purposes, absent manifest error.
(c) Without limiting the effect of the foregoing, the Lessee
shall pay to the Bank on the last day of the Interest Period therefor
so long as the Bank is maintaining reserves against "Eurocurrency
liabilities" under Regulation D an additional amount (determined by
the Bank) equal to the product of the following for each Eurodollar
Loan or Eurodollar Holder Advance, as the case may be, for each day
during such Interest Period:
(i) the principal amount of such Eurodollar Loan or
Eurodollar Holder Advance, as the case may be, outstanding on
such day; and
(ii) the remainder of (x) a fraction the numerator of which
is the rate (expressed as a decimal) at which interest accrues
on such Eurodollar Loan or Eurodollar Holder Advance, as the
case may be, for such Interest Period as provided in the Credit
Agreement or the Trust Agreement, as the case may be (less the
Applicable Percentage), and the denominator of which is one (1)
minus the effective rate (expressed as a decimal) at which such
reserve requirements are imposed on such Financing Party on such
day minus (y) such numerator; and
(iii) 1/360.
(d) Without affecting its rights under Sections 11.3(a), 11.3(b)
or 11.3(c) or any other provision of any Operative Agreement, the
Bank agrees that if there is any increase in any cost to or reduction
in any amount receivable by the Bank with respect to which the Lessee
would be obligated to compensate the Bank pursuant to Sections
11.3(a) or 11.3(b), the Bank shall use reasonable efforts to select
an alternative office for Advances or issuance of Letters of Credit
which would not result in any such increase in any cost to or
reduction in any amount receivable by the Bank; provided, however,
that the Bank shall not be obligated to select an alternative office
for Advances or issuance of Letters of Credit if the Bank determines
that (i) as a result of such selection such the Bank would be in
violation of any applicable law, regulation, treaty, or guideline, or
would incur additional costs or expenses or (ii) such selection would
be inadvisable for regulatory reasons or materially inconsistent with
the interests of the Bank.
(e) With reference to the obligations of the Lessee set forth in
Sections 11.3(a) through 11.3(d), the Lessee shall not have any
obligation to pay to the Bank amounts owing under such Sections for
any period which is more than one (1) year prior to the date upon
which the request for payment therefor is delivered to the Lessee.
31
<PAGE> 36
(f) Notwithstanding any other provision of this Agreement, if
the introduction of or any change in or in the interpretation of any
law or regulation makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for the Bank to
perform its obligations hereunder to make or maintain Eurodollar
Loans or Eurodollar Holder Advances, as the case may be, then (i)
each Eurodollar Loan or Eurodollar Holder Advance, as the case may
be, will automatically, at the earlier of the end of the Interest
Period for such Eurodollar Loan or Eurodollar Holder Advance, as the
case may be, or the date required by law, convert into an ABR Loan or
an ABR Holder Advance, as the case may be, and (iii) the obligation
of the Bank to make, convert or continue Eurodollar Loans or
Eurodollar Holder Advances, as the case may be, shall be suspended
until the Agent shall notify the Lessee that the Bank has determined
that the circumstances causing such suspension no longer exist.
11.4. FUNDING/CONTRIBUTION INDEMNITY.
Subject to the provisions of Section 2.11(a) of the Credit Agreement and
3.9(a) of the Trust Agreement, as the case may be, the Lessee agrees to
indemnify the Bank and to hold the Bank harmless from any loss or reasonable
expense which such Financing Party may sustain or incur as a consequence of (a)
any default in connection with the drawing of funds for any Advance, (b) any
default in making any prepayment after a notice thereof has been given in
accordance with the provisions of the Operative Agreements or (c) the making of
a voluntary or involuntary payment of Eurodollar Loans or Eurodollar Holder
Advances, as the case may be, on a day which is not the last day of an Interest
Period with respect thereto. Such indemnification shall be in an amount equal
to the excess, if any, of (x) the amount of interest or Holder Yield, as the
case may be, which would have accrued on the amount so paid, or not so
borrowed, accepted, converted or continued for the period from the date of such
payment or of such failure to borrow, accept, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow, accept,
convert or continue, the Interest Period that would have commenced on the date
of such failure) in each case at the applicable Eurodollar Rate plus the
Applicable Percentage for such Loan or Holder Advance, as the case may be, for
such Interest Period over (y) the amount of interest (as determined by the Bank
in its reasonable discretion) which would have accrued to the Bank on such
amount by (i) (in the case of Loans) reemploying such funds in loans of the
same type and amount during the period from the date of payment or failure to
borrow to the last day of the then applicable Interest Period (or, in the case
of a failure to borrow, the Interest Period that would have commenced on the
date of such failure) and (ii) (in the case of Holder Advances) placing such
amount on deposit for a comparable period with leading banks in the relevant
interest rate market. This covenant shall survive the termination of the
Operative Agreements and the payment of all other amounts payable hereunder.
32
<PAGE> 37
SECTION 12. MISCELLANEOUS.
12.1. SURVIVAL OF AGREEMENTS; THIRD PARTY BENEFICIARIES.
The representations, warranties, covenants, indemnities and agreements of
the parties provided for in the Operative Agreements, and the parties'
obligations under any and all thereof, shall survive the execution and delivery
of this Agreement, the transfer of any Property to the Owner Trustee or any
Development Authority, the acquisition or lease of any Property (or any of its
components), the construction of any Improvements, the Completion of any
Property, any disposition of any interest of the Owner Trustee or any
Development Authority in any Property or any interest of the Bank in the Trust
Estate, the payment of the Notes and any disposition thereof and shall be and
continue in effect notwithstanding any investigation made by any party and the
fact that any party may waive compliance with any of the other terms,
provisions or conditions of any of the Operative Agreements. Except as
otherwise expressly set forth herein or in other Operative Agreements, the
indemnities of the parties provided for in the Operative Agreements shall
survive the expiration or termination of any thereof. Each Development
Authority and Bond Trustee shall be deemed to be a third party beneficiary of
this Agreement and each other Operative Agreement (other than the Bond
Documents) to the extent named herein or therein.
12.2. NOTICES.
All notices required or permitted to be given under any Operative
Agreement shall be in writing. Notices may be served by certified or registered
mail, postage paid with return receipt requested; by private courier, prepaid;
by telex, facsimile, or other telecommunication device capable of transmitting
or creating a written record; or personally. Mailed notices shall be deemed
delivered five (5) days after mailing, properly addressed. Couriered notices
shall be deemed delivered when delivered as addressed, or if the addressee
refuses delivery, when presented for delivery notwithstanding such refusal.
Telex or telecommunicated notices shall be deemed delivered when receipt is
either confirmed by confirming transmission equipment or acknowledged by the
addressee or its office. Personal delivery shall be effective when
accomplished. Unless a party changes its address by giving notice to the other
party as provided herein, notices shall be delivered to the parties at the
following addresses:
If to the Construction Agent or the Lessee, to such entity at the
following address:
Sterile Recoveries, Inc.
28100 US Highway 19N, Suite 201
Clearwater, FL 33761
Attention: James T. Boosales
Telephone: (813) 726-4421
Telecopy: (813) 726-8037
33
<PAGE> 38
If to the Owner Trustee, to it at the following address:
First Security Bank, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attention: Val T. Orton,
Vice President
Telephone: (801) 246-5300
Telecopy: (801) 246-5053
If to the Bank, to it at the following address:
First Union National Bank
c/o First Union Capital Markets Group
DC 6
301 South College Street
Charlotte, North Carolina 28288-0166
Attention: Christy Lee Foster,
Capital Markets Services
Telephone: (704) 383-5398
Telecopy: (704) 383-7989
Any party initiating the sending of a notice hereunder with respect
to any Property subject to a Head Lease shall simultaneously provide a
copy of such notice to the applicable Development Authority and the
applicable Bond Trustee at the respective addresses for such Persons set
forth in the applicable Bond Documents.
From time to time any party may designate additional parties and/or
another address for notice purposes by notice to each of the other parties
hereto. Each notice hereunder shall be effective upon receipt or refusal
thereof.
12.3. COUNTERPARTS.
This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one (1) and
the same instrument.
12.4. TERMINATIONS, AMENDMENTS, WAIVERS, ETC.; UNANIMOUS VOTE
MATTERS.
Each Basic Document may be terminated, amended, supplemented, waived or
modified only by an instrument in writing signed by, subject to Article VIII of
the Trust Agreement regarding termination of the Trust Agreement, the Bank, the
Owner Trustee and the Lessee (to the extent the Lessee is a party to such Basic
Document); provided, to the extent no Default or Event of Default shall have
occurred and be continuing, the Bank shall not amend, supplement, waive or
modify any provision of any Basic Document in such a manner as to adversely
affect
34
<PAGE> 39
the rights of the Lessee without the prior written consent (not to be
unreasonably withheld or delayed) of the Lessee. Each Operative Agreement which
is not a Basic Document may be terminated, amended, supplemented, waived or
modified only by an instrument in writing signed by the parties thereto and the
Bank.
12.5. HEADINGS, ETC.
The Table of Contents and headings of the various Articles and Sections of
this Agreement are for convenience of reference only and shall not modify,
define, expand or limit any of the terms or provisions hereof.
12.6. PARTIES IN INTEREST.
Except as expressly provided herein, none of the provisions of this
Agreement are intended for the benefit of any Person except the parties hereto.
12.7. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; VENUE; ARBITRATION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA. Any legal action
or proceeding with respect to this Agreement or any other Operative
Agreement may be brought in the courts of the State of North Carolina
located in Mecklenburg County or of the United States for the Western
District of North Carolina, and, by execution and delivery of this
Agreement, each of the parties to this Agreement hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of such courts. Each of the
parties to this Agreement further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address set out for notices pursuant
to Section 12.2, such service to become effective three (3) days after
such mailing. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by Law or to commence legal
proceedings or to otherwise proceed against any party in any other
jurisdiction.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO
THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO ANY DISPUTE OR THIS AGREEMENT, ANY
OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(c) Each of the parties to this Agreement hereby irrevocably waives
any objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in
connection with this Agreement or
35
<PAGE> 40
any other Operative Agreement brought in the courts referred to in
subsection (a) above and hereby further irrevocably waives and agrees not
to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
(d) Notwithstanding the provisions of Section 12.7(a) or of any other
Operative Agreement to the contrary, upon demand of any party to this
Agreement and/or any other Operative Agreement, upon demand of any party
hereto, whether made before or after institution of any judicial
proceeding, any claim or controversy arising out of, or relating to the
Operative Agreements between or among the parties hereto (a "Dispute")
shall be resolved by binding arbitration conducted under and governed by
the Commercial Financial Disputes Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association (the "AAA") and the
Federal Arbitration Act. Disputes may include without limitation tort
claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, or claims arising from
documents executed in the future. A judgment upon the award may be entered
in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to swap
agreements.
All arbitration hearings shall be conducted in the city in which the
office of the Agent (referenced pursuant to Section 12.2 of this Agreement) is
located. A hearing shall begin within ninety (90) days of demand for
arbitration and all hearings shall be concluded within one hundred and twenty
(120) days of demand for arbitration. These time limitations may not be
extended unless a party shows cause for extension and then for no more than a
total of sixty (60) days. The expedited procedures set forth in Rule 51 et seq.
of the Arbitration Rules shall be applicable to claims of less than $1,000,000.
Arbitrators shall be licensed attorneys selected from the Commercial Financial
Dispute Arbitration Panel of the AAA. The parties do not waive applicable
federal or state substantive law except as provided herein.
Notwithstanding the preceding binding arbitration provisions, the parties
agree to preserve, without diminution, certain remedies that any party may
exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other security
by exercising a power of sale or under applicable law by judicial foreclosure
including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceedings; and (iv) when applicable, a judgment by confession of judgment.
Any claim or controversy with regard to any party's entitlement to such
remedies is a Dispute.
Each party to this Agreement agrees that it shall not have a remedy of
punitive or exemplary damages against any other party in any Dispute and hereby
waives any right or claim
36
<PAGE> 41
to punitive or exemplary damages they have now or which may arise in the future
in connection with any Dispute, whether the Dispute is resolved by arbitration
or judicially.
12.8. SEVERABILITY.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12.9. LIABILITY LIMITED.
(a) The Bank, the Lessee and the Owner Trustee each acknowledge
and agree that the Owner Trustee is (except as otherwise expressly
provided herein or therein) entering into this Agreement and the
other Operative Agreements to which it is a party (other than the
Trust Agreement and to the extent otherwise provided in Section 6.1
of this Agreement), solely in its capacity as trustee under the Trust
Agreement and not in its individual capacity and that the Trust
Company shall not be liable or accountable under any circumstances
whatsoever in its individual capacity for or on account of any
statements, representations, warranties, covenants or obligations
stated to be those of the Owner Trustee, except for its own gross
negligence or willful misconduct and as otherwise expressly provided
herein or in the other Operative Agreements.
(b) Anything to the contrary contained in this Agreement, the
Credit Agreement, the Notes or in any other Operative Agreement
notwithstanding, no Exculpated Person shall be personally liable in
any respect for any liability or obligation arising hereunder or in
any other Operative Agreement including without limitation the
payment of the principal of, or interest on, the Notes, or for
monetary damages for the breach of performance of any of the
covenants contained in the Credit Agreement, the Notes, this
Agreement, the Security Agreement or any of the other Operative
Agreements. The Bank agrees that, in the event any remedies under any
Operative Agreement are pursued, the Bank shall have no recourse
against any Exculpated Person, for any deficiency, loss or Claim for
monetary damages or otherwise resulting therefrom and recourse shall
be had solely and exclusively against the Trust Estate (excluding
Excepted Payments) and the Lessee (with respect to the Lessee's
obligations under the Operative Agreements); but nothing contained
herein shall be taken to prevent recourse against or the enforcement
of remedies against the Trust Estate (excluding Excepted Payments) in
respect of any and all liabilities, obligations and undertakings
contained herein and/or in any other Operative Agreement.
Notwithstanding the provisions of this Section, nothing in any
Operative Agreement shall: (i) constitute a waiver, release or
discharge of any indebtedness or obligation evidenced by the Notes
and/or the Certificates arising under any Operative Agreement or
secured by any Operative Agreement, but the same shall continue until
paid or discharged; (ii) relieve any
37
<PAGE> 42
Exculpated Person from liability and responsibility for (but only to
the extent of the damages arising by reason of): active waste
knowingly committed by any Exculpated Person with respect to any
Property, any fraud, gross negligence or willful misconduct on the
part of any Exculpated Person; (iii) relieve any Exculpated Person
from liability and responsibility for (but only to the extent of the
moneys misappropriated, misapplied or not turned over) (A) except for
Excepted Payments, misappropriation or misapplication by the Lessor
(i.e., application in a manner contrary to any of the Operative
Agreements) of any insurance proceeds or condemnation award paid or
delivered to the Lessor by any Person other than the Bank, (B) except
for Excepted Payments, any deposits or any escrows or amounts owed by
the Construction Agent under the Agency Agreement held by the Lessor
or (C) except for Excepted Payments, any rent or other income
received by the Lessor from the Lessee that is not turned over to the
Bank; or (iv) affect or in any way limit the Bank's rights and
remedies under any Operative Agreement with respect to the Rents and
rights and powers of the Bank under the Operative Agreements or to
obtain a judgment against the Lessee's interest in the Properties or
the Bank's rights and powers to obtain a judgment against the Lessor
or the Lessee (provided, that no deficiency judgment or other money
judgment shall be enforced against any Exculpated Person except to
the extent of the Lessor's interest in the Trust Estate (excluding
Excepted Payments) or to the extent the Lessor may be liable as
otherwise contemplated in clauses (ii) and (iii) of this Section
12.9(b)).
12.10. RIGHTS OF THE LESSEE.
If at any time all obligations (i) of the Owner Trustee under the Credit
Agreement, the Security Documents and the other Operative Agreements and (ii)
of the Lessee under the Operative Agreements have in each case been satisfied
or discharged in full, then the Lessee shall be entitled to (a) terminate the
Lease and (b) receive all amounts then held under the Operative Agreements and
all proceeds with respect to any of the Properties. Upon the termination of the
Lease pursuant to the foregoing clause (a), the Lessor shall transfer to the
Lessee all of its right, title and interest free and clear of the Lien of the
Lease, the Lien of the Security Documents and all Lessor Liens in and to any
Properties then subject to the Lease and any amounts or proceeds referred to in
the foregoing clause (b) shall be paid over to the Lessee.
12.11. FURTHER ASSURANCES.
The parties hereto shall promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of the Lessee, all such further
acts, conveyances, documents and assurances as the other parties may from time
to time reasonably request in order to carry out and effectuate the intent and
purposes of this Participation Agreement, the other Operative Agreements and
the transactions contemplated hereby and thereby (including without limitation
the preparation, execution and filing of any and all Uniform Commercial Code
financing statements, filings of Mortgage Instruments and other filings or
registrations which the parties hereto may from time to time request to be
filed or effected). The Lessee, at its own expense and without need of any
prior request from any other party, shall take such action as may be necessary
(including without limitation any action specified in the preceding sentence),
or (if the Owner Trustee shall so
38
<PAGE> 43
request) as so requested, in order to maintain and protect all security
interests provided for hereunder or under any other Operative Agreement. In
addition, in connection with the sale or other disposition of any Property or
any portion thereof, the Lessee agrees to execute such instruments of
conveyance as reasonably required in connection therewith.
12.12. CALCULATIONS UNDER OPERATIVE AGREEMENTS.
The parties hereto agree that all calculations and numerical
determinations to be made under the Operative Agreements by the Owner Trustee
shall be made by the Bank and that such calculations and determinations shall
be conclusive and binding on the parties hereto in the absence of manifest
error.
12.13. [INTENTIONALLY LEFT BLANK];
12.14. FINANCIAL REPORTING/TAX CHARACTERIZATION.
Lessee agrees to obtain advice from its own accountants and tax counsel
regarding the financial reporting treatment and the tax characterization of the
transactions described in the Operative Agreements. Lessee further agrees that
Lessee shall not rely upon any statement of any Financing Party or any of their
respective Affiliates and/or Subsidiaries regarding any such financial
reporting treatment and/or tax characterization.
12.15. SET-OFF.
In addition to any rights now or hereafter granted under applicable Law
and not by way of limitation of any such rights, upon and after the occurrence
of any Event of Default and during the continuance thereof, the Bank and its
Affiliates and any assignee of the Bank in accordance with the applicable
provisions of the Operative Agreements are hereby authorized by the Lessee at
any time or from time to time, without notice to the Lessee or to any other
Person, any such notice being hereby expressly waived, to set-off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including without limitation indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Bank and its Affiliates or any assignee or participant of
the Bank in accordance with the applicable provisions of the Operative
Agreements to or for the credit or the account of the Lessee against and on
account of the obligations of the Lessee under the Operative Agreements
irrespective of whether or not (a) the Bank shall have made any demand under
any Operative Agreement or (b) the Bank shall have declared any or all of the
obligations of the Lessee under the Operative Agreements to be due and payable
and although such obligations shall be contingent or unmatured.
[signature pages follow]
39
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
CONSTRUCTION AGENT
AND LESSEE:
STERILE RECOVERIES, INC., a Florida corporation
By: /s/ James T. Boosales
-------------------------------------------
Name: James T. Boosales
------------------------------------------
Title: EVP
-----------------------------------------
OWNER TRUSTEE AND
LESSOR:
FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein,
but solely as the Owner Trustee under the SRI
Realty Trust 1998-1
By: /s/ Authorized officer
-------------------------------------------
Name: Authorized officer
------------------------------------------
Title:
-----------------------------------------
BANK:
FIRST UNION NATIONAL BANK, a national banking
association, as Lender and Holder
By: /s/ Paul Solitario
-------------------------------------------
Name: Paul Solitario
------------------------------------------
Title: Vice President
-----------------------------------------
<PAGE> 45
EXHIBIT A
REQUISITION FORM
(Pursuant to Sections 4.2, 5.2, 5.3 and 5.4 of the Participation Agreement)
STERILE RECOVERIES, INC., a Florida corporation (the "Company") hereby
certifies as true and correct and delivers the following Requisition to FIRST
UNION NATIONAL BANK, as lender and holder ("Bank"):
Reference is made herein to that certain Participation Agreement dated
as of February 1, 1999 (as amended, modified, extended, supplemented, restated
and/or replaced from time to time, the "Participation Agreement") among the
Company, in its capacity as the Lessee and as the Construction Agent, First
Security Bank, National Association, as the Owner Trustee and the Bank.
Capitalized terms used herein but not otherwise defined herein shall have the
meanings set forth therefor in the Participation Agreement.
Check one:
____ INITIAL CLOSING DATE: _________________
(three (3) Business Days prior notice required for Advance)
____ PROPERTY CLOSING DATE: _________________
(three (3) Business Days prior notice required for Advance)
____ CONSTRUCTION ADVANCE DATE: _____________
(three (3) Business Days prior notice required for Advance)
1. Transaction Expenses and other fees, expenses and disbursements under
Section 7 of the Participation Agreement and any and all other amounts
contemplated to be financed under the participation Agreement including without
limitation any Work, broker's fees, taxes, recording fees and the like (with
supporting invoices or closing statement attached):
Party to Whom Amount Owed
Amount is Owed (in U.S. Dollars)
- --------------- ----------------
- --------------- ----------------
- --------------- ----------------
- --------------- ----------------
- --------------- ----------------
A-1
<PAGE> 46
[FOR TRANSACTIONS INVOLVING THE ISSUANCE OF LETTERS OF CREDIT]
The Company hereby requests the Bank to issue a Letter of Credit for the
account of the Owner Trustee in favor of _______________ in an amount not to
exceed $ ___________________.
2. Description of Land (which shall be a legal description of the Land in
connection with an Advance to pay Property Acquisition Costs): See attached
Schedule 1
3. Description of Improvements: See attached Schedule 2
4. Description of Equipment: See attached Schedule 3
5. Description of Work: See attached Schedule 4
6. Aggregate Loans and Holder Advances requested since the Initial Closing Date
with respect to each Property for which Advances are requested under this
Requisition (listed on a Property by Property basis), including without
limitation all amounts requested under this Requisition: [IDENTIFY ON A
PROPERTY BY PROPERTY BASIS]
$ [Property]
--------------
In connection with this Requisition, the Company hereby requests that
the Bank make Loans to the Lessor in the amount of $______________ and that the
Bank make Holder Advances to the Lessor in the amount of $________________. The
Company hereby certifies (i) that the foregoing amounts requested do not exceed
the total aggregate of the Available Commitments plus the Available Holder
Commitments and (ii) each of the provisions of the Participation Agreement
applicable to the Loans and Holder Advances requested hereunder have been
complied with as of the date of this Requisition.
The Company requests the Loans be allocated as follows:
$ ABR Loans
--------------
$ Eurodollar Loans
--------------
The Company requests the Holder Advances be allocated as follows:
$ ABR Holder Advances
--------------
$ Eurodollar Holder Advances
--------------
A-2
<PAGE> 47
The Company has caused this Requisition to the executed by its duly
authorized officer as of this _____ day of __________, ______.
STERILE RECOVERIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
A-3
<PAGE> 48
Schedule 1
Description of Land
(Legal Description and Street Address)
A-4
<PAGE> 49
Schedule 2
Description of Improvements
A-5
<PAGE> 50
Schedule 3
Description of Equipment
General Description Make Model Serial Number
A-6
<PAGE> 51
Schedule 4
Work
Work Performed for which the Advance is requested:
A-7
<PAGE> 52
EXHIBIT B
[Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(j) of the
Participation Agreement)
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of Sterile
Recoveries, Inc.
Dear Sirs:
We have acted as special counsel to Sterile Recoveries, Inc., a Florida
corporation (the "Lessee") in connection with certain transactions contemplated
by the Participation Agreement dated as of February 1, 1999 (the "Participation
Agreement"), among the Lessee, First Security Bank, National Association, as
the Owner Trustee (the "Owner Trustee"), and First Union National Bank, as
lender and holder ("First Union"). This opinion is delivered pursuant to
Section 5.3(j) of the Participation Agreement. All capitalized terms used
herein, and not otherwise defined herein, shall have the meanings assigned
thereto in Appendix A to the Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of [IDENTIFY THE APPLICABLE OPERATIVE
AGREEMENTS, INCLUDING EACH MORTGAGE INSTRUMENT, RELATED UCC FIXTURE FILINGS,
ADDITIONAL UCCS (HEREINAFTER DEFINED), DEEDS AND MEMORANDA OF LEASE] and such
other corporate documents and records of the Lessee, certificates of public
officials and representatives of the Lessee as to certain factual matters, and
such other instruments and documents which we have deemed necessary or
advisable to examine for the purpose of this opinion. With respect to such
examination, we have assumed (i) the statements of fact made in all such
certificates, documents and instruments are true, accurate and complete; (ii)
the due authorization, execution and delivery of the Operative Agreements by
the parties thereto; (iii) the genuineness of all signatures, the authenticity
and completeness of all documents, certificates, instruments, records and
corporate records submitted to us as originals and the conformity to the
original instruments of all documents submitted to us as copies, and the
authenticity and completeness of the originals of such copies; (iv) that all
parties have all requisite corporate power and authority to execute, deliver
and perform the Operative Agreements; and (v) except as to the Lessee, the
enforceability of the Mortgage Instrument, the Memorandum of Lease and the UCC
financing statements against all parties thereto.
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Mortgage Instrument and Memorandum of Lease are enforceable in
accordance with their respective terms, except as limited by laws generally
affecting the
B-1
<PAGE> 53
enforcement of creditors' rights, which laws will not materially prevent the
realization of the benefits intended by such documents.
(b) Each form of Mortgage Instrument and UCC fixture filing relating
thereto, attached hereto as Schedules 1 and 2, respectively, is in proper form
for filing and recording with the offices of [IDENTIFY THE RECORDING OFFICES OF
THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon
filing of each Mortgage Instrument and UCC fixture filing in [IDENTIFY THE
RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO
BE LOCATED], First Union will have a valid, perfected lien and security
interest in that portion of the Collateral described in such Mortgage
Instrument or UCC fixture filing to the extent such Collateral is comprised of
real property and/or fixtures.
(c) The forms of UCC financing statements relating to the Security
Documents, attached hereto as Schedule 3 (the "Additional UCCs"), are in proper
form for filing and recording with the offices of [IDENTIFY (I) THE RECORDING
OFFICES OF THE RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED
AND (II) THE SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED]. Upon
filing of the Additional UCCs in [IDENTIFY (I) THE RECORDING OFFICES OF THE
RESPECTIVE COUNTY CLERKS WHERE THE PROPERTIES ARE TO BE LOCATED AND (II) THE
SECRETARY OF STATE WHERE THE PROPERTIES ARE TO BE LOCATED], First Union will
have a valid, perfected lien and security interest in that portion of the
Collateral which can be perfected by filing UCC-1 financing statements under
Article 9 of the UCC.
(d) Each form of Deed and Memorandum of Lease is in appropriate form
for filing and recording with the [IDENTIFY THE RECORDING OFFICES OF THE
RESPECTIVE COUNTY CLERKS FOR THE COUNTIES WHERE THE PROPERTIES ARE TO BE
LOCATED].
(e) Each Memorandum of Lease, when filed and recorded with the
[IDENTIFY THE RECORDING OFFICES OF THE RESPECTIVE COUNTY CLERKS FOR THE
COUNTIES WHERE THE PROPERTIES ARE TO BE LOCATED], will have been filed and
recorded in all public offices in the State of [__________] in which filing or
recording is necessary to provide constructive notice of the Lease to third
Persons and to establish of record the interest of the Lessor thereunder as to
the Properties described in each such Memorandum of Lease.
(f) Title to the Properties located in the State of [___________] may
be held in the name of the Owner Trustee as follows: First Security Bank,
National Association, not individually, but solely as the Owner Trustee under
the SRI Realty Trust 1998-1.
(g) The execution and delivery by First Security Bank, National
Association, individually or as the Owner Trustee, as the case may be, of the
Operative Agreements to which it is a party and compliance by First Security
Bank, National Association, individually or as the Owner Trustee, with all of
the provisions thereof do not and will not contravene any law, rule or
regulation of [IDENTIFY THE STATE].
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<PAGE> 54
(h) By reason of their participation in the transaction contemplated
under the Operative Agreements, neither First Union nor the Owner Trustee has
to (a) qualify as a foreign corporation in [IDENTIFY THE STATE], (b) file any
application or any designation for service of process in [IDENTIFY THE STATE]
or (c) pay any franchise, income, sales, excise, stamp or other taxes of any
kind to [IDENTIFY THE STATE].
(i) The provisions in the Operative Agreements concerning Rent,
interest, fees, prepayment premiums and other similar charges do not violate
the usury laws or other similar laws regulating the use or forbearance of money
of [IDENTIFY THE STATE].
(j) If the transactions contemplated by the Operative Agreements are
characterized as a lease transaction by a court of competent jurisdiction, the
Lease and the applicable Lease Supplement shall demise to the Lessee a valid
leasehold interest in the Properties described in such Lease Supplement.
(k) If the transactions contemplated by the Operative Agreements are
characterized as a loan transaction by a court of competent jurisdiction, the
combination of the Mortgage Instruments, the Deeds, the Lease and the
applicable Lease Supplements (and the other Operative Agreements incorporated
therein by reference) are sufficient to create a valid, perfected lien or
security interest in the Properties therein described, enforceable as a
mortgage in [IDENTIFY THE STATE].
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the State of [___________] and the federal laws
of the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the Lessee, the Construction Agent, the
Owner Trustee, First Union and their respective successors and assigns and may
not be relied upon by any other person other than such parties and their
respective successors and assigns without the express written consent of the
undersigned. The opinions expressed herein are as of the date hereof and we
make no undertaking to amend or supplement such opinions if facts come to our
attention or changes in the current law of the jurisdictions mentioned herein
occur which could affect such opinions.
Very truly yours,
[LESSEE'S OUTSIDE COUNSEL]
B-3
<PAGE> 55
Distribution List
First Union National Bank as Lender and Holder
Sterile Recoveries, Inc., as the Construction Agent and the Lessee
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the SRI Realty Trust 1998-1
B-4
<PAGE> 56
Schedule 1
Form of Mortgage Instrument
B-5
<PAGE> 57
Schedule 2
Forms of UCC Fixture Filings
B-6
<PAGE> 58
Schedule 3
Forms of UCC Financing Statements
B-7
<PAGE> 59
EXHIBIT C
STERILE RECOVERIES, INC.
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(w) of the Participation Agreement)
STERILE RECOVERIES, INC., a Florida corporation (the "Company"), DOES
HEREBY CERTIFY as follows:
1. Each and every representation and warranty of the Company
contained in the Operative Agreements to which it is a party is
true and correct on and as of the date hereof.
2. No Default or Event of Default has occurred and is continuing
under any Operative Agreement.
3. Each Operative Agreement to which the Company is a party is in
full force and effect with respect to it.
4. The Company has duly performed and complied with all covenants,
agreements and conditions contained in the Participation Agreement
(hereinafter defined) or in any Operative Agreement required to be
performed or complied with by it on or prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise
defined herein have the respective meanings ascribed thereto in the
Participation Agreement dated as of February 1, 1999 among the Company, as the
Lessee and as the Construction Agent, First Security Bank, National
Association, as the Owner Trustee and First Union National Bank, as lender and
holder ("Bank").
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate
to be duly executed and delivered as of this _____ day of __________, ______.
STERILE RECOVERIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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<PAGE> 60
EXHIBIT D
STERILE RECOVERIES, INC.
SECRETARY'S CERTIFICATE
(Pursuant to Section 5.3(x) of the Participation Agreement)
STERILE RECOVERIES, INC., a Florida corporation (the "Company") DOES
HEREBY CERTIFY as follows:
1. Attached hereto as Schedule 1 is a true, correct and complete copy
of the resolutions of the Board of Directors of the Company duly
adopted by the Board of Directors of the Company on __________.
Such resolutions have not been amended, modified or rescinded
since their date of adoption and remain in full force and effect
as of the date hereof.
2. Attached hereto as Schedule 2 is a true, correct and complete copy
of the Articles of Incorporation of the Company on file in the
Office of the Secretary of State of Florida. Such Articles of
Incorporation have not been amended, modified or rescinded since
their date of adoption and remain in full force and effect as of
the date hereof.
3. Attached hereto as Schedule 3 is a true, correct and complete copy
of the Bylaws of the Company. Such Bylaws have not been amended,
modified or rescinded since their date of adoption and remain in
full force and effect as of the date hereof.
4. The persons named below now hold the offices set forth opposite
their names, and the signatures opposite their names and titles
are their true and correct signatures.
<TABLE>
<CAPTION>
Name Office Signature
---- ------ ---------
<S> <C> <C>
------------------- ----------------------- -------------------------
------------------- ----------------------- -------------------------
</TABLE>
IN WITNESS WHEREOF, the Company has caused this Secretary's Certificate to be
duly executed and delivered as of this _____ day of ___________, ______.
STERILE RECOVERIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
D-1
<PAGE> 61
Schedule 1
Board Resolutions
D-2
<PAGE> 62
Schedule 2
Articles of Incorporation
D-3
<PAGE> 63
Schedule 3
Bylaws
D-4
<PAGE> 64
EXHIBIT E
FIRST SECURITY BANK, NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
(Pursuant to Section 5.3(z) of the Participation Agreement)
FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not individually (except with respect to paragraph 1 below, to the
extent any such representations and warranties are made in its individual
capacity) but solely as the owner trustee under the SRI Realty Trust 1998-1
(the "Owner Trustee"), DOES HEREBY CERTIFY as follows:
1. Each and every representation and warranty of the Owner Trustee
contained in the Operative Agreements to which it is a party is
true and correct on and as of the date hereof.
2. Each Operative Agreement to which the Owner Trustee is a party is
in full force and effect with respect to it.
3. The Owner Trustee has duly performed and complied with all
covenants, agreements and conditions contained in the
Participation Agreement (hereinafter defined) or in any Operative
Agreement required to be performed or complied with by it on or
prior to the date hereof.
Capitalized terms used in this Officer's Certificate and not otherwise defined
herein have the respective meanings ascribed thereto in the Participation
Agreement dated as of February 1, 1999 among Sterile Recoveries, Inc., as the
Lessee and as the Construction Agent, the Owner Trustee, and First Union
National Bank, as lender and holder ("Bank").
IN WITNESS WHEREOF, the Owner Trustee has caused this Officer's Certificate to
be duly executed and delivered as of this _____ day of __________, ______.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually,
except as expressly stated herein,
but solely as the Owner Trustee
under the SRI Realty Trust 1998-1
STERILE RECOVERIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
E-1
<PAGE> 65
EXHIBIT F
FIRST SECURITY BANK, NATIONAL ASSOCIATION
SECRETARY'S CERTIFICATE
(Pursuant to Section 5.3(aa) of the Participation Agreement)
CERTIFICATE OF ASSISTANT SECRETARY
I, ______________________, duly elected and qualified Assistant
Secretary of the Board of Directors of First Security Bank, National
Association (the "Association"), hereby certify as follows:
1. The Association is a National Banking Association duly organized,
validly existing and in good standing under the laws of the United States. With
respect thereto the following is noted:
A. Pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C.
1, et seq., the Comptroller of the Currency charters and exercises
regulatory and supervisory authority over all National Banking
Associations;
B. On December 9, 1881, the First National Bank of Ogden, Utah was
chartered as a National Banking Association under the laws of the
United States and under Charter No. 2597;
C. On October 2, 1922, in connection with a consolidation of The
First National Bank of Ogden, Ogden, Utah, and The Utah National
Bank of Ogden, Ogden, Utah, the title was changed to "The First &
Utah National Bank of Ogden"; on January 18, 1923, The First &
Utah National Bank of Ogden changed its title to "First Utah
National Bank of Ogden"; on January 19, 1926, the title was
changed to "First National Bank of Ogden"; on February 24, 1934,
the title was changed to "First Security Bank of Utah, National
Association"; on June 21, 1996, the title was changed to "First
Security Bank, National Association"; and
D. First Security Bank, National Association, Ogden, Utah, continues
to hold a valid certificate to do business as a National Banking
Association.
2. The Association's Articles of Association, as amended, are in full
force and effect, and a true, correct and complete copy is attached hereto as
Schedule A and incorporated herein by reference. Said Articles were last
amended October 20, 1975, as required by law on notice at a duly called special
meeting of the shareholders of the Association.
F-1
<PAGE> 66
3. The Association's By-Laws, as amended, are in full force and
effect; and a true, correct and complete copy is attached hereto as Schedule B
and incorporated herein by reference. Said By-Laws, still in full force and
effect, were adopted September 17, 1942, by resolution, after proper notice of
consideration and adoption of By-Laws was given to each and every shareholder,
at a regularly called meeting of the Board of Directors with a quorum present.
4. Pursuant to the authority vested in it by an Act of Congress
approved December 23, 1913 and known as the Federal Reserve Act, as amended,
the Federal Reserve Board (now the Board of Governors of the Federal Reserve
System) has granted to the Association now known as "First Security Bank,
National Association" of Ogden, Utah, the right to act, when not in
contravention of State or local law, as trustee, executor, administrator,
registrar of stocks and bonds, guardian of estates, assignee, receiver,
committee of estates of lunatics, or in any other fiduciary capacity in which
State banks, trust companies or other corporations which come into competition
with National Banks are permitted to act under the laws of the State of Utah;
and under the provisions of applicable law, the authority so granted remains in
full force and effect.
5. Pursuant to authority vested by Act of Congress (12 U.S.C. 92a and
12 U.S.C. 481, as amended) the Comptroller of the Currency has issued
Regulation 9, as amended, dealing, in part, with the Fiduciary Powers of
National Banks, said regulation providing in subparagraph 9.7 (a) (1-2):
(1) The board of directors is responsible for the proper exercise of
fiduciary powers by the Bank. All matters pertinent thereto,
including the determination of policies, the investment and
disposition of property held in fiduciary capacity, and the
direction and review of the actions of all officers, employees,
and committees utilized by the Bank in the exercise of its
fiduciary powers, are the responsibility of the board. In
discharging this responsibility, the board of directors may
assign, by action duly entered in the minutes, the administration
of such of the Bank's fiduciary powers as it may consider proper
to assign to such director(s), officer(s), employee(s) or
committee(s) as it may designate.
(2) No fiduciary account shall be accepted without the prior approval
of the board, or of the director(s), officer(s), or committee(s)
to whom the board may have designated the performance of that
responsibility.
6. A Resolution relating to Exercise of Fiduciary Powers was adopted
by the Board of Directors at a meeting held July 26, 1994 at which time there
was a quorum present; said resolution is still in full force and effect and has
not been rescinded. Said resolution is attached hereto as Schedule C and
incorporated herein by reference.
F-2
<PAGE> 67
7. A Resolution relating to the Designation of Officers and Employees
to Exercise Fiduciary Powers was adopted by the Trust Policy Committee at a
meeting held February 7, 1996 at which time a quorum was present; said
resolution is still in full force and effect and has not been rescinded. Said
resolution is attached hereto as Schedule D and is incorporated herein by
reference.
8. Attached hereto as Schedule E and incorporated herein by
reference, is a listing of facsimile signatures of persons authorized (herein
"Authorized Signatory or Signatories") on behalf of the Association and its
Trust Group to act in exercise of its fiduciary powers subject to the
resolutions in Paragraphs 6 and 7, above.
