U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- ----------------
Commission File No. 0-9036
LANNETT COMPANY, INC.
(Name of small business issuer in its charter)
State of Delaware 23-0787-699
State of Incorporation I.R.S. Employer I.D. No.
9000 State Road
Philadelphia, Pennsylvania 19136
(215) 333-9000
(Address of principal executive offices and telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
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____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.
The issuer had net sales of $10,580,568 for the fiscal year ended
June 30, 1999.
As of September 1, 1999, the aggregate market value of the voting
stock held by non-affiliates was approximately $5,856,894 computed by
reference to the average of the bid and asked prices of such stock as quoted
by the National Quotations Bureau, Inc.
As of September 1, 1999, there were 5,206,128 shares of the issuer's
common stock, $.001 par value, outstanding.
Page 1 of 38 pages
Exhibit Index on Page 39
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General.
Lannett Company, Inc. (the "Company") was incorporated in 1942
under the laws of the Commonwealth of Pennsylvania. In 1991, the Company
merged into Lannett Company, Inc., a Delaware corporation. The sole purpose
of the merger was to reincorporate the Company as a Delaware corporation. The
administrative offices and manufacturing facilities of the Company are
located at 9000 State Road, Philadelphia, Pennsylvania.
The Company manufactures and distributes pharmaceutical products
sold under generic names ("competitive pharmaceutical products") and
historically has manufactured and distributed pharmaceutical products sold
under its trade or brand names. In addition, the Company contract
manufactures and private labels pharmaceutical products for other companies.
During Fiscal 1997, the Company signed a contract development and
manufacturing agreement and a number of private-label supply agreements
(collectively the "Supply Agreements"). The private label supply agreements
signed with other generic pharmaceutical companies enable the Company to
further penetrate the market for its current product lines. Revenues from
these agreements began in Fiscal 1998. Pricing stated in the Supply
Agreements is subject to change depending on market conditions. The Supply
Agreements do not dictate a certain level of purchases.
The use of the Company's manufacturing capacity remained
consistent as compared to the prior year. Certain manufacturing departments
are operating at full utilization (utilizing one shift) and certain
departments are operating on a limited second shift. The hiring of additional
personnel will allow for increased efficiency and utilization of equipment
and should be sufficient to accommodate increased production needs during
Fiscal 2000. On December 19, 1997, the Company entered into a three-year
lease for a 23,500 square foot facility. This new facility houses research
and development, administration and warehousing operations.
Principal Products.
During Fiscal 1999, the Company manufactured and distributed five
products: (i) Butalbital Compound Capsules ("BCC"), a generic version of
Novartis Pharmaceutical Corporation's Fiorinal(R); an analgesic primarily
used for the treatment of migrane headaches, (ii) Primidone, a generic
version of American Home Product's Mysoline(R) an anti-convulsant, (iii)
Dicyclomine Hydrochloride USP, 10-mg capsules, a generic version of Hoechst
Marion Roussel's Bentyl(R), an antispasmodic and anticholinergic agent, (iv)
Pseusoephedrine Hydrochlorine 60-mg tablets and (v) Guafenesin/Ephedrine
25/200-mg tablets, both cough/cold preparations.
Eight additional products are currently under development. Four of
these products are being developed and manufactured for other companies, and
the other four products are being developed as part of the Lannett product
line. One of the Lannett products has been redeveloped and submitted
-2-
to the Federal Drug Administration ("FDA") for supplemental approval. Three
additional products represent previously approved Abbreviated New Drug
Applications ("ANDA's") which the Company is planning to reintroduce. Since
the Company has no control over the FDA review process, management is unable
to anticipate when it will be able to begin producing and shipping additional
products.
During the quarter ended September 30, 1999, the Company began
manufacturing and distributing Dicyclomine Hydrochloride USP, 20-mg tablets,
a generic version of Hoechst Marion Roussel's Bentyl(R), an antispasmodic and
anticholinergic agent.
During Fiscal 1997, the Company signed a number of Supply
Agreements. The high quality of Lannett production facilities, equipment and
staff offers attractive alternatives for contract development and
manufacturing for other pharmaceutical companies and Lannett intends to
further pursue this area of business. In addition, the Company signed a
number of private label supply agreements with larger generic pharmaceutical
companies to increase market share of its current product line by utilizing
the sales and marketing strengths of these larger companies. Pricing stated
in the Supply Agreements is subject to change depending on market conditions.
The Supply Agreements do not dictate a certain level of purchases.
Raw Materials.
The raw materials used by the Company in the manufacture of
pharmaceutical products consist of pharmaceutical chemicals in various forms,
which are available from various sources. FDA approval is required in
connection with the process of selecting active ingredient suppliers. Four
suppliers, BI Chemicals Inc., Ganes Chemicals, Penn Bottle and Supply Co. and
Flavine International accounted for approximately 27%, 23%, 15% and 11%,
respectively of the Company's raw material purchases in Fiscal 1999. Four
suppliers, BI Chemicals Inc., Capsugel, Penn Bottle and Supply Co. and Ganes
Chemicals Inc. accounted for approximately 43%, 16%, 12% and 12%,
respectively, of the Company's raw material purchases in Fiscal 1998. The raw
materials purchased from these suppliers are available from a number of
vendors.
Distribution.
The Company sells its pharmaceutical products primarily to
wholesalers, distributors, warehousing chains, retail chains and other
pharmaceutical companies. Sales of the Company's pharmaceutical products are
made on an individual order basis. The Company has a number of Supply
Agreements. Two customers accounted for approximately 39% and 19%,
respectively, of net sales in Fiscal 1999. Two different customers accounted
for approximately 31% and 28%, respectively, of the Company's net sales in
Fiscal 1998. As the Company introduces additional products and is awarded
additional Supply Agreements the Company expects to broaden its customer
base.
-3-
Competition.
The manufacture and distribution of pharmaceutical products is a
highly competitive industry. Competition in the pharmaceutical industry is
primarily based on quality, price and service. The Company intends to compete
primarily on this basis, as well as flexibility, availability of inventory,
and by the fact that the Company's products are only available from limited
competitors. The modernization of its facilities, hiring of experienced
staff, implementation of inventory and quality control programs and the
signing of the recent supply agreements have improved the Company's
competitive position.
Government Regulation.
Pharmaceutical manufacturers are subject to extensive regulation
by the federal government, principally by the FDA and the Drug Enforcement
Agency ("DEA"), and, to a lesser extent, by other federal regulatory bodies
and state governments. The Federal Food, Drug and Cosmetic Act, the
Controlled Substance Act and other federal statutes and regulations govern or
influence the testing, manufacture, safety, labeling, storage, record
keeping, approval, pricing, advertising and promotion of the Company's
generic drug products. Noncompliance with applicable regulations can result
in fines, recall and seizure of products, total or partial suspension of
production, personal and/or corporate prosecution and debarment, and refusal
of the government to enter into supply contracts or to approve new drug
applications. The FDA also has the authority to revoke previously approved
drug products.
FDA approval is required before any "new" prescription drug can be
marketed. The approval procedures are generally quite burdensome. A new drug
is one not generally recognized by qualified experts as safe and effective
for its intended use. Generally, a drug which is the generic equivalent of a
previously approved prescription drug will be treated as a new generic drug
requiring FDA approval. Furthermore, each dosage form of a specific generic
drug product requires separate approval by the FDA. However, less burdensome
approval procedures may be used for generic equivalents. Although generic
equivalents of many over-the-counter drugs generally do not require
affirmative FDA pre-approval, there are instances where FDA pre-approval is
required. There are currently three ways to obtain FDA approval of a new
drug.
New Drug Applications ("NDA"). Unless one of the two procedures
discussed in the following paragraphs is available, a manufacturer must
conduct and submit to the FDA complete clinical studies to establish a drug's
safety and efficacy.
Abbreviated New Drug Applications ("ANDA"). An ANDA is similar to
an NDA, except that the FDA waives the requirement of complete clinical
studies of safety and efficacy, although it may require bioavailability and
bioequivalence studies. "Bioavailability" indicates the rate of absorption
and levels of concentration of a drug in the blood stream needed to produce a
therapeutic effect. "Bioequivalence" compares one drug product with another,
and when established, indicates that the rate of absorption and the levels of
concentration of a generic drug in the body are within prescribed statistical
limits to those of a previously approved equivalent drug. Under the Drug
Price Act, an ANDA may be submitted for a drug on the basis that it is the
equivalent of an approved drug, regardless of when such other drug was
approved. The Drug Price Act, in addition to establishing a new ANDA
procedure, created statutory protections for approved brand name
-4-
drugs. Under the Drug Price Act, an ANDA for a generic drug may not be made
effective until all relevant product and use patents for the equivalent brand
name drug have expired or have been determined to be invalid. Prior to
enactment of the Drug Price Act, the FDA gave no consideration to the patent
status of a previously approved drug. Additionally, the Drug Price Act
extends for up to five years the term of a product or use patent covering a
drug to compensate the patent holder for the reduction of the effective
market life of a patent due to federal regulatory review. With respect to
certain drugs not covered by patents, the Drug Price Act sets specified time
periods of two to ten years during which ANDA's for generic drugs cannot
become effective or, under certain circumstances, cannot be filed if the
equivalent brand name drug was approved after December 31, 1981.
Paper New Drug Applications ("Paper NDA"). For drugs which are
identical to a drug first approved after 1962, a prospective manufacturer
need not go through the full NDA procedure, but instead may demonstrate
safety and efficacy by reliance on published literature and reports, and must
also submit, if the FDA so requires, bioavailability or bioequivalence data
illustrating that the generic drug formulation produces, within an acceptable
range, the same effects as the previously approved equivalent drug. Because
published literature to support the safety and efficacy of post-1962 drugs
may not be generally available, this procedure is of limited utility to
generic drug manufacturers. Moreover, the utility of Paper NDA's has been
even further diminished by the recently broadened availability of the
abbreviated new drug application as described above.
Among the requirements for new drug approval is the requirement
that the prospective manufacturer's methods conform to the FDA's current good
manufacturing practices ("CGMP Regulations"). The CGMP Regulations must be
followed at all times during which the approved drug is manufactured. In
complying with the standards set forth in the CGMP regulations, the Company
must continue to expend time, money and effort in the areas of production and
quality control to ensure full technical compliance. Failure to comply with
the CGMP regulations risks possible FDA action such as the seizure of
noncomplying drug products or, through the Department of Justice, enjoining
the manufacture of such products.
The Company is also subject to federal, state and local laws of
general applicability, such as laws regulating working conditions, and, to
the extent that its business operations entail the generation, storage,
transportation or discharge of items that may be considered hazardous
substances, hazardous waste or environmental contaminants, the Company may be
subject to various federal, state and local environmental protection laws and
regulations. The Company monitors its compliance with all environmental laws.
Any compliance costs, which may be incurred, are contingent upon the results
of future site monitoring and will be charged against operations when
incurred. No monitoring costs were incurred by the Company during the year
ended June 30, 1999. During the year ended June 30, 1998, the Company
incurred monitoring costs of approximately $5,000.
-5-
Research and Development.
During Fiscal 1999 and Fiscal 1998, the Company incurred research
and development costs of approximately $915,000 and $466,000, respectively.
Employees.
The Company currently employs 90 employees, all of whom are
full-time.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's general business offices, laboratory and
manufacturing and distribution facilities are located in a facility owned by
the Company at 9000 State Road, Philadelphia, Pennsylvania. This facility was
extensively renovated during Fiscal 1993 and Fiscal 1992 and is approximately
31,000 square feet, located on four and one half (4-1/2) acres. The Company
had increased its warehousing activities beyond the capacity of its current
facility. As a result, on December 19, 1997, it entered into a three-year
lease for a 23,500 square foot facility located at 500 State Road, Bensalem
Bucks County, Pennsylvania. The leased facility is located approximately 1.5
miles from its main operating facility. This new leased facility houses
research and development, administration and warehousing operations.
ITEM 3. LEGAL PROCEEDINGS
Regulatory Proceedings. The Company is engaged in an industry,
which is subject to considerable government regulation relating to the
development, manufacturing and marketing of pharmaceutical products.
Accordingly, incidental to its business, the Company periodically responds to
inquiries or engages in administrative and judicial proceedings involving
regulatory authorities, particularly the FDA and the DEA.
Employee Claim. A claim of retaliatory discrimination has been
filed by a former employee with the Pennsylvania Human Relations Commission
("PHRC"). The Company has denied liability in this matter, which is being
investigated by the PHRC pursuant to its normal procedures. Management
believes that the outcome will not have a material adverse impact on the
financial position of the Company.
A claim of sexual harassment and retaliation also has been filed
against the Company by another former employee. The claim was cross-filed
with the PHRC and with the Equal Employment Opportunity Commission, which
already has closed its file on the charge. The Company has filed an answer
with the PHRC denying the charge, and the PHRC is investigating the claim
pursuant to its normal procedures. Management believes that the outcome of
this charge also will not have a material adverse impact on the financial
position of the Company.
DES Cases. The Company is currently engaged in several civil
actions as a co-defendant with many other manufacturers of Diethylstilbestrol
("DES"), a synthetic hormone. Prior litigation established that the Company's
pro rata share of any liability is less than one-tenth of one percent. The
Company was represented in many of these actions by the insurance company
with which the
-6-
Company maintained coverage during the time period that damages were alleged
to have occurred. The insurance company denied coverage of actions filed
after January 1, 1992. With respect to these actions, the Company paid
nominal damages or stipulated to its pro rata share of any liability. The
Company has either settled or is currently defending over 500 such claims.
Management believes that the outcome will not have a material adverse impact
on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to a vote of the Company's security
holders during the quarter ended June 30, 1999 and since the annual meeting
of shareholders held May 10, 1999.
-7-
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information.
The Company's common stock trades in the over-the-counter market
through the use of the inter-dealer "pink-sheets" published by the National
Quotations Bureau, Inc. (the "NQB"). The following table sets forth certain
information with respect to the high and low bid prices of the Company's
common stock during Fiscal 1999 and 1998 as quoted by the NQB. Such
quotations reflect inter-dealer prices without retail mark-up, markdown or
commission and may not represent actual transactions.
Fiscal Year Ended June 30, 1999
High Low
---- ---
First quarter.............................. $2.50 $1.31
Second quarter............................. 1.88 1.13
Third quarter.............................. 1.31 1.00
Fourth quarter............................. 1.44 1.00
Fiscal Year Ended June 30, 1998
High Low
---- ---
First quarter.............................. $1.63 $1.00
Second quarter............................. 3.00 1.13
Third quarter.............................. 2.63 2.25
Fourth quarter............................. 2.40 1.63
Holders.
The number of holders of record of the Company's common stock as
of September 1, 1999 is 498.
Dividends.
The Company did not pay any cash dividends in Fiscal 1999 or 1998.
The Company intends to use all available funds for the Company's working
capital and does not anticipate paying cash dividends in the foreseeable
future.
-8-
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
In addition to historical information, this Form 10-KSB contains
forward-looking information. The forward-looking information is subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected in the forward-looking statements. Important
factors that might cause such a difference include, but are not limited to,
those discussed in the following section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date of this Form 10-KSB.
The Company undertakes no obligation to publicly revise or update these
forward-looking statements to reflect events or circumstances which arise
later. Readers should carefully review the risk factors described in other
documents the Company files from time to time with the Securities and
Exchange Commission, including the Quarterly reports on Form 10-QSB to be
filed by the Company in Fiscal 2000, and any Current Reports on Form 8-K
filed by the Company.
Results of Operations - Fiscal 1999 to Fiscal 1998.
Net sales for Fiscal 1999 increased by 12% to $10,580,568 from net
sales of $9,464,814 in Fiscal 1998. Sales increased during Fiscal 1999 due to
increased sales of the Company's Over-The-Counter ("OTC") product line. OTC
sales increased by $1.4 million from Fiscal 1998 to Fiscal 1999, offset
partially by a decrease of approximately $300,000 in sales of prescription
products. The private-label supply agreements accounted for approximately
$3.8 million and $6.7 million of Fiscal 1999 and 1998 net sales,
respectively. The Company also generated OTC Private Label sales of
approximately $4 million and $5,000 not governed by any agreements, during
Fiscal 1999 and Fiscal 1998, respectively. Net sales derived from the
contract development and manufacturing agreement represents approximately
$168,000 and $140,000 for Fiscal 1999 and Fiscal 1998, respectively.
Cost of sales increased by 8%, to $6,619,837 in Fiscal 1999 from
$6,120,949 in Fiscal 1998. The cost of sales increase is due to the increase
in direct costs as a result of the increase in sales from Fiscal 1998 to
Fiscal 1999, partially offset by greater absorption of fixed overhead. Cost
of sales for the private-label supply agreements is consistent with the
overall cost of sales except for discounts allowed. Cost of sales related to
the contract development and manufacturing agreement represents approximately
$85,000 and $70,000 for Fiscal 1999 and Fiscal 1998, respectively. Gross
profit margins for Fiscal 1999 and Fiscal 1998 were 37% and 35%,
respectively. The increase in the gross profit percentage is primarily due to
a more favorable sales mix and greater absorption of fixed overhead as a
result of the higher sales levels.
Research and development expenses increased by 96% to $914,654 in
Fiscal 1999 from $465,729 in Fiscal 1998 due to increased activity relating
to development of new products and from development work relating to the
reintroduction of previously approved ANDA's. Selling, general and
administrative expenses were $1,216,170 in Fiscal 1999 and remained
relatively constant as compared to $1,198,098 in Fiscal 1998.
-9-
As a result of the foregoing, the Company reported an operating
profit of $1,829,907 for Fiscal 1999, as compared to an operating profit of
$1,680,038 for Fiscal 1998.
The Company's interest expense increased to $911,579 in Fiscal
1999 from $804,316 in Fiscal 1998 primarily due to increased borrowings on
the Company's debt. See Liquidity and Capital Resources below.
During Fiscal 1999 and Fiscal 1998 the Company recorded income tax
benefits of $368,100 and $150,000, respectively.
The Company reported net income of $1,308,138 for Fiscal 1999,
$0.25 basic income per share, $0.10 on a diluted basis, compared to net
income of $1,025,722 for Fiscal 1998, $0.20 basic income per share, $0.08 on
a diluted basis.
Liquidity and Capital Resources -
Net cash provided from operating activities of $1,109,142 during
Fiscal 1999 was attributable to net income of $1,308,138 as adjusted for the
effects of non-cash items of $190,387 and changes in operating assets and
liabilities totaling ($389,383). Significant changes in operating assets and
liabilities are comprised of, i) an increase in accounts receivable of
$245,471 primarily due to higher sales levels in Fiscal 1999, ii) an increase
in inventories primarily due to an increase in work-in-process in
anticipation of increased sales levels in Fiscal 2000, partially offset by
increases in accounts payable and accrued expenses due to increased inventory
and operating expense levels.
The net cash used in investing activities consisted of $1,068,428
expended during Fiscal 1999 primarily for machinery and equipment. The
Company has budgeted for $750,000 in capital expenditures in Fiscal 2000. The
anticipated additional capital expenditure requirements are necessary to
support the growth from the contract manufacturing and private label supply
agreements, and to support new product introductions. As of June 30, 1999,
approximately $2,600,000 from the proceeds of the bonds issued during Fiscal
1999 was available in financing restricted for certain future capital
expenditures.
The Company has a financing facility made available to it by
William Farber, a principal shareholder and Chairman of the Board of
Directors which consists of a $4,250,000 revolving line of credit
("Shareholder Line of Credit") and a $2,000,000 convertible debenture
("Shareholder Debenture").
The principal balance on the Shareholder Line of Credit is due
October 1, 2000. At June 30, 1999, accrued interest was $0. At June 30, 1999,
the Company had $4,225,000 outstanding and $25,000 available under the
Shareholder Line of Credit.
The maturity date of the Shareholder Debenture is December 23,
1999. The Shareholder Debenture and accrued interest is convertible at any
time prior to payment in full at the conversion rate of 4,000 shares of
common stock for each $1,000 of outstanding indebtedness. The present
-10-
intent of the principal shareholder is to convert the debenture and related
accrued interest into shares of common stock prior to December 23, 1999. At
June 30, 1999, the current outstanding indebtedness represented by the
Shareholder Debenture and the related accrued interest is approximately
$2,386,000. Deferred interest from July 1, 1996 to June 30, 1997 is payable
in six equal monthly installments, which commenced April 15, 1999 and has
been continuing on the fifteenth day of each month thereafter, until paid in
full. Deferred interest from July 1, 1997 to June 30, 1998 is payable in six
equal monthly installments, commencing July 15, 1999 and continuing on the
fifteenth day of each month thereafter. Deferred interest from July 1, 1998
to June 30, 1999 is payable in twelve equal monthly installments, commencing
July 15, 1999 and continuing on the fifteenth day of each month thereafter
with the balance due December 23, 1999. At June 30, 1999, accrued interest
was approximately $386,000, and is classified as currently due.
In April 1999, the Company entered into a loan agreement (the
"Agreement") with a governmental authority (the "Authority") to finance
future construction and growth projects of the Company. The Authority has
issued $3,700,000 in tax-exempt variable rate demand and fixed rate revenue
bonds to provide the funds to finance such growth projects pursuant to a
trust indenture ("the "Trust indenture"). A portion of the Company's proceeds
from the bonds was used to pay for bond issuance costs of approximately
$170,000. The remainder of the proceeds were deposited into a money market
account, which is restricted to future plant and equipment needs of the
Company as specified in the Agreement. The Agreement requires the Company to
repay the Authority loan through installment payments beginning in May 2003
and continuing through May 2014, the year the bonds mature. At June 30, 1999,
the Company has $3,700,000 outstanding on the Authority loan, which is
classified as a long-term liability. In April 1999, an irrevocable letter of
credit of $3,770,000 was issued by a bank to secure payment of the Authority
Loan and a portion of the related accrued interest. At June 30, 1999, no
portion of the letter of credit has been utilized.
In April 1999, the Company authorized and directed the issuance of
$2,300,000 in taxable variable rate demand and fixed rate revenue bonds
pursuant to a trust indenture between the Company and a bank as trustee (the
"Trust Indenture"). From the proceeds of the bonds, $750,000 was utilized to
pay deferred interest owed to the principal shareholder of the Company and
approximately $1,440,000 was paid to a bank to refinance a mortgage term loan
and equipment term loans. The remainder of the proceeds was used to pay bond
issuance costs of approximately $109,000. The Trust Indenture requires the
Company to repay the bonds through installment payments beginning in May 2000
1999 and continuing through May 2003, the year the bonds mature. At June 30,
1999, the Company has $2,256,285 outstanding on the bonds, of which $658,638
is classified as currently due. In April 1999, an irrevocable letter of
credit of approximately $2,349,000 was issued by a bank to secure payment of
the bonds and a portion of the related accrued interest. At June 30, 1999, no
portion of the letter of credit has been utilized.
The anticipated additional capital expenditure requirements are
necessary to support the growth from the contract manufacturing and private
label supply agreements, and to support new product introductions.
The Company has a $2,000,000 line of credit from a bank. The line
of credit is due October 31, 2000, at which time the Company expects to renew
and extend the due date. The line of credit is limited to 80% of qualified
accounts receivable and 50% of qualified inventory. At June 30, 1999, the
Company had $1,322,000 outstanding and $678,000 available under the line of
credit.
The letters of credit and bank line of credit require the
Company, among other things, to meet certain covenants with respect to
financial ratios and financial reporting. At June 30, 1999, the Company was
not in compliance with certain covenants. On September 24, 1999, the Company
obtained an appropriate waiver from the institution for these violations as
of June 30, 1999 and the letters of credit and bank line of credit were
amended to revise certain covenants. The Company is in compliance with the
covenants under the amended letter of credit and bank line of credit.
The Company believes that cash generated from its operations and
the balances available under the Company's existing loans and lines of credit
as of June 30, 1999, are sufficient to finance its level operations and
currently anticipated capital expenditures.
-11-
Except as set forth in this report, the Company is not aware of
any trends, events or uncertainties that have or are reasonably likely to
have a material adverse impact on the Company's short-term or long-term
liquidity or financial condition.
Prospects for the Future
As described above, eight additional products are currently under
development. Four of these products are being developed and manufactured for
other companies, and the other four products are being developed as part of
the Lannett product line. One of the Lannett products has been redeveloped
and submitted to the FDA for supplemental approval. Three additional products
represent previously approved ANDA's which the Company is planning to
reintroduce. Since the Company has no control over the FDA review process,
management is unable to anticipate when it will be able to begin producing
and shipping additional products.
The high quality of Lannett production facilities, equipment and
staff offers attractive alternatives for contract development and
manufacturing for other pharmaceutical companies and Lannett intends to
further pursue this area of business. In addition, during Fiscal 1998, the
Company signed a number of private label supply agreements with larger
generic pharmaceutical companies to increase market share of its current
product line by utilizing the sales and marketing strengths of these larger
companies.
Year 2000
The Company is in the process of evaluating and addressing Year
2000 compliance of both its information technology systems and its
non-information technology systems (collectively referred to as "Systems").
Such Year 2000 compliance efforts are designed to identify, address, and
resolve issues that may be created by programs written to run on
microprocessors which reference years as two digit fields rather than four
digit fields. Any such programs may recognize a date using "00" as the year
1900 rather than 2000. If this situation occurs, the potential exists for
System failure or miscalculations by computer programs.
The Company continues to make progress in achieving Year 2000
compliance and is on schedule to be fully compliant by September 30, 1999.
Nearly all of the Company's business systems were purchased as Commercial Off
The- Shelf (COTS) Software and non-programmable electronic systems, which
reduces the need for internal workforce dedication to software redesign. The
Company has not hired any external consultants or incurred any additional
costs thus far in its Year 2000 compliance efforts, other than the employment
of a Management Information Systems Manager whose job function includes the
Year 2000 compliance effort. The Company's use of its own information
technology personnel to make the business systems Year 2000 compliant may
delay some other strategic information systems development and implementation
which would have otherwise benefited the Company in various ways and to
varying extents. The Company does not believe that it will be at a
competitive disadvantage as a result of these delays.
In 1997, the Company established a Year 2000 project team to
address outstanding Year 2000 issues. The team has focused its efforts on the
following areas: (1) Information systems hardware and software, (2)
Manufacturing and distribution equipment, (3) Quality control and testing
equipment, (4) Facilities and infrastructure, and (5) Third-party
relationships.
-12-
The Year 2000 program consists of five stages: Awareness,
Inventory, Assessment, Correction & Testing, and Implementation & Contingency
Planning. Phase 1 - Awareness - involves educating the personnel and
management of the Company about the Year 2000 problem and how it can affect
them. Phase 2 Inventory - involves identifying and ranking all of the
components of the Company's systems, equipment and suppliers that may be
vulnerable to the Year 2000 problem. Phase 3 - Assessment - involves
identifying the Year 2000 readiness and options regarding the items
inventoried in Phase 2. Phase 4 - Correction - & Testing - involves obtaining
replacements or identifying remediation strategies for non-compliant systems
as well as testing those solutions in a non-productive environment. Phase 5 -
Implementation & Contingency Planning - involves implementing the solutions
obtained in Phase 4 and developing contingencies for the most reasonably
likely worst case scenarios.
As of June 30, 1999, the Company has incurred approximately
$40,000 relating to remediation of the Year 2000 issue. The Company estimates
that it will have total expenditures for remediation of approximately $30,000
in Fiscal 2000. The future remediation costs to be incurred are based on
management's best estimates, which were derived using assumptions of future
events, including the continued availability of resources and the reliability
of third party modification plans. There can be no assurance that this
estimate will be achieved and actual results may be materially different.
The Information systems hardware and software area of the project
is completed. The manufacturing and distribution equipment area of the
project is completed. The Quality Control and testing equipment area of the
project has completed Phases 1 through 4. Phase 5 involves the implementation
of a new laboratory data collection system to replace the current
non-compliant system. The Phase 5 implementation will be completed by
September 30, 1999.
The Facilities and infrastructure area of the project is
completed.
The Third-party relationship area of the project has completed
Phases 1 - 4. Phase 5 contingency planning is slated to be completed by the
end of September 30, 1999.
The Company continues to make inquiries of its vendors,
professional advisors, customers and other constituents whose Year 2000
compliance is important to its ongoing business. Based on the limited
information received by the Company, no significant issues have been
disclosed. The Company has identified that a significant disruption in the
product supply chain represents the most reasonably likely worst case Year
2000 scenario. Potential sources of risk include (i) the inability of
principal suppliers or logistics providers to be Year 2000 ready, which could
result in delays in product deliveries from such suppliers, and (ii)
disruption of the distribution channel, including ports, transportation
vendors, and the Company's own distribution center as a result of a general
failure of systems and necessary infrastructure such as electric supply. The
Company is preparing plans that could include adjusting raw material and
finished goods levels in the event of a period of disruption to the supply
chain to reduce the impact of significant failure.
The Company is aware of the potential for claims against it and
other companies for damages for products and services that are not Year 2000
compliant.
-13-
While the Company does not believe that the Year 2000 matters
discussed above will have a material impact on its business, financial
condition or results of operations, it is uncertain whether or to what extent
the Company may be affected by such matters.
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statements for the years ended June 30,
1999 and 1998 and Independent Auditor Report filed as a part of this Form -
10-KSB are listed in the "Index to Financial Statements" filed herewith.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in and disagreements with accountants
on accounting and financial disclosure during fiscal 1999.
On April 13, 1998, the Company's independent accountants who
previously audited the Company's financial statements for the fiscal year
ended June 30, 1997 and prior years, Grant Thornton LLP were notified that
the Company had elected not to utilize their services in connection with the
audit of the Company's 1998 financial statements. Grant Thornton LLP's
reports on the Company's financial statements for the fiscal year ended June
30, 1997 and June 30, 1996 did not contain an adverse opinion or a disclaimer
of opinion: nor were such reports qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company" two most recent
fiscal years ended June 30, 1997 and June 30, 1996 and the subsequent interim
period preceding April 13, 1998, there were no disagreements between the
Company and Grant Thornton LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreement, if not resolved to the satisfaction of Grant Thornton LLP
would have caused it to make reference to the subject mater of the
disagreement in connection with its report. The Company did not experience
any of the events listed in Item 304 of regulation S-B as defined as
"reportable events" within the Company's two most recent fiscal years ended
June 30, 1997 and June 30, 1996 and the subsequent interim period preceding
April 13,1998. The Form 8-K was filed on April 17, 1998.
On May 8, 1998 the Company filed on Form 8-K notification of the
engagement of Deloitte & Touche LLP as the Company's new independent
accountant to audit the Company's financial statements as of June 30, 1998
and for the year then ended.
-14-
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Directors and Executive Officers.
The directors and executive officers of the Company are set forth
below:
Age Position
--- --------
Directors:
- ---------
Roy English 68 Director
David Farber(1) 40 Director
William Farber 68 Chairman of the Board
Other Executive Officers:
Jeffrey Moshal 34 Chief Operating Officer & Treasurer
Alan Saidel 40 Vice President - Operations & Manufacturing
Roy English has served as a Director of the Company since February
1993. Mr. English is a pharmacist by profession. For many years prior to
1987, Mr. English owned and operated Major Pharmaceuticals - Kentucky
(formerly Murray Drug Corp.), a generic drug distributor. In 1987, Mr.
English sold Murray Drug Corp. From 1987 through 1989, Mr. English served as
President of Major Pharmaceuticals - Kentucky. Mr. English provided
consulting services to Major Pharmaceuticals from 1989 to August 1993. In
1988, Mr. English formed English Farms, Inc., a closely held family
corporation, which sells food products and is currently Chairman of its
Board. In 1991, Mr. English purchased 50% of Southeastern Book Co., an entity
which buys and sells used college textbooks. During Fiscal 1998, Mr. English
sold his interest in Southeastern Book Company and resigned from its board of
directors.
David Farber was elected a Director of the Company in August 1991.
In November 1994, Mr. Farber sold Vital Foods, Inc. and formed the TVO Inc.,
where he is serving in the capacity of president. Up until 1990, Mr. Farber
had been the President and owner of Vital Foods, Inc., an eight-store chain
of health food stores in the Detroit, Michigan area. Prior to that, Mr.
Farber was employed by Michigan Pharmacal Corporation for 13 years; the most
recent six years as Executive Vice President and prior to that, as Production
Manager. David Farber is the son of William Farber.
- ---------
(1) David Farber is the son of William Farber.
-15-
William Farber was elected as Chairman of the Board of Directors
in August 1991. From April 1993 to the end of 1993, Mr. Farber was the
President and a director of Auburn Pharmaceutical Company. From 1990 through
March 1993, Mr. Farber served as Director of Purchasing for Major
Pharmaceutical Corporation. From 1965 through 1990, Mr. Farber was the Chief
Executive Officer of Michigan Pharmacal Corporation. Mr. Farber is a
registered pharmacist in the State of Michigan. William Farber is the father
of David Farber and the husband of Audrey Farber, Secretary of the Company.
Jeffrey Moshal was elected Chief Operating Officer in April 1999.
From April 1996 through March 1999, Mr. Moshal was the Company's Vice
President - Finance and Treasurer. Mr. Moshal joined the Company in August
1994 as Director of Financial Operations. For the prior seven years, Mr.
Moshal was employed by Grant Thornton LLP, primarily serving manufacturing
clients. Mr. Moshal is a Certified Public Accountant.
Alan Saidel was elected Vice President Operations & Manufacturing
in July 1998. Mr. Saidel joined the Company in February 1996 as Director of
Operations & Manufacturing. Mr. Saidel has 16 years of experience in the
pharmaceutical industry. Mr. Saidel has previously been employed at Barr
Laboratories Inc., Mutual Pharmaceuticals Inc. and Pal-Pak Inc, where he held
the position of Director of Operations.
To the best of the Company's knowledge, there have been no events
under any bankruptcy act, no criminal proceedings and no judgments or
injunctions that are material to the evaluation of the ability or integrity
of any director or executive officer during the past five years.
-16-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes all compensation paid to or earned
by the executive officers of the Company for Fiscal 1999, Fiscal 1998 and
Fiscal 1997. There are no other executive officers whose total salary and
bonus for services rendered to the Company or any subsidiary exceeded
$100,000 during Fiscal 1999.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
- ------------------------------------------------------------------- ----------------------- --------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Restricted LTIP All Other
and Principal Fiscal Other Annual Stock Options/ Payouts Compensation
Position Year Salary Bonus Compensation Award(s) SARs Amount Amount
------------- ------ ------ -------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Farber 1999 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0
Chairman of the Board 1997 0 0 0 0 0 0 0
Vlad Mikijanic Vice 1999 121,528(3) 2,000 7,200(1) 0 0 0 0
President/ Technical
Affairs(2)
1998 113,980(3) 1,500 7,200(1) 0 0 0 0
1997 110,643(3) 1,400 7,200(1) 0 0 0 0
Jeffrey M. Moshal 1999 122,768(3) 2,000 7,200(1) 0 100,000(4) 0 0
Chief Operating
Officer
1998 108,150(3) 1,500 7,200(1) 0 100,000(4) 0 0
Alan Saidel(5) 1999 113,526(3) 2,000 7,200(1) 0 50,000(4) 0 13,000(6)
Vice President/
Manufacturing &
Operations 1998 105,175(3) 1,500 7,200(1) 0 50,000(4) 0 13,000(6)
-17-
- ---------
<FN>
(1) $7,200 paid to Mr. Mikijanic, Mr. Moshal and Mr. Saidel for automobile
leasing and expenses for all periods presented.
(2) Mr. Mikijanic's employment with the Company was terminated on May 14,
1999.
(3) Includes payments to the Company's 401(k) Plan for Mr. Mikijanic, Mr.
Moshal and Mr. Saidel (3% of Mr. Mikijanic's, Mr. Moshal's and Mr.
Saidel's salary).
(4) The options represent 100,000 and 50,000 incentive stock options which
were granted to Mr. Moshal and Mr. Saidel on October 13, 1997 pursuant to
the Company's 1993 Long Term Incentive Stock Plan. The options are
exercisable as follows: one-third on or after October 13, 1998, one-third
on or after October 13, 1999 and one-third on or after October 13, 2000.
At June 30, 1999, the aggregate market value of these restricted stock
holdings is $201,563 (computed by reference to the average closing bid
and ask prices of such stock as quoted by the NQB.)
(5) Mr. Saidel was elected as an officer of the Company on July 13, 1998.
(6) Represents $13,000 paid to Mr. Saidel for living expenses.
</TABLE>
-18-
<TABLE>
<CAPTION>
Option Exercises and Year End Option Values
(a) (b) (c) (d) (e)
Value of
Unexercised
Number of Securities In-the-Money
Shares Underlying Unexercised Options at
Acquired Options at FY-End FY-End
On Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
---- -------- -------- ---------------------- --------------
<S> <C> <C> <C> <C>
Jeffrey M. Moshal -- -- 33,333(1) --
Chief Operating Officer 66,667(1) --
Alan Saidel -- -- 16,667(1) --
Vice President - of 33,333(1) --
Mnaufacturing and Operations
<FN>
(1) The options represents an aggregate of 100,000 and 50,000 incentive
stock options which were granted to Mr. Moshal and Mr. Saidel on October
13, 1997 pursuant to the Company's 1993 Long Term Incentive Stock Plan.
The options are exercisable as follows: one-third on or after October 13,
1998, one-third on or after October 13, 1999 and one-third on or after
October 13, 2000.
</TABLE>
Compensation of Directors.
Directors received compensation of $300 per meeting attended, for
services provided as directors of the Company during Fiscal 1999. Directors
are reimbursed for expenses incurred in attending Board meetings.
Employment Contracts.
There were no employment contracts in existence at the end of
Fiscal 1999.
-19-
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 1, 1999,
information regarding the security ownership of the directors and certain
executive officers of the Company and persons known to the Company to be
beneficial owners of more than five (5%) percent of the Company's common
stock:
<TABLE>
<CAPTION>
Excluding Options Including Options
and Debentures and Debentures*
----------------- -----------------
Name and Address of Number Percent Number Percent of
Beneficial Owner Office of Shares of Class of Shares Class
- ------------------- ------ --------- -------- --------- ----------
Directors/Executive Officers:
<S> <C> <C> <C> <C> <C>
Roy English Director 34,000(1) .65% 34,000(1) .23%
9000 State Road
Philadelphia, PA 19136
David Farber(2) Director 71,872(3) 1.38% 71,872(3) .48%
9000 State Road
Philadelphia, PA 19136
William Farber(2) Chairman of the 1,049,986 20.17% 10,592,622(4) 71.34%
9000 State Road Board
Philadelphia, PA 19136
Jeffrey Moshal Chief Operating 200 0% 66,666(5) .45%
9000 State Road Officer
Philadelphia, PA 19136
Alan Saidel Vice President 0 0% 33,334(5) .22%
9000 State Road Manufacturing and
Philadelphia, PA 19136 Operations
All directors and 1,156,058 22.20% 10,798,494(6) 72.72%
executive officers as a group (5
persons)
-20-
<CAPTION>
Excluding Options Including Options
and Debentures and Debentures
----------------- -----------------
Name and Address of Number Percent Number Percent of
Beneficial Owner Office of Shares of Class of Shares Class
- ------------------- ------ --------- -------- --------- ----------
Other 5% Shareholders:
<S> <C> <C> <C> <C> <C>
Samuel Gratz 839,896(7) 16.13% 839,896(7) 5.66%
1139 Kerper Street
Philadelphia, PA 19111
<FN>
1 Includes 3,500 shares owned by the spouse of Mr. English.
2 William Farber is the father of David Farber and the husband of Audrey
Farber, the Secretary of the Company.
3 Includes 4,992 shares held by David Farber's minor child, 10,580 shares
held in an individual retirement account and 1,900 shares held by David
Farber's wife.
4 Includes 9,542,636 shares of common stock subject to issuance upon
conversion of the debenture and accrued interest held by Mr. Farber. Mr.
Farber may convert all or any portion of such indebtedness at any time prior
to payment in full of the outstanding indebtedness represented by the
debenture and accrued interest at a rate of 4,000 shares of common stock for
each $1,000 of outstanding indebtedness, subject to anti-dilution provisions.
The current outstanding indebtedness represented by the debenture and accrued
interest is $2,385,659.
5 Represents 100,000 options to purchase common stock exercisable within
sixty days at an exercise price of $1.375 per share.
6 Includes 100,000 options to purchase common stock exercisable within
sixty days at an exercise price of $1.375 per share, and 9,542,636 shares of
common stock subject to issuance on the conversion of the debenture held by
William Farber.
7 Includes 496 shares which are held by the wife of Samuel Gratz,
* Assumes that all options and debentures exercisable within sixty days
have been exercised, which results in 14,848,764 shares outstanding.
</TABLE>
-21-
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described above, William Farber, a principal shareholder and a
director of the Company, has provided the Company with a financing package
aggregating $6,250,000, which the Company has used to renovate its
manufacturing facility, to acquire new equipment, to retain new management
and to provide working capital. The financing package consists of a
$4,250,000 revolving line of credit due October 1, 2000 and a $2,000,000
convertible debenture due December 23, 1999. See MANAGEMENT'S DISCUSSION AND
ANALYSIS -- Liquidity and Capital Resources." Mr. Farber is currently the
holder of 1,049,986 shares of common stock of the Company, or approximately
20.17% of the Company's issued and outstanding shares. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." Mr. Farber also has
the right to acquire an additional 9,542,636 shares of the Company's common
stock upon conversion of the debenture and accrued interest. During Fiscal
1998, the maturity date of the debenture was extended from December 23, 1998
to December 23, 1999, effectively extending the period during which it can be
converted to common stock.
Prior to the election of Mr. Farber as a director, the Company's
Board of Directors determined that the value of the debenture at the time of
its issuance did not exceed its face amount. In making such determination,
the directors considered the prices at which the Company's stock had been
trading immediately prior to Mr. Farber's purchase of a significant block of
such stock, the Company's limited prospects without the financing facility
and the valuation placed on the Company by an investment banker engaged by
Mr. Farber. At the time of issuance, the inter-dealer prices quoted for the
Company's stock exceeded the conversion price for the Debenture. If Mr.
Farber exercises the conversion feature of the Debenture, the per share
earnings will be significantly diluted. It is likely that Mr. Farber will
exercise the conversion feature prior to its expiration so long as quoted
market prices for the Company's stock continue to exceed the conversion
price.
The Company sold approximately $4,153,000 and $27,000 of inventory
during the years ended June 30, 1999 and 1998, respectively, to a distributor
(the "related party") in which the owner is a relative of the Chairman of the
Board of Directors and principal shareholder of the Company. Accounts
receivable includes amounts due from the related company of $408,384 at June
30, 1999. There were no outstanding accounts receivable at June 30, 1998.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) A list of the exhibits required by Item 601 of Regulation
S-B to be filed as a part of this Form 10-KSB is shown on
the Exhibit Index filed herewith.
(b) No reports on Form 8-K were filed during the quarter
ended June 30, 1999.
-22-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LANNETT COMPANY, INC.
Date: September 24, 1999 By: / s / William Farber
------------------- ----------------------------
William Farber,
Chairman of the Board
Date: September 24, 1999 By: / s /Jeffrey M. Moshal
------------------- ----------------------------
Chief Operating Officer
& Treasurer
In accordance with the Exchange Act, 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 / William Farber Chairman of the Board September 24, 1999
- -----------------------------------
William Farber
/ s / Roy English Director September 24, 1999
- -----------------------------------
Roy English
/ s / David Farber Director September 24, 1999
- -----------------------------------
David Farber
</TABLE>
-23-
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Lannett Company, Inc. and subsidiary:
We have audited the accompanying consolidated balance sheets of Lannett
Company, Inc. and subsidiary (the "Company") as of June 30, 1999 and 1998,
and the related consolidated statements of income, shareholders' deficiency,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 audit 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of June 30, 1999
and 1998, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
September 24, 1999
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
- -----------------------------------------------------------------------------
ASSETS 1999 1998
---- ----
CURRENT ASSETS:
Cash $ 117,004 $ 16,695
Trade accounts receivable (net of
allowance of $165,000 and $50,000) 1,602,603 1,357,131
Inventories 2,624,378 2,071,946
Prepaid expenses 68,736 67,304
----------- -----------
Total current assets 4,412,721 3,513,076
----------- -----------
PROPERTY, PLANT AND EQUIPMENT 6,880,291 5,811,863
Less accumulated depreciation 2,063,543 1,502,199
----------- -----------
4,816,748 4,309,664
----------- -----------
RESTRICTED CASH 2,584,321
OTHER ASSETS 308,542 143,864
DEFERRED TAX ASSET 545,216 150,000
----------- -----------
TOTAL $12,667,548 $ 8,116,604
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Line of credit $ 1,250,000
Accounts payable $ 797,018 631,249
Deferred interest payable - shareholder
(including convertible deferred
interest payable of $385,659 and $262,250) 385,659 749,357
Accrued expenses 340,785 180,941
Convertible note payable - shareholder 2,000,000
Current portion of long-term debt 658,368 863,207
----------- -----------
Total current liabilities 4,181,830 3,674,754
----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 5,297,917 1,357,548
----------- -----------
LINE OF CREDIT 1,322,000
-----------
LINE OF CREDIT AND DEFERRED INTEREST - SHAREHOLDER 4,225,000 4,477,889
----------- -----------
CONVERTIBLE NOTE PAYABLE AND DEFERRED INTEREST -
SHAREHOLDER, LESS CURRENT PORTION 2,273,750
-----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIENCY:
Common stock - authorized 50,000,000 shares,
par value $0.001; issued and outstanding
5,206,128 shares 5,206 5,206
Additional paid-in capital 320,575 320,575
Accumulated deficit (2,684,980) (3,993,118)
----------- -----------
Total shareholders' deficiency (2,359,199) (3,667,337)
----------- -----------
TOTAL $12,667,548 $ 8,116,604
=========== ===========
See notes to consolidated financial statements.
-2-
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1999 AND 1998
- -----------------------------------------------------------------------------
1999 1998
---- ----
NET SALES $10,580,568 $9,464,814
COST OF SALES 6,619,837 6,120,949
----------- ----------
Gross profit 3,960,731 3,343,865
RESEARCH AND DEVELOPMENT EXPENSES 914,654 465,729
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,216,170 1,198,098
----------- ----------
Operating profit 1,829,907 1,680,038
----------- ----------
OTHER INCOME (EXPENSE):
Interest income - restricted 21,710
Interest expense, including $560,193 and
$566,825 to shareholder (911,579) (804,316)
----------- ----------
(889,869) (804,316)
----------- ----------
INCOME BEFORE INCOME TAX BENEFIT 940,038 875,722
INCOME TAX BENEFIT 368,100 150,000
----------- ----------
NET INCOME $ 1,308,138 $1,025,722
=========== ==========
Basic earnings per common share $ 0.25 $ 0.20
=========== ==========
Diluted earnings per common share $ 0.10 $ 0.08
=========== ==========
See notes to consolidated financial statements.
-3-
LANNETT COMPANY, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIENCY
YEARS ENDED JUNE 30, 1999 AND 1998
- -----------------------------------------------------------------------------
Common Stock
------------------- Additional
Shares Paid-in Accumulated Shareholders'
Issued Amount Capital Deficit Deficiency
------ ------ --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1997 5,206,128 $5,206 $320,575 $(5,018,840) $(4,693,059)
Net income 1,025,722 1,025,722
---------- ------ -------- ----------- -----------
BALANCE, JUNE 30, 1998 5,206,128 5,206 320,575 (3,993,118) (3,667,337)
Net income 1,308,138 1,308,138
---------- ------ -------- ----------- -----------
BALANCE, JUNE 30, 1999 $5,206,128 $5,206 $320,575 $(2,684,980) $(2,359,199)
========== ====== ======== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
-4-
LANNETT COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999 AND 1998
- ------------------------------------------------------------------------------
1999 1998
OPERATING ACTIVITIES:
Net income $ 1,308,138 $ 1,025,722
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 585,603 369,374
Change in deferred tax benefit (395,216) (150,000)
Changes in assets and liabilities which
provided (used) cash:
Trade accounts receivable (245,472) (349,229)
Inventories (552,432) (653,506)
Prepaid expenses and other assets 82,908 (162,455)
Accounts payable 165,769 82,180
Accrued expenses 159,844 (70,583)
----------- -----------
Net cash provided by operating
activities 1,109,142 91,503
----------- -----------
INVESTING ACTIVITIES -
Purchases of property, plant and equipment, net (1,068,428) (2,059,370)
----------- -----------
Net cash used in investing activities (1,068,428) (2,059,370)
----------- -----------
FINANCING ACTIVITIES:
Borrowings under line of credit - shareholder 950,000 300,000
Repayments under line of credit - shareholder (650,000) (250,000)
Borrowings under line of credit 843,000 250,000
Repayments under line of credit (771,000)
Borrowings of deferred interest - shareholder 559,018 401,645
Repayments of deferred interest - shareholder (1,749,355)
Payment of debt issuance costs (273,277)
Repayments of debt (2,264,470) (247,592)
Proceeds from debt, net of restricted cash 3,415,679 1,515,000
----------- -----------
Net cash provided by financing
activities 59,595 1,969,053
----------- -----------
NET INCREASE IN CASH 100,309 1,186
CASH, BEGINNING OF YEAR 16,695 15,509
----------- -----------
CASH, END OF YEAR $ 117,004 $ 16,695
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Interest paid $ 2,101,915 $ 391,340
=========== ===========
Income taxes paid $ 7,116 $
=========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES -
Borrowings under a line of credit of $323,688
were converted into a secured term loan payable
during the year ended June 30, 1998
See notes to consolidated financial statements.
-5-
LANNETT COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999 AND 1998
- -----------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Lannett Company, Inc. and subsidiary (the "Company"), a Delaware
corporation, manufactures and distributes, throughout the United States,
pharmaceutical products sold under generic names ("competitive
pharmaceutical products") and, historically, has manufactured and
distributed pharmaceutical products sold under its trade or brand names.
In addition, the Company manufactures and develops pharmaceutical
products for other companies.
The Company is engaged in an industry which is subject to considerable
government regulation related to the development, manufacturing and
marketing of pharmaceutical products. In the normal course of business,
the Company periodically responds to inquiries or engages in
administrative and judicial proceedings involving regulatory authorities,
particularly the Federal Drug Administration (FDA) and the Drug
Enforcement Agency (DEA).
Principles of Consolidation - The consolidated financial statements
include the accounts of Lannett Company, Inc. and its inactive wholly
owned subsidiary, Astrochem Corporation. All intercompany accounts and
transactions have been eliminated.
Revenue Recognition - The Company recognizes revenue when its products
are shipped. Under a contract in which product development occurs, the
Company recognizes revenue when services are rendered.
Inventories - Inventories are valued at the lower of cost (determined
under the first-in, first-out method) or market.
Property, Plant and Equipment - Property, plant and equipment are stated
at cost. Depreciation and amortization are provided for by the
straight-line and accelerated methods over estimated useful lives of the
assets. Depreciation expense for the years ended June 30, 1999 and 1998
was approximately $561,000 and $366,000, respectively.
Deferred Debt Acquisition Costs - Costs incurred in connection with
obtaining financing are amortized by the straight-line method over the
term of the loan arrangements. Amortization expense for the years ended
June 30, 1999 and 1998 was approximately $24,000 and $3,000,
respectively.
Research and Development - Research and development expenses are charged
to operations as incurred.
Advertising Costs - The Company charges advertising costs to operations
as incurred.
Income Taxes - The Company uses the liability method specified by
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes." Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities as measured by the enacted tax rates which will be
in effect when these differences reverse. Deferred tax expense (benefit)
is the result of changes in deferred tax assets and liabilities.
-6-
Long-Lived Assets - SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", provides
guidance on when to recognize and how to measure impairment losses of
long-lived assets and certain identifiable intangibles and how to value
long-lived assets to be disposed of. No impairment losses were recognized
during the years ended June 30, 1999 and 1998.
Earnings per Common Share - SFAS No. 128, "Earnings Per Share", requires
a dual presentation of basic and diluted earnings per share on the face
of the Company's consolidated statement of income and a reconciliation
of the computation of basic earnings per share to diluted earnings per
share. Basic earnings per share excludes the dilutive impact of common
stock equivalents and is computed by dividing net income by the
weighted-average number of shares of common stock outstanding for the
period. Diluted earnings per share includes the effect of potential
dilution from the exercise of outstanding common stock equivalents into
common stock using the treasury stock method. Earnings per share amounts
for all periods presented have been calculated in accordance with the
requirements of SFAS No. 128. A reconciliation of the Company's basic and
diluted earnings per share follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Net Income Shares Net Income Shares
(Numerator) (Denominator) (Numerator) (Denominator)
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Basic earnings per share factors $ 1,308,138 5,206,128 $ 1,025,722 5,206,128
Effect of potentially dilutive option
plans and debentures:
Interest on debentures 180,000 182,500
Conversion on debentures 9,542,636 10,144,000
Employee stock options 48,000
----------- ---------- ----------- ----------
Diluted earnings per share factors $ 1,488,138 14,748,764 $ 1,208,222 15,398,128
=========== ========== =========== ==========
Basic earnings per share $ 0.25 $ 0.20
Diluted earnings per share $ 0.10 $ 0.08
</TABLE>
Options to purchase 180,000 shares, 5,200 shares and 4,000 shares of
common stock at $1.38 per share, $3.78 per share and $4.38 per share,
respectively, were outstanding at June 30, 1999 and options to purchase
6,350 shares and 5,000 shares of common stock at $3.78 per share and
$4.38 per share, respectively, were outstanding at June 30, 1998, but
were not included in the computation of diluted earnings per share
because to do so would be antidilutive. These securities could
potentially be dilutive in the future.
Stock Option Plan - SFAS No. 123, "Accounting for Stock-Based
Compensation", encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation in accordance with Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees", under which no
compensation cost has been recognized.
Segment Information - The Company reports segment information in
accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company operates one business
segment, generic pharmaceuticals. In accordance with SFAS No. 131, the
Company aggregates all products and reports one operating segment.
-7-
Two customers accounted for approximately $4,153,000 (39%) and $1,994,000
(19%) of net sales in the fiscal year ended June 30, 1999. One of these
customers is a distributor which is a related party (see Note 14.) Two
different customers accounted for approximately $2,950,000 (31%) and
$2,699,000 (28%) of net sales in the fiscal year ended June 30, 1998.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
New Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives), and for hedging activities. It requires that
an entity recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at fair
value. This statement, as amended by SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective
Date of FASB Statement No. 133", is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company is in the process
of analyzing the impact of adopting SFAS No. 133 will have on its
consolidated financial position and results of operations when such
statement is adopted.
Reclassifications - Certain reclassifications were made to the 1998
consolidated financial statements to conform to the 1999 presentation.
2. INVENTORIES
Inventories at June 30, 1999 and 1998 consist of the following:
1999 1998
---- ----
Raw materials $ 643,052 $ 652,825
Work-in-process 1,011,640 406,442
Finished goods 661,055 778,246
Packaging supplies 308,631 234,433
---------- ----------
$2,624,378 $2,071,946
========== ==========
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1999 and 1998 consist of the
following:
Useful Lives 1999 1998
------------ ---- ----
Land -- $ 33,414 $ 33,414
Building and improvements 10 - 39 years 1,846,202 1,795,344
Machinery and equipment 5 - 10 years 4,929,751 3,918,872
Furniture and fixtures 5 - 7 years 70,924 64,233
---------- ----------
$6,880,291 $5,811,863
========== ==========
-8-
4. RESTRICTED CASH EQUIVALENTS
At June 30, 1999 the Company had restricted cash equivalents of
$2,584,321 which represents proceeds from debt invested in a money market
account and is restricted for (i) the construction of a
manufacturing-related facility as an addition to the Company's existing
facility or, alternatively, the acquisition and renovation of an existing
manufacturing and manufacturing-related facility and (ii) the acquisition
of equipment for installation and use in either of the facilities
mentioned above (see Note 6).
5. BANK LINE OF CREDIT
The Company has a $2,000,000 line of credit from the bank that bears
interest at prime plus .50% per annum (8.25% at June 30, 1999). The line
of credit is due October 31, 2000. On March 11, 1999, the line of credit
agreement was modified to increase the line of credit, extend the
maturity date and reduce the interest rate. The line of credit is limited
to 80% of qualified accounts receivable and 50% of qualified inventory.
At June 30, 1999, the Company had $1,322,000 outstanding and $678,000
available under the line of credit. The line of credit is collateralized
by substantially all Company assets and a personal guarantee of the major
shareholder. Further the line of credit and related letter of credit
contain certain financial covenants (see note 6).
6. LONG-TERM DEBT
Long-term debt at June 30, 1999 and 1998 consists of the following:
1999 1998
---- ----
Authority loan $3,700,000
Bonds 2,256,285
Mortgage term loan $ 330,507
Equipment term loans 1,890,248
---------- ----------
5,956,285 2,220,755
Less current portion 658,368 863,207
---------- ----------
$5,297,917 $1,357,548
========== ==========
In April 1999, the Company entered into a loan agreement (the
"Agreement") with a governmental authority (the "Authority") to finance
future construction and growth projects of the Company. The Authority has
issued $3,700,000 in tax-exempt variable rate demand and fixed rate
revenue bonds to provide the funds to finance such growth projects
pursuant to a trust indenture (the "Trust Indenture"). The bonds were
issued under and secured by a Trust Indenture between the Authority and a
bank, as trustee. A portion of the Company's proceeds from the bonds was
used to pay for bond issuance costs of approximately $170,000. The
remainder of the proceeds was deposited into a money market account which
is restricted to future plant and equipment needs of the Company as
specified in the Agreement (see Note 4). The Agreement requires the
Company to repay the Authority loan through installment payments
beginning in May 2003 and continuing through May 2014, the year the bonds
mature. Such payments will be deposited into an interest-bearing debt
service money market account. The bonds bear interest at the floating
variable rate determined by the organization responsible for selling the
bonds (the "remarketing agent"). The interest rate fluctuates on a weekly
basis. The effective interest rate at June 30, 1999 was 3.9%. The Company
has an option to convert the bonds to a fixed rate of interest under
certain conditions. At June 30, 1999, the Company has $3,700,000
outstanding on the Authority loan, which is classified as a long-term
liability. In April 1999, an irrevocable letter of credit of $3,770,000
was issued by a bank to secure payment of the Authority loan and a
portion of the related accrued interest. At June 30, 1999, no portion of
the letter of credit has been utilized.
-9-
In April 1999, the Company authorized and directed the issuance of
$2,300,000 in taxable variable rate demand and fixed rate revenue bonds
pursuant to a trust indenture between the Company and a bank, as trustee
(the "Trust Indenture"). From the proceeds of the bonds, $750,000 was
utilized to pay deferred interest owed to the principal shareholder of
the Company and approximately $1,440,000 was paid to a bank to refinance
a mortgage term loan and equipment term loans. The remainder of the
proceeds was used to pay bond issuance costs of approximately $109,000.
The Trust Indenture requires the Company to repay the bonds through
installment payments beginning in May 2000 and continuing through May
2003, the year the bonds mature. Such payments will be deposited into an
interest-bearing debt service money market account. The bonds bear
interest at the floating variable rate determined by the organization
responsible for selling the bonds (the "remarketing agent"). The interest
rate fluctuates on a weekly basis. The effective interest rate at June
30, 1999 was 5.15%. The Company has an option to convert the bonds to a
fixed rate of interest under certain conditions. At June 30, 1999, the
Company has $2,256,285 outstanding on the bonds, of which $658,368 is
classified as currently due. In April 1999, an irrevocable letter of
credit of approximately $2,349,000 was issued by a bank to secure payment
of the bonds and a portion of the related accrued interest. At June 30,
1999, no portion of the letter of credit has been utilized.
The letters of credit and bank line of credit require the Company, among
other things, to meet certain covenants with respect to financial ratios
and financial reporting. At June 30, 1999, the Company was not in
compliance with certain covenants. On September 24, 1999, the Company
obtained an appropriate waiver from the institution for these violations
as of June 30, 1999 and the letters of credit and bank line of credit
were amended to revise certain covenants. The Company is in compliance
with the covenants under the amended letter of credit and bank line of
credit.
At June 30, 1998, the Company had a mortgage term loan with an interest
rate of 9.25% per annum. The mortgage term loan was collateralized by
substantially all Company assets and a personal guarantee of the major
shareholder. It was also cross-collateralized with the bank line of
credit and equipment term loans. At June 30, 1998, the Company also had
six equipment term loans with interest rates ranging from 8.5% to 10.0%.
These loans were collateralized by the equipment purchased with the
proceeds from the borrowing, substantially all Company assets and a
personal guarantee of the major shareholder. The loans were also
cross-collateralized with the bank mortgage and the bank line of credit.
The balances of the mortgage term loan and the equipment term loans were
refinanced during the year ended June 30, 1999 (see discussion above).
Annual payments of long-term debt, including sinking fund requirements
and amounts payable to shareholder (Notes 7 and 8) as of June 30, 1999
are as follows:
Year Ending Long-Term Amounts Payable
June 30, Debt to Shareholder
----------- --------- ---------------
2000 $ 658,368 $2,385,659
2001 688,750 4,225,000
2002 761,750
2003 749,917
2004 797,083
Thereafter 2,300,417
---------- ----------
$5,956,285 $6,610,659
========== ==========
-10-
7. LINE OF CREDIT AND DEFERRED INTEREST PAYABLE TO SHAREHOLDER
On December 30, 1998, a debt modification agreement was consummated, by
and between, the Company and its principal shareholder relating to the
line of credit agreement described below. The Company and its principal
shareholder had previously modified the debt agreement relating to the
line of credit and convertible debenture agreements described below and
in Note 8 as of March 15, 1993, August 1, 1994, May 15, 1995, December
31, 1995, June 30, 1996, November 1, 1996, September 9, 1997 and June 30,
1998. In each of the modifications the maturity date of the debt was
extended and/or the date of the payment of accrued interest was deferred.
The modifications did not include forgiveness of debt or forgiveness of
related interest. The Company accounted for this modification under the
provisions of SFAS No. 15, "Accounting by Debtors and Creditors for
Troubled Debt Restructuring". As such, interest expense is computed in a
way that a constant effective interest rate is applied to the carrying
amount of the debt payable to the shareholder, instead of the stated rate
payable as indicated below and in Note 8. The effective interest rate for
the amounts payable to shareholder at June 30, 1999 and 1998 was
approximately 6.4% and 8.1%, respectively, for the line of credit and
approximately 7.1% and 7.6%, respectively, for the convertible
debentures. Interest expense recorded by the Company for the year ended
June 30, 1999 approximates interest expense calculated utilizing the
effective interest method.
The Company has a $4,250,000 revolving line of credit from a shareholder
who is also the Chairman of the Board. At June 30, 1999, the Company has
$4,225,000 outstanding and $25,000 available under this line of credit.
At June 30, 1998, the Company had $3,925,000 outstanding under this line
of credit. The principal is due October 1, 2000.
The line of credit bears interest at the prime rate published by Michigan
National Bank plus 1% per annum. The effective rate at June 30, 1999 and
1998 was 8.75% and 9.50%, respectively. Interest expense during the years
ended June 30, 1999 and 1998 was approximately $380,000 and $381,000,
respectively. Interest expense is being accrued but payment of interest
is deferred and will be paid as follows:
A portion of the proceeds received from the bank agreement financing (see
Note 6) was used to pay $750,000 in additional deferred interest payments
in fiscal 1999. At June 30, 1999, accrued interest was $0. At June 30,
1998, accrued interest was approximately $1,040,000 of which $553,000 was
classified as long-term and $487,000 was classified as currently due.
The line of credit is collateralized by substantially all Company assets,
is cross-collateralized with all loans from the shareholder (Note 8) and
is subordinated to the bank letters of credit and line of credit.
8. CONVERTIBLE DEBENTURE AND DEFERRED INTEREST PAYABLE TO SHAREHOLDER
On August 30, 1991, the Company issued and sold to its principal
shareholder, a $2,000,000 convertible debenture (the "debenture") that
bears interest at 9.0% per annum. The maturity date of the debenture was
originally December 23, 1998, but was extended to December 23, 1999. See
Note 7 for discussion relating to the modification of the debt
agreements. The debenture provides that no principal payments are to be
made prior to maturity without the written consent of the shareholders.
-11-
Interest expense during the years ended June 30, 1999 and 1998 was
$180,000 and $182,500, respectively. Interest expense is being accrued
but payment of interest is being deferred and will be paid as indicated
below. The convertible debenture and deferred interest payable is
collaterialized by substantially all Company assets, is
cross-collateralized with all loans from this shareholder (Note 7) and is
subordinated to the bank letters of credit and line of credit.
The debenture and accrued interest is convertible into shares of common
stock of the Company at a rate of 4,000 shares per $1,000 of principal
amount of debenture, with antidilution provisions. The shareholder is
permitted to convert the debenture and accrued interest to shares of
common stock at any time. Accordingly, at June 30, 1999, 9,542,136 shares
are reserved for this conversion. The present intent of the principal
shareholder is to convert the debenture and related accrued interest into
shares of common stock prior to December 23, 1999. Deferred interest from
July 1, 1996 to June 30, 1997 is payable in six equal monthly
installments, which commenced April 15, 1999 and has been continuing on
the fifteenth day of each month thereafter, until paid in full. Deferred
interest from July 1, 1997 to June 30, 1998 is payable in six equal
monthly installments, commencing July 15, 1999 and continuing on the
fifteenth day of each month thereafter. Deferred interest from July 1,
1998 to June 30, 1999 is payable in twelve equal monthly installments,
commencing July 15, 1999 and continuing on the fifteenth day of each
month thereafter with the balance due December 23, 1999. At June 30,
1999, accrued interest was approximately $386,000 which is classified as
currently due. At June 30, 1998, accrued interest was approximately
$536,000, of which $274,000 was classified as long-term and $262,000 was
classified as currently due.
9. INCOME TAXES
The provision (benefit) for income taxes consists of the following for
the years ended June 30, 1999 and 1998.
1999 1998
---- ----
Current $ 293,990 $ 271,500
Deferred (395,216) (150,000)
Benefit of operating loss carryforwards (266,874) (271,500)
--------- ---------
$(368,100) $(150,000)
========= =========
A reconciliation of the differences between the effective rates and
statutory rates is as follows:
1999 1998
---- ----
Federal income tax at statutory rate 35.0 % 35.0 %
State income tax, net 6.5 6.5
Change in the beginning of the year balance
of the valuation allowance (39.2) (17.1)
Use of net operating loss carryforward (41.5) (41.5)
----- -----
Benefit for income taxes (39.2)% (17.1)%
===== =====
The principal types of differences between assets and liabilities for
financial statement and tax return purposes are net operating loss
carryforwards and accumulated depreciation. A deferred tax asset is
recorded for net operating losses being carried forward for tax purposes.
-12-
The Company has federal and state net operating loss carryforwards of
approximately $5,307,000 and $110,000, respectively, expiring through
June 2008, that are available to offset future taxable income. The annual
utilization of tax loss carryforwards is subject to limitations defined
in the Internal Revenue Code and state regulations.
At June 30, 1999 and 1998, the net deferred tax asset has been reduced to
$545,216 and $150,000 by a valuation allowance. Temporary differences
which give rise to deferred tax assets and liabilities are as follows as
of June 30, 1999 and 1998:
1999 1998
---- ----
Deferred tax assets:
Accrued expenses $ 23,000 $ 21,000
Net operating loss carryforward 1,793,126 2,060,000
Other 103,190 8,100
---------- -----------
1,919,316 2,089,100
Valuation allowance (900,100) (1,669,200)
---------- -----------
Total 1,019,216 419,900
Deferred tax liability - Property,
plant and equipment 474,000 269,900
---------- -----------
Net deferred tax asset $ 545,216 $ 150,000
========== ===========
10. STOCK OPTIONS
In fiscal 1993, the Company adopted the 1993 Long-Term Incentive Plan
(the "Plan"). Pursuant to the Plan, officers and key employees of the
Company may be granted stock options which qualify as incentive stock
options as well as stock options which are nonqualified. The exercise
price of the options is at least the fair market value of the common
stock on the date of grant. The options vest over a three-year period and
expire no later than 10 years from the date of grant. There are 2,000,000
shares reserved under the Plan. Options for 1,810,800 shares remain
unissued as of June 30, 1999.
The Company accounts for the Plan in accordance with APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation
cost for the Plan been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income would
have been reduced by $45,877 and $30,584 for the years ended June 30,
1999 and 1998, respectively, and earnings per share would have been
reduced by $0.01 per share for the years ended June 30, 1999 and 1998.
-13-
A summary of the status of the Company's option plan as of June 30, 1999
and 1998 and the changes during the years then ended is represented
below:
1999 1998
------------------- ------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ ------- ------ -------
Outstanding, beginning of year 191,350 $1.54 11,350 $4.04
Granted 180,000 1.38
Terminated 2,150 4.06
------- -------
Outstanding, end of year 189,200 $1.50 191,350 $1.54
======= ===== ======= =====
Options exercisable at year-end 69,199 $1.73 11,350 $4.04
======= ===== ======= =====
The weighted average fair value of options granted during the year ended
June 30, 1998 was $137,630. The fair value of the options granted were
estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions for grants during the year ended
June 30, 1998: risk-free interest rate of 4.5%, expected volatility of
60%, dividend yield of 0%, and expected life of 5 years.
Options Outstanding
-------------------------------------
Weighted
Average Weighted
Remaining Average
Contractual Exercise
Range of Exercise Prices Options Life in Years Price
------------------------ ------- ------------- -----
$1.38 180,000 8.3 $ 1.38
$3.78 - $4.38 9,200 2.1 $ 4.04
11. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan (the "Plan") covering
substantially all employees. The Company is required to contribute
amounts pursuant to employee salary reduction agreements and a matching
contribution equal to each employee's contribution not to exceed 3% of
the employee's compensation for the Plan year. Contributions to the Plan
during the years ended June 30, 1999 and 1998 were $48,464 and $40,514,
respectively.
12. CONTINGENCIES
The Company monitors its compliance with all environmental laws. Any
compliance costs which may be incurred are contingent upon the results of
future site monitoring and will be charged to operations when incurred.
No monitoring costs were incurred during the year ended June 30, 1999.
During the year ended June 30, 1998, the Company incurred monitoring
costs of approximately $5,000.
-14-
The Company is currently engaged in several civil actions as a
co-defendant with many other manufacturers of Diethylstilbestrol ("DES"),
a synthetic hormone. Prior litigation established that the Company's pro
rata share of any liability is less than one-tenth of one percent. The
Company was represented in many of these actions by the insurance company
with which the Company maintained coverage (subject to limits of
liability) during the time period that damages were alleged to have
occurred. The Company has either settled or is currently defending over
500 such claims. Management believes that the outcome will not have a
material adverse impact on the consolidated financial position of the
Company.
In addition to the matters reported herein, the Company is involved in
litigation which arises in the normal course of business. In the opinion
of management, the resolution of these lawsuits will not have a material
adverse effect on the consolidated financial position or results of
operations.
13. COMMITMENTS
In January 1998, the Company entered into an operating lease that
includes an escalation clause for its executive office, warehouse and
research and development facility which expires in March, 2001. Future
minimum lease payments under this agreement are as follows:
Year Ending
June 30, Amount
----------- ------
2000 $ 94,333
2001 46,167
--------
$140,500
========
Rental expense for the years ended June 30, 1999 and 1998 was $90,000 and
$45,000.
14. RELATED PARTY TRANSACTIONS
The Company sold approximately $4,153,000 and $27,000 of inventory during
the years ended June 30, 1999 and 1998, respectively, to a distributor
(the "related party") in which the owner is a relative of the Chairman of
the Board of Directors and principal shareholder of the Company. Accounts
receivable includes amounts due from the related party of $408,384 at
June 30, 1999. There were no outstanding accounts receivable at June 30,
1998.
-15-
<TABLE>
<CAPTION>
Exhibit Index
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
3(a) Articles of Incorporation Incorporated by reference to the Proxy Statement filed
with respect to the Annual Meeting of Shareholders held
on December 6, 1991 (the "1991 Proxy Statement").
3(b) By-Laws, as amended Incorporated by reference to the 1991 Proxy Statement.
4(a) Specimen Certificate for Common Stock Incorporated by reference to Exhibit 4(a) to Form 8 dated
April 23, 1993 (Amendment No. 3 to Form 10-K f/y/e June
30, 1992) ("Form 8")
10(a) Loan Agreement dated August 30, 1991 Incorporated by reference to the Annual Report on Form
between the Company and William Farber 10-K f/y/e June 30, 1991
10(b) Amendment #1 to Loan Agreement dated Incorporated by reference to Exhibit 10(b) to the Annual
March 15, 1993 Report on Form 10-KSB f/y/e June 30, 1993 ("1993 Form
10-K")
10(c) Amendment #2 to Loan Agreement dated Incorporated by reference to Exhibit 10(c) to the Annual
August 1, 1994 Report on Form 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
10(d) Amendment #3 to Loan Agreement dated Incorporated by reference to Exhibit 10(d) to the Annual
May 15, 1995 Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(e) Amendment #4 to Loan Agreement dated Incorporated by reference to Exhibit 10(e) to the Annual
December 31, 1995 Report on Form 10-KSB f/y/e June 30, 1996 ("1996 Form
10-K")
10(f) Amendment #5 to Loan Agreement dated Incorporated by reference to Exhibit 10(f) to the Annual
June 30, 1996 Report on Form 10-KSB f/y/e June 30, 1996 ("1996 Form
10-K")
<CAPTION>
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
10(g) Amendment #6 to Loan Agreement dated Incorporated by reference to Exhibit 10(g) to the Annual
November 1, 1996 Report on Form 10-KSB f/y/e June 30, 1997 ("1997 Form
10-KSB")
10(h) Amendment #7 to Loan Agreement dated Incorporated by reference to Exhibit 10(h) to the Annual
September 9, 1997 Report on 1997 Form 10-KSB
10(i) Amendment #8 to Loan Agreement dated Incorporated by reference to Exhibit 10(i) to the Annual
June 30, 1998 Report on 1998 Form 10-KSB
10(j) Amendment #9 to Loan Agreement dated Incorporated by reference to Exhibit 10(j) to the
December 31, 1998 Quarterly Report on for the period ended December 31, 1998
10(k) Loan Agreement dated May 4, 1993 Incorporated by reference to Exhibit 10(c) to the 1993
between the Company and Meridian Bank Form 10-K
10(l) Amendment to Loan Documents between Incorporated by reference to Exhibit 10(e) to the Annual
the Company and Meridian Bank dated as Report on Form 10-KSB f/y/e June 30, 1994 ("1994 Form
of December 8, 1993 10-K")
10(m) Letter Agreement between the Company Incorporated by reference to Exhibit 10(f) to the Annual
and Meridian Bank dated December 21, Report on Form 10-KSB f/y/e June 30, 1994 ("1994 Form
1993 10-K")
10(n) Third Amendment to Loan Agreement Incorporated by reference to Exhibit 10(g) to the Annual
dated as of June 9, 1994 Report on Form 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
10(o) Fourth Amendment to Loan Documents Incorporated by reference to Exhibit 10(i) to the Annual
between the Company and Meridian Bank Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
as of October 27, 1994 10-K")
<CAPTION>
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
10(p) Letter Agreement between the Company Incorporated by reference to Exhibit 10(j) to the Annual
and Meridian Bank dated October 27, Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
1994 10-K")
10(q) Letter Agreement between the Company Incorporated by reference to Exhibit 10(k) to the Annual
and Meridian Bank dated July 10, 1995 Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(r) Amendment to Security Agreement Incorporated by reference to Exhibit 10(l) to the Annual
between the Company and Meridian Bank Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
dated as of July 31, 1995 10-K")
10(s) Line of Credit Note dated July 31, 1995 Incorporated by reference to Exhibit 10(m) to the Annual
Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(t) Fifth Amendment to Loan Agreement Incorporated by reference to Exhibit 10(n) to the Annual
dated July 31, 1995 Report on Form 10-KSB f/y/e June 30, 1995 ("1995 Form
10-K")
10(u) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(q) to the Annual
the Company and Meridian Bank, dated Report on Form 10-KSB f/y/e June 30, 1996 ("1996 Form
March 5, 1996. 10-K")
10(v) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
March 20, 1997.
10(w) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
March 20, 1997.
<CAPTION>
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
10(x) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
May 23, 1997.
10(y) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
September 24, 1997.
10(z) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
December 10, 1997.
10(aa) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(h) to the Annual
the Company and Corestates Bank, dated Report on 1997 Form 10-KSB
December 10, 1997.
10(ab) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(aa) to the Annual
the Company and Corestates Bank, dated Report on 1998 Form 10-KSB
June 11, 1998.
10(ac) Amendment to Loan agreement between Incorporated by reference to Exhibit 10(ab) to the Annual
the Company and Corestates Bank, dated Report on 1998 Form 10-KSB
June 1998.
10(ad) Line of Credit Note dated March 11, Filed Herewith
1999
10(ae) Taxable Variable Rate Demand/Fixed Filed Herewith
Rate Revenue Bonds, Series of 1999
10(af) Philadelphia Authority for Industrial Filed Herewith
Development Tax-Exempt Variable Rate
Demand/Fixed Revenue Bonds (Lannett
Company, Inc. Project) Series of 1999
<CAPTION>
Exhibit
Number Description Method of Filing
- -------- ----------- ----------------
<S> <C> <C>
10(ag) Reimbursement and Agreements Filed Herewith
supporting bond issues
10(ah) Amendment No. 1 to Reimbursement
Agreement and Waiver Filed Herewith
10(ai) Employment agreement between the Incorporated by reference to Exhibit 10(i) to the Annual
Company and Vlad Mikijanic Report on Form 10-KSB f/y/e June 30, 1994 ("1994 Form
10-K")
10(aj) Supply Agreement dated January 14, 1997 Incorporated by reference to Exhibit 10(ad) to the Annual
Report on 1998 Form 10-KSB
10(ak) Supply Agreement dated January 17, 1997 Incorporated by reference to Exhibit 10(ae) to the Annual
Report on 1998 Form 10-KSB
10(al) Supply Agreement dated January 17, 1997 Incorporated by reference to Exhibit 10(af) to the Annual
Report on 1998 Form 10-KSB
10(am) Supply Agreement dated February 11, Incorporated by reference to Exhibit 10(ag) to the Annual
1997 Report on 1998 Form 10-KSB
10(an) Supply Agreement dated May 27, 1997 Incorporated by reference to Exhibit 10(ah) to the Annual
Report on 1998 Form 10-KSB
11 Computation of Earnings Per Share Filed Herewith
22 Subsidiaries of the Company Incorporated by reference to the Annual Report on Form
10-K f/y/e June 30, 1990
23 Consent of Deloitte & Touche Filed Herewith
27 Financial Data Schedule Filed Herewith
</TABLE>
Exhibit 10(ad)
Line of Credit Note dated March 11, 1999
Exhibit 10 (ad)
Line of Credit Note dated March 11, 1999
LOAN AGREEMENT
First Union National Bank
123 S. Broad Street
Philadelphia, Pennsylvania 19109
(Hereinafter referred to as the "Bank")
Lannett Company, Inc.
9000 State Road
Philadelphia, Pennsylvania 19136
(Individually and collectively "Borrower")
This loan Agreement ("Agreement") is entered into March 11, 1999, by and
between Bank and Borrower, a Corporation (For profit) organized under the
laws of Delaware.
Borrower has applied to Bank for a loan or loans (individually and
collectively, the "Loan") evidenced by one or more promissory notes (whether
one or more, the "Note") as follows:
Line of Credit - in the principal amount of $2,000,000.00 which is evidenced
by the Promissory Note dated March 11, 1999 ("Line of Credit Note"), under
which Borrower may borrow, repay, and reborrow, from time to time, so long as
the total indebtedness outstanding at any one time does not exceed the
principal amount minus the sum of (I) the amount available to be drawn plus
(ii) the amount of unreimbursed drawings under all letters of credit issued
by Bank for the account of Borrower. The Loan proceeds are to be used by
Borrower solely for working capital. Bank's obligation to advance or
readvance under the Line of Credit Note shall terminate if Borrower is in
Default under the Line of Credit Note.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As
used in this Agreement as to Borrower, "Subsidiary" shall mean any
corporation of which more than 50% of the issued and outstanding voting stock
is owned directly or indirectly by Borrower. As to Borrower, "Affiliate"
shall have the meaning as defined in 11 U.S.C. ss. 101, except that the term
"debtor" therein shall be substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties
contained in this Agreement, Bank is willing to extend credit to Borrower
upon the terms and subject to the conditions set forth herein, and Bank and
Borrower agree as follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct
and complete. Any such information
relating to Borrower's financial condition will accurately reflect Borrower's
financial condition as of the date(s) thereof, (including all contingent
liabilities of every type), and Borrower further represents that its
financial condition has not changed materially or adversely since the date(s)
of such documents. Authorization; Non-Contravention. The execution, delivery
and performance by Borrower and any guarantor, as applicable, of this
Agreement and other Loan Documents to which it is a party are within its
power, have been duly authorized by all necessary action taken by the duly
authorized officers of Borrower and any guarantors and, if necessary, by
making appropriate filings with any governmental agency or unit and are the
legal, binding, valid and enforceable obligations of Borrower and any
guarantors; and do not (I) contravene, or constitute (with or without the
giving of notice or lapse of time or both) a violation of any provision of
applicable law, a violations of the organizational documents of Borrower or
any guarantor, or a default under any agreement, judgment, injunction, order,
decree or other instrument binding upon or affecting Borrower or any
guarantor, (ii) result in the creation or imposition of any lien (other than
the lien(s) created by the Loan Documents) on any of Borrower's or
guarantor's assets, or (iii) give cause for the acceleration of any
obligations of Borrower or any guarantor to any other creditor. Asset
Ownership. Borrower has good and marketable title to all of the properties
and assets reflected on the balance sheets and financial statements supplied
Bank by Borrower, and all such properties and assets are free and clear of
mortgages, security deeds, pledges, liens, charges, and all other
encumbrances, except as otherwise disclosed to Bank by Borrower in writing
("Permitted Liens"). To Borrower's knowledge, no default has occurred under
any Permitted Liens and no claims or interests adverse to Borrower's present
rights in its properties and assets have arisen. Discharge of Liens and
Taxes. Borrower has duly filed, paid and/or discharged all taxes or other
claims which may become a lien on any of its property or assets, except to
the extent that such items are being appropriately contested in good faith
and an adequate reserve for the payment thereof is being maintained.
Sufficiency of Capital. Borrower is not, and after consummation of this
Agreement and after giving effect to all indebtedness incurred and liens
created by Borrower in connection with the Loan, will not be, insolvent
within the meaning of 11 U.S.C. ss. 101(32). Compliance with Laws. Borrower
is in compliance in all respects with all federal, state and local laws,
rules and regulations applicable to its properties, operations, business, and
finances, including, without limitation, any federal or state laws relating
to liquor (including 18 U.S.C. ss. 3617, et seq.) or narcotics (including 21
U.S.C. ss. 801, et seq.) and/or any commercial crimes; all applicable
federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), if applicable. Organization and Authority. Each corporate
or limited liability company Borrower and any guarantor, as applicable, is
duly created, validly existing and in good standing under the laws of the
state of its organization, and has all powers, governmental licenses,
authorizations, consents and approvals required to operate its business as
now conducted. Each corporate or limited liability company Borrower and any
guarantor, if any, is duly qualified, licensed and in good standing in each
jurisdiction where qualification or licensing is required by the nature of
its business or the character and location of its property, business or
customers, and in which the failure to so qualify or be licensed, as the case
may be, in the aggregate, could have a material adverse effect on the
business, financial position, results of operations, properties or prospects
of Borrower or any such guarantor. No Litigation. There are no pending or
threatened suits, claims or demands against Borrower or any guarantor that
have not been disclosed to Bank by Borrower in writing. ERISA. Each employee
pension benefit plan, as defined in ERISA,
2
maintained by Borrower meets, as of the date hereof, the minimum funding
standards of ERISA and all applicable regulations thereto and requirements
thereof, and of the Internal Revenue Code of 1954, as amended. No "Prohibited
Transaction" or "Reportable Event" (as both terms are defined by ERISA) has
occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement
and until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, Borrower will: Business Continuity. Conduct its
business in substantially the same manner and locations as such business is
now and has previously been conducted. Maintain Properties. Maintain,
preserve and keep its property in good repair, working order and condition,
making all needed replacements, additions and improvements thereto, to the
extent allowed by this Agreement. Access to Books & Records. Allow Bank, or
its agents, during normal business hours, access to the books, records and
such other documents of Borrower as Bank shall reasonably require, and allow
Bank to make copies thereof at Bank's expense. Insurance. Maintain adequate
insurance coverage with respect to its properties and business against loss
or damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance,
workers compensation insurance, and business interruption insurance; all
acquired in such amounts and from such companies as Bank may reasonably
require. Notice of Default and Other Notices. (a) Notice of Default. Furnish
to Bank immediately upon becoming aware of the existence of any condition or
event which constitutes a Default (as defined in the Loan Documents) or any
event which, upon the giving of notice or lapse of time or both, may become a
Default, written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto. (b) Other Notices. Promptly notify Bank in writing of (I) any
material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which
it is a party or by which any of its properties are bound, or any
acceleration of the maturity of any indebtedness owing by Borrower; (iii) any
material adverse claim against or affecting Borrower or any part of its
properties; (iv) the commencement of, and any material determination in, any
litigation with any third party or any proceeding before any governmental
agency or unit affecting Borrower; and (v) at least 30 days prior thereto,
any change in Borrower's name or address as shown above, and/or any change in
Borrower's structure. Compliance with Other Agreements. Comply with all terms
and conditions contained in this Agreement, and any other Loan Documents, and
swap agreements, if applicable, as defined in the Note. Payment of Debts. Pay
and discharge when due, and before subject to penalty or further charge, and
otherwise satisfy before maturity or delinquency, all obligations, debts,
taxes, and liabilities of whatever nature or amount, except those which
Borrower in good faith disputes. Reports and Proxies. Deliver to Bank,
promptly, a copy of all financial statements, reports, notices, and proxy
statements, sent by Borrower to stockholders, and all regular or periodic
reports required to be filed by Borrower with any governmental agency or
authority. Other Financial Information. Deliver promptly such other
information regarding the operation, business affairs, and financial
condition of Borrower which Bank may reasonably request. Non-Default
Certificate From Borrower. Deliver to Bank, with the Financial Statements
required herein, a certificate signed by Borrower, if Borrower is an
individual, or by a principal financial officer of Borrower warranting that
no "Default" as specified in the Loan Documents nor any event which, upon the
giving of notice or lapse of time or both, would constitute such a Default,
3
has occurred. Estoppel Certificate. Furnish, within 15 days after request by
Bank, a written statement duly acknowledged of the amount due under the Loan
and whether offsets or defenses exist against the Obligations.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Cross Default. Default in payment or
performance of any obligation under any other loans, contracts or agreements
of Borrower, any Subsidiary or Affiliate of Borrower ("Affiliate" shall have
the meaning as defined in 11 U.S.C. ss. 101, except that the term "debtor"
therein shall be substituted by the term "Borrower" herein; "Subsidiary"
shall mean any corporation of which more than 50% of the issued and
outstanding voting stock is owned directly or indirectly by Borrower), any
general partner of or the holder(s) of the majority ownership interests of
Borrower with Bank or its affiliates. Default on Other Contracts or
Obligations. Default on any material contract with or obligation when due to
a third party or default in the performance of any obligation to a third
party incurred for money borrowed. Judgment Entered. Permit the entry of any
monetary judgment or the assessment against, the filing of any tax lien
against, or the issuance of any writ of garnishment or attachment against any
property of or debts due Borrower. Government Intervention. Permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any
guarantor is displaced of its authority in the conduct of its respective
business or such business is curtailed or materially impaired. Prepayment of
Other Debt. Retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. Retire or
Repurchase Capital Stock. Retire or otherwise acquire any of its capital
stock. Change of Control. Make or suffer a transfer of controlling interest
of William Farber or any change in the officers or Board of Directors. Change
in Fiscal Year. Borrower or guarantor shall not change its fiscal year
without the consent of Bank. Guarantees. Guarantee or otherwise become
responsible for obligations of any other person or persons, other than the
endorsement of checks and drafts for collection in the ordinary course of
business. Encumbrances. Create, assume, or permit to exist any mortgage,
security deed, deed of trust, pledge, lien, charge or other encumbrance on
any of its assets, whether now owned or hereafter acquired, other than: (I)
security interests required by the Loan Documents; (ii) liens for taxes
contested in good faith; (iii) liens accruing by law for employee benefits;
or (iv) Permitted Liens.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the
date hereof until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing: Current Ratio. Borrower shall, at all times,
maintain a Current Ratio of not less than 1.50 to 1.00, tested quarterly.
"Current Ratio" shall mean the ratio of current assets divided by current
liabilities. Effective Net Worth. Borrower shall maintain an Effective Net
Worth of not less than four million dollars ($4,000,000.00) at fiscal year
end 6/30/99 and not less than five million seven hundred fifty thousand
dollars ($5,750,000.00) at fiscal year end 6/30/00, tested annually.
"Effective Net Worth" shall mean total assets minus total liabilities. For
purposes of this computation, the aggregate amount of any intangible assets
of Borrower including without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks, and brand names,
shall be subtracted from total assets, and total liabilities shall exclude
debt subordinated to First Union. Senior Debt to Effective Net Worth Ratio.
Borrower shall
4
maintain a ratio of Senior Debt divided by Effective Net Worth of not more
than 2.00 to 1.00 at fiscal year end 6/30/99 and fiscal year end 6/30/00,
tested annually. "Senior Debt" shall mean the sum of total liabilities,
including capitalized leases and all reserves for deferred taxes and other
deferred sums appearing on the liabilities side of a balance sheet, in
accordance with generally accepted accounting principles applied on a
consistent basis, excluding debt subordinated to Bank. "Effective Net Worth"
shall mean total assets minus total liabilities. For purposes of this
computation, the aggregate amount of any intangible assets of Borrower
including without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets, and total liabilities shall exclude debt
subordinated to First Union. Debt Service Coverage Ratio. Borrower shall at
all times maintain a Debt Service Coverage Ratio of 1.50 to 1.00, to be
tested quarterly on a rolling four quarter basis. "Debt Service Coverage
Ratio" shall mean earnings before interest, taxes, depreciation and
amortization divided by the sum of interest expense and current maturities of
long term debt, including capitalized leases. Deposit Relationship. Borrower
shall maintain its primary depository account with Bank.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120 days
after the close of each fiscal year, audited financial statements reflecting
its operations during such fiscal year, including, without limitation, a
balance sheet, profit and loss statement and statement of cash flows, with
supporting schedules; all on a consolidated and consolidating basis and in
reasonable detail, prepared in conformity with generally accepted accounting
principles, applied on a basis consistent with that of the preceding year.
All such statements shall be examined by an independent certified public
accountant acceptable to Bank. The opinion of such independent certified
public accountant shall not be acceptable to Bank if qualified due to any
limitations in scope imposed by Borrower or its Subsidiaries, if any. Any
other qualification of the opinion by the accountant shall render the
acceptability of the financial statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank copies of
Borrower's unaudited reports on Form 10Q as filed with the Securities and
Exchange Commission, as soon as available and in any event within 45 days
after the close of the first three fiscal quarters of Borrower; all in
reasonable detail and prepared in conformity with generally accepted
accounting principles, applied on a basis consistent with that of the
preceding year. Such statements shall be certified as to their correctness by
a principal financial officer of Borrower and in each case, if audited
statements are required, subject to audit and year-end adjustments.
TAX RETURNS. Borrower shall deliver to Bank, within 30 days of filing,
complete copies of federal and state tax returns, as applicable, each of
which shall be signed and certified by Borrower to be true and complete
copies of such returns. In the event an extension is filed, Borrower shall
deliver a copy of the extension within 30 days of filing.
ACCOUNTS RECEIVABLE AGING. Borrower shall, from time to time hereafter but
not less than monthly, deliver to First Union within 10 days of the end of
each such period, a detailed aging of accounts by total, a summary aging of
accounts by customer and customer address, and a reconciliation statement.
Said aging should also include the original date of each invoice.
5
ACCOUNTS PAYABLE AGING. Borrower shall, from time to time hereafter but not
less than monthly, deliver to First Union within 10 days of the end of each
such period, a detailed aging of payables by total, a summary aging of
payables by vendor and vendor address, and a reconciliation statement. Said
aging should also include the original date of each invoice.
INVENTORY REPORTS. Borrower shall, from time to time hereafter but not less
than monthly, deliver to First Union within 10 days of the end of each such
period, an inventory report, with summary by category, showing individual
values for raw materials, work-in-progress, finished products and any
inventory obsolescence.
ANNUAL BUDGET. Borrower shall deliver to Bank, no later than 60 days after
the close of each fiscal year, Borrower's annual budget projections of
revenues and expenses for the next fiscal year.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including
without limitation, financial statements and information pertaining to
Borrower's financial condition. Such information shall be true, complete and
accurate.
BORROWING BASE. As to the Line of Credit Note in the principal amount of
$2,000,000, the following provisions shall apply:
Borrowing Limitation. The maximum principal amount that Borrower may borrow
shall be the lesser of the principal amount stated in the Line of Credit Note
minus the sum of (I) the amount available to be drawn plus (ii) the amount of
unreimbursed drawing under all letters of credit issued by Bank for the
account of Borrower or the maximum principal amount allowed under this
addendum (the "Maximum Principal Amount").
The Maximum Principal Amount shall be an amount equal to 80% of the net
amount of Eligible Accounts, plus 50% of an amount equal to its value of
Eligible Inventory (the inventory amount not to exceed $500,000.00), less the
amount of any Reserve required by the Bank.
"Eligible Account" refers to an account receivable not more than 90 days from
the date of the original invoice (except for certain Approved Account
Debtors, as described below) that arises in the ordinary course of Borrower's
business and meets the following eligibility requirements: (a) the sale of
goods or services reflected in such account is final and such goods and
services have been delivered or provided and accepted by the account debtor
and payment for such is owing; (b) the invoices comprising an account are not
subject to any claims, returns or disputes of any kind; (c) the account
debtor is not insolvent; (d) the account debtor has its principal place of
business in the United States; (e) the account debtor is not an affiliate of
Borrower and is not a supplier to Borrower and the account is not otherwise
exposed to risk of set-off; (f) not more than thirty percent of the original
invoices owing Borrower by the account debtor are more than ninety days from
the date of the original invoice. Notwithstanding the foregoing, accounts
receivable of Approved Account Debtors of Borrower may be aged more than 90
days but not more than 120 days from the date of the original invoice, so
long as said accounts receivable
6
meet all of the other eligibility requirements listed above. "Approved
Account Debtors" are such account debtors as Bank may approve in writing from
time to time. As of the date of this Agreement, Bank approves Novopharm USA,
Inc. and Mova Pharmaceutical, Inc. as Approved Account Debtors. Bank reserves
the right to add and remove any account debtor from the list of Approved
Account Debtors by written notice to Borrower.
"Eligible Inventory" means inventory of raw material and finished goods in
Borrower's possession that is held for use or sale in the ordinary course of
Borrower's business and is not unmerchantable or obsolete and is subject to a
first priority perfected security interest in favor of Bank. The value of the
inventory will be determined by Bank and will be valued at the lower of cost
or market on a first-in, first-out basis.
"Reserves" may be required at any time and from time to time by Bank without
prior notice to Borrower in amounts deemed by Bank to be adequate to reserve
against outstanding letter of credit, outstanding bankers acceptances,
Borrower's obligation to Bank or its affiliates or any guaranties or other
contingent debt of Borrower.
Required Reports. Borrower shall certify to Bank by the tenth day of each
month, the amount of Eligible accounts and the value of Eligible Inventory as
of the first day of each month, on forms required by Bank together with all
detail and supporting documents requested by Bank. Bank may at any time and
from time to time, during Bank's normal business hours, enter upon any
business premises of Borrower and audit Borrower's accounts and inventory.
Bank's determination of the amount of Eligible Accounts and the value of
Eligible Inventory shall at all times be indisputable and deemed correct. The
Borrower, at all times, shall cooperate with Bank without limitation by
providing Bank information and access to Borrower's premises and business
records and shall be courteous to Bank's agents.
Continuing Representations. Borrower warrants and represents as a continuing
warranty, that so long as principal is outstanding under the Line of Credit
Note, the outstanding principal balance shall not exceed the lesser of the
Maximum Principal Amount or the principal amount stated in the Line of Credit
Note (the "Borrowing Limit"). Borrower agrees to pay any advances in excess
of the Borrowing Limit immediately upon receipt by Borrower of written notice
that the Borrowing Limit has been exceeded.
CONDITIONS PRECEDENT. The obligation of Bank to make the Loan and any
advances pursuant to this Agreement are subject to the following conditions
precedent: Additional Documents. Receipt by Bank of such additional
supporting documents as Bank or its counsel may reasonably request.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written
above, have caused this Agreement to be executed under seal.
Lannett Company, Inc.
By: William Farber, Chairman of the Board
First Union National Bank
By: Jane Sobieski, Vice President
7
Exhibit 10(ae)
Taxable Variable Rate Demand/Fixed
Rate Revenue Bonds, Series of 1999
Exhibit 10 (ae)
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds, Series of 1999
TRUST INDENTURE
Dated April 30, 1999
by and between
LANNETT COMPANY, INC.
and
FIRST UNION NATIONAL BANK,
as Trustee
$2,300,000
Taxable Variable Rate Demand/Fixed Rate
Revenue Bonds
Series of 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I - DEFINITIONS: CONTENT OF CERTIFICATES AND
OPINIONS
SECTION 1.01. Definitions.................................................................... 3
SECTION 1.02. Content of Certificates and Opinions........................................... 12
SECTION 1.03. Interpretation................................................................. 12
ARTICLE II - THE BONDS
SECTION 2.01. Authorization of Bonds......................................................... 13
SECTION 2.02. Terms of Bonds; Interest on the Bonds.......................................... 13
SECTION 2.03. Execution of Bonds............................................................. 15
SECTION 2.04. Authentication ................................................................ 15
SECTION 2.05. Form of Bonds.................................................................. 16
SECTION 2.06. Transfer of Bonds ............................................................. 16
SECTION 2.07. Exchange of Bonds.............................................................. 16
SECTION 2.08. Bond Registrar ................................................................ 17
SECTION 2.09. Temporary Bonds................................................................ 17
SECTION 2.10. Bond Mutilated, Lost, Destroyed or Stolen...................................... 17
SECTION 2.11. Cancellation and Destruction of Surrendered Bonds.............................. 18
SECTION 2.12. Acts of Bondholders; Evidence of Ownership..................................... 18
SECTION 2.13. CUSIP Number...................................................................
SECTION 2.14. Book-Entry-Only System......................................................... 18
ARTICLE III - ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the Bonds.......................................................... 20
SECTION 3.02. Validity of Bonds.............................................................. 20
SECTION 3.03. Disposition of Proceeds of the Bonds and Other Amounts......................... 20
ARTICLE IV - REDEMPTION AND PURCHASE OF BONDS BEFORE MATURITY
SECTION 4.01. Extraordinary and Mandatory Redemption......................................... 21
SECTION 4.02. Optional Redemption............................................................ 22
SECTION 4.03. Notice of Redemption........................................................... 22
SECTION 4.04. Interest on Bonds Called for Redemption........................................ 22
SECTION 4.05. Cancellation................................................................... 22
SECTION 4.06. Partial Redemption of Bonds.................................................... 22
SECTION 4.07. Payment of Redemption Price with Available Moneys.............................. 23
ARTICLE V - CONVERSION OF INTEREST RATE; DEMAND PURCHASE
OPTION
SECTION 5.01. Conversion of Interest Rate on Conversion Date; Mandatory
Tender of Bonds................................................................ 23
SECTION 5.02. Delivery of Bonds After Conversion Date........................................ 25
SECTION 5.03. Mandatory Tender Upon Provision of Substitute Letter of
Credit by Substitute Bank...................................................... 26
SECTION 5.04. Demand Purchase Option......................................................... 26
SECTION 5.05. Funds for Purchase of Bonds.................................................... 27
SECTION 5.06. Delivery of Purchased Bonds.................................................... 28
SECTION 5.07. Sale of Bonds by Remarketing Agent............................................. 29
SECTION 5.08. Delivery of Proceeds of Sale of Purchased Bonds................................ 29
SECTION 5.09. Duties of Trustee and Tender Agent with
Respect to Purchase of Bonds................................................... 29
SECTION 5.10. No Purchases or Sales After Certain Defaults................................... 30
ARTICLE VI - REVENUES AND FUNDS
SECTION 6.01. Creation of the Bond Fund...................................................... 30
SECTION 6.02. Payments into the Bond Fund.................................................... 30
SECTION 6.03. Use of Moneys in the Bond Fund................................................. 31
SECTION 6.04. Custody of Separate Trust Fund................................................. 31
SECTION 6.05. Project Fund................................................................... 31
SECTION 6.06. Payments into the Project Fund; Disbursements.................................. 31
SECTION 6.07. Use of Money in the Project Fund Upon Default.................................. 32
SECTION 6.08. Use of Money in the Project Fund Upon
Completion of the Project...................................................... 32
SECTION 6.09. Nonpresentment of Bonds........................................................ 32
SECTION 6.10. Moneys to be Held in Trust..................................................... 33
SECTION 6.11. Repayment to the Bank and the Project
User from the Bond Fund or the Project Fund.................................... 33
SECTION 6.12. Letter of Credit............................................................... 33
SECTION 6.13. Substitute Letter of Credit.................................................... 34
SECTION 6.14. Investment of Moneys in Funds.................................................. 34
ARTICLE VII - PARTICULAR COVENANTS
SECTION 7.01. Punctual Payment............................................................... 35
SECTION 7.02. Extension of Payment of Bonds.................................................. 35
SECTION 7.03. Against Encumbrances........................................................... 35
SECTION 7.04. Power to Issue Bonds and Make Pledge and Assignment............................ 36
SECTION 7.05. Accounting Records and Financial Statements.................................... 36
SECTION 7.06. Reserved....................................................................... 36
SECTION 7.07. Reserved....................................................................... 36
SECTION 7.08. Waiver of Laws................................................................. 36
SECTION 7.09. Further Assurances............................................................. 36
ii
ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES OF
BONDHOLDERS
SECTION 8.01. Events of Default.............................................................. 37
SECTION 8.02. Acceleration................................................................... 38
SECTION 8.03. Other Remedies................................................................. 39
SECTION 8.04. Legal Proceedings by Trustee................................................... 39
SECTION 8.05. Discontinuance of Proceedings by Trustee....................................... 40
SECTION 8.06. Bondholders May Direct Proceedings by Trustee.................................. 40
SECTION 8.07. Limitations on Actions by Bondholders.......................................... 40
SECTION 8.08. Trustee May Enforce Rights Without Possession of Bonds......................... 41
SECTION 8.09. Delays and Omissions Not to Impair Rights...................................... 41
SECTION 8.10. Application of Moneys in Event of Default...................................... 41
SECTION 8.11. Remedies Not Exclusive......................................................... 41
SECTION 8.12. Subrogation Rights of Bank..................................................... 41
SECTION 8.13. Waiver of Default.............................................................. 42
ARTICLE IX - THE TRUSTEE, ETC.
SECTION 9.01. Duties, Immunities and Liabilities of Trustee................................. 42
SECTION 9.01A. Compensation and Indemnity
SECTION 9.02. Merger or Consolidation....................................................... 44
SECTION 9.03. Liability of Trustee.......................................................... 44
SECTION 9.04. Right of Trustee to Rely on Documents......................................... 45
SECTION 9.05. Preservation and Inspection of Documents...................................... 46
SECTION 9.06. Compensation.................................................................. 46
SECTION 9.07. The Tender Agent.............................................................. 46
SECTION 9.08. Qualification of Tender Agent................................................. 46
SECTION 9.09. Qualifications of Remarketing Agent; Resignation; Removal..................... 47
SECTION 9.10 Construction of Ambiguous Provisions.......................................... 47
ARTICLE X - MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 10.01. Amendments Permitted.......................................................... 47
SECTION 10.02. Effect of Supplemental Indenture.............................................. 48
SECTION 10.03. Trustee Authorized to Join in Amendment and
Supplements; Reliance on Counsel.............................................. 48
ARTICLE XI - DEFEASANCE
SECTION 11.01. Discharge of Indenture........................................................ 48
SECTION 11.02. Discharge of Liability on Bonds............................................... 49
SECTION 11.03. Deposit of Money or Securities with Trustee................................... 49
SECTION 11.04. Payment of Bonds After Discharge of Indenture................................. 50
ARTICLE XII - INSURANCE; DESTRUCTION, DAMAGE, EMINENT DOMAIN
SECTION 12.01. Insurance to be Maintained.................................................... 50
SECTION 12.02. Destruction, Damage and Eminent Domain........................................ 50
SECTION 12.03 Notice of Property Loss....................................................... 51
SECTION 12.04 Disposition of Casualty Insurance and Condemnation
Award Proceeds................................................................ 51
ARTICLE XIII - MISCELLANEOUS
SECTION 13.01. Successor is Deemed Included in All References
to Predecessor................................................................ 52
SECTION 13.02. Limitation of Rights to Parties, Bank, Company and
Bondholders................................................................... 52
iii
SECTION 13.03. Waiver of Notice.............................................................. 52
SECTION 13.04. Severability of Invalid Provisions............................................ 52
SECTION 13.05. Notices....................................................................... 52
SECTION 13.06. Evidence of Rights of Bondholders............................................. 54
SECTION 13.07. Disqualified Bonds............................................................ 55
SECTION 13.08. Money Held for Particular Bonds............................................... 55
SECTION 13.09. Funds......................................................................... 55
SECTION 13.10. Payments Due on Days other than Business Day.................................. 55
SECTION 13.11. Reserved...................................................................... 55
SECTION 13.12. Execution in Several Counterparts............................................. 56
SECTION 13.13. Notices to Rating Agency...................................................... 56
SECTION 13.14. Governing Law................................................................. 56
EXHIBIT A - Floating Rate Form of Bond
EXHIBIT B - Fixed Rate Form of Bond
EXHIBIT C - Form of Project Fund Requisition
EXHIBIT D - Form of Letter of Representation
iv
THIS TRUST INDENTURE, made and entered into April 30, 1999, by and
between Lannett Company, Inc., a Delaware corporation (together with its
successors and assigns, the "Company") and FIRST UNION NATIONAL BANK, a
national banking association duly organized, existing and authorized to
accept and execute trusts of the character herein set out under and by virtue
of the laws of the United States of America, with a corporate trust office
located in Philadelphia, Pennsylvania, as trustee (the "Trustee") and tender
agent (the "Tender Agent");
W I T N E S S E T H:
Certain of the terms and words used in these Recitals, and in the
following Granting Clauses, are defined in Section 1.01 of this Indenture.
WHEREAS, the Company has heretofore authorized and directed the
issuance of its $2,300,000 aggregate principal amount Taxable Variable Rate
Demand/Fixed Rate Revenue Bonds, Series of 1999 (the "Bonds") for the purpose
of financing a project (the "Project") consisting of (i) the refinancing of
certain indebtedness of the Company; (ii) the payment of deferred interest
due to the controlling shareholder of the Company; and (iii) the payment of a
portion of the costs of issuance of the Bonds and a portion of the costs of
issuance of the $3,700,000 Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds (Lannett Company,
Inc. Project), Series of 1999, issued simultaneously with the Bonds for the
benefit of the Company; and
WHEREAS, the Company has caused to be delivered to the Trustee an
irrevocable direct pay Letter of Credit (the "Letter of Credit") issued by
First Union National Bank (the "Bank") providing for the payment of the
aggregate principal amount of the Bonds, due and payable upon maturity,
optional redemption, sinking fund redemption or acceleration upon an event of
default hereunder, plus interest calculated for a period up to forty-six (46)
days at an interest rate of seventeen percent (17%) per annum; and
WHEREAS, the Bank shall be entitled to reimbursement by the Company
for all amounts drawn under such Letter of Credit pursuant to a reimbursement
and security agreement between the Bank and the Company; and
WHEREAS, execution and delivery of this Indenture and the issuance
of the Bonds hereunder have been duly and validly authorized by resolution of
the Company duly adopted prior to such execution and delivery; and
WHEREAS, all acts and things necessary to make the Bonds, when
authenticated by the Trustee and issued as in this Indenture provided, the
valid, binding and legal obligations of the Company in accordance with their
terms, and to constitute this Indenture the valid and binding agreement for
the security of the Bonds, have been done and performed.
GRANTING CLAUSE AND AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the acceptance
by the Trustee of the trusts hereby created and of the purchase and
acceptance of the Bonds issued and sold by the Company under this Indenture
by those who shall own the same from time to time, and of the sum of one
dollar, lawful money of the United States of America, duly paid to the
Company by the Trustee at or before the execution and delivery of this
Indenture, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and for the purpose of fixing
and declaring the terms and conditions upon which the Bonds are to be
executed, authenticated, issued, delivered and accepted by all persons who
shall from time to time be or become owners thereof, and in order to secure
the payment of the principal of and premium (if any) and interest on, and
Purchase Price of, the Bonds according to their tenor and effect and the
performance and observance by the Company of all the covenants expressed or
implied herein and in the Bonds and the payment and performance of all other
of the Company's obligations, the Company does hereby grant, bargain, sell,
convey, pledge and assign, without recourse, unto the Trustee and unto its
successors in the trust forever, and grants to the Trustee and to its
successors in the trust, a security interest in all of the following:
All right, title and interest of the Company in and to all moneys
and securities from time to time held by the Trustee under the terms of this
Indenture; provided, however, that in consideration of the issuance by the
Letter of Credit Bank of the Letter of Credit, the Company hereby grants a
security interest in the Project Fund first, to the Trustee in order to
secure payment of principal of the Bonds issued hereunder and the premium (if
any) and interest due or to become due thereon and the Purchase Price
thereof, and second, to the Letter of Credit Bank in order to secure payment
of the obligations of the Company under the Reimbursement Agreement, the
rights of the Letter of Credit Bank therein being subject and subordinate to
the rights of the Trustee so long as any amount due in respect of the Bonds
remains unpaid.
TO HAVE AND TO HOLD all and singular the Trust Estate with all
privileges and appurtenances hereby conveyed and assigned, or agreed or
intended so to be to the Trustee and its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
hereinafter set forth, (a) for the equal benefit, protection and security of
the Owners of any and all of the Bonds, all of which regardless of the time
or times of their issuance or maturity shall be of equal rank, without
preference, priority or distinction of any of the Bonds over any other
thereof, except as otherwise provided in or pursuant to this Indenture, (b)
for securing the observance and performance of the Company's obligations and
of all others of the conditions, promises, stipulations, agreements and terms
and provisions of this Indenture and the uses and purposes herein expressed
and declared, and (c) for the benefit of the Letter of Credit Bank, on a
basis subject and subordinate to the interest granted to the Trustee to
secure payment of principal of the Bonds and premium (if any) and interest
due or to become due thereon and the Purchase Price thereof.
PROVIDED, HOWEVER, that if the Company, its successors or assigns,
well and truly pays, or causes to be paid, the principal of the Bonds issued
hereunder and the premium (if any) and interest due or to become due thereon,
and the Purchase Price thereof, at the times and in the manner mentioned in
the Bonds and as provided herein, according to the true intent and meaning
thereof, and shall cause the payments to be made into the Bond Fund as
required under Article VI hereof, or shall provide, as permitted hereby, for
payment thereof, in accordance with Article XI hereof, and shall well and
truly keep, perform and observe all of the covenants and conditions pursuant
to the terms of this Indenture and all other of the Company's obligations to
be kept, performed and observed by it, and shall pay or cause to be paid to
the Trustee all sums of money due or to become due in accordance with the
terms and provisions hereof, then upon such final payments or deposits as
provided in Article XI hereof, the right, title and interest of the Trustee
in and to the Trust Estate shall cease, terminate and be void, and the
Trustee shall thereupon assign, transfer, and turn over the Trust Estate to
the Letter of Credit Bank; provided, that if the Trustee shall have received
written evidence from the Letter of Credit Bank that all obligations of the
Company under the Reimbursement Agreement have been satisfied and that the
Reimbursement Agreement has been terminated, or if no Letter of Credit Bank
shall then exist, the Trust Estate shall be assigned, transferred and turned
over to the Company; and the Trustee shall execute and deliver to the Letter
of Credit Bank and the
2
Company, as appropriate, such instruments in writing as shall be requisite to
evidence such transfer of the Trust Estate. Upon the Trustee's assignment,
transfer and turning over to the Letter of Credit Bank or the Company, as
appropriate, of the Trust Estate pursuant to the provisions of Article XI
hereof, the Trustee shall have no further duties, responsibilities or
obligations under and pursuant to this Indenture.
AND IT IS EXPRESSLY DECLARED that all Bonds issued and secured
hereunder are to be issued, authenticated and delivered and all of the Trust
Estate hereby pledged is to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements,
trusts, uses and purposes hereinafter expressed, and the Company has agreed
and covenanted and intending to be legally bound does hereby agree and
covenant with the Trustee and with the respective Owners from time to time of
the Bonds, or any part thereof as follows:
ARTICLE I
DEFINITIONS: CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires,
the terms defined in this Section shall, for all purposes of the recitals
hereto, this Indenture and of any indenture supplemental hereto and of any
certificate, opinion or other document herein mentioned, have the meanings
herein specified, to be equally applicable to both the singular and plural
forms of any of the terms herein defined. Unless otherwise defined in this
Indenture, all terms used herein shall have the meanings assigned to such
terms in the Act.
"Accountant" means any firm of independent certified public
accountants (not an individual) selected by the Company and acceptable to the
Letter of Credit Bank.
"Administrative Expenses" means those expenses of the Bank which are
properly chargeable to the Company on account of the Bonds and the Bond
Documents as administrative expenses under Generally Accepted Accounting
Principles and include, without limiting the generality of the foregoing, the
following: (a) fees and expenses of the Trustee, the Tender Agent, the Letter
of Credit Bank and the Placement Agent; and (b) reasonable fees and expenses
of the Bank's, the Trustee's, the Tender Agent's and the Placement Agent's
professional advisors reasonably necessary and fairly attributable to the
Project, including without limiting the generality of the foregoing,
reasonable fees and expenses of the Trustee's, the Bank's and the Placement
Agent's counsel.
"Authorized Representative" means with respect to the Company, the
Chairman, President, any Vice President, Secretary, Assistant Secretary or
Treasurer thereof, or any other person designated as an Authorized
Representative of the Company by a Certificate of the Company signed by the
Chairman, President, any Vice President, Secretary, Assistant Secretary or
Treasurer of the Company and filed with the Trustee.
"Available Moneys" means (i) moneys derived from drawings under the
Letter of Credit, (ii) moneys held by the Trustee in funds and accounts
established under this Indenture for a period of at least one hundred
twenty-four (124) days and not commingled with any moneys so held for less
than said one hundred twenty-four (124) day period and during and prior to
which period, no petition in bankruptcy was filed by or against the Company
under the Bankruptcy Code or any applicable state bankruptcy or insolvency
law, unless such petition was dismissed and all applicable appeal periods
have expired without an appeal having been filed, (iii) the proceeds of bonds
issued to refund the Bonds in whole or in part; (iv) investment income
derived from the investment of moneys described in clauses (i), (ii) or (iii)
above, or (v) any other moneys, if the Trustee and the Letter of Credit Bank
have received an opinion of nationally recognized counsel (acceptable to the
Rating Agency then rating the Bonds, if any) experienced in bankruptcy
matters to the effect that payment of the principal or Purchase Price of or
interest on the Bonds with such moneys would not, in the event of bankruptcy
of the Company, any affiliate of the Company or other payor, constitute a
voidable preference under the Bankruptcy Code or any applicable state
bankruptcy or insolvency law.
3
"Bank" shall mean First Union National Bank, a national banking
association organized under the laws of the United States of America, its
lawful successors and assigns and, if applicable, the issuer of any
Substitute Letter of Credit hereunder.
"Bankruptcy Code" means the Federal Bankruptcy Code, 11 U.S.C.
ss.101 et seq., as amended and supplemented from time to time.
"Bond Counsel" means any counsel nationally recognized as
experienced in the area of public finance and familiar with the transactions
contemplated herein and not unacceptable to the Trustee.
"Bond Documents" means any or all of this Indenture, the Remarketing
Agreement and all documents, certificates and instruments executed in
connection therewith.
"Bond Fund" means the fund created in Section 6.01 hereof.
"Bond Registrar" means any bank, national banking association or
trust company designated as registrar for the Bonds, and its successor
appointed under the Indenture.
"Bonds" shall have the meaning set forth in the Recitals.
"Business Day" means any day other than (i) a Saturday or Sunday;
(ii) a legal holiday on which banking institutions in the State of New York,
the Commonwealth of Pennsylvania, the City of New York or the City of
Philadelphia are authorized or required by law to close; or (iii) a day on
which the New York Stock Exchange is closed.
"Certificate," "Statement," "Request," "Requisition" and "Order"
means with respect to the Company, a written certificate, statement, request,
requisition or order signed by its Authorized Representative. Any such
instrument and supporting opinions or representations, if any, may, but need
not, be combined in a single instrument with any other instrument, opinion or
representation, and the two or more so combined shall be read and construed
as a single instrument. If and to the extent required by Section 1.02 hereof,
each such instrument shall include the statements provided for in such
Section 1.02.
"Certified Resolution of the Company" means a copy of the resolution
of the Company duly adopted and in full force and effect as of the date of
the execution and delivery of the Bonds and the Letter of Credit.
"Clearing Fund" means the fund established by that name pursuant to
Section 3.03 hereof.
"Closing Date" means April 30, 1999 or such other date which shall
be the date of the execution and delivery of the Bond Documents and the
issuance and delivery of the Bonds.
"Conversion Date" means the Optional Conversion Date.
"Conversion Option" means the option granted to the Company in
Section 5.01 hereof pursuant to which the interest rate on the Bonds is
converted from the Floating Rate to the Fixed Rate as of the Optional
Conversion Date.
"Counsel" means an attorney-at-law or law firm (who may be counsel
for the Company) not unsatisfactory to the Trustee.
"Debt Service Requirements" with reference to a specified period
means, with respect to Bonds:
(a) amounts required to be paid into any mandatory sinking
fund account during the period; and
4
(b) amounts needed to pay the principal of such
indebtedness maturing during the period and not to be redeemed prior to
maturity from amounts on deposit in any sinking fund or redemption,
retirement or similar fund or account; and
(c) interest payable on the subject indebtedness during the
period, excluding capitalized interest and amounts on deposit with the
Trustee which are available under the Indenture to pay interest with respect
to such indebtedness.
"Demand Purchase Notice" means a notice delivered pursuant to
paragraph (i) of Section 5.04 hereof.
"Demand Purchase Option" means the option granted to Owners of Bonds
to require that Bonds be purchased prior to the Conversion Date pursuant to
Section 5.05 hereof.
"Determination Date" means with respect to any Floating Rate Bonds,
each Wednesday or if such Wednesday is not a Business Day, on the next
succeeding Business Day.
"Event of Default" means any of the events specified in Section 8.01
of this Indenture.
"Fiscal Year" means the period of twelve (12) consecutive months
beginning January 1 of each year, or such other period of twelve consecutive
months established by the Company as its new Fiscal Year.
"Fixed Rate" means the interest rate in effect on any Bonds from and
after the Conversion Date, as said rate is determined in accordance with
Section 2.02(d) hereof.
"Fixed Rate Bonds" means any Bonds which shall be converted to a
Fixed Rate in accordance with the provisions of this Indenture.
"Fixed Rate Period" means, with respect to any Bonds, a period
during which interest on such Bonds accrues at a Fixed Rate.
"Floating Rate" means a variable rate of interest equal to the
minimum rate of interest necessary, in the sole judgment of the Remarketing
Agent, to sell the Bonds at a price equal to the principal amount thereof,
exclusive of accrued interest, if any, thereon; said interest rate to be in
effect on the Bonds from the date of issuance of the Bonds until (but not
including) the Conversion Date, as said rate is determined in accordance with
Section 2.02(c) hereof.
"Floating Rate Bonds" means any Bonds which bear interest at the
Floating Rate.
"Generally Accepted Accounting Principles" means those accounting
principles applicable in the preparation of financial statements of business
institutions as promulgated by the Financial Accounting Standards Board or
such other body recognized as authoritative by the American Institute of
Certified Public Accountants or any successor body.
"Government Obligations" means direct obligations of (including
obligations issued or held in book entry form), or obligations the principal
of and interest on which are unconditionally guaranteed as to full and timely
payment by the United States of America.
"Holder," "Owner" or "Bondholders" whenever used herein with respect
to a Bond, means the person in whose name such Bond is registered on the
registration books maintained by the Trustee.
"Indenture" means this Indenture, as originally executed or as it
may from time to time be supplemented, modified or amended by any
Supplemental Indenture.
5
"Interest Payment Date" means, (i) prior to the Conversion Date, the
first (1st) day of each calendar month, commencing June 1, 1999; (and (ii)
from and after the Conversion Date, May 1 and November 1 of each year,
commencing on the May 1 or November 1 next following the Conversion Date.
"Investment Securities" means any of the following which at the time
are legal investments under the laws of the State for moneys held hereunder
and then proposed to be invested therein:
(i) Government Obligations;
(ii) bonds, debentures, notes or other evidences of
indebtedness issued by any agency or other governmental body of the United
States, provided, however, that the full and timely payment of the securities
issued by each such agency or government sponsored agency is secured by the
full faith and credit of the United States;
(iii) certificates of deposit of, or time deposits in, any
bank (including the Trustee) or savings and loan association having
securities rated at the time of purchase in one of the three highest rating
categories of Moody's or S&P;
(iv) certificates which evidence ownership of the right to
the payment of the principal of and interest on obligations described in
clauses (i) and (ii) of this definition, provided that such obligations are
held in the custody of a bank or trust company acceptable to the Trustee in a
special account separate from the general assets of such custodian;
(v) obligations which are rated at the time of purchase in
one of the two highest rating categories of Moody's and the interest on which
is not includable in gross income for federal income tax purposes and the
timely payment of the principal of and interest on which is fully provided
for by the deposit in trust or escrow of cash or obligations described in
clauses (i) or (ii) of this definition;
(vi) guaranteed investment contracts or other similar
financial instruments with a commercial bank, insurance company or other
financial institution whose long term debt obligations are rated in one of
the two highest rating categories by Moody's;
(vii) any investment approved in writing by the Bank and
the Rating Agency (if any);
(viii) repurchase agreements issued by financial
institutions (i) insured by the Federal Deposit Insurance Corporation or (ii)
whose senior debt obligations at the time of purchase are rated in any of the
three highest rating categories by Moody's; provided, such repurchase
agreements are subject to perfected security interests in the Investment
Securities of the kind specified in paragraphs (i) or (ii) above; and
provided further (1) the Trustee or a third party custodian acting as agent
for the Trustee has possession of the collateral, (2) the Trustee or its
agent has a perfected first security interest in the Collateral, (3) the
Collateral is free and clear of any third-party liens and (4) failure to
maintain the requisite collateral percentage will require the Trustee (or its
agent) to liquidate the Collateral; and
(ix) money market mutual funds investing in Government
Obligations or in repurchase agreements backed by Government Obligations and
rated in either of the two highest rating categories by Standard & Poors or
Moody's, including mutual funds for which the Trustee or any of its
affiliates provide investment advisory, custodial, transfer agency,
shareholder servicing or other services and are separately and additionally
compensated therefor; and
(x) any other security or obligation, provided that the
Bank and the Rating Agency (if any) consents to the investment of funds in
such security or obligation.
"Issue Date" means the date on which the Trustee authenticates the
Bonds and on which the Bonds are delivered to the purchasers thereof upon
original issuance.
6
"Letter of Credit" means the Irrevocable Direct Pay Letter of Credit
issued by the Bank pursuant to the provisions of the Reimbursement Agreement,
or, in the event of delivery of a Substitute Letter of Credit, such
Substitute Letter of Credit.
"Letter of Credit Bank" means the Bank, as issuer of the Letter of
Credit and to the extent applicable, the issuer of any Substitute Letter of
Credit.
"Letter of Credit Termination Date" means the later of (i) that date
upon which the Letter of Credit shall expire or terminate pursuant to its
terms, or (ii) that date to which the expiration or termination of the Letter
of Credit may be extended, from time to time, either by extension or renewal
of the existing Letter of Credit or the issuance of a Substitute Letter of
Credit.
"Moody's" means Moody's Investors Service, a corporation organized
and existing under the laws of the State of Delaware, its successors and
their assigns, or, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, any
other nationally recognized securities rating agency designated by the
Company.
"Net Proceeds" when used with respect to any insurance proceeds or
any condemnation award, means the amount remaining after deducting all
expenses (including attorneys' fees and disbursements) incurred in the
collection of such proceeds or award from the gross proceeds thereof.
"Obligation Termination Date" means the date on which the Bank
delivers to the Trustee a certificate to the effect that all obligations
owing to the Bank under the Reimbursement Agreement have been paid in full.
"Officers' Certificate" means, with respect to the Company, a
certificate duly executed by its Authorized Representative, under the seal of
the Company.
"Opinion of Counsel" means a written opinion of counsel (who may be
counsel for the Company) selected by the Company and acceptable to the
Trustee. If and to the extent required by the provisions of Section 1.02
hereof, each Opinion of Counsel shall include in substance the statements
provided for in such Section 1.02.
"Optional Conversion Date" means a date on or after June 1, 1999,
which shall be a Business Day, from and after which the interest rate on the
Bonds is converted from the Floating Rate to the Fixed Rate as a result of
the exercise by the Company of the Conversion Option in accordance with the
terms of this Indenture.
"Outstanding," when used as of any particular time with reference to
Bonds, means (subject to the provisions of Section 12.10) all Bonds
theretofore, or thereupon being, authenticated and delivered by the Trustee
under this Indenture, except (1) Bonds theretofore canceled by the Trustee or
surrendered to the Trustee for cancellation; (2) Bonds with respect to which
all liability of the Company shall have been discharged in accordance with
Section 11.02, including Bonds (or portions of Bonds) referred to in Section
12.10; and (3) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and
delivered by the Trustee pursuant to this Indenture.
"Permitted Encumbrances" means any liens or encumbrances permitted
under the Reimbursement Agreement or otherwise permitted by the Bank.
"Person" means an individual, corporation, firm, association,
partnership, trust, or other legal entity or group of entities, including a
governmental entity or any agency or political subdivision thereof.
"Placement Agent" means First Union Capital Markets Corp.
7
"Pledge Agreement" means (i) the Pledge and Security Agreement dated
April 30, 1999 by and between the Bank and the Company and any amendments or
supplements thereto; and (ii) the pledge and security agreement made by the
Company to any Substitute Bank and any amendments or supplements thereto.
"Pledged Bonds" means any Bonds which shall, at the time of
determination thereof, be held in pledge for the benefit of the Bank by the
Pledged Bonds Custodian pursuant to the Pledge Agreement.
"Pledged Bonds Custodian" means that banking corporation which
serves as the custodian for the Pledged Bonds under the terms and conditions
of the Pledge Agreement. The initial Pledged Bonds Custodian shall be the
Trustee.
"Principal Corporate Trust Office" means the principal corporate
trust office of the Trustee, which at the date of the execution of the
Indenture is located at 1525 West W.T. Harris Boulevard, Charlotte, North
Carolina 28288-1153, Attention: Corporate Trust Department.
"Project" shall have the meaning set forth in the Recitals.
"Project Facilities" means the real property and improvements
thereon located at (i) 9000 State Road, Philadelphia, Pennsylvania, and (ii)
if owned by the Company, 9030 State Road, Philadelphia, Pennsylvania.
"Project Fund" means the fund established by that name pursuant to
Section 6.05 hereof.
"Purchase Date" means the date determined pursuant to Section
5.05(b)(i) hereof.
"Purchase Price" means an amount equal to 100% of the principal
amount of any Bond tendered or deemed tendered pursuant to Sections 5.01,
5.03 or 5.04 hereof, plus accrued and unpaid interest thereon to the date of
purchase.
"Rating Agency" means Moody's if the Bonds are rated by Moody's and
S&P if the Bonds are rated by S&P.
"Rating Category" means one of the general rating categories of
Moody's or S&P, as the case may be, without regard to any refinement or
gradation of such rating category by a numerical modifier or otherwise.
"Record Date" means, prior to the Conversion Date, that day which is
the Business Day next preceding any Interest Payment Date and thereafter,
that date which is the fifteenth day of the month next preceding any Interest
Payment Date.
"Reimbursement Agreement" means the Reimbursement Agreement dated
April 30, 1999 by and between the Company and the Bank, and any other similar
agreement entered into in connection with the issuance of any Substitute
Letter of Credit and any and all modifications, alterations, amendments and
supplements thereto.
"Remarketing Agent" means (singly or collectively, as the case may
be) the remarketing agent(s) appointed in writing by the Company and at the
time serving as such under the Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement, dated April
30, 1999, by and between the Company and First Union Capital Markets Corp.
and any other similar agreements between the Company and the Remarketing
Agent and any and all modifications, alterations, amendments and supplements
thereto.
"S&P" means Standard & Poor's Ratings Group, a division of the
McGraw-Hill Company, Inc., a corporation organized and existing under the
laws of the State of Delaware, its successors and their assigns, or, if such
corporation shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency designated by the Company.
8
"State" means the Commonwealth of Pennsylvania.
"Substitute Bank" means a commercial bank, savings and loan
association or savings bank which has issued a Substitute Letter of Credit.
"Substitute Letter of Credit" means an irrevocable, direct pay
letter of credit delivered to the Trustee in accordance with Section 6.13
hereof (i) issued by the Bank or a Substitute Bank, (ii) replacing any
existing Letter of Credit, (iii) dated no later than the date of the
expiration or replacement date of the Letter of Credit for which the same is
to be substituted, (iv) which shall expire on a date which is fifteen (15)
days after an Interest Payment Date for the Bonds, (v) having a term of at
least one year and (vi) if issued prior to the Conversion Date, issued on
substantially identical terms and conditions as the then existing Letter of
Credit except that the stated amount of the Substitute Letter of Credit shall
equal the sum of (A) the aggregate principal amount of Bonds at the time
Outstanding, plus (B) an amount equal to forty-six (46) days' interest
(computed at a maximum rate of seventeen percent (17%) per annum on all Bonds
at the time Outstanding).
"Supplemental Indenture" means any indenture hereafter duly
authorized and entered into between the Company and the Trustee,
supplementing, modifying or amending this Indenture, but only if and to the
extent that such Supplemental Indenture is specifically authorized hereunder.
"Tender Agent" means the Trustee and its successors and any
corporation resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor Tender Agent at the
time serving as successor Tender Agent hereunder and under the Tender Agent
Agreement. "Delivery Office" and "Principal Office" of the Tender Agent means
1525 West W.T. Harris Boulevard, Charlotte, North Carolina 28288-1153,
Attention: Corporate Trust Department, or such other address as may be
designated in writing to the Company, the Trustee and the Remarketing Agent.
"Trust Estate" means all property rights and interests transferred,
assigned, or otherwise pledged first to the Trustee and second, to the Letter
of Credit Bank pursuant to the Granting Clauses hereof.
"Trustee" means First Union National Bank and its successor and any
corporation resulting from or surviving any consolidation or merger to which
it or its successors may be a party and any successor trustee at the time
serving as successor trustee hereunder.
"Unremarketed Bonds" means Bonds which have been purchased pursuant
to Sections 5.01, 5.03 or 5.04 hereof but which have not been remarketed.
"Weekly Period" shall mean, while the Bonds bear interest at the
Floating Rate, the weekly period that begins on and includes Thursday of each
calendar week and ends at the close of business on Wednesday of the next
succeeding week.
SECTION 1.02. Content of Certificates and Opinions. The Trustee may,
but shall not be obligated to, require that every certificate or opinion
provided for in this Indenture with respect to compliance with any provision
hereof shall include (1) a statement to the effect that the Person making or
giving such certificate or opinion has read such provision and the
definitions herein relating thereto; (2) a brief statement as to the nature
and scope of the examination or investigation upon which the certificate or
opinion is based; (3) a statement to the effect that in the opinion of such
person, he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion with respect to the
subject matter referred to in the instrument to which his signature is
affixed; (4) a statement of the assumptions upon which such certificate or
opinion is based, and that such assumptions are reasonable; and (5) a
statement as to whether, in the opinion of such person, such provision has
been complied with.
Any such certificate or opinion made or given by an officer of the
Company may be based, insofar as it relates to legal or accounting matters,
upon a certificate or opinion of or representation by counsel or an
accountant, unless such officer knows, or in the exercise of reasonable care
should have known, that the certificate, opinion or
9
representation with respect to the matters upon which such certificate or
statement may be based, as aforesaid, is erroneous. Any such certificate or
opinion made or given by counsel or an accountant may be based, insofar as it
relates to factual matters (with respect to which information is in the
possession of the Company) upon a certificate or opinion of or representation
by an officer of the Company, unless such counsel or accountant knows that
the certificate or opinion or representation with respect to the matters upon
which such person's certificate or opinion or representation may be based, as
aforesaid, is erroneous. The same officer of the Company, or the same counsel
or accountant, as the case may be, need not certify to all of the matters
required to be certified under any provision of this Indenture, but different
officers, counsel or accountants may certify to different matters,
respectively.
SECTION 1.03. Interpretation. (a) Unless the context otherwise
indicates, words expressed in the singular shall include the plural and vice
versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the neuter,
masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table
of contents hereof are solely for convenience of reference, do not constitute
a part hereof and shall not affect the meaning, construction or effect
hereof.
(c) All references herein to "Articles," "Sections" and
other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Indenture; the words "herein," "hereof," "hereby,"
"hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or subdivision hereof.
(d) Whenever in this Indenture it is required that notice
be provided to the Bank or that consent of the Bank be obtained, such
provisions shall be effective only when (i) the Letter of Credit is in effect
or (ii) the Bank, in its capacity as provider of the Letter of Credit, is the
Holder of any Bonds.
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds. The Bonds shall be issued
hereunder in order to obtain moneys to finance the Project for the benefit of
the Company. The Bonds shall be comprised of one series of bonds designated
as "Lannett Company, Inc. Taxable Variable Rate Demand/Fixed Rate Revenue
Bonds, Series of 1999." The aggregate principal amount of Bonds which may be
issued and Outstanding under this Indenture shall not exceed Two Million
Three Hundred Thousand Dollars ($2,300,000). No additional Bonds may be
issued under this Indenture. This Indenture constitutes a continuing
agreement by the Company for the benefit of the Holders from time to time of
the Bonds to secure the full payment of the principal of and interest on all
such Bonds subject to the covenants, provisions and conditions herein
contained.
SECTION 2.02. Terms of Bonds; Interest on the Bonds. (a) The Bonds
shall be issued in fully registered form. Prior to the Conversion Date, (i)
such Bonds shall be Outstanding in denominations of $100,000 or any integral
multiple of $5,000 in excess thereof; and (ii) such Bonds may not be issued,
exchanged or transferred except in the authorized denominations of $100,000
or any integral multiple of $5,000 in excess thereof. From and after the
Conversion Date, (i) such Bonds shall be Outstanding in denominations of
$5,000 or any integral multiple of $5,000 and (ii) such Bonds may not be
issued, exchanged or transferred except in the authorized denominations of
$5,000 or any integral multiple of $5,000 in excess thereof. The Bonds shall
be dated as of the date of delivery and shall mature, subject to prior
redemption, as provided herein. Unless the Company shall otherwise direct,
prior to the Conversion Date the Bonds shall be lettered "VR" and shall be
numbered consecutively from 1 upward and after the Conversion Date the Bonds
shall be lettered "FR" and shall be numbered consecutively from 1 upward.
(b) Each of the Bonds shall be dated the Issue Date and
shall bear interest, payable (i) prior to the Conversion Date, on the first
Business Day of each calendar month commencing June 1, 1999, and (ii) from
and after the Conversion Date, on May 1 and November 1 of each year,
commencing on the May 1 or November 1 next following the Conversion Date, in
each case from the Interest Payment Date next preceding the date of
10
authentication thereof to which interest has been paid or duly provided for,
unless the date of authentication thereof is an Interest Payment Date to
which interest has been paid or duly provided for, in which case from the
date of authentication thereof, or unless no interest has been paid or duly
provided for on the Bonds, in which case from the Issue Date, until payment
of the principal thereof has been made or duly provided for. Notwithstanding
the foregoing, any Bond authenticated after any Record Date and before the
following Interest Payment Date shall bear interest from such Interest
Payment Date, provided, however, that if the Company shall default in the
payment of interest from the next preceding Interest Payment Date to which
interest has been paid or duly provided for, or, if no interest has been paid
or duly provided for on the Bonds, from the Issue Date.
The Bonds shall mature on May 1, 2003 as provided in
Section 4.01(c) herein.
(c) (i) From the Issue Date to the Conversion Date, the
Bonds shall bear interest at the Floating Rate. The Floating Rate applicable
to the Bonds shall be determined by the Remarketing Agent on each
Determination Date and shall be effective on such Determination Date for the
immediately following Weekly Period.
(ii) The Remarketing Agent shall advise the Trustee
of the Floating Rate applicable to the Bonds by telephone (confirmed by
telecopy to the Trustee) at or before the close of business on each
Determination Date. Upon written request of any Bondholder, the Remarketing
Agent shall notify such Bondholder of the Floating Rate then borne by the
Bonds.
(iii) If for any reason the interest rate on a Bond
for any Weekly Period is not determined by the Remarketing Agent pursuant to
(c)(i) above, or a court holds that the Floating Rate, set as provided
pursuant to (c)(i) above, is invalid or unenforceable, the Floating Rate for
the Bonds shall be for (a) the first such week that the applicable Floating
Rate is not determined by the Remarketing Agent or has been determined
invalid or unenforceable, a rate per annum equal to the Floating Rate for the
Bonds established by the Remarketing Agent pursuant to (c)(i) on the
immediately preceding Determination Date and (b) on each Determination Date
thereafter, shall be a rate per annum equal to one hundred twenty percent
(120%) of the interest rate per annum for 30 day commercial paper having a
rating of A-2/P-2 as reported in The Wall Street Journal on each
Determination Date.
(iv) The determination of the Floating Rate by the
Remarketing Agent shall be conclusive and binding upon the Company, the
Trustee, the Bank, the Remarketing Agent, the Tender Agent and the Owners of
the Bonds.
Anything herein to the contrary notwithstanding, the Floating Rate
shall in no event exceed seventeen percent (17%) per annum.
(d) The Bonds shall bear interest at the Fixed Rate from
and after the Conversion Date until the maturity of the Bonds. The Fixed Rate
shall be a fixed annual interest rate on the Bonds, such Fixed Rate to be
established by the Remarketing Agent as the rate of interest for which the
Remarketing Agent has received commitments from purchasers on or prior to the
fifth (5th) day preceding the Conversion Date to purchase all the Outstanding
Bonds on the Conversion Date at a price of par.
(e) Prior to the Conversion Date, interest on the Bonds
shall be computed on the basis of a 365 or 366-day year, as applicable, for
the actual number of days elapsed. On and after the Conversion Date, interest
on the Bonds shall be computed on the basis of a 360-day year of twelve
30-day months. The principal of and premium, if any, on the Bonds shall be
payable in lawful money of the United States of America at the Principal
Corporate Trust Office of the Trustee. The Purchase Price of the Bonds shall
be payable in lawful money of the United States of America by the Tender
Agent to the Owner of Bonds entitled to receive such Purchase Price.
Interest on the Bonds shall be payable on each Interest
Payment Date to the persons in whose name the Bonds are registered at the
close of business on the Record Date for the respective Interest Payment
Date. Interest shall be paid by check mailed to each Owner at the addresses
shown on the registration books maintained by
11
the Trustee, provided that such interest shall be paid by wire transfer to
(i) the Bank and (ii) any Holder of at least $1,000,000 in aggregate
principal amount of Bonds, if the Holder makes a written request to the
Trustee at least fifteen (15) days before a Record Date specifying the
account address (which shall be an account at a bank in the continental
United States) and wiring instructions. Such a request may provide that it
will remain in effect for subsequent interest payments until changed or
revoked by written notice to the Trustee or upon the transfer or
reregistration of the Bond.
The principal of the Bonds shall be payable in lawful money
of the United States of America at the Principal Corporate Trust Office of
the Trustee. No payment of principal shall be made on any Bond until such
Bond is surrendered to the Trustee at its Principal Corporate Trust Office.
SECTION 2.03. Execution of Bonds. The Bonds shall be executed in the
name and on behalf of the Company with the manual or facsimile signature of
its Chairman, under its seal and attested by the manual or facsimile
signature of its Secretary or Assistant Secretary. The seal of the Company
will be impressed or imprinted on the Bonds by facsimile or otherwise. The
Bonds shall then be delivered to the Trustee for authentication by it. In
case any of the officers who shall have signed or attested any of the Bonds
shall cease to be such officer or officers of the Company before the Bonds so
signed or attested shall have been authenticated or delivered by the Trustee
or issued by the Company, such Bonds may nevertheless be authenticated,
delivered and issued and, upon such authentication, delivery and issue, shall
be as binding upon the Company as though those who signed and attested the
same had continued to be such officers of the Company
SECTION 2.04. Authentication. (a) The Company hereby appoints the
Tender Agent as a co-authenticating agent for the Bonds.
(b) No Bond shall be valid or obligatory for any
purpose or entitled to any security or benefit under this Indenture unless
and until a certificate of authentication on such Bond, substantially in the
form set forth in Exhibit A or Exhibit B attached hereto, shall have been
duly executed by the Trustee or by the Tender Agent and such executed
certificate of authentication upon any such Bond shall be conclusive evidence
that such Bond has been authenticated and delivered under this Indenture. The
certificate of authentication on any Bond shall be deemed to have been
executed by the Trustee or the Tender Agent if signed by an authorized
signatory of the Trustee or the Tender Agent, as the case may be, but it
shall not be necessary that the same signatory execute the certificate of
authentication on all of the Bonds.
(c) In the event the Bond is deemed tendered to
the Tender Agent as provided in Section 5.01, 5.03 or 5.04 hereof but is not
physically delivered to the Tender Agent, the Company shall execute and the
Trustee or the Tender Agent shall authenticate a new Bond of like
denomination as that deemed tendered.
SECTION 2.05. Form of Bonds. The Floating Rate Bonds and the
certificate of authentication to be endorsed thereon prior to the Conversion
Date are to be substantially in the form set forth in Exhibit A attached
hereto, with appropriate variations, omissions and insertions as permitted or
required by this Indenture and applicable law. The Fixed Rate Bonds and the
certificate of authentication to be endorsed thereon are to be in
substantially the form set forth in Exhibit B attached hereto, with
appropriate variations, omissions and insertions as permitted or required by
this Indenture and applicable law.
SECTION 2.06. Transfer of Bonds. Subject to the provisions of
Section 2.14 hereof, any Bond may be transferred in accordance with its terms
upon the books required to be kept pursuant to the provisions of Section 2.08
hereof. Such transfer shall be made, in accordance with the requirements of
Section 2.02 hereof, by the person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such registered Bond
for cancellation, accompanied by delivery of a written instrument of
transfer, duly executed in a form approved by the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer, the
Company shall execute and the Trustee or the Tender Agent, as the case may
be, shall authenticate and deliver a new Bond or Bonds for a like aggregate
principal amount. The Trustee shall require the Bondholder requesting such
transfer to pay any tax or other
12
governmental charge required to be paid with respect to such transfer, and
may in addition require the payment of a reasonable sum to cover expenses
incurred by the Company or the Trustee in connection with such transfer. No
transfer of any Bond shall be valid unless made in accordance with such
requirements and similarly noted by endorsement of the Trustee on such Bond
or unless, at the expense of the registered owner of the Bond, the Company
shall execute, and the Trustee shall authenticate a new Bond or Bonds
registered in the name of the transferee.
The Trustee shall not be required to transfer any Bond during the
period beginning fifteen (15) days before the mailing of notice of redemption
calling the Bond or any portion of the Bond for redemption and ending on the
redemption date.
SECTION 2.07. Exchange of Bonds. Bonds may be exchanged at the
Principal Corporate Trust Office of the Trustee for a like aggregate
principal amount of Bonds of other authorized denominations in accordance
with the requirements of Section 2.02 hereof. The Trustee shall require the
Bondholder requesting such exchange to pay any tax or other governmental
charge required to be paid with respect to such exchange, and may in addition
require the payment of a reasonable sum to cover expenses incurred by the
Company or the Trustee in connection with such exchange.
The Trustee shall not be required to exchange any Bond during the
period beginning fifteen (15) days before the mailing of notice of redemption
calling the Bonds or any portion of the Bond for redemption and ending on the
redemption date.
SECTION 2.08. Bond Registrar. The Trustee is hereby appointed the
Bond Registrar of the Company and the Tender Agent is hereby appointed the
Co-Bond Registrar of the Company. The Trustee or the Tender Agent, as the
case may be, will keep or cause to be kept sufficient books for the
registration and transfer of the Bonds, which shall at all times be open to
inspection during regular business hours by any Bondholder or his agent duly
authorized in writing, the Company, the Bank and the Remarketing Agent; and,
upon presentation for such purpose, the Trustee or the Tender Agent, as the
case may be, shall, under such reasonable regulations as they or the Company
may prescribe, register or transfer or cause to be registered or transferred,
on such books, Bonds as hereinbefore provided.