9. The principal office of the First Security Bank, National
Association, Trust Group and of its departments, except for the St. George,
Utah, Ogden, Utah, and Provo, Utah, branch offices, is located at 79 South Main
Street, Salt Lake City, Utah 84111 and all records relating to fiduciary
accounts are located at such principal office of the Trust Group or in storage
facilities within Salt Lake County, Utah, except for those of the Ogden, Utah,
St. George, Utah, and Provo, Utah, branch offices, which are located at said
office.
10. Each Authorized Signatory (i) is a duly elected or appointed, duly
qualified officer or employee of the Association; (ii) holds the office or job
title set forth below his or her name on the date hereof; (iii) and the
facsimile signature appearing opposite the name of each such officer or
employee is a true replica of his or her signature.
F-3
<PAGE> 68
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Association this __________ day of _________________, ______.
(SEAL)
--------------------------------------
R. James Steenblik
Senior Vice President
Assistant Secretary
F-4
<PAGE> 69
Schedule A
Articles of Association
F-5
<PAGE> 70
Schedule B
Bylaws
F-6
<PAGE> 71
Schedule C
Resolution Relating to
Exercise of Fiduciary Powers
F-7
<PAGE> 72
Schedule D
Resolution Relating to the
Designation of Officers and Employees
to Exercise Fiduciary Powers
F-8
<PAGE> 73
Schedule E
Authorized Signatory or Signatories
F-9
<PAGE> 74
EXHIBIT G
[Outside Counsel Opinion for the Owner Trustee]
(Pursuant to Section 5.3(bb) of the
Participation Agreement)
-----------, ------
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Amended, Restated and Replacement Trust Agreement dated as of
February 1, 1999
Dear Sirs:
We have acted as special counsel for First Security Bank, National
Association, a national banking association, in its individual capacity ("FSB")
and in its capacity as trustee (the "Owner Trustee") under the Amended,
Restated and Replacement Trust Agreement dated as of February 1, 1999 (the
"Trust Agreement") by and among it and First Union National Bank, as holder
(the "Holder"), in connection with the execution and delivery by the Owner
Trustee of the Operative Agreements to which it is a party. Except as otherwise
defined herein, the terms used herein shall have the meanings set forth in
Appendix A to the Participation Agreement dated as of February 1, 1999 (the
"Participation Agreement") by and among Sterile Recoveries, Inc. (the
"Lessee"), First Security Bank, National Association, as the Owner Trustee and
First Union National Bank, as lender and holder (in such capacity, "Bank").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records and other
instruments as we have deemed necessary or advisable for the purpose of
rendering this opinion.
Based upon the foregoing, we are of the opinion that:
1. FSB is a national banking association duly organized, validly
existing and in good standing under the laws of the United States of America
and each of FSB and the Owner Trustee has under the laws of the State of Utah
and federal banking law the power and authority to enter into and perform its
obligations under the Trust Agreement and each other Operative Agreement to
which it is a party.
2. The Owner Trustee is the duly appointed trustee under the Trust
Agreement.
3. The Trust Agreement has been duly authorized, executed and
delivered by one (1) of the officers of FSB and, assuming due authorization,
execution and delivery by the Holder, is a legal, valid and binding obligation
of the Owner Trustee (and to the extent set forth therein,
G-1
<PAGE> 75
against FSB), enforceable against the Owner Trustee (and to the extent set
forth therein, against FSB) in accordance with its terms, and the Trust
Agreement creates under the laws of the State of Utah for the Holder the
beneficial interest in the Trust Estate it purports to create and is a valid
trust under the laws of the State of Utah.
4. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by FSB, and, assuming due authorization,
execution and delivery by the other parties thereto, are legal, valid and
binding obligations of FSB, enforceable against FSB in accordance with their
respective terms.
5. The Operative Agreements to which it is party have been duly
authorized, executed and delivered by the Owner Trustee, and, assuming due
authorization, execution and delivery by the other parties thereto, are legal,
valid and binding obligations of the Owner Trustee, enforceable against the
Owner Trustee in accordance with their respective terms. The Notes and
Certificates have been duly issued, executed and delivered by the Owner
Trustee, pursuant to authorization contained in the Trust Agreement, and the
Certificates are entitled to the benefits and security afforded by the Trust
Agreement in accordance with its terms and the terms of the Trust Agreement.
6. The execution and delivery by each of FSB and the Owner Trustee of
the Trust Agreement and the Operative Agreements to which it is a party, and
compliance by FSB or the Owner Trustee, as the case may be, with all of the
provisions thereof do not and will not contravene any Laws applicable to or
binding on FSB, or as the Owner Trustee, or contravene the provisions of, or
constitute a default under, its charter documents or by-laws or, to our
knowledge after due inquiry, any indenture, mortgage contract or other
agreement or instrument to which FSB or Owner Trustee is a party or by which it
or any of its property may be bound or affected.
7. The execution and delivery of the Operative Agreements by each of
FSB and the Owner Trustee and the performance by each of FSB and the Owner
Trustee of their respective obligations thereunder does not require on or prior
to the date hereof the consent or approval of, the giving of notice to, the
registration or filing with, or the taking of any action in respect of any
Governmental Authority or any court.
8. Assuming that the trust created by the Trust Agreement is treated
as a grantor trust for federal income tax purposes within the contemplation of
Section 671 through 678 of the Internal Revenue Code of 1986, there are no
fees, taxes, or other charges (except taxes imposed on fees payable to the
Owner Trustee) payable to the State of Utah or any political subdivision
thereof in connection with the execution, delivery or performance by the Owner
Trustee or the Bank, as the case may be, of the Operative Agreements or in
connection with the acquisition of any Property by the Owner Trustee or in
connection with the making by the Holder of its investment in the Trust or its
acquisition of the beneficial interest in the Trust Estate or in connection
with the issuance and acquisition of the Certificates, or the Notes, and
neither the Owner Trustee, the Trust Estate nor the trust created by the Trust
Agreement will be subject to any fee, tax or other governmental charge (except
taxes on fees payable to the Owner Trustee)
G-2
<PAGE> 76
under the laws of the State of Utah or any political subdivision thereof on,
based on or measured by, directly or indirectly, the gross receipts, net income
or value of the Trust Estate by reason of the creation or continued existence
of the trust under the terms of the Trust Agreement pursuant to the laws of the
State of Utah or the Owner Trustee's performance of its duties under the Trust
Agreement.
9. There is no fee, tax or other governmental charge under the laws
of the State of Utah or any political subdivision thereof in existence on the
date hereof on, based on or measured by any payments under the Certificates,
Notes or the beneficial interest in the Trust Estate, by reason of the creation
of the trust under the Trust Agreement pursuant to the laws of the State of
Utah or the Owner Trustee's performance of its duties under the Trust Agreement
within the State of Utah.
10. Upon the filing of the financing statement on form UCC-1 in the
form attached hereto as Schedule 1 with the Utah Division of Corporation and
Commercial Code, the Bank's security interest in the Trust Estate will be
perfected, to the extent that such perfection is governed by Article 9 of the
Uniform Commercial Code as in effect in the State of Utah (the "Utah UCC").
Your attention is directed to the Utah UCC, which provides, in part,
that a filed financing statement which does not state a maturity date or which
states a maturity date of more than five (5) years is effective only for a
period of five (5) years from the date of filing, unless within six (6) months
prior to the expiration of said period a continuation statement is filed in the
same office or offices in which the original statement was filed. The
continuation statement must be signed by the secured party, identify the
original statement by file number and state that the original statement is
still effective. Upon the timely filing of a continuation statement, the
effectiveness of the original financing statement is continued for five (5)
years after the last date to which the original statement was effective.
Succeeding continuation statements may be filed in the same manner to continue
the effectiveness of the original statement.
The foregoing opinions are subject to the following assumptions, exceptions and
qualifications:
A. We are attorneys admitted to practice in the State of Utah and in
rendering the foregoing opinions we have not passed upon, or purported to pass
upon, the laws of any jurisdictions other than the State of Utah and the
federal banking law governing the banking and trust powers of FSB. In addition,
without limiting the foregoing we express no opinion with respect to (i)
federal securities laws, including the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Trust Indenture Act of
1939, as amended, (ii) the Federal Aviation Act of 1958, as amended, (iii) the
Federal Communications Act of 1934, as amended, or (iv) state securities or
blue sky laws. Insofar as the foregoing opinions relate to the legality,
validity, binding effect and enforceability of the documents involved in these
transactions, which by their terms are governed by the laws of a state other
than Utah, we have assumed that the laws of such state (as to which we express
no opinion), are in all material aspects identical to the laws of the State of
Utah.
G-3
<PAGE> 77
B. The opinions set forth in paragraphs 3, 4, and 5 above are subject
to the qualification that enforceability of the Trust Agreement and the other
Operative Agreements to which FSB and the Owner Trustee are parties, in
accordance with their respective terms, may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium, receivership or similar laws affecting
enforcement of creditors' rights generally, and (ii) general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
C. As to the documents involved in these transactions, we have assumed
that each is a legal, valid and binding obligation of each party thereto, other
than FSB or the Owner Trustee, and is enforceable against each such party in
accordance with their respective terms.
D. We have assumed that all signatures, other than those of the Owner
Trustee or FSB, on documents and instruments involved in these transactions are
genuine, that all documents and instruments submitted to us as originals are
authentic, and that all documents and instruments submitted to us as copies
conform with the originals, which facts we have not independently verified.
E. We do not purport to be experts in respect of, or express any
opinion concerning laws, rules or regulations applicable to the particular
nature of the equipment or property involved in these transactions.
F. We have made no investigation of, and we express no opinion
concerning, the nature of the title to any part of the equipment or property
involved in these transactions or the priority of any mortgage or security
interest.
G. We have assumed that the Participation Agreement and the
transactions contemplated thereby are not within the prohibitions of Section
406 of the Employee Retirement Income Security Act of 1974.
H. In addition to any other limitation by operation of law upon the
scope, meaning, or purpose of this opinion, the opinions expressed herein speak
only as of the date hereof. We have no obligation to advise the recipients of
this opinion (or any third party) and make no undertaking to amend or
supplement such opinions if facts come to our attention or changes in the
current law of the jurisdictions mentioned herein occur which could affect such
opinions the legal analysis, a legal conclusion or any information confirmation
herein.
I. This opinion is for the sole benefit of the Lessee, the
Construction Agent, the Owner Trustee, the Bank and their respective successors
and assigns in matters directly related to the Participation Agreement or the
transaction contemplated thereunder and may not be relied upon by any other
person other than such parties and their respective successors and assigns
without the express written consent of the undersigned. The opinions expressed
in this letter are limited to the matter set forth in this letter, and no other
opinions should be inferred beyond the matters expressly stated.
G-4
<PAGE> 78
Very truly yours,
RAY, QUINNEY & NEBEKER
M. John Ashton
G-5
<PAGE> 79
Distribution List
First Union National Bank, as lender and holder
Sterile Recoveries, Inc., as the Construction Agent and the Lessee
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the SRI Realty Trust 1998-1
G-6
<PAGE> 80
EXHIBIT H
[Outside Counsel Opinion for the Lessee]
(Pursuant to Section 5.3(cc) of the Participation Agreement)
---------------,------
TO THOSE ON THE ATTACHED DISTRIBUTION LIST
Re: Synthetic Lease Financing Provided in favor of Sterile
Recoveries, Inc.
Dear Sirs:
We have acted as special counsel to Sterile Recoveries, Inc., a Florida
corporation (the "Lessee") in connection with certain transactions contemplated
by the Participation Agreement dated as of February 1, 1999 (the "Participation
Agreement"), among the Lessee, First Security Bank, National Association, as
the Owner Trustee (the "Owner Trustee"), and First Union National Bank, as
lender and holder ("First Union"). This opinion is delivered pursuant to
Section 5.3(ee) of the Participation Agreement. All capitalized terms used
herein, and not otherwise defined herein, shall have the meanings assigned
thereto in Appendix A to the Participation Agreement.
In connection with the foregoing, we have examined originals, or copies
certified to our satisfaction, of the Operative Agreements, and such other
corporate, partnership or limited liability company documents and records of
the Lessee, certificates of public officials and representatives of the Lessee
as to certain factual matters, and such other instruments and documents which
we have deemed necessary or advisable to examine for the purpose of this
opinion. With respect to such examination, we have assumed (i) the statements
of fact made in all such certificates, documents and instruments are true,
accurate and complete; (ii) the due authorization, execution and delivery of
the Operative Agreements by the parties thereto other than the Lessee; (iii)
the genuineness of all signatures (other than the signatures of persons signing
on behalf of the Lessee), the authenticity and completeness of all documents,
certificates, instruments, records and corporate records submitted to us as
originals and the conformity to the original instruments of all documents
submitted to us as copies, and the authenticity and completeness of the
originals of such copies; (iv) that all parties other than the Lessee have all
requisite corporate power and authority to execute, deliver and perform the
Operative Agreements; and (v) the enforceability of the Operative Agreements
against all parties thereto other than the Lessee and respecting the opinion
set forth below in section (i), First Security Bank, National Association,
individually or as the Owner Trustee, as the case may be. We have further
assumed that the laws of the States of [STATE OF LAWYER'S ADMISSION] and
[GOVERNING LAW OF PARTICIPATION AGREEMENT] are substantively identical.
H-1
<PAGE> 81
Based on the foregoing, and having due regard for such legal considerations as
we deem relevant, and subject to the limitations and assumptions set forth
herein, including without limitation the matters set forth in the last two (2)
paragraphs hereof, we are of the opinion that:
(a) The Lessee is a [CORPORATION] duly [INCORPORATED], validly
existing and in good standing under the laws of the state of its
[INCORPORATION] and has the power and authority to conduct its business as
presently conducted and to execute, deliver and perform its obligations under
the Operative Agreements to which it is a party. The Lessee is duly qualified
to do business in all jurisdictions in which its failure to so qualify would
materially impair its ability to perform its obligations under the Operative
Agreements to which it is a party or its financial position or its business as
now and now proposed to be conducted.
(b) The execution, delivery and performance by the Lessee of the
Operative Agreements to which it is a party have been duly authorized by all
necessary [CORPORATE] action on the part of the Lessee and the Operative
Agreements to which the Lessee is a party have been duly executed and delivered
by the Lessee.
(c) The Operative Agreements to which the Lessee is a party constitute
valid and binding obligations of the Lessee enforceable against the Lessee in
accordance with the terms thereof, subject to bankruptcy, insolvency,
liquidation, reorganization, fraudulent conveyance, and similar laws affecting
creditors' rights generally, and general principles of equity (regardless of
whether the application of such principles is considered in a proceeding in
equity or at law).
(d) The execution and delivery by the Lessee of the Operative
Agreements to which it is a party and compliance by the Lessee with all of the
provisions thereof do not and will not (i) contravene the provisions of, or
result in any breach of or constitute any default under, or result in the
creation of any Lien (other than Permitted Liens and Lessor Liens) upon any of
its property under, its [ARTICLES OF INCORPORATION, BY-LAWS, OPERATING
AGREEMENT, PARTNERSHIP AGREEMENT OR OTHER SIMILAR DOCUMENT OF FORMATION] or any
indenture, mortgage, chattel mortgage, deed of trust, lease, conditional sales
contract, bank loan or credit agreement or other agreement or instrument to
which the Lessee is a party or by which the Lessee or any property of the
Lessee may be bound or affected, or (ii) contravene any Laws or any order of
any Governmental Authority applicable to or binding on the Lessee.
(e) No Governmental Action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery or
performance by the Lessee of any of the Operative Agreements to which the
Lessee is a party or for the acquisition, ownership, construction and
completion of the Properties, except for those which have been obtained.
(f) Except as set forth on Schedule 1 hereto, there are no actions,
suits or proceedings pending or to our knowledge, threatened against the Lessee
in any court or before any Governmental Authority, that concern the Properties
or the interest of the Lessee therein or that question the validity or
enforceability of any Operative Agreement to which the Lessee is a party or the
overall transaction described in the Operative Agreements to which the Lessee
is a party.
H-2
<PAGE> 82
(g) Neither the nature of the Properties, nor any relationship between
the Lessee and any other Person, nor any circumstance in connection with the
execution, delivery and performance of the Operative Agreements to which the
Lessee is a party is such as to require any approval of stockholders of, or
approval or consent of any trustee or holders of indebtedness of, the Lessee,
except for such approvals and consents which have been duly obtained and are in
full force and effect.
(h) The Security Documents which have been executed and delivered as
of the date of this opinion create, for the benefit of First Union, the
security interests in the Collateral described therein which by their terms
such Security Documents purport to create. Upon filing of the UCC-1 financing
statements (attached hereto as Schedule 2) relating to the Security Documents
in the recording offices of (A) the respective county clerk where the principal
place of business of the Lessee is located and (B) the Secretary of State where
the principal place of business of the Lessee is located, First Union will have
a valid, perfected lien and security interest in that portion of the Collateral
which can be perfected by the filing of UCC-1 financing statements under
Article 9 of the UCC in [IDENTIFY THE STATE].
(i) The Operative Agreements to which First Security Bank, National
Association, individually or as the Owner Trustee, is a party constitute valid
and binding obligations of such party and are enforceable against First
Security Bank, National Association, individually or as the Owner Trustee, as
the case may be, in accordance with the terms thereof, subject to bankruptcy,
insolvency, liquidation, reorganization, fraudulent conveyance, and similar
laws affecting creditors, rights generally, and general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
(j) The issuance, sale and delivery of the Notes and the issuance and
delivery of the Certificates under the circumstances contemplated by the
Participation Agreement do not, under existing law, require registration of the
Notes or the Certificates being issued on the date hereof under the Securities
Act of 1933, as amended, or the qualification of the Loan Agreement under the
Trust Indenture Act of 1939, as amended.
This opinion is limited to the matters stated herein and no opinion is implied
or may be inferred beyond the matters stated herein. This opinion is based on
and is limited to the laws of the States of [FLORIDA], and the federal laws of
the United States of America. Insofar as the foregoing opinion relates to
matters of law other than the foregoing, no opinion is hereby given.
This opinion is for the sole benefit of the Lessee, the Construction Agent, the
Guarantors, the Owner Trustee, First Union and their respective successors and
assigns and may not be relied upon by any other person other than such parties
and their respective successors and assigns without the express written consent
of the undersigned. The opinions expressed herein are as of the date hereof and
we make no undertaking to amend or supplement such opinions if facts come to
our attention or changes in the current law of the jurisdictions mentioned
herein occur which could affect such opinions.
H-3
<PAGE> 83
Very truly yours,
[LESSEE'S OUTSIDE COUNSEL]
H-4
<PAGE> 84
Distribution List
First Union National Bank, as lender and holder
Sterile Recoveries, Inc., as the Construction Agent and the Lessee
First Security Bank, National Association, not individually, but solely as the
Owner Trustee under the SRI Realty Trust 1998-1
H-5
<PAGE> 85
Schedule 1
(Litigation)
H-6
<PAGE> 86
Schedule 2
(UCC 1 Financing Statements)
H-7
<PAGE> 87
EXHIBIT I
STERILE RECOVERIES, INC.
OFFICER'S CERTIFICATE
---------------------
(Pursuant to Section 5.5 of the Participation Agreement)
STERILE RECOVERIES, INC., a Florida corporation (the "Company") DOES
HEREBY CERTIFY as follows:
1. The address for the subject Property is ___________________________________
_____________________________________.
2. The Completion Date for the construction of Improvements at the Property
occurred on ______________.
3. The aggregate Property Cost for the Property was $___________.
4. Attached hereto as Schedule 1 is the detailed, itemized documentation
supporting the asserted Property Cost figures.
5. All representations and warranties of the Company in each Operative
Agreement and in each certificate delivered pursuant thereto (including
without limitation the Incorporated Representations and Warranties) are
true and correct as of the Completion Date.
Capitalized terms used in this Officer's Certificate and not otherwise defined
have the respective meanings ascribed thereto in the Participation Agreement
dated as of February 1, 1999 among the Company, as the Lessee and as the
Construction Agent, First Security Bank, National Association, as the Owner
Trustee and First Union National Bank, as lender and holder.
[The remainder of this page has been intentionally left blank.]
I-1
<PAGE> 88
IN WITNESS WHEREOF, the Company has caused this Officer's Certificate
to be duly executed and delivered as of this ____ day of _____________, ______.
STERILE RECOVERIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
I-2
<PAGE> 89
Schedule I
(Itemized Documentation in Support of Asserted Property Cost)
I-3
<PAGE> 90
EXHIBIT J
[Description of Material Litigation]
(Pursuant to Section 6.2(d) of the Participation Agreement)
None.
J-1
<PAGE> 91
- -------------------------------------------------------------------------------
Appendix A
Rules of Usage and Definitions
- -------------------------------------------------------------------------------
I. Rules of Usage
The following rules of usage shall apply to this Appendix A and the Operative
Agreements (and each appendix, schedule, exhibit and annex to the foregoing)
unless otherwise required by the context or unless otherwise defined therein:
(a) Except as otherwise expressly provided, any definitions set forth
herein or in any other document shall be equally applicable to the singular and
plural forms of the terms defined.
(b) Except as otherwise expressly provided, references in any document
to articles, sections, paragraphs, clauses, annexes, appendices, schedules or
exhibits are references to articles, sections, paragraphs, clauses, annexes,
appendices, schedules or exhibits in or to such document.
(c) The headings, subheadings and table of contents used in any
document are solely for convenience of reference and shall not constitute a
part of any such document nor shall they affect the meaning, construction or
effect of any provision thereof.
(d) References to any Person shall include such Person, its
successors, permitted assigns and permitted transferees.
(e) Except as otherwise expressly provided, reference to any agreement
means such agreement as amended, modified, extended, supplemented, restated
and/or replaced from time to time in accordance with the applicable provisions
thereof.
(f) Except as otherwise expressly provided, references to any law
includes any amendment or modification to such law and any rules or regulations
issued thereunder or any law enacted in substitution or replacement therefor.
(g) When used in any document, words such as "hereunder", "hereto",
"hereof" and "herein" and other words of like import shall, unless the context
clearly indicates to the contrary, refer to the whole of the applicable
document and not to any particular article, section, subsection, paragraph or
clause thereof.
(h) References to "including" means including without limiting the
generality of any description preceding such term and for purposes hereof the
rule of ejusdem generis shall not be
Appendix A-1
<PAGE> 92
applicable to limit a general statement, followed by or referable to an
enumeration of specific matters, to matters similar to those specifically
mentioned.
(i) References herein to "attorney's fees", "legal fees", "costs of
counsel" or other such references shall be deemed to include the allocated cost
of in-house counsel.
(j) Each of the parties to the Operative Agreements and their counsel
have reviewed and revised, or requested revisions to, the Operative Agreements,
and the usual rule of construction that any ambiguities are to be resolved
against the drafting party shall be inapplicable in the construction and
interpretation of the Operative Agreements and any amendments or exhibits
thereto.
(k) Capitalized terms used in any Operative Agreements which are not
defined in this Appendix A but are defined in another Operative Agreement shall
have the meaning so ascribed to such term in the applicable Operative
Agreement.
II. Definitions
"AAA" shall have the meaning given to such term in Section 12.7(d) of
the Participation Agreement.
"ABR" shall mean, for any day, a rate per annum equal to the greater
of (a) the Prime Lending Rate in effect on such day, and (b) the Federal Funds
Effective Rate in effect on such day plus one-half of one percent (0.5%). For
purposes hereof: "Prime Lending Rate" shall mean the rate announced by the Bank
from time to time as its prime lending rate as in effect from time to time. The
Prime Lending Rate is a reference rate and is one of several interest rate
bases used by the Bank and does not necessarily represent the lowest or most
favorable rate offered by the Bank actually charged to any customer. The Bank
may make commercial loans or other loans at rates of interest at, above or
below the Prime Lending Rate. The Prime Lending Rate shall change automatically
and without notice from time to time as and when the prime lending rate of the
Bank changes. "Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate per annum equal for each day during such period to
the weighted average of the rates on overnight Federal funds transactions with
members or the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three (3) Federal funds brokers of recognized standing selected by it. Any
change in the ABR due to a change in the Prime Lending Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Lending Rate or the Federal Funds
Effective Rate, respectively.
"ABR Holder Advance" shall mean a Holder Advance bearing a Holder
Yield based on the ABR.
Appendix A-2
<PAGE> 93
"ABR Loans" shall mean Loans the rate of interest applicable to which
is based upon the ABR.
"Acceleration" shall have the meaning given to such term in Section 6
of the Credit Agreement.
"Accounts" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Acquisition Advance" shall have the meaning given to such term in
Section 5.3 of the Participation Agreement.
"Acquisition Loan" shall mean any Loan made in connection with an
Acquisition Advance.
"Additional Incorporated Terms" shall have the meaning given to such
term in Section 28.1 of the Lease.
"Advance" shall mean a Construction Advance or an Acquisition Advance.
"Affiliate" shall mean, with respect to any Person, any Person or
group acting in concert in respect of the Person in question that, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
"After Tax Basis" shall mean, with respect to any payment to be
received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by the recipient calculated at the then
maximum marginal rates generally applicable to Persons of the same type as the
recipients with respect to the receipt by the recipient of such amounts (less
any tax savings realized as a result of the payment of the indemnified amount),
such increased payment (as so reduced) is equal to the payment otherwise
required to be made.
"Agency Agreement" shall mean the Agency Agreement, dated on or about
the Initial Closing Date between the Construction Agent and the Lessor.
"Agency Agreement Joinder" shall mean each joinder agreement
substantially in the form of Exhibit A to the Agency Agreement, or such other
form as is acceptable to the Lessee, the Lessor and the Bank.
"Agency Agreement Event of Default" shall mean an "Event of Default"
as defined in Section 5.1 of the Agency Agreement.
"Applicable Percentage" shall mean for Eurodollar Loans, Eurodollar
Holder Advances, ABR Loans and ABR Holder Advances, the appropriate applicable
percentages corresponding to the Consolidated Leverage Ratio in effect as of
the most recent Calculation Date as shown below:
Appendix A-3
<PAGE> 94
<TABLE>
<CAPTION>
APPLICABLE APPLICABLE APPLICABLE APPLICABLE
PERCENTAGE PERCENTAGE FOR PERCENTAGE FOR PERCENTAGE FOR
PRICING CONSOLIDATED FOR EURODOLLAR ABR ABR
LEVEL LEVERAGE RATIO EURODOLLAR LOANS HOLDER ADVANCES LOANS HOLDER ADVANCES
--------- ---------------- ---------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
LEVEL I <1.0:1.0 1.00% 1.75% 0.00% 0.75%
LEVEL II >1.0:1.0<2.0:1.0 1.25% 2.00% 0.25% 1.00%
LEVEL III >2.0:1.0 1.50% 2.25% 0.50% 1.25%
</TABLE>
The Applicable Percentage for Eurodollar Loans, Eurodollar Holder
Advances, ABR Loans and ABR Holder Advances shall, in each case, be determined
and adjusted quarterly on the date five (5) Business Days after the date on
which the Bank receives the quarterly officer's certificate provided by the
Lessee in accordance with the provisions of Section 8.3(k) of the Participation
Agreement (each a "Calculation Date"); provided, however, that (i) the initial
Applicable Percentage, in each case, shall be based on Pricing Level I (as
shown above) and shall remain at Pricing Level I until the delivery of the
Lessee's audited financial statements for December 31, 1998 and, thereafter,
the Pricing Level shall be determined by the then current Consolidated Leverage
Ratio, and (ii) if the Lessee fails to provide the written notice required by
Section 8.3(k) of the Participation Agreement to the Agent on or before the
most recent Calculation Date, the Applicable Percentage, in each case, from the
date of such failure shall be based on Pricing Level III until five (5)
Business Days after such time that such written notice is provided whereupon
the Pricing Level shall be determined by the then current Consolidated Leverage
Ratio. Except as set forth above, each Applicable Percentage shall be effective
from one Calculation Date until the next Calculation Date. Any adjustment in
the Applicable Percentage shall be applicable to all existing Eurodollar Loans,
Eurodollar Holder Advances, ABR Loans and ABR Holder Advances as well as any
new Eurodollar Loans, Eurodollar Holder Advances, ABR Loans and ABR Holder
Advances made or issued.
"Appraisal" shall mean, with respect to any Property, an appraisal to
be delivered in connection with the Participation Agreement or in accordance
with the terms of the Lease, in each case prepared by a reputable appraiser
reasonably acceptable to the Agent, which in the judgment of counsel to the
Agent, complies with all of the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, the rules and
regulations adopted pursuant thereto, and all other applicable Legal
Requirements and otherwise satisfactory to the Bank.
"Appraisal Procedure" shall have the meaning given such term in
Section 22.4 of the Lease.
"Appurtenant Rights" shall mean (a) all agreements, easements, rights
of way or use, rights of ingress or egress, privileges, appurtenances,
tenements, hereditaments and other rights and benefits at any time belonging or
pertaining to the Land underlying the Improvements or the Improvements,
including without limitation the use of any streets, ways, alleys, vaults or
strips of
Appendix A-4
<PAGE> 95
land adjoining, abutting, adjacent or contiguous to the Land and (b) all
permits, licenses and rights, whether or not of record, appurtenant to such
Land or the Improvements.
"Arbitration Rules" shall have the meaning given to such term in
Section 12.7(d) of the Participation Agreement.
"Assignment and Acceptance" shall mean the Assignment and Acceptance
in the form attached to the Credit Agreement as EXHIBIT B.
"Available Commitment" shall mean an amount equal to the excess, if
any, of (a) the amount of the Commitment over (b) the aggregate principal
amount of all Loans made as of such date after giving effect to Section 5.2(d)
of the Participation Agreement (but without giving effect to any other
repayments or prepayments of any Loans hereunder).
"Available Holder Commitments" shall mean an amount equal to the
excess, if any, of (a) the aggregate amount of the Holder Commitments over (b)
the aggregate amount of the Holder Advances made since the Initial Closing Date
after giving effect to Section 5.2(d) of the Participation Agreement (but
without giving effect to any other repayments or prepayments of any Holder
Advances).
"Bank" shall mean First Union National Bank, a national banking
association, and its permitted successors and assigns.
"Bankruptcy Code" shall mean Title 11 of the U. S. Code entitled
"Bankruptcy," as now or hereafter in effect or any successor thereto.
"Basic Documents" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease and the Security Agreement.
"Basic Rent" shall mean, the sum of (a) the Loan Basic Rent and (b)
the Lessor Basic Rent, calculated as of the applicable date on which Basic Rent
is due.
"Bill of Sale" shall mean a Bill of Sale regarding Equipment in form
and substance satisfactory to the Agent.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Bond Documents" shall mean any and all agreements, documents and
instruments executed and delivered by any Development Authority, any Bond
Trustee, the Owner Trustee and any other Person in connection with the issuance
of Bonds, including without limitation any Bonds, Indentures, tender agency
agreements, Head Leases, placement agency agreements, remarketing agreements,
private placement memoranda and other documents or agreements relating to any
of the foregoing.
Appendix A-5
<PAGE> 96
"Bond Trustee" shall mean any bond or indenture trustee under any Bond
Documents, and any of such trustee's successors and assigns.
"Bonds" shall mean any bonds or other securities issued by any
Development Authority for the purpose of financing the acquisition,
development, construction and equipping of one or more Properties.
"Borrower" shall mean the Owner Trustee, not in its individual
capacity but as Borrower under the Credit Agreement.
"Borrowing Date" shall mean any Business Day specified in a notice
delivered pursuant to Section 2.3 of the Credit Agreement as a date on which
the Lessor requests the Bank to make Loans hereunder.
"Budgeted Total Property Cost" shall mean, at any date of
determination with respect to any Construction Period Property, an amount equal
to the aggregate amount which the Construction Agent in good faith expects to
be expended in order to achieve Completion with respect to such Property.
"Business Day" shall mean a day on which (a) banks located in each of
the cities in which the principal of the Bank, any Bond Trustee, any other
institution that issues a letter of credit in accordance with any Bond
Document, and the Remarketing Agent are not authorized or required by law to
close, and (b) The New York Stock Exchange is not closed; provided, however,
that when used in connection with a Eurodollar Loan, the term "Business Day"
shall also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
"Capital Lease" means, with respect to the Lessee and its
Subsidiaries, any lease of any property that should, in accordance with GAAP,
be classified and accounted for as a capital lease on a consolidated balance
sheet of the Lessee and its Subsidiaries.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
property (whether real, personal, tangible, intangible or mixed of such Person)
by such Person as the lessee which would be capitalized on a balance sheet of
such Person prepared in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, capital stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
capital stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
membership interests and (v) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
Appendix A-6
<PAGE> 97
"Casualty" shall mean any damage or destruction of all or any portion
of the Property as a result of a fire or other casualty.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended
by the Superfund Amendments and Reauthorization Act of 1986.
"Certificate" shall mean a Certificate in favor of the Bank regarding
the Holder Commitment issued pursuant to the terms and conditions of the Trust
Agreement.
"Chattel Paper" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Claims" shall mean any and all obligations, liabilities, losses,
actions, suits, penalties, claims, demands, costs and expenses (including
without limitation reasonable attorney's fees and expenses) of any nature
whatsoever.
"Closing Date" shall mean the Initial Closing Date and each Property
Closing Date.
"Code" shall mean the Internal Revenue Code of 1986 together with
rules and regulations promulgated thereunder, as amended from time to time, or
any successor statute thereto.
"Collateral" shall mean all assets of the Lessor, the Construction
Agent and the Lessee, now owned or hereafter acquired, upon which a Lien is
purported to be created by one or more of the Security Documents.
"Commencement Date" shall have the meaning specified in Section 2.2 of
the Lease.
"Commitment" shall mean the obligation of the Bank to make Loans to
the Lessor in an aggregate principal amount at any time outstanding not to
exceed the Lender Commitment.
"Commitment Fee" shall have the meaning given to such term in Section
7.4 of the Participation Agreement.
"Commitment Fee Payment Date" shall mean the last Business Day of each
March, June, September and December and the last Business Day of the Commitment
Period, or such earlier date as the Commitments shall terminate as provided in
the Credit Agreement or the Holder Commitment shall terminate as provided in
the Trust Agreement.
"Commitment Period" shall mean the period from and including the
Initial Closing Date to and including the Construction Period Termination Date
(or, with respect to the issuance of Letters of Credit, to and including the
date five (5) days prior to the Maturity Date) or such earlier date as the
Commitments shall terminate as provided in the Credit Agreement or the Holder
Commitment shall terminate as provided in the Trust Agreement.
Appendix A-7
<PAGE> 98
"Completion" shall mean, with respect to a Property, such time as the
acquisition, installation, testing and final completion of the Improvements on
such Property has been achieved in accordance with the Plans and
Specifications, the Agency Agreement and/or the Lease, and in compliance with
all Legal Requirements and Insurance Requirements and a certificate of
occupancy has been issued with respect to such Property by the appropriate
governmental entity (except if non-compliance, individually or in the
aggregate, shall not have and could not reasonably be expected to have a
Material Adverse Effect). If the Lessor purchases a Property that includes
existing Improvements that are to be immediately occupied by the Lessee without
any improvements financed pursuant to the Operative Agreements, the date of
Completion for such Property shall be the Property Closing Date.
"Completion Date" shall mean, with respect to a Property, the earlier
of (a) the date on which Completion for such Property has occurred or (b) the
Construction Period Termination Date.
"Condemnation" shall mean any taking or sale of the use, access,
occupancy, easement rights or title to any Property or any part thereof, wholly
or partially (temporarily or permanently), by or on account of any actual or
threatened eminent domain proceeding or other taking of action by any Person
having the power of eminent domain, including without limitation an action by a
Governmental Authority to change the grade of, or widen the streets adjacent
to, any Property or alter the pedestrian or vehicular traffic flow to any
Property so as to result in a change in access to such Property, or by or on
account of an eviction by paramount title or any transfer made in lieu of any
such proceeding or action.
"Consolidated" means, when used with reference to financial statements
or financial statement items of the Lessee and its Subsidiaries or any other
Person, such statements or items on a consolidated basis in accordance with
applicable principles of consolidation under GAAP.
"Consolidated EBITDA" means, with respect to the Lessee and its
Subsidiaries, for any period of determination, (a) Consolidated Net Income for
such period, plus (b) the sum of the following to the extent deducted in the
determination of Consolidated Net Income: (i) Consolidated Interest Expense,
(ii) income and franchise taxes and (iii) depreciation and amortization
expense, in each case determined in accordance with GAAP for such period.
"Consolidated Interest Expense" means, for any period of
determination, the gross interest expense of the Lessee and its Subsidiaries
(including any amount attributable to interest in respect of payments under
Capital Leases and any net amount payable under any Hedging Agreement), all
determined for such period on a Consolidated basis in accordance with GAAP.
"Consolidated Leverage Ratio" means, as of the last day of each fiscal
quarter of the Lessee, the ratio of Funded Debt of the Lessee and its
Subsidiaries (computed as of the last day of such fiscal quarter) to
Consolidated EBITDA (computed for the four fiscal quarterly period then
ending).
Appendix A-8
<PAGE> 99
"Consolidated Subsidiary" shall mean, as to any Person, any Subsidiary
of such Person which under the rules of GAAP consistently applied should have
its financial results consolidated with those of such Person for purposes of
financial accounting statements.
"Construction Advance" shall mean an advance of funds to pay Property
Costs pursuant to Section 5.4 of the Participation Agreement.
"Construction Agent" shall mean Sterile Recoveries, Inc., a Florida
corporation, as the construction agent under the Agency Agreement.
"Construction Budget" shall mean the cost of acquisition,
installation, testing, constructing and developing any Property as determined
by the Construction Agent in its reasonable, good faith judgment.
"Construction Commencement Date" shall mean, with respect to
Improvements, the date on which construction of such Improvements commences
pursuant to the Agency Agreement.
"Construction Contract" shall mean any contract entered into between
the Construction Agent or the Lessee with a Contractor for the construction of
Improvements or any portion thereof on the Property.
"Construction Loan" shall mean any Loan made in connection with a
Construction Advance.
"Construction Loan Property Cost" shall mean with respect to each
Construction Period Property at the date of determination, an amount equal to
(a) the aggregate principal amount of Construction Loans made on or prior to
such date with respect to the Property minus (b) the aggregate principal amount
of prepayments or repayments of the Loans allocated to reduce the Construction
Loan Property Cost of such Property pursuant to Section 2.6(c) of the Credit
Agreement.
"Construction Period" shall mean, with respect to a Property, the
period commencing on the Construction Commencement Date for such Property and
ending on the Completion Date for such Property.
"Construction Period Property" means, at any date of determination,
any Property as to which the Rent Commencement Date has not occurred on or
prior to such date.
"Construction Period Termination Date" shall mean (a) the earlier of
(i) the date that the Commitments have been terminated in their entirety in
accordance with the terms of Section 2.5(a) of the Credit Agreement, or (ii)
the second anniversary of the Initial Closing Date or (b) such later date as
shall be agreed to by the Bank.
"Contingent Obligation" means, at any date of determination, any
obligation, contingent or otherwise, of the Lessee or any of its Subsidiaries
pursuant to which such Person has directly
Appendix A-9
<PAGE> 100
or indirectly guaranteed any Debt or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of any such Person (a) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement condition or otherwise) or (b)
entered into for the purpose of assuring in any other manner the obligee of
such Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, that the term
Contingent Obligation shall not include endorsements for collection or deposit
in the ordinary course of business.
"Contractor" shall mean each entity with whom the Construction Agent
or the Lessee contracts to construct any Improvements or any portion thereof on
the Property.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Lessee, are treated as a single
employer under Section 414 of the Code.