SECTION 2.09. Temporary Bonds. The Bonds may be issued in temporary
form exchangeable for definitive Bonds when ready for delivery. Any temporary
Bond may be printed, lithographed or typewritten, shall be of such
denomination as may be determined by the Company, shall be in fully
registered form without coupons and may contain such reference to any of the
provisions of this Indenture as may be appropriate. Every temporary Bond
shall be executed by the Company and be authenticated by the Trustee or the
Tender Agent, as the case may be, upon the same conditions and in
substantially the same manner as the definitive Bonds. If the Company issues
temporary Bonds it will execute and deliver definitive Bonds as promptly
thereafter as practicable, and thereupon the temporary Bonds may be
surrendered for cancellation, in exchange therefor at the Principal Corporate
Trust Office of the Trustee and the Trustee or the Tender Agent, as the case
may be, shall authenticate and deliver in exchange for such temporary Bonds
an equal aggregate principal amount of definitive Bonds of authorized
denominations. Until so exchanged, the temporary Bonds shall be entitled to
the same benefits under this Indenture as definitive Bonds authenticated and
delivered hereunder.
SECTION 2.10. Bond Mutilated, Lost, Destroyed or Stolen. If any Bond
shall become mutilated, the Company, at the expense of the Holder of said
Bond, shall execute and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor and number in exchange and substitution for the Bond
so mutilated, but only upon surrender to the Trustee of the Bond so
mutilated. Every mutilated Bond so surrendered to the Trustee shall be
cancelled by it and delivered to, or upon the order of, the Company. If any
Bond shall be lost, destroyed or stolen, evidence of such loss, destruction
or theft may be submitted to the Company and the Trustee and, if such
evidence be satisfactory to both and indemnity satisfactory to them both
shall be given, the Company, at the expense of the Holder, shall execute, and
the Trustee shall thereupon authenticate and deliver, a new Bond of like
tenor and number in lieu of and in substitution for the Bond so lost,
destroyed or stolen (or if any such Bond shall have matured or shall be about
to mature, instead of issuing a substitute Bond, the Trustee may pay the same
without surrender
13
thereof). The Company may require payment by the Holder of a sum not
exceeding the actual cost of preparing each new Bond issued under this
Section and of the expenses which may be incurred by the Company and the
Trustee in connection therewith. Any Bond issued under the provisions of this
Section in lieu of any Bond alleged to be lost, destroyed or stolen shall
constitute an original additional contractual obligation on the part of the
Company whether or not the Bond so alleged to be lost, destroyed or stolen be
at any time enforceable by anyone, and shall be entitled to the benefits of
this Indenture with all other Bonds secured by this Indenture.
SECTION 2.11. Cancellation and Destruction of Surrendered Bonds. All
Bonds surrendered for payment or redemption and all Bonds purchased with
moneys available for that purpose in any funds established under this
Indenture, shall, at the time of such payment or redemption, be cancelled and
destroyed by the Trustee. The Trustee shall deliver to the Company
certificates of destruction with respect to all Bonds destroyed in accordance
with this Section.
SECTION 2.12. Acts of Bondholders; Evidence of Ownership. Any action
to be taken by Bondholders may be evidenced by one or more concurrent written
instruments of similar tenor signed or executed by such Bondholders in person
or by agents appointed in writing. The fact and date of the execution by any
person of any such instrument may be proved by acknowledgment before a notary
public or other officer empowered to take acknowledgements or by an affidavit
of a witness to such execution. Any action by the Holder of any Bond shall
bind all future Holders of the same Bond in respect of any thing done or
suffered by the Company or the Trustee in pursuance thereof.
SECTION 2.13. CUSIP Number. The Company, for the convenience of the
registered Owners of the Bonds, may cause CUSIP (Committee on Uniform
Security Identification Procedures) numbers to be printed on such Bonds. No
representation shall be made as to the correctness or accuracy of such
numbers, either as printed on such Bonds or as contained in any notice of
redemption, and the Company shall have no liability of any sort with respect
thereto. No reliance with respect to any redemption notices with respect to
any Bond may be placed on the identification number printed thereon.
SECTION 2.14 Book-Entry-Only System. (a) Notwithstanding the
foregoing provisions of this Article II, the Bonds shall initially be issued
in the form of one fully registered Bond for the aggregate principal amount
of the Bonds of each maturity, which Bonds shall be registered in the name of
CEDE & Co., as nominee of The Depository Trust Company ("DTC"). Except as
provided in paragraph (g) below, all of the Bonds shall be registered in the
registration books kept by the Trustee in the name of CEDE & Co., as nominee
of DTC; provided that if DTC shall request that the Bonds be registered in
the name of a different nominee, the Trustee shall exchange all or any
portion of the Bonds for an equal aggregate principal amount of Bonds
registered in the name of such nominee or nominees of DTC. No person other
than DTC or its nominee shall be entitled to receive from the Company or the
Trustee either a Bond or any other evidence of ownership of the Bonds, or any
right to receive any payment in respect thereof unless DTC or its nominee
shall transfer record ownership of all or any portion of the Bonds on the
registration books maintained by the Trustee, in connection with
discontinuing the book entry system as provided in paragraph (g) below or
otherwise.
(b) So long as the Bonds or any portion thereof are
registered in the name of DTC or its nominee, the principal or redemption
price of and interest on such Bond shall be made to DTC or its nominee in
same day funds on the dates provided for such payments under this Indenture.
Each such payment to DTC or its nominee shall be valid and effective to
discharge fully all liability of the Company or the Trustee with respect to
the principal or redemption price of or interest on the Bonds to the extent
of the sum or sums so paid. In the event of the redemption of less than all
of the Bonds Outstanding of any maturity, the Trustee shall not require
surrender by DTC or its nominee of the Bonds so redeemed, but DTC (or its
nominee) may retain such Bonds and make an appropriate notation on the Bonds
certificate as to the amount of such partial redemption; provided that DTC
shall deliver to the Trustee, in each case, a written confirmation of such
partial redemption and thereafter the records maintained by the Trustee shall
be conclusive as to the amount of the Bonds of such maturity which have been
redeemed.
(c) The Company and the Trustee shall treat DTC (or its
nominee) as the sole and exclusive Owner of the Bonds registered in its name
for the purposes of payment of the principal or redemption price of or
interest on the Bonds, selecting the Bonds or portions thereof to be
redeemed, giving any notice permitted or
14
required to be given to Owners of Bonds under this Indenture, registering the
transfer of Bonds, obtaining any consent or other action to be taken by
Owners of Bonds and for all other purposes whatsoever; and neither the
Company nor the Trustee shall be affected by any notice to the contrary.
Neither the Company nor the Trustee shall have any responsibility or
obligation to any participant in DTC, any person claiming a beneficial
ownership interest in the Bonds under or through DTC or any such participant,
or any other person which is not shown on the registration books of the
Trustee as being an owner of Bonds, with respect to either: (1) the Bonds; or
(2) the accuracy of any records maintained by DTC or any such participants;
or (3) the payment by DTC or any such participant of any amount in respect of
the principal or redemption price of or interest on the Bonds; or (4) any
notice which is permitted or required to be given to Owners of Bonds under
this Indenture; or (5) the selection by DTC or any such participant of any
person to receive payment in the event of a partial redemption of the Bonds;
or (6) any consent given or other action taken by DTC as an Owner of Bonds.
(d) So long as the Bonds or any portion thereof are
registered in the name of DTC or any nominee thereof, all notices required or
permitted to be given to the Owners of Bonds under this Indenture shall be
given to DTC as provided in the Letter of Representation, the form of which
is attached hereto as Exhibit D.
(e) In connection with any notice or other communication to
be provided to Owners of Bonds pursuant to this Indenture by the Company or
the Trustee with respect to any consent or other action to be taken by Owners
of Bonds, DTC shall consider the date of receipt of notice requesting such
consent or other action as the Record Date for such consent or other action,
provided that the Company or the Trustee may establish a special Record Date
for such consent or other action. The Company or the Trustee shall give DTC
notice of such special Record Date not less than fifteen (15) calendar days
in advance of such special Record Date to the extent possible.
(f) At or prior to settlement for the Bonds, the Company
and the Trustee shall execute or signify their approval of the Letter of
Representation in substantially the form attached hereto as Exhibit D. Any
successor Trustee shall, in its written acceptance of its duties under this
Indenture, agree to take any actions necessary from time to time to comply
with the requirements of the Letter of Representation.
(g) The book-entry-only system for registration of the
ownership of the Bonds may be discontinued at any time if either: (1) after
notice to the Company and the Trustee, DTC determines to resign as securities
depository for the Bonds; or (2) after notice to DTC and the Trustee, the
Company determines that continuation of the system of book-entry-only
transfers through DTC (or through a successor securities depository) is not
in the best interest of the Company. In either of such events, unless the
Company appoints a successor securities depository, the Bonds shall be
delivered in registered certificate form to such persons, and in such
maturities and principal amounts, as may be designated in writing by DTC, but
without any liability on the part of the Company or the Trustee for the
accuracy of such designation. Whenever DTC requests the Company and the
Trustee to do so, the Company and the Trustee shall cooperate with DTC in
taking appropriate action after reasonable written notice to arrange for
another securities depository to maintain custody of certificates evidencing
the Bonds.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the Bonds. At any time after the execution
of this Indenture, the Company may execute and the Trustee or the Tender
Agent, as the case may be, shall authenticate and, upon request of the
Company, deliver the Bonds in the aggregate principal amount of Two Million
Three Hundred Thousand Dollars ($2,300,000).
SECTION 3.02. Validity of Bonds. The recital contained in the Bonds
that the same are issued pursuant to the Constitution and laws of the State
shall be conclusive evidence of their validity and of compliance with all
provisions of law in their issuance.
15
SECTION 3.03. Disposition of Proceeds of the Bonds and Other
Amounts. The Company shall deposit or cause to be deposited with the Trustee,
immediately upon receipt thereof, all proceeds derived from the sale of the
Bonds. The Trustee shall deposit all such amounts in a special fund which the
Trustee is hereby directed to establish, to be known as the Clearing Fund,
and in the following order, the Trustee shall:
(a) Transfer to the Persons identified on the Closing
Statement delivered to the Trustee on the Closing Date to pay or reserve for
payment any and all costs of issuance incurred in connection with the Bonds;
and
(b) Transfer to the credit of the Project Fund the balance
of the Clearing Fund not otherwise reserved for payment of the items
described in Subsection 3.03(a) above.
ARTICLE IV
REDEMPTION AND PURCHASE OF BONDS BEFORE MATURITY
SECTION 4.01. (a) Extraordinary Redemption. The Bonds are callable
for redemption in the event the Project Facilities or any portion thereof is
damaged or destroyed or taken in a condemnation proceeding as provided in
Article XII hereof. If called for redemption at any time pursuant to this
Section 4.01(a), the Bonds shall be subject to redemption by the Company on
any Interest Payment Date, in whole or in part, at a redemption price equal
to 100% of the principal amount thereof being redeemed, plus accrued interest
to the redemption date.
(b) Mandatory Redemption. The Bonds are subject to
mandatory redemption:
(i) five (5) Business Days prior to the Letter of
Credit Termination Date, in whole, at a redemption price equal to one hundred
percent (100%) of the principal amount thereof being redeemed plus accrued
interest to the redemption date if, on the thirtieth (30th) Business Day
prior to the Letter of Credit Termination Date, the Trustee shall not have
received a Substitute Letter of Credit which will be effective on or before
the Letter of Credit Termination Date.
(ii) on any Interest Payment Date, in whole or in
part, at a redemption price equal to one hundred percent (100%) of the
principal amount thereof being redeemed plus accrued interest to the
redemption date, if any proceeds of the sale of the Bonds remain on deposit
in the Project Fund established hereunder upon completion of the Project, as
set forth in Section 6.08 hereof.
(c) Mandatory Sinking Fund Redemption. The Bonds are
subject to mandatory redemption on the Interest Payment Date occurring in the
month of May in each of the years set forth below commencing on the Interest
Payment Date occurring in May of 2000 (each, a "Mandatory Sinking Account
Payment Date"), at a redemption price equal to 100% of the principal amount
thereof plus accrued interest as follows:
Bonds
Mandatory Sinking
Year Account Payments
- ---- -----------------
2000 $645,000
2001 $685,000
2002 $730,000
2003* $240,000
*Final maturity
SECTION 4.02. Optional Redemption. On or prior to the Conversion
Date, the Bonds are subject to redemption by the Company, at any time,
subject to provisions of Section 4.03 hereof, in whole or in part, at the
16
redemption price of 100% of the principal amount thereof being redeemed plus
accrued interest to the redemption date.
After the Conversion Date, (a) if the length of time from the
Conversion Date to the final maturity date of the Bonds is less than seven
(7) years, the Bonds are not subject to optional redemption; and (b) if the
length of time from the Conversion Date to the final maturity date is seven
(7) years or more, the Bonds are subject to redemption by the Company on or
after the fifth (5th) anniversary of the Conversion Date, in whole or in part
on any Interest Payment Date at the redemption price of 100% of the principal
amount thereof being redeemed plus accrued interest to the redemption date.
Notwithstanding the foregoing, if, pursuant to a conversion from the
Floating Rate to the Fixed Rate in accordance herewith, the Remarketing Agent
certifies to the Trustee and the Company in writing that the foregoing call
restriction is not consistent with the then prevailing market conditions, the
foregoing call restriction may be revised in accordance with the best
professional judgment of the Remarketing Agent to reflect the then prevailing
market conditions; provided, however that the Company shall have consented to
such revision.
Notwithstanding the foregoing, no such optional redemption shall
occur unless on the redemption date there shall be sufficient Available
Moneys to pay all amounts due with respect to such a redemption.
SECTION 4.03. Notice of Redemption. So long as the Bonds are
registered in the name of DTC or its nominee, the Trustee shall cause notice
of any redemption of Bonds hereunder to be made in accordance with the Letter
of Representations. If at any time the DTC book-entry-only system shall be
discontinued, notice of the call for redemption, identifying the Bonds or
portions thereof to be redeemed and the redemption price (including the
premium, if any), shall be given by the Trustee by mailing a copy of the
redemption notice by first class mail at least (i) ten (10) days prior to the
date fixed for mandatory redemption pursuant to Section 4.01(b)(i) hereof;
and (ii) thirty (30) days but not more than sixty (60) days prior to the date
fixed for redemption in all other instances to the Owner of each Bond to be
redeemed in whole or in part at the address shown on the registration books.
Such notice shall contain such matters specified in the Bonds for the
redemption thereof and, in the case of any extraordinary or optional
redemption, shall state that such redemption is conditional upon the receipt
of monies by the Trustee for such purpose on or prior to the redemption date.
Any notice mailed as provided in this Section shall be conclusively presumed
to have been duly given, whether or not the Owner receives the notice. The
Trustee shall deliver a copy of any such redemption notice to the Tender
Agent, the Bank, the Company and to the Remarketing Agent.
SECTION 4.04. Interest on Bonds Called for Redemption. Upon the
giving of notice and the deposit of Available Moneys for redemption at the
required times on or prior to the date fixed for redemption, as provided in
this Article, interest on the Bonds or portions thereof thus called shall no
longer accrue after the date fixed for redemption.
SECTION 4.05. Cancellation. All Bonds which have been redeemed shall
not be reissued but shall be cancelled and destroyed by the Trustee in
accordance with Section 2.11 thereof.
SECTION 4.06. Partial Redemption of Bonds. (a) If less than all the
Bonds are to be redeemed, the particular Bonds or portions thereof to be
redeemed shall be selected by the Trustee by lot.
(b) Upon surrender of any Bond for redemption in part only,
the Company shall execute and the Trustee shall authenticate and deliver to
the Owner thereof a new Bond or Bonds of authorized denominations, in an
aggregate principal amount equal to the unredeemed portion of the Bond
surrendered. If all or a portion of Bonds tendered for purchase pursuant to
Section 5.04 hereof have been selected by the Trustee for redemption, the
Tender Agent, upon receipt of such tendered Bonds, shall authenticate and
redeliver only such portion of tendered Bonds not subject to redemption. The
Tender Agent shall deliver to the tendering Bondholder a copy of the notice
of redemption, indicating the portion of the Bonds subject thereto, and upon
receipt of funds as provided herein, an amount representing the principal of
and interest on the Bonds not called for redemption. The principal of and
interest accrued on the Bonds called for redemption shall be paid to such
Bondholder on the redemption date. The
17
Tender Agent shall cancel the Bond or such portion thereof tendered for
purchase and subject to redemption, and shall deliver a certificate
evidencing such cancellation and the cancelled Bond to the Trustee.
(c) (i) Prior to the Conversion Date, in case a Bond
is of a denomination larger than $100,000, a portion of such Bond ($100,000
or any integral multiple of $5,000 in excess thereof) may be redeemed, but
Bonds shall be redeemed only if the remaining unredeemed portion of such Bond
is in the principal amount of $100,000 or any integral multiple of $5,000 in
excess of $100,000.
(ii) After the Conversion Date, in case a Bond is
of a denomination larger than $5,000, a portion of such Bond ($5,000 or any
integral multiple thereof) may be redeemed, but Bonds shall be redeemed only
if the remaining unredeemed portion of such Bond is in the principal amount
of $5,000 or any integral multiple of $5,000.
(d) Notwithstanding anything to the contrary contained
in this Indenture, whenever the Bonds are to be redeemed in part, Bonds which
are Pledged Bonds at the time of selection of Bonds for redemption shall be
selected for redemption prior to the selection of any other Bonds. If the
aggregate principal amount of Pledged Bonds at the time of selection is less
than the amount available for the partial redemption of the Bonds, the
Trustee may select for redemption Bonds in an aggregate principal amount
equal to such excess in such manner as the Trustee in its discretion shall
deem fair and appropriate.
SECTION 4.07. Payment of Redemption Price with Available Moneys.
Notwithstanding any provision to the contrary contained in this Indenture,
the payment of the redemption price of Bonds shall be made only from funds
described in clause (i) of the definition of Available Moneys. On each date
that the Bonds are subject to redemption, the Trustee shall pay the full
redemption price of the Bonds then subject to redemption from the sources and
in the order provided in Section 6.03 hereof.
ARTICLE V
CONVERSION OF INTEREST RATE; DEMAND
PURCHASE OPTION
SECTION 5.01. Conversion of Interest Rate on Conversion Date;
Mandatory Tender of Bonds. (a) The interest rate on the Bonds shall be
converted from the Floating Rate to the Fixed Rate upon the exercise by the
Company of the Conversion Option, and the Bonds shall be subject to mandatory
tender for purchase by the Owners thereof on the Conversion Date. To exercise
the Conversion Option, the Company shall notify the Trustee, the Tender
Agent, the Bank and the Remarketing Agent at least thirty-five (35) days
prior to the Conversion Date of such exercise, cause the Remarketing Agent to
furnish to the Trustee the information set forth in paragraphs 1, 2 and 6
below and, thereafter cause the Trustee to deliver or mail by first class
mail a notice at least twenty (20) days but not more than thirty (30) days
prior to the Conversion Date to the Owner of each Bond at the address shown
on the registration books of the Bond Registrar. No such notice may be given
unless the Trustee first receives (i) a commitment from the Bank or a
Substitute Bank to issue a Substitute Letter of Credit to take effect on the
Conversion Date, together with a form of such Substitute Letter of Credit,
and (ii) a certificate from Company to the effect that each of the Company's
representations and warranties made in any agreements or certificates given
by the Company in connection with the issuance of the Bonds remain true and
correct in all material respects as of the proposed Conversion Date. Any
notice given as provided in this Section shall be conclusively presumed to
have been duly given, whether or not the Owner receives the notice. Said
notice shall state in substance the following:
1. The Conversion Date.
2. The method of computation of the Fixed Rate
which will take effect on the Conversion Date.
3. That from and after the Conversion Date the
Demand Purchase Option will no longer be available to Owners of Bonds.
18
4. That the existing Letter of Credit will expire
two (2) Business Days after the Conversion Date and that the Bonds are to be
secured by a Substitute Letter of Credit after the Conversion Date, and
stating the identity of the issuer of such Substitute Letter of Credit.
5. That unless firm commitments for the purchase
of all Outstanding Bonds have been received on or prior to the fifth (5th)
Business Day prior to the proposed Conversion Date, the Company has the
option to rescind an optional conversion of the Bonds.
6. That in the event the Company elects not to
rescind the optional conversion of the Bonds, although firm commitments have
not been received for the purchase of all Outstanding Bonds, all Bonds which
have not been remarketed on or prior to the Conversion Date shall be subject
to mandatory tender on the Conversion Date pursuant to this Section 5.01.
7. That from and after the Conversion Date, the
rating then in effect on the Bonds, if any, may be reduced or may no longer
be maintained.
(b) On or prior to the Conversion Date, Owners of Bonds
shall be required to deliver their Bonds to the Tender Agent for purchase at
the Purchase Price, and any such Bonds not delivered to the Tender Agent on
or prior to the Conversion Date ("Undelivered Bonds"), for which there has
been irrevocably deposited in trust with the Trustee or the Tender Agent an
amount of money sufficient to pay the Purchase Price of the Undelivered
Bonds, shall be deemed to have been purchased pursuant to this Section 5.01
and are deemed to be no longer Outstanding with respect to such prior Owners.
IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS ON OR
PRIOR TO THE CONVERSION DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT
(INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE OPTIONAL CONVERSION
DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY
UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
(c) Notwithstanding the foregoing provisions, to the extent
that at the close of the fifth (5th) Business Day prior to the proposed
Conversion Date, the Remarketing Agent has not presented to the Company firm
commitments for the purchase of all of the Bonds, the Company, at its option,
may rescind an optional conversion of the Bonds. Any such election to rescind
must be made by the close of the fourth (4th) Business Day prior to the
proposed Conversion Date and the Company shall give written notice to the
Trustee, the Tender Agent and the Bank of its decision to rescind by each
time. The Company shall cause the Trustee to notify immediately the Owners of
such rescission and thereafter the Bonds shall bear interest at the Floating
Rate in effect for the current Weekly Period and thereafter the Bonds shall
bear interest at the Floating Rate applicable to such Bonds until any
subsequent Conversion Date effected in accordance with this Indenture.
(d) In the event the Company rescinds the proposed optional
conversion in accordance with the terms of the foregoing paragraph, the
Letter of Credit then in effect will remain in effect in accordance with its
terms.
(e) The Bonds are subject to mandatory tender in whole on
the Conversion Date, at a purchase price equal to 100% of the principal
amount thereof being purchased, plus accrued interest to the purchase date;
provided, however, that (i) all Pledged Bonds for which a commitment to
purchase has not been received in connection with a conversion of the Bonds
to the Fixed Rate shall be redeemed or otherwise paid by the Company on or
before the Conversion Date; and (ii) no such mandatory tender shall take
place in the event the Company exercises its right to rescind the conversion.
SECTION 5.02. Delivery of Bonds After Conversion Date. Upon the
Conversion Date, the Trustee or the Tender Agent, as the case may be, shall
deliver Bonds in the form of Exhibit B hereto. Prior to the delivery by the
Trustee of such Bonds, there shall be filed with the Trustee a request and
authorization to the Trustee on behalf of
19
the Company and signed by an Authorized Representative of the Company to
authenticate and deliver the Bonds, as executed by the Company, to the
purchasers thereof. Such delivery shall be made by the Trustee or the Tender
Agent, as the case may be, without making any charge therefor to the Owner of
such Bonds.
SECTION 5.03. Mandatory Tender upon Substitution of Letter of
Credit. Prior to the Conversion Date, the Bonds are subject to mandatory
purchase in whole on the Substitution Date, at a purchase price equal to 100%
of the principal amount thereof being purchased, plus accrued interest to the
purchase date. The Trustee shall deliver or mail by first class mail a notice
at least twenty (20) days but not more than thirty (30) days prior to the
Substitution Date to the Owner of each Bond at the address shown on the
registration books of the Bond Registrar notifying such Owner that their
Bonds are subject to mandatory purchase. No such notice may be given unless
the Company shall have satisfied the provisions of Section 6.13 hereof. Any
notice given as provided in this Section 5.03 shall be conclusively presumed
to have been given, whether or not the Owner receives the notice. Said notice
shall state in substance the following:
1. The Substitution Date.
2. That the existing Letter of Credit securing such Bonds
will expire two (2) Business Days after the Substitution Date.
3. That if the Company satisfies the conditions precedent
to delivery of the Substitute Letter of Credit, all Bonds shall be subject to
mandatory purchase on the Substitution Date pursuant to this Section 5.03.
On or prior to the Substitution Date, Owners of Bonds shall be
required to deliver their Bonds to the Tender Agent for purchase at the
Purchase Price, and any such Bonds not delivered to the Tender Agent on or
prior to the Substitution Date ("Undelivered Bonds"), for which there has
been irrevocably deposited in trust with the Trustee or Tender Agent an
amount of Available Money sufficient to pay the Purchase Price of the
Undelivered Bonds, shall be deemed to have been purchased pursuant to this
Section 5.03 and are deemed to no longer Outstanding with respect to such
prior Owners. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS
BONDS ON OR PRIOR TO THE SUBSTITUTION DATE, SAID OWNER SHALL NOT BE ENTITLED
TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE
SUBSTITUTION DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS,
AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, to the extent that at the
close of the fifth Business Day prior to the proposed Substitution Date, the
Company has not delivered to the Trustee and the Remarketing Agent the items
set forth in Section 6.13 hereof, the mandatory purchase of Bonds shall be
rescinded and the Trustee shall notify the Owners of such rescission
immediately and thereafter the Bonds shall continue to be secured by the
existing Letter of Credit in accordance with its terms until its termination
date.
SECTION 5.04 Demand Purchase Option. Prior to the Conversion Date,
any Bond shall be purchased at the Purchase Price from the Owner thereof
upon:
(i) delivery by such Owner to the Trustee and the Tender
Agent at their Principal Office and Delivery Office, respectively, and to the
Remarketing Agent at its Principal Office, of a notice (the "Demand Purchase
Notice") (said notice to be irrevocable and effective upon receipt) which
states (1) the aggregate principal amount and bond numbers of the Bonds to be
purchased; and (2) the date on which such Bonds are to be purchased, which
date shall be a Business Day not prior to the seventh (7th) day next
succeeding the date of delivery of such notice and which date shall be prior
to the Conversion Date; and
(ii) delivery to the Tender Agent at its Delivery Office at
or prior to 10:00 a.m., New York City time, on the date designated for
purchase in the applicable Demand Purchase Notice of such Bonds to be
purchased, with an appropriate endorsement for transfer or accompanied by a
bond power endorsed in blank.
20
Any Bond, as to which a Demand Purchase Notice has been delivered
pursuant to paragraph (i) above, must be delivered to the Tender Agent, as
provided in paragraph (ii) above, and any such Undelivered Bonds for which
there has been irrevocably deposited in trust with the Trustee or the Tender
Agent an amount of Available Moneys sufficient to pay the Purchase Price
thereof, shall be deemed to have been purchased at the Purchase Price
pursuant to this Section 5.04 and are deemed to be no longer Outstanding with
respect to such tendering Owner. IN THE EVENT OF A FAILURE BY AN OWNER OF
BONDS TO DELIVER ITS BONDS AS SPECIFIED ABOVE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE
DATE DESIGNATED FOR PURCHASE IN THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER
THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS
SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE
PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, in the event any Bonds as
to which the Owner thereof has exercised the Demand Purchase Option is
remarketed to such Owner pursuant to the Remarketing Agreement, such Owner
need not deliver such Bond to the Tender Agent as provided in paragraph (ii)
above, although such Bonds shall be deemed to have been delivered to the
Tender Agent, redelivered to such Owner, and remarketed for purposes of this
Indenture, including, without limitation, for purposes of adjusting the
Floating Rate applicable to such Bond as provided in Section 2.02(c) hereof.
SECTION 5.05. Funds for Purchase of Bonds. (a) On the date Bonds are
to be purchased pursuant to Sections 5.01, 5.03 or 5.04 hereof, such Bonds
shall be purchased at the Purchase Price only from the funds listed below.
Subject to the provisions of Section 6.12(b), funds for the payment of the
Purchase Price shall be derived from the following sources in the order of
priority indicated:
(i) moneys drawn by the Trustee under the Letter
of Credit (in the event of a draw on the Letter of Credit to fund payment of
the Purchase Price of Bonds tendered pursuant to Section 5.03 hereof, the
Trustee shall draw on the existing Letter of Credit and not the Substitute
Letter of Credit);
(ii) proceeds of the remarketing of the Bonds; and
(iii) any other Available Moneys furnished to the
Trustee or the Tender Agent and available for such purpose.
(b) Payment for the Bonds purchased pursuant to
Sections 5.01, 5.03 or 5.04 shall be made as follows:
(i) By not later than 10:00 a.m., New York City
time, on the date on which such Bonds are to be purchased (the "Purchase
Date"), the Remarketing Agent shall give telephonic notice promptly confirmed
in writing to the Bank, the Trustee and the Tender Agent, specifying:
(1) The total principal amount of Bonds, if
any, remarketed by it, and the total principal amount of unremarketed Bonds;
and
(2) The names of the persons to whom such
Bonds were sold and are to be registered, each such person's address and
social security number or taxpayer identification number, the denominations
in which replacement Bonds are to be prepared, and any other appropriate
registration and transfer instructions.
(ii) On the Purchase Date, the Trustee shall make
a drawing pursuant to the Letter of Credit in respect of the Purchase Price
of such Bonds. In connection therewith, the Trustee shall prepare and present
to the Bank the appropriate certificates required under the Letter of Credit
by 11:00 a.m., New York City time, on the Purchase Date.
21
(iii) There is hereby established with the Tender
Agent a special fund to be designated the "Bond Purchase Fund" and therein
two separate and segregated accounts to be designated the "Remarketing
Account" and the "Bank Account." An amount equal to the proceeds received by
the Trustee pursuant to a draw under the Letter of Credit shall be
transferred by the Trustee in immediately available funds to the Tender Agent
for deposit in the Bank Account no later than 12:30 p.m., New York City time,
on the applicable Purchase Date.
(iv) No later than 1:00 p.m., New York City time,
on each Purchase Date the Tender Agent shall give telephonic notice (promptly
confirmed by telecopy) to the Remarketing Agent of the amount deposited in
the Bank Account on such date. No later than 2:00 p.m., New York City time,
on each Purchase Date the Remarketing Agent shall transfer to the Bank an
amount of the proceeds of the remarketing of the Bonds equal to the amount
deposited in the Bank Account on such Purchase Date and shall give telephonic
notice (promptly confirmed by telecopy) to the Tender Agent of the amount of
such proceeds transferred to the Bank.
(v) The Tender Agent shall pay the Purchase Price
to the tendering Bondholders from the amounts on deposit in the Bank Account
to the extent available. If amounts on deposit in the Bank Account are
insufficient to pay the Purchase Price to the tendering Bondholders, the
Tender Agent shall make up such deficiency from amounts on deposit in the
Remarketing Account.
(vi) The Bank shall give telephonic confirmation
to the Tender Agent and the Trustee by 4:00 p.m., New York City time, on the
applicable Purchase Date of its receipt of the remarketing proceeds described
in Section 5.05(b)(iv) hereof.
SECTION 5.06. Delivery of Purchased Bonds. (a) Remarketed Bonds
shall be delivered by the Tender Agent, at its Delivery Office, to or upon
the order of the purchasers thereof.
(b) Unremarketed Bonds purchased with funds drawn under the
Letter of Credit shall be delivered by the Tender Agent to the Pledged Bonds
Custodian or otherwise upon the order of the Bank pursuant to the
Reimbursement Agreement.
(c) Unremarketed Bonds purchased with moneys described in
Section 5.06(a)(iii) hereof shall, at the direction of the Company, be (i)
delivered as instructed by the Company, or (ii) delivered to the Trustee for
cancellation; provided, however, that any Bonds so purchased after the
selection thereof by the Trustee for redemption shall be delivered to the
Trustee for cancellation.
Bonds delivered as provided in this Section shall be registered in
the manner directed by the recipient thereof.
SECTION 5.07. Sale of Bonds by Remarketing Agent. On each Purchase
Date, the Remarketing Agent shall offer for sale and use its best efforts to
sell, as agent of the Company, all Bonds tendered or deemed tendered for
purchase on such Purchase Date at the Purchase Price thereof and, if such
Bonds are not sold on such date, the Remarketing Agent shall continue, for a
period not in excess of thirty (30) days thereafter, to use its best efforts
to sell such Bonds.
SECTION 5.08. Delivery of Proceeds of Sale of Purchased Bonds. (a)
Except in the case of the sale of any Pledged Bonds, the proceeds of the sale
of any Bonds delivered or deemed delivered to the Tender Agent pursuant to
Section 5.01, 5.03 or 5.04 hereof, to the extent not required to reimburse
the Bank under the Reimbursement Agreement, shall be paid to or upon the
order of the Trustee.
(b) In the event the Remarketing Agent shall have
remarketed any Pledged Bonds and the Company or the Remarketing Agent shall
have directed the Bank to cause the Pledged Bond Custodian to deliver such
Pledged Bonds to the Tender Agent pursuant to the Reimbursement Agreement,
such Bonds shall be delivered to the Tender Agent and the proceeds of sale of
such Bonds shall be delivered to the Principal Corporate Trust Office of the
Tender Agent and shall be paid to or upon the order of the Bank; provided
that any amounts so paid in
22
excess of amounts then due to the Bank in respect of drawings under the
Letter of Credit shall be delivered by the Bank to or upon the order of the
Company; provided further that Pledged Bonds shall not be delivered to the
Tender Agent until the Letter of Credit has been reinstated in accordance
with the terms of the Reimbursement Agreement and the Letter of Credit.
SECTION 5.09. Duties of Trustee and Tender Agent with Respect to
Purchase of Bonds. (a) The Tender Agent shall hold all Bonds delivered to it
pursuant to Sections 5.01, 5.03 or 5.04 hereof in trust for the benefit of
the respective Owners of Bonds which shall have so delivered such Bonds until
moneys representing the Purchase Price of such Bonds shall have been
delivered to or for the account of or to the order of such Owners of Bonds.
Upon delivery of moneys representing the Purchase Price of such Bonds to or
for the account of or to the order of such Owners of Bonds, the Tender Agent
shall deliver all such Unremarketed Bonds, the funds for the purchase of
which shall have been obtained by a drawing under the Letter of Credit, to
the Pledged Bonds Custodian pursuant to Section 5.06(b) hereof for the
purpose of perfecting the Bank's security interest therein under the
Reimbursement Agreement unless the Bank shall direct the Tender Agent to
deliver such Bonds to or upon the order of the Bank in accordance with
Section 5.06 hereof.
(b) The Trustee and the Tender Agent shall hold all moneys
delivered to them pursuant to this Indenture for the purchase of Bonds in a
separate account, in trust for the benefit of the Bank or, in the case of
Remarketed Bonds, the purchasers of such Bonds, until the Bonds purchased
with such moneys shall have been delivered to or for the account of the
Pledged Bond Custodian, the Bank or to such other purchaser, as appropriate.
(c) The Trustee shall deliver to the Company and the Bank a
copy of each notice delivered to it in accordance with Section 5.04 within
two (2) days of the receipt thereof.
(d) As soon as possible, but not later than the close of
business on any date designated for purchase of Bonds in accordance with
Section 5.04, the Tender Agent shall give telephonic or telegraphic notice to
the Remarketing Agent and the Trustee specifying the principal amount of
Bonds delivered or deemed delivered for purchase on such date.
(e) The Trustee shall draw moneys under the Letter of
Credit in accordance with the terms thereof to the extent required by
Sections 5.06 and 6.12 hereof to provide for timely payment of the Purchase
Price of Bonds.
SECTION 5.10. No Purchases or Sales After Certain Defaults. Anything
in this Indenture to the contrary notwithstanding, there shall be no
purchases or sales of Bonds pursuant to Section 5.05 if there shall have
occurred any Event of Default in respect of which the principal of all Bonds
Outstanding shall have been declared immediately due and payable pursuant to
Section 8.02 and such declaration shall not have been annulled. If the
Trustee shall have given notice of a call for redemption pursuant to Section
4.03 hereof and such notice shall not have been rescinded, the Remarketing
Agent shall provide a notice of such redemption to any prospective purchaser
of such Bonds upon the remarketing of any Bonds tendered pursuant to Section
5.04 hereof. Nothing in this Section is intended to limit secondary trading
or transfer of the Bonds.
ARTICLE VI
REVENUES AND FUNDS
SECTION 6.01. Creation of the Bond Fund. There is hereby created and
established with the Trustee a trust fund to be designated "Bond Fund." Upon
receipt of moneys pursuant to Section 6.02 hereof, the Trustee shall deposit
such moneys into the Bond Fund, which amounts shall be used to pay when due
the principal and premium, if any, and interest on the Bonds.
SECTION 6.02. Payments into the Bond Fund. There shall be deposited
into the Bond Fund from time to time the following:
23
(a) any amount in the Project Fund directed to be paid into
the Bond Fund in accordance with the provisions of Section 6.07 hereof;
(b) any amount deposited into the Bond Fund pursuant to
Section 6.04 hereof;
(c) any moneys drawn under the Letter of Credit to be used
for the payment of redemption price and principal or Purchase Price of,
premium, if any, and interest on the Bonds, which moneys shall be deposited
in a separate subaccount of the Bond Fund and shall not be commingled with
any other moneys held by the Trustee; and
(d) amounts, if any, held by the Trustee pursuant to
Section 5.09 hereof.
SECTION 6.03. Use of Moneys in the Bond Fund. Except as provided in
Section 6.11 hereof, moneys in the Bond Fund shall be used solely for the
payment of the principal of, premium, if any, and interest on the Bonds, for
the redemption of the Bonds prior to maturity and for payment of the
Acceleration Price as defined in Section 8.02 hereof. Subject to the
provisions of Section 6.12(b) hereof, funds for such payments of redemption
price and principal of and premium, if any, and interest on the Bonds shall
be derived from the following sources in the order of priority indicated:
(i) amounts deposited into the Bond Fund which constitute
Available Moneys (and in connection with moneys drawn by the Trustee under
the Letter of Credit, the Trustee shall prepare and present to the Bank the
appropriate certificates required under the Letter of Credit by 12:00 noon,
New York City time, on the Business Day immediately preceding the payment
date); and
(ii) any other moneys furnished to the Trustee and
available for such purpose.
SECTION 6.04. Custody of Separate Trust Fund. The Trustee is
authorized and directed to hold all Net Proceeds from any insurance proceeds
or condemnation award and disburse such proceeds in accordance with Article
XII hereof. If the Company, with the prior written consent of the Bank
(provided the Bank is not then in default under the Letter of Credit),
directs that any portion of such Net Proceeds be applied to redeem Bonds, the
Trustee shall deposit such Net Proceeds in a separate subaccount of the Bond
Fund, and the Company shall take and cause to be taken any action necessary
to redeem on the earliest possible redemption date the amount of Bonds so
specified.
SECTION 6.05. Project Fund. There is hereby created and established
with the Trustee a trust fund to be designated "Project Fund," which shall be
expended in accordance with the provisions hereof.
SECTION 6.06. Payments into the Project Fund; Disbursements. The
Project Fund shall initially consist of those monies deposited therein
pursuant to Section 3.03(c) hereof. Proceeds of the Bonds deposited in the
Project Fund shall be applied to pay a portion of the costs of the Project.
The Trustee is hereby authorized and directed to make disbursements from the
Project Fund upon the receipt of a requisition in the form of Exhibit C
hereto signed by the Company and approved by the Bank. The Trustee shall keep
and maintain adequate records pertaining to the Project Fund and all
disbursements therefrom, and the Trustee shall, upon request of the Company,
furnish statements in the form customarily prepared by the Trustee. The
Trustee shall hold all moneys and investments from time to time on deposit in
the Project Fund for the Owners and for the Bank, the rights of the Bank
being subject and subordinate to the rights of the Trustee so long as any
amount due in respect of the Bonds remains unpaid.
SECTION 6.07. Use of Money in the Project Fund Upon Default. If the
principal of the Bonds shall have become due and payable pursuant to Article
VIII hereof, any balance remaining in the Project Fund shall without further
authorization (i) prior to the Obligation Termination Date, if any amounts
are due and owing under the Reimbursement Agreement, be transferred
immediately to the Bank, as long as the Bank is not in default of its
obligations under the Letter of Credit, or (ii) after the Obligation
Termination Date, be transferred into the Bond Fund.
24
SECTION 6.08. Use of Money in the Project Fund Upon Completion of
the Project. The completion of the Project and payment or provision for
payment of all Costs of the Project shall be evidenced by the filing with the
Trustee of an Officers' Certificate requesting, as soon as practicable and in
any event not more than sixty (60) days from the date of receipt by the
Trustee of the certificate referred to in the preceding sentence, that any
balance remaining in the Project Fund (except amounts the Company shall have
directed the Trustee to retain for any Cost of the Project not then due and
payable) shall, without further authorization be transferred into a separate
subaccount within the Bond Fund. Thereafter, the Trustee shall cause a
mandatory redemption of the Bonds in accordance with the terms of Section
4.01(b)(2) hereof in an amount such that the funds transferred to the Bond
Fund pursuant to this Section 6.08 will be sufficient to reimburse the Letter
of Credit Bank for the redemption price of the Bonds. On the date fixed for
redemption, the Trustee (i) shall draw on the Letter of Credit in an amount
sufficient to pay the full redemption price of the Bonds from the sources and
in the order provided in Section 6.03 hereof and (ii) transfer to the Letter
of Credit Bank funds from the separate subaccount within the Bond Fund
created pursuant to this Section 6.08 to reimburse the Bank for such drawing.
If there are any excess funds remaining in the Bond Fund after such mandatory
redemption, such funds shall be transferred by the Trustee on the next
Interest Payment Date to the Letter of Credit Bank to reimburse the Letter of
Credit Bank for a drawing affected pursuant to Section 6.12 hereof.
SECTION 6.09. Nonpresentment of Bonds. In the event any Bond shall
not be presented for payment when the principal thereof becomes due, either
at maturity, or at the date fixed for redemption thereof, or otherwise, if
Available Moneys sufficient to pay any such Bond shall have been made
available to the Trustee for the benefit of the Owner thereof, all liability
of the Company to the Owner thereof for the payment of such Bond shall
forthwith cease, determine and be completely discharged, and thereupon it
shall be the duty of the Trustee to hold such funds uninvested, without
liability for interest thereon, for the benefit of the Owner of such Bond who
shall thereafter be restricted exclusively to such funds for any claim of
whatever nature on his part under this Indenture with respect to such Bond.
Any moneys so deposited with and held by the Trustee not so applied
to the payment of Bonds within five (5) years after the date on which the
same shall have become due shall be repaid by the Trustee to the Company upon
written direction of an Authorized Representative of the Company, and
thereafter Owners of Bonds shall be entitled to look only to the Company for
payment, and then to the extent of the amount so repaid, and all liability of
the Trustee with respect to such money shall thereupon cease, and the Company
shall not be liable for any interest thereon and shall not be regarded as a
trustee of such money.
SECTION 6.10. Moneys to be Held in Trust. All moneys required to be
deposited with or paid to the Trustee for the account of any fund or account
referred to in any provision of this Indenture shall be held by the Trustee
in trust, and shall, while held by the Trustee, constitute part of the Trust
Estate and be subject to the lien and security interest created hereby.
SECTION 6.11. Repayment to the Bank and the Company from the Bond
Fund or the Project Fund. Any amounts remaining in the Bond Purchase Fund,
the Bond Fund, the Project Fund or any other fund or account created
hereunder after payment in full of the principal of, premium, if any, and
interest on the Bonds, the fees, charges and expenses of the Trustee and all
other amounts required to be paid hereunder, shall be paid as soon as
possible to the Bank unless the Bank notifies the Trustee to the contrary, in
writing, in which case such amounts shall be paid directly to Company.
SECTION 6.12. Letter of Credit. (a) During the term of the Letter of
Credit, and subject to Sections 4.07 and 6.03 hereof, the Trustee shall draw
moneys under the Letter of Credit in accordance with the terms thereof (i) to
pay when due (whether by reason of maturity, redemption, conversion,
acceleration or otherwise) the principal of, and interest and, to the extent
the Letter of Credit covers same, any premium on the Bonds, and (ii) to pay
when due the Purchase Price of the Bonds.
(b) Notwithstanding any provision to the contrary which may
be contained in this Indenture, including, without limitation, Section
6.12(a) (i) in computing the amount to be drawn under the Letter of Credit on
account of the payment of the principal or Purchase Price of, interest or, to
the extent the Letter of Credit covers
25
same, any premium on the Bonds, the Trustee shall exclude any such amounts in
respect of any Bonds which are Pledged Bonds prior to the date such payment
is due, and (ii) amounts drawn by the Trustee under the Letter of Credit
shall not be applied to the payment of the Purchase Price of any Bonds which
are Pledged Bonds prior to the date such payment is due.
(c) The Letter of Credit shall terminate in accordance with
its terms on the Letter of Credit Termination Date. Upon such termination,
the Trustee shall deliver the terminated Letter of Credit to the Bank,
together with such certificates as may be required by the terms of the Letter
of Credit; provided, however, that the Trustee shall not surrender the Letter
of Credit to the Bank until the third Business Day following the effective
date of any Substitute Letter of Credit or, in the event the Trustee shall
not have received a Substitute Letter of Credit which will be effective on or
before the Letter of Credit Termination Date, until the Bank has honored all
draws under such terminated Letter of Credit made in accordance with the
terms thereof.
SECTION 6.13. Substitute Letter of Credit. The Company, upon at
least thirty-five (35) days prior written notice to the Trustee, the Tender
Agent and the Remarketing Agent may, at any time, at its option, provide for
the delivery on any Business Day to the Trustee of a Substitute Letter of
Credit. Any Substitute Letter of Credit shall have administrative terms and
provisions reasonably acceptable to the Trustee and shall be delivered to the
Trustee not later than the thirtieth (30th) Business Day prior to expiration
of the Letter of Credit it is being issued to replace. On or before the date
of the delivery of any Substitute Letter of Credit to the Trustee, as a
condition to the acceptance of any Substitute Letter of Credit by the
Trustee, the Company shall furnish to the Trustee and the Remarketing Agent:
(a) written evidence that the issuer of the Substitute Letter of Credit is a
commercial bank organized and doing business in the United States or a branch
or agency of a foreign commercial bank located and doing business in the
United States and subject to regulation by state or federal banking
regulatory authorities; (b) an opinion of Bond Counsel stating that delivery
of such Substitute Letter of Credit is authorized under the Indenture and
complies with the terms thereof; (c) an opinion of counsel satisfactory to
the Trustee and the Remarketing Agent to the effect that (i) the Substitute
Letter of Credit is a legal, valid and binding obligation of the issuer (or,
in the case of a branch or agency of a foreign commercial bank, the branch or
agency) issuing the same, enforceable in accordance with its terms, (ii)
payments of principal or redemption price, premium, if any (if such
Substitute Letter of Credit secures the payment of premium), or Purchase
Price of and interest on the Bonds from the proceeds of a drawing on the
Substitute Letter of Credit will not constitute avoidable preferences under
the Bankruptcy Code or other applicable laws and regulations, and (iii) it is
not necessary to register the Substitute Letter of Credit under the
Securities Act of 1933, as amended, or to qualify an indenture with respect
thereto under the Trust Indenture Act of 1939, as amended; and (iv) written
evidence from each Rating Agency then rating the Bonds (if any) that the
rating on the Bonds will not be reduced or withdrawn as a result of the
acceptance of the Substitute Letter of Credit. In the case of a Substitute
Letter of Credit issued by a branch or agency of a foreign commercial bank
there shall also be delivered an opinion of Counsel licensed to practice law
in the jurisdiction in which the head office of such bank is located and
satisfactory to the Trustee and the Remarketing Agent, to the effect that the
Substitute Letter of Credit is the legal, valid and binding obligation of
such bank enforceable in accordance with its terms. The Trustee shall accept
any such Substitute Letter of Credit only in accordance with its terms and
upon the satisfaction of the foregoing conditions and other provisions
contained in the Indenture.
SECTION 6.14. Investment of Moneys in Funds. All moneys in any of
the funds established pursuant to this Indenture (except moneys obtained from
a draw on the Letter of Credit which shall be uninvested ) shall be invested
by the Trustee, as directed in writing by the Company, solely in Investment
Securities except with respect to Available Moneys held by the Trustee for
the payment of Undelivered Bonds, which Available Moneys the Trustee shall
not invest. Investment Securities may be purchased at such prices as the
Trustee may in its discretion determine or as may be directed by the Company.
Absent written investment directions from the Company, the Trustee shall
invest available fund balances in investments described in subparagraph (ix)
of the definition of Investment Securities. All Investment Securities shall
be acquired subject to the limitations set forth in Section 7.06, the
limitations as to maturities hereinafter in this Section set forth and such
additional limitation or requirements consistent with the foregoing as may be
established by request of the Company.
To the extent the Bank has not been reimbursed under the
Reimbursement Agreement and has notified the Trustee of same in writing, all
interest, profits and other income received from the investment of moneys in
any fund established pursuant to this Indenture shall be transferred to the
Bank in the amount specified by the
26
Bank. Otherwise, such amounts shall be deposited to the appropriate fund or
account in which such investments were made. Notwithstanding anything to the
contrary contained in this paragraph, an amount of interest received with
respect to any Investment Security equal to the amount of accrued interest,
or premium paid, if any, paid as part of the purchase price of such
Investment Security shall be credited to the fund from which such accrued
interest was paid.
Investment Securities acquired as an investment of moneys
in any fund established under this Indenture shall be credited to such fund.
For the purpose of determining the amount in any fund, all Investment
Securities credited to such fund shall be valued at the lesser of cost or par
value plus, prior to the first payment of interest following purchase, the
amount of accrued interest, if any, paid as a part of the purchase price.
The Trustee may act as principal or agent in the making or
disposing of any investment. The Trustee may sell at the best price
obtainable, or present for redemption, any Investment Securities so purchased
whenever it shall be necessary to provide moneys to meet any required
payment, transfer, withdrawal or disbursement from the fund to which such
Investment Security is credited, and the Trustee shall not be liable or
responsible for any loss resulting from such investment.
ARTICLE VII
PARTICULAR COVENANTS
SECTION 7.01. Punctual Payment. The Company shall punctually pay or
cause to be paid the principal, premium, if any, and interest to become due
in respect of all the Bonds, in strict conformity with the terms of the Bonds
and of this Indenture, according to the true intent and meaning thereof.
SECTION 7.02. Extension of Payment of Bonds. The Company shall not
directly or indirectly extend or assent to the extension of the maturity of
any of the Bonds or the time of payment of any claims for interest by the
purchase or funding of such Bonds or claims for interest or by any other
arrangement and in case the maturity of any of the Bonds or the time of
payment of any such claims for interest shall be extended, such Bonds or
claims for interest shall not be entitled, in case of any default hereunder,
to the benefits of this Indenture, except subject to the prior payment in
full of the principal of all of the Bonds then outstanding and of all claims
for interest thereon which shall not have been so extended. Nothing in this
Section shall be deemed to limit the right of the Company to issue Bonds for
the purpose of refunding any Outstanding Bonds, and such issuance shall not
be deemed to constitute an extension of maturity of Bonds.
SECTION 7.03. Against Encumbrances. The Company shall not create, or
permit the creation of, any pledge, lien, charge or other encumbrance upon
the revenues and other assets pledged or assigned under this Indenture while
any of the Bonds are Outstanding, except the pledge and assignment created by
this Indenture and will assist the Trustee in contesting any such pledge,
lien, charge or other encumbrance which may be created.
SECTION 7.04. Power to Issue Bonds and Make Pledge and Assignment.
The Company represents and covenants that it is duly authorized pursuant to
law to issue the Bonds and to enter into this Indenture. The Bonds and the
provisions of this Indenture are and will be the legal, valid and binding
obligations of the Company in accordance with their terms, and the Company
and Trustee shall at all times, to the extent permitted by law, defend,
preserve and protect all the rights of the Bondholders under this Indenture
against all claims and demands of all Persons whomsoever.
SECTION 7.05. Accounting Records and Financial Statements. (a) The
Trustee shall at all times keep, or cause to be kept, proper books of record
and account as shall be consistent with prudent industry practice, in which
complete and accurate entries shall be made of all transactions relating to
the proceeds of Bonds and all funds established pursuant to this Indenture.
Such books of record and account shall be available for inspection by the
Company, the Bank and any Bondholder, or his agent or representative duly
authorized in writing, at reasonable hours and under reasonable
circumstances.
27
(b) The Trustee shall within thirty (30) days after the end
of each month furnish to the Company a monthly statement (which need not be
audited) covering receipts, disbursements, allocation and application of any
moneys (including proceeds of Bonds) in any of the funds and accounts
established pursuant to this Indenture for such month.
SECTION 7.06. Reserved.
SECTION 7.07. Reserved.
SECTION 7.08. Waiver of Laws. The Company shall not at any time
insist upon or plead in any manner whatsoever, or claim or take the benefit
or advantage of, any stay or extension provided by law now or at any time
hereafter in force that may affect the covenants and agreements contained in
this Indenture or in the Bonds, and all benefit or advantage of any such law
or laws is hereby expressly waived by the Company to the extent permitted by
law.
SECTION 7.09. Further Assurances. The Company will make, execute and
deliver any and all such further indentures, instruments and assurances as
may be reasonably necessary or proper to carry out the intention or to
facilitate the performance of this Indenture and for the better assuring and
confirming unto the Holders of the Bonds of the rights and benefits provided
in this Indenture.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 8.01. Events of Default. e following events shall be Events
of Default:
(a) default in the due and punctual payment of the
principal of any Bond when and as the same shall become due and payable,
whether at maturity as therein expressed, by proceedings for redemption, by
acceleration, or otherwise; or
(b) default in the due and punctual payment of any
installment of interest on any Bond when and as the same shall become due and
payable; or
(c) failure to pay the purchase price on any Bond tendered
pursuant to Article V when such payment is due; or
(d) default by the Company in the observance of any of the
other covenants, agreements or conditions on its part in this Indenture or in
the Bonds, if such default shall have continued for a period of sixty (60)
days after written notice thereof, specifying such default and requiring the
same to be remedied, shall have been given to the Company by the Trustee, or
to the Company and the Trustee by the Holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds at the time
Outstanding; provided, however, that if such observance requires work to be
done, actions to be taken or conditions to be remedied, which by their nature
cannot reasonably be done, taken or remedied, as the case may be, within such
sixty (60) day period, no Event of Default shall be deemed to have occurred
or to exist if, and so long as, the Company shall commence such performance
within such sixty (60) day period and shall diligently and continuously
proceed to completion; or
(e) if the Company makes an assignment for the benefit of
creditors or a composition agreement with all or a material part of its
creditors, or a trustee, receiver, executor, conservator, liquidator,
sequestrator or other judicial representative, similar or dissimilar, is
appointed for the Company or any of its assets or revenues, or there is
commenced any proceeding in liquidation, bankruptcy, reorganization,
arrangement of debts, debtor rehabilitation, creditor adjustment or
insolvency, local, state or federal, by or against the Company; or
28
(f) the Trustee's receipt of written notice from the Bank
of declaration by the Bank of an Event of Default under the provisions of the
Reimbursement Agreement and instructing the Trustee to declare the principal
amount of the Outstanding Bonds to be immediately due and payable; or
(g) if, at any time after a draw under the Letter of
Credit, the Trustee shall have received written notice from the Bank that the
amount of such draw corresponding to the payment of interest on the Bonds
shall not be reinstated in the amount and in the manner set forth in the
Letter of Credit.
Upon actual knowledge of the existence of any Event of Default, the
Trustee shall as soon as practicable notify the Bank, the Company, the Tender
Agent (if it is not also the Trustee) and the Remarketing Agent. Anything
contained in this Indenture to the contrary notwithstanding, (i) no Event of
Default under subsections (d) or (e) above shall be deemed to have occurred
without the prior written consent of the Bank so long as the Bank is not in
default under the terms of the Letter of Credit and (ii) the Trustee shall
not notify Bondholders of the existence of any Event of Default under (d) or
(e) without the prior written consent of the Bank, as long as the Bank is not
in default under the terms of the Letter of Credit.
SECTION 8.02. Acceleration. If any Event of Default under Section
8.01 hereof occurs, the Trustee (with the written consent of the Bank
provided the Bank is not in default of its obligations under the Letter of
Credit) may, and upon request of the Owners of 25% in principal amount of the
Bonds then Outstanding shall, by written notice to the Bank and the Company,
declare the principal amount of all Bonds then Outstanding and the interest
accrued thereon to such date (the "Acceleration Date") to be due and the
Acceleration Price (as hereinafter defined) shall thereupon become payable on
the first (1st) Business Day following the Acceleration Date (the "Payment
Date"). Thereupon, the Trustee, among other things, shall draw immediately
upon the Letter of Credit as set forth in Section 6.12 hereof. Interest on
the accelerated Bonds shall cease to accrue on the Acceleration Date.
Accelerated Bonds shall be payable at a price equal to 100% of the aggregate
principal amount thereof plus interest accrued to the Payment Date (the
"Acceleration Price"). Notwithstanding anything contained herein to the
contrary, upon the occurrence of an Event of Default described in Section
8.01(f) or (g) hereof, the Trustee shall, by written notice to the Bank, and
the Company declare immediately due and payable the principal amount of the
Outstanding Bonds.
Any such declaration is subject to the condition that if, at any
time after such declaration and before any judgment or decree for the payment
of the moneys due shall have been obtained or entered, the Letter of Credit
shall have been reinstated in full as to principal and interest and the
reasonable charges and expenses of the Trustee, and any and all other
defaults known to the Trustee (other than in the payment of principal of and
interest on the Bonds due and payable solely by reason of such declaration)
shall have been made good or cured to the satisfaction of the Trustee or
provision deemed by the Trustee to be adequate shall have been made therefor,
then, and in every such case, the Holders of not less than 25% in aggregate
principal amount of the Bonds then Outstanding, by written notice to the
Company, the Bank and the Trustee, or the Trustee if such declaration was
made by the Trustee, may, on behalf of the Holders of all of the Bonds,
rescind and annul such declaration and its consequences and waive such
default; but such rescission and annulment shall not extend to or affect any
subsequent default, and shall not impair or exhaust any right or power in
consequence thereof. The foregoing to the contrary notwithstanding, Owners of
twenty-five percent (25%) in principal amount of the Bonds then Outstanding
shall have no right to request the Trustee to accelerate the bonds under this
Section 8.02 and the Trustee shall not be obligated to give any Bondholder
notice of a default under the Indenture (except upon the occurrence of an
Event of Default under Section 8.01(f) or (g) hereof) or any other documents
executed and delivered in connection with the Bonds, unless the Bank shall be
in default of its obligations under the Letter of Credit or a voluntary or
involuntary case has been commenced by the filing of a petition under the
United States Bankruptcy Code or any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts
by or against the Bank.
Upon any declaration of acceleration hereunder, the Trustee shall as
soon as possible give written notice of the acceleration to the Bondholders
as set forth below. In addition, notice of such acceleration shall be mailed,
by registered or certified mail or overnight mail, to the Rating Agency then
rating the Bonds, if any, but failure to mail any such notice or any defect
in the mailing thereof shall not affect the validity of such acceleration.
Such notice of acceleration (i) shall be given in the name of the Company,
(ii) shall identify the accelerated Bonds (by name, date of issue, interest
rate and maturity date); (iii) shall specify the Acceleration Date; (iv)
shall state that the interest on
29
the accelerated Bonds ceased to accrue on the Acceleration Date; (v) shall
state the reason for the acceleration; and (vi) shall state that on the
Payment Date the Acceleration Price will be payable at the principal
corporate trust office of the Trustee. The Trustee shall use "CUSIP" numbers
on such notices as a convenience to Bondholders and 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 acceleration and
that reliance may be placed only on the bond numbers printed on the Bonds.
Upon acceleration pursuant to this Section 8.02, the Trustee shall
immediately draw upon the Letter of Credit as provided in Section 6.12 hereof
in an amount that, together with any Available Moneys in deposit in the Bond
Fund and irrevocably committed to the payment of principal of and interest on
the Bonds, is sufficient to pay the Acceleration Price due on the Outstanding
Bonds on the Payment Date.
Upon receipt by the Trustee of any amount from the Bank under the
preceding paragraphs of this Section 8.02 (or after receipt by the Trustee of
any amounts from the Bank under any other provision of this Indenture), the
Bank shall be subrogated to the right, title and interest of the Trustee and
the Bondholders in and to any security held for the payment of the Bonds and
upon payment of any fees and expenses due and payable to the Trustee pursuant
to this Indenture, shall be assigned by the Trustee to the Bank.
SECTION 8.03. Other Remedies. If any Event of Default occurs and is
continuing, the Trustee, before or after declaring the principal of the Bonds
immediately due and payable, may enforce each and every right granted to the
Trustee under the Letter of Credit or any other security instrument, or under
any supplements or amendments thereto, and shall, at all times complying with
the provisions of Section 8.02 hereof, apply Available Moneys in the Bond
Fund held by the Trustee to the payment of principal of or interest on the
Bonds. In exercising such rights and the rights given the Trustee under this
Article VIII, the Trustee shall take such action, as in the judgment of the
Trustee, applying the standards described in Section 9.01 hereof, would best
serve the interests of the Bondholders.
SECTION 8.04. Legal Proceedings by Trustee. any Event of Default has
occurred and is continuing, the Trustee in its discretion may and, upon the
written request of the Bank or the Owners of 25% in principal amount of the
Bonds then Outstanding (subject to the consent of the Bank, as long as the
Bank is not in default of its obligations under the Letter of Credit or a
voluntary or involuntary case has not been commenced by the filing of a
petition under the Bankruptcy Code or any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts
by or against the Bank) and receipt of indemnity to its satisfaction shall,
in its own name:
A. By mandamus, other suit, action or proceeding at law or
in equity, enforce all rights of the Bondholders, including the right to
require the Company to carry out any provisions of this Indenture for the
benefit of the Bondholders and to perform its duties under the Act;
B. Bring suit upon the Bonds;
C. By action or suit in equity require the Company to
account as if it were the trustee of an express trust for the Bondholders;
and
D. By action or suit in equity enjoin any acts or things
that may be unlawful or in violation of the rights of the Bondholders.
SECTION 8.05. Discontinuance of Proceedings by Trustee. any
proceeding taken by the Trustee on account of any Event of Default is
discontinued or is determined adversely to the Trustee, the Company, the
Trustee, the Bondholders and the Bank shall be restored to their former
positions and rights hereunder as though no such proceeding had been taken,
but subject to the limitations of any such adverse determination.
SECTION 8.06. Bondholders May Direct Proceedings by Trustee. The
Holders of a majority in principal amount of the Bonds Outstanding hereunder
shall have the right to direct the method and place of conducting all
remedial proceedings by the Trustee hereunder, provided that such direction
shall not be otherwise than in
30
accordance with law or the provisions of this Indenture, and that the Trustee
shall not be required to comply with any such direction which it deems to be
unlawful or unjustly prejudicial to Bondholders not parties to such
direction. The foregoing provisions of this Section 8.06 to the contrary
notwithstanding, the Bank shall have the right to direct the method and the
place of conducting all remedial proceedings by the Trustee hereunder
provided that such direction shall not be otherwise than in accordance with
law or the provisions of this Indenture and as long as the Bank shall not be
in default under the Letter of Credit or a voluntary or involuntary case has
not been commenced by the filing of petition under the United States
Bankruptcy Code or any other law relating to the bankruptcy, insolvency or
reorganization of the Bank.
SECTION 8.07. Limitations on Actions by Bondholders. ything in this
Indenture to the contrary notwithstanding, no Bondholder shall have any right
to pursue any remedy hereunder unless:
(a) The Trustee shall have been given written notice of an
Event of Default;
(b) The Holders of at least 25% in aggregate principal
amount of the Bonds Outstanding 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;
(c) The Trustee shall have been offered indemnity
satisfactory to it against costs, expenses and liabilities;
(d) The Trustee shall have failed to comply with such
request within a reasonable time; and
(e) The Bank shall be in default of its obligations under
the Letter of Credit or a voluntary or involuntary case has not been
commenced by the filing of petition under the United States Bankruptcy Code
or any other law relating to the bankruptcy, insolvency or reorganization of
the Bank; provided, however, that nothing herein shall affect or impair the
right of any Owner of any Bond to enforce payment of the principal and
Purchase Price thereof and interest thereon at and after the maturity
thereof, or the obligation of the Company to pay such principal and Purchase
Price and interest to the respective Owners of the Bonds at the time and
place, from the source and in the manner expressed herein and in the Bonds,
provided further that such action shall not disturb or prejudice the lien of
this Indenture.
SECTION 8.08. Trustee May Enforce Rights Without Possession of
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 8.09. Delays and Omissions Not to Impair Rights. No delay or
omission in respect of exercising any right or power accruing upon any Event
of Default shall impair such right or power or be a waiver of such Event of
Default and every remedy given by this Article VIII may be exercised, from
time to time, and as often as may be deemed expedient.
SECTION 8.10. Application of Moneys in Event of Default. Any money
received by the Trustee under this Article VIII shall be applied in the order
listed below (provided that any moneys received by the Trustee upon drawing
under the Letter of Credit together with Available Moneys on deposit in the
Bond Fund and available for payment of principal and Purchase Price of and
interest on all Outstanding Bonds, any moneys held by the Trustee upon the
nonpresentment of Bonds and any money held by the Trustee for the defeasance
of Bonds pursuant to Article XI shall be applied only as provided in clause
(b) below and only to pay outstanding principal and accrued interest, as
provided in the Letter of Credit, with respect to the Bonds):
(a) to the payment of the fees and expenses of the Trustee
including reasonable counsel fees and expenses, and any disbursements of the
Trustee with interest thereon and its reasonable compensation;
31
(b) To the payment of principal and Purchase Price of and
interest then owing on the Bonds, including any interest on overdue interest,
and in case such money shall be insufficient to pay the same in full, then to
the payment of principal and Purchase Price of and interest ratably, without
preference or priority of one over another or of any installment of interest
over any other installment of interest;
(c) To the payment of any unreimbursed drawing under the
Letter of Credit, or other obligations owing by the Company to the Bank under
the Reimbursement Agreement; and
(d) The surplus, if any, remaining after the application of
the money as set forth above shall be paid to the Company or the person
lawfully entitled to receive the same as a court of competent jurisdiction
may direct.
SECTION 8.11. 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 8.12. Subrogation Rights of Bank. The Trustee agrees that
the Bank or other provider of a Substitute Letter of Credit shall be
subrogated to all rights, remedies and collateral of the Trustee under this
Indenture or any other document or instrument, to the extent the Bank or
other provider of a Substitute Letter of Credit has honored a draw under the
Letter of Credit or Substitute Letter of Credit, as the case may be, and has
not been reimbursed or paid therefor.
SECTION 8.13. Waiver of Default. As long as the Bank is not in
default of its obligations under the Letter of Credit and the Letter of
Credit is in full force and effect, the Bank may waive an Event of Default
and if the Bank does so, the Trustee must also waive such Event of Default.
The Trustee may not waive an Event of Default under this Indenture if the
Letter of Credit has not been reinstated to cover principal and Purchase
Price of interest on the Bonds in accordance with the terms of the Letter of
Credit.
ARTICLE IX
THE TRUSTEE, THE TENDER AGENT AND
THE REMARKETING AGENT
SECTION 9.01. Duties, Immunities and Liabilities of Trustee. (a) The
Trustee shall, prior to an Event of Default, and after the curing of all
Events of Default which may have occurred, perform such duties and only such
duties as are specifically set forth in this Indenture. The Trustee shall,
during the existence of any Event of Default (which has not been cured),
exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) The Company may remove the Trustee provided no Event of
Default has occurred and is continuing, and the Company shall remove the
Trustee if at any time requested to do so by an instrument or concurrent
instruments in writing signed by the Holders of not less than a majority in
aggregate principal amount of the Bonds then Outstanding (or their attorneys
duly authorized in writing) or if at any time the Trustee shall cease to be
eligible in accordance with subsection (e) of this Section, or shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or its property shall be appointed, or any public
officer shall take control or charge of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, in
each case by giving written notice of such removal to the Trustee, and
thereupon shall appoint, with the consent of the Bank, a successor Trustee by
an instrument in writing.
(c) The Trustee may at any time resign by giving written
notice of such resignation to the Company and the Bank and by giving the
Bondholders notice of such resignation by mail at the addresses shown on the
registration books maintained by the Bond Registrar. Upon receiving such
notice of resignation, the Company
32
shall promptly notify the Bank, and the Company shall promptly appoint a
successor Trustee by an instrument in writing.
(d) Any removal or resignation of the Trustee and
appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee. If no successor Trustee shall have been
appointed and have accepted appointment within forty-five (45) days of giving
notice of removal or notice of resignation as aforesaid, the resigning
Trustee or any Bondholder (on behalf of himself and all other Bondholders)
may petition any court of competent jurisdiction for the appointment of a
successor Trustee. Any successor Trustee appointed under this Indenture,
shall signify its acceptance of such appointment by executing and delivering
to the Company and to its predecessor Trustee a written acceptance thereof,
and thereupon such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the moneys, estates, properties,
rights, powers, trusts, duties and obligations of such predecessor Trustee,
with like effect as if originally named Trustee herein; but, nevertheless at
the request of the Company or the request of the successor Trustee, such
predecessor Trustee shall execute and deliver any and all instruments of
conveyance or further assurance and do such other things as may reasonably be
required for more fully and certainly vesting in and confirming to such
successor Trustee all the right, title and interest of such predecessor
Trustee in and to any property held by it under this Indenture and shall pay
over, transfer, assign and deliver to the successor Trustee any money or
other property subject to the trusts and conditions herein set forth. Upon
request of the successor Trustee, the Company shall execute and deliver any
and all instruments as may be reasonably required for more fully and
certainly vesting in and confirming to such successor Trustee all such
moneys, estates, properties, rights, powers, trusts, duties and obligations.
Upon acceptance of appointment by a successor Trustee as provided in this
subsection, such successor Trustee at its expense shall mail a notice of its
succession to the trusts hereunder to the Rating Agency (if any) and to the
Bondholders at the addresses shown on the registration books maintained by
the Bond Registrar.
(e) Any Trustee appointed under the provisions of this
Section in succession to the Trustee shall be a trust company or bank having
the powers of a trust company having a corporate trust office in the State,
having a combined capital and surplus of at least One Hundred Million Dollars
($100,000,000), subject to supervision or examination by federal or state
authorities and shall have received written evidence from the Rating Agency
(if any) that the use of such Trustee would not result in a reduction or
withdrawal of the rating on the Bonds. If such bank or trust company
publishes a report of condition at least annually, pursuant to law or to the
requirements of any supervising or examining authority above referred to,
then for the purpose of this subsection the combined capital and surplus of
such bank or trust company shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with
the provisions of this subsection (e), the Trustee shall resign immediately
in the manner and with the effect specified in this Section.
SECTION 9.01A. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time, and the Trustee shall be entitled to,
compensation for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
costs of preparing and reviewing reports, certificates and other documents,
costs of preparation and mailing of notices to Holders and reasonable costs
of counsel retained by the Trustee in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Company shall indemnify and hold harmless the
Trustee against any and all losses, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder,
including the costs and expenses of enforcing this Indenture (including this
Section 9.01A) and of defending itself against any claims (whether asserted
by any Holder, the Company or otherwise). The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct or gross negligence.
33
To secure the Company's payment obligations in this Section
9.01A, the Trustee shall have a lien prior to the Bonds on all money or
property held or collected by the Trustee other than money or property held
in trust to pay principal of and interest on particular Bonds and proceeds of
drawings on the Letter of Credit. The Trustee's right to receive payment of
any amounts due under this Section 9.01A shall not be subordinate to any
other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section
9.01A shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 8.01(e) with
respect to the Company, the expenses are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 9.02. Merger or Consolidation. Any company or association
into which the Trustee may be merged or converted or with which it may be
consolidated or any company or association resulting from any merger,
conversion or consolidation to which it shall be a party or any company or
association to which the Trustee may sell or transfer all or substantially
all of its corporate trust business, provided such company or association
shall be eligible under subsection (e) of Section 9.01, shall be the
successor to such Trustee without the execution or filing of any paper or any
further act, anything herein to the contrary notwithstanding.
SECTION 9.03. Liability of Trustee. (a) The recitals of facts herein
and in the Bonds contained shall be taken as statements of the Company, and
the Trustee shall assume no responsibility for the correctness of the same,
or make any representations as to the validity or sufficiency of this
Indenture or of the Bonds or shall incur any responsibility in respect
thereof, other than in connection with the duties or obligations herein or in
the Bonds assigned to or imposed upon it. The Trustee shall, however, be
responsible for its representations contained in its certificate of
authentication on the Bonds. The Trustee shall not be liable in connection
with the performance of its duties hereunder, except for its own gross
negligence or willful misconduct. The Trustee may become the Owner of Bonds
with the same rights it would have if it were not Trustee and, to the extent
permitted by law, may act as depositary for and permit any of its officers or
directors to act as a member of, or in any other capacity with respect to,
any committee formed to protect the rights of Bondholders, whether or not
such committee shall represent the Holders of a majority in principal amount
of the Bonds then Outstanding and may otherwise deal with the Company.
(b) The Trustee shall not be liable for any error of
judgment made in good faith by a responsible officer, unless it shall be
proved that the Trustee was grossly negligent in ascertaining the pertinent
facts.
(c) 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 the Bank or the Holders of not less than a majority in
aggregate principal amount of the Bonds at the time Outstanding 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.
(d) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture (other than the
making of a draw under the Letter of Credit in accordance with its terms and
the terms hereof, declaring the principal of the Bonds to be immediately due
and payable when required hereunder or making payments on the Bonds when due)
at the request, order or direction of any of the Bondholders or the Bank
pursuant to the provisions of this Indenture unless such Bondholders or the
Bank shall have offered to the Trustee indemnification to its satisfaction
for indemnity against the costs, expenses and liabilities which may be
incurred therein or thereby.
(e) The Trustee shall not be liable for any action taken by
it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture.
(f) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder or the other Bond Documents
unless the Trustee shall be specifically notified of such default in writing
by the Company, the Bank or the Owner of any Outstanding Bonds, and in the
absence of such notice the Trustee shall conclusively assume that there is no
default; provided that the Trustee shall be required to take notice
34
of and be deemed to have notice of its failure to receive the money necessary
to pay the principal of and premium (if any) and interest on the Bonds and
Purchase Price payments.
(g) No provision of this Indenture or the other Bond
Documents shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers.
(h) The Trustee shall not be required to record or file any
document or statement, including financing and continuation statements, or to
insure or monitor the insurance of the Project Facilities.
SECTION 9.04. Right of Trustee to Rely on Documents. The Trustee may
conclusively rely, and shall be protected in acting upon any notice,
resolution, request, consent, order, certificate, report, opinion, bond or
other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties. The Trustee may consult with
counsel, who may be counsel of or to the Company, with regard to legal
questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it
hereunder in good faith and in accordance therewith.
The Trustee shall not be bound to recognize any person as the Holder
of a Bond unless and until such Bond is submitted for inspection, if
required, and his title thereto is satisfactorily established, if disputed.
Whenever in the administration of the trusts imposed upon it by this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
Certificate of the Company, and such Certificate shall be full warrant to the
Trustee for any action taken or suffered in good faith under the provisions
of this Indenture in reliance upon such Certificate, but in its discretion
the Trustee may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as it may deem reasonable.
SECTION 9.05. Preservation and Inspection of Documents
(a) All documents received by the Trustee under the
provisions of this Indenture shall be retained in its possession and shall be
subject during normal business hours of the Trustee to the inspection of the
Company and any Bondholder, and their agents and representatives duly
authorized in writing, at reasonable hours and under reasonable conditions.
(b) The Trustee covenants and agrees that it shall maintain
a current list of the names and addresses of all the Bondholders.
SECTION 9.06. Compensation. The Trustee shall be paid from time to
time reasonable compensation for all services rendered under this Indenture,
and also all reasonable expenses, charges, legal and consulting fees and
other disbursements and those of its attorneys, agents and employees,
incurred in and about the performance of its powers and duties under this
Indenture, all as provided in its bid submitted to the Remarketing Agent and
the Company to provide services under this Indenture.
SECTION 9.07. The Tender Agent. First Union National Bank, the
initial Tender Agent appointed by the Company, and each successor tender
agent appointed in accordance herewith, shall designate its office and
signify its acceptance of the duties and obligations imposed upon it as
described herein by a written instrument of acceptance delivered to the
Trustee and the Company under which the Tender Agent shall, among other
things:
(a) hold all Bonds delivered to it hereunder in trust for
the benefit of the respective Owners of Bonds which shall have so delivered
such Bonds until moneys representing the Purchase Price of such Bond shall
have been delivered to or for the account of or to the order of such Owners
of Bonds. Upon delivery of moneys representing the Purchase Price of such
Bonds to or for the account of or to the order of such Owners of Bonds, the
Tender Agent shall hold all such Bonds which are required to be delivered to
the Pledged Bond Custodian pursuant
35
to Section 5.06(b) hereof, as the agent of the Bank for the purpose of
perfecting the Bank's security interest therein under the Pledge Agreement
(which agency shall terminate upon delivery of such Bonds by the Tender Agent
to or upon the order of the Bank in accordance with such Section 5.06(b));
and
(b) hold all moneys delivered to it hereunder and under the
Tender Agent Agreement for the purchase of such Bonds in a separate account
in trust for the benefit of the person or entity which shall have so
delivered such moneys until required to transfer such funds as provided
herein.
SECTION 9.08. Qualification of Tender Agent. (a) The Tender Agent
shall be a bank or trust company duly organized under the laws of the United
States of America or any state or territory thereof, having a combined
capital stock, surplus and undivided profits of at least One Hundred Million
Dollars ($100,000,000) or that is a wholly-owned subsidiary of such a bank or
trust company, and authorized by law to perform all duties imposed upon it by
this Indenture. The Tender Agent may at any time resign and be discharged of
its duties and obligations by giving at least sixty (60) days notice to the
Company, the Trustee, the Remarketing Agent, and the Bank; provided that such
resignation shall not take effect until the appointment of a successor Tender
Agent, and in accordance with the provisions hereof. Upon the written
approval of the Bank, the Tender Agent may be removed at any time by the
Company upon written notice to the Trustee and the Remarketing Agent.
Successor Tender Agents may be appointed from time to time by the Company,
with the prior written consent of the Bank.
(b) Upon the resignation or removal of the Tender Agent,
the Company shall appoint a successor Tender Agent and the Tender Agent shall
deliver any Bonds and moneys held by it in such capacity to its successor. If
the Company fails to appoint a successor Tender Agent within thirty (30) days
of the Tender Agent's resignation or removal, the Tender Agent may, at the
expense of the Company, petition a court of competent jurisdiction for the
appointment of a successor to it.
SECTION 9.09. Qualifications of Remarketing Agent; Resignation;
Removal. The Remarketing Agent shall be a financial institution or registered
broker/dealer authorized by law to perform all of the duties imposed upon it
by this Indenture. The Remarketing Agent may at any time resign and be
discharged of its duties and obligations created by this Indenture giving at
least thirty (30) days notice to the Company and the Trustee. The Remarketing
Agent may be removed at any time, upon not less than thirty (30) days written
notice from the Company filed with the Trustee. Upon the resignation or
removal of the Remarketing Agent, the Company shall appoint a successor
Remarketing Agent and shall provide written notice thereof to the Trustee.
The resignation or removal of the Remarketing Agent shall not become
effective until a successor Remarketing Agent is appointed and accepts such
appointment. If the Bonds are rated by a Rating Agency, any successor
Remarketing Agent shall be rated at least Baa3/P-3 or otherwise be acceptable
to such Rating Agency.
SECTION 9.10. Construction of Ambiguous Provisions. The Trustee may
construe any provision hereof insofar as such may appear to be ambiguous or
inconsistent with any other provision hereof; and any construction of any
such provision by the Trustee, in good faith shall be binding upon the Owners
of the Bonds.
ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 10.01. Amendments Permitted. This Indenture and the rights
and obligations of the Company, of the Trustee and of the Holders of the
Bonds may be modified or amended from time to time and at any time for any
lawful purpose, by an indenture or indentures supplemental hereto, which the
Company and the Trustee may enter into without the consent of any Bondholders
but with the prior written consent of the Bank (as long as the Bank is not in
default under the Letter of Credit or a voluntary or involuntary case has not
been commenced by the filing of a petition under the United States Bankruptcy
Code or any other law relating to the bankruptcy, insolvency or
reorganization of the Bank). The foregoing to the contrary notwithstanding,
no such modification or amendment shall, without the consent of the holders
of all Bonds then Outstanding, (a) extend the maturity date of any Bond, (b)
reduce the amount of principal thereof, (c) extend the time of payment or
change the method of computing the rate of interest thereon, without the
consent of the Holder of each Bond so affected, or eliminate the Holders'
rights to
36
tender the Bonds, (d) extend the due date for the purchase of Bonds
tendered by the Holders thereof, or (e) reduce the Purchase Price of such
Bonds. It shall not be necessary for the consent of the Bondholders to
approve the particular form of any Supplemental Indenture, but it shall be
sufficient if such consent shall approve the substance thereof. Promptly
after the execution by the Company and the Trustee of any Supplemental
Indenture pursuant to this Section 10.01, the Trustee shall mail a notice,
setting forth in general terms the substance of such Supplemental Indenture,
to each Rating Agency then rating the Bonds and the Holders of the Bonds at
the address shown on the registration books of the Trustee. Any failure to
give such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such Supplemental Indenture.
SECTION 10.02. Effect of Supplemental Indenture. Upon the execution
of any Supplemental Indenture pursuant to this Article, this Indenture shall
be deemed to be modified and amended in accordance therewith, and the
respective rights, duties and obligations under this Indenture of the
Company, the Trustee and all Holders of Bonds Outstanding shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modification and amendment, and all the terms and conditions of any such
Supplemental Indenture shall be deemed to be part of the terms and conditions
of this Indenture for any and all purposes.
SECTION 10.03. Trustee Authorized to Join in Amendments and
Supplements; Reliance on Counsel. The Trustee is authorized to join with the
Company in the execution and delivery of any supplemental indenture or
amendment permitted by this Article X 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 Company and
that all things necessary to make it a valid and binding agreement have been
done.
ARTICLE XI
DEFEASANCE
SECTION 11.01. Discharge of Indenture. The Bonds may be paid by the
Company in any of the following ways, provided that the Company also pays or
causes to be paid any other sums payable hereunder by the Company:
(a) by paying or causing to be paid the principal of and
interest on the Bonds, as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, Available
Moneys or securities purchased with Available Moneys in the necessary amount
(as provided in Section 11.03) to pay or redeem all Bonds then Outstanding;
or
(c) by delivering to the Trustee, for cancellation by it,
the Bonds then Outstanding.
If the Company shall pay or cause to be paid all Bonds then
Outstanding and shall also pay or cause to be paid all other sums payable
hereunder by the Company, then and in that case, at the election of the
Company (evidenced by a Certificate of the Company filed with the Trustee,
signifying the intention of the Company to discharge all such indebtedness
and this Indenture), and notwithstanding that any Bonds shall not have been
surrendered for payment, this Indenture and the pledge of Revenues and other
assets made under this Indenture and all covenants, agreements and other
obligations of the Company under this Indenture shall cease, terminate,
become void and be completely discharged and satisfied. In such event, upon
Request of the Company, the Trustee shall cause an accounting for such period
or periods as may be requested by the Company to be prepared and filed with
the Company and shall execute and deliver to the Company all such
instruments, as prepared by or caused to be prepared by the Company that may
be necessary or desirable to evidence such discharge and satisfaction, and
the Trustee shall pay over, transfer, assign or deliver all moneys or
securities or other property held by it pursuant to this Indenture, which are
not required for (i) the payment of all the charges and reasonable expenses
of the Trustee under this Indenture, (ii) the payment or redemption of Bonds
not theretofore surrendered for such payment or redemption or (iii) the
payment of amounts owed to the Bank by the Company under the Reimbursement
Agreement, to the Company, as certified to the Trustee by the Bank.
37
SECTION 11.02. Discharge of Liability on Bonds. Upon the deposit
with the Trustee, in trust, at or before maturity, of money or securities in
the necessary amount (as provided in Section 11.03) to pay or redeem any
Outstanding Bond (whether upon or prior to the end of the Fixed Rate Period
or the redemption date of such Bond), provided that, if such Bond is to be
redeemed prior to maturity, notice of such redemption shall have been given
as in Article IV provided provision satisfactory to the Trustee shall have
been made for the giving of such notice, then all liability of the Company in
respect of such Bond shall cease, terminate and be completely discharged, and
the Holder thereof shall thereafter be entitled only to payment out of such
money or securities deposited with the Trustee as aforesaid for their
payment, subject, however, to the provisions of Section 11.04 below.
The Company may at any time surrender to the Trustee for
cancellation by it any Bonds previously issued and delivered, which the
Company may have acquired in any manner whatsoever, and such Bonds, upon such
surrender and cancellation, shall be deemed to be paid and retired.
SECTION 11.03. Deposit of Money or Securities with Trustee. Whenever
in this Indenture it is provided or permitted that there be deposited with or
held in trust by the Trustee money or securities in the necessary amount to
pay or redeem any Bonds, the money or securities so to be deposited or held
shall be cash or Investment Securities described in clauses (i) or (ii) of
the definition thereof in Section 1.01 hereof, which Investment Securities
shall be noncallable and not subject to prepayment, the principal of and
interest on which when due will provide money sufficient to pay the principal
of, premium, if any, and all unpaid interest to maturity, or to the
redemption date, as the case may be, on the Bonds to be paid or redeemed, as
such principal, premium, if any, and interest become due, provided that, in
the case of Bonds which are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as provided in Article IV or
provision satisfactory to the Trustee shall have been made for the giving of
such notice; provided, in each case, that the Trustee shall have been
irrevocably instructed (by request of the Company) to apply such money to the
payment of such principal and interest with respect to such Bonds.
Whenever Investment Securities are deposited with the Trustee in
accordance with this Section 11.03, the Company shall provide to the Trustee
and the Rating Agency, if any, (a) a verification report from an Accountant,
satisfactory in form and content to the Trustee, demonstrating that the
Investment Securities so deposited and the income thereon shall be sufficient
to pay the principal of, premium, if any, and all unpaid interest to
maturity, or to the redemption date, as the case may be, on the Bonds to be
paid or redeemed, as such principal, premium, if any, and interest become due
and (b) an opinion acceptable to the Rating Agency, if any, of nationally
recognized bankruptcy counsel, to the effect that the provision for payment
of the Bonds contemplated to be made pursuant to this Section 11.03 will not
constitute or result in such payments constituting voidable preferences under
Section 547 of the Bankruptcy Code.
SECTION 11.04. Payment of Bonds After Discharge of Indenture.
Notwithstanding any provisions of this Indenture, any moneys held by the
Trustee in trust for the payment of the principal of, premium, if any, or
interest on, any Bonds and remaining unclaimed for five (5) years after the
principal of all of the Bonds has become due and payable (whether at maturity
or upon call for redemption or by acceleration as provided in this
Indenture), if such moneys were so held at such date, or five (5) years after
the date of deposit of such moneys if deposited after said date when all of
the Bonds became due and payable, shall be repaid to the Company, upon its
written request, free from the trusts created by this Indenture and all
liability of the Trustee with respect to such moneys shall thereupon cease;
provided, however, that before the repayment of such moneys to the Company as
aforesaid, the Trustee may (at the cost and request of the Company) first
mail to the Holders of Bonds which have not been paid, at the addresses last
shown on the registration books maintained by the Trustee, a notice, in such
form as may be deemed appropriate by the Trustee with respect to the Bonds so
payable and not presented and with respect to the provisions relating to the
repayment to the Bank and the Company of the moneys held for the payment
thereof.
ARTICLE XII
INSURANCE; DESTRUCTION, DAMAGE, EMINENT DOMAIN
38
SECTION 12.01. Insurance to be Maintained. The Company covenants to
provide and maintain continuously, unless otherwise herein provided, adequate
insurance on the Project Facilities as shall be mutually agreed upon by the
Bank and the Company. Each insurance policy with respect to the Project
Facilities shall name the Bank and the Trustee as additional insureds.
SECTION 12.02. Destruction, Damage and Eminent Domain. If the
Project Facilities shall be wholly or partially destroyed or damaged by fire
or other casualty covered by insurance, or shall be wholly or partially
condemned, taken or injured by any Person, including any Person possessing
the right to exercise the power of or a power in the nature of eminent domain
or shall be transferred to such a Person by way of a conveyance in lieu of
the exercise of such a power by such a Person, the Company covenants that it
will take all actions and will do all things which may be necessary to enable
recovery to be made upon such policies of insurance or on account of such
taking, condemnation, conveyance, damage or injury. The Company is
authorized, in its own name, as trustee of an express trust, to demand,
collect, sue, settle claims, receive and release moneys which may be due and
payable under policies of insurance covering such damage or destruction or on
account of such condemnation, damage or injury. Any moneys recovered (i) on
policies of insurance required to be maintained hereunder or (ii) as a result
of any taking, condemnation, conveyance, damage or injury shall be deposited
in the Project Fund held by the Trustee under this Indenture and shall be
applied in accordance with the provisions of Section 12.04 hereof; provided,
however, that as long as the Bank is not in default under the terms of the
Letter of Credit, the applicable provisions of the Reimbursement Agreement
shall control the disposition of casualty insurance and condemnation award
proceeds.
Any appraisement or adjustment of loss or damage and any
settlement or payment therefore, shall be agreed upon by the Company, the
Bank (as long as the Bank in not in default under the Letter of Credit) and
the appropriate insurer or condemnor or Person, shall be evidenced to the
Bank by the certificate and approvals set forth in this Indenture. The Bank
may rely conclusively upon such certificates.
SECTION 12.03 Notice of Property Loss. After the occurrence of loss
or damage to, or after receipt of notice of condemnation of, the Project
Facilities, the Company shall within five (5) Business Days thereof notify
the Trustee and the Bank, in writing, of such damage.
SECTION 12.04 Disposition of Casualty Insurance and Condemnation
Award Proceeds.
(a) If the Bank is in default under the terms of the Letter
of Credit, the Company may elect, in its discretion, whether to apply the
proceeds of any casualty insurance coverage and/or condemnation awards to (i)
the repair, reconstruction or replacement of damaged, destroyed or injured
property comprising the Project Facilities or (ii) the redemption of Bonds
pursuant to the applicable provisions of this Indenture. Absent timely
direction from the Company as to the application of any casualty insurance
coverage and/or condemnation awards, the proceeds thereof shall be applied to
the extraordinary redemption of the Bonds at par plus accrued interest
through the date of redemption. For purposes of the preceding sentence,
"timely direction" shall mean thirty (30) days after the Company has agreed,
in connection with any damage to or condemnation of the Project Facilities,
upon the settlement or payment with respect to any appraisement or adjustment
of loss or damage, as appropriate.
(b) If the Bank is not in default under the terms of the
Letter of Credit, the proceeds of any casualty insurance coverage and/or
condemnation awards shall be applied in accordance with the Reimbursement
Agreement.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. Successor is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Company or the Trustee is
named or referred to, such reference shall be deemed to include the
successors or assigns thereof, and all the covenants and agreements in this
Indenture contained by or on behalf of the
39
Company or the Trustee shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not.
SECTION 13.02. Limitation of Rights to Parties, Bank, Company and
Bondholders. Nothing in this Indenture or in the Bonds expressed or implied
is intended or shall be construed to give to any person other than the
Company, the Trustee, the Bank, and the Holders of the Bonds, any legal or
equitable right, remedy or claim under or in respect of this Indenture or any
covenant, condition or provision therein or herein contained; and all such
covenants, conditions and provisions are and shall be held to be for the sole
and exclusive benefit of the Company, the Trustee, the Bank, and the Holders
of the Bonds.
SECTION 13.03. Waiver of Notice. Whenever in this Indenture the
giving of notice by mail or otherwise is required, the giving of such notice
may be waived in writing by the person entitled to receive such notice and in
any such case the giving or receipt of such notice shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
SECTION 13.04. Severability of Invalid Provisions. If any one or
more of the provisions contained in this Indenture or in the Bonds shall for
any reason be held to be invalid, illegal or unenforceable in any respect,
then such provision or provisions shall be deemed several from the remaining
provisions contained in this Indenture and such invalidity, illegality or
unenforceability shall not affect any other provision of this Indenture, and
this Indenture shall be construed as if such invalid or illegal or
unenforceable provision and never been contained herein. The Company hereby
declares that it would have entered into this Indenture and each and every
other section, paragraph, sentence, clause or phrase hereof and authorized
the issuance of the Bonds pursuant thereto irrespective of the fact that any
one or more sections, paragraphs, sentences, clauses or phrases of this
Indenture may be held illegal, invalid or unenforceable.
SECTION 13.05. Notices. All notices to Bondholders shall be given by
certified or registered mail, commercial overnight delivery services, telex,
telegram, telecopier or other telecommunication device unless otherwise
provided herein and confirmed in writing as soon as practicable. All such
notices shall also be sent to the Holders and any person designated by any
Holder to receive copies of such notices. Any notice to or demand upon the
Trustee may be served or presented, and such demand may be made, at the
corporate trust office of the Trustee, or at such other address as may have
been filed in writing by the Trustee, the Company, the Remarketing Agent, the
Placement Agent, the Tender Agent or the Bank shall be deemed to have been
sufficiently given or served for all purposes by being delivered or sent by
telex or by being deposited, postage prepaid, in a post office letter box,
addressed as follows:
To the Trustee:
First Union National Bank
123 S. Broad Street
11th Floor, PA 1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
40
To the Company:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President -- Finance
(or such other address as may have been filed in writing by the Company with
the Trustee),
To the Remarketing Agent:
First Union Capital Markets Corp.
301 College Street, 8th Floor
Charlotte, NC 28288
Attn: William Bingham, Vice President
(or such other address as may have been filed in writing by the Remarketing
Agent with the Trustee),
To the Placement Agent:
First Union Capital Markets Corp.
600 Penn Street, 2nd Floor South
Reading, PA 19602
Attn: Director: Tax Advantage Products
To the Tender Agent:
First Union National Bank
123 S. Broad Street, 11th Floor
Philadelphia, PA 19109
Attn: Corporate Trust Department
(or such other address as may have been filed in writing by the Tender Agent
with the Trustee),
To the Bank:
First Union National Bank
123 S. Broad Street
Philadelphia, Pa. 19109
Attention: Jane Sobieski, Vice President
(or such other address as may have been filed in writing by the Bank with the
Trustee).
SECTION 13.06. Evidence of Rights of Bondholders. Any request,
consent or other instrument required or permitted by this Indenture to be
signed and executed by Bondholders may be in any number of concurrent
instruments of substantially similar tenor and shall be signed or executed by
such Bondholders in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other
instrument or of a writing appointing any such agent, or of the holding by
any person of Bonds transferable by delivery, shall be sufficient for any
purpose of this Indenture and shall be conclusive in favor of the Trustee and
of the Company if made in the manner provided in this Section.
41
The fact and date of the execution by any person of any such
request, consent or other instrument or writing may be proved by the
certificate of any notary public or other officer of any jurisdiction,
authorized by the laws thereof to take acknowledgements of deeds, certifying
that the person signing such request, consent or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of
such execution duly sworn to before such notary public or other officer.
The ownership of Bonds shall be proved by the bond registration
books held by the Trustee.
Any request, consent or other instrument or writing of the Holder of
any Bond shall bind every future Holder of the same Bond and the Holder of
every Bond issued in exchange therefor or in lieu thereof, in respect of
anything done or suffered to be done by the Trustee or the Company in
accordance therewith or in reliance thereon.
SECTION 13.07. Disqualified Bonds. In determining whether the
Holders of the requisite aggregate principal amount of Bonds have concurred
in any demand, request, direction, consent or waiver under this Indenture,
Bonds which are owned or held by or for the account of the Company, or by any
other obligor on the Bonds, or by any person directly or indirectly
controlling or controlled by, or under direct or indirect common control with
the Company, or any other obligor on the Bonds, shall be disregarded and
deemed not to be Outstanding for the purposes of this Section. Bonds so owned
which have been pledged in good faith may be regarded as outstanding for the
purposes of this Section if the pledgee shall establish to the satisfaction
of the Trustee the pledgee's right to vote such Bonds and that the pledgee is
not a person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, the Company, or any other obligor on
the Bonds. In case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 13.08. Money Held for Particular Bonds. The money held by
the Trustee for the payment of the interest, principal or premium due on any
date with respect to particular Bonds (or portions of Bonds in the case of
registered Bonds redeemed in part only) shall, on and after such date and
pending such payment, be set aside on its books and held uninvested in trust
by it for the Holders of the Bonds entitled thereto, subject, however, to the
provisions of Section 11.04 hereof.
SECTION 13.09. Funds. Any fund required by this Indenture to be
established and maintained by the Trustee may be established and maintained
in the accounting records of the Trustee, either as a fund or an account, and
may, for the purposes of such records, any audits thereof and any reports or
statements with respect thereto, be treated either as a fund or as an
account; but all such records with respect to all such funds shall at all
time be maintained in accordance with current industry standards, to the
extent practicable, and with due regard for the requirements of Section 7.05
hereof and for the protection of the security of the Bonds and the rights of
every holder thereof.
SECTION 13.10. Payments Due on Days other than Business Days. If a
payment day is not a Business Day at the place of payment, then payment may
be made at that place on the next Business Day and no interest shall accrue
for the intervening period.
SECTION 13.11 Reserved.
SECTION 13.12. Execution in Several Counterparts. This Indenture may
be executed in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original; and all such counterparts, or
as many of them as the Company and the Trustee shall preserve undestroyed,
shall together constitute but one and the same instrument.
SECTION 13.13. Notices to Rating Agency. Written notice shall be
provided by the Company to each Rating Agency, if any, of (a) the appointment
of any successor Trustee, Tender Agent or Remarketing Agent, (b) any
Supplemental Indenture or any amendment to the Letter of Credit or the
Reimbursement Agreement, (c) the expiration, termination or extension of the
Letter of Credit, (d) the payment of all Outstanding Bonds, and (e) the
conversion of the Bonds to the Fixed Rate.
42
SECTION 13.14. Governing Law. This Indenture shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania
(without regard to any conflict of laws provision).
43
IN WITNESS WHEREOF, Lannett Company, Inc. has caused this Indenture
to be signed in its name by its Chairman or other duly authorized officer and
its seal to be hereunto affixed and attested by its Secretary or Assistant
Secretary, and First Union National Bank in token of its acceptance of the
trusts created hereunder, has caused this Indenture to be signed in its
corporate name by a duly authorized officer and its corporate seal to be
hereunto affixed and attested by its authorized officer, all as of the day
and year first above written.
Attest: LANNETT COMPANY, INC.
________________________ By:_________________________
(Assistant) Secretary Chairman
[SEAL]
Attest: FIRST UNION NATIONAL BANK,
as Trustee
_______________________ By:_________________________
Authorized Officer Title:
[SEAL]
44
EXHIBIT A
FLOATING RATE FORM OF BOND
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to Lannett
Company, Inc. (the "Company") or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner (the "Registered Owner") hereof,
Cede & Co., has an interest herein.
LANNETT COMPANY, INC.
TAXABLE VARIABLE RATE DEMAND/FIXED
RATE REVENUE BOND
SERIES OF 1999
No. VR- $2,300,000
Interest Rate Maturity Date Dated Date CUSIP
- ------------- ------------- ---------- -----
Variable May 1, 2003 April 30, 1999
THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME
AND IN THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE
DEEMED TO HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
KNOW ALL MEN BY THESE PRESENTS that LANNETT COMPANY, INC. (the
"Company"), for value received, promises to pay to CEDE & Co. or registered
assigns, on May 1, 2003, upon surrender hereof, the principal sum of Two
Million Three Hundred Thousand Dollars ($2,300,000), and in like manner to
pay interest on said sum at the rate described below on the first Business
Day (as hereinafter defined) of each calendar month, and on the Conversion
Date (hereinafter defined), commencing, June 1, 1999 (each an "Interest
Payment Date"), from the Interest Payment Date next preceding the date of
authentication hereof to which interest has been paid or duly provided for,
unless the date of authentication hereof is an Interest Payment Date to which
interest has been paid or duly provided for, in which case from the date of
authentication hereof, or unless no interest has been paid or duly provided
for on the Bonds (as hereinafter defined), in which case from, April 30, 1999
(the "Date of Issuance"), until payment of the principal hereof has been made
or duly provided for. Notwithstanding the foregoing, if this Bond is
authenticated after any date which is the Business Day (as hereinafter
defined) next preceding any Interest Payment Date (a "Record Date") and
before the following Interest Payment Date, this Bond shall bear interest
from such Interest Payment Date; provided, however, that if the Company shall
default in the payment of interest due on such Interest Payment Date, then
this Bond shall bear interest from the next preceding Interest Payment Date
to which interest has been paid or duly provided for, or, if no interest has
been paid or duly provided for on the Bonds, from the Date of Issuance. The
principal of this Bond is payable in lawful money of the United States of
America at the principal corporate trust office of First Union National Bank,
as trustee (together with its successors in trust, the "Trustee") at 1525
West W.T. Harris Boulevard, Charlotte, North Carolina 28288-1153, Attention:
Corporate Trust Department, or at the duly designated office of any successor
Trustee under the Indenture. Payment of interest on this Bond shall be made
on each Interest Payment Date to the registered Owner hereof as of the
applicable Record Date and shall be paid by check mailed by the Trustee to
such registered Owner at his address as it appears on the registration books
of the Company or at such other address as is furnished to the Trustee in
writing by such registered Owner, or in such other manner as may be permitted
by the Indenture. The Purchase Price (hereinafter
defined) of this Bond shall be payable by First Union National Bank (together
with any successor tender agent, the "Tender Agent") to the registered Owner
hereof, upon presentation hereof, at the Delivery Office of the Tender Agent.
As used herein, the term "Business Day" means a day other than a Saturday or
Sunday, a legal holiday on which banking institutions in the State of New
York, the City of New York, the Commonwealth of Pennsylvania or the City of
Philadelphia are authorized or required by law to close, or a day on which
the New York Stock Exchange is closed.
This Bond shall bear interest as follows:
(A) From the Date of Issuance of this Bond to the
Conversion Date, this Bond shall bear interest at the "Floating Rate." The
"Floating Rate" shall be a variable rate of interest equal to the minimum
rate of interest necessary, in the sole judgment of the Remarketing Agent, to
sell the Bonds on any Business Day at a price equal to the principal amount
thereof, exclusive of accrued interest, if any, thereon. The Floating Rate
shall be determined weekly by First Union Capital Markets Corp., Charlotte,
North Carolina (the "Remarketing Agent") on each Wednesday (or if such
Wednesday is not a Business Day, on the next succeeding Business Day) and
shall be effective on the Thursday immediately following for the Weekly
Period (as hereinafter defined) immediately following , all as more fully set
forth in the Indenture. The determination of the Floating Rate shall be
conclusive and binding upon the Company, the Trustee, the Bank (as
hereinafter defined), the Remarketing Agent, the Tender Agent and the Owners
of this Bond.
Anything herein to the contrary notwithstanding, the Floating Rate
shall in no event exceed seventeen percent (17%) per annum.
(B) The Bonds shall bear interest at the "Fixed Rate" from
and after the Conversion Date. In such event, the Fixed Rate shall be
applicable until the maturity of the Bonds. The "Fixed Rate" shall be a fixed
annual interest rate on the Bonds established by the Remarketing Agent as the
rate of interest for which the Remarketing Agent has received commitments on
or prior to the fifth (5th) day preceding the Conversion Date, at a price of
par without discount or premium.
Prior to the Conversion Date, interest on the Bonds shall be
computed on the basis of a 365 or 366 day year, as applicable, and the actual
number of days elapsed. On and after the Conversion Date, interest on the
Bonds shall be computed on the basis of a 360 day year of twelve 30 day
months.
As used herein, the term "Conversion Date" means the Optional
Conversion Date (as hereinafter defined); the term "Letter of Credit
Termination Date" means the later of (i) that date upon which the Letter of
Credit (hereinafter defined) shall expire or terminate pursuant to its terms,
or (ii) that date to which the expiration or termination of the Letter of
Credit may be extended, from time to time, either by extension or renewal of
the existing Letter of Credit or the issuance of a Substitute Letter of
Credit (as defined in the Indenture); the term "Optional Conversion Date"
means that date, which shall be a Business Day, from and after which the
interest rate on the Bonds is converted from the Floating Rate to the Fixed
Rate as a result of the exercise by the Company of the Conversion Option (as
hereinafter defined); the term "Conversion Option" means the option granted
to the Company in the Indenture pursuant to which the interest rate on the
Bonds is converted from the Floating Rate to the Fixed Rate as of the
Optional Conversion Date; the term "Purchase Price" means an amount equal to
100% of the principal amount of any Bond tendered or deemed tendered for
purchase pursuant to the Indenture or with respect to which the Demand
Purchase Option (as hereinafter defined) has been exercised, plus accrued and
unpaid interest thereon to the date of purchase.
The interest rate on the Bonds may be converted from the Floating
Rate to the Fixed Rate at any time after the Initial Interest Payment Date
upon satisfaction of certain conditions and notice given by the Trustee at
the direction of the Company to the Owners of the Bonds at least twenty (20)
days but not more than thirty (30) days prior to the Conversion Date in
accordance with the requirements of the Indenture, and the Bonds shall be
subject to mandatory tender by the Owners thereof on the Conversion Date. On
and after the Conversion Date, the Demand Purchase Option will not be
available to the Owners of the Bonds. On or prior to the Conversion Date,
Owners of the Bonds shall be required to deliver their Bonds to the Tender
Agent for purchase at the Purchase Price. Accrued
2
interest on the Bonds will be payable on the Conversion Date to the Owners of
Bonds as of the Conversion Date. Any Bonds not delivered to the Tender Agent
on or prior to the Conversion Date ("Undelivered Bonds"), for which there has
been irrevocably deposited in trust with the Trustee or the Tender Agent an
amount of money sufficient to pay the Purchase Price of the Undelivered
Bonds, shall be deemed to have been purchased at the Purchase Price and are
deemed to be no longer outstanding with respect to such prior Owners. IN THE
EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS ON OR PRIOR TO
THE CONVERSION DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT
(INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE CONVERSION DATE)
OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED
BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT
FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, to the extent that at the
close of the fifth (5th) Business Day prior to the proposed Optional
Conversion Date, the Remarketing Agent has not presented to the Company firm
commitments for the purchase of all of the Bonds, the Company, at its option,
may rescind an optional conversion of the Bonds. Any such election to rescind
must be made by the close of the fourth (4th) Business Day prior to the
proposed Conversion Date and the Company shall give written notice to the
Trustee, the Tender Agent and the Bank of its decision to rescind the
optional conversion by such time. The Company shall cause the Trustee to
immediately notify the Owners of such rescission and thereafter the Bonds
shall bear interest at the Floating Rate in effect for the then current
Weekly Period and thereafter the Bonds shall bear interest at the Floating
Rate until any subsequent Conversion Date effected in accordance with the
Indenture. As used herein, "Weekly Period" means, while this Bond bears
interest at the Floating Rate, the weekly period that begins on and includes
Thursday of each calendar week and ends at the close of business on Wednesday
of the next succeeding week.
At any time prior to the Record Date preceding the first Interest
Payment Date following the Conversion Date, the Trustee or the Tender Agent,
as the case may be, shall deliver a replacement Bond evidencing interest
payable at the Fixed Rate.
Prior to the Conversion Date, this Bond shall be purchased, at the
option of the Owner hereof ("Demand Purchase Option") at the Purchase Price,
upon:
(a) delivery by such Owner to the Trustee and the Tender
Agent at their principal corporate trust office and Delivery Office
(hereinafter defined) respectively; and to the Remarketing Agent at its
principal office of a notice (a "Demand Purchase Notice") (said notice to be
irrevocable and effective upon receipt) which states (i) the aggregate
principal amount and the bond numbers of Bonds to be purchased; and (ii) the
date on which such Bonds are to be purchased, which date shall be a Business
Day not prior to the Business Day next succeeding the date of delivery of
such notice and which date shall be prior to the Conversion Date; and
(b) delivery to the Tender Agent at its Delivery Office (as
hereinafter defined) at or prior to 10:00 a.m., New York City time, on the
date designated for purchase in the applicable Demand Purchase Notice of such
Bonds to be purchased with an appropriate endorsement for transfer or
accompanied by a bond power endorsed in blank.
Any Bond as to which a Demand Purchase Notice has been delivered
pursuant to (a) above, must be delivered to the Tender Agent as provided in
(b) above, and any such Bonds not so delivered ("Undelivered Bonds"), for
which there has been irrevocably deposited in trust with the Trustee or the
Tender Agent an amount of money sufficient to pay the Purchase Price thereof,
shall be deemed to have been purchased at the Purchase Price and are deemed
to be no longer outstanding with respect to such tendering Owner. IN THE
EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS AS SPECIFIED
ABOVE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY
INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE DATE DESIGNATED FOR PURCHASE IN
THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER THAN THE PURCHASE PRICE FOR SUCH
UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO
THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PAYMENT OF THE PURCHASE PRICE
THEREFOR.
3
Notwithstanding the foregoing provisions, in the event any Bond as
to which the Owner thereof has exercised the Demand Purchase Option is
remarketed to such Owner pursuant to the Remarketing Agreement, such Owner
need not deliver such Bond to the Tender Agent as provided in (c) above,
although such Bond shall be deemed to have been delivered to the Tender
Agent, redelivered to such Owner, and remarketed for purposes of the
Indenture.
Any delivery of a notice required to be made to the Trustee at its
principal corporate trust office pursuant to (a) above shall be delivered to
the Trustee at 1525 West W.T. Harris Boulevard, Charlotte, North Carolina
28288-1153, Attention: Corporate Trust Department, or to the office
designated for such purpose by any successor Trustee; any delivery of a
notice required to be made to the Remarketing Agent at its principal office
pursuant to (a) above shall be delivered to the Remarketing Agent at 301
College Street, 8th Floor, Charlotte, North Carolina 28288, Attention: Money
Market Trading and Sales, or to the office designated for such purpose by any
successor Remarketing Agent; and any delivery of Bonds required to be made to
the Tender Agent pursuant to (b) above shall be delivered to the Tender Agent
at 123 S. Broad Street, 11th Floor, PA 1249, Philadelphia, PA 19109,
Attention: Corporate Trust Department, or the office designated for such
purpose by any successor Tender Agent (the "Delivery Office").
This Bond and the Bonds of the Series of which it is a part is
comprised of a duly authorized issue of bonds designated as " Taxable
Variable Rate Demand/Fixed Rate Revenue Bonds, Series of 1999" (the "Bonds")
issued by the Company in the aggregate principal amount of $2,300,000 and by
virtue of a resolution duly adopted by the Company (the "Bond Resolution"),
and equally and ratably secured under a Trust Indenture, dated April 30,
1999, by and between the Company and the Trustee, as the same from time to
time has been or may be amended, modified or supplemented by supplemental
indentures (being herein collectively called the "Indenture"), for the
purpose of raising funds to finance a project (the "Project") consisting of
the financing of (i) the refinancing of certain indebtedness of the Company;
(ii) the payment of deferred interest due to the controlling shareholder of
the Company; and (iii) the payment of the costs of issuance of the Bonds and
a portion of the costs of issuance of the $3,700,000 Philadelphia Authority
for Industrial Development Tax-Exempt Variable Rate Demand/Fixed Rate Revenue
Bonds (Lannett Company, Inc. Project), Series of 1999, issued simultaneously
with the Bonds for the benefit of the Company.
The Bonds are all issued under and are equally and ratably secured
by and entitled to the protection of the Indenture, pursuant to which the
Company is obligated to make payment of the principal and Purchase Price of,
and premium, if any, and interest on the Bonds and certain costs, fees and
expenses of the Trustee. The Company has caused to be delivered to the
Trustee an irrevocable direct pay letter of credit (together with any
Substitute Letter of Credit, the "Letter of Credit") issued by First Union
National Bank (in such capacity, the "Bank") and dated the Date of Issuance
of the Bonds, which will expire, unless earlier terminated or extended, on
October 31, 2002 (the "Letter of Credit Termination Date"). Subject to
certain conditions, the Letter of Credit may be replaced by a Substitute
Letter of Credit of another commercial bank, savings and loan association or
savings bank. Under the Letter of Credit, the Trustee is entitled to draw up
to an amount sufficient to pay (a) the principal of the Bonds or the portion
of the Purchaser Price corresponding to the principal of the Bonds and (b)
forty-six (46) days' accrued interest (calculated at the maximum rate of 17%
per annum based on a 365 or 366 day year, as applicable, and the actual
number of days elapsed) on the Bonds or the portion of the Purchase Price of
the Bonds corresponding to accrued interest thereon.
Reference is hereby made to the Indenture and the Letter of Credit
for description of the property pledged and assigned, the provisions, among
others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Company, the Trustee and the Owners of the
Bonds and the terms upon which the Bonds are issued and secured; and the
Owner of this Bond, by acceptance hereof, hereby consents to the terms and
provisions of all of the foregoing as a material portion of the consideration
for the issuance of this Bond.
This Bond is transferable by the registered Owner hereof in person
or by his attorney duly authorized in writing, at the principal corporate
trust office of the Trustee or at the Delivery Office of the Tender Agent or
that of any successor Tender Agent, but only in the manner, subject to the
limitations and upon payment of the charges
4
provided in the Indenture, and upon surrender and cancellation of this Bond.
Upon such transfer a new registered Bond or Bonds of authorized denomination
or denominations for the same aggregate principal amount will be issued to
the transferee in exchange therefor. The Company, the Tender Agent and the
Trustee may deem and treat the registered Owner hereof as the absolute Owner
hereof (whether nor not this Bond shall be overdue) for all purposes, and
neither the Company, the Tender Agent nor the Trustee shall be bound by any
notice or knowledge to the contrary.
Prior to the Conversion Date, (i) the Bonds are issuable as fully
registered bonds without coupons in the denominations of $100,000 or any
integral multiple of $5,000 in excess thereof; and (ii) the Bonds may not be
issued, exchanged or transferred except in authorized denominations of
$100,000 or any integral multiple of $5,000 in excess thereof. From and after
the Conversion Date, the Bonds shall be issuable as fully registered bonds
without coupons in the denominations of $5,000 or any integral multiple
thereof.
5
Extraordinary Redemption
The Bonds are callable for redemption in the event the Project
Facilities or any portion thereof is damaged or destroyed or taken in a
condemnation proceeding as provided in Article XII of the Indenture. If
called for redemption at any time as provided in the preceding sentence, the
Bonds shall be subject to redemption by the Company on any Interest Payment
Date, in whole or in part, at a redemption price of one hundred percent
(100%) of the principal amount thereof plus accrued interest to the
redemption date.
Mandatory Redemption
The Bonds are subject to mandatory redemption, five (5) Business
Days prior to the Letter of Credit Termination Date, in whole, at a
redemption price equal to one hundred percent (100%) of the principal amount
thereof being redeemed plus accrued interest to the redemption date if, on
the thirtieth (30th) Business Day prior to the Letter of Credit Termination
Date, the Trustee shall not have received a Substitute Letter of Credit which
will be effective on or before the Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in
part, on any Interest Payment Date, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date, if any proceeds of the sale of the
Bonds remain on deposit in the Project Fund established under the Indenture
upon completion of the Project, under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds
or portions thereof to be redeemed shall be selected by the Trustee at random
or in such other manner as the Trustee in its discretion shall deem fair and
appropriate.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest
Payment Date occurring in the month of May in each of the years set forth
below commencing on the Interest Payment Date occurring in May 2000 (each, a
"Mandatory Sinking Account Payment Date"), at a redemption price equal to
100% of the principal amount thereof plus accrued interest as follows:
Mandatory Sinking
Year Account Payments
- ---- ----------------
2000 $645,000
2001 $685,000
2002 $730,000
2003* $240,000
*Final maturity
Optional Redemption
On or prior to the Conversion Date, the Bonds are subject to
redemption by the Company, at the option of the Company, at any time, subject
to the notice provisions described below, in whole or in part, at the
redemption price of 100% of the principal amount thereof being redeemed plus
accrued interest to the redemption date. Notwithstanding the foregoing, no
such optional redemption shall occur unless on the redemption date there
shall be available in the Bond Fund established under the Indenture
sufficient Available Moneys (as defined in the Indenture) to pay all amounts
due with respect to such a redemption.
In the event of any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed and the redemption price (including
the
6
premium, if any), shall be given by the Trustee in accordance with the
Letter of Representations, so long as the Bonds are registered in the name of
The Depository Trust Company ("DTC") or its nominee and if the DTC
book-entry-only system shall be discontinued, notice of the call for
redemption shall be given by mailing a copy of the redemption notice by
first-class mail at least (i) ten (10) days prior to the date fixed for
redemption in the event of a mandatory redemption because the Trustee shall
not have received a Substitute Letter of Credit effective on or before the
Letter of Credit Termination Date; and (ii) thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption in all other
instances to the Owner of each Bond to be redeemed in whole or in part at the
address shown on the registration books. Any notice mailed as provided above
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. No further interest shall accrue on the principal
of any Bond called for redemption after the redemption date if Available
Moneys (as defined in the Indenture) sufficient for such redemption have been
deposited with the Trustee. Notwithstanding the foregoing, the notice
requirements contained in the first sentence of this paragraph may be deemed
satisfied with respect to a transferee of a Bond which has been purchased
pursuant to the Demand Purchase Option under certain circumstances provided
in Section 5.04 of the Indenture, after such Bond has previously been called
for redemption, notwithstanding the failure to satisfy the notice
requirements of the first sentence of this paragraph with respect to such
transferee.
Mandatory Tender
The Bonds are subject to mandatory tender in whole on the effective
date of any Substitute Letter of Credit provided by a Substitute Bank (as
such term is defined in the Indenture), at a purchase price equal to 100% of
the principal amount thereof, plus accrued interest to the purchase date.
In the event of a mandatory tender, notice of such tender shall be
given by the Trustee by delivering or mailing by first-class mail a copy of
such notice at least twenty (20) days but not more than thirty (30) days
prior to the date of such tender to the Owner of each Bond at the address
shown on the registration books.
The Bonds are issued pursuant to and in full compliance with the
laws of the Commonwealth of Pennsylvania, and by appropriate action duly
taken by the Company authorizing the execution and delivery of the Indenture.
The Owner of this Bond shall 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 default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued
under the Indenture and then outstanding may become or may be declared due
and payable before the stated maturity thereof, together with interest
accrued thereon.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modifications of the rights and obligations of
the Company and the rights of the owners of the Bonds at any time by the
Company with the consent of the Bank and the Holders of all Bonds at the time
Outstanding. Any such consent or any waiver by the Bank and the Holders of
all Bonds at the time Outstanding shall be conclusive and binding upon the
Owner and upon all future Owners of this Bond and of any Bond issued in
replacement hereof whether or not notation of such consent or waiver is made
upon this Bond. The Indenture also contains provisions which, subject to
certain conditions, permit or require the Trustee to waive certain past
defaults under the Indenture and their consequences.
It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to
and in connection with the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in due
time, form and manner as required by law.
This Bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been signed by the Trustee or
the Tender Agent, as authenticating agent.
7
IN WITNESS WHEREOF, Lannett Company, Inc. has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of
its Chairman and its corporate seal to be affixed, imprinted or reproduced
hereon and attested by the manual or facsimile signature of its Secretary or
Assistant Secretary, all as of the Date of Issuance.
Attest: LANNETT COMPANY, INC.
__________________________ By:__________________________
(Assistant) Secretary Chairman
(SEAL)
8
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the
within-mentioned Trust Indenture.
FIRST UNION NATIONAL BANK, as Trustee
and Tender Agent
By:_________________________________
Authorized Signature
Date of Authentication: April __, 1999
(Form of Transfer)
FOR VALUE RECEIVED, _______________, the undersigned, hereby
sells, assigns and transfers unto _________________ (Tax Identification or
Social Security No. __________________) the within Bond and all rights
thereunder, and hereby irrevocably constitutes and appoints _____________
attorney to transfer the within Bond on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________ ___________________________________
NOTICE: Signature must be NOTICE: The Signature to this
guaranteed by an approved assignment must correspond with the
eligible guarantor name as it appears upon the face of
institution, an the within Bond in every particular,
institution which is a without alteration or enlargement or
participant in a Securities any change whatever.
Transfer Association
recognized signature
guarantee program.
[FORM OF BOND COUNSEL OPINION]
Re: Lannett Company, Inc.
$2,300,000 Taxable Variable Demand/Fixed Rate
Revenue Bonds, Series of 1999 (the "Bonds")
TO THE REGISTERED OWNERS OF THE ABOVE BONDS:
We have acted as Bond Counsel in connection with the
issuance by Lannett Company, Inc. (the "Company") of the above-captioned
Bonds. The proceeds of the Bonds will be used by the Company to finance a
project (the "Project") consisting of the financing of (i) the refinancing of
certain indebtedness of the Company; (ii) the payment of deferred interest
due to the controlling shareholder of the Company; and (iii) the payment of a
portion of the costs of issuance of the Bonds and a portion of the costs of
issuance of the $3,700,000 Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds (Lannett Company,
Inc. Project), Series of 1999, issued simultaneously with the Bonds for the
benefit of the Company. All capitalized terms used in this opinion and not
defined herein shall have the meanings assigned to them in that certain Trust
Indenture, dated April 30, 1999, between the Company and First Union National
Bank, as Trustee (the "Indenture") unless the context clearly requires
otherwise.
The Bonds issued this date mature on May 1, 2003 and bear interest
and are subject to purchase and redemption prior to maturity upon the terms
and conditions stated therein and in the Indenture. The Bonds initially are
issuable as registered bonds in denominations of $100,000 or integral
multiples of $5,000 in excess thereof. After the Conversion Date the Bonds
shall be in denominations of $5,000 or integral multiples of $5,000 in excess
thereof.
In connection with the issuance of the Bonds, First Union National
Bank (the "Bank"), at the request of the Company, has issued a certain
irrevocable, direct pay Letter of Credit dated the date of issuance of the
Bonds (the "Letter of Credit"), in favor of the Trustee. The payment of
principal or redemption price of, or the principal component of the Purchase
Price of, and interest on the Bonds, are paid solely by and limited to
proceeds of drawings under the Letter of Credit. Pursuant to the terms and
conditions set forth in the Letter of Credit and the Indenture, on each debt
service payment date the Trustee shall draw upon the Letter of Credit the
amount necessary to pay the principal of and interest payable on the Bonds on
such debt service payment date.
In connection with providing our opinion, we have examined the
following:
1. Copies of the resolution of the Company authorizing, among other
things, the issuance of the Bonds (the "Resolution");
2. A copy of the executed Letter of Credit;
3. A specimen copy of one of the Bonds (we assume due execution and
authentication of each Bond);
4. Executed copies of the Indenture, the Reimbursement Agreement,
the Letter of Credit, the Remarketing Agreement, the Pledge and Security
Agreement, the Company General Certificate and the other documents,
agreements, certificates and opinions delivered at the closing held this day;
5. Opinion of Fox, Rothschild, O'Brien & Frankel, LLP, counsel to
the Company, dated April 30, 1999.
Based upon our examination of the foregoing and upon our attendance
at the Bond Closing, it is our opinion that, as of the date hereof:
A. The Indenture has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company enforceable in accordance with its respective terms.
B. The issuance and sale of the Bonds have been duly authorized by
the Company and, assuming due execution and authentication as stated above,
the Bonds are entitled to the benefit and security of the Indenture and
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their terms.
C. Interest on the Bonds is NOT excluded from gross income for
federal or state income tax purposes.
In providing the foregoing opinions, we advise you as follows:
(a) The enforceability of the provisions of the Bonds and the
Indenture (and any other applicable document) may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
(b) Equitable remedies with respect to the Bonds and the Indenture
(and any other applicable document) lie in the discretion of the courts and,
accordingly, may not be available.
(c) Except as specifically set forth above, we express no opinion
regarding other federal or state income tax consequences arising with respect
to the Bonds.
(d) Except for the description and summaries set forth in the
Placement Memorandum dated April 30, 1999 used in connection with the sale of
the Bonds (the "Placement Memorandum") under the captions "THE BONDS" and
"SUMMARY OF LEGAL DOCUMENTS" - "The Indenture" and "Substitute Letter of
Credit," we have not been engaged to verify, nor have we independently
verified, nor do we express any opinion to the registered owners of the Bonds
with respect to, the accuracy, completeness or truthfulness of any
statements, certifications, or information set forth in the Placement
Memorandum, or with respect to any other materials used in connection with
the placement of the Bonds.
(e) We express no opinion with respect to whether the Company or any
other person in connection with the placement of the Bonds or the preparation
of the Placement Memorandum, has made any untrue statement of a material fact
or omitted to state a material fact necessary in order to make any statement
made, not misleading. Further, we have not verified, and express no opinion
as to the accuracy of, any "CUSIP" identification number that may be printed
on any Bond. We have also assumed the genuineness of the signatures appearing
on all the certificates, documents and instruments executed and delivered at
closing.
Very truly yours,
OBERMAYER REBMANN MAXWELL & HIPPEL LLP
2
EXHIBIT B
FIXED RATE FORM OF BOND
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to Lannett
Company, Inc. (the "Company") or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner (the "Registered Owner") hereof,
Cede & Co., has an interest herein.
LANNETT COMPANY, INC.
TAXABLE REVENUE BOND
SERIES OF 1999
No. FR- $
Interest Rate Maturity Date Dated Date CUSIP
- ------------- ------------- ---------- -----
May 1, 2003
KNOW ALL MEN BY THESE PRESENTS that Lannett Company, Inc. (the
"Company"), for value received, promises to pay to CEDE & Co. or registered
assigns, on May 1, 2003, upon surrender hereof, the principal sum of Dollars
($ ), and in like manner to pay interest (calculated on the basis of a
360-day year of twelve 30-day months) on said sum at the rate of _____% per
annum on May 1 and November 1 of each year, commencing __________, ____ (each
an "Interest Payment Date"), from the Interest Payment Date next preceding
the date of authentication hereof to which interest has been paid or duly
provided for, unless the date of authentication hereof is an Interest Payment
Date to which interest has been paid or duly provided for, in which case from
the date of authentication hereof, or unless no interest has been paid or
duly provided for on the Bonds (as hereinafter defined), in which case from
the Conversion Date (as defined in the Indenture, as hereinafter defined),
until payment of the principal hereof has been made or duly provided for.
Notwithstanding the foregoing, if this Bond is authenticated after any date
which is the fifteenth calendar day (as hereinafter defined) next preceding
any Interest Payment Date (a "Record Date") and before the following Interest
Payment Date, this Bond shall bear interest from such Interest Payment Date;
provided, however, that if the Company shall default in the payment of
interest due on such Interest Payment Date, then this Bond shall bear
interest from the next preceding Interest Payment Date to which interest has
been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Bonds, from the Conversion Date.
The principal of this Bond is payable in lawful money of the United
States of America at the principal corporate trust office of First Union
National Bank, as trustee (together with its successors in trust, the
"Trustee") at 1525 West W.T. Harris Boulevard, Charlotte, North Carolina
28288-1153, Attention: Corporate Trust Department, or at the duly designated
office of any successor Trustee under the Trust Indenture, dated April 30,
1999, between the Company and the Trustee (which Trust Indenture, as from
time to time amended and supplemented, is hereinafter referred to as the
"Indenture"). Payment of interest on this Bond shall be made on each Interest
Payment Date to the registered Owner hereof as of the applicable Record Date
and shall be paid by check mailed by the Trustee to such registered Owner at
his address as it appears on the registration books of the Company or at such
other address as is furnished to the Trustee in writing by such registered
Owner, or in such other manner as may be permitted by the Indenture. The
Purchase Price (hereinafter defined) of this Bond shall be payable by First
Union
National Bank (together with any successor, the "Tender Agent") to the
registered Owner hereof, upon presentation hereof, at the Delivery Office of
the Tender Agent. As used herein, the term "Business Day" means a day other
than a Saturday or Sunday, a legal holiday on which banking institutions in
the State of New York, the City of New York, the Commonwealth of Pennsylvania
or the City of Philadelphia are authorized or required by law to close or a
day on which the New York Stock Exchange is closed.
This Bond and the Bonds of the Series of which it is a part is
comprised of a duly authorized issue of bonds designated as "Lannett Company,
Inc. Taxable Revenue Bonds, Series of 1999" (the "Bonds") issued in the
aggregate principal amount of $2,300,000 and by virtue of a resolution duly
adopted by the Company and equally and ratably secured under the Indenture
for the purpose of raising funds to finance a project (the "Project")
consisting of the financing of (i) the refinancing of certain indebtedness of
the Company; (ii) the payment of deferred interest due to the controlling
shareholder of the Company; and (iii) the payment of a portion of the costs
of issuance of the Bonds and a portion of the costs of issuance of the
$3,700,000 Philadelphia Authority for Industrial Development Tax-Exempt
Variable Rate Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc.
Project), Series of 1999, issued simultaneously with the Bonds for the
benefit of the Company.
The Bonds are all issued under and are equally and ratably secured
by and entitled to the protection of the Indenture, pursuant to which the
Company is obligated to make payment of the principal and premium, if any,
and interest on the Bonds and certain costs, fees and expenses of the
Trustee. The Company has caused to be delivered to the Trustee an irrevocable
direct pay letter of credit (together with any Substitute Letter of Credit,
the "Letter of Credit") issued by First Union National Bank (in such
capacity, the "Bank") and dated the Date of Issuance of the Bonds, which will
expire, unless earlier terminated or extended, on October 31, 2002, (the
"Letter of Credit Termination Date"). Subject to certain conditions, the
Letter of Credit may be replaced by a Substitute Letter of Credit of another
commercial bank, savings and loan association or savings bank. Under the
Letter of Credit, the trustee is entitled to draw up to an amount sufficient
to pay (a) the principal of the Bonds and (b) 205 days' accrued interest on
the Bonds (calculated at the interest rate on the Bonds).
Reference is hereby made to the Indenture and the Letter of Credit
for description of the property pledged and assigned, the provisions, among
others, with respect to the nature and extent of the security, the rights,
duties and obligations of the Company, the Trustee and the Owners of the
Bonds and the terms upon which the Bonds are issued and secured; and the
Owner of this Bond, by acceptance hereof, hereby consents to the terms and
provisions of all of the foregoing as a material portion of the consideration
for the issuance of this Bond.
This Bond is transferable by the registered Owner hereof in person
or by his attorney duly authorized in writing, at the principal corporate
trust office of the Trustee but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and
upon surrender and cancellation of this Bond. Upon such transfer a new
registered Bond or Bonds of authorized denomination or denominations for the
same aggregate principal amount will be issued to the transferee in exchange
therefor. The Company and the Trustee may deem and treat the registered Owner
hereof as the absolute Owner hereof (whether nor not this Bond shall be
overdue) for all purposes, and neither the Company nor the Trustee shall be
bound by any notice or knowledge to the contrary.
The Bonds shall be issuable as fully registered bonds without
coupons in the denominations of $5,000 or any integral multiple thereof.
Extraordinary Redemption
The Bonds are callable for redemption in the event the Project
Facilities or any portion thereof is damaged or destroyed or taken in a
condemnation proceeding as provided in Article XII of the Indenture. If
called for redemption at any time as provided in the preceding sentence, the
Bonds shall be subject to redemption by the Company on any Interest Payment
Date, in whole or in part, at a redemption price of one hundred percent
(100%) of the principal amount thereof plus accrued interest to the
redemption date.
Mandatory Redemption
2
The Bonds are subject to mandatory redemption, five (5) Business
Days prior to the Letter of Credit Termination Date, in whole, at a
redemption price equal to one hundred percent (100%) of the principal amount
thereof being redeemed plus accrued interest to the redemption date if, on
the thirtieth (30th) Business Day prior to the Letter of Credit Termination
Date, the Trustee shall not have received a Substitute Letter of Credit which
will be effective on or before the Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in
part, on any Interest Payment Date, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date, if any proceeds of the sale of the
Bonds remain on deposit in the Project Fund established under the Indenture
upon completion of the Project, under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds
or portions thereof to be redeemed shall be selected by the Trustee at random
or in such other manner as the Trustee in its discretion shall deem fair and
appropriate.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest
Payment Date occurring in the month of May in each of the years set forth
below commencing on the Interest Payment Date occurring in May ____ (each, a
"Mandatory Sinking Account Payment Date"), at a redemption price equal to
100% of the principal amount thereof plus accrued interest as follows:
Mandatory Sinking
Year Account Payments
---- ----------------
$
$
$
$
*
*Final maturity
Optional Redemption
[TO BE PROVIDED]
In the event of any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed and the redemption price (including
the premium, if any), shall be given by the Trustee in accordance with the
Letter of Representations, so long as the Bonds are registered in the name of
The Depository Trust Company ("DTC") or its nominee and if the DTC
book-entry-only system shall be discontinued, notice of the call for
redemption shall be given by mailing a copy of the redemption notice by
first-class mail at least (i) ten (10) days prior to the date fixed for
redemption in the event of a mandatory redemption because the Trustee shall
not have received a Substitute Letter of Credit effective on or before the
Letter of Credit Termination Date; and (ii) thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption in all other
instances to the Owner of each Bond to be redeemed in whole or in part at the
address shown on the registration books. Any notice mailed as provided above
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. No further interest shall accrue on the principal
of any Bond called for redemption after the redemption date if Available
Moneys (as defined in the Indenture) sufficient for such redemption have been
deposited with the Trustee.
Mandatory Tender
3
The Bonds are subject to mandatory tender in whole on the effective
date of any Substitute Letter of Credit provided by a Substitute Bank (as
defined in the Indenture), at a purchase price equal to 100% of the principal
amount thereof, plus accrued interest to the purchase date.
In the event of a mandatory tender, notice of such tender shall be
given by the Trustee by delivering or mailing by first-class mail a copy of
such notice at least twenty (20) days but not more than thirty (30) days
prior to the date of such tender to the Owner of each Bond at the address
shown on the registration books.
The Bonds are issued pursuant to and in full compliance with the
laws of the Commonwealth of Pennsylvania, and by appropriate action duly
taken by the Company which authorizes the execution and delivery of the
Indenture.
The Owner of this Bond shall 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 default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued
under the Indenture and then outstanding may become or may be declared due
and payable before the stated maturity thereof, together with interest
accrued thereon.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modifications of the rights and obligations of
the Company and the rights of the Owners of the Bonds at any time by the
Company with the consent of the Bank and the Holders of all Bonds at the time
Outstanding. Any such consent or any waiver by the Bank and the Holders of
all Bonds at the time Outstanding shall be conclusive and binding upon the
Owner and upon all future Owners of this Bond and of any Bond issued in
replacement hereof whether or not notation of such consent or waiver is made
upon this Bond. The Indenture also contains provisions which, subject to
certain conditions, permit or require the Trustee to waive certain past
defaults under the Indenture and their consequences.
It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to
and in connection with the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in due
time, form and manner as required by law.
This Bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been signed by the Trustee or
the Tender Agent, as authenticating agent.
4
IN WITNESS WHEREOF, Lannett Company, Inc. has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of
its Chairman and its corporate seal to be affixed, imprinted or reproduced
hereon and attested by the manual or facsimile signature of its Secretary or
Assistant Secretary, all as of the Date of Issuance.
Attest: LANNETT COMPANY, INC.
__________________________ By:__________________________
(Assistant) Secretary Chairman
(SEAL)
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the
within-mentioned Trust Indenture.
FIRST UNION NATIONAL BANK, as Trustee
By:_________________________________
Authorized Signature
Date of Authentication: __________________
(Form of Transfer)
FOR VALUE RECEIVED, _______________, the undersigned, hereby
sells, assigns and transfers unto _________________ (Tax Identification or
Social Security No. __________________) the within Bond and all rights
thereunder, and hereby irrevocably constitutes and appoints _____________
attorney to transfer the within Bond on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:__________________ ___________________________________
NOTICE: Signature must be NOTICE: The Signature to this
guaranteed by an approved assignment must correspond with the
eligible guarantor name as it appears upon the face of
institution, an the within Bond in every particular,
institution which is a without alteration or enlargement or
participant in a Securities any change whatever.
Transfer Association
recognized signature
guarantee program.
5
PLEDGE AND SECURITY AGREEMENT
(Unremarketed Bonds)
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement") is made the
30th day of April, 1999, by Lannett Company, Inc., a Delaware corporation
(the "Pledgor") in favor of FIRST UNION NATIONAL BANK, a national banking
association (the "Bank").
WHEREAS, the Pledgor is issuing its $2,300,000 aggregate principal
amount Taxable Variable Rate Demand/Fixed Rate Revenue Bonds, Series of 1999
(the "Bonds"), under a Trust Indenture, dated April 30, 1999 (the
"Indenture"), by and between the Pledgor and First Union National Bank, as
trustee (the "Trustee"); and
WHEREAS, Pledgor and the Bank have entered into a Reimbursement
Agreement, dated April 30, 1999 (the "Reimbursement Agreement"), pursuant to
which the Bank has agreed, subject to the conditions precedent provided in
the Reimbursement Agreement, to issue an irrevocable direct pay letter of
credit by Bank in favor of the Trustee (the "Letter of Credit").
NOW, THEREFORE, the parties, intending to be legally bound,
agree as follows:
1. Defined Terms. As used in this Agreement, the terms defined
in the preambles to this Agreement shall have such meanings and the following
terms have the following meanings (all such meanings to be equally applicable
to both the singular and plural forms of the terms defined, all capitalized
terms not defined herein shall have the meanings ascribed to such terms in
the Reimbursement Agreement):
"Collateral" means all property at any time pledged to
the Bank under this Agreement (whether described in this Agreement or not)
and all income therefrom and proceeds thereof.
"Event of Default" has the meaning given to such term in
the Reimbursement Agreement.
"Pledged Bonds" has the meaning given to such term in
Section 3 hereof.
"Pledged Bonds Custodian" means First Union National
Bank (or such other successor thereto or substitute therefor) in its capacity
as collateral agent for the Bank.
"Remarketing Agent" has the meaning given to such term
in the Indenture.
"Tender Agent" has the meaning given to such term in the
Indenture.
"Unremarketed Bonds" has the meaning given to such term
in the Indenture.
6
2. Interpretation. (a) Unless the context otherwise indicates,
words expressed in the singular shall include the plural and vice versa and
the use of the neuter, masculine or feminine gender is for convenience only
and shall be deemed to mean and include the neuter, masculine or feminine
gender, as appropriate.
(b) Headings of articles and sections herein are solely
for convenience of reference, do not constitute a part hereof and shall not
affect the meaning, construction or effect hereof.
(c) All references herein to "Articles," "Sections,"
"Paragraphs" and other subdivisions are to the corresponding Articles,
Sections, Paragraphs or subdivisions of this Agreement; the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Paragraph or
subdivision hereof.
3. Pledge. The Pledgor hereby pledges, assigns, hypothecates
and transfers to the Bank all of the Pledgor's right, title and interest to
the Unremarketed Bonds delivered from time to time to the Tender Agent by the
owners thereof and grants to the Bank a first lien on, and security interest
in, all of its right, title and interest in and to the Unremarketed Bonds,
the interest thereon, and all proceeds thereof, as collateral security for
the prompt and complete payment by the Pledgor (by acceleration, at stated
maturity, or otherwise) of all amounts payable from time to time by the
Pledgor to the Bank in respect of the Indebtedness. Unless all amounts drawn
under the Letter of Credit with respect to the payment of the Purchase Price
of the Bonds pursuant to mandatory and optional tenders of the Bonds are
reimbursed to the Bank on the same day as such Drawings, the Pledgor shall,
no later than 5:00 p.m. (Philadelphia time) on the same day, (a) deliver or
use its best efforts to cause to be delivered to the Pledged Bonds Custodian,
Unremarketed Bonds in a principal amount equal to the unreimbursed portion of
such drawing (such Unremarketed Bonds so delivered to and held by the Pledged
Bonds Custodian from time to time to be referred to as the "Pledged Bonds")
and (b) give or use its best efforts to cause to be given to the Bank notice
of the number and principal amount of each such Pledged Bond.
4. Registration of and Interest on Pledged Bonds. If the Bonds
are in certificated form, Pledged Bonds shall be registered in the name of
the Pledged Bonds Custodian and shall be duly endorsed for transfer by the
Pledged Bonds Custodian in blank or by appropriate instruments of transfer
duly executed in blank. The Bank may, but shall not be obligated to, request
that Pledged Bonds be registered in its name at any time or from time to
time. Any interest on Pledged Bonds shall be paid to or upon the order of the
Bank and shall be applied as a credit against the Indebtedness with respect
to the related Principal and Interest Drawings under the Letter of Credit in
accordance with the terms of the Reimbursement Agreement. The Pledged Bonds
Custodian shall follow the written direction of the Bank ensuring the release
or transfer of the Pledged Bonds.
5. Release of Pledged Bonds. Upon payment to the Bank of the
proceeds of remarketed Pledged Bonds in an amount sufficient to cover the
principal of and accrued interest, if any, on the Unremarketed Bonds, the
Bank shall (i) reinstate the Letter of Credit to an amount equal to the
principal amount of such Bonds together with an amount equal to forty-six
(46) days interest thereon calculated at an interest rate (based on a 365 or
366 day year, as applicable, for the actual number of days elapsed) of
seventeen percent (17%) to pay interest on the Bonds; (ii) notify the Trustee
of the amount of such reinstatement; and (iii) release or instruct the
Pledged Bonds Custodian to release Pledged Bonds in a principal amount equal
to the principal amount of such payment to the Bank from the pledge and
security interest created by this Agreement. Such Pledged Bonds shall be
delivered to or upon the order of the Tender Agent only after payment to the
Bank as aforesaid.
6. Redemption of Pledged Bonds. In the event any Pledged Bond
is called for redemption under the Indenture, Pledgor shall use its best
efforts to cause the Trustee to take all such actions as shall be required
under the Indenture to effect the redemption and shall pay or cause to be
paid the redemption price to or to the order of the Bank as a credit against
the Indebtedness.
7. Rights of the Bank. The Bank shall not be liable, except in
the case of its willful misconduct or gross negligence, for failure to
collect or realize upon the Indebtedness or the Collateral or any part
thereof, or for any delay in so doing, nor shall the Bank be under any
obligation to take any action whatsoever with regard thereto. If an Event of
Default has occurred and its continuing, the Bank, with or without notice,
shall have the
7
right to exercise all rights, privileges or options pertaining to any Pledged
Bonds, as if it were the absolute owner thereof, upon such terms and
conditions as it may, in its sole discretion determine, all without liability
except to account to the Pledgor for property actually received by it. The
Bank shall have no duty to exercise any of the aforesaid rights, privileges
or options and shall not be responsible for any failure to do so or delay in
so doing.
8. Remedies. In the event that any portion of the Indebtedness
has been declared due and payable (upon scheduled maturity, acceleration or
otherwise), the Bank, without demand for performance or other demand,
advertisement or notice of any kind (except the notice specified below of
time and place of public or private sale) to the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are expressly
waived by the Pledgor), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels or portions at public or private sale or sales, at any exchange,
broker's board or at any of the Bank's offices or elsewhere upon such terms
and conditions as it may, in its sole discretion, deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk, with the right to the Bank, upon any
such sale or sales, public or private, to purchase the whole or any part of
the Collateral so sold, free to any right or equity of redemption in the
Pledgor, which right or equity is hereby expressly waived or released by
Pledgor. The net proceeds or any such collection, recovery, receipts,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care,
safekeeping, or otherwise of any and all of the Collateral or in any way
relating to the rights of the Bank under this Agreement, including, but not
limited to, reasonable attorneys' fees and legal expenses, shall be applied
first to the satisfaction of the Indebtedness in such order as the Bank may
elect, the Pledgor remaining liable for any deficiency remaining unpaid after
such application, and only after so paying over such net proceeds and after
the payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Uniform Commercial
Code, need the Bank account for the surplus, if any, to the Pledgor. The
Pledgor agrees that the Bank need not give more than five (5) days' notice of
the time and place of any public sale or of the time after which a private
sale or other intended disposition is to take place and that such notice is
reasonable notification of such matters. In addition to the rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to any of the Indebtedness, the
Bank shall have the authority to exercise all the rights and remedies of a
secured party under the Uniform Commercial Code. Notwithstanding anything
contained herein to the contrary, the Bank may not sell, assign, give an
option or options to purchase, contract to sell or otherwise dispose of and
deliver the Collateral unless it shall reinstate the Letter of Credit in full
as to principal and interest with respect to such Bonds, except this shall
not apply in the case of a conversion of the Bonds to a Fixed Rate in
accordance with the terms of the Indenture.
9. Representations, Warranties and Covenants of the Pledgor.
The Pledgor represents and warrants that: (a) on the date of delivery to the
Bank or the Pledged Bonds Custodian of any Pledged Bonds, none of the
Remarketing Agent, the Tender Agent, the Trustee nor any other person, firm
or corporation (other than the Pledgor or the Bank or the Pledged Bonds
Custodian) will have any right, title or interest in and to the Pledged
Bonds; (b) it has, and on the date of delivery to the Bank or the Pledged
Bonds Custodian of any Pledged Bonds will have, full power, authority and
legal right to pledge all of its right, title and interest in and to the
Pledged Bonds pursuant to this Agreement; (c) the Pledged Bonds and the
proceeds thereof, are not subject to any pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor which would include the Pledged Bonds. The
Pledgor covenants and agrees that it will defend the Bank's and the Pledged
Bonds Custodian's right, title and security interest in and to the Pledged
Bonds and the proceeds thereof against the claims and demands of all persons
at the Pledgor's sole cost and expense.