"Co-Owner Trustee" shall have the meaning specified in Section 9.2 of
the Trust Agreement.
"Credit Agreement" shall mean the Credit Agreement, dated on or about
the Initial Closing Date, among the Lessor and the Bank.
"Credit Agreement Default" shall mean any event or condition which,
with the lapse of time or the giving of notice, or both, would constitute a
Credit Agreement Event of Default.
"Credit Agreement Event of Default" shall mean any event or condition
defined as an "Event of Default" in Section 6 of the Credit Agreement.
"Credit Documents" shall mean the Participation Agreement, the Credit
Agreement, the Notes, the Letters of Credit and the Security Documents.
"Debt" means, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (c) all obligations of such
Person under conditional sale or other title retention agreements relating to
property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the
ordinary course of business), (d) all obligations of such Person issued or
assumed as the deferred purchase price of property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (e) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Debt of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any Lien
on, or payable out of the
Appendix A-10
<PAGE> 101
proceeds of production from, property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all Contingent
Obligations of any such Person (excluding, for purposes hereof, the Contingent
Obligations identified on Schedule 1.1B to the Lessee Credit Agreement), (h)
the principal portion of all obligations of such Person under Capital Leases,
(i) all obligations of such Person under Hedging Agreements, (j) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (k) all preferred Capital
Stock issued by such Person and required by the terms thereof to be redeemed,
or for which mandatory sinking fund payments are due, prior to the Maturity
Date, (l) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP, and (m) the Debt of any partnership or
unincorporated joint venture in which such Person is legally obligated or has a
reasonable expectation of being liable with respect thereto (excluding, for
purposes hereof, the Debt of any such partnership or unincorporated joint
venture which is not majority-owned by such Person as of the Initial Closing
Date until such time, if ever, that such entity becomes majority-owned by such
person).
"Deed" shall mean a warranty deed regarding the Land and/or
Improvements in form and substance satisfactory to the Bank.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Deficiency Balance" shall have the meaning given in Section 22.1(b)
of the Lease Agreement.
"Development Authority" shall mean any industrial development
authority or similar governmental or other entity identified as the issuer of
Bonds and owner and lessor under any Head Lease with respect to one or more
Properties, together with any such entity's successors and assigns.
"Disputes" shall have the meaning given to such term in Section
12.7(d) of the Participation Agreement.
"Documents" shall have the meaning given to such term in Section 1 of
the Security Agreement.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Election Date" shall have the meaning given to such term in Section
20.1 of the Lease.
"Election Notice" shall have the meaning given to such term in Section
20.1 of the Lease.
Appendix A-11
<PAGE> 102
"Employee Benefit Plan" or "Plan" shall mean an employee benefit plan
(within the meaning of Section 3(3) of ERISA, including without limitation any
Multiemployer Plan), or any "plan" as defined in Section 4975(e)(1) of the Code
and as interpreted by the Internal Revenue Service and the Department of Labor
in rules, regulations, releases or bulletins in effect on any Closing Date.
"Environmental Claims" shall mean any investigation, notice,
violation, demand, allegation, action, suit, injunction, judgment, order,
consent decree, penalty, fine, lien, proceeding, or claim (whether
administrative, judicial, or private in nature) arising (a) pursuant to, or in
connection with, an actual or alleged violation of, any Environmental Law, (b)
in connection with any Hazardous Substance, (c) from any abatement, removal,
remedial, corrective, or other response action in connection with a Hazardous
Substance, Environmental Law, or other order of a Tribunal or (d) from any
actual or alleged damage, injury, threat, or harm to health, safety, natural
resources, or the environment.
"Environmental Laws" shall mean any Law, permit, consent, approval,
license, award, or other authorization or requirement of any Tribunal relating
to emissions, discharges, releases, threatened releases of any Hazardous
Substance into ambient air, surface water, ground water, publicly owned
treatment works, septic system, or land, or otherwise relating to the handling,
storage, treatment, generation, use, or disposal of Hazardous Substances,
pollution or to the protection of health or the environment, including without
limitation CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. ss.
6901, et seq., and state statutes analogous thereto.
"Environmental Violation" shall mean any activity, occurrence or
condition that violates or threatens (if the threat requires remediation under
any Environmental Law and is not remediated during any grace period allowed
under such Environmental Law) to violate or results in or threatens (if the
threat requires remediation under any Environmental Law and is not remediated
during any grace period allowed under such Environmental Law) to result in
noncompliance with any Environmental Law.
"Equipment" shall mean personal property of every kind and nature
whatsoever purchased, leased or otherwise acquired using the proceeds of the
Bonds, the Loans or the Holder Advances by the Construction Agent, the Lessee,
any Development Authority or the Lessor and all improvements and modifications
thereto and replacements thereof, whether or not now owned or hereafter
acquired or now or subsequently attached to, contained in or used or usable in
any way in connection with any operation of any Improvements.
"Equipment Schedule" shall mean (a) each Equipment Schedule attached
to the applicable Requisition and (b) each Equipment Schedule attached to the
applicable Head Lease and/or Lease Supplement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
Appendix A-12
<PAGE> 103
"ERISA Affiliate" shall mean each entity required to be aggregated
with the Lessee pursuant to the requirements of Section 414(b) or (c) of the
Code.
"Eurocurrency Reserve Requirements" shall mean for any day as applied
to a Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal) of reserve requirements in effect on such day
(including without limitation basic, supplemental, marginal and emergency
reserves under any regulations of the Board or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed on eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D) maintained by a member bank of the Federal
Reserve System.
"Eurodollar Holder Advance" shall mean a Holder Advance bearing a
Holder Yield based on the Eurodollar Rate.
"Eurodollar Loans" shall mean Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan or Eurodollar Holder
Advance for any Interest Period therefor, the rate per annum appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two (2)
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Eurodollar Loan for
any Interest Period therefor, the rate per annum appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one (1) rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates.
"Event of Default" shall mean a Lease Event of Default, an Agency
Agreement Event of Default, a Credit Agreement Event of Default or a default
under any Bond Document after required notices, if any, and the expiration of
applicable cure periods.
"Excepted Payments" shall mean:
(a) all indemnity payments (including without limitation
indemnity payments made pursuant to Section 11 of the Participation
Agreement), whether made by adjustment to Basic Rent or otherwise, to
which the Owner Trustee, or any of its respective Affiliates, agents,
officers, directors or employees is entitled;
(b) any amounts (other than Basic Rent or Termination Value)
payable under any Operative Agreement to reimburse the Owner Trustee,
or any of its Affiliates (including without limitation the reasonable
expenses of the Owner Trustee or the Trust Company and incurred in
connection with any such payment) for performing or
Appendix A-13
<PAGE> 104
complying with any of the obligations of the Lessee under and as
permitted by any Operative Agreement;
(c) any insurance proceeds (or payments with respect to risks
self-insured or policy deductibles) under liability policies other
than such proceeds or payments payable to the Bank;
(d) any insurance proceeds under policies maintained by the
Owner Trustee or the Bank;
(e) Transaction Expenses or other amounts, fees, disbursements
or expenses paid or payable to or for the benefit of the Owner
Trustee;
(f) all right, title and interest of the Owner Trustee to any
Property or any portion thereof or any other property to the extent
any of the foregoing has been released from the Liens of the Security
Documents and the Lease pursuant to the terms thereof;
(g) upon termination of the Credit Agreement pursuant to the
terms thereof, all remaining property covered by the Lease or Security
Documents;
(h) any payments in respect of interest to the extent
attributable to payments referred to in clauses (a) through (g) above;
and
(i) any rights of either the Owner Trustee or the Trust
Company to demand, collect, sue for or otherwise receive and enforce
payment of any of the foregoing amounts, provided that such rights
shall not include the right to terminate the Lease.
"Excess Proceeds" shall mean the excess, if any, of the aggregate of
all awards, compensation or insurance proceeds payable in connection with a
Casualty or Condemnation over the Termination Value paid by the Lessee pursuant
to the Lease with respect to such Casualty or Condemnation.
"Exculpated Persons" shall mean the Trust Company (except with respect
to the representations and warranties and the other obligations of the Trust
Company pursuant to the Operative Agreements expressly undertaken in its
individual capacity, including without limitation the representations and
warranties of the Trust Company pursuant to Section 6.1 of the Participation
Agreement, the obligations of the Trust Company pursuant to Section 8.2 of the
Participation Agreement and the obligations of the Trust Company pursuant to
the Trust Agreement) and the Bank (except with respect to the obligations of
the Bank expressly undertaken pursuant to the Participation Agreement and the
Trust Agreement), their officers, directors, shareholders and partners.
"Exempt Payments" shall have the meaning specified in Section 11.2(e)
of the Participation Agreement.
Appendix A-14
<PAGE> 105
"Expiration Date" shall mean the last day of the Term; provided, in no
event shall the Expiration Date be later than fifteen (15) days after the third
annual anniversary of the Initial Closing Date, unless such later date has been
expressly agreed to in writing by each of the Lessor, the Lessee and the Bank.
"Fair Market Sales Value" shall mean, with respect to any Property
(or, as applicable, Lessor's leasehold interest in such Property pursuant to
any Head Lease), the amount, which in any event, shall not be less than zero
(0), that would be paid in cash in an arms-length transaction between an
informed and willing purchaser and an informed and willing seller, neither of
whom is under any compulsion to purchase or sell, respectively, such Property
(or, as applicable, Lessor's leasehold interest in such Property pursuant to
any Head Lease). Fair Market Sales Value of any Property (or, as applicable,
Lessor's leasehold interest in such Property pursuant to any Head Lease) shall
be determined based on the assumption that, except for purposes of Section 17
of the Lease, such Property (or, as applicable, Lessor's leasehold interest in
such Property pursuant to any Head Lease) is in the condition and state of
repair required under Section 10.1 of the Lease and the Lessee is in compliance
with the other requirements of the Operative Agreements.
"Federal Funds Effective Rate" shall have the meaning given to such
term in the definition of ABR.
"Financing Parties" shall mean the Lessor, the Owner Trustee, in its
trust capacity, the Bank, as Holder and Lender, and their respective successors
and assigns.
"First Union" shall mean First Union National Bank, a national banking
association, and its permitted successors and assigns.
"Fixtures" shall mean all fixtures relating to the Improvements,
including without limitation all components thereof, located in or on the
Improvements, together with all replacements, modifications, alterations and
additions thereto.
"Force Majeure Event" shall mean any event beyond the control of the
Construction Agent, other than a Casualty or Condemnation, including without
limitation strikes, lockouts, adverse soil conditions, acts of God, adverse
weather conditions, inability to obtain labor or materials, governmental
activities, civil commotion and enemy action; but excluding any event, cause or
condition that results from the Construction Agent's financial condition.
"Funded Debt" means, with respect to any Person, without duplication,
(i) all Debt of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made, (iii) all purchase money
Indebtedness (including for purposes hereof, indebtedness and obligations
described in clauses (c) and (d) of the definition of "Debt") of such Person,
including without limitation the principal portion of all obligations of such
Person under Capital Leases, (iv) all Contingent Obligations of such Person
with respect to Funded Debt of another Person, (v) the
Appendix A-15
<PAGE> 106
maximum available amount of all standby letters of credit or acceptances issued
or created for the account of such Person, (vi) all Funded Debt of another
Person secured by a Lien on any Property of such Person, whether or not such
Funded Debt has been assumed, provided that for purposes hereof the amount of
such Funded Debt shall be limited to the greater of (A) the amount of such
Funded Debt as to which there is recourse to such Person and (B) the fair
market value of the property which is subject to the Lien, (vii) the
outstanding attributed principal amount under any securitization transaction,
and (viii) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet
financing product to which such Person is a party, where such transaction is
considered borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP. The Funded Debt of any Person shall
include the Funded Debt of any partnership or joint venture in which such
Person is a general partner or joint venturer, but only to the extent to which
there is recourse to such Person for the payment of such Funded Debt.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the accounting principles board of the
American Institute of Certified Public Accountants, and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, that are applicable to the circumstances as of the
date of determination.
"Government Acts" shall have the meaning specified in Section
2.12(k)(i) of the Participation Agreement.
"Governmental Action" shall mean all permits, authorizations,
registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions,
publications, filings, notices to and declarations of or with, or required by,
any Governmental Authority, or required by any Legal Requirement, and shall
include, without limitation, all environmental and operating permits and
licenses that are required for the full use, occupancy, zoning and operating of
the Property.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Ground Lease" shall mean a ground lease (in form and substance
satisfactory to the Agent) respecting any Property (a) owned by the Lessee (or
a parent corporation or any Subsidiary of the Lessee) and leased to the Lessor
where such lease has at least a ninety-nine (99) year term and payments set at
no more than $1.00 per year, or (b) where such lease is subject to such other
terms and conditions as are satisfactory to the Bank.
"Hard Costs" shall mean all costs and expenses payable for supplies,
materials, labor and profit with respect to the Improvements under any
Construction Contract.
Appendix A-16
<PAGE> 107
"Hazardous Substance" shall mean any of the following: (a) any
petroleum or petroleum product, explosives, radioactive materials, asbestos,
formaldehyde, polychlorinated biphenyls, lead and radon gas; (b) any substance,
material, product, derivative, compound or mixture, mineral, chemical, waste,
gas, medical waste, or pollutant, in each case whether naturally occurring,
man-made or the by-product of any process, that is toxic, harmful or hazardous
to the environment or human health or safety as determined in accordance with
any Environmental Law; or (c) any substance, material, product, derivative,
compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant
that would support the assertion of any claim under any Environmental Law,
whether or not defined as hazardous as such under any Environmental Law.
"Head Lease" shall mean any lease relating to any Property between any
Development Authority, as lessor, and the Owner Trustee, as lessee, as such may
be amended, modified, supplemented, restated and/or replaced from time to time.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection
with hedging the interest rate exposure of the Lessee or any of its
Subsidiaries under any agreement executed in connection with any Debt, and any
confirming letter executed pursuant to such hedging agreement, all as amended
or supplemented from time to time.
"Holder" shall mean the Bank as the holder of one or more Certificates
in connection with the SRI Realty Trust 1998-1.
"Holder Advance" shall mean any advance made by the Bank to the Owner
Trustee pursuant to the terms of the Trust Agreement or the Participation
Agreement.
"Holder Amount" shall mean as of any date, the aggregate amount of
Holder Advances made by the Bank to the Trust Estate pursuant to Section 2 of
the Participation Agreement and Section 3.1 of the Trust Agreement less any
payments of any Holder Advances received by the Bank pursuant to Section 3.4 of
the Trust Agreement.
"Holder Commitments" shall mean $300,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements.
"Holder Construction Property Cost" shall mean, with respect to each
Construction Period Property, at any date of determination, an amount equal to
the outstanding Holder Advances made with respect thereto under the Trust
Agreement.
"Holder Overdue Rate" shall mean the lesser of (a) the then current
rate of Holder Yield respecting the particular amount in question plus two
percent (2%) and (b) the highest rate permitted by applicable law.
Appendix A-17
<PAGE> 108
"Holder Property Cost" shall mean with respect to a Property an amount
equal to the outstanding Holder Advances with respect thereto.
"Holder Yield" shall mean with respect to Holder Advances from time to
time either the Eurodollar Rate plus the Applicable Percentage for Eurodollar
Holder Advances or the ABR as elected by the Owner Trustee from time to time
with respect to such Holder Advances in accordance with the terms of the Trust
Agreement; provided, however, (a) the outstanding Holder Advances shall bear a
yield at the ABR applicable from time to time from and after the dates and
during the periods specified in Section 3.7(c) of the Trust Agreement, and (b)
the Holder Advances shall bear a yield at the ABR applicable from time to time
after the dates and during the periods specified in Section 11.3(f) of the
Participation Agreement.
"Impositions" shall mean any and all liabilities, losses, expenses,
costs, charges and Liens of any kind whatsoever for fees, taxes, levies,
imposts, duties, charges, assessments or withholdings ("Taxes") including but
not limited to (i) real and personal property taxes, including without
limitation personal property taxes on any property covered by the Lease that is
classified by Governmental Authorities as personal property, and real estate or
ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes
and other similar taxes (including rent taxes and intangibles taxes); (iii)
excise taxes; (iv) real estate transfer taxes, conveyance taxes, stamp taxes
and documentary recording taxes and fees; (v) taxes that are or are in the
nature of franchise, income, value added, privilege and doing business taxes,
license and registration fees; (vi) assessments on any Property, including
without limitation all assessments for public Improvements or benefits, whether
or not such improvements are commenced or completed within the Term; and (vii)
taxes, Liens, assessments or charges asserted, imposed or assessed by the PBGC
or any governmental authority succeeding to or performing functions similar to,
the PBGC; and in each case all interest, additions to tax and penalties
thereon, which at any time prior to, during or with respect to the Term or in
respect of any period for which the Lessee shall be obligated to pay
Supplemental Rent, may be levied, assessed or imposed by any Governmental
Authority upon or with respect to (a) any Property or any part thereof or
interest therein; (b) the leasing, financing, refinancing, demolition,
construction, substitution, subleasing, assignment, control, condition,
occupancy, servicing, maintenance, repair, ownership, possession, activity
conducted on, delivery, insuring, use, operation, improvement, sale, transfer
of title, return or other disposition of such Property or any part thereof or
interest therein; (c) the Notes, other indebtedness with respect to any
Property, or the Certificates, or any part thereof or interest therein; (d) the
rentals, receipts or earnings arising from any Property or any part thereof or
interest therein; (e) the Operative Agreements, the performance thereof, or any
payment made or accrued pursuant thereto; (f) the income or other proceeds
received with respect to any Property or any part thereof or interest therein
upon the sale or disposition thereof; (g) any contract (including the Agency
Agreement) relating to the construction, acquisition or delivery of the
Improvements or any part thereof or interest therein; (h) the issuance of the
Notes or the Certificates; (i) the Owner Trustee, the Trust or the Trust
Estate; or (j) otherwise in connection with the transactions contemplated by
the Operative Agreements.
"Improvements" shall mean, with respect to the construction,
renovations and/or Modifications on any Land, all buildings, structures,
Fixtures, and other improvements of every
Appendix A-18
<PAGE> 109
kind existing at any time and from time to time on or under the Land purchased
or otherwise acquired using the proceeds of the Bonds, the Loans or the Holder
Advances or which is subject to a Ground Lease, together with any and all
appurtenances to such buildings, structures or improvements, including without
limitation sidewalks, utility pipes, conduits and lines, parking areas and
roadways, and including without limitation all Modifications and other
additions to or changes in the Improvements at any time, including without
limitation (a) any Improvements existing as of the Property Closing Date as
such Improvements may be referenced on the applicable Requisition and (b) any
Improvements made subsequent to such Property Closing Date.
"Incorporated Covenants" shall have the meaning given to such term in
Section 28.1 of the Lease.
"Incorporated Representations and Warranties" shall have the meaning
given to such term in Section 28.1 of the Lease.
"Indebtedness" of a Person shall mean, without duplication, such
Person's:
(a) obligations for borrowed money;
(b) obligations representing the deferred purchase price of
Property (whether real, personal, tangible, intangible or mixed) or
services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade);
(c) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person;
(d) obligations which are evidenced by notes, acceptances or
other instruments;
(e) Capitalized Lease obligations;
(f) net liabilities under interest rate swap, exchange or cap
agreements; and
(g) contingent obligations.
"Indemnified Person" shall mean the Lessor, the Owner Trustee, in its
individual and its trust capacity, the Trust, the Trust Company, the Bank and
their respective successors, assigns, directors, shareholders, partners,
officers, employees, agents and Affiliates.
"Indemnity Provider" shall mean, respecting each Property, the Lessee.
Appendix A-19
<PAGE> 110
"Indenture" shall mean each trust indenture between the applicable
Development Authority and the applicable Bond Trustee relating to the
applicable Bonds.
"Initial Closing Date" shall mean February 24, 1999.
"Initial Construction Advance" shall mean any initial Advance to pay
for: (a) Property Costs for construction of any Improvements; and (b) the
Property Costs of restoring or repairing any Property which is required to be
restored or repaired in accordance with Section 15.1(e) of the Lease.
"Instruments" shall have the meaning given to such term in Section 1
of the Security Agreement.
"Insurance Requirements" shall mean all terms and conditions of any
insurance policy either required by the Lease to be maintained by the Lessee or
required by the Agency Agreement to be maintained by the Construction Agent,
and all requirements of the issuer of any such policy and, regarding self
insurance, any other requirements of the Lessee.
"Interest Period" shall mean (a) during the Commitment Period and
thereafter as to any Eurodollar Loan or Eurodollar Holder Advance (i) with
respect to the initial Interest Period, the period beginning on the date of the
first Eurodollar Loan and Eurodollar Holder Advance and ending one (1) month,
two (2) months or three (3) months thereafter, as selected by the Lessor (in
the case of a Eurodollar Loan) or the Owner Trustee (in the case of a
Eurodollar Holder Advance) in its applicable notice given with respect thereto
and (ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan or Eurodollar
Holder Advance and ending one (1) month, two (2) months or three (3) months
thereafter, as selected by the Lessor by irrevocable notice to the Bank (in the
case of a Eurodollar Loan) or by the Owner Trustee (in the case of a Eurodollar
Holder Advance) in each case not less than three (3) Business Days prior to the
last day of the then current Interest Period with respect thereto; provided,
however, that all of the foregoing provisions relating to Interest Periods are
subject to the following: (A) if any Interest Period would end on a day which
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding
Business Day), (B) no Interest Period shall extend beyond the Maturity Date or
the Expiration Date, as the case may be, (C) where an Interest Period begins on
a day for which there is no numerically corresponding day in the calendar month
in which the Interest Period is to end, such Interest Period shall end on the
last Business Day of such calendar month, (D) there shall not be more than four
(4) Interest Periods outstanding at any one (1) time.
"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, together with the rules and regulations promulgated
thereunder.
"Land" shall mean a parcel of real property described on (a) the
Requisition issued by the Construction Agent on the Property Closing Date
relating to such parcel and (b) the schedules to
Appendix A-20
<PAGE> 111
each applicable Lease Supplement executed and delivered in accordance with the
requirements of Section 2.4 of the Lease.
"Land Cost" shall have the meaning specified in Section 5.4 of the
Agency Agreement.
"Law" shall mean any statute, law, ordinance, regulation, rule,
directive, order, writ, injunction or decree of any Tribunal.
"Lease" or "Lease Agreement" shall mean the Lease Agreement dated on
or about the Initial Closing Date, between the Lessor and the Lessee, together
with any Lease Supplements thereto.
"Lease Default" shall mean any event or condition which, with the
lapse of time or the giving of notice, or both, would constitute a Lease Event
of Default.
"Lease Event of Default" shall have the meaning specified in Section
17.1 of the Lease.
"Lease Supplement" shall mean each Lease Supplement substantially in
the form of EXHIBIT A to the Lease, together with all attachments and schedules
thereto.
"Legal Requirements" shall mean all foreign, federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions affecting the Owner Trustee, the
Lessor, any applicable Development Authority or Bond Trustee with respect to a
particular Property, the Lessee, the Bank or any Property, Land, Improvement,
Equipment or the taxation, demolition, construction, use or alteration of such
Improvements, whether now or hereafter enacted and in force, including without
limitation any that require repairs, modifications or alterations in or to any
Property or in any way limit the use and enjoyment thereof (including without
limitation all building, zoning and fire codes and the Americans with
Disabilities Act of 1990, 42 U.S.C. ss. 12101 et. seq., and any other similar
federal, state or local laws or ordinances and the regulations promulgated
thereunder) and any that may relate to environmental requirements (including
without limitation all Environmental Laws), and all permits, certificates of
occupancy, licenses, authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments which are either of record or known to the Lessee affecting any
Property or the Appurtenant Rights.
"Lender" shall mean the Bank as lender under the Participation
Agreement and the Credit Agreement.
"Lender Commitment" shall mean $9,700,000, as such amount may be
increased or reduced from time to time in accordance with the provisions of the
Operative Agreements.
"Lender Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdiction in order to procure a security interest in favor of the
Bank in the Collateral subject to the Security Documents.
Appendix A-21
<PAGE> 112
"Lessee" shall have the meaning set forth in the Lease.
"Lessee Credit Agreement" shall mean that certain Credit Agreement
dated as of February 24, 1999 among the Lessee, certain subsidiaries of the
Lessee which are parties thereto from time to time, as guarantors, the lenders
from time to time parties thereto and First Union National Bank, as agent, as
such may hereafter be amended, modified, supplemented, restated and/or replaced
from time to time.
"Lessee Credit Agreement Event of Default" shall mean an Event of
Default as defined in Section 11.1 of the Lessee Credit Agreement.
"Lessor" shall mean the Owner Trustee, not in its individual capacity,
but as the Lessor under the Lease.
"Lessor Basic Rent" shall mean the scheduled Holder Yield due on the
Holder Advances on any Scheduled Interest Payment Date pursuant to the Trust
Agreement (but not including interest on (a) any such scheduled Holder Yield
due on the Holder Advances prior to the Rent Commencement Date with respect to
the Property to which such Holder Advances relate or (b) overdue amounts under
the Trust Agreement or otherwise).
"Lessor Financing Statements" shall mean UCC financing statements and
fixture filings appropriately completed and executed for filing in the
applicable jurisdictions in order to protect the Lessor's interest under the
Lease to the extent the Lease is a security agreement or a mortgage.
"Lessor Lien" shall mean any Lien, true lease or sublease or
disposition of title arising as a result of (a) any claim against the Lessor or
the Trust Company, in its individual capacity, not resulting from the
transactions contemplated by the Operative Agreements, (b) any act or omission
of the Lessor or the Trust Company, in its individual capacity, which is not
required by the Operative Agreements or is in violation of any of the terms of
the Operative Agreements, (c) any claim against the Lessor or the Trust
Company, in its individual capacity, with respect to Taxes or Transaction
Expenses against which the Lessee is not required to indemnify the Lessor or
the Trust Company, in its individual capacity, pursuant to Section 11 of the
Participation Agreement or (d) any claim against the Lessor arising out of any
transfer by the Lessor of all or any portion of the interest of the Lessor in
the Properties, the Trust Estate or the Operative Agreements other than the
transfer of title to or possession of any Properties by the Lessor pursuant to
and in accordance with the Lease, the Credit Agreement, the Security Agreement
or the Participation Agreement or pursuant to the exercise of the remedies set
forth in Article XVII of the Lease.
"Letter of Credit" shall mean any direct-pay letter of credit issued
by the Bank for the account of the Borrower in accordance with the terms of
Section 2.12 of the Credit Agreement.
Appendix A-22
<PAGE> 113
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien, option or charge of any kind.
"Limited Recourse Amount" shall mean with respect to all the
Properties (or, as applicable, Lessor's leasehold interests in such Properties
subject to one or more Head Leases) on an aggregate basis, an amount equal to
the sum of the Termination Values with respect to all the Properties (and all
Bonds relating to any such Properties) on an aggregate basis on each Payment
Date, less the Maximum Residual Guarantee Amount as of such date with respect
to all the Properties on an aggregate basis.
"Loan Basic Rent" shall mean the scheduled interest due on the Loans
on any Scheduled Interest Payment Date pursuant to the Credit Agreement (but
not including interest on (a) any such Loan due prior to the Rent Commencement
Date with respect to the Property to which such Loan relates or (b) any overdue
amounts under Section 2.8(b) of the Credit Agreement or otherwise).
"Loan Property Cost" shall mean, with respect to each Property at any
date of determination, an amount equal to (a) (i) the aggregate principal
amount all Loans (including without limitation all Acquisition Loans and
Construction Loans) made on or prior to such date with respect to such Property
plus (ii) the aggregate LOC Reimbursement Amounts minus (b) the aggregate
amount of prepayments or repayments as the case may be of the Loans allocated
to reduce the Loan Property Cost of such Property pursuant to Section 2.6(c) of
the Credit Agreement.
"Loans" shall mean the loans extended pursuant to the Credit
Agreement.
"LOC Documents" shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any Pledge Agreement, any documents
delivered in connection therewith, any application therefor, and any
agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing
for (i) the rights and obligations of the parties concerned or at risk or (ii)
any collateral security for such obligations.
"LOC Obligations" shall mean, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be drawn
under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by the Bank
but not theretofore reimbursed by the Borrower with amounts provided by the
Lessee as Supplemental Rent.
"LOC Reimbursement Amount" shall mean the aggregate amount of all
drawings under Letters of Credit honored by the Bank (but not previously
reimbursed by the Borrower with amounts provided by the Lessee as Supplemental
Rent) plus all other interests, charges, fees, commissions and other amounts
owing from time to time with respect to the Letters of Credit
Appendix A-23
<PAGE> 114
(but not previously reimbursed by the Borrower with amounts provided by the
Lessee as Supplemental Rent).
"Marketing Period" shall mean, if the Lessee has given a Sale Notice
in accordance with Section 20.1 of the Lease, the period commencing on the date
such Sale Notice is given and ending on the Expiration Date.
"Material Adverse Effect" shall, mean a material adverse effect on (a)
the business, condition (financial or otherwise), assets, liabilities or
operations of the Lessee, (b) the ability of the Lessee to perform its
respective obligations under any Operative Agreement to which it is a party,
(c) the validity or enforceability of any Operative Agreement or the rights and
remedies of the Bank or the Lessor thereunder, (d) the validity, priority or
enforceability of any Lien on any Property created by any of the Operative
Agreements, or (e) the value, utility or useful life of any Property or the
use, or ability of the Lessee to use, any Property for the purpose for which it
was intended.
"Maturity Date" shall mean the Expiration Date.
"Maximum Residual Guarantee Amount" shall mean an amount equal to the
product of the aggregate Property Cost for all of Properties times eighty-five
percent (85%).
"Modifications" shall have the meaning specified in Section 11.1(a) of
the Lease.
"Mortgage Instrument" shall mean any mortgage, deed of trust or any
other instrument executed by the Owner Trustee and the Lessee (or regarding any
Property subject to a Ground Lease, the applicable Affiliate of the Lessee) in
favor of the Bank) and evidencing a Lien on the Property (or, as applicable,
Lessor's leasehold interest in such Property under any Head Lease), in form and
substance reasonably acceptable to the Bank.
"Multiemployer Plan" shall mean any plan described in Section
4001(a)(3) of ERISA to which contributions are or have been made or required by
the Lessee or any of its Subsidiaries or ERISA Affiliates.
"Multiple Employer Plan" shall mean a plan to which the Lessee or any
ERISA Affiliate and at least one (1) other employer other than an ERISA
Affiliate is making or accruing an obligation to make, or has made or accrued
an obligation to make, contributions.
"New Facility" shall have the meaning given to such term in Section
28.1 of the Lease.
"Notes" shall mean those notes issued to the Bank pursuant to the
Credit Agreement.
"Obligations" shall have the meaning given to such term in Section 1
of the Security Agreement.
Appendix A-24
<PAGE> 115
"Officer's Certificate" with respect to any person shall mean a
certificate executed on behalf of such person by a Responsible Officer who has
made or caused to be made such examination or investigation as is necessary to
enable such Responsible Officer to express an informed opinion with respect to
the subject matter of such Officer's Certificate.
"Operative Agreements" shall mean the following: the Participation
Agreement, the Agency Agreement, the Trust Agreement, the Certificates, the
Credit Agreement, the Notes, the Lease, the Lease Supplements (and memoranda of
the Lease and each Lease Supplement in a form reasonably acceptable to the
Agent), the Security Agreement, the Mortgage Instruments, the other Security
Documents, the Ground Leases, the Deeds, the Bills of Sale, the Bond Documents,
the LOC Documents and any and all other agreements, documents and instruments
executed in connection with any of the foregoing.
"Original Executed Counterpart" shall have the meaning given to such
term in Section 5 of EXHIBIT A to the Lease.
"Overdue Interest" shall mean any interest payable pursuant to Section
2.8(b) of the Credit Agreement.
"Overdue Rate" shall mean (a) with respect to the Loan Basic Rent, and
any other amount owed under or with respect to the Credit Agreement or the
Security Documents, the rate specified in Section 2.8(b) of the Credit
Agreement, (b) with respect to the Lessor Basic Rent, the Holder Yield and any
other amount owed under or with respect to the Trust Agreement, the Holder
Overdue Rate, and (c) with respect to any other amount, the amount referred to
in clause (y) of Section 2.8(b) of the Credit Agreement.
"Owner Trustee," "Borrower" or "Lessor" shall mean First Security
Bank, National Association, not individually, except as expressly stated in the
various Operative Agreements, but solely as the Owner Trustee under the SRI
Realty Trust 1998-1, and any successor, replacement and/or additional Owner
Trustee expressly permitted under the Operative Agreements.
"Participation Agreement" shall mean the Participation Agreement dated
on or about the Initial Closing Date, among the Lessee, the Owner Trustee, not
in its individual capacity except as expressly stated therein, and the Bank.
"Payment Date" shall mean any Scheduled Interest Payment Date and any
date on which interest or Holder Yield in connection with a prepayment of
principal on the Loans or of the Holder Advances is due under the Credit
Agreement or the Trust Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002(a) of ERISA or any successor thereto.
"Pension Plan" shall mean a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan), and to which
Appendix A-25
<PAGE> 116
the Lessee or any ERISA Affiliate may have any liability, including without
limitation any liability by reason of having been a substantial employer within
the meaning of section 4063 of ERISA at any time during the preceding five (5)
years, or by reason of being deemed to be a contributing sponsor under section
4069 of ERISA.
"Permitted Facility" shall mean a Property approved by the Bank.
"Permitted Liens" shall mean:
(a) the respective rights and interests of the parties to the
Operative Agreements as provided in the Operative Agreements;
(b) the rights of any sublessee or assignee under a sublease
or an assignment expressly permitted by the terms of the Lease for no
longer than the duration of the Lease;
(c) Liens for Taxes that either are not yet due or are being
contested in accordance with the provisions of Section 13.1 of the
Lease;
(d) Liens arising by operation of law, materialmen's,
mechanics', workmen's, repairmen's, employees', carriers',
warehousemen's and other like Liens relating to the construction of
the Improvements or in connection with any Modifications or arising in
the ordinary course of business for amounts that either are not more
than thirty (30) days past due or are being diligently contested in
good faith by appropriate proceedings, so long as such proceedings
satisfy the conditions for the continuation of proceedings to contest
Taxes set forth in Section 13.1 of the Lease;
(e) Liens of any of the types referred to in clause (d) above
that have been bonded for not less than the full amount in dispute (or
as to which other security arrangements satisfactory to the Lessor and
the Bank have been made), which bonding (or arrangements) shall comply
with applicable Legal Requirements, and shall have effectively stayed
any execution or enforcement of such Liens;
(f) Liens arising out of judgments or awards with respect to
which appeals or other proceedings for review are being prosecuted in
good faith and for the payment of which adequate reserves have been
provided as required by GAAP or other appropriate provisions have been
made, so long as such proceedings have the effect of staying the
execution of such judgments or awards and satisfy the conditions for
the continuation of proceedings to contest Taxes set forth in Section
13.1 of the Lease; and
(g) Liens in favor of municipalities to the extent agreed to
by the Lessor.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other entity.
Appendix A-26
<PAGE> 117
"Plans and Specifications" shall mean, with respect to Improvements,
the plans and specifications for such Improvements to be constructed or already
existing, as such Plans and Specifications may be amended, modified or
supplemented from time to time in accordance with the terms of the Operative
Agreements.
"Pledge Agreement" shall mean each pledge agreement from the Owner
Trustee to the Bank relating to the applicable Bonds.
"Prime Lending Rate" shall have the meaning given to such term in the
definition of ABR.
"Property" shall mean, with respect to each Permitted Facility that is
(or is to be) acquired, constructed and/or renovated pursuant to the terms of
the Operative Agreements, the Land and each item of Equipment and the various
Improvements, in each case located on such Land, including without limitation
each Construction Period Property, each Property subject to a Ground Lease,
each Property subject to a Head Lease and each Property for which the Term has
commenced.
"Property Acquisition Cost" shall mean the cost to the Lessor (or, as
applicable, any Development Authority) to purchase a Property on a Property
Closing Date.
"Property Closing Date" shall mean the date on which the Lessor (or,
as applicable, any Development Authority) purchases a Property or, with respect
to the first Advance, the date on which the Lessor seeks reimbursement for
Property previously purchased by the Lessor (or, as applicable, any Development
Authority).
"Property Cost" shall mean with respect to a Property the aggregate
amount (and/or the various items and occurrences giving rise to such amounts)
of the Loan Property Cost plus the Holder Property Cost for such Property (as
such amounts shall be increased equally among all Properties respecting the
Holder Advances and the Loans extended from time to time to pay for the
Transaction Expenses, fees, expenses and other disbursements referenced in
Section 7.1 of the Participation Agreement).
"Purchase Option" shall have the meaning given to such term in Section
20.1 of the Lease.
"Purchasing Lender" shall have the meaning given to such term in
Section 9.8(a) of the Credit Agreement.
"Redemption Date" shall have the meaning specified in Section 2.12(e)
of the Participation Agreement.
Appendix A-27
<PAGE> 118
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Release" shall mean any release, pumping, pouring, emptying,
injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance.
"Remarketing Agent" shall mean any Person appointed to serve as
remarketing agent or in a similar capacity with respect to any Bonds under the
applicable Indenture or other Bond Documents.
"Rent" shall mean, collectively, the Basic Rent and the Supplemental
Rent, in each case payable under the Lease.
"Rent Commencement Date" shall mean, regarding each Property, the
Completion Date.
"Reportable Event" shall have the meaning specified in ERISA.
"Requested Funds" shall mean any funds requested by the Lessee or the
Construction Agent, as applicable, in accordance with Section 5 of the
Participation Agreement.
"Requisition" shall have the meaning specified in Section 4.2 of the
Participation Agreement.
"Responsible Officer" 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 Senior Vice President or Executive
Vice President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer, or any Assistant Treasurer, except that when used with respect to
the Trust Company or the Owner Trustee, "Responsible Officer" shall also
include the Cashier, any Assistant Cashier, any Trust Officer or Assistant
Trust Officer, the Controller and any Assistant Controller or any other officer
of the Trust Company or the Owner Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, 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.
"Sale Date" shall have the meaning given to such term in Section
20.3(a) of the Lease.
"Sale Notice" shall mean a notice given to the Lessor in connection
with the election by the Lessee of its Sale Option.
"Sale Option" shall have the meaning given to such term in Section
20.1 of the Lease.
Appendix A-28
<PAGE> 119
"Sale Proceeds Shortfall" shall mean the amount by which the proceeds
of a sale described in Section 22.1 of the Lease are less than the Limited
Recourse Amount with respect to the Properties if it has been determined that
the Fair Market Sales Value of the Properties at the expiration of the term of
the Lease has been impaired by greater than ordinary wear and tear during the
Term of the Lease.
"Scheduled Interest Payment Date" shall mean (a) as to any Eurodollar
Loan or Eurodollar Holder Advance, the last day of the Interest Period
applicable to such Eurodollar Loan or Eurodollar Holder Advance, (b) as to any
ABR Loan or any ABR Holder Advance, the fifteenth day of each month, unless
such day is not a Business Day and in such case on the next occurring Business
Day and (c) as to all Loans and Holder Advances, the date of any voluntary or
involuntary payment, prepayment, return or redemption, and the Maturity Date or
the Expiration Date, as the case may be.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"Security Agreement" shall mean the Security Agreement dated on or
about the Initial Closing Date between the Lessor and the Bank.