10. No Disposition, etc. Except as contemplated in this
Agreement, without the prior written consent of the Bank, the Pledgor agrees
that it will not sell, assign, transfer, exchange or otherwise dispose of, or
grant any option with respect to, the Collateral, nor will it create, incur
or permit to exist any pledge, lien, mortgage, hypothecation, security
interest, charge, option or any other encumbrance with respect to any of the
Collateral, or any interest therein, or any proceeds thereof, except for the
lien and security interest provided for by this Agreement.
8
11. Sale of Collateral. (a) The Pledgor recognizes that the
Bank may be unable to effect a public sale of any or all of the Pledged Bonds
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws, but may
be compelled to resort to one or more private sales thereof to a restricted
group or purchasers who may be obliged to agree, among other things, to
acquire such securities for their own account for investment and not with a
view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner. The Bank
shall be under no obligation to delay a sale of any of the Pledged Bonds for
the period of time necessary to permit the Pledgor to register such
securities for public sale under the Securities Act, or under applicable
state securities law, even if the Pledgor would agree to do so.
(b) The Pledgor further agrees to promptly do or cause
to be done all such other reasonable acts and things as may be necessary to
make any sale or sales of any portion or all of the Pledged Bonds valid and
binding and in compliance with any and all applicable laws, regulations,
orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Pledgor's cost and
expense.
12. Further Assurances. The Pledgor agrees that at any time and
from time to time upon the written request of the Bank or the Pledged Bonds
Custodian, the Pledgor will execute and deliver such further documents and do
such further acts and things as the Bank or the Pledged Bonds Custodian may
reasonably request in order to effect the purposes of this Agreement.
13. 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 provision of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
14. No Waiver; Cumulative Remedies. No act, delay or omission
of the Bank or the Pledged Bonds Custodian shall be deemed to be a waiver of
any rights or remedies granted under this Agreement and no waiver shall be
valid unless in writing, signed by the Bank, and then only to the extent set
forth in such waiver. A waiver of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Bank would otherwise have on any future occasion. No failure to exercise
and no delay in exercising on the part of the Bank or the Pledged Bonds
Custodian any right, power or privilege under this Agreement shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other right, power or
privilege. The rights and remedies provided in this Agreement are cumulative
and may be exercised singly or concurrently, and are not exclusive of any
rights or remedies provided by law or equity.
15. Waivers, Amendments. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Pledgor and the Bank and if such
amendment affects the rights or duties of the Pledged Bonds Custodian, with
the written consent of the Pledged Bonds Custodian. This Agreement and all
obligations of the Pledgor under this Agreement shall be binding upon the
successors and assigns of the Pledgor, and shall, together with the rights
and remedies of the Bank or the Pledged Bonds Custodian under this Agreement,
inure to the benefit of the Bank and its successors and assigns.
16. Fees and Expenses of the Pledged Bonds Custodian. The
Pledgor agrees that it will pay or reimburse the Bank for (i) all fees
charged and expenses incurred by the Pledged Bonds Custodian for and in
connection with its acting as such for the purposes of this Agreement and
(ii) all costs and other expenses incurred by the Bank or the Pledged Bonds
Custodian in connection with the transfer, registration or exchange of the
Pledged Bonds.
17. Governing Law. This Agreement shall be governed by and be
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
9
18. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be a original and all of which shall
constitute but one and the same instrument.
10
IN WITNESS WHEREOF, the Pledgor and the Bank have caused this
Agreement to be duly executed and delivered by their duly authorized officers
as of the day and year first above written.
ATTEST: LANNETT COMPANY, INC.
_____________________ By:____________________________
(Assistant) Secretary William Farber
Chairman
FIRST UNION NATIONAL BANK
By:____________________________
Vice President
11
April 30, 1999
First Union National Bank
123 S. Broad Street
15th Floor
Philadelphia, PA 19109
Ladies and Gentlemen:
We refer to the Pledge and Security Agreement dated April 30,
1999 (the "Agreement"), between Lannett Company, Inc. (the "Pledgor") and
you. All terms used in this letter and not otherwise defined shall have the
meanings given to such terms in the Agreement.
We accept our appointment as Pledged Bonds Custodian under the
Agreement and undertake to hold any Pledged Bonds which the Pledgor shall
deliver or cause to be delivered to us in such capacity as your collateral
agent until otherwise directed in writing by you and to otherwise perform the
duties of the Pledged Bonds Custodian under the Agreement.
The Pledgor by its signature to this letter agrees, jointly and
severally, to indemnify and hold us and our directors, officers, agents and
employees (collectively, the "Indemnitees") harmless from and against any and
all claims, liabilities, losses, damages, fines, penalties and expenses,
including out-of-pocket, incidental expenses, legal fees and expenses and the
allocated costs and expenses of in-house counsel and legal staff ("Losses")
that may be imposed on, incurred by or asserted against the Indemnitees or
any of them for following any instruction or other direction upon which we
are authorized to rely pursuant to the terms of the Agreement. In addition to
and not in limitation of the immediately preceding sentence, the Pledgor also
agrees jointly and severally to indemnify and hold the Indemnitees and each
of them harmless from and against any and all Losses that may be imposed on,
incurred by or asserted against, the Indemnitees or any of them in connection
with or arising out of our performance under the Agreement, provided we have
not acted with gross negligence or engaged in willful misconduct. Anything in
the Agreement to the contrary notwithstanding, in no event shall we be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if we have been advised of
such loss or damage and regardless of the form of action.
12
The provisions of this paragraph shall survive the termination of
the Agreement and our resignation or removal for any reason.
Very truly yours,
FIRST UNION NATIONAL BANK
By: __________________________
Vice President
ACKNOWLEDGED AND AGREED:
LANNETT COMPANY, INC.
By: ________________________________
Chairman
13
REMARKETING AGREEMENT
$2,300,000
Lannett Company, Inc.
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds
Series of 1999
This REMARKETING AGREEMENT ("Agreement") is made and entered into
April 30, 1999, by and between FIRST UNION CAPITAL MARKETS CORP.
("Remarketing Agent") and LANNETT COMPANY, INC., a Delaware corporation (the
"Company") and shall be effective if, as and when the $2,300,000 Taxable
Variable Rate Demand/Fixed Rate Revenue Bonds, Series of 1999 (the "Bonds")
are issued by the Company. This Agreement shall be upon the following terms
and conditions, to wit:
In the event there is any conflict between provisions of this
Agreement and the Indenture (hereinafter defined), the provisions of the
Indenture shall be controlling.
1. Consideration. The consideration for this Agreement is comprised
of the mutual covenants and agreements herein contained, together with other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged. Further, the parties hereto have entered into this
Agreement each intending to be legally bound hereby.
2. Bonds. The Bonds are being issued pursuant to a Trust Indenture,
of even date herewith (the "Indenture"), between the Company and First Union
National Bank, as trustee (acting in such capacity, the "Trustee"), which
Indenture calls for and requires the services of a Remarketing Agent with
regard to certain determinations and actions to effect remarketings of the
Bonds as more specifically set forth in the Indenture to which further
reference is hereby made. Unless the context otherwise clearly requires, all
initially capitalized terms and phrases used herein and not otherwise defined
herein shall have the meanings given to such terms and phrases in the
Indenture.
3. Establishment of the Floating Rate and the Fixed Rate. (a) The
Remarketing Agent agrees to establish the Floating Rate in accordance with
the provisions of the Indenture and the Bonds from and including the period
during which the Bonds are initially issued through the earlier of (i) the
Conversion Date or (ii) the date on which the Bonds mature, are fully
redeemed, are accelerated or otherwise cease to be outstanding, as the case
may be. The Remarketing Agent shall determine the Floating Rate in accordance
with the applicable provisions of this Agreement and the Indenture.
(b) The Remarketing Agent shall determine the Fixed Rate in
accordance with the applicable provisions of this Agreement and the
Indenture.
(c) In the event that the Remarketing Agent fails to
establish the Floating Rate in accordance with the provisions of this
Agreement and the Indenture, the Floating Rate to be borne by the Bonds for
the next succeeding Weekly Period shall be determined as provided in the
Indenture.
4. Payment of Bonds. Payments of amounts due on the Bonds from time
to time as provided in the Indenture shall be made as provided in the
Indenture by the Trustee or the Tender Agent on behalf of the Company from
amounts on deposit in the Bond Fund, from remarketing proceeds, and certain
other security including but not limited to an irrevocable, direct pay letter
of credit (the "Letter of Credit") issued by First Union National Bank
(acting in such capacity, the "Bank"). In no event shall the Remarketing
Agent be in any manner or to any extent liable for the payment of any amounts
due on the Bonds, either as to principal, interest, premium (if any),
Purchase Price or otherwise, except as herein expressly provided.
5. Tenders. On each date on which tenders of Bonds are required
under Sections 5.01, 5.03 or 5.04 of the Indenture ("Tender Dates"), Owners
of the Bonds will be required to tender such Bonds to First Union National
Bank, as tender agent, or any successor tender agent appointed under the
Indenture (the "Tender Agent")
14
for purchase in accordance with the Indenture. The Purchase Price for any
such tendered Bonds will be derived from moneys in the manner set forth in
Section 5.05 of the Indenture.
6. Appointment and Acceptance. The Company desires that the
Remarketing Agent undertake to remarket any Bond in respect of which a notice
pursuant to Sections 5.01, 5.03 or 5.04 of the Indenture has been delivered,
such remarketings to be made pursuant to the provisions of the Indenture and
this Agreement. The Company hereby appoints, subject to the terms and
conditions herein contained, First Union Capital Markets Corp., as
Remarketing Agent for the Bonds.
The Remarketing Agent, subject to the terms and conditions
herein contained, accepts such appointment and the duties and obligations
imposed by the Indenture and this Agreement.
7. Standard of Care. In performing its duties and obligations
hereunder, the Remarketing Agent shall use the same degree of care and skill
as a prudent person would exercise under the same circumstances in the
conduct of his own affairs. The Remarketing Agent shall not be liable in
connection with the performance of its duties hereunder except for its own
willful misconduct, gross negligence or bad faith.
8. Dealing in Bonds. The Remarketing Agent may deal in the Bonds to
the same extent and with the same effect as provided in the Indenture with
respect to the Trustee.
9. Remarketing Agent as Bondholder. The Remarketing Agent, for its
own account, may in good faith buy, sell, own, hold and deal in any of the
Bonds, and may join in any action which any Bondholder may be entitled to
take with like effect as if it were not the Remarketing Agent. The
Remarketing Agent, in its individual capacity, either as principal or agent,
may also engage in or be interested in any financial or other transaction
with the Company, and may act as depositary, trustee or agent for any
committee or body or holders of Bonds secured by the Indenture or other
obligations of the Company as freely as if it were not the Remarketing Agent.
The Remarketing Agent shall have the right to tender Bonds for purchase
pursuant to the provisions of the Indenture and shall have all other rights
of a Bondholder at any time that it is the Owner of any Bonds.
10. Cooperation as to Registration. The Company will cooperate in
taking all steps reasonably requested by the Remarketing Agent which the
Remarketing Agent or its counsel may consider necessary or desirable: (a) to
register the sale of the Bonds by the Remarketing Agent under any federal or
state securities law or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended; or (b) to enable the Remarketing Agent to establish
a "due diligence" defense to any action commenced against the Remarketing
Agent in respect of any disclosure documents.
11. Timely Determinations. So long as this Agreement remains in
effect, the Remarketing Agent agrees that it will (i) be available to advise
the Company on a timely basis with respect to the applicable Floating Rate
and (ii) perform its duties under the Indenture and this Agreement. In
addition, the Remarketing Agent will furnish the Trustee, the Tender Agent,
the Company and other parties required to have such information under the
Indenture, such information as they may from time to time reasonably request
with respect to the purchasers of the Bonds and the prices at which the Bonds
are sold.
12. Waiver of Lien. The Remarketing Agent hereby waives any rights
to, or lien on, any funds or obligations held by or owing to it pursuant
hereto or to the Indenture. The Remarketing Agent shall be reimbursed its
costs and expenses and compensated for acting as Remarketing Agent hereunder
and pursuant to the Indenture from payments to be made by the Company
pursuant to the applicable provisions of this Agreement and the Indenture.
13. Performance. (a) The Remarketing Agent shall, in accordance with
the applicable terms of the Indenture and this Agreement, use its best
efforts (i) to sell all Bonds on the applicable Purchase Date at the
applicable Purchase Price for which it receives a timely tender notice at its
principal corporate office from any Bondholder; and (ii) for a period not
exceeding thirty (30) days beginning on each Tender Date, to sell all Pledged
Bonds.
15
(b) The Remarketing Agent shall not offer for sale or sell
any Bonds upon the occurrence and continuation of any Event of Default as
defined in the Indenture.
(c) By not later than 10:00 a.m., New York City time, on
the Purchase Date, the Remarketing Agent shall give telephonic notice,
promptly confirmed in writing, to the Bank, the Trustee and the Tender Agent,
specifying:
(i) the total principal amount of the Bonds, if
any, remarketed by it; and
(ii) the names of the persons to whom such Bonds
were sold and are to be registered, each such person's address and social
security number or taxpayer identification number, the denominations in which
replacement Bonds are to be prepared, and any other appropriate registration
and transfer instructions.
(d) Not later than 10:00 a.m., New York City time, on each
Purchase Date, the Remarketing Agent shall transfer the proceeds of the
remarketing of the Bonds to the Tender Agent for deposit in the Remarketing
Account established with respect to such Bonds and, if there are not
sufficient remarketing proceeds on deposit in the Remarketing Account, the
Remarketing Agent shall give telephonic notice (promptly confirmed by
telecopy) to the Tender Agent, the Trustee, the Borrower and the Bank (if the
Letter of Credit securing the Bonds is then in effect) of (i) the aggregate
amount of Bonds tendered or deemed tendered for purchase; and (ii) the amount
of proceeds on deposit in the Remarketing Account established with respect to
such Bonds.
(e) The Remarketing Agent shall determine the rate or rates
to be borne by the Bonds pursuant to, at the times specified in, and in the
manner provided in Articles II and V of the Indenture.
14. Representations and Warranties. Each of the parties hereto
represents and warrants to the other that this Agreement has been duly
authorized, executed and delivered by such party and (assuming due
authorization, execution and delivery by the other party hereto), constitutes
a legal, valid and binding obligation of such party. The Remarketing Agent
hereby further represents and warrants that it is a member of the National
Association of Securities Dealers, Inc., has a capitalization of at least
$15,000,000 and is authorized by law to perform all the duties imposed upon
it by this Agreement and by the Indenture. The principal corporate office of
the Remarketing Agent for purposes of the Indenture is as set forth below in
Section 17.
15. Remarketing Fees. In consideration of the services to be
provided by the Remarketing Agent hereunder, the Company agrees to pay to the
Remarketing Agent all costs, fees and expenses in connection with each
remarketing in accordance with Schedule A which is attached hereto and
incorporated herein by reference.
16. Termination. This Agreement and the obligations of the
Remarketing Agent hereunder shall, in the absence of earlier termination
pursuant to the provisions hereof, terminate on the earlier of (a) the date
all of the Bonds to be remarketed after the Conversion Date have been
remarketed and (b) the final maturity of the Bonds. Notwithstanding the
foregoing, the Remarketing Agent may at any time resign and be discharged of
the duties and obligations created by this Agreement and the Indenture by
giving at least thirty (30) days' notice to the Company, the Bank and the
Trustee. The Remarketing Agent may be removed by the Company at any time for
any reason or no reason upon thirty (30) days' written notice. No such
resignation or removal shall be effective unless and until a successor
Remarketing Agent is appointed by the Company and accepts such appointment.
Upon receipt of notice from the Remarketing Agent or upon delivery of notice
to the Remarketing Agent, the Company agrees to use its best efforts to
appoint a successor Remarketing Agent. Upon the effective date of any such
resignation or removal, this Agreement shall terminate.
In the event of the resignation or removal of the
Remarketing Agent, the Remarketing Agent shall pay over, assign and deliver
any moneys and Bonds held by it in such capacity to its successor or, if
there be no successor, to the Company or its assigns. Termination of this
Agreement pursuant to any of the provisions of this Section shall not
terminate liability for any fees due hereunder and not yet paid.
16
17. Notices. Except as otherwise required in Section 13 hereof, any
notice required or permitted to be given under this Agreement may be given in
person or by mail or telecopier and shall be deemed received, if mailed,
three (3) business days after being deposited in the United States mail,
postage prepaid, or, if by telecopier, when received at the appropriate
office for transmission, in all cases addressed to the Company, the Bank, the
Trustee, the Tender Agent and the Remarketing Agent, as follows:
The Company:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attention: Vice President - Finance
The Bank:
First Union National Bank
123 S. Broad Street
PA 1222
Philadelphia, PA 19109
Attention: Jane Sobieski, Vice President
The Trustee:
First Union National Bank
123 S. Broad Street
11th Floor, PA-1249
Philadelphia, PA 19109
Attention: Corporate Trust Department
The Tender Agent:
First Union National Bank
123 S. Broad Street
11th Floor, PA-1249
Philadelphia, PA 19109
Attention: Corporate Trust Department
17
The Remarketing Agent:
First Union Capital Markets Corp.
301 College Street, 8th Floor
Charlotte, NC 28288-0600
Attention: William Bingham, Vice President
Each party hereto may change the address for service of notice upon
it by a notice in writing and in the manner provided herein to the other
parties hereto.
18. Telephonic Requests or Directions. The Remarketing Agent may
rely upon, and is hereby authorized to honor, any telephonic request or
directions which the Remarketing Agent believes, in its sole discretion, to
emanate from an authorized representative of the Company, the Trustee or the
Tender Agent acting pursuant hereto, regardless of the source of such request
or direction. Any telephonic request or direction to the Remarketing Agent
shall promptly be confirmed in writing; provided, however, that failure to
receive any such written confirmation shall not affect the authority of the
Remarketing Agent to rely and act upon such request or direction.
19. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
and the officers and directors and controlling persons thereof, and no other
person(s) will have any rights or obligations hereunder.
20. Severability. If any provision of this Agreement for any reason
shall be held or deemed to be or shall, in fact, be invalid, inoperative or
unenforceable as applied in any particular case in any jurisdiction or all
jurisdictions, such circumstances shall not have the effect of rendering the
provision in question invalid, inoperative or unenforceable in any other case
or circumstance, or of rendering any other provision or provisions of this
Agreement invalid, inoperative or unenforceable to any extent whatever. In
case any one or more of the provisions in this Agreement shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.
21. Amendment. This Agreement may be amended by the parties hereto
without the consent of or notice to any owners of the Bonds.
22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
23. Captions. Captions to the sections hereof are inserted for
convenience of reference only and shall not be relied upon for any
interpretive purpose whatsoever.
24. Disclosure. The Company hereby covenants and agrees to
immediately advise the Remarketing Agent of any event or circumstance that
would materially and adversely affect the financial condition of the Company
or its ability to perform its obligations under the Reimbursement Agreement,
and to cooperate with the Remarketing Agent and/or its counsel in the
preparation of such disclosure material deemed necessary by the Remarketing
Agent in connection therewith. The Company also hereby covenants to cooperate
with the Remarketing Agent and/or its counsel and to provide updated
disclosure materials to the Remarketing Agent to be delivered to Owners of
Bonds in connection with any remarketing of the Bonds in order to comply with
state and federal laws, regulations and rules. The Company further agrees to
pay all costs and fees associated with the preparation of such disclosure
materials.
25. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania.
18
IN WITNESS WHEREOF, the parties hereto have caused this Remarketing
Agreement to be executed as of the date first above written.
ATTEST: LANNETT COMPANY, INC.
By:___________________________
(Assistant) Secretary William Farber, Chairman
FIRST UNION CAPITAL MARKETS CORP.
By:___________________________
Vice President and Director
SCHEDULE A
Fees for Remarketing Bonds
Prior to any remarketing in connection with a Conversion Date, the
remarketing fee payable by the Company to the Remarketing Agent shall be an
amount equal to 0.125% per annum of the outstanding principal amount of
Bonds, payable annually in advance; provided, however, the Company and the
Remarketing Agent agree that such fee shall be adjusted upwards, from time to
time, in the event that the applicable prevailing fees for such services in
the marketplace increase.
Remarketing fees in connection with a remarketing for a conversion
to Fixed Rate shall be subject to good faith negotiations prior to such
remarketing.
In addition, the Remarketing Agent shall be reimbursed for all its
costs and expenses in preparing any disclosure material required for any
remarketings, including but not limited to, legal costs.
19
BOND PLACEMENT AGREEMENT
$2,300,000
Lannett Company, Inc.
Taxable Variable Rate Demand/Fixed Rate Revenue Bonds
Series of 1999
BOND PLACEMENT AGREEMENT ("Placement Agreement"), dated April
30, 1999, by and between LANNETT COMPANY, INC., a Delaware corporation (the
"Company") and FIRST UNION CAPITAL MARKETS CORP. (the "Placement Agent").
1. Background
A. The Company is issuing its Taxable Variable Rate
Demand/Fixed Rate Revenue Bonds, Series of 1999, in the aggregate principal
amount of $2,300,000 (the "Bonds") pursuant to a Trust Indenture of even date
herewith (the "Indenture") between the Company and First Union National Bank,
as Trustee (the "Trustee"). The proceeds of the Bonds are being applied to
finance a project (the "Project") consisting of (i) the refinancing of
certain indebtedness of the Company; (ii) the payment of deferred interest
due to the controlling shareholder of the Company; and (iii) the payment of a
portion of the costs of issuance of the Bonds and a portion of the costs of
issuance of the $3,700,000 Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds (Lannett Company,
Inc. Project), Series of 1999, issued simultaneously with the Bonds for the
benefit of the Company.
B. Concurrently with, and as a condition to the issuance of
the Bonds, the Company will cause to be delivered to the Trustee an
irrevocable, direct-pay Letter of Credit, dated the date of issuance of the
Bonds (the "Letter of Credit") issued by First Union National Bank. Under the
terms of the Letter of Credit, the Trustee will be entitled to draw up to an
amount equal to the principal of the Bonds plus at least forty-six (46) days'
accrued and unpaid interest thereon (at a maximum rate of 17% per annum for
the Bonds, based on a 365 or 366 day year, as applicable, and the actual
number of days elapsed). The Letter of Credit will be issued pursuant to a
Reimbursement Agreement, of even date herewith (the "Reimbursement
Agreement"), between the Bank and the Company. The Letter of Credit will
expire on October 31, 2002, unless earlier terminated pursuant to its terms
(the "Letter of Credit Termination Date"). The Bonds mature on May 1, 2003
and are subject to optional, extraordinary, mandatory and mandatory sinking
fund redemption and optional and mandatory tender prior to maturity, all as
set forth in the Placement Memorandum (as hereinafter defined).
2
C. The Bonds will be issued pursuant to a Resolution
adopted by the Company (the "Resolution") and the Indenture.
D. The Bonds will be remarketed in accordance with the
applicable provisions of the Indenture and a Remarketing Agreement of even
date herewith (the "Remarketing Agreement"), by and between First Union
Capital Markets Corp., in its capacity as remarketing agent, and the Company.
E. The professional advisors referred to in this Placement
Agreement are:
Bond Counsel,
Bank Counsel and Obermayer Rebmann Maxwell & Hippel LLP
Placement Agent Counsel: One Penn Center, 19th Floor
1617 John F. Kennedy Boulevard
Philadelphia, PA 19103
Company Counsel: J. Randolph Lawlace, Esquire
Fox, Rothschild, O'Brien & Frankel, LLP
2000 Market Street
Philadelphia, PA 19103
2. Placement and Closing. Subject to the terms and conditions and in
reliance on the representations, warranties, agreements and indemnities set
forth herein, (i) the Placement Agent hereby agrees to privately place the
Bonds, as agent for the Company; and (ii) the Company hereby agrees to
deliver to such investors, all (but not less than all) of the Bonds as
provided in the Indenture. The aggregate price for the Bonds shall be 100% of
the principal amount thereof plus accrued interest to the date of Closing (as
hereinafter defined), payable in immediately available funds to the order of
the Trustee for the account of the Company. As consideration for its private
placement of the Bonds, the Company shall pay the Placement Agent a fee equal
to 1.25% of the principal amount of the Bonds in immediately available funds
on the date of closing. Closing will be held at the offices of Obermayer
Rebmann Maxwell & Hippel LLP at 9:00 a.m. prevailing local time, on April 30,
1999 (the "Closing"), or at such other place and time as may be agreed to by
the parties hereto. The Bonds will be delivered to The Depository Trust
Company in New York, New York, in fully registered form in such denominations
and registered in such names as shall be requested by the Placement Agent.
3. Company's Representations. The Company makes the following
representations as of the date hereof, all of which will continue to be in
effect subsequent to the private placement of the Bonds:
(a) The Company is a corporation duly organized and validly
subsisting under the laws of the State of Delaware and is qualified as a
foreign corporation to conduct business in the Commonwealth of Pennsylvania.
(b) The Company has full legal power to execute and deliver
the Bonds, the Indenture, the Reimbursement Agreement, the Remarketing
Agreement, this Placement Agreement, the Reimbursement Documents (as such
term is defined in the Reimbursement Agreement) and any and all other
documents, certificates and agreements executed by the Company in connection
with the issuance of the Bonds and the Letter of Credit (collectively, the
"Company Documents") and to perform its obligations thereunder and hereunder.
(c) The Company has duly authorized the execution and
delivery of the Company Documents and the undertaking of its obligations
thereunder and hereunder, and the taking of all actions as may be required on
the part of the Company to carry out the same; and the making and performance
of each such agreement will not conflict with, nor constitute a breach of or
a default under, any provision of the Certificate of Incorporation, By-laws
or other constituent documents of the Company or any indenture, agreement or
other instrument to which the Company is a party or by which the Company or
any of its properties may be bound, or any constitutional or statutory
provision or order, rule, regulation, decree or ordinance of any court,
government or governmental body to which the Company or any of its properties
are subject.
3
(d) As of the Closing, the Company Documents will be duly
executed and delivered by the Company, will be in full force and effect and,
assuming due authorization, execution and delivery by the other parties
thereto, each of the Company Documents will constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles in effect from time to time affecting
the enforcement of creditors' rights generally.
(e) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best knowledge of the
Company, threatened against the Company, nor to the best knowledge of the
Company is there any basis therefor, wherein an unfavorable ruling or finding
would adversely affect the validity or enforceability of the Company
Documents or would materially and adversely affect any of the transactions
contemplated by this Placement Agreement.
(f) The information set forth in the Placement Memorandum
(as hereinafter defined), with the exception of the information in Appendices
A and B (as to which no representation or warranty is made), is true and
correct in all material respects and does not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(g) The Company has obtained all consents, approvals,
authorizations and orders of governmental or regulatory authorities that are
required to be obtained by it as a condition precedent to the execution by
the Company of the Company Documents. The Company has obtained all consents
that are required to be obtained by it for the performance of its obligations
under the Company Documents.
4. Placement Agent's Representations, Warranties and Covenants. The
Placement Agent makes the following representations, warranties and
covenants, all of which will continue to be in effect subsequent to the
purchase and placement of the Bonds:
(a) The Placement Agent has full legal power to execute and
deliver this Placement Agreement, the Remarketing Agreement and any and all
other agreements, documents and certificates executed by the Placement Agent
in connection with the issuance of the Bonds (collectively, the "Placement
Agent Documents") and to perform its obligations thereunder and hereunder.
(b) The Placement Agent has received all necessary
information with respect to the Company, the Bank and the Project in order to
place the Bonds and any and all information relating to the Company or the
Bank and their affairs, which the Placement Agent has requested has been
provided to the Placement Agent.
(c) The Placement Agent Documents have been duly executed
and delivered by the Placement Agent and assuming the due authorization,
execution and delivery by the other parties thereto, each of the Placement
Agent Documents is the binding and enforceable agreement of the Placement
Agent enforceable in accordance with its terms, except that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws or equitable principles affecting creditors'
rights or remedies generally.
(d) The documents relating to the issuance of the Bonds,
including without limitation, the Indenture and the Letter of Credit, have
been reviewed by the Placement Agent and such documents contain terms
acceptable to, and agreed to by, the Placement Agent.
(e) The Placement Agent has complied with and will continue
to comply with all applicable regulations of the Municipal Securities
Rulemaking Board.
(f) The Bonds are being offered in authorized denominations
of $100,000 or more and are being sold to no more than thirty-five (35)
persons each of whom the Placement Agent reasonably believes (i) has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of the prospective investment and (ii) is
not purchasing for more than one account or with a view to distributing the
Bonds. The Placement Agent acknowledges that each investor has been given or
will have been given an
4
opportunity to examine such material relating to the Bonds, the Company, the
Project and the Bank as is satisfactory to each of them.
(g) There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before or by any court, public body or
other governmental authority, pending or, to the best knowledge and
information of the Placement Agent, threatened against or affecting the
Placement Agent, wherein an unfavorable decision, ruling or finding could
materially adversely affect the business or financial condition of the
Placement Agent or could adversely affect the transactions contemplated by
this Agreement, or which in any manner raises any questions concerning the
legality, validity or enforceability of this Agreement nor to the best
knowledge and belief of the Placement Agent is there any basis therefor.
(h) The execution, delivery and performance by the
Placement Agent of this Agreement does not and will not violate its
certificate of incorporation or by-laws or any order, injunction, ruling or
decree by which the Placement Agent is bound, and does not and will not
constitute a breach of or a default under any agreement, indenture, mortgage,
lease, note or other obligation, instrument or arrangement to which the
Placement Agent is a party or by which the Placement Agent or any of its
property is bound, or contravene or constitute a violation of any law, rule
or regulation to which the Placement Agent or any of its property is subject,
and no approval or other action by, or filing or registration with any
governmental authority or agency is required in connection therewith which
has not been previously obtained or accomplished.
5. Placement Memorandum. Prior to the Closing, the Company approved
and authorized the distribution of the Placement Memorandum (including all
exhibits and appendices thereto, the " Placement Memorandum"), and authorized
the use of the Placement Memorandum in connection with the private placement
of the Bonds.
6. Company Covenants. The Company covenants to indemnify, hold
harmless and defend the Placement Agent, its officers, agents and employees,
past, present and future and each person, if any, who controls the Placement
Agent within the meaning of Section 15 of the Securities Act of 1933, as
amended (individually, an "Indemnified Party" and collectively, the
"Indemnified Parties"), to the full extent permitted by law against any and
all losses, claims, damages or liabilities (including reasonable legal and
other expenses of defending any actions) that they or any of them may incur
or have asserted against them caused by (a) any untrue statement or alleged
untrue statement of a material fact in the Placement Memorandum (except for
the information contained in Appendices A and B) or any amendments or
supplements to the Placement Memorandum; or (b) the omission or alleged
omission to state therein a material fact required to be stated in the
Placement Memorandum or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading or (c) any breach
(or alleged breach) by the Company of any of its representations or
warranties set forth in this Placement Agreement or directly or indirectly
resulting from, arising out of, or related to the Project.
7. Actions Brought Against Indemnified Parties. In case any action
shall be brought against any Indemnified Party with respect to which
indemnity may be sought against the Company under the provisions of this
Placement Agreement, such Indemnified Party shall promptly notify the Company
in writing, and the Company shall assume the defense thereof, including the
employment of counsel and the payment of all expenses. Any Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the sole cost and expense of such Indemnified Party unless (i)
the employment of such counsel has been specifically authorized in writing by
the Company; or (ii) the named parties to any such action (including any
impleaded parties) include both such Indemnified Party and the Company and
such Indemnified Party shall have been advised by its counsel that it is
probable that a conflict of interest between the Company and such Indemnified
Party may arise and for this reason it is not desirable for the same counsel
to represent both the Company and the Indemnified Party (in which case the
Company shall not have the right to assume the defense of such action on
behalf of such Indemnified Party); it being understood, however, that in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, the Company shall not be liable for the
reasonable fees and expenses or more than one separate firm of attorneys for
all such Indemnified Parties, which firm shall be designated in writing by
the Indemnified Parties). The Company shall not be liable for any settlement
of any such action effected without its written consent, but if settled with
the written consent of the Company or if there is a final judgment for the
plaintiff in any such action, the Company agrees to indemnify and hold
harmless
5
any Indemnified Party from and against any loss, cost, expense or liability
by reason of such settlement or judgment, including but not limited to
attorneys' fees. This indemnity includes but is not limited to reimbursement
for expenses reasonably incurred by the Indemnified Party in investigating
the claim and in defending it if the Company declines to assume the defense,
provided that the matter is one for which indemnification is required of the
Company under this Agreement. The indemnity agreements of the Company
contained in Section 6 hereof shall survive the delivery and payment of the
Bonds.
8. Blue Sky Requirements. The Placement Agent shall, in its sole
discretion, determine the jurisdictions in which the Bonds shall be offered
and sold. The Placement Agent shall use its best efforts to qualify the Bonds
for offer, sale and delivery under the securities or "Blue Sky" laws of each
such jurisdiction to the extent required. The Company shall cooperate with
the Placement Agent in its efforts to qualify the Bonds for such offer, sale
and delivery under the securities or "Blue Sky" laws of such jurisdictions as
the Placement Agent may request. The Company consents to the use of the
Placement Memorandum by the Placement Agent in obtaining such qualifications.
9. Conditions of Closing. The obligations of the Placement Agent to
privately place the Bonds on the date of Closing shall be subject, except as
specifically waived in writing by the Placement Agent in its sole discretion,
to (i) the accuracy of the representations and warranties on the part of the
Company contained herein as of the date hereof and as of the date of Closing;
(ii) the accuracy in all material respects of the statements of the officers
of the Company made in any certificates or other documents furnished pursuant
to the provisions hereof, and (iii) the performance by the Company of its
obligations to be performed hereunder or otherwise at or prior to the Closing
and to the following additional conditions:
(a) At the Closing, the Resolution shall have been duly
adopted by the Company and shall be in full force and effect and constitute
the legal, valid and binding action of the Company, and the Company
Documents, when executed and delivered by the parties thereto, will
constitute legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms, and such documents
shall not have been amended, modified or supplemented except as may have been
agreed to in writing by the Placement Agent;
(b) At the Closing, there shall not have been any material
adverse change in the business, properties or financial condition of the
Bank, as described in the Placement Memorandum, or of the Company, which in
the judgment of the Placement Agent, makes it inadvisable to proceed with the
offer and sale of the Bonds;
(c) The Letter of Credit shall have been delivered by the
Bank;
(d) At the Closing, the Placement Memorandum shall not have
been amended, modified or supplemented, except as may have been agreed to in
writing by the Placement Agent;
(e) The Company shall not have defaulted in the performance
of any of its covenants hereunder, under the Indenture or under the Company
Documents;
(f) The Placement Agent shall have received:
(i) An opinion of Bond Counsel, dated the date of
Closing, addressing the matters set forth in Exhibit A hereto and any other
matters which may be reasonably requested by the Placement Agent, with such
changes therein as are acceptable to the Placement Agent and its counsel;
(ii) An opinion of Counsel for the Company, dated
the date of Closing and addressed to the Placement Agent, the Bank, the
Trustee and Bond Counsel covering the matters set forth in Exhibit B hereto
and any other matters which may be reasonably requested by the Placement
Agent, with such changes therein as are acceptable to the Placement Agent,
the Bank, the Trustee and Bond Counsel;
(iii) An opinion of Counsel for the Bank, dated
the date of Closing and addressed to the Company, the Placement Agent, the
Bank and the Trustee, covering the matters set forth in Exhibit C hereto,
with such changes therein as are acceptable to the Company, the Placement
Agent, the Bank, the Trustee and Bond Counsel;
6
(iv) A certificate, dated the date of Closing and
signed by an authorized representative of the Company to the effect (A) that
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under this Placement
Agreement, the Indenture and the Reimbursement Agreement or otherwise at or
prior to the Closing; and (B) such other matters as Bond Counsel and the
Placement Agent may reasonably request;
(v) Such additional documents, instruments,
agreements, certificates and opinions as Bond Counsel and the Placement Agent
may reasonably request to evidence the accuracy of the representations and
warranties and compliance with the covenants set forth herein, including the
covenants the exemption of the offering of the Bonds from registration under
the Securities Act of 1933, as amended; and
(g) Between the date hereof and the date of Closing, the
market price or marketability of the Bonds shall not have been materially
adversely affected, in the reasonable judgment of the Placement Agent
(evidenced by a written notice to the Company terminating the obligation of
the Placement Agent to privately place the Bonds), by reason of any of the
following:
(i) Legislation enacted by or introduced in the
Congress of the United States or reported out of or pending in committee or
recommended for passage by the President of the United States, or a decision
rendered by a court established under Article III of the Constitution of the
United States, or an order, ruling, regulation or official statement (final,
temporary or proposed) issued or made or any other release or announcement by
or on behalf of the Securities and Exchange Commission, or any other
governmental agency having jurisdiction of the subject matter, to the effect
that obligations of the general character of the Bonds are not exempt from
qualification under, or other requirements of, the Trust Indenture Act of
1939, as amended, or that the issuance, offering or sale of obligations of
the general character of the Bonds, including any or all underlying
arrangements as contemplated hereby or by the Placement memorandum, is or
would be in violation of the federal securities laws as amended and then in
effect and the regulations promulgated thereunder; or
(ii) The declaration of war or engagement in major
hostilities by the United States or the occurrence of any other local,
national or international emergency or calamity relating to the effective
operation of the government of or the financial community in the United
States, or a default with respect to the debt obligations of, or the
institution of proceedings under the federal bankruptcy laws by or against,
any state of the United States or agency thereof, the City of New York, New
York, or any city in the United States having a population of over 1,000,000,
the effect of which on the financial markets of the United States will be
such as, in the Placement Agent's judgment, makes it impracticable for the
Placement Agent to place the Bonds; or
(iii) The declaration of a general banking
moratorium by federal, New York or Pennsylvania authorities, or the general
suspension of trading on any national securities exchange; or
(iv) Any amendment to the United States
Constitution or the Pennsylvania Constitution or action by any federal or
state court, legislative body, regulatory body or other authority materially
adversely affecting the validity or enforceability of the Resolution, the
Bonds, the Indenture, the Reimbursement Agreement, the Letter of Credit or
this Placement Agreement, or the ability of either the Company or the Bank to
meet its respective covenants under such agreements; or
(v) Any event occurring, or information becoming
known which, in the reasonable judgment of the Placement Agent or the Company
makes untrue in any material respect any statement or information contained
in the Placement Memorandum, or has the effect that the Placement Memorandum
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
If the Placement Agent terminates its obligation to place the Bonds
for any reason permitted by this Placement agreement, this Placement
Agreement will terminate without liability on the part of the Company or the
Placement Agent, except for the provisions of Section 8 as to indemnification
of the Placement Agent.
7
10. Representation of the Placement Agent. The Placement Agent
acknowledges that each investor has been given or will have been given an
opportunity to examine such material relating to the Bonds, and the Bank as
is satisfactory to each of them.
11. Notices and Other Actions. All notices, demands and formal
actions hereunder will be in writing, mailed, telegraphed or delivered to:
The Company:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President - Finance
with a copy to:
Fox, Rothschild, O'Brien & Frankel, LLP
2000 Market Street
Philadelphia, PA 19103
Attn: J. Randolph Lawlace, Esquire
The Placement Agent:
First Union Capital Markets Corp.
Second Floor South
600 Penn Street
Reading, PA 19602
Attn: Director: Tax-Advantage Products
12. Acknowledgment of Multiple Representation. Each of the parties
hereto acknowledges and confirms that it was advised on or before March 1,
1999 that Obermayer Rebmann Maxwell & Hippel LLP would act as Bond Counsel,
Bank Counsel and Counsel to the Placement Agent in connection with the
transaction described in this Bond Placement Agreement. Each of the parties
hereto further acknowledges and confirms that, upon being so advised, it
agreed to such multiple representation.
13. Execution in Counterparts. This Placement Agreement may be
executed in any number of counterparts, all of which shall constitute but one
and the same document, and any parties hereto may execute this Placement
Agreement by signing any such counterparts.
14. Successors. This Placement Agreement will inure to the benefit
of and be binding upon the parties hereto and their successors, and no other
person shall acquire or have any right hereunder or by virtue hereof.
15. Applicable Law. This Placement Agreement shall be governed by
and construed in accordance with the domestic internal laws (but not the law
of conflict of laws) of the Commonwealth of Pennsylvania.
8
IN WITNESS WHEREOF, the Company and the Placement Agent, intending
to be legally bound, have caused their duly authorized representatives to
execute and deliver this Bond Placement Agreement as of the date first
written above.
ATTEST: LANNETT COMPANY, INC.
_____________________________ By:_________________________________
(Assistant) Secretary William Farber, Chairman
WITNESS: FIRST UNION CAPITAL MARKETS CORP.
_____________________________ By:_________________________________
Director and Vice President
9
EXHIBIT A
Points to be covered in
Opinion of Bond Counsel
1. The Bonds are exempt from registration under the
Securities Act of 1933 and the Indenture is exempt from qualification under
the Trust Indenture Act of 1939, as amended.
2. The description and summaries under the captions entitled
"The Bonds" (except for the information extracted from information provided
by DTC) and "The Indenture" contained in the Placement Memorandum fairly
summarize the applicable provisions of the documents or portions of
applicable law, as the case may be, which are purported to be summarized
therein.
EXHIBIT B
Points to be covered in Opinion of counsel for the Company
1. The Company is a corporation duly organized and validly
subsisting under the laws of the State of Delaware and is qualified as a
foreign corporation to conduct business in the Commonwealth of Pennsylvania.
2. The Company has the necessary authority to execute and
deliver the Company Documents, and the undertakings of its obligations
thereunder, and the taking of all actions as may be required on the part of
the Company to carry out the same, and the making and performance of each
such agreement will not conflict with, constitute a breach of or a default
under, any provision of the Certificate of Incorporation, By-laws or other
constituent documents of the Company or, to counsel's knowledge, any
indenture, agreement or other instrument to which the Company is a party or
by which the company or any of its properties may be bound, or any
constitutional or statutory provision or order, rule, regulation, decree or
ordinance of any court, government or governmental body to which the Company
or any of its properties are subject.
3. The Company Documents have been duly authorized, executed,
acknowledged and delivered by the Company, are in full force and effect and
constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as enforcement may be limited by equitable principles, or by
bankruptcy, insolvency, reorganization, moratorium and other similar laws or
equitable principles in effect from time to time affecting the enforcement of
creditors' rights generally.
4. To the best of such counsel's knowledge, no authorization,
consent, approval or review of any court or governmental body or regulatory
authority is required for the authorization, execution and delivery by the
Company of, and performance by the Company of its obligations under, the
Company Documents or for any action taken by the Company in connection with
the transactions contemplated thereby, which has not been obtained or
effected.
5. There is no action, suit, litigation, proceeding, inquiry
or investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of such counsel's
knowledge, threatened against the Company, nor to the best of such counsel's
knowledge is there any basis therefor, wherein an unfavorable ruling or
finding would adversely affect (i) the business, properties or financial
condition of the Company; (ii) the validity or enforceability of the Company
Documents; or (iii) any of the transactions contemplated by the undertaking
of the Project and the aforementioned documents.
6. The Company has duly authorized the taking of any and all
action necessary to carry out and give effect to the transactions
contemplated to be performed on its part by the Company Documents and the
Placement Memorandum and has duly authorized the taking of any and all action
necessary to carry out and give effect to the transactions contemplated to be
performed on its part by the Company Documents.
7. The Company has all necessary permits, licenses,
certifications and qualifications to conduct its business as it is presently
being conducted, subject to such exceptions which, in the aggregate, would
not have a material adverse effect on the business or operations of the
Company and the Company is not in any material way in breach of or in default
under any applicable law or administrative regulation of the Commonwealth of
Pennsylvania or of the United States or any applicable judgment or decree.
8. The Company has obtained all approvals required under
applicable federal and state laws (other than securities laws) to finance the
Project.
EXHIBIT C
Points to be covered in the Opinion of Counsel for the Bank
1. The Bank is a national banking association, validly existing and
in good standing under the laws of the United States of America and has full
power and authority to issue and deliver the Letter of Credit and to execute
and deliver the Reimbursement Agreement and to perform its obligations
thereunder.
2. The Reimbursement Agreement and the Letter of Credit have been
duly authorized and constitute valid and binding obligations of the Bank,
enforceable against the Bank in accordance with their respective terms,
except as the enforceability thereof may be limited by equitable principles,
or by bankruptcy, insolvency, reorganization, moratorium, liquidation and
similar laws in effect from time to time affecting the enforcement of
creditors, rights generally, as such laws would apply in the event of the
bankruptcy, insolvency, reorganization or liquidation of, or other similar
occurrence with respect to, the Bank or in the event of any moratorium or
similar occurrence affecting the Bank. In connection with its opinion in this
paragraph, counsel expresses no opinion as to whether a court, in the
exercise of its equitable powers, may temporarily enjoin or restrain payment
of the drawing under the Letter of Credit. However, counsel is of the opinion
that a court would not permanently enjoin or restrain such payment in the
event of a bankruptcy, reorganization, insolvency or liquidation or similar
proceeding affecting the Company.
3. The issuance of the Letter of Credit and the performance by the
Bank of its obligations thereunder (a) require no consents or approvals of,
or filing with, any governmental or other regulatory agencies and (b) do not
violate any existing law, rule, regulation or ordinance.
4. The Letter of Credit constitutes a security issued or guaranteed
by a bank within the meaning of Section 3(a)(2) of the Securities Act of
1933, as amended (the "Securities Act") and, as such, is not required to be
registered pursuant to the Securities Act.
5. Although such counsel has not been engaged by the Bank to review
generally, or to express its opinion with respect to, disclosure materials
used in connection with the offer and sale of the Bonds and expresses no
opinion with respect thereto other than as set forth in this Paragraph 5,
such counsel has reviewed the information relating to the Letter of Credit
and the Reimbursement Agreement in the Placement Memorandum (the "Placement
Memorandum") set forth under the heading "The Letter of Credit and the
Reimbursement Agreement." Such information sets forth accurate summaries of
the portions of the Letter of Credit and Reimbursement Agreement purported to
be summarized therein.
</TABLE>
Exhibit 10(af)
Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed
Revenue Bonds (Lannett Company, Inc. Project)
Series of 1999
Exhibit 10 (af)
Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project) Series of 1999
LOAN AGREEMENT
Dated April 30, 1999
by and between
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
and
LANNETT COMPANY, INC.
Relating to Philadelphia Authority for Industrial Development
$3,700,000 Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
ARTICLE I - DEFINITIONS ................................................................................. 3
Section 1.01 Definitions...................................................................... 3
Section 1.02 Content of Certificates and Opinions............................................. 3
Section 1.03. Interpretation................................................................... 4
ARTICLE II - THE LOAN; USE OF PROCEEDS.................................................................... 4
Section 2.01. Loan of Funds to the Borrower.................................................... 4
Section 2.02. Use of Proceeds.................................................................. 4
Section 2.03 Establishment of Completion Date................................................. 4
Section 2.04 Covenants for Benefit of Bondholders and Bank.................................... 5
ARTICLE III - PAYMENT PROVISIONS.......................................................................... 5
Section 3.01 Loan Payments.................................................................... 5
Section 3.02 Letter of Credit................................................................. 6
Section 3.03 Time of Loan Payments............................................................ 6
Section 3.04 Additional Payments; Taxes; Utility Charges...................................... 7
Section 3.05 Acceleration of Payment to Redeem Bonds.......................................... 8
Section 3.06 No Defense or Set-Off............................................................ 9
Section 3.07 Termination Upon Payment or Defeasance of Fixed Rate Bonds....................... 9
Section 3.08 Assignment of Authority's Rights................................................. 9
Section 3.09 Assignment by Borrower........................................................... 10
Section 3.10 Indemnity Against Claims......................................................... 10
Section 3.11 Authority is Conduit Issuer; Borrower is Real Party in
Interest; Covenant Not to Sue.................................................... 11
ARTICLE IV - BORROWER OBLIGATIONS; ASSIGNMENT TO TRUSTEE.................................................. 12
Section 4.01 General Obligation of the Borrower............................................... 12
Section 4.02 Assignment to Trustee............................................................ 12
Section 4.03 Maintenance and Operation of the Project Facilities.............................. 13
Section 4.04 Maintenance of Existence......................................................... 13
Section 4.05 Compliance with Laws............................................................. 14
Section 4.06 Notice of Bankruptcy Case Commencement........................................... 15
Section 4.07 Substitute Letter of Credit...................................................... 15
ARTICLE V - THE PROJECT FACILITIES........................................................................ 16
Section 5.01 Prohibited Uses.................................................................. 16
ARTICLE VI - INSURANCE; DESTRUCTION, DAMAGE, EMINENT DOMAIN............................................... 16
Section 6.01 Insurance to be Maintained....................................................... 16
Section 6.02 Destruction, Damage and Eminent Domain........................................... 16
Section 6.03 Notice of Property Loss.......................................................... 17
Section 6.04 Disposition of Casualty Insurance and Condemnation
Award Proceeds................................................................... 17
ARTICLE VII - ADDITIONAL COVENANTS OF THE BORROWER........................................................ 17
Section 7.01 Compliance with Laws ........................................................... 18
Section 7.02 Power to Perform Obligations..................................................... 18
Section 7.03 Inspection....................................................................... 18
Section 7.04 Additional Information .......................................................... 19
Section 7.05 Tax-Exemption.................................................................... 19
Section 7.06 Hazardous Substances............................................................. 19
Section 7.07 No Material Proceedings Affecting Borrower....................................... 20
Section 7.08 Tax Filings...................................................................... 20
Section 7.09 No Existing Defaults............................................................. 20
Section 7.10 No Material Misstatements or Omissions........................................... 20
Section 7.11 Inducement to Borrower........................................................... 20
Section 7.12 Borrower's Annual Reporting Obligations.......................................... 20
Section 7.13 Cooperation with Trustee......................................................... 21
Section 7.14 Rebate Fund...................................................................... 21
ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES............................................................ 22
Section 8.01 Events of Default................................................................ 22
Section 8.02 Acceleration..................................................................... 23
Section 8.03 Payment of Loan Payments on Default; Suit Therefor............................... 24
Section 8.04 Other Remedies................................................................... 24
Section 8.05 Waiver........................................................................... 25
Section 8.06 Cumulative Rights................................................................ 25
Section 8.07 No Exercise of Remedies Without Consent of Bank.................................. 25
Section 8.08 Determination of Taxability Not a Default........................................ 26
ARTICLE IX - OPTIONS TO TERMINATE AGREEMENT............................................................... 26
Section 9.01 Option to Terminate Upon Defeasance.............................................. 26
Section 9.02 Option to Terminate Upon the Occurrence of Certain Events........................ 26
ARTICLE X - MISCELLANEOUS 27
Section 10.01 Approval of Indenture............................................................ 27
Section 10.02 Taxes and Insurance; Rights of Authority to Pay.................................. 28
Section 10.03 Illegal Provisions Disregarded................................................... 28
Section 10.04 Limitation of Liability of the Authority......................................... 28
Section 10.05 No Recourse as to the Authority.................................................. 28
Section 10.06 Reference to Statute or Regulation............................................... 29
Section 10.07 Notices.......................................................................... 29
Section 10.08 Applicable Law................................................................... 30
Section 10.09 Amendments....................................................................... 30
Section 10.10 Term of Agreement................................................................ 31
Section 10.11 Amounts Remaining in Bond Fund................................................... 31
Section 10.12 Survival of Covenants, Conditions and Representations............................ 31
Section 10.13 Headings......................................................................... 31
Section 10.14 Multiple Counterparts............................................................ 31
Section 10.15 Consent.......................................................................... 31
</TABLE>
THIS LOAN AGREEMENT, dated April 30, 1999 (the "Agreement"), is by
and between PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT (the
"Authority"), a public body corporate and politic constituting an
instrumentality of the Commonwealth of Pennsylvania organized and existing
under the Pennsylvania Economic Development Financing Law (Act of August 23,
1967, Act No. 102, P.L. 251, 73 P.S. ss.ss.371 et seq., as amended and
supplemented from time to time (the "Act") and LANNETT COMPANY, INC., a
Pennsylvania corporation ("Borrower").
WITNESSETH:
WHEREAS, the Authority is authorized under the Act to acquire, hold,
construct, improve, maintain, own, finance, lease in the capacity of lessor
or lessee, and/or sell industrial, commercial and specialized development
projects for the public purpose of alleviating unemployment, maintaining
employment at a high level and creating and developing business
opportunities, by the construction, improvement, rehabilitation,
revitalization and financing of industrial commercial and specialized
enterprises; and
WHEREAS, the Authority, to accomplish the purposes of the Act, is
empowered to extend credit to such employment promoting enterprises in the
name of the Authority on such terms and conditions and in such manner as it
may deem proper for such consideration and upon such terms and conditions as
the Authority may determine to be reasonable; and
WHEREAS, the Borrower has requested that the Authority issue bonds
to finance a project (the "Project") consisting of: (i) the construction of
an approximately 40,000 square foot manufacturing and manufacturing-related
facility as an addition to a 33,000 square foot existing facility located at
9000 State Road, Philadelphia, Pennsylvania (the "9000 State Road Facility")
or, alternatively, the acquisition and renovation of an existing
manufacturing and manufacturing-related facility located at 9030 State Road,
Philadelphia, Pennsylvania (the "9030 State Road Facility"); (ii) the
acquisition of equipment for installation and use in either the 9000 State
Road Facility or the 9030 State Road Facility; and (iii) the payment of a
portion of the costs of issuance of the Bonds; and
WHEREAS, pursuant to and in accordance with the provisions of the
Act and a resolution adopted by the Authority (the "Resolution"), the
Authority has authorized and undertaken to issue $3,700,000 aggregate
principal amount of its Tax-Exempt Variable Rate Demand/Fixed Rate Revenue
Bonds (Lannett Company, Inc. Project), Series of 1999 (the "Bonds") for the
purpose of providing funds for financing the Project; and
WHEREAS, the Act provides that the Bonds shall be secured by a
pledge of, and have a lien upon, the revenues and receipts derived pursuant
to this Agreement; and
WHEREAS, the Bonds are to be issued under and secured by a Trust
Indenture of even date herewith (the "Indenture"), between the Authority and
First Union National Bank, as trustee (the "Trustee"); and
WHEREAS, this Agreement provides that the Authority will loan the
proceeds of the Bonds to the Borrower to finance a portion of the costs of
the Project and the Borrower will agree, among other things, to repay the
loan in installments equal to payments of debt service on and the Purchase
Price of the Bonds when due; and
WHEREAS, the Borrower has agreed to make payments pursuant to this
Agreement sufficient in the aggregate to pay fully when due the principal of,
premium, if any, and interest on the Bonds, the Purchase Price of Bonds
tendered for purchase, and related expenses; and
WHEREAS, the Borrower has caused to be delivered to the Trustee an
irrevocable direct pay Letter of Credit (the "Letter of Credit") issued by
First Union National Bank (the "Bank"), providing for the payment of the
aggregate principal amount and the Purchase Price of the Bonds, due and
payable upon tender, maturity, mandatory redemption, optional redemption,
sinking fund redemption or acceleration upon an event of default hereunder,
plus interest calculated for a period up to forty-six (46) days at a maximum
interest rate of fifteen percent (15%) per annum to pay interest on, or the
interest component of the Purchase Price of, the Bonds; and
WHEREAS, the Trustee has agreed under the Indenture to draw on the
Letter of Credit at such times and in such amounts as shall be sufficient to
pay when due the principal, interest and Purchase Price on the Bonds and to
credit all amounts paid under the Letter of Credit against the Borrower's
obligation to make installment payments under this Agreement for such items;
and
WHEREAS, as security for the full and prompt payment and performance
of all its obligations under the Indenture, including, specifically, without
limiting the generality of the foregoing, its obligation to make payment of
principal of, premium, if any and interest on the Bonds, when due, the
Authority has, pursuant to all the provisions of the Indenture, assigned to
the Trustee all of its right, title and interest in, to and under this
Agreement (except its right to indemnification and to receive its fees and
expenses thereunder), including without limitation, the right to receive the
installment payments payable by the Borrower hereunder; and
WHEREAS, the Authority hereby finds and determines that the
financing of the Project will comply with the purposes and provisions of the
Act; and
WHEREAS, the execution and delivery of this Agreement and the
Indenture, and the issuance of the Bonds under the Act, have been in all
respects duly and validly authorized by the Resolution of the Authority, duly
adopted and approved; and
WHEREAS, the Authority and the Borrower desire to enter into this
Agreement to set forth the terms and conditions upon which the Authority will
make the Loan, as hereinafter defined.
NOW, THEREFORE, in consideration of the above premises and of the
mutual covenants hereinafter contained, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Terms used as defined terms in the
recitals shall have the same meanings throughout this Agreement, and, in
addition thereto, capitalized terms used and not defined herein shall have
the meanings assigned to such terms in the Indenture.
Section 1.02 Content of Certificates and Opinions. The Trustee
may, but shall not be obligated to, require that every certificate or opinion
provided for in this Agreement with respect to compliance with any provision
hereof shall include (1) a statement to the effect that the Person making or
giving such certificate or opinion has read such provision and the
definitions herein relating thereto; (2) a brief statement as to the nature
and scope of the examination or investigation upon which the certificate or
opinion is based; (3) a statement to the effect that in the opinion of such
Person, he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion with respect to the
subject matter referred to in the instrument to which his signature is
affixed; (4) a statement of the assumptions upon which such certificate or
opinion is based, and that such assumptions are reasonable; and (5) a
statement as to whether, in the opinion of such Person, such provision has
been complied with.
Any such certificate or opinion made or given by an officer of the
Authority or the Borrower may be based, insofar as it relates to legal or
accounting matters, upon a certificate or opinion of or representation by
Counsel or an accountant, unless such officer knows, or in the exercise of
reasonable care should have known, that the certificate, opinion or
representation with respect to the matters upon which such certificate or
statement may be based, as aforesaid, is erroneous. Any such certificate or
opinion made or given by Counsel or an accountant may be based, insofar as it
relates to factual matters (with respect to which information is in the
possession of the Authority or the Borrower, as the case may be) upon a
certificate or opinion of or representation by an officer of the Authority or
the Borrower, unless such Counsel or accountant knows, or in the exercise of
reasonable care should have known, that the certificate or opinion or
representation with respect to the matter upon which such certificate or
opinion or representation may be based, as aforesaid, is erroneous. The same
officer of the Authority or the Borrower, or the same Counsel or accountant,
as the case may be, need not certify to all of the matters required to be
certified under any provision of this Agreement, but different officers,
Counsel or accountants may certify to different matters, respectively.
Section 1.03 Interpretation.
(a) Unless the context otherwise indicates, words expressed in the
singular shall include the plural and vice versa and the use of the neuter,
masculine or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of
contents hereof are solely for convenience of reference, do not constitute a
part hereof and shall not affect the meaning, construction or effect hereof.
(c) All references herein to "Articles, "Sections" and other
subdivisions are to the corresponding Articles, Sections or subdivisions of
this Agreement; the words "herein," "hereof," "hereby," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or subdivision hereof.
(d) Whenever in this Agreement it is required that notice be
provided to the Bank or that consent of the Bank be obtained, such provisions
shall be effective only when (i) the Letter of Credit is in effect and the
Bank is not in default thereunder, (ii) the Bank, in its capacity as provider
of the Letter of Credit, is the Holder of any Bonds or (iii) any amounts are
due and owing to the Bank under the Reimbursement Agreement.
ARTICLE II
THE LOAN; USE OF PROCEEDS
Section 2.01 Loan of Funds to the Borrower. The Authority
hereby agrees that simultaneously with the execution and delivery of this
Agreement, it will loan to the Borrower, upon the terms and conditions
specified herein and in the Indenture, the proceeds of the sale of the Bonds
(the "Loan"), and the Borrower agrees to receive such Loan from the
Authority, for the purposes provided herein and in the Indenture.
Section 2.02 Use of Proceeds. The proceeds of the Bonds shall
be deposited with the Trustee and applied as provided in the Indenture and in
this Agreement to finance a portion of the costs of the Project.
Section 2.03 Establishment of Completion Date.
(a) The Completion Date shall be evidenced to the Authority and
the Trustee by a certificate signed by an Authorized Representative of the
Borrower stating in effect that (i) all Property for the Project has been
acquired and all costs and expenses incurred in connection with such
acquisition have been paid; (ii) all equipment for the Project has been
installed, such equipment so installed is suitable and sufficient for the
operation of the Project, and all costs and expenses incurred in the
acquisition and installation of such equipment have been paid, and (iii) all
other facilities necessary in connection with the Project have been acquired,
constructed, improved, and equipped and all costs and expenses incurred in
connection therewith have been paid. Notwithstanding the foregoing, such
certificate shall state that it is given without prejudice to any rights
against third parties which exist at the date of such certificate or which
may subsequently come into being. Forthwith upon completion of the
acquisition and equipping of the Project, the Borrower agrees to cause such
certificate to be furnished to the Authority and the Trustee. If any amounts
remain, prior to any transfer of said amounts to the Bond Fund as provided
below, the Trustee shall give notice to the Borrower of the amount of funds
remaining unspent in the Project Fund. Any remaining moneys on deposit in the
Project Fund shall be forthwith applied to the payment of the Costs of the
Project, or if not so applied shall be promptly transferred by the Trustee
into the Bond Fund and applied as set forth in Section 2.03(b) below.
(b) If, after the receipt by the Trustee of the certificate
described in subsection 2.03(a) above, at least ninety-five percent (95%) of
the sum of (i) the actual amount of the proceeds received by the Authority
from the sale of the Bonds less amounts expended for issuance expenses and
(ii) any investment earnings on moneys in the Project Fund, have not been
used (A) for the acquisition, construction, reconstruction or improvement of
land or property of a character subject to the allowance for depreciation
under the Code, or (B) for payment of amounts which are, for federal income
tax purposes, chargeable to the Project's capital account or would be so
chargeable either with a proper election by the Borrower or but for a proper
election by the Borrower to deduct such amounts, any amount (exclusive of
amounts retained by the Trustee in the Project Fund for payment of Costs of
the Project not then due and payable) remaining in the Project Fund shall be
segregated by the Trustee in a separate subaccount of the Bond Fund and used
by the Trustee in accordance with the terms of Section 6.08 of the Indenture.
The Borrower shall be responsible for calculating the amount to be segregated
in the Bond Fund and shall notify the Trustee in writing of such amount.
Section 2.04 Covenants for Benefit of Bondholders and Bank.
This Agreement is executed in part to induce (a) the purchase by others of
the Bonds and (b) the issuance by the Bank of the Letter of Credit, and the
participation by the Bank in the funding of advances under the Letter of
Credit. Accordingly, all covenants and agreements on the part of the Borrower
and the Authority, as set forth in the Agreement, are hereby declared to be
for the benefit of the Owners from time to time of the Bonds and for the
benefit of the Bank.
ARTICLE III
PAYMENT PROVISIONS
Section 3.01 Loan Payments.
(a) The Borrower hereby agrees to duly and punctually pay (i) the
principal, premium, if any, and interest due and payable on the Bonds; (ii)
the Purchase Price of the Bonds, and (iii) any other amounts due and payable
by the Borrower under this Agreement. The Borrower shall be given an
immediate credit in the amount of all draws paid to the Trustee under the
Letter of Credit against the loan payments due hereunder. Any portion of the
loan payments due under this Agreement which is not timely paid (upon proper
demand under the Letter of Credit by the Trustee) from draws under the Letter
of Credit shall be paid to the Trustee directly by the Borrower as provided
in Section 3.03 hereof. Any other amounts required to be paid under this
Agreement shall be paid by the Borrower to the party entitled to receive same
hereunder and in the manner provided for herein. Loan payments shall be made
by the Borrower with the Borrower's funds, except to the extent a credit in
respect thereof has been granted pursuant to the terms of this Agreement. It
is the intention of the Authority and the Borrower that, notwithstanding any
other provision of this Agreement, the Authority shall receive funds from the
Borrower under this Agreement at such times and in such amounts as will
enable the Authority to meet all of its obligations under the Bonds and the
Indenture, including any such obligations surviving the payment of the Bonds
and the defeasance of the Indenture. The loan payments required by this
Section 3.01(a) shall be reduced after payment of the principal, premium if
any and interest on the Bonds in accordance with the terms of the Indenture
has been made.
(b) All loan payments and other sums due and payable to the
Authority or the Trustee under this Agreement shall be absolutely net to the
Authority or the Trustee, as applicable, free of any taxes, costs,
liabilities or other deductions whatsoever with respect to the Project
Facilities and the maintenance, repair, or use thereof or any portion
thereof, so that this Agreement shall yield all amounts due hereunder net to
the Authority or the Trustee throughout the term hereof.
(c) The Borrower hereby covenants to make all required payments
into the Rebate Fund as provided for in the Indenture.
Section 3.02 Letter of Credit. Concurrently with the issuance
by the Authority of the Bonds, the Borrower shall cause to be delivered to
the Trustee the Letter of Credit issued by the Bank, authorizing the Trustee
to make draws on the Bank, up to an aggregate stated amount of $3,769,945.20,
of which not more than $3,700,000 shall be in respect of principal on the
Bonds and not more than $69,945.20 shall be in respect of forty-six (46) days
interest accrued on the Bonds on or prior to the maturity thereof.
Section 3.03 Time of Loan Payments.
(a) The Borrower shall pay to the Trustee, as assignee of the
Authority, on the dates and times hereinafter set forth, for deposit in the
Bond Fund (but only to the extent such amounts have not been advanced to the
Trustee under the Letter of Credit), the following sums as payment of the
amount due hereunder:
(i) On any Interest Payment Date or any other date that any
payment of interest, premium, if any, or principal is required to be made in
respect of the Bonds pursuant to the Indenture, until the principal of,
premium, if any, and interest on the Bonds shall have been fully paid or
provision for the payment thereof shall have been made in accordance with the
Indenture, in immediately available funds, a sum which, together with any
moneys available for such payment in the Bond Fund, will enable the Trustee
to pay the amount payable on such date as principal of (whether at maturity
or upon redemption or acceleration or otherwise), premium, if any, and
interest on the Bonds as provided in the Indenture; provided, however, that
the obligation of the Borrower to make any payment hereunder shall be deemed
satisfied and discharged to the extent of the corresponding payment made by
the Bank to the Trustee under the Letter of Credit.
It is understood and agreed that all payments payable by the
Borrower under subsection (a)(i) of this Section 3.03 are assigned by the
Authority to the Trustee for the benefit of the Owners of the Bonds. The
Borrower assents to such assignment. The Authority directs the Borrower, and
the Borrower agrees to pay to the Trustee at the Principal Corporate Trust
Office of the Trustee, all payments payable by the Borrower pursuant to this
subsection (a)(i).
(ii) The Borrower covenants, for the benefit of the Owners of
the Bonds, to pay or cause to be paid, to the Tender Agent, such amounts as
shall be necessary to enable the Tender Agent to pay the purchase price of
Bonds delivered to it for purchase, all as more particularly described in
Sections 5.01, 5.03 and 5.04 of the Indenture; provided, however, that the
obligation of the Borrower to make any such payment under this subsection
(a)(ii) shall be reduced by the amount of moneys available for such payment
described in subsection (i) or (ii) of Section 5.05 of the Indenture; and
provided, further, that the obligation of the Borrower to make any payment
under this subsection (a)(ii) shall be deemed to be satisfied and discharged
to the extent of the corresponding payment made by the Bank under the Letter
of Credit.
(iii) Additionally, from time to time, the Borrower shall make
such payments as shall be necessary to make up any deficiency in or to fully
fund any of the funds established under the Indenture.
Section 3.04 Additional Payments; Taxes; Utility Charges. As
Additional Payments hereunder, the Borrower, during the term of the
Agreement, shall pay or cause to be paid the following:
(a) To the public officers charged with the collection thereof,
promptly as the same become due, all taxes (or contributions or payments in
lieu thereof), including but not limited to income, profits or property
taxes, which may now or hereafter be imposed by the United States of America,
any state or municipality or any political subdivision or subdivisions
thereof, and all assessments for public improvements or other assessments,
levies, license fees, charges for publicly supplied water or sewer services,
excises, franchises, imposts and charges, general and special, ordinary and
extraordinary (including interest, penalties and all costs resulting from
delayed payment of any of the foregoing) of whatever name, nature and kind
and whether or not now within the contemplation of the parties hereto and
which are now or may hereafter be levied, assessed, charged or imposed or
which are or may become a lien upon the payments due under the Agreement, the
Project Facilities or the use or occupation thereof, or upon the Borrower or
the Authority, or upon any franchises, businesses, transactions, income,
earnings and receipts (gross, net or otherwise) of the Borrower in connection
with the Project Facilities, or its earnings, profits or receipts from, or
its subleasing of, the Project Facilities; provided, however, that the
Borrower shall not be required to pay or discharge or cause to be paid or
discharged any tax, assessment, lien or other matter hereunder so long as the
validity thereof is being contested in good faith and by appropriate legal
proceedings diligently pursued, so long as the operation of the Project
Facilities or the receipt of income therefrom is not adversely affected by
reason thereof;
(b) All reasonable fees, charges and expenses of the Trustee, the
Remarketing Agent, the Placement Agent, the Tender Agent and the Bank, as and
when the same become due and payable;
(c) The reasonable fees and expenses of such accountants,
consultants, attorneys and other experts as may be engaged by the Authority,
the Trustee or the Tender Agent to prepare audits, financial statements,
reports, opinions or provide such other services required or permitted under
this Agreement or the Indenture; and
(d) The reasonable fees and expenses of the Authority (including
without limitation the Authority Annual Administrative Fee) and the Trustee
in connection with this Agreement, the Bonds, the Indenture or the
Remarketing Agreement, and any and all other expenses incurred in connection
with the authorization, issuance, sale and delivery of any such Bonds or
incurred by the Authority and the Trustee in connection with any litigation
which may at any time be instituted involving this Agreement, the Bonds, the
Indenture or any of the other documents contemplated thereby, or incurred in
connection with the supervision or inspection of the Agreement, or otherwise
in connection with this Agreement, the Indenture, the Bonds, the Remarketing
Agreement or any of the other documents, instruments or agreements in
connection therewith. The "Authority Annual Administrative Fee" shall mean
the annual fee paid on the Interest Payment Date in each May in an amount
equal to one percent (1%) of each loan payment made by the Borrower during
the immediately prior year for the general administrative services of the
Authority until the Bonds are paid in full. In the event that the Borrower
prepays the loan payments (other than through mandatory sinking fund
redemption), the Borrower shall pay to the Authority a prepayment fee equal
to one-half of one percent (0.5%) of the amount of such prepayment; provided
that in the event such prepayment is effected by a refunding by the
Authority, such prepayment fee shall be waived in full.
Such Additional Payments shall be billed to the
Borrower by the Authority, the Trustee, the Remarketing Agent, the Tender
Agent or the Bank, as the case may be from time to time, together with a
statement certifying that the amount billed has been paid or incurred and
attaching reasonable supporting documentation indicating that the amount
billed has been paid or incurred for one or more of the above items. After
such a demand, amounts so billed shall be paid by the Borrower within thirty
(30) days after receipt of the bill by the Borrower.
Section 3.05. Acceleration of Payment to Redeem Bonds. Whenever
the Bonds are subject to optional redemption or extraordinary redemption
pursuant to the Indenture and the provisions hereof, the Authority will, upon
request of the Borrower, direct the Trustee to call the same for redemption
as provided in the Indenture. Whenever any Bond is subject to mandatory
redemption pursuant to the Indenture, the Borrower will cooperate with the
Authority and the Trustee in effecting such redemption. In the event of any
mandatory, optional or extraordinary redemption of the Bonds, the Borrower
will pay or cause to be paid to the Trustee an amount equal to the applicable
redemption price as a prepayment of that portion of the loan payment
corresponding to the Bonds of such series to be redeemed together with
interest accrued to the date of redemption and will also pay all fees and
expenses of the Authority and the Trustee arising with respect to such
redemption or otherwise due and owing hereunder or under the Indenture at
such times and in such amounts as are required to effect the mandatory,
optional or extraordinary redemption of the Bonds under the terms of the
Indenture.