"Security Documents" shall mean the collective reference to the
Security Agreement, the Mortgage Instruments, (to the extent the Lease is
construed as a security instrument) the Lease, the UCC Financing Statements and
all other security documents hereafter delivered to the Bank granting a lien on
any asset or assets of any Person to secure the obligations and liabilities of
the Lessor under the Credit Agreement and/or under any of the other Credit
Documents or to secure any guarantee of any such obligations and liabilities.
"Soft Costs" shall mean all costs which are ordinarily and reasonably
incurred in relation to the acquisition, development, installation,
construction, improvement and testing of the Properties other than Hard Costs,
including without limitation structuring fees, administrative fees, legal fees,
upfront fees, fees and expenses related to appraisals, title examinations,
title insurance, document recordation, surveys, environmental site assessments,
geotechnical soil investigations and similar costs and professional fees
customarily associated with a real estate closing, the Commitment Fee, fees and
expenses of the Owner Trustee payable or reimbursable under the Operative
Agreements and costs and expenses incurred pursuant to Section 7 of the
Participation Agreement.
"SRI Realty Trust 1998-1" shall mean the grantor trust created
pursuant to the terms and conditions of the Trust Agreement.
"Sterile Recoveries" shall mean Sterile Recoveries, Inc., a Florida
corporation, and its successors and permitted assignees.
"Subsidiary" shall mean, as to any Person, any corporation of which at
least a majority of the outstanding stock having by the terms thereof ordinary
voting power to elect a majority of the
Appendix A-29
<PAGE> 120
board of directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time owned by such Person, or by one (1) or more Subsidiaries, or by such
Person and one (1) or more Subsidiaries.
"Supplemental Amounts" shall have the meaning given to such term in
Section 9.18 of the Credit Agreement.
"Supplemental Rent" shall mean all amounts, liabilities and
obligations (other than Basic Rent) which the Lessee assumes or agrees to pay
to any Development Authority, any Bond Trustee, the Lessor, the Trust Company,
the Bank or any other Person under the Lease or under any of the other
Operative Agreements including without limitation payments of the Termination
Value and the Maximum Residual Guarantee Amount and all indemnification
amounts, liabilities and obligations.
"Taxes" shall have the meaning specified in the definition of
"Impositions".
"Tender Advance" shall have the meaning specified in Section
2.12(d)(i) of the Participation Agreement.
"Tender Agent" shall mean any Person appointed to serve as tender
agent or in any similar capacity with respect to any Bonds under the applicable
Indenture or other Bond Documents.
"Tender Draft" shall have the meaning specified in each Letter of
Credit, as applicable.
"Term" shall have the meaning specified in Section 2.2 of the Lease.
"Termination Date" shall have the meaning specified in Section 16.2(a)
of the Lease.
"Termination Event" shall mean (a) with respect to any Pension Plan,
the occurrence of a Reportable Event or an event described in Section 4062(e)
of ERISA, (b) the withdrawal of the Lessee or any ERISA Affiliate from a
Multiple Employer Plan during a plan year in which it was a substantial
employer (as such term is defined in Section 4001(a)(2) of ERISA), or the
termination of a Multiple Employer Plan, (c) the distribution of a notice of
intent to terminate a Plan or Multiemployer Plan pursuant to Section 4041(a)(2)
or 4041A of ERISA, (d) the institution of proceedings to terminate a Plan or
Multiemployer Plan by the PBGC under Section 4042 of ERISA, (e) any other event
or condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or
Multiemployer Plan, or (f) the complete or partial withdrawal of the Lessee or
any ERISA Affiliate from a Multiemployer Plan.
"Termination Notice" shall have the meaning specified in Section 16.1
of the Lease.
Appendix A-30
<PAGE> 121
"Termination Value" shall mean the sum of (a) either (i) with respect
to all Properties, an amount equal to the aggregate outstanding Property Cost
for all the Properties, in each case as of the last occurring Payment Date, or
(ii) with respect to a particular Property, an amount equal to the Property
Cost allocable to such Property, plus (b) respecting the amounts described in
each of the foregoing subclause (i) or (ii), as applicable, any and all accrued
but unpaid interest on the Loans and any and all Holder Yield on the Holder
Advances related to the applicable Property Cost, plus (c) to the extent the
same is not duplicative of the amounts payable under clause (b) above, all
other Rent and other amounts then due and payable or accrued under the Agency
Agreement, Lease and/or under any other Operative Agreement (including without
limitation amounts under Sections 11.1 and 11.2 of the Participation Agreement
and all costs and expenses referred to in clause FIRST of Section 22.2 of the
Lease).
"Transaction Expenses" shall mean all Soft Costs and all other costs
and expenses incurred in connection with the preparation, execution and
delivery of the Operative Agreements and the transactions contemplated by the
Operative Agreements including without limitation all of the following:
(a) the reasonable fees, out-of-pocket expenses and
disbursements of counsel in negotiating the terms of the Operative
Agreements and the other transaction documents, preparing for the
closings under, and rendering opinions in connection with, such
transactions and in rendering other services customary for counsel
representing parties to transactions of the types involved in the
transactions contemplated by the Operative Agreements;
(b) the reasonable fees, out-of-pocket expenses and
disbursements of accountants for the Lessee in connection with the
transaction contemplated by the Operative Agreements;
(c) any and all other reasonable fees, charges or other
amounts payable to the Bank, the Owner Trustee or any broker which
arises under any of the Operative Agreements;
(d) any other reasonable fee, out-of-pocket expenses,
disbursement or cost of any party to the Operative Agreements or any
of the other transaction documents; and
(e) any and all Taxes and fees incurred in recording or filing
any Operative Agreement or any other transaction document, any deed,
declaration, mortgage, security agreement, notice or financing
statement with any public office, registry or governmental agency in
connection with the transactions contemplated by the Operative
Agreement.
"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial, or other court or government body, subdivision agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Trust" shall mean the SRI Realty Trust 1998-1.
Appendix A-31
<PAGE> 122
"Trust Agreement" shall mean the Amended, Restated and Replacement
Trust Agreement dated on or about the Initial Closing Date between the Bank and
the Owner Trustee.
"Trust Company" shall mean First Security Bank, National Association,
in its individual capacity, and any successor owner trustee under the Trust
Agreement in its individual capacity.
"Trust Estate" shall have the meaning specified in Section 2.2 of the
Trust Agreement.
"Type" shall mean, as to any Loan, whether it is an ABR Loan or a
Eurodollar Loan.
"UCC Financing Statements" shall mean collectively the Lender
Financing Statements and the Lessor Financing Statements.
"UCP" shall have the meaning specified in Section 2.12(j) of the
Participation Agreement.
"Unfunded Amount" shall have the meaning specified in Section 3.2 of
the Agency Agreement.
"Unfunded Liability" shall mean, with respect to any Plan, at any
time, the amount (if any) by which (a) the present value of all benefits under
such Plan exceeds (b) the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of the Company or any member of the Controlled Group to the PBGC or
such Plan under Title IV of ERISA.
"Uniform Commercial Code" and "UCC" shall mean the Uniform Commercial
Code as in effect in any applicable jurisdiction.
"United States Bankruptcy Code" shall mean Title 11 of the United
States Code.
"U.S. Taxes" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Withholdings" shall have the meaning specified in Section 11.2(e) of
the Participation Agreement.
"Work" shall mean the furnishing of labor, materials, components,
furniture, furnishings, fixtures, appliances, machinery, equipment, tools,
power, water, fuel, lubricants, supplies, goods and/or services with respect to
any Property.
"Year 2000" shall mean the calendar year beginning January 1, 2000 and
ending December 31, 2000.
Appendix A-32
<PAGE> 1
Exhibit 10.30
- -----------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of February 1, 1999
among
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, except as
expressly stated herein,
but solely as the Owner Trustee
under the SRI Realty Trust 1998-1,
as the Borrower,
and
FIRST UNION NATIONAL BANK,
as the Bank
- -----------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS...........................................................................................1
1.1 Definitions..........................................................................................1
1.2 Interpretation.......................................................................................1
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.......................................................................1
2.1 Commitments..........................................................................................1
2.2 Notes................................................................................................2
2.3 Procedure for Borrowing..............................................................................2
2.4 [Intentionally Left Blank]...........................................................................3
2.5 Termination or Reduction of Commitments..............................................................3
2.6 Prepayments and Payments.............................................................................4
2.7 Conversion and Continuation Options..................................................................5
2.8 Interest Rates and Payment Dates.....................................................................5
2.9 Computation of Interest..............................................................................6
2.10 [Intentionally Left Blank]..........................................................................7
2.11 Notice of Amounts Payable; Mandatory Assignment.....................................................7
2.12 Letter of Credit Subfacility........................................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES.......................................................................13
SECTION 4. CONDITIONS PRECEDENT.................................................................................14
4.1 Conditions to Effectiveness.........................................................................14
4.2 Conditions to Each Loan and Letter of Credit........................................................14
SECTION 5. COVENANTS............................................................................................14
5.1 Other Activities....................................................................................14
5.2 Ownership of Properties, Indebtedness...............................................................14
5.3 Disposition of Assets...............................................................................15
5.4 Compliance with Operative Agreements................................................................15
5.5 Further Assurances..................................................................................15
5.6 Notices.............................................................................................15
5.7 Discharge of Liens..................................................................................15
5.8 Trust Agreement.....................................................................................16
SECTION 6. EVENTS OF DEFAULT....................................................................................16
SECTION 7. [INTENTIONALLY LEFT BLANK]...........................................................................18
SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL...........................................................19
8.1 Collection and Allocation of Payments and Other Amounts.............................................19
8.2 Certain Remedial Matters............................................................................19
8.3 Excepted Payments...................................................................................19
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 9 MISCELLANEOUS.........................................................................................19
9.1 Amendments and Waivers..............................................................................19
9.2 Notices.............................................................................................19
9.3 No Waiver; Cumulative Remedies......................................................................20
9.4 Survival of Representations and Warranties..........................................................20
9.5 Payment of Expenses and Taxes.......................................................................20
9.6 Successors and Assigns; Participations and Assignments..............................................20
9.7 [Intentionally Left Blank]..........................................................................20
9.8 Assignments.........................................................................................20
9.9 [Intentionally Left Blank]..........................................................................21
9.10 Set-off............................................................................................21
9.11 Counterparts.......................................................................................22
9.12 Severability.......................................................................................22
9.13 Integration........................................................................................22
9.14 GOVERNING LAW......................................................................................22
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.....................................................22
9.16 Acknowledgments....................................................................................23
9.17 WAIVERS OF JURY TRIAL..............................................................................23
9.18 Nonrecourse........................................................................................23
9.19 USURY SAVINGS PROVISION............................................................................24
</TABLE>
EXHIBITS
EXHIBIT A-1 Form of Note
EXHIBIT B Form of Assignment and Acceptance
ii
<PAGE> 4
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 1, 1999 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
the "Agreement") is among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not
individually, except as expressly stated herein, but solely as the Owner
Trustee under the SRI Realty Trust 1998-1 (the "Owner Trustee" or the
"Borrower") and FIRST UNION NATIONAL BANK, a national banking association, as
lender ("Bank").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINITIONS.
For purposes of this Agreement, capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in Appendix A to that certain Participation Agreement dated as of February
1, 1999 (as amended, modified, extended, supplemented, restated and/or replaced
from time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Sterile Recoveries, Inc., as Lessee and as
Construction Agent, the Borrower, and First Union National Bank, as Lender and
Holder. Unless otherwise indicated, references in this Agreement to articles,
sections, paragraphs, clauses, appendices, schedules and exhibits are to the
same contained in this Agreement.
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Agreement.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 COMMITMENTS.
(a) Subject to the terms and conditions hereof, the Bank agrees to
make Loans to the Borrower and to issue Letters of Credit in connection with
Development Authority financings of Properties from time to time during the
Commitment Period in an aggregate amount up to the Commitment for the purpose
of enabling the Borrower to purchase the Properties (or to the extent
applicable in connection with any Development Authority financings or
otherwise, to lease the Properties) and to pay Property Acquisition Costs,
Property Costs and Transaction Expenses. Any prepayments of the Loans, whether
mandatory or at the Borrower's election, shall not be subject to reborrowing
except as set forth in Section 5.2(d) of the Participation Agreement.
<PAGE> 5
(b) The Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans, or (iii) a combination thereof, as determined by the Borrower and
notified to the Bank in accordance with Sections 2.3 and 2.7. The Letters of
Credit shall satisfy the requirements of Section 2.12. In the event the Borrower
fails to provide notice pursuant to Section 2.3, the Loan shall be an ABR Loan.
Further, any Loans by the Bank on a given date in an aggregate amount less than
$100,000 shall be ABR Loans, unless the remaining Available Commitment is less
than $100,000, in which case, the Borrower may elect a Eurodollar Loan for such
remaining amount.
2.2 NOTES.
The Loans and the LOC Reimbursement Amounts shall be evidenced by
promissory notes of the Borrower, substantially in the form of EXHIBIT A (the
"Notes"), with appropriate insertions as to payee and date. The Bank is hereby
authorized to record the date, Type and amount of each Loan made each
continuation thereof, each conversion of all or a portion thereof to another
Type, the date and amount of each payment or prepayment of principal thereof
and information regarding the LOC Reimbursement Amounts on the schedule annexed
to and constituting a part of any Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded,
provided, that the failure to make any such recordation or any error in such
recordation shall not affect the Borrower's obligations hereunder or under such
Note. Each Note shall (i) be dated the Initial Closing Date, (ii) be stated to
mature on the Maturity Date and (iii) provide for the payment of principal in
accordance with Section 2.6(d) and the payment of interest in accordance with
Section 2.8.
2.3 PROCEDURE FOR BORROWING.
(a) The Borrower may borrow under the Commitments during the
Commitment Period on any Business Day that an Advance may be requested pursuant
to the terms of Section 5.2 of the Participation Agreement, provided, that the
Borrower shall give the Bank irrevocable notice (which must be received by the
Bank prior to 12:00 Noon, prevailing Eastern time, at least three (3) Business
Days prior to the requested Borrowing Date specifying (i) the amount to be
borrowed (which on any date shall not be in excess of the then Available
Commitments), (ii) the requested Borrowing Date, (iii) whether the borrowing is
to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) if the
borrowing is to be a combination of Eurodollar Loans and ABR Loans, the
respective amounts of each Type of Loan and (v) the Interest Period applicable
to each Eurodollar Loan. Pursuant to the terms of the Participation Agreement,
the Borrower shall be deemed to have delivered such notice upon the delivery of
a notice by the Construction Agent or the Lessee containing such required
information. Upon receipt of any such notice from the Borrower, the Bank shall
make such borrowing available for the account of the Borrower at the office of
the Bank specified in Section 9.2 prior to 12:00 Noon, prevailing Eastern time,
on the Borrowing Date requested by the Borrower in funds immediately available.
No amount of any Loan which is repaid or prepaid by the Borrower may be
reborrowed hereunder, except as set forth in Section 5.2(d) of the
Participation Agreement. The Borrower may request the issuance of one or more
Letters of Credit in accordance with Section 2.12. For the period prior to the
Completion Date for each Property (without regard to receipt of any such notice
as referenced in
2
<PAGE> 6
the preceding provisions of this Section 2.3(a) but subject to the satisfaction
or waiver of all other conditions precedent under Section 5.3 of the
Participation Agreement), the Bank shall fund a Loan on each date that a draw
is made with respect to any Letter of Credit on each date that a Tender Advance
is to be made and on each date that a payment for the Bank is required on any
Redemption Date in order to reimburse the Bank for such draw, Tender Advance,
other such Advance and all other LOC Reimbursement Amounts payable pursuant to
Section 2.12 on any such date except for amounts due and owing pursuant to
Section 2.12(k); provided, notwithstanding the foregoing, no such Loan shall be
made to the extent the Borrower has otherwise received Bond fund proceeds to
reimburse the Bank (and has in fact reimbursed the Bank) for each such draw,
Tender Advance, other such payments on any Redemption Date and all other LOC
Reimbursement Amounts. To the extent such conditions precedent are not
satisfied or waived (and the Borrower has not otherwise received Bond fund
proceeds to reimburse the Bank (or has not otherwise reimbursed the Bank) for
each such draw, Tender Advance, other such Advance or payment and all other LOC
Reimbursement Amounts due and owing on such Redemption Date), then such draw,
Tender Advance, other such Advance and such other LOC Reimbursement Amounts
shall not be reimbursed with Loan proceeds and instead shall accrue interest as
specified in Section 2.12 until the Completion Date for the applicable
Property. Amounts owed pursuant to Section 2.12(k) shall be paid (at the
election of the Borrower) by the Borrower (with funds provided by the Lessee as
Supplemental Rent) or by the Lessee directly. For the period from and after the
Completion Date for each Property, the Borrower shall reimburse the Bank (with
funds provided by the Lessee as Supplemental Rent) for all LOC Reimbursement
Amounts on each date that a draw is made with respect to any Letter of Credit.
(b) Interest accruing on each Loan and on each LOC Reimbursement
Amount during the Construction Period with respect to any Property shall,
subject to the limitations set forth in Section 5.1(b) of the Participation
Agreement and Section 2.12(a), be added to the principal amount of such Loan on
the relevant Scheduled Interest Payment Date and added to such LOC
Reimbursement Amount on the applicable draw date under the applicable Letter of
Credit. On each such Scheduled Interest Payment Date or other such date, the
Loan Property Cost and Construction Loan Property Cost shall be increased by
the amount of interest added to the Loans.
2.4 [INTENTIONALLY LEFT BLANK].
2.5 TERMINATION OR REDUCTION OF COMMITMENTS.
(a) The Borrower shall have the right, upon not less than three (3)
Business Days' written notice to the Bank, to terminate the Commitments or,
from time to time, to reduce the amount of the Commitments, provided, that (i)
after giving effect to such reduction, the aggregate outstanding principal
amount of the Loans plus the aggregate LOC Obligations shall not exceed the
aggregate Commitments and (ii) such notice shall be accompanied by a
certificate of the Construction Agent stating that the amount equal to
ninety-seven percent (97%) of aggregate Budgeted Total Property Costs as of the
date of such reduction does not exceed the aggregate amount of Available
Commitments as of such date after giving effect to such reduction. Any such
reduction (A) shall be in an amount equal to the lesser of (1) $1,000,000 (or
3
<PAGE> 7
an even multiple thereof) or (2) the remaining Available Commitments and (B)
shall reduce permanently the Commitments then in effect.
(b) Except for the Commitment to issue Letters of Credit which shall
continue until the date five (5) days prior to the Maturity Date (provided,
however, in no event shall any Letter of Credit issued pursuant hereto have an
expiry date (including without limitation pursuant to any extension thereof)
after the Maturity date), the Commitments respecting any particular Property
shall automatically be reduced to zero (0) upon the occurrence of the Rent
Commencement Date respecting such Property. On any date on which the
Commitments shall automatically be reduced to zero (0) pursuant to Section 6,
the Borrower shall prepay all outstanding Loans, all outstanding amounts under
the Letters of Credit and in each case together with accrued unpaid interest
thereon and all other amounts owing thereunder.
2.6 PREPAYMENTS AND PAYMENTS.
(a) Subject to Sections 11.2(e), 11.3 and 11.4 of the Participation
Agreement, the Borrower may at any time and from time to time prepay the Loans,
in whole or in part, without premium or penalty, upon at least three (3)
Business Days' irrevocable notice to the Bank, specifying the date and amount
of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a
combination thereof, and, if a combination thereof, the amount allocable to
each. If any such notice is given, the amount specified in such notice shall be
due and payable on the date specified therein. Amounts prepaid may not be
reborrowed, and shall reduce the Commitments and the Available Commitments,
except in each case as set forth in Section 5.2(d) of the Participation
Agreement. The LOC Reimbursement Amounts shall be paid pursuant to Section
2.12.
(b) If on any date the Lessor shall receive any payment in respect of
(i) any Casualty, Condemnation or Environmental Violation pursuant to Sections
15.1(a) or 15.1(g) or Article XVI of the Lease (excluding any payments in
respect thereof which are payable to the Lessee in accordance with the Lease),
or (ii) the Termination Value of any Property in connection with the delivery
of a Termination Notice pursuant to Article XVI of the Lease, or (iii) the
Termination Value of any Property in connection with the exercise of the
Purchase Option under Article XX of the Lease or the exercise of the option of
the Lessor to transfer the Properties to the Lessee pursuant to Section 20.3 of
the Lease, or (iv) any payment required to be made or elected to be made by the
Construction Agent to the Lessor pursuant to the terms of the Agency Agreement,
then in each case, the Borrower shall pay such amounts to the Bank.
(c) Each prepayment of the Loans pursuant to Section 2.6(a) shall be
allocated to reduce the respective Loan Property Costs of all Properties pro
rata according to the Loan Property Costs of such Properties immediately before
giving effect to such prepayment. Each prepayment of the Loans pursuant to
Section 2.6(b) shall be allocated to reduce the Loan Property Cost of the
Property or Properties subject to the respective Casualty, Condemnation,
Environmental Violation, termination, purchase, transfer or other circumstance
giving rise to such prepayment. Any amounts applied to reduce the Loan Property
Cost of any Construction Period Property pursuant to this paragraph (c) shall
also be applied to reduce the Construction
4
<PAGE> 8
Loan Property Cost of such Property until such Construction Loan Property Cost
has been reduced to zero (0).
(d) The outstanding principal balance of the Loans, the LOC
Reimbursement Amounts and all other amounts then due and owing under this
Agreement or otherwise with respect to the Loans or Letters of Credit shall be
due and payable in full on the Maturity Date.
2.7 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to ABR Loans by giving the Bank at least three (3) Business Days' prior
irrevocable notice of such election, provided, that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto, and provided, further, to the extent an Event of Default has
occurred and is continuing on the last day of any such Interest Period, the
applicable Eurodollar Loan shall automatically be converted to an ABR Loan. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans
by giving the Bank at least three (3) Business Days' prior irrevocable notice
of such election. All or any part of outstanding Eurodollar Loans or ABR Loans
may be converted as provided herein, provided, that (i) no ABR Loan may be
converted into a Eurodollar Loan after the date that is thirty (30) days prior
to the Maturity Date and (ii) such notice of conversion regarding any
Eurodollar Loan shall contain an election by the Borrower of an Interest Period
for such Eurodollar Loan to be created by such conversion and such Interest
Period shall be in accordance with the terms of the definition of the term
"Interest Period" including without limitation subparagraphs (A) through (D)
thereof.
(b) Subject to the restrictions set forth in Section 2.3 hereof, any
Eurodollar Loan may be continued as such upon the expiration of the current
Interest Period with respect thereto by the Borrower giving irrevocable notice
to the Bank, in accordance with the applicable notice provision for the
conversion of ABR Loans to Eurodollar Loans set forth herein, of the length of
the next Interest Period to be applicable to such Loans, provided, that no
Eurodollar Loan may be continued as such after the date that is one (1) month
prior to the Maturity Date, provided, further, no Eurodollar Loans may be
continued as such if an Event of Default has occurred and is continuing as of
the last day of the Interest Period for such Eurodollar Loan, and provided,
further, that if the Borrower shall fail to give any required notice as
described above or otherwise herein, or if such continuation is not permitted
pursuant to the proceeding proviso, such Loan shall automatically be converted
to an ABR Loan on the last day of such then expiring Interest Period.
2.8 INTEREST RATES AND PAYMENT DATES.
(a) The Loans outstanding hereunder from time to time shall bear
interest at a rate per annum equal to either (i) with respect to a Eurodollar
Loan, the Eurodollar Rate determined for the applicable Interest Period plus
the Applicable Percentage or (ii) with respect to an ABR Loan, the ABR, as
selected by the Borrower in accordance with the provisions hereof; provided,
however, (A) the Loans of the Lender shall bear interest at the ABR applicable
from time to time from and after the dates and during the periods specified in
Section 2.9(c), (B) the Loans
5
<PAGE> 9
shall bear interest at the ABR applicable from time to time from and after the
dates and during the periods specified in Section 11.3(f) of the Participation
Agreement and (C) in such other circumstances as expressly provided herein, the
Loans shall bear interest at the ABR. The LOC Reimbursement Amounts hereunder
from time to time shall bear interest in accordance with the provisions of
Section 2.12.
(b) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which
is the lesser of (x) the then current rate of interest respecting such payment
plus two percent (2%) and (y) the highest interest rate permitted by applicable
law, in each case from the date of such non-payment until such amount is paid
in full (whether after or before judgment). All such amounts referenced in this
Section 2.8(b) shall be paid upon demand.
(c) Interest on Loans shall be payable in arrears on the applicable
Scheduled Interest Payment Date provided, that (i) interest accruing pursuant to
paragraph (b) of this Section 2.8 shall be payable from time to time on demand
and (ii) each prepayment of the Loans shall be accompanied by accrued interest
to the date of such prepayment on the amount prepaid.
2.9 COMPUTATION OF INTEREST.
(a) Whenever it is calculated on the basis of the Prime Lending Rate,
interest shall be calculated on the basis of a year of three hundred sixty-five
(365) days (or three hundred sixty-six (366) days, as the case may be) for the
actual days elapsed; and, otherwise, interest shall be calculated on the basis
of a year of three hundred sixty (360) days for the actual days elapsed. All
payments of interest, commission, reimbursement and other charges with regard
to the Letters of Credit shall be calculated on the basis of a year of three
hundred sixty (360) days for the actual days elapsed. The Bank shall as soon as
practicable notify the Borrower of each determination of a Eurodollar Rate. Any
change in the interest rate on a Loan resulting from a change in the ABR or the
Eurocurrency Reserve Requirements shall become effective as of the day on which
such change becomes effective. The Bank shall as soon as practicable notify the
Borrower of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Bank pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower in
the absence of manifest error.
(c) If the Eurodollar Rate cannot be determined by the Bank in the
manner specified in the definition of the term "Eurodollar Rate", the Bank shall
give telecopy or telephonic notice thereof to the Borrower as soon as
practicable thereafter. Until such time as the Eurodollar Rate can be determined
by the Bank in the manner specified in the definition of such term, no further
Eurodollar Loans shall be made or shall be continued as such at the end of the
then current Interest Period nor shall the Borrower have the right to convert
ABR Loans to Eurodollar Loans.
6
<PAGE> 10
2.10 [INTENTIONALLY LEFT BLANK]
2.11 NOTICE OF AMOUNTS PAYABLE; MANDATORY ASSIGNMENT.
(a) In the event that the Bank becomes aware that any amounts are or
will be owed to it pursuant to Sections 11.2(e) or 11.3 of the Participation
Agreement or that it is unable to make Eurodollar Loans, then it shall promptly
notify the Borrower and the Lessee thereof and, as soon as possible thereafter,
the Bank shall submit to the Borrower a certificate indicating the amount owing
to it and the calculation thereof. The amounts set forth in such certificate
shall be prima facie evidence of the obligations of the Borrower hereunder.
(b) In the event that the Bank delivers to the Borrower a certificate
in accordance with Section 2.11(a) in connection with amounts payable pursuant
to Sections 11.2(e) or 11.3 of the Participation Agreement or the Bank is
required to make Loans as ABR Loans in accordance with Section 11.3(d) of the
Participation Agreement then, subject to Section 9.1 of the Participation
Agreement, the Borrower may, at its own expense (provided, such amounts shall
be reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent) and in the discretion of the Borrower, (i) require the Bank
to transfer or assign, in whole or (with the Bank's consent) in part, without
recourse (in accordance with Section 9.8), all or (with the Bank's consent)
part of its interests, rights (except for rights to be indemnified for actions
taken while a party hereunder) and obligations under this Agreement to a
replacement bank or institution if the Borrower (subject to Section 9.1 of the
Participation Agreement), with the full cooperation of the Bank, can identify a
Person who is ready, willing and able to be such replacement bank or
institution with respect thereto and such replacement bank or institution shall
assume such assigned obligations, or (ii) during such time as no Default or
Event of Default has occurred and is continuing, terminate the Commitment and
prepay all outstanding Loans and all LOC Reimbursement Amounts, provided,
however, that (x) subject to Section 9.1 of the Participation Agreement, the
Borrower or such replacement bank or institution, as the case may be, shall
have paid to the Bank in immediately available funds the principal of and
interest accrued to the date of such payment on the Loans and all LOC
Reimbursement Amounts and all other amounts owed to it hereunder (and all
Holder Advances and Holder Yield accrued and unpaid thereon), (y) any
termination of Commitments shall be subject to the terms of Section 2.5(a) and
(z) such assignment or termination of the Commitment and prepayment of Loans
and LOC Reimbursement Amounts does not conflict with any law, rule or
regulation or order of any court or Governmental Authority.
2.12 LETTER OF CREDIT SUBFACILITY.
(a) Subject to the terms and conditions of the Operative Agreements
and any other terms and conditions which the Bank may reasonably require and in
reliance upon the representations and warranties set forth in the Operative
Agreements, the Bank agrees to issue Letters of Credit in favor of Bond
Trustees in connection with Development Authority financings of Properties in
Dollars from time to time from the Initial Closing Date until the date five (5)
days prior to the Maturity Date as the Borrower may request, in a form
acceptable to the Bank; provided, however, that the sum of the aggregate
outstanding principal amount of Loans plus LOC
7
<PAGE> 11
Obligations shall not at any time exceed the Commitment. Notwithstanding
anything to the contrary in any Operative Agreement, no Letter of Credit shall,
as originally issued or as extended, have an expiry date extending beyond the
Maturity Date. Each Letter of Credit shall comply with the related LOC
Documents. The issuance and expiry dates of each Letter of Credit shall be a
Business Day. The repayment of LOC Reimbursement Amounts shall be subject to
the provisions of Section 2.3(a), this Section 2.12 and the other applicable
provisions of this Agreement.
(b) The request for the issuance of a Letter of Credit shall be
submitted by the Borrower to the Bank at least three (3) Business Days prior to
the requested date of issuance.
(c) Except as otherwise provided in Section 2.12(d), the Borrower
shall pay to the Bank:
(i) on or before 3:00 P.M. (prevailing Eastern time), but
after the honoring of a draw by the Bank, on the date that any amount
is drawn under the applicable Letter of Credit, a sum together with
interest on such sum equal to such amount so drawn under the
applicable Letter of Credit, plus to the extent permitted by
applicable law, any and all reasonable charges and expenses that the
Bank may pay or incur relative to the applicable Letter of Credit
which have not been previously paid by or on behalf of the Borrower;
provided, the Borrower and the Bank acknowledge that such amounts due
under this Section 2.12(c)(i) shall be due and payable and subject to
interest thereon at a fluctuating interest rate per annum equal at all
times to the ABR plus two percent (2%) even though no Event of Default
has occurred;
(ii) on demand, interest on any and all amounts remaining
unpaid by the Borrower when due hereunder from the date such amounts
become due until payment thereof in full, at a fluctuating interest
rate per annum equal at all times to the ABR plus two percent (2%);
(iii) on demand, any and all reasonable expenses incurred
by the Bank in enforcing any rights under this Agreement and the
other Operative Agreements which have not been previously paid by or
on behalf of the Borrower; and
(iv) on demand all charges, commissions, costs and
expenses set forth in Sections 2.12(a) through 2.12(l) or any other
amounts owed pursuant to the Operative Agreements with regard to any
Letter of Credit which have not been previously paid by or on behalf
of the Borrower.
(d) (i) If the Bank shall make any payment of that portion of the
purchase price corresponding to principal and interest of the Bonds drawn under
any applicable Letter of Credit pursuant to a Tender Draft and the conditions
precedent set forth in the Section 2.12(d)(v) shall have been fulfilled, such
payment shall constitute a tender advance made by the Bank to the Borrower on
the date and in the amount of such payment (a "Tender Advance"); provided, that
if the conditions of said Section 2.12(d)(v) have not been fulfilled, the amount
so drawn pursuant to the Tender Draft shall be payable in
8
<PAGE> 12
accordance with the terms of Section 2.12(c). Notwithstanding any
other provision of the Operative Agreements, the Borrower shall repay
the unpaid amount of each Tender Advance, together with all unpaid
interest thereon, on the earlier to occur of (X) such date as any
Bonds purchased pursuant to a Tender Draft are resold as provided in
Section 2.12(d)(iv), (Y) on the date one year and one day following
the date of such Tender Advance, or (Z) the Maturity Date. The
Borrower may prepay the outstanding amount of any Tender Advance in
whole or in part, together with accrued interest to the date of such
prepayment on the amount prepaid. The Borrower shall notify the Bank
prior to 11:00 A.M. (prevailing Eastern time) on the date of such
prepayment of the amount to be prepaid.
(ii) The Borrower shall pay interest on the unpaid amount of
each Tender Advance from the date of such Tender Advance until such
amount is paid in full, payable monthly, in arrears, on the first day
of each month during the term of each Tender Advance and on the date
such amount is paid in full, at a fluctuating interest rate per annum
in effect from time to time equal to the rate applicable to the Bonds,
provided that the unpaid amount of any Tender Advance which is not
paid when due shall bear interest at the ABR plus two percent (2%),
payable on demand and on the date such amount is paid in full.
(iii) Pursuant to the applicable Pledge Agreement, the
Borrower has agreed that, in accordance with the terms of the
applicable Indenture, Bonds purchased with proceeds of any Tender
Draft shall be delivered by the applicable Tender Agent to the Bank
or its designee (or otherwise in the manner provided in the
applicable Pledge Agreement) to be held by the Bank or its designee
in pledge as collateral securing the Borrower's payment obligations
to the Bank pursuant to the Operative Agreements. Bonds so delivered
to the Bank or its designee shall be registered in the name of the
Bank, or its designee, as pledgee of the Borrower, as provided for in
the applicable Pledge Agreement.
(iv) Prior to or simultaneously with the resale of such
pledged bonds, the Borrower shall prepay the then outstanding Tender
Advances (in the order in which they were made) by paying to the Bank
an amount equal to the sum of (a) the amounts advanced by the Bank
pursuant to the corresponding Tender Drafts relating to such Bonds,
plus (b) the aggregate amount of accrued and unpaid interest on such
Tender Advances. Such payment shall be applied by the Bank in
reimbursement of such drawings (and as prepayment of Tender Advances
resulting from such drawings in the manner described below), and, upon
receipt by the Bank of a certificate completed and signed by the
applicable Bond Trustee in substantially the form of the applicable
annex to the Letter of Credit (if any), the Borrower irrevocably
authorizes the Bank to rely on such certificate and to reinstate the
Letter of Credit in accordance therewith. Funds held by the applicable
Tender Agent as a result of sales of such pledged bonds by the
applicable Remarketing Agent shall be paid to the Bank by the
applicable Tender Agent to be applied to the amounts owing by the
Borrower to the Bank pursuant to this Section 2.12(d)(iv). Upon
payment to the Bank of the amount of such Tender Advance to be
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prepaid, together with accrued interest on such Tender Advance to the
date of such prepayment on the amount to be prepaid, the principal
amount outstanding of Tender Advances shall be reduced by the amount
of such prepayment and interest shall cease to accrue on the amount
prepaid.
(v) Each payment made by the Bank under any Letter of Credit
pursuant to a Tender Draft shall constitute a Tender Advance
hereunder only if on the date of such payment the following
statements shall be true:
(A) The representations and warranties of the
Borrower and the Lessee contained in the Operative Agreements
are true and correct on and as of the date of such Tender
Advance as though made on and as of such date; and
(B) No event has occurred or would result from
such Tender Advance, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
Unless the Borrower or the Lessee shall have previously advised the Bank in
writing or the Bank has actual knowledge that one or more of the above
statements is no longer true, the Borrower and the Lessee shall be deemed to
have represented and warranted, on the date of payment by the Bank under the
applicable Letter of Credit pursuant to a Tender Draft, that on the date of
such payment the above statements are true and correct.
(e) Subject to the option of prepayment being available under the
terms of the applicable Head Lease and the other applicable Bond Documents, the
Borrower shall, in accordance with the provisions of the applicable Indenture,
direct the applicable Bond Trustee on each appropriate date as specified in the
applicable Indenture (each a "Redemption Date") to give notice that there will
be an optional redemption of a specified principal amount of the applicable
Bonds on such Redemption Date. The Borrower shall pay the remaining principal
amount of the applicable Bonds on the maturity date of such Bonds. The Borrower
will also provide the applicable Bond Trustee with the notice required pursuant
to the provisions of the applicable Indenture on or before the appropriate date
as specified in the applicable Indenture before each Redemption Date in
connection with the optional redemption of the applicable Bonds on such
Redemption Date.
(f) (i) The Borrower shall pay, or cause to be paid, to the Bank a
commission at the rate of three-quarters of one percent (0.75%) per
annum on the undrawn amount available to be drawn under each Letter of
Credit (computed on the date that such commission is payable) from and
including the date of issuance of each Letter of Credit until the
Maturity Date, payable annually in advance on the date of issuance of
each Letter of Credit and on each anniversary of the issuance of each
Letter of Credit, subject to adjustment upon demand by the Bank due to
any event that may increase the cost to the Bank of issuing or
maintaining each Letter of Credit, as applicable.
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(ii) The Borrower shall pay, or cause to be paid, to the
Bank, upon each drawing under any Letter of Credit in accordance
with the terms thereof, a fee of $150 per drawing.
(iii) The Borrower shall pay, or cause to be paid,
to the Bank, upon transfer of each Letter of Credit in
accordance with the terms thereof, a transfer fee of $1,000.
(g) Except as hereinafter provided, each Letter of Credit will expire
on the expiry date stated therein. Subject to the provisions of the following
sentence, each Letter of Credit shall automatically be extended for an
additional one-year period from the then applicable expiry date, unless the
Bank shall have notified the Borrower and the applicable Bond Trustee in
writing at least ninety (90) days prior to the then applicable expiry date that
the Bank will not extend such then applicable expiry date for an additional
one-year period from the then applicable expiry date. In no event shall any
Letter of Credit issued pursuant hereto have an expiry date (including without
limitation pursuant to any extension thereof) after the Maturity Date.
(h) The obligations of the Borrower under the Operative Agreements
shall be absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of the Operative Agreements, under all circumstances
whatsoever, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit, any Bonds, any of the other Bond Documents, any of the
Security Documents or any other Operative Agreement;
(ii) any amendment or waiver of or any consent to departure
from the terms of any Letter of Credit, any Bonds, any of the
other Bond Documents, any of the Security Documents or any other
Operative Agreement;
(iii) the existence of any claim, set off, defense or other
right which either the Borrower or any issuer of any Bond may
have at any time against any Bond Trustee, any beneficiary or any
transferee of any Letter of Credit (or any Person for whom any
Bond Trustee, any such beneficiary or any such transferee may be
acting), the Bank or any other Person, whether in connection with
this Agreement, the Security Documents, the Letters of Credit,
the Bond Documents, the other Operative Agreements, any Property
or any unrelated transaction;
(iv) any statement, draft or other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being
untrue or inaccurate in any respect whatsoever; provided, that
the payment is not the result of the gross negligence or willful
misconduct of the Bank; and provided further, that the documents
must substantially comply with the Letter of Credit terms;
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(v) the surrender, exchange or impairment of any security
for the performance or observance of any of the terms of this
Agreement or any other Operative Agreement; or
(vi) any other circumstance which might otherwise
constitute a defense available to, or a discharge of the Borrower,
except subject to the qualification that obligations may be
reinstated upon bankruptcy.
(i) The renewal or extension of any Letter of Credit shall, for
purposes hereof, be treated in all respects the same as the issuance of a new
Letter of Credit hereunder.