Section 3.06 No Defense or Set-Off. The obligations of the
Borrower to make loan payments shall be absolute and unconditional without
any defense or set-off for any reason, including, without limitation, any
acts or circumstances that may constitute failure of consideration,
destruction of or damage to the Project Facilities, invalidity or
unenforceability of the Bonds, commercial frustration of purpose or failure
of the Authority to perform and observe any agreement, whether express or
implied, or any duty, liability or obligation arising out of or connected
with this Agreement, it being the intention of the parties that the payments
required of the Borrower hereunder will be paid in full when due without any
delay or diminution whatsoever.
Section 3.07. Termination Upon Payment or Defeasance of Bonds.
When (a) interest on, and principal or the redemption price (as the case may
be) of, all Bonds issued under the Indenture, together with all other amounts
due and payable by the Borrower hereunder, shall have been paid, or (b) there
shall have been deposited with the Trustee an amount evidenced by moneys or
Government Obligations, the principal of and interest on which, when due,
without reinvestment, will provide sufficient moneys to fully pay the
principal or redemption price (as the case may be) of and all accrued
interest on all Bonds then Outstanding, as well as all other sums payable or
to become payable by the Borrower under the Agreement, as evidenced by a
verification report from an independent public accountant, delivered to the
Trustee, satisfactory in form and content to the Trustee, no further loan
payments shall be payable hereunder and, with the consent of the Bank (if the
Letter of Credit remains outstanding or if any amounts are due and owing to
the Bank under the Reimbursement Agreement), this Agreement shall thereupon
be terminated, and the Authority, (i) shall cause the Trustee to pay over to
the Borrower any additional moneys then remaining in any Funds under the
Indenture (and which will not be required to pay any amounts as set forth in
the preceding sentence), and (ii) shall pay over to the Borrower any
additional moneys which may be paid to the Authority by the Trustee;
provided, however, that in each case moneys remaining in any Fund under the
Indenture shall be first paid to the Bank to the extent of any moneys then
due and owing from the Borrower to the Bank under the Reimbursement Agreement
and, provided further, that the provisions of Section 3.10 shall not be
terminated.
Section 3.08. Assignment of Authority's Rights. As security for
the payment of the Bonds, the Authority will assign to the Trustee all the
Authority's rights under the Agreement (except its right to indemnification
and to receive its fees and expenses thereunder). Subject to the prior
assignment made to the Trustee to secure the Bonds, the Authority will also
assign all the Authority's rights under this Agreement to the Bank to secure
the Reimbursement Agreement (except its right to indemnification and to
receive its fees and expenses thereunder). The Borrower consents to such
assignments and agrees to make the loan payments under Section 3.01 and
Section 3.05 hereof directly to the Trustee without defense or set-off by
reason of any dispute between the Borrower and the Trustee. Whenever the
Borrower is required to obtain the consent of the Authority hereunder, the
Borrower shall also obtain the consent of the Bank.
Section 3.09 Assignment by Borrower. This Agreement may be
assigned in whole or in part by the Borrower without the necessity of
obtaining the consent of the Trustee or the Owners of the Bonds; provided,
however, that any such assignment shall require the prior written consent of
the Bank (as long as the Bank is not in default under the Letter of Credit)
and the Authority; and further provided that no assignment pursuant to this
Section shall be made otherwise than in accordance with the Act and the Code
as from time to time amended. The Borrower shall, within thirty (30) days
after execution thereof, furnish or cause to be furnished to the Authority,
the Trustee and the Bank a true and complete copy of each such assignment
together with any instrument of assumption.
Section 3.10 Indemnity Against Claims.
(a) The Borrower agrees that at all times it will protect and hold
the Authority and the Trustee, their officers, members, employees, directors
and agents harmless and indemnified from and against all claims for losses,
damages or injuries to others, including death, personal injury and property
damage or loss, arising during the term hereof or during any other period
arising out of the acquisition, installation and equipping of the Project
Facilities; and neither the Authority nor the Trustee shall be liable for any
loss, damage or injury to the person or property of the Borrower or its
agents, servants or employees or any other person who or which may be upon
the Project Facilities or damaged or injured as a result of any condition
existing or activity occurring upon the Project Facilities or any other
matter connected directly or indirectly therewith due to any act or
negligence of any person, excepting only willful misconduct of the Authority
or the Trustee, their officers, agents, members, directors or employees. The
indemnity provided for in this Section 3.10(a) shall be effective only to the
extent that any loss sustained by the Authority and the Trustee, their
officers, members, employees, directors and agents shall be in excess of the
net proceeds recovered upon any insurance carried with respect to the loss
sustained.
(b) The Borrower hereby covenants and agrees that it will
indemnify and hold the Trustee and its directors, officers, employees and
agents ("Indemnitees") harmless from and against all claims, liabilities,
losses, suits, judgments, fines, damages, penalties and expenses, including
out-of-pocket and incidental expenses and the fees and expenses of its
attorneys, as well as the allocated costs and expenses of its in-house
counsel and legal staff ("Losses") resulting from the Trustee following any
direction given to it under this Agreement, the Indenture and the other Bond
Documents. In addition to the requirements of the preceding sentence, the
Borrower also agrees to indemnify the Indemnitees and hold them harmless from
and against any and all Losses incurred by any of them resulting from the
Trustee's exercise and performance of its power and duties granted to it
under the Agreement, the Indenture and the other Bond Documents and not
resulting from Trustee's gross negligence or willful misconduct.
(c) The Borrower will indemnify, hold harmless and defend the
Authority and the Trustee, and the respective officers, members, directors,
officials and employees of each of them against all losses, costs, damages,
expenses, suits, judgments, actions and liabilities of whatever nature
including, specifically, any liability under any state or federal securities
laws (including but not limited to reasonable attorneys' fees, litigation and
court costs, amounts paid in settlement and amounts paid to discharge
judgments) directly or indirectly resulting from or arising out of or related
to: (i) the installation, operation, use, maintenance or ownership of the
Project Facilities (including compliance with laws, ordinances and rules and
regulations of public authorities relating thereto); or (ii) any statements
or representations with respect to the Borrower, the Project Facilities, this
Agreement, the Bonds, the Indenture, the Letter of Credit, the Reimbursement
Agreement or any other documents or instruments delivered at or in connection
with the closing held on the Closing Date (including any statements or
representations made in connection with the offer or sale thereof) made or
given to the Authority, the Trustee or any underwriters or purchasers of any
of the Bonds, by the Borrower or any of its officers, partners, agents or
employees, including, but not limited to, statements or representations of
facts, financial information or corporate or partnership affairs. The
Borrower also will pay and discharge and indemnify and hold harmless the
Authority and the Trustee from (x) any lien or charge upon payments by the
Borrower to the Authority and the Trustee under this Agreement and (y) any
taxes (including, without limitation, any ad valorem taxes and sales taxes,
assessments, impositions and other charges in respect of any portion of the
Project Facilities). If any such claim is asserted, or any such lien or
charge upon payments, or any such taxes, assessments, impositions or other
charges are sought to be imposed, the Authority or the Trustee will give
prompt notice to the Borrower, and the Borrower will have the sole right and
duty to assume, and will assume, the defense thereof, with full power to
litigate, compromise or settle the same in its sole discretion.
(d) If the indemnification provided heretofore is for any reason
determined to be unavailable to the Authority or the Trustee or their
directors, officers, employees and agents, or any of them, with respect to
any such Losses, the Authority and the Trustee as appropriate, shall be
entitled as a matter of right to contribution by the Borrower. The amount of
such contribution shall be in such proportion as is appropriate to reflect
relative culpability of the parties.
(e) The provisions of this Section 3.10 shall survive the
termination and discharge of this Agreement and the Indenture and the
resignation or removal of the Trustee for any reason.
Section 3.11. Authority is Conduit Issuer; Borrower is Real
Party in Interest; Covenant Not to Sue.
(a) The Borrower hereby expressly acknowledges that the Authority
is a conduit issuer and that all of the right, title and interest of the
Authority in and to this Agreement, but not the obligations of the Authority,
are to be assigned first to the Trustee and then on a subordinated basis to
the Bank (except for the right of the Authority to receive its reasonable
fees and expenses and to indemnification), naming the Trustee and the Bank,
as applicable, its true and lawful attorney for and in its name to enforce
the terms and conditions of this Agreement. Notwithstanding any other
provision contained herein, the Borrower hereby expressly agrees,
acknowledges and covenants that it shall duly and punctually perform or cause
to be performed each and every duty and obligation of the Authority under and
pursuant to the Indenture.
(b) The Borrower covenants and agrees that it shall neither sue
the Authority, or any of its board members, officers, agents or employees,
past, present or future, for any claim, loss, demand, action or nonaction
based upon this financing nor ever raise as a defense in any proceedings
whatsoever that the Authority is the true party in interest. Notwithstanding
the provisions of the foregoing sentence, the Borrower shall be entitled to
(i) bring an action of specific performance against the Authority to compel
any action required to be taken by the Authority hereunder or an action to
enjoin the Authority from performing any action prohibited by this
instrument, but no such action shall in any way impose pecuniary liability
against the Authority or any of its board members, officers, agents or
employees, and (ii) join the Authority in any litigation if such joinder is
necessary to pursue any of the Borrower's rights, provided that prior to such
joinder, the Borrower shall post such security as the Authority may require
to further protect the Authority from loss.
ARTICLE IV
BORROWER OBLIGATIONS; ASSIGNMENT TO TRUSTEE
Section 4.01 General Obligation of the Borrower. This Agreement
constitutes a general obligation of the Borrower and the full faith and
credit of the Borrower is pledged to the payment of all amounts due
hereunder.
Section 4.02 Assignment to Trustee. The Authority, immediately
following execution and delivery hereof, shall assign this Agreement and all
loan payments payable hereunder (except its right to receive its fees and
expenses and indemnification) to the Trustee pursuant to the Indenture, IN
TRUST, to be held and applied pursuant to the provisions of the Indenture,
and to the Bank. The Borrower: (1) consents to such assignments and accepts
notice thereof with the same legal effect as though such acceptances were
embodied in separate instruments, separately executed after execution of such
assignments; (2) agrees to pay directly to the Trustee or the Bank, as
applicable, all payments payable hereunder for application to amounts then
due and payable or to become due and payable under the Indenture, such
payments to be paid by the Borrower to the Trustee without any defense,
set-off or counterclaim arising out of any default on the part of the
Authority under the Agreement or any transaction between the Borrower and the
Authority or the Borrower and the Trustee; and (3) agrees that the Trustee
and the Bank, after the Bonds and fees and expenses of the Trustee have been
paid, may exercise any and all rights and pursue any and all remedies granted
the Authority hereunder.
Section 4.03 Maintenance and Operation of the Project Facilities.
(a) During the term of this Agreement, the Borrower will at its
own cost and expense keep and maintain, or cause to be kept and maintained,
in good repair and condition (excepting reasonable wear and tear) the Project
Facilities and all additions and improvements thereto, and pay, or cause to
be paid, any costs and expenses arising out of its use of the Project
Facilities.
(b) The Borrower agrees to timely pay for any improvements to the
Project Facilities lawfully done or lawfully ordered to be done by any
municipal, state or federal authority and to comply in all material respects
at its own cost and expense with all lawful and enforceable notices received
(whether by the Authority or the Borrower) from public authorities from and
after the date hereof that affect the Project Facilities and the use and
operation thereof, other than those improvements, orders and notices, the
amount, validity or application of which is at the time being contested, in
whole or in part, in good faith by appropriate proceedings promptly initiated
and diligently conducted.
(c) The Borrower covenants and agrees that the Project Facilities
shall be used only for the purpose of industrial or commercial activities or
activities accessory thereto, and only for such purposes as are lawful under
the Act.
Section 4.04 Maintenance of Existence. (a) Except as otherwise
permitted in the Reimbursement Agreement, Borrower agrees that it will
maintain its existence as a Delaware corporation, will not dissolve or
otherwise dispose of all or substantially all of its assets and will not
consolidate with or merge into another entity.
(b) The Borrower shall not sell, assign, transfer or otherwise
dispose of substantially all of the Project or substantially all of its
assets, except as may be required by a condemnation by a proper authority or
except as permitted by the Indenture. Notwithstanding the preceding sentence,
the Project or this Agreement may be transferred without violating this
Section, provided (i) the Borrower causes the proposed transferee to furnish
the Authority with a "Change of Ownership Information Form" or similar form
then in use by the Authority and the Authority approves in writing the
transferee; (ii) the net worth of the transferee following the transfer is
substantially equal to or greater than the net worth of the Borrower
immediately preceding the transfer as certified to by the independent
auditors of the Borrower; (iii) any litigation or investigations known to the
Borrower in which the transferee or, where applicable, its officers and
directors are involved at the time of such transfer (other than litigation
involving the Borrower), and any court, administrative or other orders to
which the transferee is or, where applicable, its officers and directors are,
subject, relate to matters arising in the ordinary course of business; (iv)
the transferee assumes in writing the obligations of the Borrower under this
Agreement, the Placement Memorandum, the Tax Compliance Agreement and the
Bonds; and (v) after the transfer, the Project shall continue to be operated
as an authorized project under the Act. The Borrower shall, prior to the
taking of any of the foregoing proposed actions, deliver to the Authority and
the Trustee an opinion of nationally recognized bond counsel to the effect
that the proposed action will not cause the interest on the Bonds to become
includable in the gross income of the Owners of the Bonds for federal or
state income tax purposes except in the event such Owner is a substantial
user or a related person thereto within the meaning of Section 144(a)(3) or
Section 147(a) of the Code.
(c) Subject to the provisions of paragraph (b), the Borrower may
not assign or transfer the whole or any part of this Agreement without the
prior express written consent of the Authority and the Trustee. Any
assignment of this Agreement by the Borrower without the prior express
written consent of the Authority and the Trustee shall be null and void.
(d) The Borrower shall not sell or otherwise dispose of any
possessory interest in whole or in part of the Project without complying with
the provisions of paragraph (b), except in the ordinary course of its
business.
(e) The Borrower shall not lease, sublease or otherwise dispose of
any possessory interest in whole or in part of the Project without the prior
express written consent of the Authority. In the event that the Borrower
proposes to lease or sublease the Project or any portion thereof to any
tenant other than the Borrower and the proposed lessee shall submit to the
Authority and, if required under the terms of the Reimbursement Agreement,
the Bank, an application for project occupants in the form currently in use
by the Authority and a copy of the proposed lease. The Authority may review
the proposed lease and application to determine if it tends to further the
public purposes for which the Authority was created, and if the Authority
determines that the lease would not promote these purposes, it may disapprove
the proposed lease.
In making the determination described above, the Authority may
consider, among other criteria, (i) if the proposed occupancy complies with
the conditions specified in the Act for the Authority's assistance to
"projects" as defined in the Act; (ii) if the proposed occupancy is
consistent with the provisions respecting tax-exempt qualified small issue
bond financings set forth in Section 144 of the Code; and (iii) if the
proposed lease will result in the loss of employment for a substantial number
of Pennsylvania workers by reason of relocating the business of the lessee
from one part of the Commonwealth to another or for any other reason.
If the Authority fails to deliver notice of either approval or
disapproval of a proposed lease within twenty (20) days from the day the
Authority receives a proposal for the lease, including all of the information
identified above and such other information as the Authority may reasonably
require, the proposed lease shall be deemed to be approved by the Authority.
The Borrower shall promptly send a copy of each executed lease to the
Authority.
Section 4.05 Compliance with Laws. With respect to the Project
Facilities and any additions, alterations or improvements thereto, the
Borrower will at all times comply with all applicable requirements of
federal, state and local laws and with all applicable lawful requirements of
any agency, board, or commission created under laws of the State or of any
other duly constituted public authority, and will use, and permit the use of
the Project Facilities only for such purposes as are lawful under the Act;
provided, however, that the Borrower shall be deemed in compliance with this
Section 4.05 so long as it is contesting in good faith any such requirement
by appropriate legal proceedings.
Section 4.06 Notice of Bankruptcy Case Commencement. The Borrower
covenants and agrees that it shall immediately notify in writing the
Authority, the Bank, the Trustee and the Placement Agent of the commencement
of any case by or against it under the Bankruptcy Code.
Section 4.07 Substitute Letter of Credit. The Borrower may provide
for the delivery to the Trustee of a Substitute Letter of Credit upon written
notice to the Trustee the Tender Agent, the Remarketing Agent, the Placement
Agent and the Authority. Any Substitute Letter of Credit shall be delivered
to the Trustee not later than the thirtieth (30th) Business Day prior to the
expiration of the Letter of Credit it is being issued to replace on or before
the date of the delivery of any Substitute Letter of Credit to the Trustee,
as a condition to the acceptance of any Substitute Letter of Credit by the
Trustee, the Borrower shall furnish to the Issuer, the Trustee and the
Remarketing Agent (i) written evidence that the issuer of such Substitute
Letter of Credit is a commercial bank organized and doing business in the
United States or a branch or agency of a foreign commercial bank located and
doing business in the United States and subject to regulation by state or
federal banking regulatory authorities and that it has been assigned the same
rating as the Letter of Credit in effect prior to the substitution of the
Substitute Letter of Credit, if the Letter of Credit is then rated (ii) an
opinion of nationally recognized bond counsel stating that the delivery of
such Substitute Letter of Credit is authorized under this Agreement and the
Indenture and the Act and complies with the terms hereof and that the
delivery of such Substitute Letter of Credit does not adversely affect the
exclusion from gross income of the interest on the Bonds for federal income
tax purposes, (iii) an opinion of Counsel satisfactory to the Trustee, the
Issuer, the Borrower and the Remarketing Agent to the effect that the
Substitute Letter of Credit is the legal, valid and binding obligation of the
issuer (or, in the case of a branch or agency of a foreign commercial bank,
the branch or agency) issuing the same, enforceable in accordance with its
terms, that payments of principal, premium, if any (if such Substitute Letter
of Credit secures the payment of premium), or Purchase Price of or interest
on the Bonds from the proceeds of a drawing on the Substitute Letter of
Credit will not constitute avoidable preferences under the Bankruptcy Code or
other applicable laws and regulations and that it is not necessary to
register the Substitute Letter of Credit under the Securities Act of 1933, as
amended, or to qualify an indenture with respect thereto under the Trust
Indenture Act of 1939, as amended and (iv) written evidence from each Rating
Agency then rating the Bonds (if any), if the Bonds are then rated, that the
rating on the Bonds will not be reduced or withdrawn as a result of the
acceptance of the Substitute Letter of Credit. In the case of a Substitute
Letter of Credit issued by a branch or agency of a foreign commercial bank
there shall also be delivered an opinion of counsel satisfactory to the
Trustee, the Authority, the Borrower and the Remarketing Agent and licensed
to practice law in the jurisdiction in which the head office of such bank is
located, to the effect that the Substitute Letter of Credit is the legal,
valid and binding obligation of such bank enforceable in accordance with its
terms. The Trustee shall accept any such Substitute Letter of Credit only in
accordance with the terms, and upon the satisfaction of the conditions,
contained in this section and any other provisions applicable to acceptance
of a Substitute Letter of Credit under this Agreement and the Indenture.
ARTICLE V
THE PROJECT FACILITIES
Section 5.01 Prohibited Uses. The Borrower covenants and agrees
that it will not use or permit the use by any Person of any of the funds
provided by the Authority hereunder or any other of its funds, directly or
indirectly, or direct the Trustee to invest any funds held by it under the
Indenture or this Agreement, in such manner as would, or enter into, or allow
any "related person" (as defined in Section 144(a)(3) of the Code) to enter
into, any arrangement, formal or informal, that would, or take or omit to
take any other action that would, cause any Bond to be an "arbitrage bond"
within the meaning of Section 148(a) of the Code. The Borrower acknowledges
having read Sections 6.13 and 7.06 of the Indenture and agrees to perform all
duties imposed upon it by such Sections and by the Tax Compliance Agreement.
Insofar as said Sections and the Tax Compliance Agreement impose duties and
responsibilities on the Borrower, they are specifically incorporated herein
by reference.
ARTICLE VI
INSURANCE; DESTRUCTION, DAMAGE, EMINENT DOMAIN
Section 6.01 Insurance to be Maintained. The Borrower covenants to
provide and maintain continuously unless otherwise herein provided, adequate
insurance on the Project Facilities as shall be mutually agreed upon by the
Bank and the Borrower. Each insurance policy with respect to the Project
Facilities shall name the Bank and the Authority as additional insureds.
Section 6.02 Destruction, Damage and Eminent Domain. If the Project
Facilities shall be wholly or partially destroyed or damaged by fire or other
casualty covered by insurance, or shall be wholly or partially condemned,
taken or injured by any Person, including any Person possessing the right to
exercise the power of or a power in the nature of eminent domain or shall be
transferred to such a Person by way of a conveyance in lieu of the exercise
of such a power by such a Person, the Borrower covenants that it will take
all actions and will do all things which may be necessary to enable recovery
to be made upon such policies of insurance or on account of such taking,
condemnation, conveyance, damage or injury. The Borrower is authorized, in
its own name, as trustee of an express trust, to demand, collect, sue, settle
claims, receipt and release moneys which may be due and payable under
policies of insurance covering such damage or destruction or on account of
such condemnation, damage or injury. Any moneys recovered (i) on policies of
insurance required to be maintained hereunder or (ii) as a result of any
taking, condemnation, conveyance, damage or injury shall be deposited in the
Project Fund held by the Trustee under the Indenture and shall be applied in
accordance with the provisions of Section 6.04 hereof; provided, however,
that as long as the Bank is not in default under the terms of the Letter of
Credit, the applicable provisions of the Reimbursement Agreement shall
control the disposition of casualty insurance and condemnation award
proceeds.
Any appraisement or adjustment of loss or damage and any
settlement or payment therefore, shall be agreed upon by the Borrower, the
Bank (as long as the Bank is not in default under the Letter of Credit) and
the appropriate insurer or condemnor or Person, and shall be evidenced to the
Bank by the certificate and approvals set forth in the Indenture. The Bank
may rely conclusively upon such certificates.
Section 6.03 Notice of Property Loss. After the occurrence of loss
or damage to, or after receipt of notice of condemnation of, the Project
Facilities, the Borrower shall within five (5) Business Days thereof notify
the Authority, the Trustee and the Bank, in writing, of such damage.
Section 6.04 Disposition of Casualty Insurance and Condemnation
Award Proceeds. If the Bank is in default under the terms of the Letter of
Credit, and as long as the Borrower is not in default under the terms of this
Agreement, the Borrower may elect, in its discretion, whether to apply the
proceeds of any casualty insurance coverage and/or condemnation awards to (i)
the repair, reconstruction or replacement of damaged, destroyed or injured
property comprising the Project Facilities or (ii) the redemption of Bonds
pursuant to the applicable provisions of the Indenture. Absent timely
direction from the Borrower as to the application of any casualty insurance
coverage and/or condemnation awards or if the Borrower shall be in default
under the terms of this Agreement, the proceeds thereof shall be applied to
the extraordinary redemption of the Bonds at par plus accrued interest
through the date of redemption. For purposes of the preceding sentence,
"timely direction" shall mean thirty (30) days after the Borrower has agreed,
in connection with any damage to or condemnation of the Project Facilities,
upon the settlement or payment with respect to any appraisement or adjustment
of loss or damage, as appropriate.
ARTICLE VII
ADDITIONAL COVENANTS OF THE BORROWER
The Borrower makes the following additional representations and
covenants:
Section 7.01 Compliance with Laws. The Borrower covenants that all
actions heretofore and hereafter taken by the Borrower or by the Authority
upon the recommendation or request of any officer of the Borrower to acquire
and carry out the Project have been and will be in full compliance with all
pertinent laws, ordinances, rules, regulations and orders applicable to the
Borrower. In connection with the operation, maintenance, repair and
replacement of the Project Facilities, the Borrower covenants that it shall
comply with all applicable ordinances, laws, rules, regulations and orders of
the government of the United States of America, the State, the County of
Philadelphia, and any other applicable government unit having jurisdiction
over it, and any requirement of any board of fire underwriters having
jurisdiction or of any insurance company writing insurance on the Project
Facilities; provided, however, that nothing herein shall prevent or prohibit
the Borrower from contesting in good faith and by appropriate proceedings the
legality or reasonableness of any such standards, or the imposition of any
such standards upon it with respect to the Project Facilities so long as the
operation of the Project Facilities or the receipt of income therefrom would
not be adversely affected by reason thereof. The Borrower further covenants
and represents that the Project Facilities are in compliance with all
applicable laws and ordinances. The Borrower covenants that it shall not take
any action or request the Authority to execute any release which would cause
the Project Facilities to be in violation of such laws or ordinances or such
that a conveyance of the Project Facilities or of any portion of the Project
Facilities would create a violation of such laws and ordinances. The Borrower
acknowledges that any review by the Authority or Counsel to the Authority of
any action heretofore or hereafter taken by the Borrower has been or will be
solely for the protection of the Authority. Such reviews shall not prevent
the Authority from enforcing any of the covenants made by the Borrower.
Section 7.02 Power to Perform Obligations.
(a) The Borrower covenants and represents that it has full power
and legal right to enter into this Agreement and perform its obligations
hereunder. The making and performance of the Agreement by the Borrower has
been duly authorized by all necessary action and will not conflict with or
constitute a breach of or default under its Articles of Incorporation or
By-Laws, or any bond, contract, indenture, agreement or any other instrument
by which the Borrower or any of its properties is or may be bound.
(b) The Borrower covenants and agrees that throughout the term of
this Agreement it shall not take any action or permit any action to be taken
on its behalf, or cause or permit any circumstances within its control to
arise or continue, if such action or circumstances would cause the interest
paid by the Authority on the Bonds to be subject to federal income tax in the
hands of the Owners thereof.
(c) The Borrower is duly qualified to do business in the State,
has the power and authority to own its properties and assets and to carry on
its business as now being conducted.
(d) The execution, delivery and performance by the Borrower of
this Agreement and other instruments required hereunder:
(i) do not and will not in any material respect conflict with
or violate any provision of law, rule or regulation, any order of any court
or other agency of government;
(ii) do not and will not result in the creation or imposition
of any lien, charge or encumbrance of any nature, other than the liens
created by this Agreement, the Indenture and all documents and instruments
executed in connection herewith or therewith.
Section 7.03 Inspection. The Borrower covenants that the Authority,
by its duly authorized representatives, at reasonable times and with
reasonable notice, for purposes of determining compliance with the Agreement,
may inspect any part of the Project Facilities.
Section 7.04 Additional Information. The Borrower agrees, whenever
requested by the Authority, to provide and certify or cause to be provided
and certified such information concerning the Project Facilities, to enable
the Authority to make any reports or supply any information required by the
Indenture, law, governmental regulation or otherwise.
Section 7.05 Tax-Exemption. The Borrower covenants and agrees
that it will not take any action or permit any action to be taken on its
behalf, or cause or permit any circumstances within its control to arise, if
such action or circumstances would cause the interest paid on the Bonds to be
includible in the gross income of the Bondholders under the Indenture.
Section 7.06 Hazardous Substances.
(a) The Borrower shall comply with all applicable federal, state
and local laws, ordinances, rules and regulations with respect to Hazardous
Substances (as defined in subsection (b) below), and shall keep the Property
free and clear of any liens imposed pursuant to such laws, ordinances, rules
and regulations. In the event that the Borrower receives any notice from any
governmental authority with regard to Hazardous Substances on, from or
affecting the Premises, the Borrower shall (i) immediately notify the Bank
and the Authority and any other Person, governmental or quasigovernmental
authority that it is required to notify pursuant to any applicable law at
such time as it is aware of a release or threatened released of a Hazardous
Substance on, from or affecting the Premises, (ii) immediately notify the
Bank and the Authority at such time as an environmental investigation or
clean-up proceeding is instituted by any Person in connection with the
Premises, (iii) fully comply with and assist any such environmental
investigation and clean-up proceeding, (iv) promptly execute and complete any
remedial actions necessary to ensure that no environmental liens or
encumbrances are levied against or exist with respect to the Premises, and
(v) promptly, upon the written request of the Bank or the Authority provide
the Bank and the Authority, from time to time, with an environmental site
assessment or report, in form and substance satisfactory to Bank, and (vi)
provide the Bank and the Authority with copies of all notices received by the
Borrower from any governmental authority or other Person with regard to
Hazardous Substances on, from or in any way affecting the Premises. The
Borrower shall conduct and complete all investigations, studies, sampling,
and testing, and all remedial, removal, and other actions necessary to clean
up and remove all Hazardous Substances on, from or affecting the Premises in
accordance with all applicable federal, state and local laws, ordinances,
rules, regulations, and policies and to the satisfaction of the Bank.
(b) As used herein, the term "Hazardous Substances" shall include,
without limitation, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances,
hazardous or toxic pollutant, or related materials, asbestos or any material
containing asbestos, or petroleum, petroleum by-products or materials
containing petroleum, or any other substance, mixture, waste, compound,
material, element, product, or matter as defined by any federal, state or
local environmental law, ordinance, rule, or regulation including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss.ss. 9601 et seq.), the
Hazardous Materials Transportation Act, as amended (49 U.S.C. ss.ss. 1801 et
seq.), the Resource Conservation and Recovery Act, amended (42 U.S.C. ss.ss.
9601 et seq.), the Clean Water Act, as amended (33 U.S.C. ss.ss. 1251 et
seq.), and the Clean Air Act, as amended (42 U.S.C. ss.ss. 7401 et seq.), and
in the regulations adopted and publications promulgated pursuant thereto at
any time.
Section 7.07 No Material Proceedings Affecting Borrower. There
is no action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency now pending or, to the knowledge
of the Borrower, threatened against or affecting it or any of its properties
or rights which, if adversely determined, would (i) materially affect the
transactions contemplated hereby, (ii) affect the validity or enforceability
of this Agreement, the Indenture, the other applicable Bond Documents and all
documents and instruments executed in connection herewith or therewith, (iii)
affect the ability of the Borrower to perform its obligations under this
Agreement, the Indenture, the other applicable Bond Documents and all
documents and instruments executed in connection herewith or therewith, (iv)
materially impair the value of the Project, (v) materially impair the
Borrower's right to carry on its business substantially as now conducted, or
(vi) have a material adverse effect on the Borrower's financial condition.
Section 7.08 Tax Filings. The Borrower has filed or caused to
be filed all federal, state and local tax returns which are required to be
filed, and has paid or caused to be paid all taxes as shown on said returns
or on any assessment it has received, to the extent that such taxes have
become due, except such taxes are as being contested by the Borrower in
appropriate proceedings.
Section 7.09 No Existing Defaults. The Borrower is not in
default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any material agreement or
instrument to which it is a party or by which it is bound.
Section 7.10 No Material Misstatements or Omissions. The
Placement Memorandum, the Indenture, this Agreement, the other applicable
Bond Documents and all other documents, certificates, or statements furnished
to the Trustee, the Authority or the Bank by the Borrower do not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein and therein
regarding the Borrower not misleading or incomplete. It is specifically
represented that the Borrower is neither involved in any litigation required
to be disclosed in the Placement Memorandum nor is the subject of any
investigation or administrative proceeding except as disclosed in the
Placement Memorandum. It is specifically understood by the Borrower that all
such statements, representations and warranties shall be deemed to have been
relied upon by the Authority as an inducement to make the Loan and by the
Bank as an inducement to post the Letter of Credit and that if any such
statements, representations and warranties were false at the time they were
made, the Authority or the Bank may, in its sole discretion, consider any
such misrepresentation or breach of warranty an Event of Default under
Section 8.01 hereof and exercise the remedies provided for in this Agreement.
Section 7.11 Inducement to Borrower. Financial assistance
provided by the Authority is an important inducement to the Borrower to
locate or retain the Project within the State.
Section 7.12 Borrower's Annual Reporting Obligations. On each
anniversary of the Issue Date of the Bonds, the Borrower shall furnish or
cause to be furnished to the Authority, the Bank and the Trustee the
following:
(a) copies of a no default certificate of an Authorized
Representative of the Borrower, to the effect that he is not aware of any
condition, event or act which constitutes an uncured Event of Default; and
(b) a written description of the present use of the Project and a
description of any anticipated material change in the use of the Project or
in the number of employees employed at the Project.
The Borrower shall also furnish annually to the Authority an
employment report on a form to be supplied by the Authority.
Section 7.13 Cooperation with Trustee. The Borrower covenants
and agrees that it will not interfere with the exercise of the power and
authority granted to the Trustee in the Indenture. The Borrower further
agrees to aid in furnishing to the Authority or the Trustee any documents,
financial reports, certificates or opinions that may be required under the
Indenture or this Agreement or requested by the Trustee and to comply with
the provisions thereof or hereof to the extent applicable to the Borrower.
Section 7.14 Rebate Fund. The Borrower hereby agrees to
calculate the amount to be deposited in the Rebate Fund and the amount to be
rebated to the United States of America pursuant to Section 148(f) of the
Code in any manner not inconsistent with its arbitrage covenants set forth in
the Tax Compliance Agreement and in this Agreement. Such calculation shall
give regard to all regulations applicable to such Section 148(f) including
any temporary regulations heretofore or hereafter released.
Section 7.15 Nondiscrimination. During the term of this
Agreement, the Borrower agrees, as to itself and as to each occupant of the
Project Facilities controlling, controlled by or under common control with
the Borrower (each a "Contractor") as follows:
(a) Contractor shall not discriminate against any employee,
applicant for employment, independent contractor or any other Person because
of race, color, religious creed, handicap, ancestry, national origin, age or
sex. Contractor shall take affirmative action to insure that applicants are
employed, and that employees or agents are treated during employment, without
regard to their race, color, religious creed, handicap, ancestry, national
origin, age or sex. Such affirmative action shall include, but is not limited
to: employment, upgrading, demotion or transfer, recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of
compensation; and selection for training. Contractor shall post in
conspicuous places, available to employees, agents, applicants for employment
and other persons, a notice to be provided by the contracting agency setting
forth the provisions of this Section 7.15.
(b) Contractor shall in advertisements or requests for employment
placed by it or on its behalf, state that all qualified applicants will
receive consideration for employment without regard to race, color, religious
creed, handicap, ancestry, national origin, age or sex.
(c) Contractor shall send each labor union or workers'
representative with which it has a collective bargaining agreement or other
contract or understanding, a notice advising said labor union or workers'
representative of its commitment to this nondiscrimination clause. Similar
notice shall be sent to every other source of recruitment regularly utilized
by Contractor.
(d) It shall be no defense to a finding of noncompliance with this
Section 7.15 that Contractor had delegated some of its employment practices
to any union, training program or other source of recruitment which prevents
it from meeting its obligations. However, if the evidence indicates that
Contractor was not on notice of the third-party discrimination or made a good
faith effort to correct it, such factor shall be considered in mitigation in
determining appropriate sanctions.
(e) Where the practices of a union or of any training program or
other source of recruitment will result in the exclusion of minority group
persons, so that Contractor will be unable to meet its obligations under this
Section 7.15, Contractor shall then employ and fill vacancies through other
nondiscriminatory employment procedures.
(f) Contractor shall comply with all state and federal laws
prohibiting discrimination in hiring or employment opportunities.
Noncompliance with this Section 7.15 will constitute an Event of Default
under this Agreement.
(g) Contractor shall furnish all necessary employment documents
and records to, and permit access to its books, records and accounts by, the
Authority for purposes of investigation to ascertain compliance with the
provisions of this Section 7.15. If Contractor does not possess documents or
records reflecting the necessary information requested, it shall furnish such
information on reporting forms supplied by the Authority.
(h) Contractor shall actively recruit minority subcontractors and
women subcontractors or subcontractors with substantial minority or women
representation among their employees.
(i) Contractor shall include the provisions of this Section 7.15
in every subcontract, so that such provisions will be binding upon each
subcontractor.
(j) Contractor obligations under this Section 7.15 are limited to
Contractor's facilities within Pennsylvania or, where the contract is for
purchase of goods manufactured outside of Pennsylvania, the facilities at
which such goods are actually produced.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01 Events of Default. Each of the following events shall
constitute an "Event of Default" under this Agreement:
(a) if the Borrower fails to make any payment required by Sections
3.01, 3.03 or 3.05 hereof; or
(b) if the Borrower fails to make any other payment required
hereby and such failure continues for ten (10) days after the Authority or
the Trustee gives notice to the Borrower that such payment is due and unpaid;
or
(c) if the Borrower fails to perform any of its other covenants or
conditions or fails to perform any of its obligations hereunder and such
failure continues for thirty (30) days after the Authority or the Trustee
gives the Borrower notice thereof; provided, however, that if such
performance requires work to be done, actions to be taken, or conditions to
be remedied, which by their nature cannot reasonably be done, taken or
remedied, as the case may be, within such thirty (30) day period, no Event of
Default shall be deemed to have occurred or to exist if, and so long as, the
Borrower shall commence such performance within such thirty (30) day period
and shall diligently and continuously proceed to completion; or
(d) if the Borrower commits any act of bankruptcy under the
Bankruptcy Code or any State bankruptcy law or any law providing for
reorganization or relief for debtors or files or has filed against it a
petition in bankruptcy or for arrangement or reorganization pursuant to the
Bankruptcy Code or other similar law, federal or state, or if, by the decree
of a court of competent jurisdiction, is adjudicated a bankrupt or declared
insolvent, or makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally when or as they become due,
or consents to the appointment of a trustee, receiver or to the liquidation
of all or any part of the Project Facilities, provided that, if any such
proceeding is commenced by a person other than the Borrower, there shall be
no Event of Default if such proceedings are dismissed within sixty (60) days
of the filings of initial pleadings therein; or
(e) the declaration by the Bank of an Event of Default under the
provisions of the Reimbursement Agreement.
Section 8.02 Acceleration. Subject to the provisions of this
Agreement, upon the occurrence of any "Event of Default" by the Authority
under the Indenture caused or resulting directly or indirectly by the
occurrence of an Event of Default by the Borrower hereunder, the Trustee
shall, pursuant to Section 8.02 of the Indenture (with the prior written
consent of the Bank as long as the Bank is not in default under the Letter of
Credit), declare the principal of the then Outstanding Bonds and all accrued
interest immediately due and payable. Upon such declaration by the Trustee,
the Authority shall have the right to terminate this Agreement and, upon such
termination, there shall become immediately due and payable hereunder as then
current damages of the Authority under this Agreement, an amount equal (i) to
all amounts then due and payable by the Authority to the Trustee under
Section 8.02 of the Indenture and (ii) all other amounts due and owing as
loan payments hereunder. Until such amount is paid by the Borrower, at the
time or times and in the manner required to permit the Authority to meet its
obligations under the Indenture, the Authority shall continue to have all of
the rights, powers and remedies herein (notwithstanding the termination
hereof), and, for such time as may be necessary to enable the Authority to
satisfy in full its obligations under the Indenture, the term of this
Agreement shall, at the election of the Authority, be extended at the will of
the Authority, and the Borrower's obligations hereunder shall continue in
full force and effect.
Section 8.03 Payment of Loan Payments on Default; Suit Therefor.
(a) The Borrower covenants that, if default shall be made in the
payment of any sum payable by the Borrower under this Agreement as and when
the same shall become due and payable, whether at maturity or by acceleration
or otherwise, then, upon demand of the Authority or its assignee, the
Borrower will pay to the Authority or its assignee the whole amount of the
loan payments that then shall have become due and payable hereunder and to
the extent such loan payments represent payments due on the Bonds, such
payments shall be applied to the payment of the Bonds in accordance with the
terms of the Indenture; and, in addition thereto, such further amount as
shall be sufficient to pay the costs and expenses of collection, including
reasonable compensation based upon actual time expended by the Authority and
its assignee and their respective agents, attorneys and counsel, and any
expenses or liabilities incurred by the Authority or its assignee (other than
through the Authority's or its assignee's own gross negligence or bad faith).
In case the Borrower shall fail forthwith to pay such amounts upon such
demand, the Authority or its assignee shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the collection
of the sums so due and unpaid, and may prosecute any such action or
proceeding to judgment or final decree, and may enforce any such judgment or
final decree against the Borrower and collect in the manner provided by law
out of the property of the Borrower the money adjudged or decreed to be
payable.
(b) In case there shall be pending proceedings in bankruptcy or
for the reorganization of the Borrower under the Bankruptcy Code or any other
applicable law, or in case a receiver or trustee shall have been appointed
for the benefit of the creditors or the property of the Borrower, or in the
case of any other similar judicial proceedings relative to the Borrower, the
Authority or its assignee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the
whole amount of the loan payments, including interest owing and unpaid in
respect thereof, and, in case of any judicial proceedings, to file such
proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Authority or its assignee
allowed, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the
deduction of its charges and expenses; and any receiver, assignee or trustee
in bankruptcy or reorganization is hereby authorized to make such payments to
the Authority or its assignee, and to pay to the Authority or its assignee
any amount due it for compensation based upon actual time expended and
expenses, including counsel fees incurred by it up to the date of such
distribution.
Section 8.04 Other Remedies. Whenever the Borrower is in
default hereunder the Authority or its assignee shall be entitled to any one
or more of the following remedies:
(a) Upon the written consent of the Bank (as long as the Bank is
not in default under the Letter of Credit), the Authority or its assignee may
terminate this Agreement and the Borrower shall remain liable for any
deficiency in its obligations under Sections 3.01, 3.04 and 3.05 hereof after
the application of such proceeds;
(b) The Authority or its assignee shall be entitled to all the
remedies under the Pennsylvania Uniform Commercial Code, 13 P.S. ss.1001 et
seq., as secured party in respect of the property subject to the security
interests created hereunder, including without limitation the right to take
possession of such property and sell the same at private or public sale, the
proceeds of such sale to be applied as provided in subsection (e) of this
Section 8.04;
(c) Any money received by the Authority under this Section 8.04
shall be paid to its assignee and applied pursuant to the provisions of
Section 8.10 of the Indenture; or
(d) The Authority or its assignee may pursue whatever remedies may
be available at law or in equity as may appear necessary or desirable to
collect the purchase price and any other amounts payable by the Borrower
hereunder, or to enforce performance and observance of any obligation,
agreement or covenant of the Borrower under this Agreement.
No action taken pursuant to this Section 8.04 (including
termination of this Agreement) shall relieve the Borrower of the Borrower's
obligations pursuant to Sections 3.01, 3.04, 3.05 and 8.03 hereof, all of
which shall survive any such action.
Section 8.05 Waiver. The Borrower hereby waives and relinquishes
the benefits of any present or future law exempting the Project Facilities
from attachment, levy or sale on execution, or any part of the proceeds
arising from the sale thereof, and all benefit of stay of execution or other
process.
Section 8.06 Cumulative Rights. No remedy conferred upon or
reserved to the Authority or its assignee by this Agreement is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy
given under this Agreement or now or hereafter existing at law or in equity
or by statute. No waiver by the Authority or its assignee of any breach by
the Borrower of any of its obligations, agreements or covenants hereunder
shall be a waiver of any subsequent breach, and no delay or omission to
exercise any right or power shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient.
Section 8.07 No Exercise of Remedies Without Consent of Bank.
Notwithstanding anything to the contrary contained in this Agreement, neither
the Authority nor any assignee of the Authority under this Agreement shall
exercise or pursue remedies or declare an Event of Default or cause an
acceleration of the obligations contained in this Agreement without the prior
written consent of the Bank as long as the Bank shall not be in default of
its obligations under the Letter of Credit or a voluntary or involuntary case
has not been commenced by the filing of a petition under the United States
Bankruptcy Code or any other law relating to insolvency, bankruptcy,
reorganization, winding-up or composition or adjustment of debts by or
against the Bank.
Section 8.08 Determination of Taxability Not a Default.
Notwithstanding anything to the contrary contained in this Agreement, in the
event of a breach or inaccuracy of any applicable statutory or regulatory
requirement or of a covenant or representation of the Borrower relating to
the exclusion from gross income of interest on the Bonds for purposes of
federal income taxation, such breach or inaccuracy shall not be considered an
Event of Default hereunder so long as the Borrower performs all of its
obligations arising out of the breach or inaccuracy including, without
limitation, the payment of all amounts due under Sections 3.01, 3.04 and 3.05
hereof if such breach or inaccuracy results in a Determination of Taxability
with respect to the Bonds.
ARTICLE IX
OPTIONS TO TERMINATE AGREEMENT
Section 9.01 Option to Terminate Upon Defeasance. The Borrower
shall have, and is hereby granted, the option to terminate its obligations
under this Agreement prior to full payment of the Bonds by providing for the
payment of all of the Outstanding Bonds in accordance with Article XI of the
Indenture.
Section 9.02 Option to Terminate Upon the Occurrence of Certain
Events. The Borrower shall have, and is hereby granted, the option to
terminate its obligations under this Agreement if any of the events set forth
below shall occur:
(a) The Project Facilities or any portion thereof shall have been
damaged or destroyed (1) to such extent that it cannot, in the Borrower's
judgment, be reasonably restored within a period of six (6) months to the
condition thereof immediately preceding such damage or destruction, or (2) to
such extent that the Borrower is thereby prevented, in the Borrower's
reasonable judgment, from carrying on its normal operation of the Project
Facilities for a period of six (6) months or more;
(b) Title to, or the temporary use for a period of six (6) months
or more of, all or substantially all of the Project Facilities, or such part
thereof as shall materially interfere, in the Borrower's reasonable judgment,
with the operation of the Project Facilities for the purpose for which the
Project Facilities are designed, shall have been taken under the exercise of
the power of eminent domain by any governmental body or by any Person, firm
or corporation acting under governmental authority (including such a taking
or takings as results in the Borrower being thereby prevented from carrying
on its normal operation of the Project Facilities for a period of six (6)
months or more);
(c) Changes which the Borrower cannot reasonably control or
overcome in the economic availability of materials, supplies, labor,
equipment and other properties and things necessary for the efficient
operation of the Project Facilities for the purposes contemplated by this
Agreement, shall have occurred, or technological or other changes shall have
occurred which in the judgment of the Borrower render the continued operation
of the Project Facilities uneconomical for such purpose; or
(d) As a result of any changes in the Constitution of the
Commonwealth of Pennsylvania or the Constitution of the United States of
America or of legislative or administrative action (whether state or federal)
or by final decree, judgment or order of any court or administrative body
(whether state or federal) entered after the contest thereof by the Borrower
in good faith, this Agreement shall have become void and unenforceable or
impossible of performance in accordance with the intent and purposes of the
parties as expressed in this Agreement, or unreasonable burdens or excessive
liabilities shall have been imposed on the Borrower in respect to the Project
Facilities, including, without limitation, federal, state or other ad
valorem, property, income, or other taxes not being imposed on the date of
this Agreement.
To exercise such option, the Borrower shall within ninety (90)
days following the event authorizing such termination, give written notice to
the Authority and the Trustee and shall specify therein the date of
redemption of Bonds pursuant to Section 4.01 of the Indenture, which date
shall be the next interest payment date in respect of the Bonds for which the
required notice of redemption can practicably be given. In accordance with
the terms of the Indenture, the Borrower shall make arrangements for the
Trustee to give the required notice of redemption. Payment of the redemption
price of Bonds redeemed pursuant to this Section 9.02 will be made in
accordance with the terms of the Indenture.
Anything contained in this Agreement to the contrary
notwithstanding, the Bank shall have the right (as long as the Bank shall not
be in default under the terms of the Letter of Credit) to cause the Borrower
to terminate its obligations under this Agreement, in accordance with the
provisions of this Section 9.02 by so notifying the Borrower in writing, if
as a result of any changes in the Constitution of the Commonwealth of
Pennsylvania or the Constitution of the United States of America or as a
result of a legislative or administrative action (whether state or federal)
or final decree, judgment or order of any court or administrative body
(whether state or federal) entered after the contest thereof by the Borrower
in good faith, this Agreement shall have become void and unenforceable or
impossible of performance, in accordance with the intent and purposes of the
parties as expressed in this Agreement.
ARTICLE X
MISCELLANEOUS
Section 10.01 Approval of Indenture. The Borrower acknowledges
that it has received executed copies of the Indenture and a copy of the
Letter of Credit and that it is familiar with their provisions, and agrees
that it will take all such actions as are required or contemplated of it
under the Indenture to preserve and protect the rights of the Trustee
thereunder and that it will not take any action which would cause a default
thereunder. It is agreed by the Borrower and the Authority that any
redemption of the Bonds prior to maturity shall be effected as provided in
the Indenture.
Section 10.02 Taxes and Insurance; Rights of Authority to Pay.
If the Borrower, at any time, fails to pay any taxes or other impositions
payable by it in accordance with Section 3.04 hereof, or to take out, pay
for, maintain or deliver any of the insurance policies provided for in
Article VI, or shall fail, within the time provided for in Article VIII after
the notice therein specified of any Event of Default, as therein defined, has
been given thereunder, to make any other payment or perform any other act on
its part to be made or performed, then the Authority may, but shall not be
obligated so to do, and without further notice to or demand upon the Borrower
and without waiving or releasing the Borrower from any of its obligations
under the Agreement, (a) pay any taxes or other impositions payable by the
Borrower in accordance with Section 3.04 hereof, (b) take out, pay for and
maintain any of the insurance policies provided for in Article VI hereof, or
(c) make any other payment or perform any other act on the Borrower's part to
be made or performed as provided in the Agreement. All sums so paid by the
Authority and all necessary incidental costs and expenses in connection with
the performance of any such act by the Authority shall, together with
interest thereon at the legal rate, be payable to the Authority, on demand,
or, at the option of the Authority, may be added to any installment of the
loan payments then due or thereafter becoming due under the Agreement, and
the Borrower covenants to pay any such sums.
Section 10.03 Illegal Provisions Disregarded. If any term or
provision hereof or the application thereof for any reason or circumstance
shall to any extent be held to be invalid or unenforceable, this instrument
shall be invalid or unenforceable only to the extent of such invalidity or
unenforceability and such invalidity or unenforceability shall not invalidate
the balance of such provision or the remaining terms or provisions of this
instrument or the application of such terms or provisions to persons other
than those as to which it has been held invalid or unenforceable; each term
and provision hereof shall be valid and enforceable to the fullest extent
permitted by law, and shall be liberally construed in favor of the Authority
or its assignee in order to effect the intent of this instrument.
Section 10.04 Limitation of Liability of the Authority. In the
event of any default by the Authority hereunder, and notwithstanding any
provision or obligation to the contrary hereinbefore or hereinafter set
forth, the liability of the Authority shall be limited to its interest in the
Project Facilities, the improvements thereon, the rents, issues and profits
therefrom, and the lien of any judgment shall be restricted thereto. The
Authority does not assume general liability nor specific liability for the
repayment of any mortgage or other loan, or for the costs, fees, penalties,
taxes, interest, commissions, charges, insurance or other payments therein
recited or therein set forth, or incurred in any way in connection therewith.
Section 10.05 No Recourse as to the Authority. Except as set
forth hereinabove as to the Authority, no recourse under or upon any
obligation, covenant or agreement contained herein or in any Bonds shall be
had against the Authority or any past, present or future member, officer,
employee or agent of the Authority under this Agreement or under any rule of
law, statute or constitutional provision, or by enforcement of any assessment
or by any legal or equitable proceeding or otherwise, it expressly being
agreed and understood that the obligations of the Authority hereunder, and
under the Bonds and elsewhere, are solely corporate obligations of the
Authority to the extent specifically limited in the Economic Development
Financing Law, being the Act of August 23, 1967, P.L. 251, as amended, 73
P.S. ss.371, et seq., and that no personal liability whatsoever shall attach
to or shall be incurred by such members, officers, employees or agents of the
Authority or of any successor of the Authority, or any of them, because of
such indebtedness or by reason of any obligation, covenant or agreement
contained herein, in the Bonds or implied therefrom. All such recourse or
liability is hereby expressly waived and released as a condition of and in
consideration for execution and delivery of this Agreement by the Authority.
In the event of entry of judgment against the Authority by virtue of the
power herein contained, the Authority shall mark the judgment index to the
effect that the judgment is limited as aforesaid.
Section 10.06 Reference to Statute or Regulation. A reference
herein to a statute or to a regulation issued by a governmental agency
includes the statute or regulation in force as of the date hereof, together
with all amendments and supplements thereto and any statute or regulation
substituted for such statute or regulation, unless the specific language or
the context of the reference herein clearly includes only the statute or
regulation in force as of the date hereof.
A reference herein to a governmental agency, department, board,
commission or other public body or to a public officer includes an entity or
officer which or who succeeds to substantially the same functions as those
performed by such public body or officer as of the date hereof, unless the
specific language or the context of the reference herein clearly includes
only such public body or public officer as of the date hereof.
Section 10.07 Notices. All notices required or authorized to be
given by the Borrower, the Authority or the Trustee under the Indenture or
pursuant to this Agreement shall be in writing and shall be sent by
registered or certified mail, postage prepaid, to the following addresses:
to the Authority to:
Philadelphia Authority for Industrial Development
2600 Centre Square West
1500 Market Street
Philadelphia, PA 19102
Attn: Chairman
to the Borrower to:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President-Finance
to the Trustee to:
First Union National Bank
123 S. Broad Street
11th Floor - PA-1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
to the Placement Agent:
First Union Capital Markets Corp.
301 College Street
8th Floor
Charlotte, NC 28288
Attn: Money Market Trading and Sales
to the Bank:
First Union National Bank
123 South Broad Street
15th Floor, PA 1222
Philadelphia, PA 19109
Attn: Jane Sobieski, Vice President
or to such other addresses as may from time to time be furnished to the
parties, effective upon the receipt of notice thereof given as set forth
above.
Section 10.08 Applicable Law. This Agreement shall be deemed to
be a contract made in the Commonwealth of Pennsylvania and governed by the
laws of the Commonwealth of Pennsylvania.
Section 10.09 Amendments.
(a) This Agreement may not be amended except by an instrument in
writing signed by the parties and, if such amendment occurs after the
issuance of any of the Bonds, consented to by the Trustee and the Bank, so
long as the Bank is not in default under the Letter of Credit.
(b) Notwithstanding Section 10.09(a) hereof, this Agreement shall
be amended by such additions, deletions or modifications that may be
necessary in the opinion of nationally recognized bond counsel to assure
compliance with Section 144(a)(4) of the Code relating to qualified small
issue obligations, Section 147 of the Code relating to certain requirements
applicable to private activity bonds, Section 148(d)(3) of the Code relating
to the 150% limitation on investments or Section 148(f) of the Code relating
to the required rebate to the United States of "excess investment earnings"
(as such term is defined in the Code) or otherwise as may be necessary to
assure the exemptions from federal income taxation of the interest on the
Bonds. A copy of any such amendment shall be given to the Trustee and to the
Bank.
Section 10.10 Term of Agreement. Except as provided in Section
3.10 hereof, this Agreement and the respective obligations of the parties
hereto shall be in full force and effect from the date hereof until all
principal of, premium, if any, and interest on the Bonds shall have been paid
or provision for such payment shall have been made pursuant to the terms and
provisions of the Indenture.
Section 10.11 Amounts Remaining in Bond Fund. It is agreed by
the parties hereto that any amounts remaining in the Bond Fund established
under the Indenture upon expiration or sooner termination of this Agreement
after payment in full of the Bonds (or provision for payment thereof having
been made in accordance with the provisions of the Indenture) and of the
fees, charges and expenses of the Trustee and the Authority in accordance
with the Indenture, shall, to the extent of any unreimbursed draws under the
Letter of Credit, or any other obligations owing by the Borrower to the Bank
under the Reimbursement Agreement as certified to the Trustee by the Bank, be
paid to the Bank. Any remaining moneys shall belong to and be paid to the
Borrower by the Trustee as overpayments hereunder.
Section 10.12 Survival of Covenants, Conditions and
Representations. All covenants, conditions and representations of the
Borrower contained herein that, by nature, impliedly or expressly involve
performance in any particular manner after the termination of this Agreement
or that cannot be ascertained to have been performed until after termination
of this Agreement, shall survive said termination. Without intending to limit
the generality of the foregoing, the Borrower's covenant to indemnify the
Authority and the Trustee, as set forth in Section 3.10 hereof, shall survive
any termination of this Agreement.
Section 10.13 Headings. The captions or headings in this
Agreement are for convenience of reference only and shall not control or
affect the meaning or construction of any provision hereof.
Section 10.14 Multiple Counterparts. This Agreement 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.
Section 10.15 Consent. Whenever the consent of the Authority is
given pursuant to the terms of this Agreement, such consent shall create no
liability or responsibility upon the Authority, and whenever required, shall
not be unreasonably withheld.
IN WITNESS WHEREOF, the PHILADELPHIA AUTHORITY FOR INDUSTRIAL
DEVELOPMENT has caused this Loan Agreement to be executed in its name and on
its behalf by its Chairman and its official seal to be affixed hereunto and
attested by its Secretary or Assistant Secretary and LANNETT COMPANY, INC.
has caused this Agreement to be executed in its name and on its behalf by its
President and its corporate seal to be affixed hereunto and attested by its
Secretary or Assistant Secretary as of the day and year first above written.
ATTEST: PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
___________________________ By:__________________________________
(Assistant) Secretary Chairman
ATTEST: LANNETT COMPANY, INC.
___________________________ By:__________________________________
(Assistant) Secretary President
TRUST INDENTURE
Dated April 30, 1999
Between
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
and
FIRST UNION NATIONAL BANK,
as Trustee
$3,700,000 Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
RECITALS 1
ARTICLE I - DEFINITIONS: CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01 Definitions 6
SECTION 1.02 Content of Certificates and Opinions 17
SECTION 1.03 Interpretation 18
ARTICLE II - THE BONDS
SECTION 2.01 Authorization of Bonds 19
SECTION 2.02 Terms of Bonds; Interest on the Bonds 19
SECTION 2.03 Execution of Bonds 21
SECTION 2.04 Authentication 21
SECTION 2.05 Form of Bonds 22
SECTION 2.06 Transfer of Bonds 22
SECTION 2.07 Exchange of Bonds 22
SECTION 2.08 Bond Registrar 22
SECTION 2.09 Temporary Bonds 23
SECTION 2.10 Bond Mutilated, Lost, Destroyed or Stolen 23
SECTION 2.11 Cancellation and Destruction of Surrendered Bonds 23
SECTION 2.12 Acts of Bondholders; Evidence of Ownership 24
SECTION 2.13 CUSIP Number 24
SECTION 2.14 Book-Entry-Only System for the Bonds 24
ARTICLE III - ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01 Issuance of the Bonds 26
SECTION 3.02 Validity of Bonds 26
SECTION 3.03 Disposition of Proceeds of the Bonds and Other Amounts 26
ARTICLE IV - REDEMPTION OF BONDS BEFORE MATURITY
SECTION 4.01 Extraordinary Redemption 27
SECTION 4.02 Optional Redemption 28
SECTION 4.03 Notice of Redemption 29
SECTION 4.04 Interest on Bonds Called for Redemption 29
SECTION 4.05 Cancellation 29
SECTION 4.06 Partial Redemption of Bonds 29
SECTION 4.07 Payment of Redemption Price with Available Moneys 30
ARTICLE V - CONVERSION OF INTEREST RATE; DEMAND PURCHASE OPTION
SECTION 5.01 Conversion of Interest Rate on Conversion Date 30
SECTION 5.02 Delivery of Bonds After Conversion Date 32
SECTION 5.03 Mandatory Tender Upon Substitution of Letter of Credit 32
SECTION 5.04 Demand Purchase Option 33
SECTION 5.05 Funds for Purchase of Bonds 34
SECTION 5.06 Delivery of Purchased Bonds 36
SECTION 5.07 Sale of Bonds by Remarketing Agent 36
SECTION 5.08 Delivery of Proceeds of Sale of Purchased Bonds 36
SECTION 5.09 Duties of Trustee and Tender Agent with Respect to Purchase
of Bonds 37
SECTION 5.10 No Purchase or Sales After Certain Defaults 37
ARTICLE VI - REVENUES AND FUNDS
Section 6.01 Creation of the Bond Fund 38
SECTION 6.02 Payments into the Bond Fund 38
SECTION 6.03 Use of Moneys in the Bond Fund 38
SECTION 6.04 Custody of Separate Trust Fund 39
SECTION 6.05 Project Fund 39
SECTION 6.06 Payments into the Project Fund, Disbursements 39
SECTION 6.07 Use of Money in the Project Fund Upon Default 39
SECTION 6.08 Use of Money in the Project Fund Upon Completion of the
Project 39
SECTION 6.09 Nonpresentment of Bonds 40
SECTION 6.10 Moneys to be Held in Trust 40
SECTION 6.11 Repayment to the Bank and the Borrower from the Bond
Fund, the Rebate Fund or the Project Fund 40
SECTION 6.12 Letter of Credit 41
SECTION 6.13 Rebate Fund 41
SECTION 6.14 Investment of Moneys in Funds 43
ARTICLE VII - PARTICULAR COVENANTS
SECTION 7.01 Punctual Payment 44
SECTION 7.02 Extension of Payment of Bonds 44
SECTION 7.03 Against Encumbrances 44
SECTION 7.04 Power to Issue Bonds and Make Pledge and Assignment 44
SECTION 7.05 Accounting Records and Financial Statements 45
SECTION 7.06 Tax Covenants 45
SECTION 7.07 Other Covenants 46
SECTION 7.08 Waiver of Laws 46
SECTION 7.09 Further Assurances 46
ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS
SECTION 8.01 Events of Default 46
SECTION 8.02 Acceleration 47
SECTION 8.03 Other Remedies 49
SECTION 8.04 Legal Proceedings by Trustee 49
SECTION 8.05 Discontinuance of Proceedings by Trustee 50
SECTION 8.06 Bondholders May Direct Proceedings by Trustee 50
SECTION 8.07 Limitations on Actions by Bondholders 50
SECTION 8.08 Trustee May Enforce Rights Without Possession of Bonds 51
SECTION 8.09 Delays and Omissions Not to Impair Rights 51
SECTION 8.10 Application of Moneys in Event of Default 51
SECTION 8.11 Trustee and Bondholders Entitled to All Remedies Under Act;
Remedies Not Exclusive 52
SECTION 8.12 Trustee's Right to Receiver 52
SECTION 8.13 Subrogation Rights of Bank 52
SECTION 8.14 Waiver of Default 52
ARTICLE IX - THE TRUSTEE; THE TENDER AGENT; AND THE REMARKETING
AGENT
SECTION 9.01 Duties, Immunities and Liabilities of Trustee 52
SECTION 9.01A Compensation and Indemnity 54
SECTION 9.02 Merger or Consolidation 55
SECTION 9.03 Liability of Trustee 55
SECTION 9.04 Right of Trustee to Rely on Documents 56
SECTION 9.05 Preservation and Inspection of Documents 57
SECTION 9.06 Compensation 57
SECTION 9.07 The Tender Agent 57
SECTION 9.08 Qualification of Tender Agent 58
SECTION 9.09 Qualifications of Remarketing Agent; Resignation; Removal 58
SECTION 9.10 Construction of Ambiguous Provisions 58
ARTICLE X - MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 10.01 Amendments Permitted 59
SECTION 10.02 Effect of Supplemental Indenture 59
SECTION 10.03 Trustee Authorized to Join in Amendments and Supplements;
Reliance on Counsel 59
ARTICLE XI - DEFEASANCE
SECTION 11.01 Discharge of Indenture 60
SECTION 11.02 Discharge of Liability on Bonds 60
SECTION 11.03 Deposit of Money or Securities with Trustee 61
SECTION 11.04 Payment of Bonds After Discharge of Indenture 61
ARTICLE XII - MISCELLANEOUS
SECTION 12.01 Liability of Authority Limited to Revenues 62
SECTION 12.02 Limitation of Liability of Directors, etc. of Authority 62
SECTION 12.03 Covenant Not to Sue 63
SECTION 12.04 Successor is Deemed Included in All References to Predecessor 63
SECTION 12.05 Limitation of Rights to Parties, Bank, Borrower and
Bondholders 63
SECTION 12.06 Waiver of Notice 63
SECTION 12.07 Severability of Invalid Provisions 63
SECTION 12.08 Notices 64
SECTION 12.09 Evidence of Rights of Bondholders 65
SECTION 12.10 Disqualified Bonds 66
SECTION 12.11 Money Held for Particular Bonds 66
SECTION 12.12 Funds 66
SECTION 12.13 Payments Due on Days other than Business Days 67
SECTION 12.14 Provisions Applicable After Conversion Date 67
SECTION 12.15 Execution in Several Counterparts 67
SECTION 12.16 Notices to Rating Agency 67
SECTION 12.17 Governing Law 67
EXHIBIT A - Form of Floating Rate Bond
EXHIBIT B Form of Fixed Rate Bond
EXHIBIT C Requisition Form
EXHIBIT D DTC Letter of Representation
</TABLE>
THIS TRUST INDENTURE, made and entered into April 30, 1999 by and
between the PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT, a body
corporate and politic constituting a public instrumentality of the
Commonwealth of Pennsylvania (the "Authority"), organized and existing under
the Pennsylvania Economic Development Financing Law (Act of August 23, 1967,
Act No. 102, P.L. 251), 73 P.S. ss.ss. 371 et seq., as amended and
supplemented from time to time (the "Act") and FIRST UNION NATIONAL BANK, a
national banking association duly organized, existing and authorized to
accept and execute trusts of the character herein set out under and by virtue
of the laws of the United States of America, having a corporate trust office
located in Philadelphia, Pennsylvania, as trustee (the "Trustee") and tender
agent (the "Tender Agent").
W I T N E S S E T H:
Certain of the terms and words used in these Recitals, and in the
following Granting Clauses, are defined in Section 1.01 of this Indenture.
WHEREAS, the Authority is authorized under the Act to acquire, hold,
construct, improve, maintain, own, finance, lease in the capacity of lessor
or lessee, and/or sell industrial, commercial and specialized development
projects for the public purpose of alleviating unemployment, maintaining
employment at a high level and creating and developing business
opportunities, by the construction, improvement, rehabilitation,
revitalization and financing of industrial commercial and specialized
enterprises; and
WHEREAS, the Authority, to accomplish the purposes of the Act, is
empowered to extend credit to such employment promoting enterprises in the
name of the Authority and in such manner as it may deem proper, for such
consideration and upon such terms and conditions as the Authority shall deem
reasonable; and
WHEREAS, Lannett Company, Inc. (the "Borrower") has requested that
the Authority provide funds to finance a project (the "Project") consisting
of (i) the construction of an approximately 40,000 square foot manufacturing
and manufacturing-related facility as an addition to a 33,000 square foot
existing facility located at 9000 State Road, Philadelphia, Pennsylvania (the
"9000 State Road Facility") or, alternatively, the acquisition and renovation
of an existing manufacturing and manufacturing-related facility located at
9030 State Road, Philadelphia, Pennsylvania (the "9030 State Road Facility");
(ii) the acquisition of equipment for installation and use in either the 9000
State Road Facility or the 9030 State Road Facility; and (iii) the payment of
a portion of the costs of issuance of the Bonds; and
WHEREAS, the Authority has determined that it shall undertake the
financing of the Project pursuant to the provisions and requirements of the
Act; and
WHEREAS, the Authority has by Resolution authorized the issuance of
its $3,700,000 aggregate principal amount Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc. Project), Series of
1999 (the "Bonds") for the purpose of providing funds for financing the
Project; and
WHEREAS, the Borrower has caused to be delivered to the Trustee an
irrevocable direct pay Letter of Credit (the "Letter of Credit") issued by
First Union National Bank (the "Bank") providing for the payment of the
aggregate principal amount of the Bonds, due and payable upon optional,
extraordinary, mandatory and mandatory sinking fund redemption and optional
and mandatory tender prior to maturity or acceleration upon an event of
default hereunder, plus interest calculated for a period up to forty-six (46)
days at an interest rate of fifteen percent (15%) per annum on the Bonds; and
WHEREAS, the Bank shall be entitled to reimbursement by the Borrower
for all amounts drawn under the Letter of Credit pursuant to a reimbursement
agreement (the "Reimbursement Agreement") between the Bank and the Borrower;
and
WHEREAS, the Authority has entered into that certain Loan Agreement
of even date herewith (the "Loan Agreement"), with the Borrower wherein the
Authority will loan the proceeds of the Bonds to the Borrower, and wherein
the Borrower agrees, among other things, to make certain loan payments to the
Authority, all as set forth in the Loan Agreement; and
WHEREAS, the Authority has determined to assign, transfer and pledge
unto the Trustee, as trustee under this Indenture, all right, title and
interest of the Authority (except for certain rights of the Authority to
indemnification and the payment of its costs, fees and expenses as more
particularly described in the Loan Agreement) in and to the Loan Agreement
and sums payable thereunder; and
WHEREAS, the Authority is authorized by the Act to borrow money, and
the Authority deems it necessary to borrow money under and pursuant to the
provisions hereof for the purposes of, among other things, financing the
costs and expenses of the Project (all in accordance with applicable law) and
of carrying out its obligations under the terms of the Loan Agreement, and,
for that end, the Authority has duly authorized and directed the issuance,
sale and delivery of the Bonds to be issued as fully registered bonds; and to
secure payment of the principal thereof and of the interest and premium, if
any, thereon and the performance and observance of the covenants and
conditions herein contained, the Authority has authorized the execution and
delivery of this Indenture; and
WHEREAS, execution and delivery of this Indenture and the issuance
of the Bonds hereunder and under the Act have been duly and validly
authorized by resolution of the Board of the Authority duly adopted prior to
such execution and delivery; and
WHEREAS, all acts and things necessary to make the Bonds, when
authenticated by the Trustee and issued as in this Indenture provided, the
valid, binding and legal obligations of the Authority in accordance with
their terms, and to constitute this Indenture the valid and binding agreement
for the security of the Bonds, have been done and performed.
GRANTING CLAUSES AND AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the acceptance
by the Trustee of the trusts hereby created and of the purchase and
acceptance of the Bonds issued and sold by the Authority under this Indenture
by those who shall own the same from time to time, and of the sum of one
dollar, lawful money of the United States of America, duly paid to the
Authority by the Trustee at or before the execution and delivery of this
Indenture, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and for the purpose of fixing
and declaring the terms and conditions upon which the Bonds are to be
executed, authenticated, issued, delivered and accepted by all persons who
shall from time to time be or become owners thereof, and in order to secure
the payment of the principal of and premium (if any) and interest on, and
Purchase Price of, the Bonds according to their tenor and effect and the
performance and observance by the Authority of all the covenants expressed or
implied herein and in the Bonds and the payment and performance of all other
of the Authority's obligations, the Authority does hereby grant, bargain,
sell, convey, pledge and assign, without recourse, unto the Trustee and unto
its successors in the trust forever, and grants to the Trustee and to its
successors in the trust, a security interest in all of the following:
GRANTING CLAUSE FIRST
All right, title and interest of the Authority in and to the Loan
Agreement and the security granted thereunder and under the Bond Documents,
including, but not limited to (i) the obligation of the Borrower under
Section 3.01 and Section 3.03 of the Loan Agreement to make payments at such
times and in such amounts as are necessary to pay the principal and Purchase
Price of, interest and redemption premium, if any, on the Bonds, (ii) the
present and continuing right to make claim for, collect, receive and receipt
for any of the sums, amounts, income, revenues, issues and profits and any
other sums of money payable or receivable under the Loan Agreement and the
other Bond Documents (except for the right to receive any Administrative Fees
and Expenses and any Additional Payments to the extent payable to the
Authority and any rights of the Authority to indemnification), (iii) the
present and continuing right to bring actions and proceedings thereunder or
for the enforcement thereof, and (iv) the present and continuing right to do
any and all things which the Authority is or may become entitled to do under
the Loan Agreement and the other Bond Documents.
GRANTING CLAUSE SECOND
All right, title and interest of the Authority in and to all moneys
and securities from time to time held by the Trustee under the terms of this
Indenture except those held in the Rebate Fund; provided, however, that in
consideration of the issuance by the Letter of Credit Bank of the Letter of
Credit, the Authority hereby grants a security interest in the Project Fund
to the Bank in order to secure payment of the obligations of the Borrower
under the Reimbursement Agreement, the rights of the Bank therein being
subject and subordinate to the rights of the Trustee so long as any amount
due in respect of the Bonds remains unpaid.
GRANTING CLAUSE THIRD
Any and all other property rights and interests of every kind and
nature from time to time hereafter by delivery or by writing of any kind
granted, bargained, sold, alienated, demised, released, conveyed, assigned,
transferred, mortgaged, pledged, hypothecated or otherwise subjected hereto,
as and for additional security herewith, by the Borrower or any other person
on its behalf or with its written consent or by the Authority or any other
person on its behalf or with its written consent, and the Trustee is hereby
authorized to receive any and all such property at any and all times and to
hold and apply the same subject to the terms hereof.