(j) The Bank may have the Letters of Credit be subject to The
Uniform Customs and Practice for Documentary Credits, as published as of the
date of issue by the International Chamber of Commerce (the "UCP"), in which
case the UCP may be incorporated therein and deemed in all respects to be a
part thereof.
(k) (i) In addition to its other obligations under this Section 2.12,
the Borrower hereby agrees to pay, and protect, indemnify and save the
Bank harmless from and against, any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) that the Bank may incur or be subject to
as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or (B) the failure of the Bank to honor a drawing
under a Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or omissions,
herein called "Government Acts").
(ii) As between the Borrower and the Bank, the Borrower shall
assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Bank shall not be responsible:
(A) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (D) for any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under
a Letter of Credit or of the proceeds thereof; and (E) for any
consequences arising from causes beyond the control of the Bank,
including without limitation any Government Acts. None of the above
shall affect, impair, or prevent the vesting of the Bank's rights or
powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by the Bank, under or in connection with any Letter of Credit
or the related certificates, if taken or omitted in good faith, shall
not put
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the Bank under any resulting liability to the Borrower. It is the
intention of the parties that this Agreement shall be construed and
applied to protect and indemnify the Bank against any and all risks
involved in the issuance of the Letters of Credit, all of which risks
are hereby assumed by the Borrower (on behalf of itself), including
without limitation any and all Government Acts. The Bank shall not,
in any way, be liable for any failure by the Bank or anyone else to
pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the Bank.
(iv) Nothing in this Section 2.12(k) is intended to limit
the reimbursement obligations of the Borrower contained in Sections
2.12(c) through 2.12(j). The obligations of the Borrower under this
Section 2.12(k) shall survive the termination of this Agreement. No
act or omission of any current or prior beneficiary of a Letter of
Credit shall in any way affect or impair the rights of the Bank to
enforce any right, power or benefit under this Agreement.
(v) Notwithstanding anything to the contrary contained in
this Section 2.12(k), the Borrower shall have no obligation to
indemnify the Bank in respect of any liability incurred by the Bank in
connection with the matters described in this Section 2.12(k) (A)
arising solely out of the gross negligence or willful misconduct of
the Bank, as determined by a court of competent jurisdiction, or (B)
caused by the Bank's failure to pay under any Letter of Credit after
presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit, as determined by a court of
competent jurisdiction, unless such payment is prohibited by any law,
regulation, court order or decree or (C) caused by the Bank's payment
under a Letter of Credit without the beneficiary having presented a
sight draft and certificate that at least substantially complies with
the terms and conditions of the Letter of Credit.
(l) Except as otherwise provided in the next sentence, in the
event of any conflict between this Agreement and any LOC Document (including
any letter of credit application), this Agreement shall control. Incorporation
of the UCP or any similar body of interpretive rules regarding letters of
credit shall be effectuated solely by express provision regarding such
incorporation being set forth in the applicable Letter of Credit.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, to make the Loans and
to issue the Letters of Credit, each of the Trust Company and the Owner Trustee
hereby makes and affirms the representations and warranties set forth in
Section 6.1 of the Participation Agreement or in any of the other Operative
Agreements to the same extent as if such representations and warranties were
set forth in this Agreement in their entirety.
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SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO EFFECTIVENESS.
The effectiveness of this Agreement is subject to the satisfaction of
all conditions precedent set forth in Section 5.3 of the Participation
Agreement required by said Section to be satisfied on or prior to the Initial
Closing Date.
4.2 CONDITIONS TO EACH LOAN AND LETTER OF CREDIT.
The agreement of the Bank to make any Loan and to issue any Letter of
Credit requested to be made by it on any date is subject to the satisfaction of
all conditions precedent set forth in Sections 5.3 and 5.4 of the Participation
Agreement (and regarding any Letter of Credit, as otherwise set forth in
Section 2.12) required by said Sections to be satisfied on or prior to the date
of the applicable Loan.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such Loan or such
issuance of any Letter of Credit that the conditions contained in this Section
4.2 have been satisfied.
SECTION 5. COVENANTS
So long as any Loan or any amount pursuant to any Letter of Credit or
Note remains outstanding and unpaid or any other amount is owing to the Bank
hereunder:
5.1 OTHER ACTIVITIES.
The Borrower shall not conduct, transact or otherwise engage in, or
commit to transact, conduct or otherwise engage in, any business or operations
other than the entry into, and exercise of rights and performance of
obligations in respect of, the Operative Agreements and other activities
incidental or related to the foregoing.
5.2 OWNERSHIP OF PROPERTIES, INDEBTEDNESS.
The Borrower shall not own, lease, manage or otherwise operate any
properties or assets other than in connection with the activities described in
Section 5.1, or incur, create, assume or suffer to exist any Indebtedness or
other consensual liabilities or financial obligations other than as may be
incurred, created or assumed or as may exist in connection with the activities
described in Section 5.1 (including without limitation the Loans, LOC
Reimbursement Amounts and other obligations incurred by the Borrower
hereunder).
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5.3 DISPOSITION OF ASSETS.
The Borrower shall not convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets, whether now owned
or hereafter acquired, except to the extent expressly contemplated by the
Operative Agreements.
5.4 COMPLIANCE WITH OPERATIVE AGREEMENTS.
The Borrower shall at all times (a) observe and perform all of the
covenants, conditions and obligations required to be performed by it (whether
in its capacity as the Lessor, the Owner Trustee or otherwise) under each
Operative Agreement to which it is a party and (b) observe and perform, or
cause to be observed and performed, all of the covenants, conditions and
obligations of the lessee under the Head Lease and of the Lessor under the
Lease, even in the event that the Head Lease or the Lease, as the case may be,
is terminated at stated expiration, following an event of default under the
Head Lease, a Lease Event of Default or otherwise.
5.5 FURTHER ASSURANCES.
At any time and from time to time, upon the written request of the
Bank, and at the expense of the Borrower (provided, such amounts shall be
reimbursed or paid entirely (as elected by the Borrower) by the Lessee, as
Supplemental Rent), the Borrower will promptly and duly execute and deliver
such further instruments and documents and take such further action as the Bank
may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and the other Operative Agreements and of the rights
and powers herein or therein granted.
5.6 NOTICES.
If on any date, a Responsible Officer of the Borrower shall obtain
actual knowledge of the occurrence of a Default or Event of Default that has
not been cured within the applicable cure period, the Borrower will give
written notice thereof to the Bank within five (5) Business Days after such
date.
5.7 DISCHARGE OF LIENS.
Neither the Borrower nor the Trust Company will create or permit to
exist at any time, and will, at its own expense, promptly take such action as
may be necessary duly to discharge, or cause to be discharged, all Lessor Liens
attributable to it, provided, that the Borrower and the Trust Company shall not
be required to discharge any Lessor Lien while the same is being contested in
good faith by appropriate proceedings diligently prosecuted so long as such
proceedings shall not involve any material danger of impairment of any of the
Liens contemplated by the Security Documents or of the sale, forfeiture or loss
of, and shall not materially interfere with the disposition of, any Property or
title thereto or any interest therein or the payment of Rent.
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5.8 TRUST AGREEMENT.
Without prejudice to any right under the Trust Agreement of the Owner
Trustee to resign, the Owner Trustee (a) agrees not to terminate or revoke the
trust created by the Trust Agreement except as permitted by Article VIII of the
Trust Agreement, (b) agrees not to amend, supplement, terminate, revoke or
otherwise modify any provision of the Trust Agreement in any manner which could
reasonably be expected to have an adverse effect on the rights or interests of
the Bank hereunder or under the other Operative Agreements and (c) agrees to
comply with all of the terms of the Trust Agreement.
SECTION 6. EVENTS OF DEFAULT
Upon the occurrence of any of the following specified events (each an
"Event of Default"):
(a) Except as provided in Sections 6(c), the Borrower shall
default in the payment when due of any principal on the Loans or default in the
payment when due of any interest on the Loans, and in either such case, such
default shall continue for three (3) or more days; or
(b) Except as provided in Sections 6(a) and 6(c), the Borrower
shall default, and such default shall continue for three (3) or more days, in
the payment of any amount owing under any Credit Document; or
(c) (i) The Borrower shall default in the payment of any amount
due on the Maturity Date owing under any Credit Document or (ii) the Borrower
shall default in the payment when due of any principal or interest on the Loans
payable with regard to any obligation of Lessee to pay Termination Value when
due or to pay Basic Rent or Supplemental Rent at such time as any Termination
Value is due; or
(d) The Borrower shall default in the due performance or observance by
it of any term, covenant or agreement contained in any Credit Document to which
it is a party (other than those referred to in paragraphs (a), (b) and (c)
above) or in any Bond Document or LOC Document to which it is a party (after
the expiration of applicable grace or cure periods in any such Bond Document or
LOC Document), provided, that in the case of any such default under Sections
5.4, 5.5 or 5.8(c), such default shall have continued unremedied for a period
of at least fifteen (15) days after notice to the Borrower by the Bank,
provided, further, if any such default under Sections 5.4, 5.5 or 5.8(c) is not
capable of remedy within such fifteen (15) day period but may be remedied with
further diligence and if the Borrower has and continues to pursue diligently
such remedy, then the Borrower shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) days.
(e) Any representation, warranty or statement made or deemed made
by the Borrower herein or in any other Credit Document, Bond Document or LOC
Document or by the Borrower or the Lessee in any Operative Agreement, or in any
statement or certificate delivered or required
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to be delivered pursuant hereto or thereto, shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
(f) (i) Any Lease Event of Default or any event of default under any
Head Lease shall have occurred and be continuing or (ii) the Owner Trustee
shall default in the due performance or observance by it of any term, covenant
or agreement contained in the Participation Agreement or in the Trust Agreement
to or for the benefit of the Bank, provided, that in the case of this clause
(ii) such default shall have continued unremedied for a period of at least
fifteen (15) days after notice to the Owner Trustee and Lessee by the Bank,
provided, further, that in the case of this clause (ii), such default is not
capable of remedy within such fifteen (15) day period but may be remedied with
further diligence and if the Borrower has and continues to pursue diligently
such remedy, then the Borrower shall be granted additional time to pursue such
remedy but in no event more than an additional thirty (30) days; or
(g) The Borrower shall commence a voluntary case concerning itself
under the Bankruptcy Code or an involuntary case is commenced against the
Borrower and the petition is not contravened within ten (10) days after
commencement of the case or an involuntary case is commenced against the
Borrower and the petition is not dismissed within sixty (60) days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower; or the Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower, or there is
commenced against the Borrower any such proceeding which remains undismissed
for a period of sixty (60) days; or the Borrower is adjudicated insolvent or
bankrupt, or any order of relief or other order approving any such case or
proceeding is entered; or the Borrower suffers any appointment of any custodian
or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of sixty (60) days; or the Borrower makes
a general assignment for the benefit of creditors; or any corporate or
partnership action is taken by the Borrower for the purpose of effecting any of
the foregoing; or
(h) Any Security Document shall cease to be in full force and effect,
or shall cease to give the Bank the Liens, rights, powers and privileges
purported to be created thereby (including without limitation a first priority
perfected security interest in, and Lien on, all of the Properties), superior
to and prior to the rights of all third Persons and subject to no other Liens
(except in each case to the extent expressly permitted herein or in any
Operative Agreement) other than any Ground Lease or any Head Lease; or
(i) The Lease shall cease to be enforceable against the Lessee or
any Head Lease shall cease to be enforceable against the applicable Development
Authority; or
(j) One (1) or more judgments or decrees shall be entered against
the Borrower involving a liability of $100,000 or more in the aggregate for all
such judgments and decrees for the Borrower and any such judgments or decrees
shall not have been vacated, discharged or stayed or bonded pending appeal
within sixty (60) days from the entry thereof,
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then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder and all LOC
Reimbursement Amounts (with accrued interest thereon) and all other amounts
owing under this Agreement and the Notes shall immediately become due and
payable, and (B) if such event is any other Event of Default, either or both of
the following actions may be taken: (i) the Bank may, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) the Bank may by notice to the Borrower,
declare the Loans hereunder and all LOC Reimbursement Amounts (with accrued
interest thereon) and all other amounts owing under this Agreement and the
Notes to be due and payable forthwith, whereupon the same shall immediately
become due and payable (any of the foregoing occurrences or actions referred to
in clause (A) or (B) above, an "Acceleration"). Except as expressly provided
above in this Section 6, presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Bank may exercise any
or all of the rights and powers and pursue any and all of the remedies
available to it hereunder and (subject to the terms thereof) under the other
Credit Documents, the Lease and the other Operative Agreements and shall have
any and all rights and remedies available under the Uniform Commercial Code or
any provision of law.
Upon the occurrence of any Event of Default and at any time thereafter
so long as any Event of Default shall be continuing, the Bank may proceed to
protect and enforce this Agreement, the Notes, the other Credit Documents, the
Head Lease and the Lease by suit or suits or proceedings in equity, at law or
in bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted,
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for the Property (or the leasehold interest of the Borrower therein, as the
case may be) or for the recovery of judgment for the indebtedness secured
thereby or for the enforcement of any other proper, legal or equitable remedy
available under applicable laws.
The Borrower shall be liable for any and all accrued and unpaid
amounts due hereunder before, after or during the exercise of any of the
foregoing remedies, including without limitation all reasonable legal fees and
other reasonable costs and expenses incurred by the Bank by reason of the
occurrence of any Event of Default or the exercise of remedies with respect
thereto.
SECTION 7. [INTENTIONALLY LEFT BLANK]
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SECTION 8. MATTERS RELATING TO PAYMENT AND COLLATERAL
8.1 COLLECTION AND ALLOCATION OF PAYMENTS AND OTHER AMOUNTS.
The Lessee, the Construction Agent, the Bank and the Borrower have
agreed pursuant to the terms of Section 8.7 of the Participation Agreement to a
procedure for the allocation of certain payments, including without limitation
the proceeds of Collateral.
8.2 CERTAIN REMEDIAL MATTERS.
Notwithstanding any other provision of this Agreement or any other
Credit Document:
(a) the Borrower shall at all times retain to the exclusion of
all other parties, all rights to Excepted Payments payable to it and to demand,
collect or commence an action at law to obtain such payments and to enforce any
judgment with respect thereto; and
(b) the Borrower and the Bank shall at all times retain the right
(i) to retain all rights with respect to insurance that Article XIV of the
Lease specifically confers upon the "Lessor", (ii) to provide such insurance as
the Lessee shall have failed to maintain or as the Borrower or the Bank may
desire, and (iii) to enforce compliance by the Lessee with the provisions of
Articles VIII, IX, X, XI, XIV and XVII of the Lease.
8.3 EXCEPTED PAYMENTS.
Notwithstanding any other provision of this Agreement or the Security
Documents, any Excepted Payment received at any time by the Bank shall be
distributed promptly to the Person entitled to receive such Excepted Payment.
SECTION 9 MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS.
None of the terms or provisions of this Agreement may be terminated,
amended, supplemented, waived or modified except in accordance with the terms
of Section 12.4 of the Participation Agreement.
9.2 NOTICES.
All notices required or permitted to be given under this Agreement
shall be given in accordance with Section 12.2 of the Participation Agreement.
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9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the
Bank, any right, remedy, power or privilege hereunder or under the other Credit
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or future exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made by the Borrower under the
Operative Agreements shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans hereunder.
9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrower agrees to (with funds provided by the Lessee as
Supplemental Rent): (a) pay all reasonable out-of-pocket costs and expenses of
the Bank (i) whether or not the transactions herein contemplated are
consummated, in connection with the negotiation, preparation, execution,
administration and delivery of the Operative Agreements and the documents and
instruments referred to therein (including without limitation the reasonable
fees and disbursements of Moore & Van Allen, PLLC) and any amendment, waiver or
consent relating thereto (including without limitation the reasonable fees and
disbursements of counsel to the Agent) and (ii) in connection with the
enforcement of the Operative Agreements and the documents and instruments
referred to therein (including without limitation the reasonable fees and
disbursements of counsel for the Bank) and (b) pay and hold the Bank harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
This Agreement shall be binding upon and inure to the benefit of the
Borrower and the Bank and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Bank.
9.7 [INTENTIONALLY LEFT BLANK]
9.8 ASSIGNMENTS.
(a) Subject to and in accordance with Section 10.1 of the
Participation Agreement, the Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time and from time to time assign
with the consent, subject to Section 9.1 of the
20
<PAGE> 24
Participation Agreement, of the Borrower (which shall not be unreasonably
withheld or delayed and which consent of the Borrower shall not be required
during the continuation of any Event of Default), to any bank, financial
institution or other entity that is either organized under the laws of the
United States or any state thereof or is a foreign bank that operates a branch
office in the United States (each, a "Purchasing Lender") all or any part of
its rights and obligations under this Agreement and the other Operative
Agreements pursuant to an Assignment and Acceptance, substantially in the form
of EXHIBIT B. Upon such execution, delivery, acceptance and recording, from and
after the effective date determined pursuant to such Assignment and Acceptance,
(x) the Purchasing Lender thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of
the Bank hereunder with a Commitment as set forth therein, and (y) the Bank
shall, to the extent provided in such Assignment and Acceptance, be released
from its obligations under this Agreement (and the Bank shall cease to be a
party hereto). Notwithstanding anything to the contrary in this Agreement, the
consent of the Borrower shall not be required, and, unless requested by the
relevant Purchasing Lender, new Notes shall not be required to be executed and
delivered by the Borrower, for any assignment which occurs at any time when any
of the events described in Section 6(g) shall have occurred and be continuing.
(b) Upon its receipt of an Assignment and Acceptance executed by the
Bank and a Purchasing Lender the Borrower shall execute and deliver to
Purchasing Lender new Notes (in exchange for the Notes of the Bank), each in an
amount equal to the Commitment assumed or Loans or obligations pursuant to each
outstanding Letter of Credit purchased by the relevant Purchasing Lender
pursuant to such Assignment and Acceptance. Such new Notes shall be dated the
effective date of the applicable Assignment and Acceptance and shall otherwise
be in the form of the Notes replaced thereby.
(c) [Intentionally Left Blank]
(d) The Bank may, from time to time and without the consent of the
Borrower or any other Person, pledge or assign for security purposes any
portion of its Loans, any LOC Reimbursement Amounts or any other interests in
this Agreement and the other Credit Documents to any Federal Reserve Bank.
9.9 [INTENTIONALLY LEFT BLANK]
9.10 SET-OFF.
(a) [Intentionally Left Blank].
(b) In addition to any rights now or hereafter granted under
applicable law or otherwise, and not by way of limitation of any such rights,
upon the occurrence of an Event of Default, the Bank is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held
or owing by the Bank (including
21
<PAGE> 25
without limitation by branches and agencies of the Bank wherever located) to or
for the credit or the account of the Borrower against and on account of the
obligations and liabilities of the Borrower to the Bank under this Agreement or
under any of the other Operative Agreements, and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Operative Agreement, irrespective or whether or not the Bank shall have made
any demand and although said obligations, liabilities or claims, or any of
them, shall be contingent or unmatured.
9.11 COUNTERPARTS.
This Agreement may be executed by one (1) or more of the parties to
this Agreement on any number of separate counterparts (including without
limitation by telecopy), and all of said counterparts taken together shall be
deemed to constitute one (1) and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Borrower and
the Bank.
9.12 SEVERABILITY.
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
9.13 INTEGRATION.
This Agreement and the other Credit Documents represent the agreement
of the Borrower and the Bank with respect to the subject matter hereof and
thereof, and there are no promises, undertakings, representations or warranties
by the Bank relative to subject matter hereof not expressly set forth or
referred to herein or in the other Credit Documents.
9.14 GOVERNING LAW.
THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED,
INTERPRETED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH
CAROLINA.
9.15 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO SUBMISSION
TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
22
<PAGE> 26
9.16 ACKNOWLEDGMENTS.
The Borrower hereby acknowledges that:
(a) The Bank has no fiduciary relationship with or duty to the
Borrower arising out of or in connection with this Agreement or any of the
other Credit Documents, and the relationship between the Bank on one (1) hand,
and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(b) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated hereby
or among the Borrower and the Bank.
9.17 WAIVERS OF JURY TRIAL.
THE BORROWER AND THE BANK HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.18 NONRECOURSE.
In addition to and not in limitation of Section 12.9 of the
Participation Agreement, anything to the contrary contained in this Agreement
or in any other Operative Agreement notwithstanding, no Exculpated Person shall
be personally liable in any respect for any liability or obligation hereunder
or under any other Operative Agreement including without limitation the payment
of the principal of, or interest on, the Notes, or for monetary damages for the
breach of performance of any of the covenants contained in this Agreement, the
Notes or any of the other Operative Agreements. The Bank agrees that, in the
event it pursues any remedies available under this Agreement, the Notes or any
other Operative Agreement, the Bank shall not have any recourse against the
Borrower, nor any other Exculpated Person, for any deficiency, loss or claim
for monetary damages or otherwise resulting therefrom and recourse shall be had
solely and exclusively against the Trust Estate and the Lessee; but nothing
contained herein shall be taken to prevent recourse against or the enforcement
of remedies against the Trust Estate in respect of any and all liabilities,
obligations and undertakings contained in this Agreement, the Notes or any
other Operative Agreement. The Bank further agrees that the Borrower shall not
be responsible for the payment of any amounts owing hereunder (excluding
principal and interest (other than Overdue Interest) in respect of the Loans)
(such non-excluded amounts, "Supplemental Amounts") except to the extent that
payments of Supplemental Rent designated by the Lessee for application to such
Supplemental Amounts shall have been paid by the Lessee pursuant to the Lease
(it being understood that the failure by the Lessee for any reason to pay any
Supplemental Rent in respect of such Supplemental Amounts shall nevertheless be
deemed to constitute a default by the Borrower for the purposes of Section 6).
Notwithstanding the foregoing provisions of this Section 9.18, nothing in this
Agreement or any other Operative Agreement shall (a) constitute a waiver,
release or discharge of any obligation evidenced or
23
<PAGE> 27
secured by this Agreement or any other Credit Document, (b) limit the right of
the Bank to name the Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under any Security Document, or (c) affect in any
way the validity or enforceability of any guaranty (whether of payment and/or
performance) given to the Lessor or the Bank or of any indemnity agreement
given by the Borrower, in connection with the Loans made hereunder.
9.19 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND CONTRACT IN
STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT AND THAT
N.C. GEN. STAT. SS.24-9 SHALL APPLY WITH RESPECT TO THIS AGREEMENT. TO THE
EXTENT N.C. GEN. STAT. SS.24-9 IS HEREAFTER DEEMED NOT TO APPLY BY A COURT OF
COMPETENT JURISDICTION AND ANY PAYMENTS HEREUNDER ARE HEREINAFTER CHARACTERIZED
AS THE REPAYMENT OF PRINCIPAL AND INTEREST THEREON, THE FOLLOWING PROVISIONS OF
THIS SECTION 9.19 SHALL APPLY. ANY SUCH PAYMENTS SO CHARACTERIZED AS INTEREST
MAY BE REFERRED TO HEREIN AS "INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO
ARE HEREBY LIMITED BY THE PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND
CONTROL ALL SUCH AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER WRITTEN OR ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING
WITHOUT LIMITATION PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY
OBLIGATION), SHALL ANY INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR
RECEIVED UNDER THIS AGREEMENT OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS
AMOUNT PERMISSIBLE UNDER APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF
ANY OF THE OPERATIVE AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST
WOULD OTHERWISE BE PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH
CONSTRUCTION SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH
AMOUNTS UNDER SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE
MAXIMUM NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY
OF EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF THE BANK SHALL
EVER RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST WITH RESPECT
TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND WHICH WOULD, APART
FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL AMOUNT, AN AMOUNT EQUAL
TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST SHALL, WITHOUT PENALTY,
BE APPLIED TO THE REDUCTION OF THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL
AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED TO THE BORROWER OR ANY OTHER
PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE
EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE PRINCIPAL. THE RIGHT TO DEMAND
PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE OPERATIVE
24
<PAGE> 28
AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH HAS NOT
OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND THE BANK DOES NOT INTEND TO
CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND. ALL
INTEREST PAID OR AGREED TO BE PAID TO THE BANK, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE
FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF
THIS AGREEMENT SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES
NOT EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
[signature pages follow]
25
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
FIRST SECURITY BANK NATIONAL ASSOCIATION,
not individually, except as expressly
stated herein, but solely as the Owner
Trustee under the SRI Realty Trust 1998-1
By: /s/ Authorized Officer
-----------------------------------
Name: Authorized Officer
Title:
FIRST UNION NATIONAL BANK, as Bank
By: /s/ Paul Solitario
---------------------------------
Name: Paul Solitario
Title: Vice President
<PAGE> 30
EXHIBIT A
PROMISSORY NOTE
(SRI Realty Trust 1998-1)
[ DATE ]
FOR VALUE RECEIVED, the undersigned, FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not in its individual capacity, but solely as the Owner Trustee
under the SRI Realty Trust 1998-1 (the "Borrower"), hereby unconditionally
promises to pay to the order of FIRST UNION NATIONAL BANK (the "Lender"), at
the office of First Union National Bank, located at c/o First Union Capital
Markets Group, DC6, 301 South College Street, Charlotte, North Carolina
28288-0166 or at such other address as may be specified by the Lender, in
lawful money of the United States of America and in immediately available
funds, on the Maturity Date the aggregate unpaid principal amount of all Loans
made by the Lender to the Borrower pursuant to Section 2.1 of the Credit
Agreement (as defined below) and all LOC Reimbursement Amounts. The Borrower
agrees to pay interest in like money at such office on the unpaid principal
amount hereof from time to time outstanding at the rates and on the dates
specified in Sections 2.8 and 2.12 of the Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof and each
conversion of all or a portion thereof to another Type and information
regarding each advance pursuant to each Letter of Credit. Each such endorsement
shall constitute prima facie evidence of the accuracy of the information
endorsed. The failure to make any such endorsement or any error in such
endorsement shall not affect the obligations of the Borrower in respect of such
Loan.
This Note (a) is one (1) of the Notes referred to in the Credit
Agreement dated as of February 1, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among the Borrower and the
Lender, (b) is subject to the provisions of the Credit Agreement (including
without limitation Section 9.18 thereof) and (c) is subject to optional and
mandatory prepayment in whole or in part as provided in the Credit Agreement.
Reference is hereby made to the Credit Documents for a description of the
properties and assets in which a security interest has been granted, the nature
and extent of the security and the guarantees, the terms and conditions upon
which the security interests and each guarantee were granted and the rights of
the holder of this Note in respect thereof.
A-1
<PAGE> 31
Upon the occurrence of any one (1) or more of the Events of Default,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
[The remainder of this page has been left blank intentionally.]
A-2
<PAGE> 32
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NORTH CAROLINA.
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner
Trustee under the SRI Realty Trust 1998-1
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
A-3
<PAGE> 33
EXHIBIT B
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of February 1,
1999 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among FIRST SECURITY BANK, NATIONAL ASSOCIATION, not in
its individual capacity, but solely as the Owner Trustee under the SRI Realty
Trust 1998-1 (the "Owner Trustee" or the "Borrower"), and FIRST UNION NATIONAL
BANK, as the Lender. Unless otherwise defined herein, terms defined in the
Credit Agreement (or pursuant to Section 1 of the Credit Agreement, defined in
other agreements) and used herein shall have the meanings given to them in or
pursuant to the Credit Agreement.
FIRST UNION NATIONAL BANK (the "Assignor") and [_______________] (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a 100% interest (the "Assigned Interest") in
and to the Assignor's rights and obligations under the Credit Agreement with
respect to the credit facility contained in the Credit Agreement as are set
forth on Schedule 1 hereto (the " Assigned Facility"), in a principal amount
for the Assigned Facility as set forth on Schedule 1.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Operative
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Operative Agreement or
any other instrument or document furnished pursuant thereto, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, or any other obligor or the
performance or observance by the Borrower, or any other obligor of any of their
respective obligations under the Credit Agreement or any other Operative
Agreement or any other instrument or document furnished pursuant hereto or
thereto; and (c) attaches the Note held by it evidencing the Assigned Facility
and requests that the Borrower exchange such Note for a new Note payable to the
Assignee.
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received copies of the Operative Agreements, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (c) agrees that it will,
independently and without reliance upon the Assignor and based on such
documents and
B-1
<PAGE> 34
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Operative Agreements or any other instrument or document furnished
pursuant hereto or thereto; and (d) agrees that it will be bound by the
provisions of the Credit Agreement and the other Operative Agreements to which
Assignee is a party and will perform in accordance herewith all the obligations
which by the terms of the Credit Agreement and the other Operative Agreements
to which Assignee is a party are required to be performed by it.
4. The effective date of this Assignment and Acceptance shall be
[DATE ] (the "Effective Date").
5. From and after the Effective Date, the Borrower shall make all
payments in respect of the Assigned Interest (including without limitation
payments of principal, interest, fees and other amounts) to the Assignee
whether such amounts have accrued prior to the Effective Date or accrue
subsequent to the Effective Date. The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Borrower for periods prior to the
Effective Date or with respect to the making of this assignment directly
between themselves.
6. From and after the Effective Date, (a) the Assignee shall be
a party to the Credit Agreement and, to the extent provided in this Assignment
and Acceptance, have the rights and obligations of a Lender thereunder and
under the other Operative Agreements and shall be bound by the provisions
thereof and (b) the Assignor shall, to the extent provided in this Assignment
and Acceptance, relinquish its rights and be released from its obligations
under the Credit Agreement and the other Operative Agreements.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND
CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA.
B-2
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their
respective duly authorized officers on Schedule 1 hereto
FIRST UNION NATIONAL BANK, as Assignor
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
[Name of Assignee]
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Consented To:
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually, but solely as the Owner
Trustee under the SRI Realty Trust 1998-1
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
[consents required only to the extent expressly provided in Section 9.8 of
the Credit Agreement]
B-3
<PAGE> 36
SCHEDULE 1
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT,
DATED AS OF FEBRUARY 1, 1999,
AMONG
FIRST SECURITY BANK, NATIONAL ASSOCIATION
NOT INDIVIDUALLY,
BUT SOLELY AS THE OWNER TRUSTEE,
AND
FIRST UNION NATIONAL BANK, AS LENDER
Name of Assignor: First Union National Bank
Name of Assignee:
----------------------------
Effective Date of Assignment:
-----------------
<TABLE>
<CAPTION>
Credit Principal Commitment Percentage
Facility Assigned Amount Assigned Assigned
<S> <C> <C>
$ 100%
- ----------------------------- ------------------------------ ------------------------------
</TABLE>
FIRST UNION NATIONAL BANK, as Assignor
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
[Name of Assignee], as Assignee
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE> 1
Exhibit 10.31
- -------------------------------------------------------------------------------
LEASE AGREEMENT
Dated as of February 1, 1999
between
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
not individually,
but solely as the Owner Trustee
under the SRI Realty Trust 1998-1,
as Lessor
and
STERILE RECOVERIES, INC.,
as Lessee
- -------------------------------------------------------------------------------
This Lease Agreement is subject to a security interest in favor of First Union
National Bank ("Bank") under a Security Agreement dated as of February 1, 1999
between First Security Bank, National Association, not individually, but solely
as the Owner Trustee under the SRI Realty Trust 1998-1 and the Bank, as
amended, modified, extended, supplemented, restated and/or replaced from time
to time in accordance with the applicable provisions thereof. This Lease
Agreement has been executed in several counterparts. To the extent, if any,
that this Lease Agreement constitutes chattel paper (as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in this Lease Agreement may be created through the transfer
or possession of any counterpart other than the original counterpart containing
the receipt therefor executed by the Bank on the signature page hereof.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I ............................................................................................. 1
1.1 Definitions............................................................................... 1
1.2 Interpretation............................................................................ 2
ARTICLE II ............................................................................................ 2
2.1 Property.................................................................................. 2
2.2 Lease Term................................................................................ 2
2.3 Title..................................................................................... 2
2.4 Lease Supplements......................................................................... 3
ARTICLE III ........................................................................................... 3
3.1 Rent...................................................................................... 3
3.2 Payment of Basic Rent..................................................................... 3
3.3 Supplemental Rent......................................................................... 3
3.4 Performance on a Non-Business Day......................................................... 4
3.5 Rent Payment Provisions................................................................... 4
ARTICLE IV ............................................................................................ 5
4.1 Taxes; Utility Charges.................................................................... 5
ARTICLE V ............................................................................................. 5
5.1 Quiet Enjoyment........................................................................... 5
ARTICLE VI ............................................................................................ 5
6.1 Net Lease................................................................................. 5
6.2 No Termination or Abatement............................................................... 6
ARTICLE VII ........................................................................................... 7
7.1 Ownership of the Properties............................................................... 7
ARTICLE VIII .......................................................................................... 8
8.1 Condition of the Properties............................................................... 8
8.2 Possession and Use of the Properties...................................................... 9
8.3 Integrated Properties.....................................................................10
ARTICLE IX ............................................................................................10
9.1 Compliance With Legal Requirements, Insurance Requirements and
Manufacturer's Specifications and Standards.............................................10
ARTICLE X .............................................................................................11
10.1 Maintenance and Repair; Return...........................................................11
10.2 Environmental Inspection.................................................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE XI ............................................................................................12
11.1 Modifications............................................................................12
ARTICLE XII ...........................................................................................13
12.1 Warranty of Title........................................................................13
ARTICLE XIII ..........................................................................................14
13.1 Permitted Contests Other Than in Respect of Indemnities..................................14
13.2 Impositions, Utility Charges, Other Matters; Compliance with Legal Requirements..........15
ARTICLE XIV ...........................................................................................15
14.1 Public Liability and Workers' Compensation Insurance.....................................15
14.2 Permanent Hazard and Other Insurance.....................................................15
14.3 Coverage.................................................................................16
ARTICLE XV ............................................................................................17
15.1 Casualty and Condemnation................................................................17
15.2 Environmental Matters....................................................................19
15.3 Notice of Environmental Matters..........................................................20
ARTICLE XVI ...........................................................................................21
16.1 Termination Upon Certain Events..........................................................21
16.2 Procedures...............................................................................21
ARTICLE XVII ..........................................................................................21
17.1 Lease Events of Default..................................................................21
17.2 Surrender of Possession..................................................................24
17.3 Reletting................................................................................25
17.4 Damages..................................................................................25
17.5 Power of Sale............................................................................26
17.6 Final Liquidated Damages.................................................................26
17.7 Environmental Costs......................................................................26
17.8 Waiver of Certain Rights.................................................................27
17.9 Assignment of Rights Under Contracts.....................................................27
17.10 Remedies Cumulative.....................................................................27
ARTICLE XVIII .........................................................................................27
18.1 Lessor's Right to Cure Lessee's Lease Defaults...........................................27
ARTICLE XIX ...........................................................................................28
19.1 Provisions Relating to Lessee's Exercise of its Purchase Option..........................28
19.2 No Purchase or Termination With Respect to Less than All of a Property...................28
ARTICLE XX ............................................................................................28
20.1 Purchase Option or Sale Option-General Provisions........................................28
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
20.2 Lessee Purchase Option...................................................................29
20.3 Third Party Sale Option..................................................................30
ARTICLE XXI ...........................................................................................31
21.1 [Intentionally Omitted]..................................................................31
ARTICLE XXII ..........................................................................................31
22.1 Sale Procedure...........................................................................31
22.2 Application of Proceeds of Sale..........................................................34
22.3 Indemnity for Excessive Wear.............................................................34
22.4 Appraisal Procedure......................................................................34
22.5 Certain Obligations Continue.............................................................35
ARTICLE XXIII .........................................................................................35
23.1 Holding Over.............................................................................35
ARTICLE XXIV ..........................................................................................36
24.1 Risk of Loss.............................................................................36
ARTICLE XXV ...........................................................................................36
25.1 Assignment...............................................................................36
25.2 Subleases................................................................................36
ARTICLE XXVI ..........................................................................................37
26.1 No Waiver................................................................................37
ARTICLE XXVII .........................................................................................37
27.1 Acceptance of Surrender..................................................................37
27.2 No Merger of Title.......................................................................37
ARTICLE XXVIII ........................................................................................38
28.1 Incorporation of Covenants...............................................................38
ARTICLE XXIX ..........................................................................................39
29.1 Notices..................................................................................39
ARTICLE XXX ...........................................................................................39
30.1 Miscellaneous............................................................................39
30.2 Amendments and Modifications.............................................................39
30.3 Successors and Assigns...................................................................39
30.4 Headings and Table of Contents...........................................................39
30.5 Counterparts.............................................................................39
30.6 GOVERNING LAW............................................................................39
30.7 Calculation of Rent......................................................................40
30.8 Memoranda of Lease and Lease Supplements.................................................40
30.9 [Intentionally Left Blank]...............................................................40
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
30.10 Limitations on Recourse.................................................................40
30.11 WAIVERS OF JURY TRIAL...................................................................40
30.12 Exercise of Lessor Rights...............................................................41
30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION..........................................41
30.14 USURY SAVINGS PROVISION.................................................................41
30.15 ACKNOWLEDGMENT OF HEAD LEASE; BOND DOCUMENTS............................................42
EXHIBITS
EXHIBIT A - Lease Supplement No. ____
EXHIBIT B - Memorandum of Lease and Lease Supplement No. ____
</TABLE>
iv
<PAGE> 6
LEASE AGREEMENT
THIS LEASE AGREEMENT dated as of February 1, 1999 (as amended,
modified, extended, supplemented, restated and/or replaced from time to time,
this "Lease") is between FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, having its principal office at 79 South Main Street, Salt
Lake City, Utah 84111, not individually, but solely as the Owner Trustee under
the SRI Realty Trust 1998-1, as lessor (the "Lessor"), and STERILE RECOVERIES,
INC., a Florida corporation, having its principal place of business at 28100 US
Highway 19N, Suite 201, Clearwater, FL 33761, as lessee (the "Lessee").
W I T N E S S E T H:
A. WHEREAS, subject to the terms and conditions of the Participation
Agreement and the Agency Agreement, Lessor will (i) purchase, lease pursuant to
one (1) or more Head Leases or ground lease various parcels of real property,
some of which will (or may) have existing Improvements thereon, from one (1) or
more third parties designated by Lessee and (ii) fund or otherwise finance the
acquisition, installation, testing, use, development, construction, operation,
maintenance, repair, refurbishment and restoration of the Properties by the
Construction Agent; and
B. WHEREAS, the Term shall commence with respect to each Property upon
the Property Closing Date with respect thereto; provided, Basic Rent with
respect thereto shall not be payable until the applicable Rent Commencement
Date; and
C. WHEREAS, Lessor desires to lease or sublease, as the case may be,
to Lessee, and Lessee desires to lease or sublease, as the case may be, from
Lessor, each Property;
NOW, THEREFORE, in consideration of the foregoing, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
1.1 DEFINITIONS.
For purposes of this Lease, capitalized terms used in this Lease
and not otherwise defined herein shall have the meanings assigned to them in
Appendix A to that certain Participation Agreement dated as of February 1, 1999
(as amended, modified, extended, supplemented, restated and/or replaced from
time to time in accordance with the applicable provisions thereof, the
"Participation Agreement") among Lessee, Lessor and First Union National Bank,
as Lender and Holder ("Bank"). Unless otherwise indicated, references in this
Lease to articles, sections, paragraphs, clauses, appendices, schedules and
exhibits are to the same contained in this Lease.
<PAGE> 7
1.2 INTERPRETATION.
The rules of usage set forth in Appendix A to the Participation
Agreement shall apply to this Lease.