PROVIDED, HOWEVER, that the Authority, in order to accomplish the
purposes and objectives of the Act, retains the right, jointly and severally
with the Trustee, upon the happening of an Event of Default, to enforce the
provisions contained in the Loan Agreement and the other Loan Documents, as
more specifically set forth in the Loan Agreement whether or not the Trustee
or the Bondholders shall have exercised any rights or remedies under this
Indenture or the Loan Agreement and the other Loan Documents. In addition,
the Authority shall have the right and remedy, without posting bond or other
security, to have provisions of the Loan Agreement and the other Loan
Documents specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any breach or threatened breach of a
provision of the Loan Agreement and the other Loan Documents will cause
irreparable injury to the Authority and that money damages will not provide
an adequate remedy therefor;
PROVIDED THAT THE BONDS AND THE AUTHORITY'S COVENANTS UNDER THIS
INDENTURE ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY
FROM THE REVENUES AND AMOUNTS DESCRIBED HEREIN AND IN THE LOAN AGREEMENT;
THAT THE OBLIGATION TO REIMBURSE THE BANK FOR DRAWS UNDER THE LETTER OF
CREDIT AND THE OTHER OBLIGATIONS UNDER THE REIMBURSEMENT AGREEMENT ARE SOLELY
OBLIGATIONS OF THE BORROWER AND ARE NOT IN ANY MANNER OBLIGATIONS OF THE
AUTHORITY, THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION
THEREOF, AND THAT NEITHER THE GENERAL CREDIT OF THE AUTHORITY NOR THE GENERAL
CREDIT OR THE TAXING POWER OF THE COMMONWEALTH OF PENNSYLVANIA OR ANY
POLITICAL SUBDIVISION THEREOF IS PLEDGED FOR THE PAYMENT OF THE BONDS OR THE
PERFORMANCE OF THE AUTHORITY'S COVENANTS UNDER THIS INDENTURE, AND NEITHER
THE BONDS NOR THIS INDENTURE SHALL BE OR BE DEEMED AN OBLIGATION OF THE
COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF; IT BEING
FURTHER UNDERSTOOD THAT THE AUTHORITY HAS NO TAXING POWER;
THE BONDS ARE NOT AND SHALL NOT BE IN ANY WAY A DEBT OR LIABILITY OF
THE COMMONWEALTH OF PENNSYLVANIA OR OF ANY POLITICAL SUBDIVISION THEREOF
(EXCEPT THAT THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY AS
DESCRIBED HEREINABOVE), AND DO NOT AND SHALL NOT CREATE OR CONSTITUTE ANY
INDEBTEDNESS, LIABILITY OR OBLIGATION OF SAID COMMONWEALTH, OR OF ANY
POLITICAL SUBDIVISION (EXCEPT THAT THE BONDS ARE SPECIAL, LIMITED OBLIGATIONS
OF THE AUTHORITY AS DESCRIBED HEREINABOVE), WHETHER LEGAL, MORAL OR
OTHERWISE. THE BONDS DO NOT NOW AND SHALL NEVER CONSTITUTE A CHARGE AGAINST
THE GENERAL CREDIT OF THE AUTHORITY.
TO HAVE AND TO HOLD all and singular the Trust Estate with all
privileges and appurtenances hereby conveyed and assigned, or agreed or
intended so to be to the Trustee and its successors in trust forever.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions
hereinafter set forth, (a) for the equal benefit, protection and security of
the Owners of any and all of the Bonds, all of which regardless of the time
or times of their issuance or maturity shall be of equal rank, without
preference, priority or distinction, except as otherwise provided in or
pursuant to this Indenture, (b) for securing the observance and performance
of the Authority's obligations and of all others of the conditions, promises,
stipulations, agreements and terms and provisions of this Indenture and the
uses and purposes herein expressed and declared, and (c) on a subordinated
basis, for the benefit of the Letter of Credit Bank to the extent of payments
made under the Letter of Credit that have not been reimbursed pursuant to the
Reimbursement Agreement.
PROVIDED, HOWEVER, that if the Authority, its successors or assigns,
well and truly pays, or causes to be paid, the principal of the Bonds issued
hereunder and the premium (if any) and interest due or to become due thereon,
and the Purchase Price thereof, at the times and in the manner mentioned in
the Bonds and as provided herein, according to the true intent and meaning
thereof, and shall cause the payments to be made into the Bond Fund as
required under Article VI hereof, or shall provide, as permitted hereby, for
payment thereof, in accordance with Article XI hereof, and shall well and
truly keep, perform and observe all of the covenants and conditions pursuant
to the terms of this Indenture and all other of the Authority's obligations
to be kept, performed and observed by it, and shall pay or cause to be paid
to the Trustee all sums of money due or to become due in accordance with the
terms and provisions hereof, then upon such final payments or deposits as
provided in Article XI hereof, and upon the termination of the Loan
Agreement, the right, title and interest of the Trustee in and to the Trust
Estate shall cease, terminate and be void, and the Trustee shall thereupon
assign, transfer, and turn over the Trust Estate to the Letter of Credit
Bank; provided, that if the Trustee shall have received written evidence from
the Letter of Credit Bank that all obligations of the Borrower under the
Reimbursement Agreement have been satisfied and that the Reimbursement
Agreement has been terminated, or if no Letter of Credit Bank shall then
exist, the Trust Estate shall be assigned, transferred and turned over to the
Borrower; and the Trustee shall execute and deliver to the Authority, the
Letter of Credit Bank and the Borrower, as appropriate, such instruments in
writing as shall be requisite to evidence such transfer of the Trust Estate.
Upon the Trustee's assignment, transfer and turning over to the Letter of
Credit Bank or the Borrower, as appropriate, of the Trust Estate pursuant to
the provisions of Section XI hereof, the Trustee shall have no further
duties, responsibilities or obligations under and pursuant to this Indenture.
AND IT IS EXPRESSLY DECLARED that all Bonds issued and secured
hereunder are to be issued, authenticated and delivered and all of the Trust
Estate hereby pledged is to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements,
trusts, uses and purposes hereinafter expressed, and the Authority has agreed
and covenanted and intending to be legally bound does hereby agree and
covenant with the Trustee and with the respective Owners from time to time of
the Bonds, or any part thereof as follows:
ARTICLE I
DEFINITIONS: CONTENT OF CERTIFICATES AND OPINIONS
SECTION 1.01. Definitions. Unless the context otherwise requires,
the terms defined in this Section shall, for all purposes of the recitals
hereto, this Indenture and of any indenture supplemental hereto and of any
certificate, opinion or other document herein mentioned, have the meanings
herein specified, to be equally applicable to both the singular and plural
forms of any of the terms herein defined. Unless otherwise defined in this
Indenture, all terms used herein shall have the meanings assigned to such
terms in the Act.
"Accountant" means any firm of independent certified public
accountants (not an individual) selected by the Borrower and acceptable to
the Bank.
"Act" means the Pennsylvania Economic Development Financing Law, as
defined above.
"Additional Payments" means any payments required to be made by the
Borrower pursuant to the Loan Agreement which are not required to be (i)
applied to the payment of scheduled debt service on or the Purchase Price of
the Bonds or (ii) reimbursed to the Letter of Credit Bank for monies drawn on
the Letter of Credit to pay debt service on or the Purchase Price of the
Bonds.
"Administrative Expenses" means those expenses of the Authority and
the Bank which are properly chargeable to the Borrower on account of the
Bonds and the Bond Documents as administrative expenses under Generally
Accepted Accounting Principles and include, without limiting the generality
of the foregoing, the following: (a) fees and expenses of the Trustee, the
Tender Agent, the Authority, the Bank and the Placement Agent; and (b) fees
and expenses of the Authority's, the Bank's, the Trustee's, the Tender
Agent's and the Placement Agent's professional advisors reasonably necessary
and fairly attributable to the Project, including without limiting the
generality of the foregoing, fees and expenses of the Authority's, the
Trustee's, the Tender Agent's, the Bank's and the Placement Agent's counsel.
"Authority" means the Philadelphia Authority for Industrial
Development, as defined above, and its successors and assigns.
"Authority Board" shall mean at any given time the governing body of
the Authority.
"Authority Officer" means the Chairman, Vice Chairman, Secretary or
Assistant Secretary and, when used with reference to an act or document, also
means any other person authorized by resolution of the Authority to perform
such act or sign such document.
"Authorized Representative" means, with respect to the Borrower, the
President, Vice President, Secretary, Assistant Secretary or Treasurer
thereof, as the case may be, or any other person designated as an Authorized
Representative of the Borrower by a certificate of the Borrower signed by the
President, Vice President, Secretary, Assistant Secretary or Treasurer of the
Borrower, as the case may be, and filed with the Trustee.
"Available Moneys" means (i) moneys derived from drawings under the
Letter of Credit, (ii) moneys held by the Trustee in funds and accounts
established under this Indenture for a period of at least one hundred
twenty-four (124) days and not commingled with any moneys so held for less
than said one hundred twenty-four (124) day period and during and prior to
which period, no petition in bankruptcy was filed by or against the Borrower
or the Authority under the Bankruptcy Code or any applicable state bankruptcy
or insolvency law, unless such petition was dismissed and all applicable
appeal periods have expired without an appeal having been filed, (iii) the
proceeds of bonds issued to refund the Bonds in whole or in part, (iv)
investment income derived from the investment of moneys described in clauses
(i), (ii) or (iii) above, or (v) any other moneys, if the Trustee and the
Letter of Credit Bank have received an opinion of nationally recognized
counsel (acceptable to the Rating Agency then rating the Bonds, if any)
experienced in bankruptcy matters to the effect that payment of the principal
or Purchase Price of or interest on the Bonds with such moneys would not, in
the event of bankruptcy of the Borrower, the Authority, any affiliate of the
Borrower or other payor, constitute a voidable preference under the
Bankruptcy Code or any applicable state bankruptcy or insolvency law.
"Bank" means First Union National Bank, a national banking
association organized under the laws of the United States of America, its
lawful successors and assigns and, if applicable, the issuer of any
Substitute Letter of Credit hereunder.
"Bankruptcy Code" means the Federal Bankruptcy Code, 11 U.S.C.
ss.101 et seq., as amended and supplemented from time to time.
"Bond Counsel" means any counsel nationally recognized as
experienced in the area of public finance and familiar with the transactions
contemplated herein and not unacceptable to the Trustee.
"Bond Documents" means any or all of the Loan Agreement, this
Indenture, the Remarketing Agreement and all documents, certificates and
instruments executed in connection with the foregoing.
"Bond Fund" means the fund created in Section 6.01 hereof.
"Bond Registrar" means any bank, national banking association or
trust company designated as registrar for the Bonds, and its successor
appointed under the Indenture.
"Bonds" means the Bonds as defined above.
"Bond Year" shall have the meaning ascribed to such term in the Tax
Compliance Agreement delivered on the date of issuance of the Bonds.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday; (ii) a legal holiday on which banking institutions in the State of
New York, the Commonwealth of Pennsylvania, the City of New York or the City
of Philadelphia are authorized or required by law to close; or (iii) a day on
which the New York Stock Exchange is closed.
"Certificate," "Statement," "Request," "Direction," "Requisition"
and "Order" means (a) with respect to the Authority, a written certificate,
statement, request, requisition or order signed in the name of the Authority
by its Chairman, Vice Chairman, or such other person as may be designated and
authorized to sign for the Authority, or (b) with respect to the Borrower, a
written certificate, statement, request, requisition or order signed by an
Authorized Representative of the Borrower. Any such instrument and supporting
opinions or representations, if any, may, but need not, be combined in a
single instrument with any other instrument, opinion or representation, and
the two or more so combined shall be read and construed as a single
instrument. If and to the extent required by Section 1.02 hereof, each such
instrument shall include the statements provided for in such Section 1.02.
"Certified Resolution of the Authority" means a copy of a resolution
of the Authority Board certified by the Secretary or an Assistant Secretary
of the Authority, or other officer serving in a similar capacity, under its
corporate seal, to have been duly adopted by the Authority Board and to be in
full force and effect on the date of such certification.
"Certified Resolution of the Borrower" means a copy of the
resolution of the Borrower duly adopted and in full force and effect as of
the date of the execution and delivery of the Bonds and the Letter of Credit.
"Clearing Fund" means the fund established by that name pursuant to
Section 3.03 hereof.
"Closing Date" means April 30, 1999 or such other date which shall
be the date of the execution and delivery of the Loan Agreement and the other
Bond Documents and the issuance and delivery of the Bonds.
"Code" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, to the extent applicable to the Bonds.
"Completion Date" means the date of completion of the Project, as
that date shall be certified as provided in Section 2.03 of the Loan
Agreement.
"Conversion Date" means the Optional Conversion Date.
"Conversion option" means the option granted to the Borrower in
Section 5.01 hereof pursuant to which the interest rate on the Bonds is
converted from the Floating Rate to the Fixed Rate as of the Optional
Conversion Date.
"Cost" or "Costs" means any cost in respect of the Project
Facilities permitted under the Act and the Code.
"Counsel" means an attorney-at-law or law firm (who may be counsel
for the Borrower or for the Authority) not unsatisfactory to the Trustee.
"County" means the County of Philadelphia, Pennsylvania.
"Debt Service Requirements" with reference to a specified period
means, with respect to Bonds:
(a) amounts required to be paid into any mandatory sinking
fund account during the period; and
(b) amounts needed to pay the principal of such
indebtedness maturing during the period and not to be redeemed prior to
maturity from amounts on deposit in any sinking fund or redemption,
retirement or similar fund or account; and
(c) interest payable on the subject indebtedness during the
period, excluding capitalized interest and amounts on deposit with the
Trustee which are available under the Indenture to pay interest with respect
to such indebtedness.
"Demand Purchase Notice" means a notice delivered pursuant to
paragraph (i) of Section 5.04 hereof.
"Demand Purchase Option" means the option granted to Owners of Bonds
to require that Bonds be purchased prior to the Conversion Date pursuant to
Section 5.04 hereof.
"Determination Date" means with respect to any Floating Rate Bonds
for each Weekly Period, each Wednesday or if such Wednesday is not a Business
Day, on the next succeeding Business Day.
"Determination of Taxability" means, with respect to any Bond, the
first to occur of the following events: (i) the date on which the Borrower
determines that an Event of Taxability (hereinafter defined) has occurred by
filing with the Trustee a statement to that effect supported by one or more
tax schedules, returns or documents that disclose that such an Event of
Taxability has occurred; (ii) the date on which the Borrower or the Trustee
is advised by private ruling, technical advice or any other written
communication from any authorized official of the Internal Revenue Service
that, based upon any filings of the Borrower or any other Person or entity,
or upon any review or audit of the Borrower or any other Person or entity, or
upon any other grounds whatsoever, an Event of Taxability has occurred; (iii)
the date on which the Trustee or the Borrower is advised that a court of
competent jurisdiction has issued an order, declaration, ruling or judgment
to the effect that an Event of Taxability has occurred; (iv) the date the
Trustee shall have received written notice from any Owner of the Bonds that
such Owner has received a written assertion or claim by any authorized
official of the Internal Revenue Service that an Event of Taxability has
occurred; or (v) the date the Trustee is notified that the Internal Revenue
Service has issued any private ruling, technical advice or any other written
communication, with or to the effect that an Event of Taxability has
occurred; provided, however, that (x) no Determination of Taxability
described in each of clauses (i) or (v) above shall be deemed to have
occurred unless the Trustee shall have received a written opinion of
nationally recognized bond counsel satisfactory to the Bank and the Borrower
and not unsatisfactory to the Trustee, and in form and substance satisfactory
to the Bank and the Borrower and not unsatisfactory to the Trustee, to the
effect that an Event of Taxability has occurred; and (y) no Determination of
Taxability described in each of clauses (i), (ii), (iii), (iv) or (v) above
shall be deemed to have occurred until 180 days shall have elapsed from the
dates described in clauses (i), (ii), (iii), (iv) or (v) above without such
Determination of Taxability having been rescinded or cancelled.
"Event of Default" means any of the events specified in Section 8.01
of this Indenture.
"Event of Taxability" means, with respect to any Bond, a change of
law or regulation, or the interpretation thereof, or the occurrence of any
other event or the existence of any other circumstances (including without
limitation the fact that any representations or warranties of the Borrower or
the Authority made in connection with the issuance of any Bond is or was
untrue or that a covenant of the Borrower has been breached) that has the
effect of causing interest payable on any Bond to be includable in gross
income for federal income tax purposes under Section 103 of the Code other
than by reason that such interest (i) is includable in the gross income of an
Owner or former Owner of any Bond while such Owner or former Owner is or was
a "substantial user" or a "related person" to a "substantial user" of the
Project Facilities (as such terms are used in Section 147(a)(1) of the Code)
or (ii) is deemed an item of tax preference, including without limitation an
item of tax preference, including without limitation an item subject to any
alternative minimum tax.
"Fiscal Year" means the period of twelve (12) consecutive months
beginning January 1 of each year, or such other period of twelve (12)
consecutive months established by the Borrower as its new Fiscal Year.
"Fixed Rate" means the interest rate in effect on any Bonds from and
after the Conversion Date, as said rate is determined in accordance with
Section 2.02(d) hereof.
"Fixed Rate Bonds" means any Bonds which shall be converted to a
Fixed Rate in accordance with the provisions of this Indenture.
"Fixed Rate Period" means, with respect to any Bonds, a period
during which interest on such Bonds accrues at a Fixed Rate.
"Floating Rate" means a variable rate of interest equal to the
minimum rate of interest necessary, in the sole judgment of the Remarketing
Agent, to sell the Bonds at a price equal to the principal amount thereof,
exclusive of accrued interest, if any, thereon; said interest rate to be in
effect on the Bonds from the date of issuance of the Bonds until (but not
including) the Conversion Date, as said rate is determined in accordance with
Section 2.02(c) hereof.
"Floating Rate Bonds" means any Bonds which bear interest at the
Floating Rate.
"Generally Accepted Accounting Principles" means those accounting
principles applicable in the preparation of financial statements of business
institutions or industrial development authorities, as appropriate, as
promulgated by the Financial Accounting Standards Board or such other body
recognized as authoritative by the American Institute of Certified Public
Accountants or any successor body.
"Government obligations" means direct obligations of (including
obligations issued or held in book entry form), or obligations the principal
of and interest on which are unconditionally guaranteed as to full and timely
payment by the United States of America.
"'Holder," "Owner" or "Bondholder" whenever used herein with respect
to a Bond, means the Person in whose name such Bond is registered on the
registration books maintained by the Trustee.
"Indenture" means this Trust Indenture, as originally executed or as
it may from time to time be supplemented, modified or amended by any
Supplemental Trust Indenture.
"Interest Payment Date" means, prior to the Conversion Date, the
first Business Day of each calendar month commencing June 1, 1999 and from
and after the Conversion Date, May 1 and November 1 of each year, commencing
on the May 1 or November 1 next following the Conversion Date.
"Investment Securities" means any of the following which at the time
are legal investments under the laws of the State for moneys held hereunder
and then proposed to be invested therein:
(i) Government Obligations;
(ii) bonds, debentures, notes or other evidences of
indebtedness issued by any agency or other governmental or other
government-sponsored agencies which may hereafter be created by the United
States, provided, however, that the full and timely payment of the securities
issued by each such agency or government sponsored agency is secured by the
full faith and credit of the United States;
(iii) certificates of deposit of, or time deposits in, any
bank (including the Trustee) or savings and loan association having
securities rated at the time of purchase or acquisition in one of the three
highest rating categories of Moody's or S&P;
(iv) certificates which evidence ownership of the right to
the payment of the principal of and interest on obligations described in
clauses (i) and (ii) of this definition, provided that such obligations are
held in the custody of a bank or trust Borrower acceptable to the Trustee in
a special account separate from the general assets of such custodian;
(v) obligations which are rated at the time of purchase in
one of the two highest rating categories of Moody's and the interest on which
is not includable in gross income for federal income tax purposes and the
timely payment of the principal of and interest on which is fully provided
for by the deposit in trust or escrow of cash or obligations described in
clauses (i) or (ii) of this definition;
(vi) guaranteed investment contracts or other similar
financial instruments with a commercial bank, insurance company or other
financial institution whose long term debt obligations are rated at the time
of purchase in one of the two highest rating categories by Moody's;
(vii) any investment approved in writing by the Bank and
the Rating Agency, if any;
(viii) repurchase agreements issued by financial
institutions (i) insured by the Federal Deposit Insurance corporation or (ii)
whose senior debt obligations at the time of purchase are rated in any of the
three highest rating categories by Moody's; provided, such repurchase
agreements are subject to perfected security interests in the Investment
Securities of the kind specified in paragraphs (i) or (ii) above; and
provided further, (1) the Trustee or a custodian acting on behalf of the
Trustee has possession of the collateral, (2) the Trustee has a perfected
first security interest in the collateral, (3) the collateral is free and
clear of any third party liens and (4) failure to maintain the requisite
collateral percentage will require the Trustee to liquidate the collateral;
(ix) money market mutual funds investing in Investment
Securities of the kind specified in paragraphs (i) or (ii) above, including,
without limitation, any mutual fund for which the Trustee or an affiliate of
the Trustee serves as investment manager, administrator, shareholder
servicing agent and/or custodian or subcustodian, notwithstanding that (i)
the Trustee or an affiliate of the Trustee receives fees from such funds for
services rendered; (ii) the Trustee charges and collects fees for services
rendered pursuant to this Indenture, which fees are separate from the fees
received from such funds; and (iii) services performed for such funds and
pursuant to this Indenture may at times duplicate those provided to such
funds by the Trustee or its affiliates; and
(x) any other security or obligation constituting a
permitted investment under the Act, provided that the Bank and the Rating
Agency, if any, consent to the investment of funds in such security or
obligation.
"Issue Date" means the date on which the Trustee authenticates the
Bonds and on which the Bonds are delivered to the purchasers thereof upon
original issuance.
"Letter of Credit" means the Irrevocable Direct Pay Letter of Credit
issued by the Letter of Credit Bank pursuant to the provisions of the
Reimbursement Agreement, or, in the event of delivery of a Substitute Letter
of Credit, such Substitute Letter of Credit.
"Letter of Credit Bank" means the Bank, as issuer of the Letter of
Credit, and its lawful successors and assigns, and to the extent applicable,
the issuer of any Substitute Letter of Credit.
"Letter of Credit Termination Date" means the later of (i) that date
upon which the Letter of Credit shall expire or terminate pursuant to its
terms, or (ii) that date to which the expiration or termination of the Letter
of Credit may be extended, from time to time, either by extension or renewal
of the existing Letter of Credit or the issuance of a Substitute Letter of
Credit.
"Loan Agreement" shall have the meaning set forth in the Recitals.
"Moody's" means Moody's Investors Service, a corporation organized
and existing under the laws of the State of Delaware, its successors and
their assigns, or, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, any
other nationally recognized securities rating agency designated by the
Authority, with the approval of the Borrower.
"Net Proceeds" when used with respect to any insurance proceeds or
any condemnation award, means the amount remaining after deducting all
expenses (including attorneys' fees and disbursements) incurred in the
collection of such proceeds or award from the gross proceeds thereof.
"Obligation Termination Date" means the date on which the Bank
delivers to the Trustee a certificate to the effect that all obligations
owing to the Bank under the Reimbursement Agreement have been paid in full.
"Officers' Certificate" means with respect to the Authority, a
certificate, duly executed by the chairman or Vice Chairman, Secretary or
Assistant Secretary, Treasurer or Assistant Treasurer of the Authority, under
the corporate seal of the Authority; or with respect to the Borrower, a
certificate duly executed by an Authorized Representative, under the
corporate seal of the Borrower, if applicable.
"Opinion of Counsel" means a written opinion of Counsel (who may be
counsel for the Authority) approved by the Authority. If and to the extent
required by the provisions of Section 1.02 hereof, each Opinion of Counsel
shall include in substance the statements provided for in such Section 1.02.
"Optional Conversion Date" means that date on or after June 1, 1999,
which shall be a Business Day, from and after which the interest rate on the
Bonds is converted from the Floating Rate to the Fixed Rate as a result of
the exercise by the Borrower of the Conversion Option in accordance with the
terms of this Indenture.
"Outstanding," when used as of any particular time with reference to
Bonds, means (subject to the provisions of Section 12.10) all Bonds
theretofore, or thereupon being, authenticated and delivered by the Trustee
under this Indenture, except (1) Bonds theretofore cancelled by the Trustee
or surrendered to the Trustee for cancellation; (2) Bonds with respect to
which all liability of the Authority shall have been discharged in accordance
with Section 11.02, including Bonds (or portions of Bonds) referred to in
Section 12.10; and (3) Bonds for the transfer or exchange of or in lieu of or
in substitution for which other Bonds shall have been authenticated and
delivered by the Trustee pursuant to this Indenture.
"Permitted Encumbrances" means any liens or encumbrances permitted
under the Reimbursement Agreement or otherwise permitted by the Bank.
"Person" means an individual, corporation, firm, association,
partnership, trust, or other legal entity or group of entities, including a
governmental entity or any agency or political subdivision thereof.
"Placement Agent" means First Union Capital Markets Corp.
"Pledge Agreement" means (i) the Pledge and security Agreement of
even date herewith by and between the Bank and the Borrower, and any
amendments or supplements thereto, and (ii) the pledge and security agreement
made by the Borrower to any Substitute Bank, and any amendments or
supplements thereto.
"Pledged Bonds" means any Bonds which shall, at the time of
determination thereof, be held in pledge for the benefit of the Bank by the
Pledged Bonds Custodian pursuant to the Pledge Agreement.
"Pledged Bonds Custodian" means that banking corporation or
association which serves as the custodian for the Pledged Bonds under the
terms and conditions of the Pledge Agreement. The initial Pledged Bonds
Custodian shall be the Trustee.
"Principal Corporate Trust Office" means the corporate trust office
of the Trustee, which at the date of the execution of the Indenture is
located at 1525 West W.T. Harris Boulevard, Charlotte, North Carolina
28288-1153, Attention: Corporate Trust Department.
"Project" shall have the meaning set forth in the Recitals.
"Project Facilities" shall mean the Facility and the Equipment
constructed or acquired, in whole or in part, with the proceeds of the Bonds.
"Project Fund" means the fund established by that name pursuant to
Section 6.05 hereof.
"Purchase Price" means an amount equal to 100% of the principal
amount of any Bond tendered or deemed tendered pursuant to Sections 5.01,
5.03 or 5.04 hereof, plus accrued and unpaid interest thereon to the date of
purchase.
"Qualified Project Costs" means the cost of the items authorized by
the Act and financed by the Authority from the proceeds of the Bonds,
provided that such costs were paid or incurred:
(i) no more than sixty (60) days of the date of the Resolution (or,
if paid more than sixty days prior to the date of the Resolution, provided
that such costs qualify as "preliminary expenditures" under Section
1.150-2(f)(2) of the Regulations); and
(ii)for either land or property subject to the allowance for
depreciation provided by Section 167 of the Code, and were properly
chargeable and actually charged to the Project's capital account for federal
income tax purposes.
Qualified Project Costs do not include any amount applied directly or
indirectly to the payment of:
(i) Issuance Costs (as such term is defined in the Tax Compliance
Agreement);
(ii)interest on any indebtedness following completion of each
separately functioning portion of the Project, to the extent such interest
may not be capitalized pursuant to an election under Section 266 of the Code
and the Regulations thereunder; and
(iii) any working capital or inventory, including reimbursement to
the Borrower or any Related Person for any amounts incurred in the
acquisition, construction, and equipping of the Project that were paid more
than sixty (60) days prior to the date of the Resolution Provided, however,
that the Borrower may be reimbursed for amounts paid in the acquisition,
construction and equipping of the Project more than sixty (60) days prior to
the date of the Resolution if such amounts qualify as "preliminary
expenditures" under Section 1.150-2(f)(2) of the Regulations.
"Rating Agency" means Moody's if the Bonds are rated by Moody's and
S&P if the Bonds are rated by S&P.
"Rating Category" means one of the general rating categories of
Moody's or S&P, without regard to any refinement or gradation of such rating
category by a numerical modifier or otherwise.
"Rebate Fund" means the fund by that name established pursuant to
the provisions of Section 6.13 hereof.
"Record Date" means, prior to the Conversion Date, that day which is
the Business Day next preceding any Interest Payment Date and thereafter,
that date which is the fifteenth (15th) day next preceding any Interest
Payment Date.
"Reimbursement Agreement" means the Reimbursement Agreement of even
date herewith by and between the Borrower and the Bank, and any other similar
agreement entered into in connection with the issuance of any Substitute
Letter of Credit and any and all modifications, alterations, amendments and
supplements thereto.
"Reimbursement Documents" means the Reimbursement Agreement and the
agreements, instruments and documents executed in connection therewith.
"Remarketing Agent" means (singly or collectively, as the case may
be) the remarketing agent(s) appointed by the Borrower and approved in
writing by the Authority and at the time serving as such under the
Remarketing Agreement.
"Remarketing Agreement" means the Remarketing Agreement of even date
herewith by and between the Borrower and First Union Capital Markets Corp.
"Revenues" means all amounts received by the Authority or the
Trustee for the account of the Authority pursuant or with respect to the Loan
Agreement for debt service on or Purchase Price of the Bonds, and all amounts
received by the Authority or the Trustee with respect to the Letter of
Credit, including without limiting the generality of the foregoing, payments
under the Loan Agreement (including both timely and delinquent payments and
late charges, and whether paid from any source), prepayments, insurance
proceeds, condemnation proceeds, and all interest, profits or other income
derived from the investment of amounts in any fund or account established
pursuant to this Indenture.
"S&P" means Standard & Poor's Corporation, a corporation organized
and existing under the laws of the State of Delaware, its successors and
their assigns, or, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency
designated by the Authority, with the approval of the Borrower.
"State" means the Commonwealth of Pennsylvania.
"Substitute Bank" means a commercial bank, savings and loan
association or savings bank which has issued a Substitute Letter of Credit.
"Substitute Letter of Credit" means a letter of credit delivered to
the Trustee in accordance with Section 4.07 of the Loan Agreement (i) issued
by the Bank or a Substitute Bank, the short term unsecured debt of which
shall then have been assigned a rating by Moody's of "P-1" (ii) replacing any
existing Letter of Credit, (iii) dated no later than the date of the
expiration or replacement date of the Letter of Credit for which the same is
to be substituted, (iv) which shall expire on a date which is fifteen (15)
days after an Interest Payment Date for the Bonds, (v) having a term of at
least one year and (vi) issued on substantially identical terms and
conditions as the then existing Letter of Credit except that the stated
amount of the Substitute Letter of Credit shall equal the sum of (A) the
aggregate principal amount of Bonds at the time outstanding, plus (B) an
amount equal to (i) prior to the Conversion Date, forty-six (46) days,
interest (computed at a maximum rate of fifteen percent (15%) per annum) on
all Bonds at the time Outstanding; and (ii) from and after the Conversion
Date, 205 days' interest (computed at the Fixed Rate on all Bonds at the time
Outstanding).
"Supplemental Trust Indenture" means any indenture hereafter duly
authorized and entered into between the Authority and the Trustee,
supplementing, modifying or amending this Indenture, but only if and to the
extent that such Supplemental Indenture is specifically authorized hereunder.
"Tax Compliance Agreement" means the Tax Compliance Agreement of
even date herewith by and between the Borrower and the Trustee.
"Tender Agent" means First Union National Bank and its successors
and any corporation resulting from or surviving any consolidation or merger
to which it or its successors may be a party and any successor Tender Agent
at the time serving as successor Tender Agent hereunder. "Delivery Office"
and "Principal Office" of the Tender Agent means 1525 West W.T. Harris
Boulevard, Charlotte, North Carolina 28288-1153, Attention: Corporate Trust
Department or such other address as may be designated in writing to the
Authority, the Trustee, the Remarking Agent and the Borrower.
"Trust Estate" means all property rights and interests transferred,
assigned, or otherwise pledged to the Trustee and the Letter of Credit Bank
pursuant to the Granting Clauses hereof, which does not include the moneys on
deposit from time to time in the Rebate Fund pursuant to Section 6.13 hereof.
"Trustee" means First Union National Bank _, and its successors and
any corporation or association resulting from or surviving any consolidation
or merger to which it or its successors may be a party and any successor
trustee at the time serving as successor trustee hereunder.
"Unremarketed Bonds" means Bonds which have been purchased pursuant
to Sections 5.01, 5.03 or 5.04 hereof but which have not been remarketed.
"Weekly Period" shall mean, while the Bonds bear interest at the
Floating Rate, the weekly period that begins on and includes Thursday of each
calendar week and ends at the close of business on Wednesday of the next
succeeding week.
SECTION 1.02. Content of Certificates and Opinions. The Trustee may,
but shall not be obligated to, require that every certificate or opinion
provided for in this Indenture with respect to compliance with any provision
hereof shall include (1) a statement to the effect that the Person making or
giving such certificate or opinion has read such provision and the
definitions herein relating thereto; (2) a brief statement as to the nature
and scope of the examination or investigation upon which the certificate or
opinion is based; (3) a statement to the effect that in the opinion of such
Person, he has made or caused to be made such examination or investigation as
is necessary to enable him to express an informed opinion with respect to the
subject matter referred to in the instrument to which his signature is
affixed; (4) a statement of the assumptions upon which such certificate or
opinion is based, and that such assumptions are reasonable; and (5) a
statement as to whether, in the opinion of such Person, such provision has
been complied with.
Any such certificate or opinion made or given by an officer of the
Authority or the Borrower may be based, insofar as it relates to legal or
accounting matters, upon a certificate or opinion of or representation by
Counsel or an accountant, unless such officer knows, or in the exercise of
reasonable care should have known, that the certificate, opinion or
representation with respect to the matters upon which such certificate or
statement may be based, as aforesaid, is erroneous. Any such certificate or
opinion made or given by Counsel or an accountant may be based, insofar as it
relates to factual matters (with respect to which information is in the
possession of the Authority or the Borrower as the case may be) upon a
certificate or opinion of or representation by an Authorized Officer of the
Authority or Authorized Representative of the Borrower, unless such Counsel
or accountant knows, or in the exercise of reasonable care should have known,
that the certificate or opinion or representation with respect to the matters
upon which such Person's certificate or opinion or representation may be
based, as aforesaid, is erroneous. The same Authorized Officer of the
Authority or the Authorized Representative of Borrower, or the same counsel
or accountant, as the case may be, need not certify to all of the matters
required to be certified under any provision of this Indenture, but different
officers, counsel or accountants may certify to different matters,
respectively.
SECTION 1.03. Interpretation. (a) Unless the context otherwise
indicates, words expressed in the singular shall include the plural and vice
versa and the use of the neuter, masculine, or feminine gender is for
convenience only and shall be deemed to mean and include the neuter,
masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table
of contents hereof are solely for convenience of reference, do not constitute
a part hereof and shall not affect the meaning, construction or effect
hereof.
(c) All references herein to "Articles," "Sections" and
other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Indenture; the words "herein," "hereof," "hereby,"
"hereunder" and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or subdivision hereof.
(d) Whenever in this Indenture it is required that notice
be provided to the Bank or that consent of the Bank be obtained, such
provisions shall be effective only when (i) the Letter of Credit is in effect
or (ii) the Bank, in its capacity as provider of the Letter of Credit, is the
Holder of any Bonds.
ARTICLE II
THE BONDS
SECTION 2.01. Authorization of Bonds. The Bonds shall be issued
hereunder in order to obtain moneys to finance the Project for the benefit of
the Authority and the Borrower. The Bonds shall be designated as
"Philadelphia Authority for Industrial Development Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc. Project), Series of
1999." The aggregate principal amount of Bonds which may be issued and
Outstanding under this Indenture shall not exceed Three Million Seven Hundred
Thousand Dollars ($3,700,000). No additional Bonds may be issued under this
Indenture. This Indenture constitutes a continuing agreement by the Authority
for the benefit of the Holders from time to time of the Bonds to secure the
full payment of the principal and Purchase Price of and interest and premium,
if any, on all such Bonds subject to the covenants, provisions and conditions
herein contained.
SECTION 2.02. Terms of Bonds; Interest on the Bonds. (a) The Bonds
shall be issued in fully registered form. Prior to the Conversion Date, (i)
such Bonds shall be outstanding in denominations of $100,000 or any integral
multiple of $5,000 in excess thereof; and (ii) such Bonds may not be issued,
exchanged or transferred except in the authorized denominations of $100,000
or any integral multiple of $5,000 in excess thereof. From and after the
Conversion Date, (i) such Bonds shall be Outstanding in denominations of
$5,000 or any integral multiple of $5,000 and (ii) such Bonds may not be
issued, exchanged or transferred except in the authorized denominations of
$5,000 or any integral multiple of $5,000 in excess thereof. The Bonds shall
be dated as of the date of delivery and shall mature, subject to prior
redemption, as provided herein. Unless the Authority shall otherwise direct,
prior to the Conversion Date the Bonds shall be lettered "VR" and shall be
numbered consecutively from 1 upward and after the Conversion Date the Bonds
shall be lettered "FR" and shall be numbered consecutively from 1 upward.
(b) Each of the Bonds shall be dated the Issue Date and
shall bear interest, payable (i) prior to the Conversion Date, on the first
Business Day of each calendar month commencing June 1, 1999; (ii) on the
Conversion Date and (iii) from and after the Conversion Date, on May 1 and
November 1 of each year, commencing on the May 1 or November 1 next following
the Conversion Date, in each case from the Interest Payment Date next
preceding the date of authentication thereof to which interest has been paid
or duly provided for, unless the date of authentication thereof is an
Interest Payment Date to which interest has been paid or duly provided for,
in which case from the date of authentication thereof, or unless no interest
has been paid or duly provided for on the Bonds, in which case from the Issue
Date, until payment of the principal thereof has been made or duly provided
for. Notwithstanding the foregoing, any Bond authenticated after any Record
Date and before the following Interest Payment Date shall bear interest from
such Interest Payment Date; provided, however, that if the Authority shall
default in the payment of interest from the next preceding Interest Payment
Date to which interest has been paid or duly provided for, or, if no interest
has been paid or duly provided for on the Bonds, from the Issue Date. The
Bonds shall mature as provided in Section 4.01(c) herein.
(c) (i) From the Issue Date to the Conversion Date, the
Bonds shall bear interest at the Floating Rate. The Floating Rate shall be
determined by the Remarketing Agent on each Determination Date and shall be
effective for the immediately succeeding Weekly Period.
(ii) The Remarketing Agent shall advise the Trustee of
the Floating Rate by telephone (confirmed by telecopy to the Trustee) at or
before the close of business on each Determination Date. Upon request of any
Bondholder, the Remarketing Agent shall notify such Bondholder of the
Floating Rate then borne by the Bonds.
(iii) If for any reason the interest rate on a Bond for
any Weekly Period is not determined by the Remarketing Agent pursuant to
(c)(i) above, or a court holds that the Floating Rate, set as provided
pursuant to (c)(i) above, is invalid or unenforceable, the Floating Rate for
the Bonds shall be for (a) the first such week that the applicable Floating
Rate is not determined by the Remarketing Agent or has been determined
invalid or unenforceable, a rate per annum equal to the Floating Rate for
such series of Bonds established by the Remarketing Agent pursuant to (c)(i)
on the immediately preceding Determination Date and (b) on each Determination
Date thereafter, shall be a rate per annum equal to 85% of the interest rate
per annum for 30 day commercial paper having a rating of A-2/P-2 as reported
in The Wall Street Journal on each Determination Date.
(iv) The determination of the Floating Rate by the
Remarketing Agent shall be conclusive and binding upon the Authority, the
Trustee, the Bank, the Borrower, the Remarketing Agent, the Tender Agent and
the Owners of the Bonds.
Anything herein to the contrary notwithstanding, the Floating Rate
shall in no event exceed fifteen (15%) per annum.
(d) The Bonds shall bear interest at the Fixed Rate
from and after the Conversion Date until the maturity of the Bonds. The Fixed
Rate shall be a fixed annual interest rate on the Bonds, such Fixed Rate to
be established by the Remarketing Agent as the rate of interest for which the
Remarketing Agent has received commitments from purchasers on or prior to the
fifth (5th) day preceding the Conversion Date to purchase all the Outstanding
Bonds on the Conversion Date at a price of par.
(e) Prior to the Conversion Date, interest on the Bonds
shall be computed on the basis of a 365 or 366-day year, as applicable, for
the actual number of days elapsed. on and after the Conversion Date, interest
on the Bonds shall be computed on the basis of a 360-day year of twelve
30-day months. The principal of and premium, if any, on the Bonds shall be
payable in lawful money of the United States of America at the Principal
Corporate Trust Office of the Trustee, or the designated office of its
successor in trust. The Purchase Price of the Bonds shall be payable at the
Delivery Office of the Tender Agent in lawful money of the United States of
America by the Tender Agent to the Owner of Bonds entitled to receive such
Purchase Price.
Interest on the Bonds shall be payable on each Interest Payment Date
to the Persons in whose name the Bonds are registered at the close of
business on the Record Date for the respective Interest Payment Date.
Interest shall be paid by check mailed on the applicable Interest Payment
Date to each Owner at the addresses shown on the registration books
maintained by the Trustee, provided that such interest shall be paid by wire
transfer to (i) the Bank and (ii) any Holder of at least $1,000,000 in
aggregate principal amount of Bonds, if the Holder makes a written request to
the Trustee at least fifteen (15) days before a Record Date specifying the
account address and wiring instructions. Such a request may provide that it
will remain in effect for subsequent interest payments until changed or
revoked by written notice to the Trustee or upon the transfer or
reregistration of the Bond.
SECTION 2.03. Execution of Bonds. The Bonds shall be executed in the
name and on behalf of the Authority with the manual or facsimile signature of
its chairman or vice Chairman and attested by the manual or facsimile
signature of its Secretary or Assistant Secretary, and the seal of the
Authority will be impressed or imprinted on the Bonds by facsimile or
otherwise. The Bonds shall then be delivered to the Trustee for
authentication. In case any of the officers who shall have signed or attested
any of the Bonds shall cease to be such officer or officers of the Authority
before the Bonds so signed or attested shall have been authenticated or
delivered by the Trustee or issued by the Authority, such Bonds may
nevertheless be authenticated, delivered and issued and, upon such
authentication, delivery and issue, shall be as binding upon the Authority as
though those who signed and attested the same had continued to be such
officers of the Authority.
Only such of the Bonds as shall bear thereon a certificate of
authentication substantially in the form set forth on the form of Bond,
manually executed by the Trustee, shall be valid or obligatory for any
purpose or entitled to the benefits of this Indenture, and such certificate
of the Trustee shall be conclusive evidence that the Bonds so authenticated
have been duly executed, authenticated and delivered hereunder and are
entitled to the benefits of this Indenture.
SECTION 2.04. Authentication. (a) The Authority hereby appoints the
Tender Agent as a co-authenticating agent for the Bonds.
(b) No Bond shall be valid or obligatory for any purpose or
entitled to any security or benefit under this Indenture unless and until a
certificate of authentication on such Bond, substantially in the form set
forth in Exhibit A or Exhibit B, attached hereto, as applicable, shall have
been duly executed by the Trustee or by the Tender Agent and such executed
certificate of authentication upon any such Bond shall be conclusive evidence
that such Bond has been authenticated and delivered under this Indenture. The
certificate of authentication on any Bond shall be deemed to have been
executed by the Trustee or the Tender Agent if signed by an authorized
signatory of the Trustee or the Tender Agent, as the case may be, but it
shall not be necessary that the same signatory execute the certificate of
authentication on all of the Bonds.
(c) In the event the Bond is deemed tendered to the Tender
Agent as provided in Section 5.01, 5.03 or 5.04 hereof but is not physically
delivered to the Tender Agent, the Authority shall execute and the Trustee or
the Tender Agent shall authenticate a new Bond of like denomination as that
deemed tendered.
SECTION 2.05. Form of Bonds. The Floating Rate Bonds and the
certificate of authentication to be endorsed thereon prior to the Conversion
Date are to be substantially in the form set forth in Exhibit A attached
hereto, with appropriate variations, omissions and insertions as permitted or
required by this Indenture and applicable law. The Fixed Rate Bonds and the
certificate of authentication to be endorsed thereon are to be in
substantially the form set forth in Exhibit B attached hereto, with
appropriate variations, omissions and insertions as permitted or required by
this Indenture and applicable law.
SECTION 2.06. Transfer of Bonds. Subject to the provisions of
Section 2.14 hereof, any Bond may be transferred in accordance with its terms
upon the books required to be kept pursuant to the provisions of Section 2.08
hereof. Such transfer shall be made, in accordance with the requirements of
Section 2.02 hereof, by the Person in whose name it is registered, in person
or by his duly authorized attorney, upon surrender of such registered Bond
for cancellation, accompanied by delivery of a written instrument of
transfer, duly executed in a form approved by the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer, the
Authority shall execute and the Trustee or the Tender Agent, as the case may
be, shall authenticate and deliver a new Bond or Bonds of the same Series for
a like aggregate principal amount. The Trustee shall require the Bondholder
requesting such transfer to pay any tax or other governmental charge required
to be paid with respect to such transfer, and may in addition require the
payment of a reasonable sum to cover expenses incurred by the Authority or
the Trustee in connection with such transfer.
The Trustee shall not be required to transfer any Bond during the
period beginning fifteen (15) days before the mailing of notice of redemption
calling the Bond or any portion of the Bond for redemption and ending on the
redemption date.
SECTION 2.07. Exchange of Bonds. Bonds may be exchanged at the
Principal Corporate Trust Office of the Trustee for a like aggregate
principal amount of Bonds of the same Series of other authorized
denominations in accordance with the requirements of Section 2.02 hereof. The
Trustee shall require the Bondholder requesting such exchange to pay any tax
or other governmental charge required to be paid with respect to such
exchange, and may in addition require the payment of a reasonable sum to
cover expenses incurred by the Authority or the Trustee in connection with
such exchange.
The Trustee shall not be required to exchange any Bond during the
period beginning fifteen (15) days before the mailing of notice of redemption
calling the Bonds or any portion of the Bonds for redemption and ending on
the redemption date.
SECTION 2.08. Bond Registrar. The Trustee is hereby appointed the
Bond Registrar of the Authority and the Tender Agent is hereby appointed the
Co-Bond Registrar of the Authority. The Trustee or the Tender Agent, as the
case may be, will keep or cause to be kept sufficient books for the
registration and transfer of the Bonds, which shall at all times be open to
inspection during regular business hours upon prior written notice by the
Authority, the Borrower, the Bank and the Remarketing Agent; and, upon
presentation for such purpose, the Trustee or the Tender Agent, as the case
may be, shall, under such reasonable regulations as they may prescribe,
register or transfer or cause to be registered or transferred, on such books,
Bonds as hereinbefore provided.
SECTION 2.09. Temporary Bonds. The Bonds may be issued in temporary
form exchangeable for definitive Bonds when ready for delivery. Any temporary
Bond may be printed, lithographed or typewritten, shall be of such
denomination as may be determined by the Authority, shall be in fully
registered form without coupons and may contain such reference to any of the
provisions of this Indenture as may be appropriate. Every temporary Bond
shall be executed by the Authority and be authenticated by the Trustee or the
Tender Agent, as the case may be, upon the same conditions and in
substantially the same manner as the definitive Bonds. If the Authority
issues temporary Bonds it will execute and deliver definitive Bonds as
promptly thereafter as practicable, and thereupon the temporary Bonds may be
surrendered for cancellation, in exchange therefor at the designated office
of the Trustee and the Trustee or the Tender Agent, as the case may be, shall
authenticate and deliver in exchange for such temporary Bonds an equal
aggregate principal amount of definitive Bonds of authorized denominations.
Until so exchanged, the temporary Bonds shall be entitled to the same
benefits under this Indenture as definitive Bonds authenticated and delivered
hereunder.
SECTION 2.10. Bond Mutilated, Lost, Destroyed or Stolen. If any Bond
shall become mutilated, the Authority, at the expense of the Holder of said
Bond, shall execute and the Trustee shall thereupon authenticate and deliver,
a new Bond of like tenor and number in exchange and substitution for the Bond
so mutilated, but only upon surrender to the Trustee of the Bond so
mutilated. Every mutilated Bond so surrendered to the Trustee shall be
cancelled by it and delivered to, or upon the order of, the Authority. If any
Bond shall be lost, destroyed or stolen, evidence of such loss, destruction
or theft may be submitted to the Authority and the Trustee and, if such
evidence be satisfactory to both and indemnity satisfactory to them both
shall be given, the Authority, at the expense of the Holder, shall execute,
and the Trustee shall thereupon authenticate and deliver, a new Bond of like
tenor and number in lieu of and in substitution for the Bond so lost,
destroyed or stolen (or if any such Bond shall have matured or shall be about
to mature, instead of issuing a substitute Bond, the Trustee may pay the same
without surrender thereof). The Authority may require payment by the Holder
of a sum not exceeding the actual cost of preparing each new Bond issued
under this Section and of the expenses which may be incurred by the Authority
and the Trustee in connection therewith. Any Bond issued under the provisions
of this Section in lieu of any Bond alleged to be lost, destroyed or stolen
shall constitute an original additional contractual obligation on the part of
the Authority whether or not the Bond so alleged to be lost, destroyed or
stolen be at any time enforceable by anyone, and shall be entitled to the
benefits of this Indenture with all other Bonds secured by this Indenture.
SECTION 2.11. Cancellation and Destruction of Surrendered Bonds. All
Bonds surrendered for payment or redemption and all Bonds purchased with
moneys available for that purpose in any funds established under this
Indenture, shall, at the time of such payment or redemption, be cancelled and
destroyed by the Trustee. The Trustee shall deliver to the Authority
certificates of destruction with respect to all Bonds destroyed in accordance
with this Section.
SECTION 2.12. Acts of Bondholders; Evidence of Ownership. Any action
to be taken by Bondholders may be evidenced by one or more concurrent written
instruments of similar tenor signed or executed by such Bondholders in person
or by agents appointed in writing. The fact and date of the execution by any
Person of any such instrument may be proved by acknowledgment before a notary
public or other officer empowered to take acknowledgements or by an affidavit
of a witness to such execution. Any action by the Holder of any Bond shall
bind all future Holders of the same Bond in respect of any thing done or
suffered by the Authority or the Trustee in pursuance thereof.
SECTION 2.13. CUSIP Number. The Authority, for the convenience of
the registered Owners of the Bonds, may cause CUSIP (Committee on Uniform
Security Identification Procedures) numbers to be printed on such Bonds. No
representation shall be made as to the correctness or accuracy of such
numbers, either as printed on such Bonds or as contained in any notice of
redemption, and the Authority shall have no liability of any sort with
respect thereto. No reliance with respect to any redemption notices with
respect to any Bond may be placed on the identification number printed
thereon.
SECTION 2.14 Book-Entry-Only System for the Bonds. (a)
Notwithstanding the foregoing provisions of this Article II, the Bonds shall
initially be issued in the form of one fully registered Bond for the
aggregate principal amount of the Bonds of each maturity, which Bonds shall
be registered in the name of CEDE & Co., as nominee of The Depository Trust
Company ("DTC"). Except as provided in paragraph (g) below, all of the Bonds
shall be registered in the registration books kept by the Trustee in the name
of CEDE & Co., as nominee of DTC; provided that if DTC shall request that the
Bonds be registered in the name of a different nominee, the Trustee shall
exchange all or any portion of the Bonds for an equal aggregate principal
amount of Bonds registered in the name of such nominee or nominees of DTC. No
Person other than DTC or its nominee shall be entitled to receive from the
Authority or the Trustee either a Bond or any other evidence of ownership of
the Bonds, or any right to receive any payment in respect thereof unless DTC
or its nominee shall transfer record ownership of all or any portion of the
Bonds on the registration books maintained by the Trustee, in connection with
discontinuing the book entry system as provided in paragraph (g) below or
otherwise.
(b) So long as the Bonds or any portion thereof are
registered in the name of DTC, the principal or redemption price of and
interest on such Bond shall be made to DTC or its nominee in same day funds
on the dates provided for such payments under this Indenture. Each such
payment to DTC or its nominee shall be valid and effective to fully discharge
all liability of the Authority or the Trustee with respect to the principal
or redemption price of or interest on the Bonds to the extent of the sum or
sums so paid. In the event of the redemption of less than all of the Bonds
Outstanding of any maturity, the Trustee shall not require surrender by DTC
or its nominee of the Bonds so redeemed, but DTC (or its nominee) may retain
such Bonds and make an appropriate notation on the Bond certificate as to the
amount of such partial redemption; provided that DTC shall deliver to the
Trustee, in each case, a written confirmation of such partial redemption and
thereafter the records maintained by the Trustee shall be conclusive as to
the amount of the Bonds of such maturity which have been redeemed.
(c) The Authority and the Trustee shall treat DTC (or its
nominee) as the sole and exclusive Owner of the Bonds registered in its name
for the purposes of payment of the principal or redemption price of and
interest on the Bonds, selecting the Bonds or portions thereof to be
redeemed, giving any notice permitted or required to be given to Owners of
Bonds under this Indenture, registering the transfer of Bonds, obtaining any
consent or other action to be taken by Owners of Bonds and for all other
purposes whatsoever; and neither the Authority nor the Trustee shall be
affected by any notice to the contrary. Neither the Authority nor the Trustee
shall have any responsibility or obligation to any participant in DTC, any
Person claiming a beneficial ownership interest in the Bonds under or through
DTC or any such participant, or any other Person which is not shown on the
registration books of the Trustee as being an Owner of Bonds, with respect to
either: (1) the Bonds; or (2) the accuracy of any records maintained by DTC
or any such participants; or (3) the payment by DTC or any such participant
of any amount in respect of the principal or redemption price of or interest
on the Bonds; or (4) any notice which is permitted or required to be given to
Owners of Bonds under this Indenture; or (5) the selection by DTC or any such
participant of any Person to receive payment in the event of a partial
redemption of the Bonds; or (6) any consent given or other action taken by
DTC as an Owner of Bonds.
(d) So long as the Bonds or any portion thereof are
registered in the name of DTC or any nominee thereof, all notices required or
permitted to be given to the Owners of Bonds under this Indenture shall be
given to DTC as provided in the Letter of Representation, the form of which
is attached hereto as Exhibit D.
(e) In connection with any notice or other communication to
be provided to Owners of Bonds pursuant to this Indenture by the Authority or
the Trustee with respect to any consent or other action to be taken by Owners
of Bonds, DTC shall consider the date of receipt of notice requesting such
consent or other action as the record date for such consent or other action,
provided that the Authority or the Trustee may establish a special record
date for such consent or other action. The Authority or the Trustee shall
give DTC notice of such special record date not less than fifteen (15)
calendar days in advance of such special record date to the extent possible.
(f) At or prior to settlement for the Bonds, the Authority
and the Trustee shall execute or signify their approval of the Letter of
Representation. Any successor Trustee shall, in its written acceptance of its
duties under this Indenture, agree to take any actions necessary from time to
time to comply with the requirements of the Letter of Representation.
(g) The book-entry-only system for registration of the
ownership of the Bonds may be discontinued at any time if either: (1) after
notice to the Authority and the Trustee, DTC determines to resign as
securities depository for the Bonds; or (2) after notice to DTC and the
Trustee, the Authority determines that continuation of the system of
book-entry-only transfers through DTC (or through a successor securities
depository) is not in the best interest of the Authority. In either of such
events, unless the Authority appoints a successor securities depository, the
Bonds shall be delivered in registered certificate form to such Persons, and
in such maturities and principal amounts, as may be designated in writing by
DTC to the Authority and the Trustee, but without any liability on the part
of the Authority or the Trustee for the accuracy of such designation.
Whenever DTC requests the Authority and the Trustee to do so, the Authority
and the Trustee shall cooperate with DTC in taking appropriate action after
reasonable written notice to arrange for another securities depository to
maintain custody of certificates evidencing the Bonds.
ARTICLE III
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS
SECTION 3.01. Issuance of the Bonds. At any time after the execution
of this Indenture, the Authority may execute and the Trustee or the Tender
Agent, as the case may be, shall authenticate and, upon request of the
Authority, deliver the Bonds in the aggregate principal amount of Three
Million Seven Hundred Thousand Dollars ($3,700,000).
SECTION 3.02. Validity of Bonds. The validity of the authorization
and issuance of the Bonds is not dependent on and shall not be affected in
any way by any proceedings taken by the Authority or the Trustee with respect
to or in connection with the Loan Agreement. The recital contained in the
Bonds that the same are issued pursuant to the Act and the Constitution and
laws of the State shall be conclusive evidence of their validity and of
compliance with all provisions of law in their issuance.
SECTION 3.03. Disposition of Proceeds of the Bonds and Other
Amounts. The Authority shall deposit or cause to be deposited with the
Trustee, immediately upon receipt thereof, all proceeds derived from the sale
of the Bonds, together with any monies deposited by the Borrower as an equity
contribution. The Trustee shall deposit all such amounts in a special fund
which the Trustee is hereby directed to establish, to be known as the
Clearing Fund, and in the following order, the Trustee shall:
(a) Transfer to the Borrower in accordance with the Closing
Statement delivered to the Trustee on the Closing Date funds sufficient to
reimburse the Borrower for costs of the Project which were incurred and paid
prior to the Closing Date and which are Qualified Project Costs of the
Project (as such term is defined in the Tax Compliance Agreement);
(b) Transfer to the Persons identified on the Closing
Statement delivered to the Trustee on the Closing Date to pay or reserve for
payment any and all costs of issuance incurred in connection with the Bonds;
and
(c) Transfer to the credit of the Project Fund the balance
of the Clearing Fund not otherwise used or reserved for payment of the items
described in Subsection 3.03(a) and (b) above.
ARTICLE IV
REDEMPTION OF BONDS BEFORE MATURITY
SECTION 4.01. Extraordinary Redemption. (a) The Bonds are callable
for redemption in the event (i) the Project Facilities or any portion thereof
is damaged or destroyed or taken in a condemnation proceeding as provided in
Section 6.04 of the Loan Agreement or (ii) the Borrower shall exercise its
option to cause the Bonds to be redeemed as provided in Section 9.02 of the
Loan Agreement. If called for redemption at any time pursuant to this Section
4.01(a), the Bonds shall be subject to redemption by the Authority on any
Interest Payment Date, in whole or in part, at a redemption price equal to
100% of the principal amount thereof being redeemed, plus accrued interest to
the redemption date.
(b) Mandatory Redemption. The Bonds are subject to
mandatory redemption:
(1) five (5) days prior to the Letter of Credit
Termination Date, in whole, at a redemption price equal to one hundred
percent (100%) of the principal amount thereof being redeemed plus accrued
interest to the redemption date if, on the thirtieth (30th) Business Day
prior to the Letter of Credit Termination Date, the Trustee shall not have
received a Substitute Letter of Credit which will be effective on or before
the Letter of Credit Termination Date.
(2) on any Interest Payment Date, in whole or in
part, at a redemption price equal to one hundred percent (100%) of the
principal amount thereof being redeemed plus accrued interest to the
redemption date, if any proceeds of the sale of the Bonds remain on deposit
in the Project Fund established hereunder upon completion of the Project, as
set forth in Section 6.08 hereof.
(3) in whole, at any time, within one hundred
eighty (180) days after the occurrence of a Determination of Taxability, at a
redemption price of one hundred percent (100%) of the aggregate principal
amount of Bonds Outstanding plus accrued interest to the redemption date.
(c) Mandatory Sinking Fund Redemption. The Bonds are
subject to mandatory redemption on the Interest Payment Date occurring in the
month of May in each of the years set forth below commencing on the Interest
Payment Date occurring in May of 2003 (each, a "Mandatory Sinking Account
Payment Date"), at a redemption price equal to 100% of the principal amount
thereof plus accrued interest as follows:
Year Account Payments
---- ----------------
2003 $535,000
2004 $810,000
2005 $655,000
2006 $690,000
2007 $105,000
2008 $110,000
2009 $115,000
2010 $125,000
2011 $130,000
2012 $135,000
2013 $140,000
2014* $150,000
*maturity
SECTION 4.02. Optional Redemption. On or prior to the Conversion
Date, the Bonds are subject to redemption by the Authority, at the option of
the Borrower, at any time, subject to the provisions of Section 4.03 hereof,
in whole or in part, at a redemption price of 100% of the principal amount
thereof being redeemed plus accrued interest to the redemption date.
After the Conversion Date, (a) if the length of time from the
Conversion Date to the final maturity date of the Bonds is less than seven
(7) years, the Bonds are not subject to optional redemption; and (b) if the
length of time from the Conversion Date to the final maturity date is seven
(7) years or more, the Bonds are subject to redemption by the Authority, at
the option of the Borrower, on or after the fifth (5th) anniversary of the
Conversion Date, in whole or in part on any Interest Payment Date at the
redemption price of 100% of the principal amount thereof being redeemed plus
accrued interest to the redemption date.
Notwithstanding the foregoing, if, pursuant to a conversion from the
Floating Rate to the Fixed Rate in accordance herewith, the Remarketing Agent
certifies to the Trustee and the Borrower in writing that the foregoing call
restriction is not consistent with the then prevailing market conditions, the
foregoing call restriction may be revised in accordance with the best
professional judgment of the Remarketing Agent to reflect the then prevailing
market conditions; provided, however that the Borrower shall have consented
to such revision and shall have furnished the Trustee with an opinion
addressed to the Trustee, the Authority, the Borrower, the Bank and the
Remarketing Agent, if any at such time, of nationally recognized bond counsel
acceptable to the Borrower and the Trustee, stating that such revision will
not adversely affect the excludability from federal income taxation of
interest on the Bonds.
Notwithstanding the foregoing, no such optional redemption shall
occur unless on the redemption date there shall be sufficient Available
Moneys to pay all amounts due with respect to such a redemption.
SECTION 4.03. Notice of Redemption. So long as the Bonds are
registered in the name of DTC or its nominee, the Trustee shall cause notice
of any redemption of Bonds hereunder to be made in accordance with the Letter
of Representations. If at any time the book-entry-only system shall be
discontinued, notice of the call for redemption, identifying the Bonds or
portions thereof to be redeemed and the redemption price (including the
premium, if any), shall be given by the Trustee by mailing a copy of the
redemption notice by first class mail at least (i) ten (10) days prior to the
date fixed for a mandatory redemption pursuant to Section 4.01 (b) (1)
hereof, and (ii) thirty (30) days but not more than sixty (60) days prior to
the date fixed for redemption in all other instances to the Owner of each
Bond to be redeemed in whole or in part at the address shown on the
registration books. Such notice shall contain such matters specified in the
Bonds for the redemption thereof and shall state that such redemption is
conditional upon the receipt of monies by the Trustee for such purpose on or
prior to the redemption date. Any notice mailed as provided in this Section
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. The Trustee shall deliver a copy of any such
redemption notice to the Tender Agent, Borrower and to the Remarketing Agent.
SECTION 4.04. Interest on Bonds Called for Redemption. Upon the
giving of notice and the deposit of Available Moneys for redemption at the
required times on or prior to the date fixed for redemption, as provided in
this Article, interest on the Bonds or portions thereof thus called shall no
longer accrue after the date fixed for redemption.
SECTION 4.05. Cancellation. All Bonds which have been redeemed shall
not be reissued but shall be cancelled and destroyed by the Trustee in
accordance with Section 2.11 thereof.
SECTION 4.06. Partial Redemption of Bonds. (a) If less than all the
Bonds are to be redeemed, the particular Bonds or portions thereof to be
redeemed shall be selected by the Trustee by lot.
(b) Upon surrender of any Bond for redemption in part only,
the Authority shall execute and the Trustee shall authenticate and deliver to
the Owner thereof a new Bond or Bonds of authorized denominations, in an
aggregate principal amount equal to the unredeemed portion of the Bond
surrendered. If all or a portion of Bonds tendered for purchase pursuant to
Section 5.04 hereof have been selected by the Trustee for redemption, the
Tender Agent, upon receipt of such tendered Bonds, shall authenticate and
redeliver only such portion of tendered Bonds not subject to redemption. The
Tender Agent shall deliver to the tendering Bondholder a copy of the notice
of redemption, indicating the portion of the Bonds subject thereto, and upon
receipt of funds as provided herein, an amount representing the principal of
and interest on the Bonds not called for redemption. The principal of and
interest accrued on the Bonds called for redemption shall be paid to such
Bondholder on the redemption date. The Tender Agent shall cancel the Bond or
such portion thereof tendered for purchase and subject to redemption, and
shall deliver a certificate evidencing such cancellation and the cancelled
Bond to the Trustee.
(c) (i) Prior to the Conversion Date, in case a Bond is of
a denomination larger than $100,000, a portion of such Bond ($100,000 or any
integral multiple of $5,000 in excess thereof) may be redeemed, but Bonds
shall be redeemed only if the remaining unredeemed portion of such Bond is in
the principal amount of $100,000 or any integral multiple of $5,000 in excess
of $100,000.
(ii) After the Conversion Date, in case a Bond is
of a denomination larger than $5,000, a portion of such Bond ($5,000 or any
integral multiple thereof) may be redeemed, but Bonds shall be redeemed only
if the remaining unredeemed portion of such Bond is in the principal amount
of $5,000 or any integral multiple of $5,000.
(d) Notwithstanding anything to the contrary contained in
this Indenture, whenever the Bonds are to be redeemed in part, Bonds which
are Pledged Bonds at the time of selection of Bonds for redemption shall be
selected for redemption prior to the selection of any other Bonds. If the
aggregate principal amount of Pledged Bonds at the time of selection is less
than the amount available for the partial redemption of the Bonds, the
Trustee may select for redemption Bonds in an aggregate principal amount
equal to such excess in such manner as the Trustee in its discretion shall
deem fair and appropriate.
SECTION 4.07. Payment of Redemption Price with Available Moneys.
Notwithstanding any provision to the contrary contained in this Indenture,
the payment of the redemption price of Bonds shall be made only from
Available Moneys. On each date that the Bonds are subject to redemption, the
Trustee shall pay the full redemption price of the Bonds then subject to
redemption from the sources and in the order provided in Section 6.03 hereof.
ARTICLE V
CONVERSION OF INTEREST RATE;
DEMAND PURCHASE OPTION
SECTION 5.01. Conversion of Interest Rate on Conversion Date. (a)
The interest rate on the Bonds shall be converted from the Floating Rate to
the Fixed Rate, upon the exercise by the Borrower of the Conversion Option,
and the Bonds shall be subject to mandatory tender for purchase by the Owners
thereof on the Conversion Date. To exercise the Conversion Option, the
Borrower shall notify the Trustee, the Tender Agent, the Bank, the Authority
and the Remarketing Agent at least thirty-five (35) days prior to the
Conversion Date of such exercise, cause the Remarketing Agent to furnish to
the Trustee the information set forth in paragraphs 1, 2 and 6 below and,
thereafter cause the Trustee to deliver or mail by first class mail a notice
at least twenty (20) days but not more than thirty (30) days prior to the
Conversion Date to the Owner of each Bond at the address shown on the
registration books of the Bond Registrar. No such notice may be given unless
the Trustee first receives (i) an opinion of nationally recognized bond
counsel to the effect that the proposed conversion of the interest rate on
the Bonds will not cause the interest on the Bonds to be includable in gross
income of the Bondholders for federal income tax purposes, (ii) a commitment
from the Bank or a Substitute Bank to issue a Substitute Letter of Credit to
take effect on the Conversion Date, together with a form of such Substitute
Letter of Credit, and (iii) a Borrower certificate to the effect that each of
the Borrower's representations and warranties made in the Loan Agreement and
in any other agreements or certificates given by the Borrower in connection
with the issuance of the Bonds remain true and correct in all material
respects as of the proposed Conversion Date. Any notice given as provided in
this Section shall be conclusively presumed to have been duly given, whether
or not the Owner receives the notice. Said notice shall state in substance
the following:
1. The Conversion Date.
2. The method of computation of the Fixed Rate
which will take effect on the Conversion Date.
3. That from and after the Conversion Date the
Demand Purchase Option will no longer be available to Owners of Bonds.
4. That the existing Letter of Credit will expire
two (2) Business Days after the Conversion Date and that the Bonds are to be
secured by a Substitute Letter of Credit after the Conversion Date, and
stating the identity of the issuer of such Substitute Letter of Credit.
5. That unless firm commitments for the purchase
of all Outstanding Bonds have been received on or prior to the fifth (5th)
Business Day prior to the proposed Conversion Date, the Borrower has the
option to rescind an optional conversion of the Bonds.
6. That in the event the Borrower elects not to
rescind the optional conversion of the Bonds, although firm commitments have
not been received for the purchase of all Outstanding Bonds, all Bonds which
have not been remarketed on or prior to the Conversion Date shall be subject
to mandatory purchase on the Conversion Date pursuant to this Section 5.01.
7. That from and after the Conversion Date, the
rating then in effect on the Bonds, if any, may be reduced or may no longer
be maintained.
(b) on or prior to the Conversion Date, owners of Bonds
shall be required to deliver their Bonds to the Tender Agent at its Delivery
Office for purchase at the Purchase Price, and any such Bonds not delivered
to the Tender Agent on or prior to the Conversion Date ("Undelivered Bonds"),
for which there has been irrevocably deposited in trust with the Trustee or
the Tender Agent an amount of money sufficient to pay the Purchase Price of
the Undelivered Bonds, shall be deemed to have been purchased pursuant to
this Section 5.01 and are deemed to be no longer Outstanding with respect to
such prior Owners. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER
ITS BONDS ON OR PRIOR TO THE CONVERSION DATE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO
THE OPTIONAL CONVERSION DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH
UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO
THE BENEFITS OF THIS INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE
PURCHASE PRICE THEREFOR.
(c) Notwithstanding the foregoing provisions, to the extent
that at the close of the fifth (5th) Business Day prior to the proposed
Conversion Date, the Remarketing Agent has not presented to the Borrower firm
commitments for the purpose of all of the Bonds, the Borrower, at its option,
may rescind an optional conversion of the Bonds. Any such election to rescind
must be made by the close of the fourth (4th) Business Day prior to the
proposed Conversion Date and the Borrower shall give written notice to the
Trustee, the Tender Agent and the Bank of its decision to rescind by each
time. The Borrower shall cause the Trustee to immediately notify the Owners
of such rescission and thereafter the Bonds shall bear interest at the
Floating Rate in effect for the current Weekly Period and thereafter the
Bonds shall bear interest at the Floating Rate applicable to such series of
Bonds until any subsequent Conversion Date effected in accordance with this
Indenture.
(d) In the event the Borrower rescinds the proposed
optional conversion in accordance with the terms of the foregoing paragraph,
the Letter of Credit then in effect will remain in effect in accordance with
its terms.
(e) The Bonds are subject to mandatory purchase in whole on
the Conversion Date at a Purchase Price equal to 100% of the principal amount
thereof being purchased, plus accrued interest to the purchase date;
provided, however, that (i) all Pledged Bonds for which a commitment to
purchase has not been received in connection with a conversion of the Bonds
to the Fixed Rate shall be redeemed or otherwise paid by the Borrower on or
before the Conversion Date; and (ii) no such mandatory purchase shall take
place in the event the Borrower exercises its right to rescind the optional
conversion.
SECTION 5.02. Delivery of Bonds After Conversion Date. At any time
prior to the Record Date preceding the first Interest Payment Date following
the Conversion Date, the Trustee or the Tender Agent, as the case may be,
shall deliver Bonds in the form of Exhibit B hereto. Prior to the delivery by
the Trustee of such Bonds, there shall be filed with the Trustee a request
and authorization to the Trustee on behalf of the Authority and signed by the
Chairman, Vice Chairman, Secretary, Assistant Secretary or any authorized
officer of the Authority to authenticate and deliver the Bonds, as executed
by the Authority, to the purchasers thereof. Such delivery shall be made by
the Trustee or the Tender Agent, as the case may be, without making any
charge therefor to the Owner of such Bonds.
SECTION 5.03. Mandatory Tender upon Substitution of Letter of
Credit. Prior to the Conversion Date, the Bonds are subject to mandatory
purchase in whole on the Substitution Date, at a purchase price equal to 100%
of the principal amount thereof being purchased, plus accrued interest to the
purchase date. The Trustee shall deliver or mail by first class mail a notice
at least twenty (20) days but not more than thirty (30) days prior to the
Substitution Date to the Owner of each Bond at the address shown on the
registration books of the Bond Registrar notifying such Owner that their
Bonds are subject to mandatory purchase. No such notice may be given unless
the Borrower shall have satisfied the provisions of Section 4.07 of the Loan
Agreement. Any notice given as provided in this Section 5.03 shall be
conclusively presumed to have been given, whether or not the Owner receives
the notice. Said notice shall state in substance the following:
1. The Substitution Date.
2. That the existing Letter of Credit securing such Bonds
will expire two (2) Business Days after the Substitution Date.
3. That if the Borrower satisfies the conditions precedent
to delivery of the Substitute Letter of Credit, all Bonds shall be subject to
mandatory purchase on the Substitution Date pursuant to this Section 5.03.