ARTICLE II
2.1 PROPERTY.
Subject to the terms and conditions hereinafter set forth and
contained in the respective Lease Supplement relating to each Property, Lessor
hereby leases to Lessee and Lessee hereby leases from Lessor, each Property.
2.2 LEASE TERM.
The term of this Lease with respect to each Property (the
"Term") shall begin upon the Property Closing Date for such Property (in each
case the "Commencement Date") and shall end on the third annual anniversary of
the Initial Closing Date, unless the Term is earlier terminated; provided,
however, with respect to any Property financed with the proceeds of Bonds, the
Term shall end on an interest payment date with respect to such Bonds, which
interest payment date shall be no later than fifteen (15) days after the third
annual anniversary of the Initial Closing Date; provided, further, that in the
event such interest payment date with respect to such Bonds is later than
fifteen (15) days after the third annual anniversary of the Initial Closing
Date, the Term with respect to such Property shall end on the interest payment
date immediately preceding the third annual anniversary of the Initial Closing
Date. Notwithstanding the foregoing, Lessee shall not be obligated to pay Basic
Rent until the Rent Commencement Date with respect to such Property.
2.3 TITLE.
Each Property is leased to Lessee without any representation or
warranty, express or implied, by Lessor and subject to the rights of parties in
possession (if any), the existing state of title (including without limitation
the Permitted Liens) and all applicable Legal Requirements. Lessee shall in no
event have any recourse against Lessor for any defect in Lessor's title to any
Property or any interest of Lessee therein (other than for Lessor Liens) or as
a result of the lack of validity or enforceability of any provision of any Head
Lease, and the obligations of Lessee hereunder, including without limitation
with respect to the payment of all Rent, shall remain in full force and effect.
The parties hereto acknowledge that, with respect to any Property subject to a
Head Lease, the Lessor has only such interest in such Property as arises under
such Head Lease.
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<PAGE> 8
2.4 LEASE SUPPLEMENTS.
On or prior to each Commencement Date, Lessee and Lessor shall
each execute and deliver a Lease Supplement for the Property to be leased
effective as of such Commencement Date in substantially the form of Exhibit A
hereto.
ARTICLE III
3.1 RENT.
(a) Lessee shall pay Basic Rent in arrears on each Payment Date,
and on any date on which this Lease shall terminate with respect to
any or all Properties during the Term; provided, however, with respect
to each individual Property Lessee shall have no obligation to pay
Basic Rent with respect to such Property until the Rent Commencement
Date with respect to such Property (notwithstanding that Basic Rent
for such Property shall accrue from and including the Scheduled
Interest Payment Date immediately preceding such Rent Commencement
Date).
(b) Basic Rent shall be due and payable in lawful money of the
United States and shall be paid by wire transfer of immediately
available funds on the due date therefor (or within the applicable
grace period) to such account or accounts at such bank or banks as
Lessor shall from time to time direct.
(c) Lessee's inability or failure to take possession of all or
any portion of any Property when delivered by Lessor, whether or not
attributable to any act or omission of Lessor, the Construction Agent,
Lessee or any other Person or for any other reason whatsoever, shall
not delay or otherwise affect Lessee's obligation to pay Rent for such
Property in accordance with the terms of this Lease.
(d) Lessee shall make all payments of Rent prior to 12:00 Noon,
Charlotte, North Carolina time, on the applicable date for payment of
such amount.
3.2 PAYMENT OF BASIC RENT.
Basic Rent shall be paid absolutely net to Lessor or its
designee, so that this Lease shall yield to Lessor the full amount thereof,
without setoff, deduction or reduction.
3.3 SUPPLEMENTAL RENT.
Lessee shall pay to the Person entitled thereto any and all
Supplemental Rent when and as the same shall become due and payable, and if
Lessee fails to pay any Supplemental Rent within three (3) days after the same
is due, Lessor shall have all rights, powers and remedies provided for herein
or by law or equity or otherwise in the case of nonpayment of Basic Rent. All
such payments of Supplemental Rent shall be in the full amount thereof, without
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<PAGE> 9
setoff, deduction or reduction. Lessee shall pay to the appropriate Person, as
Supplemental Rent due and owing to such Person, among other things, on demand,
(a) any and all payment obligations (excluding amounts payable as Basic Rent
but including without limitation LOC Reimbursement Amounts subject to the
provisions of Section 2.3(a) of the Credit Agreement regarding accrual of such
amounts until the Completion Date for each Property, as applicable) owing from
time to time under the Operative Agreements by any Person to the Bank or any
other Person, (b) interest at the applicable Overdue Rate on any installment of
Basic Rent not paid when due (subject to the applicable grace period) for the
period for which the same shall be overdue and on any payment of Supplemental
Rent not paid when due or demanded by the appropriate Person (subject to any
applicable grace period) for the period from the due date or the date of any
such demand, as the case may be, until the same shall be paid and (c) amounts
referenced as Supplemental Rent obligations pursuant to Section 8.3 of the
Participation Agreement. It shall be an additional Supplemental Rent obligation
of Lessee to pay to the appropriate Person all rent and other amounts when such
become due and owing from time to time under each Ground Lease and each Head
Lease and without the necessity of any notice from Lessor with regard thereto.
The expiration or other termination of Lessee's obligations to pay Basic Rent
hereunder shall not limit or modify the obligations of Lessee with respect to
Supplemental Rent. Unless expressly provided otherwise in this Lease, in the
event of any failure on the part of Lessee to pay and discharge any
Supplemental Rent as and when due, Lessee shall also promptly pay and discharge
any fine, penalty, interest or cost which may be assessed or added for
nonpayment or late payment of such Supplemental Rent, all of which shall also
constitute Supplemental Rent.
3.4 PERFORMANCE ON A NON-BUSINESS DAY.
If any Basic Rent is required hereunder on a day that is not a
Business Day, then such Basic Rent shall be due on the corresponding Scheduled
Interest Payment Date. If any Supplemental Rent is required hereunder on a day
that is not a Business Day, then such Supplemental Rent shall be due on the
next succeeding Business Day.
3.5 RENT PAYMENT PROVISIONS.
Lessee shall make payment of all Basic Rent and Supplemental
Rent when due (subject to the applicable grace periods) regardless of whether
any of the Operative Agreements pursuant to which same is calculated and is
owing shall have been rejected, avoided or disavowed in any bankruptcy or
insolvency proceeding involving any of the parties to any of the Operative
Agreements. Such provisions of such Operative Agreements and their related
definitions are incorporated herein by reference and shall survive any
termination, amendment or rejection of any such Operative Agreements.
4
<PAGE> 10
ARTICLE IV
4.1 TAXES; UTILITY CHARGES.
Lessee shall pay or cause to be paid all Impositions with
respect to the Properties and/or the use, occupancy, operation, repair, access,
maintenance or operation thereof and all charges for electricity, power, gas,
oil, water, telephone, sanitary sewer service and all other rents, utilities
and operating expenses of any kind or type used in or on any Property and
related real property during the Term. Upon Lessor's request, Lessee shall
provide from time to time Lessor with evidence of all such payments referenced
in the foregoing sentence. Lessee shall be entitled to receive any credit or
refund with respect to any Imposition or utility charge paid by Lessee. Unless
an Event of Default shall have occurred and be continuing, the amount of any
credit or refund received by Lessor on account of any Imposition or utility
charge paid by Lessee, net of the costs and expenses incurred by Lessor in
obtaining such credit or refund, shall be promptly paid over to Lessee. All
charges for Impositions or utilities imposed with respect to any Property for a
period during which this Lease expires or terminates shall be adjusted and
prorated on a daily basis between Lessor and Lessee, and each party shall pay
or reimburse the other for such party's pro rata share thereof.
ARTICLE V
5.1 QUIET ENJOYMENT.
Subject to the rights of Lessor contained in Sections 17.2, 17.3
and 20.3 and the other terms of this Lease and the other Operative Agreements
and so long as no Event of Default shall have occurred and be continuing,
Lessee shall peaceably and quietly have, hold and enjoy each Property (or, if
applicable, its subleasehold interest in such Property) for the applicable
Term, free of any claim or other action by Lessor or anyone rightfully claiming
by, through or under Lessor (other than Lessee) with respect to any matters
arising from and after the applicable Commencement Date.
ARTICLE VI
6.1 NET LEASE.
This Lease shall constitute a net lease, and the obligations of
Lessee hereunder are absolute and unconditional. Lessee shall pay all operating
expenses arising out of the use, operation and/or occupancy of each Property
whether arising hereunder, under a Head Lease or otherwise. Any present or
future law to the contrary notwithstanding, this Lease shall not terminate, nor
shall Lessee be entitled to any abatement, suspension, deferment, reduction,
setoff, counterclaim, or defense with respect to the Rent, nor shall the
obligations of Lessee hereunder be affected (except as expressly herein
permitted and by performance of the obligations in connection therewith) for
any reason whatsoever, including without limitation by reason of: (a)
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<PAGE> 11
any damage to or destruction of any Property or any part thereof; (b) any
taking of any Property or any part thereof or interest therein by Condemnation
or otherwise; (c) any prohibition, limitation, restriction or prevention of
Lessee's use, occupancy or enjoyment of any Property or any part thereof, or
any interference with such use, occupancy or enjoyment by any Person or for any
other reason; (d) any title defect, Lien or any matter affecting title to any
Property (whether related to the interest of a Development Authority, the
interest therein purported to be created by a Head Lease or otherwise); (e)
any eviction by paramount title or otherwise; (f) any default by Lessor
hereunder; (g) any action for bankruptcy, insolvency, reorganization,
liquidation, dissolution or other proceeding relating to or affecting the Bank,
Lessor, Lessee or any Governmental Authority; (h) the impossibility or
illegality of performance by Lessor, Lessee or both; (i) any action of any
Governmental Authority or any other Person; (j) Lessee's acquisition of
ownership of all or part of any Property; (k) breach of any warranty or
representation with respect to any Property or any Operative Agreement; (l) any
defect in the condition, quality or fitness for use of any Property or any part
thereof; (m) any default under any Head Lease or any other circumstance arising
under or related to any Head Lease or any other Bond Document (including
without limitation the lack of validity or enforceability of any provision
thereof); or (n) any other cause or circumstance whether similar or dissimilar
to the foregoing and whether or not Lessee shall have notice or knowledge of
any of the foregoing. The parties intend that the obligations of Lessee
hereunder shall be covenants, agreements and obligations that are separate and
independent from any obligations of Lessor hereunder or under any Head Lease
and shall continue unaffected unless such covenants, agreements and obligations
shall have been modified or terminated in accordance with an express provision
of this Lease. Lessee acknowledges that, to the extent any Head Lease imposes
burdens, restrictions or obligations in excess of or in addition to Lessee's
obligations hereunder, Lessee agrees, in addition to Lessee's obligations
hereunder, that Lessee shall perform, satisfy and comply with such burdens,
restrictions and obligations. Lessor and Lessee acknowledge and agree that the
provisions of this Section 6.1 have been specifically reviewed and subject to
negotiation.
6.2 NO TERMINATION OR ABATEMENT.
Lessee shall remain obligated under this Lease in accordance
with its terms and shall not take any action to terminate, rescind or avoid
this Lease, notwithstanding any action for bankruptcy, insolvency,
reorganization, liquidation, dissolution, or other proceeding affecting any
Person or any Governmental Authority, or any action with respect to this Lease
or any Operative Agreement which may be taken by any trustee, receiver or
liquidator of any Person or any Governmental Authority or by any court with
respect to any Person, or any Governmental Authority. Lessee hereby waives all
right (a) to terminate or surrender this Lease (except as permitted under the
terms of the Operative Agreements) or (b) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with respect
to any Rent. Lessee shall remain obligated under this Lease in accordance with
its terms and Lessee hereby waives any and all rights now or hereafter
conferred by statute or otherwise to modify or to avoid strict compliance with
its obligations under this Lease. Notwithstanding any such statute or
otherwise, Lessee shall be bound by all of the terms and conditions contained
in this Lease.
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<PAGE> 12
ARTICLE VII
7.1 OWNERSHIP OF THE PROPERTIES.
(a) Lessor and Lessee intend that (i) for financial accounting
purposes with respect to Lessee (A) this Lease will be treated as an
"operating lease" pursuant to Statement of Financial Accounting
Standards No. 13, as amended, (B) Lessor will be treated as the owner
and lessor of each Property and (C) Lessee will be treated as the
lessee of each Property, but (ii) for federal and all state and local
income tax purposes, bankruptcy purposes, regulatory purposes,
commercial law and real estate purposes and all other purposes (A)
this Lease will be treated as a financing arrangement and (B) Lessee
will be treated as the owner of the Properties and will be entitled to
all tax benefits ordinarily available to owners of property similar to
the Properties for such tax purposes. Notwithstanding the foregoing,
neither party hereto has made, or shall be deemed to have made, any
representation or warranty as to the availability of any of the
foregoing treatments under applicable accounting rules, tax,
bankruptcy, regulatory, commercial or real estate law or under any
other set of rules. Lessee shall claim the cost recovery deductions
associated with each Property, and Lessor shall not, to the extent not
prohibited by Law, take on its tax return a position inconsistent with
Lessee's claim of such deductions.
(b) For all purposes other than as set forth in Section
7.1(a)(i), Lessor and Lessee intend this Lease to constitute a finance
lease and not a true lease. In order to secure the obligations of
Lessee now existing or hereafter arising under any and all Operative
Agreements, Lessee hereby conveys, grants, assigns, transfers,
hypothecates, mortgages and sets over to Lessor, for the benefit of
all Financing Parties, a first priority security interest (but subject
to the security interest in the assets granted by Lessee in favor of
the Bank in accordance with the Security Agreement) in and lien on all
right, title and interest of Lessee (now owned or hereafter acquired)
in and to all Properties, to the extent such is personal property and
irrevocably grants and conveys a lien, deed of trust and mortgage on
all right, title and interest of Lessee (now owned or hereafter
acquired) in and to all Properties to the extent such is real
property. Lessor and Lessee further intend and agree that, for the
purpose of securing the obligations of Lessee and/or the Construction
Agent now existing or hereafter arising under the Operative
Agreements, (i) this Lease shall be a security agreement and financing
statement within the meaning of Article 9 of the Uniform Commercial
Code respecting each of the Properties and all proceeds (including
without limitation insurance proceeds thereof) to the extent such is
personal property and an irrevocable grant and conveyance of a lien,
deed of trust and mortgage on each of the Properties and all proceeds
(including without limitation insurance proceeds thereof) to the
extent such is real property; (ii) the acquisition of title by Lessor
(or to the extent applicable, a leasehold interest pursuant to a
Ground Lease or a Head Lease) in each Property referenced in Article
II constitutes a grant by Lessee to Lessor of a security interest,
lien, deed of trust and mortgage in all of Lessee's right, title and
interest in and to each Property and all proceeds (including without
limitation insurance proceeds thereof) of the conversion, voluntary or
7
<PAGE> 13
involuntary, of the foregoing into cash, investments, securities or
other property, whether in the form of cash, investments, securities
or other property, and an assignment of all rents, profits and income
produced by each Property; and (iii) notifications to Persons holding
such property, and acknowledgments, receipts or confirmations from
financial intermediaries, bankers or agents (as applicable) of Lessee
shall be deemed to have been given for the purpose of perfecting such
lien, security interest, mortgage lien and deed of trust under
applicable law. Lessee shall promptly take such actions as Lessor may
reasonably request (including without limitation the filing of Uniform
Commercial Code Financing Statements, Uniform Commercial Code Fixture
Filings and memoranda (or short forms) of this Lease and the various
Lease Supplements) to ensure that the lien, security interest, lien,
mortgage lien and deed of trust in each Property and the other items
referenced above will be deemed to be a perfected lien, security
interest, mortgage lien and deed of trust of first priority under
applicable law and will be maintained as such throughout the Term.
ARTICLE VIII
8.1 CONDITION OF THE PROPERTIES.
LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY
"AS-IS WHERE-IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR
IMPLIED) BY LESSOR (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE AND CLEAR
OF LESSOR LIENS) AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE,
INCLUDING WITHOUT LIMITATION ANY HEAD LEASE FROM A DEVELOPMENT AUTHORITY TO THE
LESSOR, (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF (IF ANY), (C) ANY
STATE OF FACTS REGARDING ITS PHYSICAL CONDITION OR WHICH AN ACCURATE SURVEY
MIGHT SHOW, (D) ALL APPLICABLE LEGAL REQUIREMENTS AND (E) VIOLATIONS OF LEGAL
REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF AND/OR THE DATE OF THE
APPLICABLE LEASE SUPPLEMENT. NONE OF LESSOR, ANY DEVELOPMENT AUTHORITY OR THE
BANK HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) (EXCEPT THAT LESSOR SHALL KEEP EACH PROPERTY FREE
AND CLEAR OF LESSOR LIENS) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER
AS TO THE TITLE, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION,
MERCHANTABILITY OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR
ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED,
WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NONE OF LESSOR, ANY
DEVELOPMENT AUTHORITY OR THE BANK SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR
PATENT DEFECT THEREON OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO
COMPLY WITH ANY LEGAL REQUIREMENT. LESSEE HAS OR PRIOR TO THE BASIC TERM
COMMENCEMENT DATE WILL HAVE BEEN AFFORDED FULL OPPORTUNITY TO INSPECT EACH
PROPERTY AND THE
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<PAGE> 14
IMPROVEMENTS THEREON (IF ANY), IS OR WILL BE (INSOFAR AS LESSOR, THE
DEVELOPMENT AUTHORITY AND THE BANK ARE CONCERNED) SATISFIED WITH THE RESULTS OF
ITS INSPECTIONS AND IS ENTERING INTO THIS LEASE SOLELY ON THE BASIS OF THE
RESULTS OF ITS OWN INSPECTIONS, AND ALL RISKS INCIDENT TO THE MATTERS DESCRIBED
IN THE PRECEDING SENTENCE, AS BETWEEN LESSOR, THE DEVELOPMENT AUTHORITY AND THE
BANK, ON THE ONE (1) HAND, AND LESSEE, ON THE OTHER HAND, ARE TO BE BORNE BY
LESSEE.
8.2 POSSESSION AND USE OF THE PROPERTIES.
(a) At all times during the Term with respect to each Property,
such Property shall be a Permitted Facility and shall be used by
Lessee in the ordinary course of its business. Lessee shall pay, or
cause to be paid, all charges and costs required in connection with
the use of the Properties as contemplated by this Lease. Lessee shall
not commit or permit any waste of the Properties or any part thereof.
(b) The address stated in Section 29.1 of this Lease is the
principal place of business and chief executive office of Lessee (as
such terms are used in Section 9-103(3) of the Uniform Commercial Code
of any applicable jurisdiction), and Lessee will provide Lessor with
prior written notice of any change of location of its principal place
of business or chief executive office. Regarding a particular
Property, each Lease Supplement correctly identifies the initial
location of the related Equipment (if any) and Improvements (if any)
and contains an accurate legal description for the related parcel of
Land or a copy of the Ground Lease (if any). The Equipment and
Improvements respecting each particular Property will be located only
at the location identified in the applicable Lease Supplement.
(c) Lessee will not attach or incorporate any item of Equipment
to or in any other item of equipment or personal property or to or in
any real property in a manner that could give rise to the assertion of
any Lien on such item of Equipment by reason of such attachment or the
assertion of a claim that such item of Equipment has become a fixture
and is subject to a Lien in favor of a third party that is prior to
the Liens thereon created by the Operative Agreements.
(d) On the Commencement Date for each Property, Lessor and
Lessee shall execute a Lease Supplement in regard to such Property
which shall contain an Equipment Schedule that has a general
description of the Equipment which shall comprise the Property, an
Improvement Schedule that has a general description of the
Improvements which shall comprise the Property and a legal description
of the Land to be leased hereunder (or in the case of any Property
subject to a Ground Lease or a Head Lease to be subleased hereunder)
as of such date. Each Property subject to a Ground Lease or a Head
Lease shall be deemed to be subleased from Lessor to Lessee as of the
Commencement Date, and such sublease shall be in effect until this
Lease is terminated or expires, in each case in accordance with the
terms and provisions hereof. Lessee shall satisfy and perform all
obligations imposed on Lessor under each Ground Lease or Head Lease.
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<PAGE> 15
Simultaneously with the execution and delivery of each Lease
Supplement, such Equipment, Improvements, Land, subleasehold interest,
all additional Equipment and all additional Improvements which are
financed under the Operative Agreements after the Commencement Date
and the remainder of such Property shall be deemed to have been
accepted by Lessee for all purposes of this Lease and to be subject to
this Lease.
(e) At all times during the Term with respect to each Property,
Lessee will comply with all obligations under and (to the extent no
Event of Default exists and provided that such exercise will not
impair the value, utility or remaining useful life of such Property)
shall be permitted to exercise all rights and remedies under, all
operation and easement agreements and related or similar agreements
applicable to such Property.
8.3 INTEGRATED PROPERTIES.
On the Rent Commencement Date for each Property, Lessee shall,
at its sole cost and expense, cause such Property and the applicable property
subject to a Ground Lease or a Head Lease to constitute (and for the duration
of the Term shall continue to constitute) all of the equipment, facilities,
rights, other personal property and other real property necessary or
appropriate to operate, utilize, maintain and control a Permitted Facility in a
commercially reasonable manner.
ARTICLE IX
9.1 COMPLIANCE WITH LEGAL REQUIREMENTS, INSURANCE REQUIREMENTS AND
MANUFACTURER'S SPECIFICATIONS AND STANDARDS.
Subject to the terms of Article XIII relating to permitted
contests, Lessee, at its sole cost and expense, shall (a) comply with all
applicable Legal Requirements (including without limitation all Environmental
Laws) and all Insurance Requirements relating to the Properties, (b) procure,
maintain and comply with all licenses, permits, orders, approvals, consents and
other authorizations required for the acquisition, installation, testing, use,
development, construction, operation, maintenance, repair, refurbishment and
restoration of the Properties, and (c) comply with all manufacturer's
specifications and standards, including without limitation the acquisition,
installation, testing, use, development, construction, operation, maintenance,
repair, refurbishment and restoration of the Properties, whether or not
compliance therewith shall require structural or extraordinary changes in any
Property or interfere with the use and enjoyment of any Property unless the
failure to procure, maintain and comply with such items identified in
subparagraphs (b) and (c), individually or in the aggregate, shall not and
could not reasonably be expected to have a Material Adverse Effect. In
addition, Lessee agrees to take such action as is required to cause Lessor to
comply with each and every provision of each Head Lease including, if
applicable, any tax-exempt covenants relating to the Properties. Lessor agrees
to take such actions as may be reasonably requested by Lessee in connection
with the compliance by Lessee of its obligations under this Section 9.1.
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ARTICLE X
10.1 MAINTENANCE AND REPAIR; RETURN.
(a) Lessee, at its sole cost and expense, shall maintain each
Property in good condition, repair and working order (ordinary wear
and tear excepted) and in the repair and condition as when originally
delivered to Lessor and make all necessary repairs thereto and
replacements thereof, of every kind and nature whatsoever, whether
interior or exterior, ordinary or extraordinary, structural or
nonstructural or foreseen or unforeseen, in each case as required by
Section 9.1 and on a basis consistent with the operation and
maintenance of properties or equipment comparable in type and function
to the applicable Property, such that such Property is capable of
being immediately utilized by a third party and in compliance with
standard industry practice subject, however, to the provisions of
Article XV with respect to Casualty and Condemnation.
(b) Lessee shall not move or relocate any component of any
Property beyond the boundaries of the Land (comprising part of such
Property) described in the applicable Lease Supplement, except for the
temporary removal of Equipment and other personal property for repair
or replacement.
(c) If any component of any Property becomes worn out, lost,
destroyed, damaged beyond repair or otherwise permanently rendered
unfit for use, Lessee, at its own expense, will within a reasonable
time replace such component with a replacement component which is free
and clear of all Liens (other than Permitted Liens and Lessor Liens)
and has a value, utility and useful life at least equal to the
component replaced (assuming the component replaced had been
maintained and repaired in accordance with the requirements of this
Lease). All components which are added to any Property shall
immediately become the property of (and title thereto shall vest in)
Lessor or, with respect to any Property subject to a Head Lease, the
applicable Development Authority and shall be deemed incorporated in
such Property and subject to the terms of the applicable Head Lease
and/or this Lease as if originally leased thereunder and/or hereunder.
(d) Upon reasonable advance notice, Lessor and its agents shall
have the right to inspect each Property and all maintenance records
with respect thereto at any reasonable time during normal business
hours but shall not, in the absence of an Event of Default, materially
disrupt the business of Lessee.
(e) Lessee shall cause to be delivered to Lessor (at Lessee's
sole expense) one (1) or more reappraisals of Property as Lessor may
request if any one (1) of Lessor, the Trust Company or the Bank is
required pursuant to any applicable Legal Requirement to obtain such
reappraisals.
(f) Lessor shall under no circumstances be required to build any
improvements or install any equipment on any Property, make any
repairs, replacements,
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alterations or renewals of any nature or description to any Property,
make any expenditure whatsoever in connection with this Lease or
maintain any Property in any way. Lessor shall not be required to
maintain, repair or rebuild all or any part of any Property, and
Lessee waives the right to (i) require Lessor to maintain, repair, or
rebuild all or any part of any Property, or (ii) make repairs at the
expense of Lessor pursuant to any Legal Requirement, Insurance
Requirement, contract, agreement, covenant, condition or restriction
at any time in effect.
(g) Lessee shall, upon the expiration or earlier termination of
this Lease with respect to a Property, if Lessee shall not have
exercised its Purchase Option with respect to such Property (or
Lessor's leasehold interest therein, as the case may be) and purchased
such Property (or Lessor's leasehold interest therein, as the case may
be), surrender such Property (i) to Lessor pursuant to the exercise of
the applicable remedies upon the occurrence of a Lease Event of
Default or (ii) pursuant to the second paragraph of Section 22.1(a)
hereof, to Lessor or the third party purchaser, as the case may be,
subject to Lessee's obligations under this Lease (including without
limitation the obligations of Lessee at the time of such surrender
under Sections 9.1, 10.1(a) through (f), 10.2, 11.1, 12.1, 22.1 and
23.1).
10.2 ENVIRONMENTAL INSPECTION.
If Lessee has not given notice of exercise of its Purchase
Option on the Expiration Date pursuant to Section 20.1 or for whatever reason
Lessee does not purchase a Property in accordance with the terms of this Lease,
then not more than one hundred twenty (120) days nor less than sixty (60) days
prior to the Expiration Date, Lessee at its expense shall cause to be delivered
to Lessor a Phase I environmental site assessment recently prepared (no more
than thirty (30) days prior to the date of delivery) by an independent
recognized professional reasonably acceptable to Lessor, and in form, scope and
content reasonably satisfactory to Lessor.
ARTICLE XI
11.1 MODIFICATIONS.
(a) Lessee at its sole cost and expense, at any time and from
time to time without the consent of Lessor may make modifications,
alterations, renovations, improvements and additions to any Property
or any part thereof and substitutions and replacements therefor
(collectively, "Modifications"), and Lessee shall make any and all
Modifications required to be made pursuant to all Legal Requirements,
Insurance Requirements and manufacturer's specifications and
standards; provided, that: (i) no Modification shall materially impair
the value, utility or useful life of any Property from that which
existed immediately prior to such Modification; (ii) each Modification
shall be done expeditiously and in a good and workmanlike manner;
(iii) no Modification shall adversely affect the structural integrity
of any Property; (iv) to the extent required by
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Section 14.2(a), Lessee shall maintain builders' risk insurance at all
times when a Modification is in progress; (v) subject to the terms of
Article XIII relating to permitted contests, Lessee shall pay all
costs and expenses and discharge any Liens arising with respect to any
Modification; (vi) each Modification shall comply with the
requirements of this Lease (including without limitation Sections 8.2
and 10.1); and (vii) no Improvement shall be demolished or otherwise
rendered unfit for use unless Lessee shall finance the proposed
replacement Modification outside of this lease facility; provided,
further, Lessee shall not make any Modification (unless required by
any Legal Requirement) to the extent any such Modification,
individually or in the aggregate, shall or could reasonably be
expected to have a Material Adverse Effect. All Modifications shall
immediately and without further action upon their incorporation into
the applicable Property (1) become property of Lessor or, with respect
to any Property subject to a Head Lease, the applicable Development
Authority, (2) be subject to the applicable Head Lease, if any, and
this Lease and (3) be titled in the name of Lessor or, with respect to
any Property subject to a Head Lease, the applicable Development
Authority. Lessee shall not remove or attempt to remove any
Modification from any Property. Each Ground Lease for a Property shall
expressly provide for the provisions of the foregoing sentence.
Lessee, at its own cost and expense, will pay for the repairs of any
damage to any Property caused by the removal or attempted removal of
any Modification.
(b) The construction process provided for in the Agency
Agreement is acknowledged by Lessor to be consistent with and in
compliance with the terms and provisions of this Article XI.
ARTICLE XII
12.1 WARRANTY OF TITLE.
(a) Lessee hereby acknowledges and shall cause title in each
Property (including without limitation all Equipment, all
Improvements, all replacement components to each Property and all
Modifications) immediately and without further action to vest in and
become the property of Lessor and to be subject to the terms of this
Lease (provided, respecting each Property subject to a Ground Lease or
Head Lease, Lessor's interest therein is acknowledged to be a
leasehold interest pursuant to such Ground Lease or Head Lease) from
and after the date hereof or such date of incorporation into any
Property. Lessee agrees that, subject to the terms of Article XIII
relating to permitted contests, Lessee shall not directly or
indirectly create or allow to remain, and shall promptly discharge at
its sole cost and expense, any Lien, defect, attachment, levy, title
retention agreement or claim upon any Property, any component thereof
or any Modifications or any Lien, attachment, levy or claim with
respect to the Rent or with respect to any amounts held by Lessor or
the Bank pursuant to any Operative Agreement, other than Permitted
Liens and Lessor Liens. Lessee shall promptly notify Lessor in the
event it receives actual knowledge that a Lien other than a Permitted
Lien or Lessor Lien has occurred with respect to a Property, the Rent
or any other such amounts, and Lessee
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represents and warrants to, and covenants with, Lessor that the Liens
in favor of Lessor and/or the Bank created by the Operative Agreements
are (and until the Financing Parties under the Operative Agreements
have been paid in full shall remain) first priority perfected Liens
subject only to Permitted Liens and Lessor Liens. At all times
subsequent to the Commencement Date respecting a Property, Lessee
shall (i) cause a valid, perfected, first priority Lien on each
applicable Property to be in place in favor of the Bank and (ii) file,
or cause to be filed, all necessary documents under the applicable
real property law and Article 9 of the Uniform Commercial Code to
perfect such title and Liens.
(b) Nothing contained in this Lease shall be construed as
constituting the consent or request of any Development Authority or
the Lessor, expressed or implied, to or for the performance by any
contractor, mechanic, laborer, materialman, supplier or vendor of any
labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to any
Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF ANY
DEVELOPMENT AUTHORITY OR THE LESSOR IS OR SHALL BE LIABLE FOR ANY
LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE,
OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER
LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR,
SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF ANY
DEVELOPMENT AUTHORITY OR LESSOR IN AND TO ANY PROPERTY.
ARTICLE XIII
13.1 PERMITTED CONTESTS OTHER THAN IN RESPECT OF INDEMNITIES.
Except to the extent otherwise provided for in Section 11 of the
Participation Agreement, Lessee, on its own or on Lessor's or any Development
Authority's behalf, as the case may be, but at Lessee's sole cost and expense,
may contest, by appropriate administrative or judicial proceedings conducted in
good faith and with due diligence, the amount, validity or application, in
whole or in part, of any Legal Requirement, Imposition or utility charge
payable pursuant to Section 4.1 or any Lien, attachment, levy, encumbrance or
encroachment, and Lessor agrees not to pay, settle or otherwise compromise any
such item, provided, that (a) the commencement and continuation of such
proceedings shall suspend the collection of any such contested amount from, and
suspend the enforcement thereof against, the applicable Properties, the
applicable Development Authority, Lessor and the Bank; (b) there shall not be
imposed a Lien (other than Permitted Liens and Lessor Liens) on any Property
and no part of any Property nor any Rent (or amount due under any Head Lease or
with respect to any Bonds) would be in any danger of being sold, forfeited,
lost or deferred; (c) at no time during the permitted contest shall there be a
risk of the imposition of criminal liability or material civil liability on the
Development Authority, the Lessor or the Bank for failure to comply therewith;
and (d) in the event that, at any time, there shall be a material risk of
extending the application of such item
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beyond the end of the Term, then Lessee shall deliver to Lessor an Officer's
Certificate certifying as to the matters set forth in clauses (a), (b) and (c)
of this Section 13.1. Lessor, at Lessee's sole cost and expense, shall execute
and deliver to Lessee such authorizations and other documents as may reasonably
be required in connection with any such contest and, if reasonably requested by
Lessee, shall join as a party therein at Lessee's sole cost and expense.
13.2 IMPOSITIONS, UTILITY CHARGES, OTHER MATTERS; COMPLIANCE WITH
LEGAL REQUIREMENTS.
Except with respect to Impositions, Legal Requirements, utility
charges and such other matters referenced in Section 13.1 which are the subject
of ongoing proceedings contesting the same in a manner consistent with the
requirements of Section 13.1, Lessee shall cause (a) all Impositions, utility
charges and such other matters to be timely paid, settled or compromised, as
appropriate, with respect to each Property and (b) each Property to comply with
all applicable Legal Requirements.
ARTICLE XIV
14.1 PUBLIC LIABILITY AND WORKERS' COMPENSATION INSURANCE.
During the Term for each Property, Lessee shall procure and
carry, at Lessee's sole cost and expense, commercial general liability and
umbrella liability insurance for claims for injuries or death sustained by
persons or damage to property while on such Property or respecting the
Equipment and such other public liability coverages as are then customarily
carried by similarly situated companies conducting business similar to that
conducted by Lessee. Such insurance shall be on terms and in amounts that are
no less favorable than insurance maintained by Lessee with respect to similar
properties and equipment that it owns and are then carried by similarly
situated companies conducting business similar to that conducted by Lessee, and
in no event shall have a minimum combined single limit per occurrence coverage
(i) for commercial general liability of less than $5,000,000 and (ii) for
umbrella liability of less than $25,000,000. The policies shall name Lessee as
the insured and shall be endorsed to name the applicable Development Authority
(if any), the applicable Bond Trustee (if any), the Lessor and the Bank as
additional insureds. The policies shall also specifically provide that such
policies shall be considered primary insurance which shall apply to any loss or
claim before any contribution by any insurance which the applicable Development
Authority (if any), the applicable Bond Trustee (if any), the Lessor or the
Bank may have in force. In the operation of the Properties, Lessee shall comply
with applicable workers' compensation laws and protect the applicable
Development Authority (if any), the applicable Bond Trustee (if any), the
Lessor and the Bank against any liability under such laws.
14.2 PERMANENT HAZARD AND OTHER INSURANCE.
(a) During the Term for each Property, Lessee shall keep such
Property insured against all risk of physical loss or damage by fire
and other risks and shall
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maintain builders' risk insurance during construction of any
Improvements or Modifications in each case in amounts no less than
the then current replacement value of such Property (assuming that
such Property was in the condition required by the terms of this Lease
immediately prior to such loss) and on terms that (i) are no less
favorable than insurance covering other similar properties owned by
Lessee and (ii) are then carried by similarly situated companies
conducting business similar to that conducted by Lessee. The policies
shall name Lessee as the insured and shall be endorsed to name each of
Lessor and the Bank (and, respecting any particular Property, each
other party as may be required under the terms of any Head Lease with
respect to such Property) as an additional insured and as a loss
payee, to the extent of their respective interests; provided, so long
as no Event of Default exists, any loss payable under the insurance
policies required by this Section for losses up to $1,000,000 will be
paid to Lessee.
(b) If, during the Term with respect to a Property the area in
which such Property is located is designated a "flood-prone" area
pursuant to the Flood Disaster Protection Act of 1973, or any
amendments or supplements thereto or is in a zone designated A or V,
then Lessee shall comply with the National Flood Insurance Program as
set forth in the Flood Disaster Protection Act of 1973. In addition,
Lessee will fully comply with the requirements of the National Flood
Insurance Act of 1968 and the Flood Disaster Protection Act of 1973,
as each may be amended from time to time, and with any other Legal
Requirement, concerning flood insurance to the extent that it applies
to any such Property. During the Term, Lessee shall, in the operation
and use of each Property, maintain workers' compensation insurance
consistent with that carried by similarly situated companies
conducting business similar to that conducted by Lessee and containing
minimum liability limits of no less than $100,000. In the operation of
each Property, Lessee shall comply with workers' compensation laws
applicable to Lessee, and protect the applicable Development Authority
(if any), the applicable Bond Trustee (if any), the Lessor and the
Bank against any liability under such laws.
14.3 COVERAGE.
(a) As of the date of this Lease and annually thereafter during
the Term, Lessee shall furnish the applicable Development Authority
(if any), the applicable Bond Trustee (if any) and the Bank (on behalf
of Lessor) with certificates prepared by the insurers or insurance
broker of Lessee showing the insurance required under Sections 14.1
and 14.2 to be in effect, naming (to the extent of their respective
interests) Lessor and the Bank as additional insureds and loss payees
and evidencing the other requirements of this Article XIV. All such
insurance shall be at the cost and expense of Lessee and provided by
nationally recognized, financially sound insurance companies having an
A or better rating by A.M. Best's Key Rating Guide. Lessee shall cause
such certificates to include a provision for thirty (30) days' advance
written notice by the insurer to the applicable Development Authority
(if any), the applicable Bond Trustee (if any) and the Bank (on behalf
of Lessor) in the event of cancellation or material alteration of such
insurance. If an Event of Default has occurred and is continuing and
the Bank
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(on behalf of Lessor) so requests, Lessee shall deliver to the Bank
(on behalf of Lessor) copies of all insurance policies required by
Sections 14.1 and 14.2.
(b) Lessee agrees that the insurance policy or policies required
by Sections 14.1, 14.2(a) and 14.2(b) shall include an appropriate
clause pursuant to which any such policy shall provide that it will
not be invalidated should Lessee or any Contractor, as the case may
be, waive, at any time, any or all rights of recovery against any
party for losses covered by such policy or due to any breach of
warranty, fraud, action, inaction or misrepresentation by Lessee or
any Person acting on behalf of Lessee. Lessee hereby waives any and
all such rights against the applicable Development Authority (if any),
the applicable Bond Trustee (if any), the Lessor and the Bank to the
extent of payments made to any such Person under any such policy.
(c) Neither Lessor nor Lessee shall carry separate insurance
concurrent in kind or form or contributing in the event of loss with
any insurance required under this Article XIV, except that Lessor may
carry separate liability insurance at Lessor's sole cost so long as
(i) Lessee's insurance is designated as primary and in no event excess
or contributory to any insurance Lessor may have in force which would
apply to a loss covered under Lessee's policy and (ii) each such
insurance policy will not cause Lessee's insurance required under this
Article XIV to be subject to a coinsurance exception of any kind.
(d) Lessee shall pay as they become due all premiums for the
insurance required by Section 14.1 and Section 14.2, shall renew or
replace each policy prior to the expiration date thereof or otherwise
maintain the coverage required by such Sections without any lapse in
coverage.
ARTICLE XV
15.1 CASUALTY AND CONDEMNATION.
(a) Subject to the provisions of the Agency Agreement and this
Article XV and Article XVI (in the event Lessee delivers, or is
obligated to deliver or is deemed to have delivered, a Termination
Notice) and except as otherwise provided in any applicable Bond
Document (including without limitation any Head Lease), and prior to
the occurrence and continuation of a Default or an Event of Default,
Lessee shall be entitled to receive (and Lessor hereby irrevocably
assigns to Lessee all of Lessor's right, title and interest in) any
condemnation proceeds, award, compensation or insurance proceeds under
Sections 14.2(a) or 14.2(b) hereof to which Lessee or Lessor may
become entitled by reason of their respective interests in a Property
(i) if all or a portion of such Property is damaged or destroyed in
whole or in part by a Casualty or (ii) if the use, access, occupancy,
easement rights or title to such Property or any part thereof is the
subject of a Condemnation; provided, however, if a Default or an Event
of Default shall have occurred and be continuing or if such award,
compensation or insurance proceeds shall
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exceed $1,000,000, then such award, compensation or insurance proceeds
shall be paid directly to Lessor or, if received by Lessee, shall be
held in trust for Lessor, and shall be paid over by Lessee to Lessor
and held in accordance with the terms of this paragraph (a). All
amounts held by Lessor hereunder on account of any award, compensation
or insurance proceeds either paid directly to Lessor or turned over to
Lessor shall be held as security for the performance of Lessee's
obligations hereunder and under the other Operative Agreements and
when all such obligations of Lessee with respect to such matters (and
all other obligations of Lessee which should have been satisfied
pursuant to the Operative Agreements as of such date) have been
satisfied, all amounts so held by Lessor shall be paid over to Lessee.
(b) Lessee may appear in any proceeding or action to negotiate,
prosecute, adjust or appeal any claim for any award, compensation or
insurance payment on account of any such Casualty or Condemnation and
shall pay all expenses thereof. At Lessee's reasonable request, and at
Lessee's sole cost and expense, Lessor and the Bank shall participate
in any such proceeding, action, negotiation, prosecution or
adjustment. Lessor and Lessee agree that this Lease shall control the
rights of Lessor and Lessee in and to any such award, compensation or
insurance payment.
(c) If Lessee shall receive notice of a Casualty or a
Condemnation of a Property or any interest therein where damage to the
affected Property is estimated to equal or exceed twenty-five percent
(25%) of the Property Cost of such Property (or where such claim is
estimated to exceed twenty-five percent (25%) of "Project Costs",
"Costs of the Project" or other similar term used in any Head Lease),
Lessee shall give notice thereof to Lessor promptly after Lessee's
receipt of such notice. In the event such a Casualty or Condemnation
occurs (regardless of whether Lessee gives notice thereof), then
Lessee shall be deemed to have delivered a Termination Notice to
Lessor and the provisions of Sections 16.1 and 16.2 shall apply.
(d) In the event of a Casualty or a Condemnation (regardless of
whether notice thereof must be given pursuant to paragraph (c)), this
Lease shall terminate with respect to the applicable Property in
accordance with Section 16.1 if Lessee, within thirty (30) days after
such occurrence, delivers to Lessor a notice to such effect.
(e) If pursuant to this Section 15.1 this Lease shall continue
in full force and effect following a Casualty or Condemnation with
respect to the affected Property, Lessee shall, at its sole cost and
expense (subject to reimbursement in accordance with Section 15.1(a))
promptly and diligently repair any damage to the applicable Property
caused by such Casualty or Condemnation in conformity with the
requirements of Sections 10.1 and 11.1, using the as-built Plans and
Specifications or manufacturer's specifications for the applicable
Improvements, Equipment or other components of the applicable Property
(as modified to give effect to any subsequent Modifications, any
Condemnation affecting the applicable Property and all applicable
Legal Requirements), so as to restore the applicable Property to the
same or a greater remaining economic value, useful life, utility,
condition, operation and function as existed immediately prior
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to such Casualty or Condemnation (assuming all maintenance and repair
standards have been satisfied). In such event, title to the applicable
Property shall remain with Lessor (or with the applicable Development
Authority (if any)) and be subject to this Lease and the applicable
Head Lease (if any).
(f) In no event shall a Casualty or Condemnation affect Lessee's
obligations to pay Rent pursuant to Article III.
(g) Notwithstanding anything to the contrary set forth in
Section 15.1(a) or Section 15.1(e), if during the Term with respect to
a Property a Casualty occurs with respect to such Property or Lessee
receives notice of a Condemnation with respect to such Property, and
following such Casualty or Condemnation, the applicable Property
cannot reasonably be restored, repaired or replaced on or before the
date six (6) months prior to the Expiration Date or the date nine (9)
months after the occurrence of such Casualty or Condemnation (if such
Casualty or Condemnation occurs during the Term) to the same or a
greater remaining economic value, useful life, utility, condition,
operation and function as existed immediately prior to such Casualty
or Condemnation (assuming all maintenance and repair standards have
been satisfied) or on or before such day such Property is not in fact
so restored, repaired or replaced, then Lessee shall be required to
exercise its Purchase Option for such Property on the next Payment
Date (notwithstanding the limits on such exercise contained in Section
20.2) and pay Lessor the Termination Value for such Property;
provided, if any Default or Event of Default has occurred and is
continuing, Lessee shall also promptly (and in any event within three
(3) Business Days) pay Lessor any award, compensation or insurance
proceeds received on account of any Casualty or Condemnation with
respect to any Property; provided, further, that if no Default or
Event of Default has occurred and is continuing, any Excess Proceeds
shall be paid to Lessee. If a Default or an Event of Default has
occurred and is continuing and any Loans, Holder Advances or other
amounts are owing with respect thereto, then any Excess Proceeds (to
the extent of any such Loans, Holder Advances or other amounts owing
with respect thereto) shall be paid to Lessor, held as security for
the performance of Lessee's obligations hereunder and under the other
Operative Agreements and applied to such obligations upon the exercise
of remedies in connection with the occurrence of an Event of Default,
with the remainder of such Excess Proceeds in excess of such Loans,
Holder Advances and other amounts owing with respect thereto being
distributed to the Lessee.
15.2 ENVIRONMENTAL MATTERS.
Promptly upon Lessee's actual knowledge of the presence of
Hazardous Substances in any portion of any Property or Properties in
concentrations and conditions that constitute an Environmental Violation and
which, in the reasonable opinion of Lessee, the cost to undertake any legally
required response, clean up, remedial or other action will or might result in a
cost to Lessee of more than $15,000. Lessee shall notify Lessor in writing of
such condition. In the event of any Environmental Violation (regardless of
whether notice thereof must be given), Lessee shall, not later than thirty (30)
days after Lessee has actual knowledge of such
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Environmental Violation, either deliver to Lessor a Termination Notice with
respect to the applicable Property or Properties pursuant to Section 16.1, if
applicable, or, at Lessee's sole cost and expense, promptly and diligently
undertake and diligently complete any response, clean up, remedial or other
action (including without limitation the pursuit by Lessee of appropriate
action against any off-site or third party source for contamination) necessary
to remove, cleanup or remediate the Environmental Violation in accordance with
all Environmental Laws. Any such undertaking shall be timely completed in
accordance with prudent industry standards. If Lessee does not deliver a
Termination Notice with respect to such Property pursuant to Section 16.1,
Lessee shall, upon completion of remedial action by Lessee, cause to be
prepared by a reputable environmental consultant acceptable to Lessor a report
describing the Environmental Violation and the actions taken by Lessee (or its
agents) in response to such Environmental Violation, and a statement by the
consultant that the Environmental Violation has been remedied in full
compliance with applicable Environmental Law. Not less than sixty (60) days
prior to any time that Lessee elects to cease operations with respect to any
Property or to remarket any Property pursuant to Section 20.1 hereof or any
other provision of any Operative Agreement, Lessee at its expense shall cause
to be delivered to Lessor a Phase I environmental site assessment respecting
such Property recently prepared (no more than thirty (30) days prior to the
date of delivery) by an independent recognized professional acceptable to
Lessor in its reasonable discretion and in form, scope and content satisfactory
to Lessor in its reasonable discretion. Notwithstanding any other provision of
any Operative Agreement, if Lessee fails to comply with the foregoing
obligation regarding the Phase I environmental site assessment, Lessee shall be
obligated to purchase such Property for its Termination Value and shall not be
permitted to exercise (and Lessor shall have no obligation to honor any such
exercise) any rights under any Operative Agreement regarding a sale of such
Property to a Person other than Lessee or any Affiliate of Lessee.
15.3 NOTICE OF ENVIRONMENTAL MATTERS.
Promptly, but in any event within five (5) Business Days from
the date Lessee has actual knowledge thereof, Lessee shall provide to Lessor
written notice of any pending or threatened claim, action or proceeding
involving any Environmental Law or any Release on or in connection with any
Property or Properties. All such notices shall describe in reasonable detail
the nature of the claim, action or proceeding and Lessee's proposed response
thereto. In addition, Lessee shall provide to Lessor, within five (5) Business
Days of receipt, copies of all material written communications with any
Governmental Authority relating to any Environmental Law in connection with any
Property. Lessee shall also promptly provide such detailed reports of any such
material environmental claims as may reasonably be requested by Lessor.
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ARTICLE XVI
16.1 TERMINATION UPON CERTAIN EVENTS.
If Lessee has delivered, or is deemed to have delivered, written
notice of a termination of this Lease with respect to the applicable Property
to Lessor in the form described in Section 16.2(a) (a "Termination Notice")
pursuant to the provisions of this Lease, then following the applicable
Casualty, Condemnation or Environmental Violation, this Lease shall terminate
with respect to the affected Property on the applicable Termination Date.
16.2 PROCEDURES.
(a) A Termination Notice shall contain: (i) notice of
termination of this Lease with respect to the affected Property on a
Payment Date not more than sixty (60) days after Lessor's receipt of
such Termination Notice (the "Termination Date"); and (ii) a binding
and irrevocable agreement of Lessee to pay the Termination Value for
the applicable Property (or, if applicable, for Lessor's leasehold
interest and/or other rights existing under the Head Lease with
respect to such Property) and purchase such Property (or, if
applicable, Lessor's leasehold interest and/or other rights existing
under the Head Lease with respect to such Property) on such
Termination Date.
(b) On each Termination Date, Lessee shall pay to Lessor the
Termination Value for the applicable Property (or, if applicable, for
Lessor's leasehold interest and/or other rights existing under the
Head Lease with respect to such Property), and Lessor shall convey
such Property (or, if applicable, Lessor's leasehold interest and/or
other rights existing under the Head Lease with respect to such
Property) or the remaining portion thereof, if any, to Lessee (or
Lessee's designee), all in accordance with Section 20.2.
ARTICLE XVII
17.1 LEASE EVENTS OF DEFAULT.
If any one (1) or more of the following events (each a "Lease
Event of Default") shall occur:
(a) Lessee shall fail to make payment of (i) any Basic Rent
(except as set forth in clause (ii)) within five (5) Business Days
after the same has become due and payable or (ii) any Termination
Value, on the date any such payment is due and payable, or any payment
of Basic Rent or Supplemental Rent due on the due date of any such
payment of Termination Value, or any amount due on the Expiration
Date;
(b) Lessee shall fail to make payment of any Supplemental Rent
(other than Supplemental Rent referred to in Section 17.1(a)(ii)) or
shall fail to make any payment of
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any amount under any Operative Agreement which has become due and
payable within five (5) Business Days after receipt of notice that
such payment is due;
(c) Lessee shall fail to maintain insurance as required by
Article XIV of this Lease or to deliver any requisite annual
certificate with respect thereto within ten (10) days of the date such
certificate is due under the terms hereof;
(d) (i) Lessee shall fail to observe or perform any term,
covenant, obligation or condition of Lessee under this Lease
(including without limitation the Incorporated Covenants) or any other
Operative Agreement to which Lessee is a party other than those set
forth in Sections 17.1(a), (b) or (c) hereof and such failure shall
continue for fifteen (15) days (or with respect to the Incorporated
Covenants, the grace period, if any, applicable thereto) after notice
thereof to the Lessee, or (ii) any representation or warranty made by
Lessee set forth in this Lease (including without limitation the
Incorporated Representation and Warranties) or in any other Operative
Agreement or in any document entered into in connection herewith or
therewith or in any document, certificate or financial or other
statement delivered in connection herewith or therewith shall be false
or inaccurate in any material way when made;
(e) An Agency Agreement Event of Default shall have occurred and
be continuing;
(f) The Lessee or any Subsidiary of the Lessee shall default
(beyond applicable periods of grace and/or notice and cure) in the
payment when due of any principal of or interest on any Indebtedness
having an outstanding principal amount of at least $5,000,000; or any
other event or condition shall occur which results in a default of any
such Indebtedness or enables the holder of any such Indebtedness or
any Person acting on such holder's behalf to accelerate the maturity
thereof;
(g) The liquidation or dissolution of the Lessee, or the
suspension of the business of the Lessee, or the filing by the Lessee
of a voluntary petition or an answer seeking reorganization,
arrangement, readjustment of its debts or for any other relief under
the United States Bankruptcy Code, as amended, or under any other
insolvency act or law, state or federal, now or hereafter existing, or
any other action of Lessee indicating its consent to, approval of or
acquiescence in, any such petition or proceeding; the application by
Lessee for, or the appointment by consent or acquiescence of Lessee of
a receiver, a trustee or a custodian of Lessee for all or a
substantial part of its property; the making by Lessee of any
assignment for the benefit of creditors; the inability of Lessee or
the admission by Lessee in writing of its inability to pay its debts
as they mature; or Lessee taking any corporate action to authorize any
of the foregoing;
(h) The filing of an involuntary petition against Lessee in
bankruptcy or seeking reorganization, arrangement, readjustment of its
debts or for any other relief under the United States Bankruptcy Code,
as amended, or under any other insolvency act or law, state or federal,
now or hereafter existing; or the involuntary appointment of a
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receiver, a trustee or a custodian of Lessee for all or a substantial
part of its property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the
property of Lessee, and the continuance of any of such events for
ninety (90) days undismissed or undischarged;
(i) The adjudication of Lessee as bankrupt or insolvent;
(j) The entering of any order in any proceedings against the
Lessee or any Subsidiary of the Lessee decreeing the dissolution,
divestiture or split-up of the Lessee or any Subsidiary of the Lessee,
and such order remains in effect for more than sixty (60) days;
(k) Any report, certificate, financial statement or other
instrument delivered to Lessor by or on behalf of the Lessee pursuant
to the terms of this Lease or any other Operative Agreement is false
or misleading in any material respect when made or delivered;
(l) Any Lessee Credit Agreement Event of Default shall have
occurred and be continuing and shall not have been waived;
(m) A final judgment or judgments for the payment of money shall
be rendered by a court or courts against the Lessee or any Subsidiary
of the Lessee in excess of $500,000 in the aggregate, and (i) the same
shall not be discharged (or provision shall not be made for such
discharge), or a stay of execution thereof shall not be procured,
within thirty (30) days from the date of entry thereof, or (ii) the
Lessee or any such Subsidiary shall not, within said period of thirty
(30) days, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal, or (iii) such judgment or
judgments shall not be discharged (or provisions shall not be made for
such discharge) within thirty (30) days after a decision has been
reached with respect to such appeal and the related stay has been
lifted;
(n) The Lessee or any member of the Controlled Group shall fail
to pay when due an amount or amounts aggregating in excess of
$2,000,000 which it shall have become liable to pay to the PBGC or to
a Pension Plan under Title IV of ERISA; or notice of intent to
terminate a Pension Plan or Pension Plans having aggregate Unfunded
Liabilities in excess of $2,000,000 shall be filed under Title IV of
ERISA by the Lessee or any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any such Pension Plan or
Pension Plans or a proceeding shall be instituted by a fiduciary of
any such Pension Plan or Pension Plans against the Lessee or any
member of the Controlled Group to enforce Section 515 or 4219(c)(5) of
ERISA; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Pension Plan or
Pension Plans must be terminated;
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(o) (i) As a result of one (1) or more transactions after the
date of this Lease, any "person" or "group" of persons shall have
"beneficial ownership" (within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended, and the applicable
rules and regulations thereunder) other than Richard Isel, Wayne
Peterson, James Boosales and Bertram T. Martin, Jr. of twenty percent
(20%) or more of the outstanding common stock of Lessee; or (ii)
without limiting the generality of the foregoing, during any period of
twenty-four (24) consecutive months, commencing after the date of this
Lease, individuals who at the beginning of such period of twenty-four
(24) months were directors of Lessee shall cease for any reason to
constitute a majority of the board of directors of Lessee, provided,
that the relationships among the respective shareholders of Lessee on
the Initial Closing Date shall not be deemed to constitute all or any
combination of them as a "group" for purposes of clause (o)(i);
(p) Any Operative Agreement shall cease to be in full force and
effect; or
(q) Any default shall occur under the Head Lease or any other
Bond Document after the expiration of any express cure or grace
periods;
then, in any such event, Lessor may, in addition to the other rights and
remedies provided for in this Article XVII and in Section 18.1, terminate this
Lease by giving Lessee five (5) days notice of such termination (provided,
notwithstanding the foregoing, this Lease shall be deemed to be automatically
terminated without the giving of notice upon the occurrence of a Lease Event of
Default under Sections 17.1(g), (h) or (i)), and this Lease shall terminate,
and all rights of Lessee under this Lease shall cease. Lessee shall, to the
fullest extent permitted by law, pay as Supplemental Rent all costs and
expenses incurred by or on behalf of Lessor or any other Financing Party,
including without limitation reasonable fees and expenses of counsel, as a
result of any Lease Event of Default hereunder.
A POWER OF SALE HAS BEEN GRANTED IN THIS LEASE. A POWER OF SALE MAY
ALLOW LESSOR TO TAKE THE PROPERTIES AND SELL THE PROPERTIES WITHOUT GOING TO
COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF A LEASE EVENT OF DEFAULT.
17.2 SURRENDER OF POSSESSION.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall, upon thirty (30) days written notice, surrender
to Lessor possession of the Properties. Lessor may enter upon and repossess the
Properties by such means as are available at law or in equity, and may remove
Lessee and all other Persons and any and all personal property and Lessee's
equipment and personalty and severable Modifications from the Properties.
Lessor shall have no liability by reason of any such entry, repossession or
removal performed in accordance with applicable law. Upon the written demand of
Lessor, Lessee shall return the Properties promptly to Lessor, in the
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manner and condition required by, and otherwise in accordance with the
provisions of, Section 22.1(c) hereof.
17.3 RELETTING.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessor may, but shall be under no obligation to, relet any or
all of the Properties, for the account of Lessee or otherwise, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor may determine, and
Lessor may collect, receive and retain the rents resulting from such reletting.
Lessor shall not be liable to Lessee for any failure to relet any Property or
for any failure to collect any rent due upon such reletting.
17.4 DAMAGES.
Neither (a) the termination of this Lease as to all or any of
the Properties pursuant to Section 17.1; (b) the repossession of all or any of
the Properties; nor (c) the failure of Lessor to relet all or any of the
Properties, the reletting of all or any portion thereof, nor the failure of
Lessor to collect or receive any rentals due upon any such reletting, shall
relieve Lessee of its liabilities and obligations hereunder, all of which shall
survive any such termination, repossession or reletting. If any Lease Event of
Default shall have occurred and be continuing and notwithstanding any
termination of this Lease pursuant to Section 17.1, Lessee shall forthwith pay
to Lessor all Rent and other sums due and payable hereunder to and including
without limitation the date of such termination. Thereafter, on the days on
which the Basic Rent or Supplemental Rent, as applicable, are payable under
this Lease or would have been payable under this Lease if the same had not been
terminated pursuant to Section 17.1 and until the end of the Term hereof or
what would have been the Term in the absence of such termination, Lessee shall
pay Lessor, as current liquidated damages (it being agreed that it would be
impossible accurately to determine actual damages) an amount equal to the Basic
Rent and Supplemental Rent that are payable under this Lease or would have been
payable by Lessee hereunder if this Lease had not been terminated pursuant to
Section 17.1, less the net proceeds, if any, which are actually received by
Lessor with respect to the period in question of any reletting of any Property
or any portion thereof; provided, that Lessee's obligation to make payments of
Basic Rent and Supplemental Rent under this Section 17.4 shall continue only so
long as Lessor shall not have received the amounts specified in Section 17.6.
In calculating the amount of such net proceeds from reletting, there shall be
deducted all of Lessor's and the Bank's reasonable expenses in connection
therewith, including without limitation repossession costs, brokerage or sales
commissions, fees and expenses for counsel and any necessary repair or
alteration costs and expenses incurred in preparation for such reletting. To
the extent Lessor receives any damages pursuant to this Section 17.4, such
amounts shall be regarded as amounts paid on account of Rent. Lessee
specifically acknowledges and agrees that its obligations under this Section
17.4 shall be absolute and unconditional under any and all circumstances and
shall be paid and/or performed, as the case may be, without notice or demand
and without any abatement, reduction, diminution, setoff, defense, counterclaim
or recoupment whatsoever.
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17.5 POWER OF SALE.
Without limiting any other remedies set forth in this Lease,
Lessor and Lessee agree that Lessee has granted, pursuant to Section 7.1(b)
hereof and each Lease Supplement, a Lien against the Properties WITH POWER OF
SALE, and that, upon the occurrence and during the continuance of any Lease
Event of Default, Lessor shall have the power and authority, to the extent
provided by law, after prior notice and lapse of such time as may be required
by law, to foreclose its interest (or cause such interest to be foreclosed) in
all or any part of the Properties.
17.6 FINAL LIQUIDATED DAMAGES.
If a Lease Event of Default shall have occurred and be
continuing, whether or not this Lease shall have been terminated pursuant to
Section 17.1 and whether or not Lessor shall have collected any current
liquidated damages pursuant to Section 17.4, Lessor shall have the right to
recover, by demand to Lessee and at Lessor's election, and Lessee shall pay to
Lessor, as and for final liquidated damages, but exclusive of the indemnities
payable under Section 11 of the Participation Agreement (which, if requested,
shall be paid concurrently), and in lieu of all current liquidated damages
beyond the date of such demand (it being agreed that it would be impossible
accurately to determine actual damages) the Termination Value. Upon payment of
the amount specified pursuant to the first sentence of this Section 17.6,
Lessee shall be entitled to receive from Lessor, either at Lessee's request or
upon Lessor's election, in either case at Lessee's cost, an assignment of
Lessor's entire right, title and interest in and to the Properties,
Improvements, Fixtures, Modifications, Equipment and all components thereof
(including Lessor's leasehold interests under any Head Lease), in each case in
recordable form and otherwise in conformity with local custom and free and
clear of the Lien of this Lease (including without limitation the release of
any memoranda of Lease and/or the Lease Supplement recorded in connection
therewith) and any Lessor Liens. The Properties (and Lessor's leasehold
interests under any Head Leases) shall be conveyed to Lessee "AS-IS, WHERE-IS"
and in their then present physical condition. If any statute or rule of law
shall limit the amount of such final liquidated damages to less than the amount
agreed upon, Lessor shall be entitled to the maximum amount allowable under
such statute or rule of law; provided, however, Lessee shall not be entitled to
receive an assignment of Lessor's interest in the Properties, the Improvements,
Fixtures, Modifications, Equipment or the components thereof (including
Lessor's leasehold interests under any Head Leases) unless Lessee shall have
paid in full the Termination Value. Lessee specifically acknowledges and agrees
that its obligations under this Section 17.6 shall be absolute and
unconditional under any and all circumstances and shall be paid and/or
performed, as the case may be, without notice or demand and without any
abatement, reduction, diminution, setoff, defense, counterclaim or recoupment
whatsoever.
17.7 ENVIRONMENTAL COSTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall pay directly to any third party (or at Lessor's
election, reimburse Lessor) for the cost of any environmental
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testing and/or remediation work undertaken respecting any Property, as such
testing or work is deemed appropriate in the reasonable judgment of Lessor.
Lessee shall pay all amounts referenced in the immediately preceding sentence
within ten (10) days of any request by Lessor for such payment. The provisions
of this Section 17.7 shall not limit the obligations of Lessee under any
Operative Agreement regarding indemnification obligations, environmental
testing, remediation and/or work.
17.8 WAIVER OF CERTAIN RIGHTS.
If this Lease shall be terminated pursuant to Section 17.1,
Lessee waives, to the fullest extent permitted by Law, (a) any notice of
re-entry or the institution of legal proceedings to obtain re-entry or
possession; (b) any right of redemption, re-entry or possession; (c) the
benefit of any laws now or hereafter in force exempting property from liability
for rent or for debt; and (d) any other rights which might otherwise limit or
modify any of Lessor's rights or remedies under this Article XVII.
17.9 ASSIGNMENT OF RIGHTS UNDER CONTRACTS.
If a Lease Event of Default shall have occurred and be
continuing, and whether or not this Lease shall have been terminated pursuant
to Section 17.1, Lessee shall upon Lessor's demand immediately assign, transfer
and set over to Lessor all of Lessee's right, title and interest in and to each
agreement executed by Lessee in connection with the acquisition, installation,
testing, use, development, construction, operation, maintenance, repair,
refurbishment and restoration of the Properties (including without limitation
all right, title and interest of Lessee with respect to all warranty,
performance, service and indemnity provisions), as and to the extent that the
same relate to the acquisition, installation, testing, use, development,
construction, operation, maintenance, repair, refurbishment and restoration of
the Properties or any of them.
17.10 REMEDIES CUMULATIVE.
The remedies herein provided shall be cumulative and in addition
to (and not in limitation of) any other remedies available at law, equity or
otherwise, including without limitation any mortgage foreclosure remedies.
ARTICLE XVIII
18.1 LESSOR'S RIGHT TO CURE LESSEE'S LEASE DEFAULTS.
Lessor, without waiving or releasing any obligation or Lease
Event of Default, may (but shall be under no obligation to) remedy any Lease
Event of Default for the account and at the sole cost and expense of Lessee,
including without limitation the failure by Lessee to maintain the insurance
required by Article XIV, and may, to the fullest extent permitted by law, and
notwithstanding any right of quiet enjoyment in favor of Lessee, enter upon any
Property, and take all such action thereon as may be necessary or appropriate
therefor. No such entry shall
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be deemed an eviction of any lessee. All out-of-pocket costs and expenses so
incurred (including without limitation fees and expenses of counsel), together
with interest thereon at the Overdue Rate from the date on which such sums or
expenses are paid by Lessor, shall be paid by Lessee to Lessor on demand.
ARTICLE XIX
19.1 PROVISIONS RELATING TO LESSEE'S EXERCISE OF ITS PURCHASE OPTION.
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date
on which this Lease is to terminate with respect to any Property, and upon
tender by Lessee of the amounts set forth in Sections 16.2(b) or 20.2, as
applicable, Lessor shall execute and deliver to Lessee (or to Lessee's
designee) at Lessee's cost and expense an assignment (by deed or other
appropriate instrument) of Lessor's entire interest in such Property (including
Lessor's leasehold interests under any Head Lease), in each case in recordable
form and otherwise in conformity with local custom and free and clear of any
Lessor Liens attributable to Lessor but without any other warranties (of title
or otherwise) from Lessor. Such Property (or leasehold interests under any Head
Lease) shall be conveyed to Lessee "AS-IS, WHERE-IS" and in then present
physical condition.
19.2 NO PURCHASE OR TERMINATION WITH RESPECT TO LESS THAN ALL OF A
PROPERTY.
Lessee shall not be entitled to exercise its Purchase Option or
the Sale Option separately with respect to a portion of any Property consisting
of Land, Equipment, Improvements and/or any interest pursuant to a Ground Lease
or Head Lease but shall be required to exercise its Purchase Option or the Sale
Option with respect to an entire Property.
ARTICLE XX
20.1 PURCHASE OPTION OR SALE OPTION-GENERAL PROVISIONS.
Not less than one hundred eighty (180) days (or respecting the
Purchase Option only, not less than sixty (60) days) and no more than two
hundred forty (240) days prior to the third annual anniversary of the date of
this Lease, the Expiration Date or, respecting the Purchase Option only, any
Payment Date (such third annual anniversary date, such Expiration Date or,
respecting the Purchase Option only, any such Payment Date being hereinafter
referred to as the "Election Date"), Lessee may give Lessor irrevocable written
notice (the "Election Notice") that Lessee is electing to exercise either (a)
the option to purchase all, but not less than all, the Properties (including
Lessor's leasehold interests in all Properties subject to Head Leases) on the
applicable Election Date (the "Purchase Option") or (b) with respect to an
Election Notice given in connection with the third annual anniversary of the
date of this Lease or the Expiration Date only, the option to remarket all, but
not less than all, the Properties (including Lessor's leasehold
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interests in all Properties subject to Head Leases) to a Person other than
Lessee or any Affiliate of Lessee and cause a sale of such Properties
(including Lessor's leasehold interests in all Properties subject to Head
Leases) to occur on the applicable Election Date pursuant to the terms of
Section 22.1 (the "Sale Option"). If Lessee does not give an Election Notice
indicating the Purchase Option or the Sale Option at least one hundred eighty
(180) days and not more than two hundred forty (240) days prior to the
Expiration Date, then Lessee shall be deemed to have elected for the Purchase
Option to apply on the Expiration Date. If Lessee shall either (i) elect (or be
deemed to have elected) to exercise the Purchase Option or (ii) elect the Sale
Option and fail to cause all, but not less than all, the Properties (including
Lessor's leasehold interests in all Properties subject to Head Leases) to be
sold in accordance with the terms of Section 22.1 on the applicable Election
Date, then in either case Lessee shall pay to Lessor on the date on which such
purchase or sale is scheduled to occur an amount equal to the Termination Value
for all, but not less than all, the Properties (including Lessor's leasehold
interests in all Properties subject to Head Leases) (which amount the parties
do not intend to be a "bargain" purchase price) and, upon receipt of such
amounts and satisfaction of such obligations, Lessor shall transfer to Lessee
all of Lessor's right, title and interest in and to all, but not less than all,
the Properties (including Lessor's leasehold interests in all Properties
subject to Head Leases) in accordance with Section 20.2.
20.2 LESSEE PURCHASE OPTION.
Provided, no Default or Event of Default shall have occurred and
be continuing (other than those that will be cured by the payment of the
Termination Value for all the Properties) and provided, that the Election
Notice has been appropriately given specifying the Purchase Option, Lessee
shall purchase all the Properties (including Lessor's leasehold interests in
all Properties subject to Head Leases) on the applicable Election Date at a
price equal to the Termination Value for such Properties (which price the
parties do not intend to be a "bargain" purchase price).
Subject to Section 19.2, in connection with any termination of
this Lease with respect to any Property pursuant to the terms of Section 16.2,
or in connection with Lessee's exercise of its Purchase Option, upon the date
on which this Lease is to terminate with respect to a Property or all of the
Properties, and upon tender by Lessee of the amounts set forth in Section
16.2(b) or this Section 20.2, as applicable, Lessor shall execute, acknowledge
(where required) and deliver to Lessee, at Lessee's cost and expense, each of
the following: (a) an assignment of Lessor's leasehold interest under each Head
Lease and a termination or assignment (as requested by the Lessee) of each
applicable Ground Lease and special or limited warranty Deeds conveying each
Property (to the extent it is real property not subject to a Ground Lease or a
Head Lease) to Lessee free and clear of the Lien of this Lease, the Lien of the
Credit Documents and any Lessor Liens; (b) a Bill of Sale conveying each
Property (to the extent it is personal property not subject to a Head Lease) to
Lessee free and clear of the Lien of this Lease, the Lien of the Credit
Documents and any Lessor Liens; (c) any real estate tax affidavit or other
document required by law to be executed and filed in order to record the
applicable Deed and/or the applicable Ground Lease termination; and (d) FIRPTA
affidavits. All of the foregoing documentation must be in form and substance
reasonably satisfactory to Lessor. The applicable
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Property (or leasehold interest under each applicable Head Lease) shall be
conveyed without warranty to Lessee "AS-IS, WHERE-IS" and in then present
physical condition.
If any Property is the subject of remediation efforts respecting
Hazardous Substances at the applicable Election Date which could materially and
adversely impact the Fair Market Sales Value of such Property (or leasehold
interest under such applicable Head Lease) (with materiality determined in
Lessor's discretion), then Lessee shall be obligated to purchase each such
Property (or leasehold interest under such applicable Head Lease) pursuant to
Section 20.2.
On the applicable Election Date on which Lessee has elected to
exercise its Purchase Option, Lessee shall pay (or cause to be paid) to Lessor,
the Bank and all other parties, as appropriate, the sum of all costs and
expenses incurred by any such party in connection with the election by Lessee
to exercise its Purchase Option and all Rent and all other amounts then due and
payable or accrued under this Lease and/or any other Operative Agreement.
20.3 THIRD PARTY SALE OPTION.
(a) Provided, that (i) no Default or Event of Default shall have
occurred and be continuing and (ii) the Election Notice has been
appropriately given specifying the Sale Option, Lessee shall undertake
to cause a sale of the Properties (including Lessor's leasehold
interests in all Properties subject to Head Leases) on the applicable
Election Date (all as specified in the Election Notice), in accordance
with the provisions of Section 22.1 hereof. Such Election Date on
which a sale is required may be hereafter referred to as the "Sale
Date".
(b) In the event Lessee exercises the Sale Option then, as soon
as practicable and in all events not less than sixty (60) days prior
to the Sale Date, Lessee at its expense shall cause to be delivered to
Lessor a Phase I environmental site assessment for each of the
Properties recently prepared (no more than thirty (30) days old prior
to the Sale Date) by an independent recognized professional reasonably
acceptable to Lessor and in form, scope and content reasonably
satisfactory to Lessor. In the event that Lessor shall not have
received such environmental site assessment by the date sixty (60)
days prior to the Sale Date or in the event that such environmental
assessment shall reveal the existence of any material violation of
Environmental Laws, other material Environmental Violation or
potential material Environmental Violation (with materiality
determined in each case by Lessor in its reasonable discretion), then
Lessee on the Sale Date shall pay to Lessor an amount equal to the
Termination Value for all the Properties (including Lessor's leasehold
interests in all Properties subject to Head Leases) and any and all
other amounts due and owing hereunder. Upon receipt of such payment
and all other amounts due under the Operative Agreements, Lessor shall
transfer to Lessee all of Lessor's right, title and interest in and to
all the Properties in accordance with Section 19.1.
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ARTICLE XXI
21.1 [INTENTIONALLY OMITTED].
ARTICLE XXII
22.1 SALE PROCEDURE.
(a) During the Marketing Period, Lessee, on behalf of Lessor,
shall obtain bids for the cash purchase of all the Properties
(including Lessor's leasehold interests in all Properties subject to
Head Leases) in connection with a sale to one (1) or more third party
purchasers to be consummated on the Sale Date for the highest price
available, shall notify Lessor promptly of the name and address of
each prospective purchaser and the cash price which each prospective
purchaser shall have offered to pay for each such Property (including
Lessor's leasehold interests in all Properties subject to Head Leases)
and shall provide Lessor with such additional information about the
bids and the bid solicitation procedure as Lessor may reasonably
request from time to time. All such prospective purchasers must be
Persons other than Lessee or any Affiliate of Lessee. On the Sale
Date, Lessee shall pay (or cause to be paid) to Lessor and all other
parties, as appropriate, the sum of all costs and expenses incurred by
Lessor and/or the Bank (as the case may be) in connection with such
sale of one or more Properties (including Lessor's leasehold interests
with respect to one or more Properties subject to Head Leases), all
Rent and all other amounts then due and payable or accrued under this
Lease and/or any other Operative Agreement.
Lessor may reject any and all bids and may solicit and obtain
bids by giving Lessee written notice to that effect; provided,
however, that notwithstanding the foregoing, Lessor may not reject the
bids submitted by Lessee if such bids, in the aggregate, are greater
than or equal to the sum of the Limited Recourse Amount for all the
Properties (including Lessor's leasehold interests in all Properties
subject to Head Leases), and represent bona fide offers from one (1)
or more third party purchasers. If the highest price which a
prospective purchaser or the prospective purchasers shall have offered
to pay for all the Properties (including Lessor's leasehold interests
in all Properties subject to Head Leases) on the Sale Date is less
than the sum of the Limited Recourse Amount for all the Properties
(including Lessor's leasehold interests in all Properties subject to
Head Leases) or if such bids do not represent bona fide offers from
one (1) or more third parties or if there are no bids, Lessor may
elect to retain one or more of the Properties (or Lessor's leasehold
interest in one or more of the Properties subject to any Head Lease)
by giving Lessee prior written notice of Lessor's election to retain
the same, and promptly upon receipt of such notice, Lessee shall
surrender, or cause to be surrendered, each of the Properties
specified in such notice in accordance with the terms and conditions
of Section 10.1. Upon acceptance of any bid, Lessor agrees, at
Lessee's request and expense, to execute a contract of sale with
respect to such sale, so long as the
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same is consistent with the terms of this Article 22 and provides by
its terms that it is nonrecourse to Lessor.
Unless Lessor shall have elected to retain one or more of the
Properties (or Lessor's leasehold interest in one or more of the
Properties subject to any Head Lease) pursuant to the provisions of
the preceding paragraph, Lessee shall arrange for Lessor to sell all
the Properties (including Lessor's leasehold interests in all
Properties subject to Head Leases) free and clear of the Lien of this
Lease and any Lessor Liens attributable to Lessor, without recourse or
warranty (of title or otherwise), for cash on the Sale Date to the
purchaser or purchasers offering the highest cash sales price, as
identified by Lessee or Lessor, as the case may be; provided, however,
solely as to Lessor or the Trust Company, in its individual capacity,
any Lessor Lien shall not constitute a Lessor Lien so long as Lessor
or the Trust Company, in its individual capacity, is diligently and in
good faith contesting, at the cost and expense of Lessor or the Trust
Company, in its individual capacity, such Lessor Lien by appropriate
proceedings in which event the applicable Sale Date, all without
penalty or cost to Lessee, shall be delayed for the period of such
contest. To effect such transfer and assignment, Lessor shall execute,
acknowledge (where required) and deliver to the appropriate purchaser
each of the following: (a) special or limited warranty Deeds conveying
each such Property (to the extent it is real property titled to
Lessor) and an assignment of the Ground Lease or Head Lease conveying
the leasehold interest of Lessor in each such Property (to the extent
it is real property and subject to a Ground Lease or a Head Lease) to
the appropriate purchaser free and clear of the Lien of this Lease,
the Lien of the Credit Documents and any Lessor Liens; (b) a Bill of
Sale conveying each such Property (to the extent it is personal
property not subject to a Head Lease) titled to Lessor to the
appropriate purchaser free and clear of the Lien of this Lease, the
Lien of the Credit Documents and any Lessor Liens; (c) any real estate
tax affidavit or other document required by law to be executed and
filed in order to record each Deed and/or each Ground Lease or Head
Lease assignment; and (d) FIRPTA affidavits, as appropriate. All of
the foregoing documentation must be in form and substance reasonably
satisfactory to Lessor. Lessee shall surrender the Properties
(including Lessor's leasehold interests in all Properties subject to
Head Leases) so sold or subject to such documents to each purchaser in
the condition specified in Section 10.1, or in such other condition as
may be agreed between Lessee and such purchaser. Lessee shall not take
or fail to take any action which would have the effect of unreasonably
discouraging bona fide third party bids for any Property. If each of
the Properties is not either (i) sold on the Sale Date in accordance
with the terms of this Section 22.1, or (ii) retained by Lessor
pursuant to an affirmative election made by Lessor pursuant to the
second sentence of the second paragraph of this Section 22.1(a), then
(x) Lessee shall be obligated to pay Lessor on the Sale Date an amount
equal to the aggregate Termination Value for all the Properties
(including Lessor's leasehold interests in all Properties subject to
Head Leases) less any sales proceeds received, and (y) Lessor shall
transfer each applicable Property (or Lessor's leasehold interest in
each applicable Property subject to a Head Lease) to Lessee in
accordance with Section 20.2.
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(b) If the Properties (including Lessor's leasehold interests in
all Properties subject to Head Leases) are sold on a Sale Date to one
(1) or more third party purchasers in accordance with the terms of
Section 22.1(a) and the aggregate purchase price paid for all the
Properties (including Lessor's leasehold interests in all Properties
subject to Head Leases) is less than the sum of the aggregate Property
Cost for all the Properties (including Lessor's leasehold interests in
all Properties subject to Head Leases) (hereinafter such difference
shall be referred to as the "Deficiency Balance"), then Lessee hereby
unconditionally promises to pay to Lessor on the Sale Date the lesser
of (i) the Deficiency Balance, or (ii) the Maximum Residual Guarantee
Amount for all the Properties (including Lessor's leasehold interests
in all Properties subject to Head Leases). On a Sale Date if (x)
Lessor receives the aggregate Termination Value for all the Properties
(including Lessor's leasehold interests in all Properties subject to
Head Leases) from one (1) or more third party purchasers, (y) Lessor
and such other parties receive all other amounts specified in the last
sentence of the first paragraph of Section 22.1(a) and (z) the
aggregate purchase price paid for all the Properties (including
Lessor's leasehold interests in all Properties subject to Head Leases)
on such date exceeds the sum of the aggregate Property Cost for all
the Properties (including Lessor's leasehold interests in all
Properties subject to Head Leases), then Lessee may retain such
excess. If one or more of the Properties (or Lessor's leasehold
interests in one or more Properties subject to one or more Head
Leases) are retained by Lessor pursuant to an affirmative election
made by Lessor pursuant to the provisions of Section 22.1(a), then
Lessee hereby unconditionally promises to pay to Lessor on the Sale
Date an amount equal to the Maximum Residual Guarantee Amount for the
Properties so retained. Any payment of the foregoing amounts described
in this Section 22.1(b) shall be made together with a payment of all
other amounts referenced in the last sentence of the first paragraph
of Section 22.1(a).
(c) In the event that all the Properties (including Lessor's
leasehold interests in all Properties subject to Head Leases) are
either sold to one (1) or more third party purchasers on the Sale Date
or retained by Lessor in connection with an affirmative election made
by Lessor pursuant to the provisions of Section 22.1(a), then in
either case on the applicable Sale Date Lessee shall provide Lessor or
such third party purchaser (unless otherwise agreed by such third
party purchaser) with (i) all permits, certificates of occupancy,
governmental licenses and authorizations necessary to use, operate,
repair, access and maintain each such Property for the purpose it is
being used by Lessee, and (ii) such manuals, permits, easements,
licenses, intellectual property, know-how, rights-of-way and other
rights and privileges in the nature of an easement as are reasonably
necessary or desirable in connection with the use, operation, repair,
access to or maintenance of each such Property for its intended
purpose or otherwise as Lessor or such third party purchaser(s) shall
reasonably request (and a royalty-free license or similar agreement to
effectuate the foregoing on terms reasonably agreeable to Lessor or
such third party purchaser(s), as applicable). All assignments,
licenses, easements, agreements and other deliveries required by
clauses (i) and (ii) of this paragraph (c) shall be in form reasonably
satisfactory to Lessor or such third party purchaser(s), as
applicable, and shall be fully assignable (including without
limitation both primary
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assignments and assignments given in the nature of security) without
payment of any fee, cost or other charge. Lessee shall also execute
any documentation requested by Lessor or such third party
purchaser(s), as applicable, evidencing the continuation or assignment
of each Ground Lease.
22.2 APPLICATION OF PROCEEDS OF SALE.
Lessor shall apply the proceeds of sale of any Property (or sale
of any leasehold interest in any Property subject to a Head Lease) in the
following order of priority:
(a) FIRST, to pay or to reimburse Lessor (and/or the Bank, as
the case may be) for the payment of all reasonable costs and expenses
incurred by Lessor (and/or the Bank, as the case may be) in connection
with the sale (to the extent Lessee has not satisfied its obligation
to pay such costs and expenses);
(b) SECOND, so long as the Credit Agreement is in effect and any
Loans or Holder Advances or any amount is owing to the Financing
Parties under any Operative Agreement, to the Bank to be allocated in
accordance with Section 8.7 of the Participation Agreement; and
(c) THIRD, to Lessee.
22.3 INDEMNITY FOR EXCESSIVE WEAR.
If the proceeds of the sale described in Section 22.1 with
respect to Lessor's interest in the Properties shall be less than the Limited
Recourse Amount with respect to the Properties, and at the time of such sale it
shall have been reasonably determined (pursuant to the Appraisal Procedure)
that the Fair Market Sales Value of Lessor's interest in the Properties shall
have been impaired by greater than expected wear and tear during the term of
the Lease, Lessee shall pay to Lessor within ten (10) days after receipt of
Lessor's written statement (i) the amount of such excess wear and tear
determined by the Appraisal Procedure or (ii) the amount of the Sale Proceeds
Shortfall, whichever amount is less.
22.4 APPRAISAL PROCEDURE.
For determining the Fair Market Sales Value of the Properties
(including Lessor's leasehold interests in all Properties subject to Head
Leases) or any other amount which may, pursuant to any provision of any
Operative Agreement, be determined by an appraisal procedure, Lessor and Lessee
shall use the following procedure (the "Appraisal Procedure"). Lessor and
Lessee shall endeavor to reach a mutual agreement as to such amount for a
period of ten (10) days from commencement of the Appraisal Procedure under the
applicable section of the Lease, and if they cannot agree within ten (10) days,
then two (2) qualified appraisers, one (1) chosen by Lessee and one (1) chosen
by Lessor, shall mutually agree thereupon, but if either party shall fail to
choose an appraiser within twenty (20) days after notice from the other party
of the selection of its appraiser, then the appraisal by such appointed
appraiser shall be binding on Lessee and
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Lessor. If the two (2) appraisers cannot agree within twenty (20) days after
both shall have been appointed, then a third appraiser shall be selected by the
two (2) appraisers or, failing agreement as to such third appraiser within
thirty (30) days after both shall have been appointed, by the American
Arbitration Association. The decisions of the three (3) appraisers shall be
given within twenty (20) days of the appointment of the third appraiser and the
decision of the appraiser most different from the average of the other two (2)
shall be discarded and such average shall be binding on Lessor and Lessee;
provided, that if the highest appraisal and the lowest appraisal are
equidistant from the third appraisal, the third appraisal shall be binding on
Lessor and Lessee. The fees and expenses of the appraiser appointed by Lessee
shall be paid by Lessee; the fees and expenses of the appraiser appointed by
Lessor shall be paid by Lessor (such fees and expenses not being indemnified
pursuant to Section 11 of the Participation Agreement); and the fees and
expenses of the third appraiser shall be divided equally between Lessee and
Lessor.
22.5 CERTAIN OBLIGATIONS CONTINUE.
During the Marketing Period, the obligation of Lessee to pay
Rent with respect to the Properties (including without limitation the
installment of Basic Rent due on the Sale Date) shall continue undiminished
until payment in full to Lessor of the sale proceeds, if any, the Maximum
Residual Guarantee Amount, the amount due under Section 22.3, if any, and all
other amounts due to Lessor or any other Person with respect to all Properties
or any Operative Agreement. Lessor shall have the right, but shall be under no
duty, to solicit bids, to inquire into the efforts of Lessee to obtain bids or
otherwise to take action in connection with any such sale, other than as
expressly provided in this Article XXII.
ARTICLE XXIII
23.1 HOLDING OVER.
If Lessee shall for any reason remain in possession of a
Property after the expiration or earlier termination of this Lease as to such
Property (unless such Property is conveyed to Lessee), such possession shall be
as a tenancy at sufferance during which time Lessee shall continue to pay
Supplemental Rent that would be payable by Lessee hereunder were the Lease then
in full force and effect with respect to such Property and Lessee shall
continue to pay Basic Rent at the lesser of the highest lawful rate and one
hundred ten percent (110%) of the last payment of Basic Rent due with respect
to such Property prior to such expiration or earlier termination of this Lease.
Such Basic Rent shall be payable from time to time upon demand by Lessor and
such additional amount of Basic Rent shall be applied by Lessor ratably to the
Lenders and the Holders based on their relative amounts of the then outstanding
aggregate Property Cost for all Properties. During any period of tenancy at
sufferance, Lessee shall, subject to the second preceding sentence, be
obligated to perform and observe all of the terms, covenants and conditions of
this Lease, but shall have no rights hereunder other than the right, to the
extent given by law to tenants at sufferance, to continue their occupancy and
use of such Property. Nothing contained in this Article XXIII shall constitute
the consent, express or implied, of Lessor to the holding over of Lessee after
the expiration or earlier termination of this
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Lease as to any Property (unless such Property (or Lessor's leasehold interest
therein) is conveyed to Lessee) and nothing contained herein shall be read or
construed as preventing Lessor from maintaining a suit for possession of such
Property or exercising any other remedy available to Lessor at law or in
equity.
ARTICLE XXIV
24.1 RISK OF LOSS.
During the Term, unless Lessee shall not be in actual possession
of any Property in question solely by reason of Lessor's exercise of its
remedies of dispossession under Article XVII, the risk of loss or decrease in
the enjoyment and beneficial use of such Property as a result of the damage or
destruction thereof by fire, the elements, casualties, thefts, riots, wars or
otherwise is assumed by Lessee, and Lessor shall in no event be answerable or
accountable therefor.
ARTICLE XXV
25.1 ASSIGNMENT.
(a) Lessee may not assign this Lease or any of its rights or
obligations hereunder or with respect to any Property in whole or in
part to any Person without the prior written consent of the Bank and
Lessor.
(b) No assignment by Lessee (referenced in this Section 25.1 or
otherwise) or other relinquishment of possession to any Property shall
in any way discharge or diminish any of the obligations of Lessee to
Lessor hereunder and Lessee shall remain directly and primarily liable
under the Operative Agreements as to any rights or obligations
assigned by Lessee or regarding any Property in which rights or
obligations have been assigned or otherwise transferred.
25.2 SUBLEASES.
(a) Promptly, but in any event within five (5) Business Days,
following the execution and delivery of any sublease permitted by this
Article XXV, Lessee shall notify Lessor of the execution of such
sublease. As of the date of each Lease Supplement, Lessee shall lease
the respective Properties (or sublease Lessor's leasehold interest
therein, as the case may be) described in such Lease Supplement from
Lessor, and any existing tenant respecting such Property shall
automatically be deemed to be a subtenant of Lessee and not a tenant
of Lessor.
(b) So long as no Lease Event of Default shall have occurred and
be continuing, without the prior written consent of the Bank or Lessor
and subject to the
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other provisions of this Section 25.2, Lessee may sublet any Property
or portion thereof (or Lessor's leasehold interest therein, as the
case may be) to any wholly-owned Subsidiary of Lessee. Except as
referenced in the immediately preceding sentence, no other subleases
shall be permitted unless consented to in writing by Lessor. All
subleasing shall be done on market terms and shall in no way diminish
the fair market value or useful life of any applicable Property (or
Lessor's leasehold interest therein, as the case may be).
(c) No sublease (referenced in this Section 25.2 or otherwise)
or other relinquishment of possession to any Property shall in any way
discharge or diminish any of Lessee's obligations to Lessor hereunder
and Lessee shall remain directly and primarily liable under this Lease
as to such Property, or portion thereof, so sublet. The term of any
such sublease shall not extend beyond the Term. Each sublease shall be
expressly subject and subordinate to this Lease.
ARTICLE XXVI
26.1 NO WAIVER.
No failure by Lessor or Lessee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy upon a
default hereunder, and no acceptance of full or partial payment of Rent during
the continuance of any such default, shall constitute a waiver of any such
default or of any such term. To the fullest extent permitted by law, no waiver
of any default shall affect or alter this Lease, and this Lease shall continue
in full force and effect with respect to any other then existing or subsequent
default.
ARTICLE XXVII
27.1 ACCEPTANCE OF SURRENDER.
No surrender to Lessor of this Lease or of all or any portion of
any Property or of any part of any thereof or of any interest therein shall be
valid or effective unless agreed to and accepted in writing by Lessor and no
act by Lessor or the Bank or any representative or agent of Lessor or the Bank,
other than a written acceptance, shall constitute an acceptance of any such
surrender.
27.2 NO MERGER OF TITLE.
There shall be no merger of this Lease or of the leasehold
estate created hereby by reason of the fact that the same Person may acquire,
own or hold, directly or indirectly, in whole or in part, (a) this Lease or the
leasehold estate created hereby or any interest in this Lease or such leasehold
estate, (b) any right, title or interest in any Property, (c) any Notes, or (d)
a beneficial interest in Lessor.
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ARTICLE XXVIII
28.1 INCORPORATION OF COVENANTS.
Reference is made to the Lessee Credit Agreement and the
representations and warranties of Lessee contained in Article VI of the Lessee
Credit Agreement (hereinafter referred to as the "Incorporated Representations
and Warranties") and the covenants contained in Articles VII, VIII, IX and X of
the Lessee Credit Agreement (hereinafter referred to as the "Incorporated
Covenants"). Lessee agrees with Lessor that the Incorporated Representations
and Warranties and the Incorporated Covenants (and all other relevant
provisions of the Lessee Credit Agreement related thereto, including without
limitation the defined terms contained in Article I thereof which are used in
the Incorporated Representations and Warranties and the Incorporated Covenants,
hereinafter referred to as the "Additional Incorporated Terms") are hereby
incorporated by reference into this Lease to the same extent and with the same
effect as if set forth fully herein and shall inure to the benefit of Lessor,
without giving effect to any waiver, amendment, modification or replacement of
the Lessee Credit Agreement or any term or provision of the Incorporated
Representations and Warranties or the Incorporated Covenants occurring
subsequent to the date of this Lease, except to the extent otherwise
specifically provided in the following provisions of this paragraph. In the
event a waiver is granted under the Lessee Credit Agreement or an amendment or
modification is executed with respect to the Lessee Credit Agreement, and such
waiver, amendment and/or modification affects the Incorporated Representations
and Warranties, the Incorporated Covenants or the Additional Incorporated
Terms, then such waiver, amendment or modification shall be effective with
respect to the Incorporated Representations and Warranties, the Incorporated
Covenants and the Additional Incorporated Terms as incorporated by reference
into this Lease. In the event of any replacement of the Lessee Credit Agreement
with a similar credit facility (the "New Facility") the representations and
warranties, covenants and additional terms contained in the New Facility which
correspond to the representations and warranties, covenants contained in
Article VI and Articles VII, VIII, IX and X, respectively, and such additional
terms (each of the foregoing contained in the Lessee Credit Agreement) shall
become the Incorporated Representations and Warranties, the Incorporated
Covenants and the Additional Incorporated Terms and, if the Lessee Credit
Agreement is terminated and not replaced, then the representations and
warranties and covenants contained in Article VI and Articles VII, VIII, IX and
X, respectively, and such additional terms (each of the foregoing contained in
the Lessee Credit Agreement (together with any modifications or amendments
approved in accordance with this paragraph)) shall continue to be the
Incorporated Representations and Warranties, the Incorporated Covenants and the
Additional Incorporated Terms hereunder.
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ARTICLE XXIX
29.1 NOTICES.
All notices required or permitted to be given under this Lease
shall be in writing and delivered as provided in the Participation Agreement.
ARTICLE XXX
30.1 MISCELLANEOUS.
Anything contained in this Lease to the contrary
notwithstanding, all claims against and liabilities of Lessee or Lessor arising
from events commencing prior to the expiration or earlier termination of this
Lease shall survive such expiration or earlier termination. If any provision of
this Lease shall be held to be unenforceable in any jurisdiction, such
unenforceability shall not affect the enforceability of any other provision of
this Lease and such jurisdiction or of such provision or of any other provision
hereof in any other jurisdiction.
30.2 AMENDMENTS AND MODIFICATIONS.
Neither this Lease nor any Lease Supplement may be amended,
waived, discharged or terminated except in accordance with the provisions of
Section 12.4 of the Participation Agreement.
30.3 SUCCESSORS AND ASSIGNS.
All the terms and provisions of this Lease shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
30.4 HEADINGS AND TABLE OF CONTENTS.
The headings and table of contents in this Lease are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
30.5 COUNTERPARTS.
This Lease may be executed in any number of counterparts, each
of which shall be an original, but all of which shall together constitute one
(1) and the same instrument.
30.6 GOVERNING LAW.
THIS LEASE SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
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OF NORTH CAROLINA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A
PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY.
30.7 CALCULATION OF RENT.
All calculation of Rent payable hereunder shall be computed
based on the actual number of days elapsed over a year of three hundred sixty
(360) days or, to the extent such Rent is based on the Prime Lending Rate,
three hundred sixty-five (365) (or three hundred sixty-six (366), as
applicable) days.
30.8 MEMORANDA OF LEASE AND LEASE SUPPLEMENTS.
This Lease shall not be recorded; provided, Lessor and Lessee
shall promptly record (a) a memorandum of this Lease and the applicable Lease
Supplement (in substantially the form of Exhibit B attached hereto) or a short
form lease (in form and substance reasonably satisfactory to Lessor) regarding
each Property promptly after the acquisition thereof in the local filing office
with respect thereto, in all cases at Lessee's cost and expense, and as
required under applicable law to sufficiently evidence this Lease and any such
Lease Supplement in the applicable real estate filing records.
30.9 [INTENTIONALLY LEFT BLANK].
30.10 LIMITATIONS ON RECOURSE.
Notwithstanding anything contained in this Lease to the
contrary, Lessee agrees to look solely to Lessor's estate and interest in the
Properties (and in no circumstance to the Bank or otherwise to Lessor) for the
collection of any judgment requiring the payment of money by Lessor in the
event of liability by Lessor, and no other property or assets of Lessor or any
shareholder, owner or partner (direct or indirect) in or of Lessor, or any
director, officer, employee, beneficiary, Affiliate of any of the foregoing
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Lessee under or with respect to this Lease, the
relationship of Lessor and Lessee hereunder or Lessee's use of the Properties
or any other liability of Lessor to Lessee. Nothing in this Section shall be
interpreted so as to limit the terms of Sections 6.1 or 6.2 or the provisions
of Section 12.9 of the Participation Agreement.
30.11 WAIVERS OF JURY TRIAL.
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY, TO
THE FULLEST EXTENT ALLOWED BY APPLICABLE LAW, WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE AND FOR ANY
COUNTERCLAIM THEREIN.
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30.12 EXERCISE OF LESSOR RIGHTS.
Lessee hereby acknowledges and agrees that the rights and powers
of Lessor under this Lease have been assigned to the Bank pursuant to the terms
of the Security Agreement and the other Operative Agreements. Lessor and Lessee
hereby acknowledge and agree that (a) the Bank shall, in its discretion, direct
and/or act on behalf of Lessor pursuant to the provisions of Sections 8.2(h)
and 8.6 of the Participation Agreement, (b) all notices to be given to Lessor
shall be given to the Bank and (c) all notices to be given by Lessor may be
given by the Bank, at its election.
30.13 SUBMISSION TO JURISDICTION; VENUE; ARBITRATION.
THE PROVISIONS OF THE PARTICIPATION AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION, VENUE AND ARBITRATION ARE HEREBY INCORPORATED BY
REFERENCE HEREIN, MUTATIS MUTANDIS.
30.14 USURY SAVINGS PROVISION.
IT IS THE INTENT OF THE PARTIES HERETO TO CONFORM TO AND
CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN
EFFECT. TO THE EXTENT ANY RENT OR PAYMENTS HEREUNDER ARE HEREINAFTER
CHARACTERIZED BY ANY COURT OF COMPETENT JURISDICTION AS THE REPAYMENT OF
PRINCIPAL AND INTEREST THEREON, THIS SECTION 30.14 SHALL APPLY. ANY SUCH RENT
OR PAYMENTS SO CHARACTERIZED AS INTEREST MAY BE REFERRED TO HEREIN AS
"INTEREST." ALL AGREEMENTS AMONG THE PARTIES HERETO ARE HEREBY LIMITED BY THE
PROVISIONS OF THIS PARAGRAPH WHICH SHALL OVERRIDE AND CONTROL ALL SUCH
AGREEMENTS, WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER WRITTEN OR
ORAL. IN NO WAY, NOR IN ANY EVENT OR CONTINGENCY (INCLUDING WITHOUT LIMITATION
PREPAYMENT OR ACCELERATION OF THE MATURITY OF ANY OBLIGATION), SHALL ANY
INTEREST TAKEN, RESERVED, CONTRACTED FOR, CHARGED, OR RECEIVED UNDER THIS LEASE
OR OTHERWISE, EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMISSIBLE UNDER
APPLICABLE LAW. IF, FROM ANY POSSIBLE CONSTRUCTION OF ANY OF THE OPERATIVE
AGREEMENTS OR ANY OTHER DOCUMENT OR AGREEMENT, INTEREST WOULD OTHERWISE BE
PAYABLE IN EXCESS OF THE MAXIMUM NONUSURIOUS AMOUNT, ANY SUCH CONSTRUCTION
SHALL BE SUBJECT TO THE PROVISIONS OF THIS PARAGRAPH AND SUCH AMOUNTS UNDER
SUCH DOCUMENTS OR AGREEMENTS SHALL BE AUTOMATICALLY REDUCED TO THE MAXIMUM
NONUSURIOUS AMOUNT PERMITTED UNDER APPLICABLE LAW, WITHOUT THE NECESSITY OF
EXECUTION OF ANY AMENDMENT OR NEW DOCUMENT OR AGREEMENT. IF LESSOR SHALL EVER
RECEIVE ANYTHING OF VALUE WHICH IS CHARACTERIZED AS INTEREST
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WITH RESPECT TO THE OBLIGATIONS OWED HEREUNDER OR UNDER APPLICABLE LAW AND
WHICH WOULD, APART FROM THIS PROVISION, BE IN EXCESS OF THE MAXIMUM LAWFUL
AMOUNT, AN AMOUNT EQUAL TO THE AMOUNT WHICH WOULD HAVE BEEN EXCESSIVE INTEREST
SHALL, WITHOUT PENALTY, BE APPLIED TO THE REDUCTION OF THE COMPONENT OF
PAYMENTS DEEMED TO BE PRINCIPAL AND NOT TO THE PAYMENT OF INTEREST, OR REFUNDED
TO LESSEE OR ANY OTHER PAYOR THEREOF, IF AND TO THE EXTENT SUCH AMOUNT WHICH
WOULD HAVE BEEN EXCESSIVE EXCEEDS THE COMPONENT OF PAYMENTS DEEMED TO BE
PRINCIPAL. THE RIGHT TO DEMAND PAYMENT OF ANY AMOUNTS EVIDENCED BY ANY OF THE
OPERATIVE AGREEMENTS DOES NOT INCLUDE THE RIGHT TO RECEIVE ANY INTEREST WHICH
HAS NOT OTHERWISE ACCRUED ON THE DATE OF SUCH DEMAND, AND LESSOR DOES NOT
INTEND TO CHARGE OR RECEIVE ANY UNEARNED INTEREST IN THE EVENT OF SUCH DEMAND.
ALL INTEREST PAID OR AGREED TO BE PAID TO LESSOR SHALL, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, BE AMORTIZED, PRORATED, ALLOCATED, AND SPREAD THROUGHOUT THE
FULL STATED TERM (INCLUDING WITHOUT LIMITATION ANY RENEWAL OR EXTENSION) OF
THIS LEASE SO THAT THE AMOUNT OF INTEREST ON ACCOUNT OF SUCH PAYMENTS DOES NOT
EXCEED THE MAXIMUM NONUSURIOUS AMOUNT PERMITTED BY APPLICABLE LAW.
30.15 ACKNOWLEDGMENT OF HEAD LEASE; BOND DOCUMENTS.
Lessee acknowledges and agrees that Lessor has entered into or may
enter into one or more Head Leases and related Bond Documents at the request
and direction of Lessee in order to make the property the subject of such Head
Leases available to Lessee pursuant to this Lease. Further, Lessee acknowledges
and agrees that it will incur a substantial benefit as a result of the Lessor
entering into such Head Leases and the related Bond Documents, including
without limitation a partial abatement of ad valorem taxes accruing in
connection with the property the subject of such Head Leases and this Lease.
Further, Lessee acknowledges and agrees that it has reviewed or will review the
terms and conditions of each Head Lease and the related Bond Documents.
Accordingly, Lessee specifically acknowledges and agrees that it shall pay and
perform, or cause to be paid and performed, each and every obligation of Lessor
arising under or in connection with any such Head Lease and the related Bond
Documents. The obligations arising hereunder shall survive the expiration or
termination of this Lease.
[signature pages follow]
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IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed and delivered as of the date first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the
SRI Realty Trust 1998-1, as Lessor
By: /s/ Authorized Officer
----------------------------------
Name: Authorized Officer
--------------------------------
Title:
-------------------------------
STERILE RECOVERIES, INC., as Lessee
By: /s/ James T. Boosales
----------------------------------
Name: James T. Boosales
--------------------------------
Title: EVP
-------------------------------
Receipt of this original
counterpart of the foregoing
Lease is hereby acknowledged
as the date hereof
FIRST UNION NATIONAL BANK,
as Lender and Holder
By: /s/ Paul Solatario
----------------------------------
Name: Paul Solatario
--------------------------------
Title: Vice President
-------------------------------
<PAGE> 49
EXHIBIT A TO THE LEASE
LEASE SUPPLEMENT NO. ___
THIS LEASE SUPPLEMENT NO. ___ (this "Lease Supplement") dated as of
___________, 199___ 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, as lessor (the "Lessor"), and STERILE
RECOVERIES, INC., a Florida corporation, as lessee (the "Lessee").
WHEREAS, Lessor is the [owner or will be the owner of the
Property][lessee or will be the lessee of the Property pursuant to the Head
Lease attached as Schedule 1C] described on Schedule 1 hereto (the "Leased
Property") and wishes to lease the same to Lessee;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS; RULES OF USAGE. For purposes of this Lease
Supplement, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in Appendix A to the Participation
Agreement, dated as of February 1, 1999, among Lessee, Lessor, not
individually, except as expressly stated therein, but solely as the Owner
Trustee under the SRI Realty Trust 1998-1, and First Union National Bank, as
Lender and Holder, as such may be amended, modified, extended, supplemented,
restated and/or replaced from time to time.
SECTION 2. THE PROPERTIES. Attached hereto as Schedule 1 is the
description of the Leased Property, with an Equipment Schedule attached hereto
as Schedule 1 A, an Improvement Schedule attached hereto as Schedule 1 B and [a
legal description of the Land/a copy of the Ground Lease or a copy of the
Head Lease] attached hereto as Schedule 1 C. Effective upon the execution and
delivery of this Lease Supplement by Lessor and Lessee, the Leased Property
shall be subject to the terms and provisions of the Lease. Without further
action, any and all additional Equipment funded under the Operative Agreements
and any and all additional Improvements made to the Land shall be deemed to be
titled to the Lessor and subject to the terms and conditions of the Lease and
this Lease Supplement.
This Lease Supplement shall constitute a mortgage, deed of trust,
security agreement and financing statement under the laws of the state in which
the Leased Property is situated. The maturity date of the obligations secured
hereby shall be [___________] unless extended to not later than [___________].
For purposes of provisions of the Lease and this Lease Supplement
related to the creation and enforcement of the Lease and this Lease Supplement
as a security agreement and a fixture filing, Lessee is the debtor and Lessor
is the secured party. The mailing addresses of the debtor
A-1
<PAGE> 50
(Lessee herein) and of the secured party (Lessor herein) from which information
concerning security interests hereunder may be obtained are set forth on the
signature pages hereto. A carbon, photographic or other reproduction of the
Lease and this Lease Supplement or of any financing statement related to the
Lease and this Lease Supplement shall be sufficient as a financing statement
for any of the purposes referenced herein.
SECTION 3. USE OF PROPERTY. At all times during the Term with respect
to each Property, Lessee will comply with all obligations under and (to the
extent no Event of Default exists and provided, that such exercise will not
impair the value of such Property) shall be permitted to exercise all rights
and remedies under, all operation and easement agreements and related or
similar agreements applicable to such Property.
SECTION 4. RATIFICATION; INCORPORATION BY REFERENCE. Except as
specifically modified hereby, the terms and provisions of the Lease and the
Operative Agreements are hereby ratified and confirmed and remain in full force
and effect. The Lease is hereby incorporated herein by reference as though
restated herein in its entirety.
SECTION 5. ORIGINAL LEASE SUPPLEMENT. The single executed original of
this Lease Supplement marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED
COUNTERPART" on the signature page thereof and containing the receipt of the
Agent therefor on or following the signature page thereof shall be the original
executed counterpart of this Lease Supplement (the "Original Executed
Counterpart"). To the extent that this Lease Supplement constitutes chattel
paper, as such term is defined in the Uniform Commercial Code as in effect in
any applicable jurisdiction, no security interest in this Lease Supplement may
be created through the transfer or possession of any counterpart other than the
Original Executed Counterpart.
SECTION 6. GOVERNING LAW. THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY
AND CONSTRUED, INTERPRETED TO AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NORTH CAROLINA, EXCEPT TO THE EXTENT THE LAWS OF THE STATE WHERE A
PARTICULAR PROPERTY IS LOCATED ARE REQUIRED TO APPLY.
SECTION 7. MORTGAGE; POWER OF SALE. Without limiting any other
remedies set forth in the Lease, in the event that a court of competent
jurisdiction rules that the Lease constitutes a mortgage, deed of trust or
other secured financing as is the intent of the parties, then Lessor and Lessee
agree that Lessee hereby grants a Lien against the Leased Property WITH POWER
OF SALE, and that, upon the occurrence of any Lease Event of Default, Lessor
shall have the power and authority, to the extent provided by law, after prior
notice and lapse of such time as may be required by law, to foreclose its
interest (or cause such interest to be foreclosed) in all or any part of the
Leased Property.
SECTION 8. COUNTERPART EXECUTION. This Lease Supplement may be
executed in any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together constituting but one (1)
and the same instrument.
A-2
<PAGE> 51
For purposes of the provisions of this Lease Supplement concerning
this Lease Supplement constituting a security agreement and fixture filing, the
addresses of the debtor (Lessee herein) and the secured party (Lessor herein),
from whom information may be obtained about this Lease Supplement, are as set
forth on the signature pages hereto.
[The remainder of this page has been intentionally left blank.]
A-3
<PAGE> 52
IN WITNESS WHEREOF, each of the parties hereto has caused this Lease
Supplement to be duly executed by an officer thereunto duly authorized as of
the date and year first above written.
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the
SRI Realty Trust 1998-1, as Lessor
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
First Security Bank, National
Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Val T. Orton
Vice President
STERILE RECOVERIES, INC.,
as Lessee
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Sterile Recoveries, Inc.
28100 US Highway 19N, Suite 201
Clearwater, Florida 33761
Attn: James T. Boosales
Receipt of this original counterpart of the foregoing Lease Supplement is
hereby acknowledged as the date hereof.
FIRST UNION NATIONAL BANK, as
Lender and Holder
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
A-4
<PAGE> 53
First Union National Bank
c/o First Union Capital Markets Group
301 South College Street, DC 6
Charlotte, North Carolina 28288-0166
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF )
-----------------
) ss:
COUNTY OF )
----------------
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of FIRST SECURITY
BANK, NATIONAL ASSOCIATION, a national banking association, not individually,
but solely as the Owner Trustee under the SRI Realty Trust 1998-1, on behalf of
the Owner Trustee.
[Notarial Seal] --------------------------------------
Notary Public
My commission expires:
---------------
STATE OF )
-----------------
) ss:
COUNTY OF )
----------------
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of _________________ this _____ day of
______________, by ________________, as __________________ of STERILE
RECOVERIES, INC., a Florida corporation, on behalf of the corporation.
[Notarial Seal] -------------------------------------
Notary Public
My commission expires:
---------------
STATE OF )
-----------------
) ss:
COUNTY OF )
----------------
The foregoing Lease Supplement was acknowledged before me, the
undersigned Notary Public, in the County of ________________ this ____ day of
___________, by _____________, as __________________ of FIRST UNION NATIONAL
BANK, a national banking association.
[Notarial Seal] -------------------------------------
Notary Public
My commission expires:
---------------
A-5
<PAGE> 54
SCHEDULE 1
TO LEASE SUPPLEMENT NO. ____
(Description of the Leased Property)
A-6
<PAGE> 55
SCHEDULE 1A
TO LEASE SUPPLEMENT NO. ____
(Schedule of Equipment)
<PAGE> 56
SCHEDULE 1B
TO LEASE SUPPLEMENT NO. ____
(Schedule of Improvements)
<PAGE> 57
SCHEDULE 1C
TO LEASE SUPPLEMENT NO. ____
(Legal Description of Land\copy of Ground Lease\copy of Head Lease)
<PAGE> 58
EXHIBIT B TO THE LEASE
[MODIFY OR SUBSTITUTE SHORT FORM LEASE AS
NECESSARY FOR LOCAL LAW REQUIREMENTS]
Recordation requested by:
Moore & Van Allen, PLLC
After recordation return to:
Moore & Van Allen, PLLC (WMA)
100 North Tryon Street, Floor 47
Charlotte, NC 28202-4003
Space above this line
for Recorder's use
- -------------------------------------------------------------------------------
MEMORANDUM OF LEASE AGREEMENT
AND
LEASE SUPPLEMENT NO. ____
THIS MEMORANDUM OF LEASE AGREEMENT AND LEASE SUPPLEMENT NO. ____
("Memorandum"), dated as of _____________, 1999, is by and 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, with an office at 79 South Main Street, Salt Lake City, Utah 84111
(hereinafter referred to as "Lessor") and STERILE RECOVERIES, INC., a Florida
corporation with an office at 28100 US Highway 19N, Suite 201, Clearwater,
Florida 33761 (hereinafter referred to as "Lessee").
WITNESSETH:
That for value received, Lessor and Lessee do hereby covenant, promise
and agree as follows:
1. DEMISED PREMISES AND DATE OF LEASE. Lessor has leased to Lessee,
and Lessee has leased from Lessor, for the Term (as hereinafter defined),
certain real property and other property located in ________________ [subject
to a ground lease/head lease], which [ground lease/head lease] is described in
the attached Schedule 1 (the "Property"), pursuant to the terms of a Lease
Agreement between Lessor and Lessee dated as of February 1, 1999 (as such may
be amended, modified, extended, supplemented, restated and/or replaced from
time to time,
<PAGE> 59
"Lease") and a Lease Supplement No. _____ between Lessor and Lessee dated as of
______________ (the "Lease Supplement").
The Lease and the Lease Supplement shall constitute a mortgage, deed
of trust and security agreement and financing statement under the laws of the
state in which the Property is situated. The maturity date of the obligations
secured thereby shall be ___________, unless extended to not later than
___________.
For purposes of provisions of the Lease and the Lease Supplement
related to the creation and enforcement of the Lease and the Lease Supplement
as a security agreement and a fixture filing, Lessee is the debtor and Lessor
is the secured party. The mailing addresses of the debtor (Lessee herein) and
of the secured party (Lessor herein) from which information concerning security
interests hereunder may be obtained are as set forth on the signature pages
hereof. A carbon, photographic or other reproduction of this Memorandum or of
any financing statement related to the Lease and the Lease Supplement shall be
sufficient as a financing statement for any of the purposes referenced herein.
2. TERM, RENEWAL, EXTENSION AND PURCHASE OPTION. The term of the Lease
for the Property ("Term") commenced as of __________, 19__ and shall end as of
_________, 19__, unless the Term is extended or earlier terminated in
accordance with the provisions of the Lease. The Lease contains provisions for
renewal and extension. The tenant has a purchase option under the Lease.
3. TAX PAYER NUMBERS.
Lessor's tax payer number: __________________.
Lessee's tax payer number: __________________.
4. MORTGAGE; POWER OF SALE. Without limiting any other remedies set
forth in the Lease, in the event that a court of competent jurisdiction rules
that the Lease constitutes a mortgage, deed of trust or other secured financing
as is the intent of the parties, then Lessor and Lessee agree that Lessee has
granted, pursuant to the terms of the Lease and the Lease Supplement, a Lien
against the Property WITH POWER OF SALE, and that, upon the occurrence and
during the continuance of any Lease Event of Default, Lessor shall have the
power and authority, to the extent provided by law, after prior notice and
lapse of such time as may be required by law, to foreclose its interest (or
cause such interest to be foreclosed) in all or any part of the Property.
5. EFFECT OF MEMORANDUM. The purpose of this instrument is to give
notice of the Lease and the Lease Supplement and their respective terms,
covenants and conditions to the same extent as if the Lease and the Lease
Supplement were fully set forth herein. This Memorandum shall not modify in any
manner the terms, conditions or intent of the Lease or the Lease Supplement and
the parties agree that this Memorandum is not intended nor shall it be
<PAGE> 60
used to interpret the Lease or the Lease Supplement or determine the intent of
the parties under the Lease or the Lease Supplement.
[The remainder of this page has been intentionally left blank.]
<PAGE> 61
IN WITNESS WHEREOF, the parties hereto have duly executed this
instrument as of the day and year first written.
LESSOR:
FIRST SECURITY BANK, NATIONAL
ASSOCIATION, not individually, but
solely as the Owner Trustee under the
SRI Realty Trust 1998-1, as Lessor
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
First Security Bank, National
Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Val T. Orton
Vice President
LESSEE:
STERILE RECOVERIES, INC.,
as Lessee
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Sterile Recoveries, Inc.
28100 US Highway 19N, Suite 201
Clearwater, FL 33761
Attn: James T. Boosales
<PAGE> 62
SCHEDULE 1
(Description of Property)
<PAGE> 63
[CONFORM TO STATE LAW REQUIREMENTS]
STATE OF )
-----------------
) ss:
COUNTY OF )
----------------
The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
__________________ of FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not individually, but solely as the Owner Trustee under
the SRI Realty Trust 1998-1, on behalf of the Owner Trustee.
[Notarial Seal] --------------------------------------
Notary Public
My commission expires:
---------------
STATE OF )
-----------------
) ss:
COUNTY OF )
----------------
The foregoing Memorandum of Lease Agreement and Lease Supplement No.
_____ was acknowledged before me, the undersigned Notary Public, in the County
of _________________ this _____ day of ______________, by ________________, as
______________________ of STERILE RECOVERIES, INC., a Florida corporation, on
behalf of the corporation.
[Notarial Seal] --------------------------------------
Notary Public
My commission expires:
---------------
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
Sterile Recoveries, Inc.
We have issued our reports dated February 26, 1999 accompanying the
consolidated financial statements and schedule of Sterile Recoveries, Inc. that
are included in the Company's Form 10-K for the year ended December 31, 1998.
We hereby consent to the incorporation by reference of said reports in the
Registration Statement of Sterile Recoveries, Inc. on Form S-B (File No.
333-31911, effective July 23, 1997).
GRANT THORNTON LLP
Tampa, Florida
February 26, 1999
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
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<SECURITIES> 0
<RECEIVABLES> 7,645
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<INVENTORY> 2,324
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0
<COMMON> 6
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<TOTAL-LIABILITY-AND-EQUITY> 43,620
<SALES> 52,318
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