On or prior to the Substitution Date, Owners of Bonds shall be
required to deliver their Bonds to the Tender Agent for purchase at the
Purchase Price, and any such Bonds not delivered to the Tender Agent on or
prior to the Substitution Date ("Undelivered Bonds"), for which there has
been irrevocably deposited in trust with the Trustee or Tender Agent an
amount of Available Money sufficient to pay the Purchase Price of the
Undelivered Bonds, shall be deemed to have been purchased pursuant to this
Section 5.03 and are deemed to no longer Outstanding with respect to such
prior Owners. IN THE EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS
BONDS ON OR PRIOR TO THE SUBSTITUTION DATE, SAID OWNER SHALL NOT BE ENTITLED
TO ANY PAYMENT (INCLUDING ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE
SUBSTITUTION DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS,
AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THIS
INDENTURE, EXCEPT FOR THE PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, to the extent that at the
close of the fifth Business Day prior to the proposed Substitution Date, the
Borrower has not delivered to the Authority, the Trustee and the Remarketing
Agent the items set forth in Section 4.07(i) through (iii) of the Loan
Agreement, the mandatory purchase of Bonds shall be rescinded and the Trustee
shall notify the Owners of such rescission immediately and thereafter the
Bonds shall continue to be secured by the existing Letter of Credit in
accordance with its terms until its termination date.
SECTION 5.04. Demand Purchase Option. Prior to the Conversion Date,
any Bond shall be purchased at the Purchase Price from the owner thereof
upon:
(i) delivery by such Owner to the Trustee and the Tender
Agent at their Principal Office and Delivery Office, respectively, and to the
Remarketing Agent at its Principal office, of a notice (the "Demand Purchase
Notice") (said notice to be irrevocable and effective upon receipt) which
states (1) the aggregate principal amount and bond numbers of the Bonds to be
purchased; and (2) the date on which such Bonds are to be purchased, which
date shall be a Business Day not prior to the seventh (7th) day next
succeeding the date of delivery of such notice and which date shall be prior
to the Conversion Date; and
(ii) delivery to the Tender Agent at its Delivery Office at
or prior to 10:00 a.m., New York City time, on the date designated for
purchase in the applicable Demand Purchase Notice of such Bonds to be
purchased, with an appropriate endorsement for transfer or accompanied by a
bond power endorsed in blank.
Any Bond, as to which a Demand Purchase Notice has been delivered
pursuant to paragraph (i) above, must be delivered to the Tender Agent, as
provided in paragraph (ii) above, and any such Undelivered Bonds, for which
there has been irrevocably deposited in trust with the Trustee or the Tender
Agent an amount of Available Money sufficient to pay the Purchase Price
thereof, shall be deemed to have been purchased at the Purchase Price
pursuant to this Section 5.04 and are deemed to be no longer Outstanding with
respect to such tendering Owner. IN THE EVENT OF A FAILURE BY AN OWNER OF
BONDS TO DELIVER ITS BONDS AS SPECIFIED ABOVE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE
DATE DESIGNATED FOR PURCHASE IN THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER
THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS
SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE
PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, in the event any Bonds as
to which the Owner thereof has exercised the Demand Purchase Option is
remarketed to such owner pursuant to the Remarketing Agreement, such Owner
need not deliver such Bond to the Tender Agent as provided in paragraph (iii)
above, although such Bonds shall be deemed to have been delivered to the
Tender Agent, redelivered to such Owner, and remarketed for purposes of this
Indenture, including, without limitation, for purposes of adjusting the
Floating Rate applicable to such Bond as provided in Section 2.02(c) hereof.
SECTION 5.05. Funds for Purchase of Bonds. (a) on the date Bonds are
to be purchased pursuant to Section 5.01, 5.03 or Section 5.04 hereof, such
Bonds shall be purchased at the Purchase Price only from the funds listed
below. Subject to the provisions of Section 6.12(b), funds for the payment of
the Purchase Price shall be derived from the following sources in the order
of priority indicated:
(i) moneys drawn by the Trustee under the Letter
of Credit (in the event of a draw on the Letter of Credit to fund payment of
the Purchase Price of Bonds tendered pursuant to Section 5.03 hereof, the
Trustee shall draw on the existing Letter of Credit and not the Substitute
Letter of Credit);
(ii) proceeds of the remarketing of the Bonds; and
(iii) any other Available Moneys furnished to the
Trustee, or the Tender Agent and available for such purpose.
(b) Payment for the Bonds purchased pursuant to Section
5.01, 5.03 or 5.04 shall be made as follows:
(i) By not later than 10:00 a.m., New York City
time, on the date on which such Bonds are to be purchased (the "Purchase
Date"), the Remarketing Agent shall give telephonic notice promptly confirmed
in writing to the Bank, the Trustee and the Tender Agent, specifying:
(1) The total principal amount of Bonds,
if any, remarketed by it, and the total principal amount of unremarketed
Bonds; and
(2) The names of the persons to whom
such Bonds were sold and are to be registered, each such person's address and
social security number or taxpayer identification number, the denominations
in which replacement Bonds are to be prepared, and any other appropriate
registration and transfer instructions.
(ii) On the Purchase Date, the Trustee shall make
a drawing pursuant to the Letter of Credit in respect of the Purchase Price
of such Bonds. In connection therewith, the Trustee shall prepare and present
to the Bank the appropriate certificates required under the Letter of Credit
by 11:00 a.m., New York City time, on the Purchase Date.
(iii) There is hereby established with the Tender
Agent a special fund to be designated the "Bond Purchase Fund" and therein
two separate and segregated accounts to be designated the "Remarketing
Account" and the "Bank Account." An amount equal to the proceeds received by
the Trustee pursuant to a draw under the Letter of Credit shall be
transferred by the Trustee in immediately available funds to the Tender Agent
for deposit in the Bank Account no later than 12:30 p.m., New York City time,
on the applicable Purchase Date.
(iv) No later than 1:00 p.m., New York City time,
on each Purchase Date the Tender Agent shall give telephonic notice (promptly
confirmed by telecopy) to the Remarketing Agent of the amount deposited in
the Bank Account on such date. No later than 2:00 p.m., New York City time,
on each Purchase Date the Remarketing Agent shall (A) transfer to the Bank an
amount of the proceeds of the remarketing of the Bonds equal to the amount
deposited in the Bank Account on such Purchase Date; and (B) transfer the
remainder of the proceeds of the remarketing of the Bonds to the Tender Agent
for deposit in the Remarketing Account and shall give telephonic notice
(promptly confirmed by telecopy) to the Tender Agent of the amount of such
proceeds transferred to the Bank.
(v) The Tender Agent shall pay the Purchase Price
to the tendering Bondholders from the amounts on deposit in the Bank Account
to the extent available. If amounts on deposit in the Bank Account are
insufficient to pay the Purchase Price to the tendering Bondholders, the
Tender Agent shall make up such deficiency from amounts on deposit in the
Remarketing Account.
(vi) The Bank shall give telephonic confirmation
to the Tender Agent and the Trustee by 4:00 p.m., New York City time, on the
applicable Purchase Date of its receipt of the remarketing proceeds described
in Section 5.05(b)(iv) hereof.
SECTION 5.06. Delivery of Purchased Bonds. (a) Remarketed Bonds
shall be delivered by the Tender Agent, at its Delivery Office, to or upon
the order of the purchasers thereof.
(b) Unremarketed Bonds purchased with funds drawn under the
Letter of Credit shall be delivered by the Tender Agent to the Pledged Bonds
Custodian or otherwise upon the order of the Bank pursuant to the Pledge
Agreement.
(c) Unremarketed Bonds purchased with moneys described in
Section 5.05(a)(iii) hereof shall, at the direction of the Borrower, be (i)
delivered as instructed by the Borrower, or (ii) delivered to the Trustee for
cancellation; provided, however, that any Bonds so purchased after the
selection thereof by the Trustee for redemption shall be delivered to the
Trustee for cancellation.
Bonds delivered as provided in this Section shall be registered in
the manner directed by the recipient thereof.
SECTION 5.07. Sale of Bonds by Remarketing Agent. On each Purchase
Date, the Remarketing Agent shall offer for sale and use its best efforts to
sell, as agent of the Borrower, all Bonds tendered or deemed tendered for
purchase on such Purchase Date at the Purchase Price thereof and, if such
Bonds are not sold on such date, the Remarketing Agent shall continue, for a
period not in excess of thirty (30) days thereafter, to use its best efforts
to sell such Bonds. Notwithstanding the foregoing, the Remarketing Agent
shall not sell the Bonds to the Authority or the Borrower.
SECTION 5.08. Delivery of Proceeds of Sale of Purchased Bonds. (a)
Except in the case of the sale of any Pledged Bonds, the proceeds of the sale
of any Bonds delivered or deemed delivered to the Tender Agent pursuant to
Section 5.01, 5.03 or 5.04 hereof, to the extent not required to reimburse
the Bank under the Reimbursement Agreement, shall be paid to or upon the
order of the Trustee.
(b) In the event the Remarketing Agent shall have
remarketed any Pledged Bonds and the Borrower or the Remarketing Agent shall
have directed the Bank to cause the Pledged Bonds Custodian to deliver such
Pledged Bonds to the Tender Agent pursuant to the Pledge Agreement, such
Bonds shall be delivered to the Tender Agent and the proceeds of sale of such
Bonds shall be delivered to the Delivery Office of the Tender Agent and shall
be paid to or upon the order of the Bank; provided that any amounts so paid
in excess of amounts then due to the Bank in respect of drawings under the
Letter of Credit shall be delivered by the Bank to or upon the order of the
Borrower; provided further that Pledged Bonds shall not be delivered to the
Tender Agent until the Letter of Credit has been reinstated in accordance
with the terms of the Reimbursement Agreement and the Letter of Credit.
SECTION 5.09. Duties of Trustee and Tender Agent with Respect to
Purchase of Bonds. (a) The Tender Agent shall hold all Bonds delivered to it
pursuant to Sections 5.01, 5.03 or 5.04 hereof in trust for the benefit of
the respective Owners of Bonds which shall have so delivered such Bonds until
moneys representing the Purchase Price of such Bonds shall have been
delivered to or for the account of or to the order of such Owners of Bonds.
Upon delivery of moneys representing the Purchase Price of such Bonds to or
for the account of or to the order of such Owners of Bonds, the Tender Agent
shall deliver all such Unremarketed Bonds, the funds for which shall have
been obtained by a drawing under the Letter of Credit, to the Pledged Bonds
Custodian pursuant to Section 5.06(b) hereof for the purpose of perfecting
the Bank's security interest therein under the Pledge Agreement unless the
Bank shall direct the Tender Agent to deliver such Bonds to or upon the order
of the Bank in accordance with Section 5.06 hereof.
(b) The Trustee and the Tender Agent shall hold all moneys
delivered to them pursuant to this Indenture for the purchase of Bonds in a
separate account, in trust for the benefit of the Bank or, in the case of
remarketed Bonds, the purchasers of such Bonds, until the Bonds purchased
with such moneys shall have been delivered to or for the account of the
Pledged Bonds Custodian, the Bank or to such other purchaser, as appropriate.
(c) The Trustee shall deliver to the Borrower and the Bank
a copy of each notice delivered to it in accordance with Section 5.04 within
two (2) Business Days of the receipt thereof.
(d) As soon as possible, but not later than the close of
business on any date designated for purchase of Bonds in accordance with
Section 5.04, the Tender Agent shall give telephonic or telegraphic notice to
the Remarketing Agent and the Trustee specifying the principal amount of
Bonds delivered or deemed delivered for purchase on such date.
(e) The Trustee shall draw moneys under the Letter of
Credit in accordance with the terms thereof to the extent required by
Sections 5.05 and 6.12 hereof to provide for timely payment of the Purchase
Price of Bonds.
SECTION 5.10. No Purchases or Sales After Certain Defaults. Anything
in this Indenture to the contrary notwithstanding, there shall be no
purchases or sales of Bonds pursuant to Section 5.04 if there shall have
occurred any Event of Default in respect of which the principal of all Bonds
outstanding shall have been declared immediately due and payable pursuant to
Section 8.02 and such declaration shall not have been annulled. If the
Trustee shall have given notice of a call for redemption pursuant to Section
4.03 hereof and such notice shall not have been rescinded, the Remarketing
Agent shall provide a notice of such redemption to any prospective purchaser
of such Bonds upon the remarketing of any Bonds tendered pursuant to Section
5.04 hereof. Nothing in this Section is intended to limit secondary trading
or transfer of the Bonds.
ARTICLE VI
REVENUES AND FUNDS
SECTION 6.01. Creation of the Bond Fund. There is hereby created and
established with the Trustee a trust fund to be designated "Bond Fund." Upon
receipt of moneys pursuant to Section 6.02 hereof, the Trustee shall deposit
such moneys into the specified accounts of the Bond Fund, which amounts shall
be used to pay when due the principal and Purchase Price of, premium, if any,
and interest on the Bonds.
SECTION 6.02. Payments into the Bond Fund. There shall be deposited
into the Bond Fund from time to time the following:
(a) any amount in the Project Fund directed to be paid
into the Bond Fund in accordance with the provisions of Section 6.07 hereof;
(b) any amount deposited into the Bond Fund pursuant to
Section 6.04 hereof;
(c) all payments specified in Sections 3.03 and 3.04 of
the Loan Agreement (other than amounts paid for the Trustee's or the
Authority's own account);
(d) any moneys drawn under the Letter of Credit to be used
for the payment of principal or Purchase Price of, and interest on the Bonds
which moneys shall be deposited or credited in a separate subaccount of the
Bond Fund and shall not be commingled with any other moneys held by the
Trustee; and
(e) all other moneys received by the Trustee under and
pursuant to any of the provisions of the Loan Agreement which are required to
be or which are accompanied by directions that such moneys are to be paid
into the Bond Fund.
SECTION 6.03. Use of Moneys in the Bond Fund. Except as provided in
Section 6.11 hereof, moneys in the Bond Fund shall be used solely for the
payment of the principal of, premium, if any, and interest on the Bonds, for
the redemption of the Bonds prior to maturity and for payment of the
Acceleration Price as defined in Section 8.02 hereof. Subject to the
provisions of Section 6.12(b) hereof, funds for such payments of the
redemption price and principal of and premium, if any, and interest on the
Bonds shall be derived from the following sources in the order of priority
indicated:
(i) amounts deposited into the Bond Fund which constitute
Available Moneys (and in connection with moneys drawn by the Trustee under
the Letter of Credit, the Trustee shall prepare and present to the Bank the
appropriate certificates required under the Letter of Credit by 12:00 noon,
New York City time, on the Business Day immediately preceding the payment
date); and
(ii) any other moneys furnished to the Trustee and
available for such purpose.
SECTION 6.04. Custody of Separate Trust Fund. The Trustee is
authorized and directed to hold all Net Proceeds from any insurance proceeds
or condemnation award and disburse such proceeds in accordance with Article
VI of the Loan Agreement. If the Borrower, with the prior written consent of
the Bank (provided the Bank is not then in default under the Letter of
Credit), directs that any portion of such Net Proceeds be applied to redeem
Bonds, the Trustee shall deposit such Net Proceeds in a separate subaccount
of the Bond Fund, and the Authority covenants and agrees to take and cause to
be taken any action requested by the Authority to redeem on the earliest
possible redemption date the amount of Bonds so specified by the Borrower.
SECTION 6.05. Project Fund. There is hereby created and established
with the Trustee a trust fund to be designated "Project Fund," which shall be
expended in accordance with the provisions hereof and of the Loan Agreement.
The Project Fund shall consist of funds deposited therein, from time to time,
pursuant to the provisions hereof, for purposes of paying Qualified Project
Costs of the Project.
SECTION 6.06. Payments into the Project Fund; Disbursements. The
Project Fund shall initially consist of those moneys deposited therein
pursuant to Section 3.03(c) hereof. Proceeds of the Bonds deposited in the
Project Fund shall be applied to pay a portion of the costs of the Project.
The Trustee is hereby authorized and directed to make disbursements from the
Project Fund upon the receipt of a requisition in the form of Exhibit C
hereto signed by the Borrower and approved in writing by the Bank. The
Trustee shall keep and maintain adequate records pertaining to the Project
Fund and all disbursements therefrom, including records of all requisitions
made pursuant to the Loan Agreement and the Trust Indenture, and the Trustee
shall, upon request of the Borrower, furnish statements in the form
customarily prepared by the Trustee. The Trustee shall hold all moneys and
investments from time to time on deposit in the Project Fund for the Owners
and for the Bank in order to secure payment of the obligations of the
Borrower under the Reimbursement Agreement, the rights of the Bank being
subject and subordinate to the rights of the Trustee so long as any amount
due in respect of the Bonds remains unpaid.
SECTION 6.07. Use of Money in the Project Fund Upon Default. If the
principal of the Bonds shall have become due and payable pursuant to Article
VIII hereof, any balance remaining in the Project Fund shall without further
authorization (i) prior to the Obligation Termination Date, if any amounts
are due and owing under the Reimbursement Agreement, be transferred
immediately to the Bank, as long as the Bank is not in default of its
obligations under the Letter of Credit, or (ii) after the Obligation
Termination Date, be transferred into the Bond Fund.
SECTION 6.08. Use of Money in the Project Fund Upon Completion of
the Project. The completion of the Project and payment or provision for
payment of all Costs of the Project shall be evidenced by the filing with the
Trustee of the certificate required by Section 2.03 of the Loan Agreement. As
soon as practicable and in any event not more than sixty (60) days from the
date of receipt by the Trustee of the certificate referred to in the
preceding sentence, any balance remaining in the Project Fund (except amounts
the Borrower shall have directed the Trustee to retain for any Cost of the
Project not then due and payable) shall, without further authorization be
transferred into a separate subaccount within the Bond Fund. Thereafter, the
Trustee shall cause a mandatory redemption of the Bonds in accordance with
the terms of Section 4.01(b)(2) hereof in an amount such that the funds
transferred to the Bond Fund pursuant to this Section 6.08 will be sufficient
to reimburse the Letter of Credit Bank for the redemption price of the Bonds.
On the date fixed for redemption, the Trustee (i) shall draw on the Letter of
Credit in an amount sufficient to pay the full redemption price of the Bonds
from the sources and in the order provided in Section 6.03 hereof and (ii)
transfer to the Letter of Credit Bank funds from the separate subaccount
within the Bond Fund created pursuant to this Section 6.08 to reimburse the
Bank for such drawing. If the sum transferred to the Bond Fund pursuant to
this Section 6.08 is not sufficient to effect a mandatory redemption of the
Bonds in accordance with the terms of Section 4.01(b)(2) hereof or if there
are any excess funds remaining in the Bond Fund after such mandatory
redemption, such funds shall be transferred by the Trustee on the next
Interest Payment Date to the Letter of Credit Bank to reimburse the Letter of
Credit Bank for a drawing effected pursuant to Section 6.12 hereof.
SECTION 6.09. Nonpresentment of Bonds. In the event any Bond shall
not be presented for payment when the principal thereof becomes due, either
at maturity, or at the date fixed for redemption thereof, or otherwise, if
Available Moneys sufficient to pay any such Bond shall have been made
available to the Trustee for the benefit of the Owner thereof, all liability
of the Authority to the owner thereof for the payment of such Bond shall
forthwith cease, determine and be completely discharged, and thereupon it
shall be the duty of the Trustee to hold such funds uninvested, without
liability for interest thereon, for the benefit of the owner of such Bond who
shall thereafter be restricted exclusively to such funds for any claim of
whatever nature on his part under this Indenture with respect to such Bond.
Any moneys so deposited with and held by the Trustee not so applied
to the payment of Bonds within five (5) years after the date on which the
same shall have become due shall be repaid by the Trustee to the Borrower
upon written direction of an Authorized Representative, and thereafter owners
of Bonds shall be entitled to look only to the Borrower for payment, and then
to the extent of the amount so repaid, and all liability of the Trustee with
respect to such money shall thereupon cease, and the Borrower shall not be
liable for any interest thereon and shall not be regarded as a trustee of
such money.
SECTION 6.10. Moneys to be Held in Trust. Except as otherwise
provided in Section 6.13 with respect to the Rebate Fund, all moneys required
to be deposited with or paid to the Trustee for the account of any fund or
account referred to in any provision of this Indenture or the Loan Agreement
shall be held by the Trustee in trust, and (except for the moneys from time
to time required to be deposited and maintained in the Rebate Fund) shall,
while held by the Trustee, constitute part of the Trust Estate and be subject
to the lien and security interest created hereby.
SECTION 6.11. Repayment to the Bank and the Borrower from the Bond
Fund, the Rebate Fund or the Project Fund. Any amounts remaining in the Bond
Fund, the Project Fund, the Rebate Fund or any other fund or account created
hereunder after payment in full of the principal of, premium, if any, and
interest on the Bonds, the fees, charges and expenses of the Trustee and all
other amounts required to be paid hereunder, including payment to the United
States of America of the final installment of the Rebate Amount, if any,
pursuant to Section 6.13 hereof, shall be paid as soon as possible to the
Bank unless the Bank notifies the Trustee to the contrary in writing, in
which case such amounts shall be paid directly to the Borrower.
SECTION 6.12. Letter of Credit. (a) During the term of the Letter of
Credit, and subject to Sections 4.07 and 6.03 hereof, the Trustee shall draw
moneys under the Letter of Credit in accordance with the terms thereof (i) to
pay when due (whether by reason of maturity, redemption, conversion,
acceleration or otherwise) the principal of, and interest and, to the extent
the Letter of Credit covers same, any premium on the Bonds, and (ii) to pay
when due the Purchase Price of the Bonds.
(b) Notwithstanding any provision to the contrary which may
be contained in this Indenture, including, without limitation, Section
6.12(a) (i) in computing the amount to be drawn under the Letter of Credit on
account of the payment of the principal or Purchase Price of, interest or, to
the extent the Letter of Credit covers same, any premium on the Bonds, the
Trustee shall exclude any such amounts in respect of any Bonds which are
Pledged Bonds prior to the date such payment is due, and (ii) amounts drawn
by the Trustee under the Letter of Credit shall not be applied to the payment
of the Purchase Price of any Bonds which are Pledged Bonds prior to the date
such payment is due.
(c) The Letter of Credit shall terminate in accordance with
its terms on the Letter of Credit Termination Date. Upon such termination,
the Trustee shall deliver the terminated Letter of Credit to the Bank,
together with such certificates as may be required by the terms of the Letter
of Credit.
SECTION 6.13. Rebate Fund. (a) The Trustee shall establish and
maintain a fund separate from any other fund established and maintained
hereunder designated as the Rebate Fund. The Rebate Fund shall be held for
the benefit of the United States of America and not for the benefit of the
Holders of the Bonds or the Bank, which Holders or the Bank shall have no
rights in or to such fund.
(b) Subject to subsection (c) of this Section 6.13, as of
the last day of each fifth Bond Year (the "Rebate Computation Date"), the
Borrower, on behalf of the Authority, shall calculate or cause to be
calculated the amount required to be paid to the United States of America
(the "Rebatable Arbitrage") pursuant to Section 148 of the Code. On or before
the sixtieth (60th) day after such date, the Trustee at the written direction
of, and upon the receipt of funds from, the Borrower shall deposit in the
Rebate Fund the amount, if any, needed to increase the amount in such Fund to
an amount equal to ninety percent (90%) of the Rebatable Arbitrage for the
period from the date of issuance of the Bonds to the Rebate Computation Date
at issue, or shall transfer from the Rebate Fund to the Bond Fund the amount,
if any, needed to reduce the amount in the Rebate Fund to ninety percent
(90%) of the amount of the Rebatable Arbitrage for such period.
Subject to subsection (c) of this Section 6.13, as of the last day
on which the last remaining Outstanding Bond is retired (the "Final
Computation Date"), the Borrower, on behalf of the Authority, shall
calculate, or cause to be calculated, the amount required to be paid to the
United States of America pursuant to Section 148 of the Code. on or before
the sixtieth (60th) day after such date, the Trustee, at the written
direction of, and upon the receipt of funds from, the Borrower, shall deposit
in the Rebate Fund the amount, if any, needed to increase the amount in such
Fund to an amount equal to the Rebatable Arbitrage for the period from the
date of issuance of the Bonds to the Final Computation Date, or shall
transfer from the Rebate Fund to the Bond Fund the amount, if any, needed to
reduce the amount in the Rebate Fund to the amount of the Rebatable Arbitrage
for such period.
After making any transfer required for a Rebate Computation Date and
the Final Computation Date, the Authority shall immediately pay or cause to
be paid to the United States of America the amount in the Rebate Fund. The
amounts in the Rebate Fund shall not be subject to the claim of any party,
including any Bondholder or the Bank, and shall not be paid to any party
other than the United States.
All amounts in the Rebate Fund shall be used and withdrawn by the
Authority or the Trustee solely for the purposes set forth in this Section.
In the event the amount in the Rebate Fund is for any reason insufficient to
pay to the United States of America the amounts due as calculated in this
Section, the Borrower or the Trustee at the direction of, and upon the
receipt of funds from, the Borrower, shall deposit in the Rebate Fund the
amount for such deficiency.
(c) Notwithstanding the provisions of this Section 6.13,
the Borrower, on behalf of the Authority, hereby agrees to calculate the
amount to be deposited in the Rebate Fund and the amount to be rebated to the
United States of America pursuant to Section 148(f) of the Code in any manner
not inconsistent with its arbitrage covenants set forth in the Tax Compliance
Agreement and the Loan Agreement delivered on the date of issuance of the
Bonds. Such calculation shall give regard to all regulations applicable to
such Section 148(f) including any temporary regulations heretofore or
hereafter released.
(d) The Authority and the Borrower agree that the Trustee
shall not be liable for any damages, costs or liabilities resulting from the
performance of the Trustee's duties and obligations under Section 6.13
hereof, except that the Trustee shall be liable for its gross negligence or
willful misconduct. The Borrower shall indemnify and hold the Trustee and its
directors, officers, agents and employees (collectively, the Indemnitees")
harmless from and against any and all claims, liabilities, losses, damages,
fines, penalties and expenses, including out-of-pocket, incidental expenses,
legal fees and expenses and the allocated costs and expenses of in-house
counsel and legal staff ("Losses") that may be imposed on, incurred by or
asserted against, the Indemnitees or any of them for following any
instructions or other directions upon which the Trustee is authorized to rely
pursuant to this Section 6.13. In addition to and not in limitation of the
immediately preceding sentence, the Borrower also agrees to indemnify and
hold the Indemnitees and each of them harmless from and against any and all
Losses that may be imposed on, incurred by or asserted against the
Indemnitees or any of them in connection with or arising out of the Trustee's
exercise or performance of its duties and obligations under this Section
6.13, provided the Trustee has not acted with gross negligence or engaged in
willful misconduct. The provisions of this Section 6.13 shall survive the
termination of this Indenture and the resignation or removal of the Trustee
for any reason. In making any deposit or transfer to or payment from the
Rebate Fund, the Trustee shall be entitled to rely solely on the written
instructions of the Borrower and shall have no duty to examine such written
instruments to determine the accuracy of the Borrower's calculation of the
Rebate Amount or the amounts to be paid to the United States. In the event
that the Borrower or the Authority shall not comply with their respective
obligations under Section 6.13 of this Indenture, the Trustee shall have no
obligation to cause compliance on their respective behalf.
SECTION 6.14. Investment of Moneys in Funds. All moneys in any of
the funds established pursuant to this Indenture (except moneys obtained from
a draw on the Letter of Credit) shall be invested by the Trustee, as directed
in writing by the Borrower, solely in Investment Securities except with
respect to Available Moneys held by the Trustee for the payment of
Undelivered Bonds, which Available Moneys the Trustee shall not invest.
Investment Securities may be purchased at such prices as the Trustee may in
its discretion determine or as may be directed by the Borrower. Absent
written investment directions from the Borrower, the Trustee shall invest
available fund balances in investments described in subparagraph (ix) of the
definition of Investment Securities. All Investment Securities shall be
acquired subject to the limitations set forth in Section 7.06, the
limitations as to maturities hereinafter in this Section set forth and such
additional limitations or requirements consistent with the foregoing as may
be established by request of the Borrower. The Borrower shall be responsible
for selecting Investment Securities that are legal investments under the laws
of the State.
To the extent the Bank has not been reimbursed under the
Reimbursement Agreement and has notified the Trustee of same in writing, all
interest, profits and other income received from the investment of moneys in
any fund established pursuant to this Indenture shall be transferred to the
Bank in the amount specified by the Bank. Otherwise, such amounts shall be
deposited to the appropriate fund or account in which such investments were
made. Notwithstanding anything to the contrary contained in this paragraph,
an amount of interest received with respect to any Investment Security equal
to the amount of accrued interest, or premium paid, if any, paid as part of
the purchase price of such Investment Security shall be credited to the fund
from which such accrued interest was paid.
Investment Securities acquired as an investment of moneys in any
fund established under this Indenture shall be credited to such fund. For the
purpose of determining the amount in any fund, all Investment Securities
credited to such fund shall be valued at the lesser of cost or par value
plus, prior to the first payment of interest following purchase, the amount
of accrued interest, if any, paid as a part of the purchase price.
The Trustee may act as principal or agent in the making or disposing
of any investment. The Trustee may sell at the best price obtainable, or
present for redemption, any Investment securities so purchased whenever it
shall be necessary to provide moneys to meet any required payment, transfer,
withdrawal or disbursement from the fund to which such Investment Security is
credited. The Trustee shall not be liable or responsible for any loss or
depreciation in value resulting from such investment made in accordance with
this Section 6.14.
ARTICLE VII
PARTICULAR COVENANTS
SECTION 7.01. Punctual Payment. The Authority shall punctually pay
or cause to be paid the principal, premium, if any, and interest to become
due in respect of all the Bonds, in strict conformity with the terms of the
Bonds and of this Indenture, according to the true intent and meaning
thereof, but only out of Revenues and other assets pledged for such payment
as provided in this Indenture.
SECTION 7.02. Extension of Payment of Bonds. The Authority shall not
directly or indirectly extend or assent to the extension of the maturity of
any of the Bonds or the time of payment of any claims for interest by the
purchase or funding of such Bonds or claims for interest or by any other
arrangement and in case the maturity of any of the Bonds or the time of
payment of any such claims for interest shall be extended, such Bonds or
claims for interest shall not be entitled, in case of any default hereunder,
to the benefits of this Indenture, except subject to the prior payment in
full of the principal of all of the Bonds then outstanding and of all claims
for interest thereon which shall not have been so extended. Nothing in this
Section shall be deemed to limit the right of the Authority to issue Bonds
for the purpose of refunding any Outstanding Bonds, and such issuance shall
not be deemed to constitute an extension of maturity of Bonds.
SECTION 7.03. Against Encumbrances. The Authority shall not create,
or permit the creation of, any pledge, lien, charge or other encumbrance upon
the Revenues and other assets pledged or assigned under this Indenture while
any of the Bonds are Outstanding, except the pledge and assignment created by
this Indenture and will assist the Trustee in contesting any such pledge,
lien, charge or other encumbrance which may be created. Subject to this
limitation, the Authority expressly reserves the right to enter into one or
more other indentures for any of its corporate purposes, including other
programs under the Act, and reserves the right to issue other obligations for
such purposes.
SECTION 7.04. Power to Issue Bonds and Make Pledge and Assignment.
The Authority represents and covenants that it is duly authorized pursuant to
law to issue the Bonds and to enter into this Indenture and to pledge and
assign the Revenues and other assets pledged and assigned, respectively,
under this Indenture in the manner and to the extent provided in this
Indenture. The Bonds and the provisions of this Indenture are and will be the
legal, valid and binding limited obligations of the Authority in accordance
with their terms, and the Authority and the Trustee, subject to the
provisions of Article IX hereof, shall at all times, to the extent permitted
by law, defend, preserve and protect said pledge and assignment of Revenues
and other assets and all the rights of the Bondholders under this Indenture
against all claims and demands of all Persons whomsoever.
SECTION 7.05. Accounting Records and Financial Statements. (a) The
Trustee shall at all times keep, or cause to be kept, proper books of record
and account as shall be consistent with prudent corporate trust industry
practice, in which complete and accurate entries shall be made of all
transactions relating to the proceeds of Bonds, the Revenues, the payments
under the Loan Agreement and all funds established pursuant to this
Indenture. Such books of record and account shall be available for inspection
by the Authority, the Borrower, the Bank and any Bondholder, or his agent or
representative duly authorized in writing, at reasonable hours and under
reasonable circumstances subject to prior written notice to the Trustee.
(b) The Trustee shall within thirty (30) days after the end
of each month furnish to the Borrower a monthly statement (which need not be
audited) covering receipts, disbursements, allocation and application of
Revenues and any other moneys (including proceeds of Bonds) in any of the
funds and accounts established pursuant to this Indenture for such month.
SECTION 7.06. Tax Covenants. The Borrower has covenanted not to take
any action, or fail to take any action, if any such action or failure to take
action would adversely affect the exclusion from gross income of the interest
on the Bonds under Section 103 and Sections 141 through 150, inclusive, of
the Code. The Authority and the Borrower will not directly or indirectly use
or permit the use of any proceeds of the Bonds or any other funds of the
Authority or the Borrower, or take or omit to take any action that would
cause the Bonds to be "arbitrage bonds" within the meaning of Section 148(a)
of the Code. To that end, the Authority and the Borrower will comply with all
requirements of Section 148 of the Code to the extent applicable to the
Bonds. In the event that any time the Authority or the Borrower is of the
opinion that for purposes of this Section 7.06 it is necessary to restrict or
limit the yield on the investment of any moneys held by the Trustee under
this Indenture, the Loan Agreement or otherwise, the Authority or the
Borrower shall so instruct the Trustee in writing, and the Trustee shall take
such action as shall be set forth in such instructions. The covenants of the
Authority contained in the Loan Agreement are fully incorporated herein by
reference and are made a part of this Indenture as if fully set forth herein.
Without limiting the generality of the foregoing, the Authority and
the Borrower agree that there shall be paid from time to time all amounts
required to be rebated to the United States pursuant to Section 148(f) of the
Code and any temporary, proposed or final Treasury Regulations as may be
applicable to the Bonds from time to time. This covenant shall survive
payment in full or defeasance of the Bonds. The Authority and the Borrower
specifically covenant to pay or cause to be paid to the United States at the
times and in the amounts determined under Section 6.13 hereof the Rebatable
Arbitrage, as described in such Section 6.13 and in the Tax Compliance
Agreement.
Notwithstanding any provision of this Section and Section 6.13
hereof, if the Borrower shall provide to the Authority and the Trustee an
opinion of nationally recognized bond counsel to the effect that any action
required under this Section and/or Section 6.13 hereof is no longer required,
or to the effect that some further action is required, to maintain the
exclusion from gross income of interest on the Bonds, the Authority, the
Trustee and the Borrower may rely conclusively on such opinion.
SECTION 7.07. Other Covenants. (a) Subject to Article IX hereof, the
Trustee shall promptly collect all amounts due from the Borrower pursuant to
the Loan Agreement, shall perform all duties imposed upon it pursuant to the
Loan Agreement and shall diligently enforce, and take all steps, actions and
proceedings reasonably necessary for the enforcement of all of the rights of
the Authority and all of the obligations of the Borrower.
(b) The Authority shall not amend, modify or terminate any
of the terms of the Loan Agreement, or consent to any such amendment,
modification or termination, without the written consent of the Trustee. The
Trustee shall give such written consent only if (i) notification of such
amendment, modification or termination has been given to each Rating Agency
then rating the Bonds and to the Holders, (ii) the Trustee receives the
written consent of the Bank, (iii)(A) such amendment, modification or
termination will not materially adversely affect the interests of the Holders
or result in any material impairment of the security hereby given for the
payment of the Bonds or (B) the Trustee first obtains the written consent of
the Bank and the Holders of a majority in principal amount of the Bonds then
Outstanding to such amendment, modification or termination, provided that no
such amendment, modification or termination shall reduce the amount of loan
payments to be made to the Authority or the Trustee by the Borrower pursuant
to the Loan Agreement, or extend the time for making such payment, without
the written consent of all of the Holders of the Bonds then Outstanding, and
(iv) the Authority shall have delivered to the Trustee an opinion of Counsel
satisfactory to the Trustee that all of the provisions and conditions set
forth in this Section 7.07(b), including those in subsection (b)(iii)(A)
hereof, have been satisfied.
SECTION 7.08. Waiver of Laws. The Authority shall not at any time
insist upon or plead in any manner whatsoever, or claim or take the benefit
or advantage of, any stay or extension provided by law now or at any time
hereafter in force that may affect the covenants and agreements contained in
this Indenture or in the Bonds, and all benefit or advantage of any such law
or laws is hereby expressly waived by the Authority to the extent permitted
by law.
SECTION 7.09. Further Assurances. The Authority will make, execute
and deliver any and all such further indentures, instruments and assurances
as may be reasonably necessary or proper to carry out the intention or to
facilitate the performance of this Indenture and for the better assuring and
confirming unto the Holders of the Bonds of the rights and benefits provided
in this Indenture.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES OF BONDHOLDERS
SECTION 8.01. Events of Default. The following events shall be
Events of Default:
(a) default in the due and punctual payment of the
principal of any Bond when and as the same shall become due and payable,
whether at maturity as therein expressed, by proceedings for redemption, by
acceleration, or otherwise; or
(b) default in the due and punctual payment of any
installment of interest on any Bond when and as the same shall become due and
payable; or
(c) failure to pay the Purchase Price on any Bond tendered
pursuant to Article V when such payment is due; or
(d) default by the Authority in the observance of any of
the other covenants, agreements or conditions on its part in this Indenture
or in the Bonds, if such default shall have continued for a period of sixty
(60) days after written notice thereof, specifying such default and requiring
the same to be remedied, shall have been given to the Authority by the
Trustee, or to the Authority and the Trustee by the Holders of not less than
twenty-five percent (25%) in aggregate principal amount of the Bonds at the
time outstanding; or
(e) if there occurs an Event of Default as defined in
Sections 8.01(a) through (d) of the Loan Agreement; or
(f) the Trustee's receipt of written notice of declaration
by the Bank of an Event of Default under the provisions of the Reimbursement
Agreement and instructing the Trustee to declare the principal amount of the
Outstanding Bonds to be immediately due and payable; or
(g) if, at any time after a draw under the Letter of
Credit, the Trustee shall have received notice from the Bank that the amount
of such draw corresponding to the payment of interest on the Bonds shall not
be reinstated in the amount and in the manner set forth in the Letter of
Credit.
Upon actual knowledge of the existence of any Event of Default, the
Trustee shall as soon as practicable notify the Bank, the Borrower, the
Authority, the Tender Agent, if it is not also the Trustee, and the
Remarketing Agent. Anything contained in this Indenture to the contrary
notwithstanding, (i) no Event of Default under subsections (d) or (e) above
shall occur without the prior written consent of the Bank so long as the Bank
is not in default under the terms of the Letter of Credit and (ii) the
Trustee shall not notify Bondholders of the existence of any Event of Default
without the prior written consent of the Bank, as long as the Bank is not in
default under the terms of the Letter of Credit.
SECTION 8.02. Acceleration. If any Event of Default under Section
8.01 hereof occurs, the Trustee (with the written consent of the Bank
provided the Bank is not in default of its obligations under the Letter of
Credit) may, and upon request of the Owners of twenty-five percent (25%) in
principal amount of the Bonds then Outstanding shall, by written notice to
the Authority, the Bank and the Borrower, declare the principal amount of all
Bonds then Outstanding and the interest accrued thereon to such date (the
"Acceleration Date") to be due and the Acceleration Price (as here defined)
shall thereupon become payable on the first (lst) Business Day following the
Acceleration Date (the "Payment Date"). Thereupon, the Trustee among other
things, shall draw immediately upon the Letter of Credit as set forth in
Section 6.12 hereof. Interest on the accelerated Bonds shall cease to accrue
on the Acceleration Date. Accelerated Bonds shall be payable at a price equal
to 100% of the aggregate principal amount thereof plus interest accrued to
the Payment Date (the "Acceleration Price"). Notwithstanding anything
contained herein to the contrary, upon the occurrence of an Event of Default
described in Section 8.01 (f) or (g) hereof, the Trustee shall, by written
notice to the Bank, the Borrower and the Authority declare immediately due
and payable the principal amount of the Outstanding Bonds.
Any such declaration is subject to the condition that if, at any
time after such declaration and before any judgment or decree for the payment
of the moneys due shall have been obtained or entered, the Letter of Credit
shall have been reinstated in full as to principal and interest and the
reasonable charges and expenses of the Trustee, and any and all other
defaults known to the Trustee (other than in the payment of principal of and
interest on the Bonds due and payable solely by reason of such declaration)
shall have been made good or cured to the satisfaction of the Trustee or
provision deemed by the Trustee to be adequate shall have been made therefor,
then, and in every such case, the Holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds then Outstanding, by
written notice to the Authority, the Bank, the Borrower and the Trustee, or
the Trustee if such declaration was made by the Trustee, may, on behalf of
the Holders of all of the Bonds, rescind and annul such declaration and its
consequences and waive such default; but such rescission and annulment shall
not extend to or affect any subsequent default, and shall not impair or
exhaust any right or power in consequence thereof. The foregoing to the
contrary notwithstanding, Owners of twenty-five percent (25%) in principal
amount of the Bonds then Outstanding shall have no right to request the
Trustee to accelerate the bonds under this Section 8.02 and the Trustee shall
not be obligated to give any Bondholder notice of a default under the
Indenture (except upon the occurrence of an Event of Default under Section
8.01(f) or (g) hereof), the Loan Agreement or any other documents executed
and delivered in connection with the Bonds, unless the Bank shall be in
default of its obligations under the Letter of Credit or a voluntary or
involuntary case has been commenced by the filing of a petition under the
United States Bankruptcy Code or any other law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts
by or against the Bank.
Upon any declaration of acceleration hereunder, the Trustee shall
as soon as possible give written notice of the acceleration to the
Bondholders as set forth below. In addition, notice of such acceleration
shall be mailed, by registered or certified mail or overnight mail, to each
Rating Agency then rating the Bonds, if any, but failure to mail any such
notice or any defect in the mailing thereof shall not affect the validity of
such acceleration. Such notice of acceleration (i) shall be given in the name
of the Authority, (ii) shall identify the Accelerated Bonds (by name, date of
issue, interest rate and maturity date); (iii) shall specify the Acceleration
Date; (iv) shall state that the interest on the accelerated Bonds ceased to
accrue on the Acceleration Date; (v) shall state the reason for the
acceleration; and (vi) shall state that on the Payment Date the Acceleration
Price will be payable at the office of the Trustee designated in such notice.
The Trustee shall use "CUSIP" numbers on such notices as a convenience to
Bondholders and 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 acceleration and that reliance may be placed on
the registration and description printed on the Bonds.
Upon acceleration pursuant to this Section 8.02, the Trustee shall
immediately exercise such rights as it may have under the Loan Agreement to
declare all payments thereunder to be immediately due and payable and shall
immediately draw upon the Letter of Credit as provided in Section 6.12 hereof
in an amount that, together with any Available Moneys on deposit in the Bond
Fund and irrevocably committed to the payment of principal of and interest on
the Bonds, is sufficient to pay the Acceleration Price due on the Outstanding
Bonds on the Payment Date.
Upon receipt by the Trustee of any amount from the Bank under the
preceding paragraphs of this Section 8.02 (or after receipt by the Trustee of
any amounts from the Bank under any other provision of this Indenture), the
Bank shall be subrogated to the right, title and interest of the Trustee and
the Bondholders in and to the Loan Agreement, the Project Facilities and any
other security held for the payment of the Bonds (other than said funds), all
of which, upon payment of any fees and expenses due and payable to the
Trustee pursuant to the Loan Agreement or this Indenture, shall be assigned
by the Trustee to the Bank. Upon such assignment to the Bank, the Trustee
shall have no further duties or obligations under the Bond Documents.
SECTION 8.03. Other Remedies. If any Event of Default occurs and is
continuing, the Trustee, before or after declaring the principal of the Bonds
immediately due and payable, may enforce each and every right granted to the
Authority or the Trustee under the Loan Agreement, the Letter of Credit or
any other security instrument, or under any supplements or amendments
thereto, and shall, at all times complying with the provisions of Section
8.02 hereof, apply any Revenues or Available Moneys in the Bond Fund held by
the Trustee to the payment of principal of or interest on the Bonds. In
exercising such rights and the rights given the Trustee under this Article
VIII, the Trustee shall take such action, as in the judgment of the Trustee,
applying the standards described in Section 9.01 hereof, would best serve the
interests of the Bondholders.
SECTION 8.04. Legal Proceedings By Trustee. If any Event of Default
has occurred and is continuing, the Trustee in its discretion may and, upon
the written request of the Bank or the Owners of twenty-five percent (25%) in
principal amount of the Bonds then Outstanding (subject to the consent of the
Bank, as long as the Bank is not in default of its obligations under the
Letter of Credit or a voluntary or involuntary case has not been commenced by
the filing of a petition under the United States Bankruptcy Code or any other
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts by or against the Bank) and receipt of
indemnity to its satisfaction shall, in its own name:
A. By mandamus, other suit, action or proceeding at law or
in equity, enforce all rights of the Bondholders, including the right to
require the Authority to collect the amounts payable under the Loan Agreement
and to require the Authority to carry out any other provisions of this
Indenture for the benefit of the Bondholders and to perform its duties under
the Act;
B. Bring suit upon the Bonds;
C. By action or suit in equity require the Authority to
account as if it were the trustee of an express trust for the Bondholders;
and
D. By action or suit in equity enjoin any acts or things
that may be unlawful or in violation of the rights of the Bondholders.
SECTION 8.05. Discontinuance of Proceedings by Trustee. If any
proceeding taken by the Trustee on account of any Event of Default is
discontinued or is determined adversely to the Trustee, the Authority, the
Trustee, the Bondholders and the Bank shall be restored to their former
positions and rights hereunder as though no such proceeding had been taken,
but subject to the limitations of any such adverse determination.
SECTION 8.06. Bondholders May Direct Proceedings by Trustee. The
Holders of a majority in principal amount of the Bonds Outstanding hereunder
shall have the right to direct the method and place of conducting all
remedial proceedings by the Trustee hereunder, provided that such direction
shall not be otherwise than in accordance with law or the provisions of this
Indenture, and that the Trustee shall not be required to comply with any such
direction which it deems to be unlawful or unjustly prejudicial to
Bondholders not parties to such direction. The foregoing provisions of this
Section 8.06 to the contrary notwithstanding, the Bank shall have the right
to direct the method and the place of conducting all remedial proceedings by
the Trustee hereunder provided that such direction shall not be otherwise
than in accordance with law or the provisions of this Indenture as long as
the Bank shall not be in default under the Letter of Credit or a voluntary or
involuntary case has not been commenced by the filing of a petition under the
United States Bankruptcy Code or any other law relating to the bankruptcy,
insolvency or reorganization of the Bank.
SECTION 8.07. Limitations on Actions By Bondholders. Anything in
this Indenture to the contrary notwithstanding, no Bondholder shall have any
right to pursue any remedy hereunder or under the Loan Agreement unless:
(a) The Trustee shall have been given written notice of an
Event of Default;
(b) The holders of at least twenty-five percent (25%) in
aggregate principal amount of the Bonds Outstanding 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;
(c) The Trustee shall have been offered indemnity
satisfactory to it against costs, expenses and liabilities.
(d) The Trustee shall have failed to comply with such
request within a reasonable time; and
(e) The Bank shall be in default of its obligations under
the Letter of Credit or a voluntary or involuntary case has been commenced by
the filing of a petition under the United States Bankruptcy Code or any other
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts by or against the Bank; provided, however,
that nothing herein shall affect or impair the right of any Owner of any Bond
to enforce payment of the principal and Purchase Price thereof and interest
thereon at and after the maturity thereof, or the obligation of the Authority
to pay such principal and Purchase Price and interest to the respective
Owners of the Bonds at the time and place, from the source and in the manner
expressed herein and in the Bonds; and provided further that such action
shall not disturb or prejudice the lien of this Indenture.
SECTION 8.08. Trustee May Enforce Rights Without Possession of
Bonds. All rights under the 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 8.09. Delays and Omissions Not to Impair Rights. No delay or
omission in respect of exercising any right or power accruing upon any Event
of Default shall impair such right or power or be a waiver of such Event of
Default and every remedy given by this Article VIII may be exercised, from
time to time, and as often as may be deemed expedient.
SECTION 8.10. Application of Moneys in Event of Default. Any moneys
received by the Trustee under this Article VIII shall be applied in the order
listed below (provided that any moneys received by the Trustee upon drawing
under the Letter of Credit together with Available Moneys on deposit in the
Bond Fund and available for payment of principal and Purchase Price of and
interest on all Outstanding Bonds, any moneys held by the Trustee upon the
nonpresentment of Bonds and any moneys held by the Trustee for the defeasance
of Bonds pursuant to Article XI shall be applied only as provided in clause B
below and only to pay outstanding principal and accrued interest, as provided
in the Letter of Credit, with respect to the Bonds):
A. To the payment of the fees and expenses of the Trustee
and the Authority including reasonable counsel fees and expenses, and any
disbursements of the Trustee with interest thereon and its reasonable
compensation;
B. To the payment of principal and Purchase Price of and
interest then owing on the Bonds, including any interest on overdue interest,
and in case such moneys shall be insufficient to pay the same in full, then
to the payment of principal and Purchase Price of and interest ratably,
without preference or priority of one over another or of any installment of
interest over any other installment of interest; and
C. The surplus, if any, remaining after the application of
the moneys as set forth above shall, to the extent of any unreimbursed
drawing under the Letter of Credit or other obligations owing by the Borrower
to the Bank under the Reimbursement Agreement, as certified by the Bank to
the Trustee, be paid to the Bank. Any remaining moneys shall be paid to the
Borrower or the Person lawfully entitled to receive the same as a court of
competent jurisdiction may direct.
SECTION 8.11. Trustee and Bondholders Entitled to All Remedies Under
Act; Remedies Not Exclusive. It is the purpose of this Article VIII to
provide to the Trustee and the Bondholders all rights and remedies 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 permitted by the Act. It is further
intended that, insofar as lawfully possible, the provisions of this Article
VIII shall apply to and be binding upon any trustee or receiver appointed
under the Act.
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 8.12. Trustee's Right to Receiver. As provided by the Act,
the Trustee shall be entitled as of right to the appointment of a receiver;
and the Trustee, the Bondholders and any receiver so appointed shall have
such rights and powers and be subject to such limitations and restrictions as
may be contained in or permitted by the Act.
SECTION 8.13. Subrogation Rights of Bank. The Trustee agrees that
the Bank or other provider of a Substitute Letter of Credit shall be
subrogated to all rights, remedies and collateral of the Bondholder under the
Indenture, the Loan Agreement or any other document or instrument, to the
extent the Bank or other provider of a Substitute Letter of Credit has
honored a draw under the Letter of Credit or Substitute Letter of Credit, as
the case may be, and has not been reimbursed or paid therefor.
SECTION 8.14. Waiver of Default. As long as the Bank is not in
default of its obligations under the Letter of Credit and the Letter of
Credit is in full force and effect, or a voluntary or involuntary case has
not been commenced by the filing of a petition under the United States
Bankruptcy Code or any other law relating to the bankruptcy, insolvency or
reorganization of the Bank, the Bank may waive an Event of Default and if the
Bank does so, the Trustee must also waive such Event of Default. The Trustee
may not waive an Event of Default under this Indenture if the Letter of
Credit has not been reinstated to cover principal and Purchase Price of and
interest on the Bonds in accordance with the terms of the Letter of Credit.
ARTICLE IX
THE TRUSTEE; THE TENDER AGENT; AND THE REMARKETING AGENT
SECTION 9.01. Duties, Immunities and Liabilities of Trustee. (a) The
Trustee accepts the Trusts hereby created and agrees to perform the duties
herein required of it subject to the provisions of this Article IX. The
Trustee shall, prior to an Event of Default, and after the curing of all
Events of Default which may have occurred, perform such duties and only such
duties as are specifically set forth in this Indenture. The Trustee shall,
during the existence of any Event of Default (which has not been cured),
exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs. The Trustee shall not be required to give any bond or surety with
respect to its acceptance of its rights and duties under this Indenture. No
permissive right of the Trustee to take action enumerated in this Indenture
shall be construed as a duty.
(b) The Authority shall remove the Trustee if at any time
requested to do so by an instrument or concurrent instruments in writing
signed by the Holders of not less than a majority in aggregate principal
amount of the Bonds then outstanding (or their attorneys duly authorized in
writing), or if at any time the Trustee shall cease to be eligible in
accordance with Subsection (e) of this Section or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or its property shall be appointed, or any public officer shall take
control or charge of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, in each case by
giving written notice of such removal to the Trustee, and thereupon shall
appoint, with the consent of the Bank and the Borrower, a successor Trustee
by an instrument in writing.
(c) The Trustee may at any time resign by giving written
notice of such resignation to the Authority and the Bank and by giving the
Bondholders notice of such resignation by mail at the addresses shown on the
registration books maintained by the Trustee. Upon receiving such notice of
resignation, the Authority shall promptly appoint, with the consent of the
Bank and the Borrower, a successor Trustee by an instrument in writing.
(d) Any removal or resignation of the Trustee and
appointment of a successor Trustee shall become effective upon acceptance of
appointment by the successor Trustee. If no successor Trustee shall have been
appointed and have accepted appointment within forty-five (45) days of giving
notice of removal or notice of resignation as aforesaid, the resigning
Trustee, at the expense of the Borrower or any Bondholder (on behalf of
himself and all other Bondholders), may petition any court of competent
jurisdiction for the appointment of a successor Trustee. Any successor
Trustee appointed under this Indenture shall signify its acceptance of such
appointment by executing and delivering to the Authority and to its
predecessor Trustee a written acceptance thereof, and thereupon such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the moneys, estates, properties, rights, powers, trusts,
duties and obligations of such predecessor Trustee, with like effect as if
originally named Trustee herein; but, nevertheless at the request of the
Authority or the request of the successor Trustee, such predecessor Trustee
shall execute and deliver any and all instruments of conveyance or further
assurance and do such other things as may reasonably be required for more
fully and certainly vesting in and confirming to such successor Trustee all
the right, title and interest of such predecessor Trustee in and to any
property held by it under this Indenture and shall pay over, transfer, assign
and deliver to the successor Trustee any moneys or other property subject to
the trusts and conditions herein set forth. Upon request of the successor
Trustee, the Authority shall execute and deliver any and all instruments as
may be reasonably required for more fully and certainly vesting in and
confirming to such successor Trustee all such moneys, estates, properties,
rights, powers, trusts, duties and obligations. Upon acceptance of
appointment by a successor Trustee as provided in this subsection, the
Authority shall mail a notice of the succession of such Trustee to the trusts
hereunder to the Rating Agency, if any, and to the Bondholders at the
addresses shown on the registration books maintained by the Trustee. If the
Authority fails to mail such notice within fifteen (15) days after acceptance
of appointment by the successor Trustee, the successor Trustee shall cause
such notice to be mailed at the expense of the Authority.
(e) Any Trustee appointed under the provisions of this
Section in succession to the Trustee shall be a trust company or bank having
the powers of a trust company having a corporate trust office in the State
having a combined capital and surplus of at least one Hundred Million Dollars
($100,000,000), subject to supervision or examination by federal or state
authorities and shall have received written evidence from the Rating Agency
then rating the Bonds, if any, that the use of such Trustee would not result
in a reduction or withdrawal of the rating on the Bonds. If such bank or
trust company publishes a report of condition at least annually, pursuant to
law or to the requirements of any supervising or examining authority above
referred to, then for the purpose of this subsection the combined capital and
surplus of such bank or trust company shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this subsection (e), the Trustee shall
resign immediately in the manner and with the effect specified in this
Section.
SECTION 9.01A. Compensation and Indemnity. The Company shall pay to
the Trustee from time to time, and the Trustee shall be entitled to,
compensation for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
costs of preparing and reviewing reports, certificates and other documents,
costs of preparation and mailing of notices to Holders and reasonable costs
of counsel retained by the Trustee in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Company shall indemnify and hold harmless the
Trustee against any and all losses, liability or expense (including
reasonable attorneys' fees) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder,
including the costs and expenses of enforcing this Indenture (including this
Section 9.01A) and of defending itself against any claims (whether asserted
by any Holder, the Company or otherwise). The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee may
have separate counsel and the Company shall pay the fees and expenses of such
counsel. The Company need not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
willful misconduct or gross negligence.
To secure the Company's payment obligations in this Section
9.01A, the Trustee shall have a lien prior to the Bonds on all money or
property held or collected by the Trustee other than money or property held
in trust to pay principal of and interest on particular Bonds and proceeds of
drawings on the Letter of Credit. The Trustee's right to receive payment of
any amounts due under this Section 9.01A shall not be subordinate to any
other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section
9.01A shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 8.01(e) with
respect to the Company, the expenses are intended to constitute expenses of
administration under any bankruptcy law.
SECTION 9.02. Merger or Consolidation. Any company or association
into which the Trustee may be merged or converted or with which it may be
consolidated or any company or association resulting from any merger,
conversion or consolidation to which it shall be a party or any company or
association to which the Trustee may sell or transfer all or substantially
all of its corporate trust business, provided such company shall be eligible
under subsection (e) of Section 9.01, shall be the successor to such Trustee
without the execution or filing of any paper or any further act, anything
herein to the contrary notwithstanding.
SECTION 9.03. Liability of Trustee. (a) The recitals of facts herein
and in the Bonds shall be taken as statements of the Authority, and the
Trustee shall assume no responsibility for the correctness of the same, or
make any representations as to the validity or sufficiency of this Indenture
or of the Bonds or the security provided for the Bonds hereunder or shall
incur any responsibility in respect thereof, other than in connection with
the duties or obligations herein or in the Bonds assigned to or imposed upon
it. The Trustee shall not be accountable for the use or application by the
Authority or the Borrower of the Bonds, or upon disbursement from the Project
Fund, the proceeds thereof. The Trustee shall, however, be responsible for
its representations contained in its certificate of authentication on the
Bonds. The Trustee shall not be liable in connection with the performance of
its duties hereunder, except for its own gross negligence or willful
misconduct. The Trustee may become the owner of Bonds with the same rights it
would have if it were not Trustee and, to the extent permitted by law, may
act as depositary for and permit any of their officers or directors to act as
a member of, or in any other capacity with respect to, any committee formed
to protect the rights of Bondholders, whether or not such committee shall
represent the Holders of a majority in principal amount of the Bonds then
Outstanding and may otherwise deal with the Authority, the Borrower and the
Bank.
(b) The Trustee shall not be liable for any error of
judgment made in good faith by a responsible officer, unless it shall be
proved that the Trustee was grossly negligent in ascertaining the pertinent
facts.
(c) 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 the Holders of not less than a majority in aggregate
principal amount of the Bonds at the time Outstanding 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.
(d) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture (other than the
making of a draw under the Letter of Credit in accordance with its terms and
the terms hereof, declaring the principal of the Bonds to be immediately due
and payable when required hereunder or making payments on the Bonds with
funds provided under this Indenture when due) at the request, order or
direction of any of the Bondholders pursuant to the provisions of this
Indenture unless such Bondholders shall have offered to the Trustee
indemnification to its satisfaction for indemnity against the costs, expenses
and liabilities which may be incurred therein or thereby.
(e) The Trustee shall not be liable for any action taken by
it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Indenture.
(f) The Trustee shall not be required to take notice or be
deemed to have notice of any default hereunder or the other Bond Documents
unless the Trustee shall be specifically notified of such default in writing
by the Authority, the Borrower, the Bank or the Owner of any Outstanding
Bonds, and in the absence of such notice the Trustee shall conclusively
assume that there is no default; provided that the Trustee shall be required
to take notice of and be deemed to have notice of its failure to receive the
money necessary to pay the principal of and premium (if any) and interest on
the Bonds and Purchase Price payments.
(g) No provision of this Indenture or the other Bond
Documents shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers.
(h) The Trustee shall not be required to record or file any
document or statement, including financing and continuation statements, or to
insure or monitor the insurance of the Project Facilities.
SECTION 9.04. Right of Trustee to Rely on Documents. The Trustee may
conclusively rely, and shall be protected in acting upon any notice,
resolution, direction, requisition, request, consent, order, statement,
certificate, report, opinion, bond or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties. The Trustee may consult with counsel, who may be counsel of or to
the Authority, with regard to legal questions, and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered by it hereunder in good faith and in accordance
therewith.
The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly through agents or
attorneys, and the Trustee shall not be responsible for any negligence on the
part of any agent or attorney representing it with due care. The Trustee
shall not be bound to recognize any person as the Holder of a Bond unless and
until such Bond is submitted for inspection, if required, and his title
thereto is satisfactorily established, if disputed.
Whenever in the administration of the trusts imposed upon it by this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
Certificate of the Authority, and such Certificate shall be full warrant to
the Trustee for any action taken or suffered in good faith under the
provisions of this Indenture in reliance upon such Certificate, but in its
discretion the Trustee may, in lieu thereof, accept other evidence of such
matter or may require such additional evidence as it may deem reasonable.
SECTION 9.05. Preservation and Inspection of Documents.
(a) All documents received by the Trustee under the
provisions of this Indenture shall be retained in its possession and shall be
subject during normal business hours of the Trustee to the inspection of the
Authority and any Bondholder, and their agents and representatives duly
authorized in writing, at reasonable hours and under reasonable conditions
upon prior written notice.
(b) The Trustee covenants and agrees that it shall maintain
a current list of the names and addresses of all the Bondholders.
SECTION 9.06. Compensation. The Trustee shall be paid (solely from
Additional Payments) from time to time reasonable compensation for all
services rendered under this Indenture, and also all reasonable expenses,
charges, legal and consulting fees and other disbursements and those of its
attorneys, agents and employees, incurred in and about the performance of its
powers and duties under this Indenture.
SECTION 9.07. The Tender Agent. First Union National Bank, the
initial Tender Agent appointed by the Borrower, and each successor tender
agent appointed in accordance herewith, shall designate its office and
signify its acceptance of the duties and obligations imposed upon it as
described herein by a written instrument of acceptance delivered to the
Trustee and the Borrower under which the Tender Agent shall, among other
things:
(a) hold all Bonds delivered to it hereunder in trust for
the benefit of the respective Owners of Bonds which shall have so delivered
such Bonds until moneys representing the Purchase Price of such Bond shall
have been delivered to or for the account of or to the order of such Owners
of Bonds. Upon delivery of moneys representing the Purchase Price of such
Bonds to or for the account of or to the order of such Owners of Bonds, the
Tender Agent shall hold all such Bonds which are required to be delivered to
the Pledged Bonds Custodian pursuant to Section 5.06(b) hereof, as the agent
of the Bank for the purpose of perfecting the Bank's security interest
therein under the Pledge Agreement (which agency shall terminate upon
delivery of such Bonds by the Tender Agent to or upon the order of the Bank
in accordance with such Section 5.06(b)); and
(b) hold all moneys delivered to it hereunder and under the
Tender Agent Agreement for the purchase of such Bonds in a separate account
in trust for the benefit of the Person or entity which shall have so
delivered such moneys until required to transfer such funds as provided
herein.
SECTION 9.08. Qualification of Tender Agent. (a) The Tender Agent
shall be a bank or trust company duly organized under the laws of the United
States of America or any state or territory thereof, having a combined
capital stock, surplus and undivided profits of at least One Hundred Million
Dollars ($100,000,000) or that is a wholly-owned subsidiary of such a bank or
trust company, and authorized by law to perform all duties imposed upon it by
this Indenture. The Tender Agent may at any time resign and be discharged of
its duties and obligations by giving at least sixty (60) days notice to the
Authority, the Trustee, the Remarketing Agent, the Bank and the Borrower;
provided that such resignation shall not take effect until the appointment of
a successor Tender Agent in accordance with the provisions hereof. Upon the
written approval of the Bank, the Tender Agent may be removed at any time by
the Borrower upon written notice to the Authority, the Trustee and the
Remarketing Agent. Successor Tender Agents may be appointed from time to time
by the Borrower, with the prior written consent of the Bank. The rights and
immunities of the Trustee granted under this Article IX shall also apply to
the Tender Agent.
(b) Upon the resignation or removal of the Tender Agent,
the Tender Agent shall deliver any Bonds and moneys held by it in such
capacity to its successor and the Borrower shall appoint a successor Tender
Agent. If the Borrower fails to appoint a successor Tender Agent within
thirty (30) days of the Tender Agent's resignation or removal, the Tender
Agent may, at the expense of the Borrower, petition a court of competent
jurisdiction for the appointment of a successor to it.
SECTION 9.09. Qualifications of Remarketing Agent, Resignation;
Removal. The Remarketing Agent shall be a financial institution or registered
broker/dealer authorized by law to perform all of the duties imposed upon it
by this Indenture. The Remarketing Agent may at any time resign and be
discharged of its duties and obligations created by this Indenture by giving
at least thirty (30) days notice to the Authority, the Borrower and the
Trustee. The Remarketing Agent may be removed at any time, upon not less than
thirty (30) days written notice from the Borrower filed with the Trustee.
Upon the resignation or removal of the Remarketing Agent, the Borrower shall
appoint a successor Remarketing Agent and shall provide written notice
thereof to the Trustee. The resignation or removal of the Remarketing Agent
shall not become effective until a successor Remarketing Agent is appointed
and accepts such appointment. if the Bonds are rated by a Rating Agency, any
successor Remarketing Agent shall be acceptable to such Rating Agency.
SECTION 9.10. Construction of Ambiguous Provisions. The Trustee may
construe any provision hereof insofar as such may appear to be ambiguous or
inconsistent with any other provision hereof; and any construction of any
such provision by the Trustee in good faith shall be binding upon the Owners
of the Bonds.
ARTICLE X
MODIFICATION OR AMENDMENT OF THE INDENTURE
SECTION 10.01. Amendments Permitted. This Indenture and the rights
and obligations of the Authority, the Trustee and the Holders of the Bonds
may be modified or amended from time to time and at any time for any lawful
purpose, by an indenture or indentures supplemental hereto, which the
Authority and the Trustee may enter into without the consent of any
Bondholders but with the prior written consent of the Bank (as long as the
Bank is not in default under the Letter of Credit or a voluntary or
involuntary case has not been commenced by the filing of a petition under the
United States Bankruptcy Code or any other law relating to the bankruptcy,
insolvency or reorganization of the Bank). The foregoing to the contrary
notwithstanding, no such modification or amendment shall, without the consent
of the Holders of all Bonds then Outstanding, (i) extend the maturity date of
any Bond, (ii) reduce the amount of principal thereof, (iii) extend the time
of payment or change the method of computing the rate of interest thereon,
without the consent of the Holder of each Bond so affected, or eliminate the
Holders' rights to tender the Bonds, (iv) extend the due date for the
purchase of Bonds tendered by the Holders thereof, or (v) reduce the Purchase
Price of such Bonds. It shall not be necessary for the consent of the
Bondholders to approve the particular form of any supplemental indenture, but
it shall be sufficient if such consent shall approve the substance thereof.
Promptly after the execution by the Authority and the Trustee of any
supplemental indenture pursuant to this Section 10.01, the Trustee shall mail
a notice, setting forth in general terms the substance of such supplemental
indenture, to each Rating Agency then rating the Bonds and the Holders of the
Bonds at the address shown on the registration books of the Trustee. Any
failure to give such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 10.02. Effect of Supplemental indenture. Upon the execution
of any supplemental indenture pursuant to this Article, this Indenture shall
be deemed to be modified and amended in accordance therewith, and the
respective rights, duties and obligations under this Indenture of the
Authority, the Trustee and all Holders of Bonds Outstanding shall thereafter
be determined, exercised and enforced hereunder subject in all respects to
such modification and amendment, and all the terms and conditions of any such
supplemental indenture shall be deemed to be part of the terms and conditions
of this Indenture for any and all purposes.
SECTION 10.03. Trustee Authorized to Join in Amendments and
Supplements; Reliance on Counsel. The Trustee is authorized to join with the
Authority in the execution and delivery of any supplemental indenture or
amendment permitted by this Article X 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 Authority and
that all things necessary to make it a valid and binding agreement have been
done.
ARTICLE XI
DEFEASANCE
SECTION 11.01. Discharge of Indenture. The Bonds may be paid by the
Authority in any of the following ways, provided that the Authority also pays
or causes to be paid any other sums payable hereunder by the Authority and
the fees and expenses of the Trustee are paid:
(a) by paying or causing to be paid the principal of and
interest on the Bonds as and when the same become due and payable;
(b) by depositing with the Trustee, in trust, Available
Moneys or securities purchased with Available Moneys in the amount necessary
(as provided in Section 11.03) to pay or redeem all Bonds then Outstanding;
or
(c) by delivering to the Trustee, for cancellation by it,
the Bonds then Outstanding.
If the Authority shall also pay or cause to be paid all Bonds then
Outstanding and shall also pay or cause to be paid all other sums payable
hereunder by the Authority, and the fees and expenses of the Trustee are
paid, then and in that case, at the election of the Authority (evidenced by a
Certificate of the Authority filed with the Trustee, signifying the intention
of the Authority to discharge all such indebtedness and this Indenture), and
notwithstanding that any Bonds shall not have been surrendered for payment,
this Indenture, the assignment of the Loan Agreement and the pledge of
Revenues and other assets made under this Indenture and all covenants,
agreements and other obligations of the Authority under this Indenture shall
cease, terminate, become void and be completely discharged and satisfied. In
such event, upon Request of the Authority, the Trustee shall, to the extent
it has not already done so, cause an accounting for such period or periods as
may be requested by the Authority to be prepared and filed with the Authority
and shall execute and deliver to the Authority all such instruments, as
prepared by or caused to be prepared by the Authority, that may be necessary
or desirable to evidence such discharge and satisfaction, and the Trustee
shall pay over, transfer, assign or deliver all moneys or securities or other
property held by it pursuant to this Indenture, which are not required for
(i) the payment of all the charges and reasonable expenses of the Trustee
under this Indenture, (ii) the payment or redemption of Bonds not theretofore
surrendered for such payment or redemption, (iii) the payment of amounts owed
to the Bank by the Borrower under the Reimbursement Agreement, to the
Borrower, as certified to the Trustee by the Bank, or (iv) the payment of any
and all sums due to the United States of America hereunder.
SECTION 11.02. Discharge of Liability on Bonds. Upon the deposit
with the Trustee, in trust, at or before maturity, of money or securities in
the necessary amount (as provided in Section 11.03) to pay or redeem any
Outstanding Bond (whether upon or prior to the end of the Fixed Rate Period
or the redemption date of such Bond), provided that, if such Bond is to be
redeemed prior to maturity, notice of such redemption shall have been given
as in Article IV provided provision satisfactory to the Trustee shall have
been made for the giving of such notice, then all liability of the Authority
in respect of such Bond shall cease, terminate and be completely discharged,
and the Holder thereof shall thereafter be entitled only to payment out of
such money or securities deposited with the Trustee as aforesaid for their
payment, subject, however, to the provisions of Section 11.04.
The Authority may at any time surrender to the Trustee for
cancellation by it any Bonds previously issued and delivered, which the
Authority may have acquired in any manner whatsoever, and such Bonds, upon
such surrender and cancellation, shall be deemed to be paid and retired.
SECTION 11.03. Deposit of Money or Securities with Trustee. Whenever
in this Indenture it is provided or permitted that there be deposited with or
held in trust by the Trustee money or securities in the necessary amount to
pay or redeem any Bonds, the money or securities so to be deposited or held
shall be cash or Investment securities described in clauses (i) or (ii) of
the definition thereof in Section 1.01 hereof, which Investment Securities
shall be noncallable and not subject to prepayment, the principal of and
interest on which when due will provide money sufficient to pay the principal
of, premium, if any, and all unpaid interest to maturity, or to the
redemption date, as the case may be, on the Bonds to be paid or redeemed, as
such principal, premium, if any, and interest become due, provided that, in
the case of Bonds which are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as provided in Article IV or
provision satisfactory to the Trustee shall have been made for the giving of
such notice; provided, in each case, that the Trustee shall have been
irrevocably instructed (by request of the Authority) to apply such money to
the payment of such principal and interest with respect to such Bonds.
Whenever Investment securities are deposited with the Trustee in
accordance with this Section 11.03, the Borrower shall provide to the Trustee
and the Rating Agency, if any, (i) a verification report from an independent
public accountant, satisfactory in form and content to the Trustee,
demonstrating that the Investment Securities so deposited and the income
therefrom shall be sufficient to pay the principal of, premium, if any, and
all unpaid interest to maturity, or to the redemption date, as the case may
be, on the Bonds to be paid or redeemed, as such principal, premium, if any,
and interest become due and (ii) an opinion acceptable to the Rating Agency,
if any, of nationally recognized bankruptcy counsel, to the effect that the
provision for payment of the Bonds contemplated to be made pursuant to this
Section 11.03 will not constitute or result in such payments constituting
voidable preferences under Section 547 of the Bankruptcy Code.
SECTION 11.04. Payment of Bonds After Discharge of Indenture.
Notwithstanding any provisions of this Indenture, any moneys held by the
Trustee in trust for the payment of the principal of, premium, if any, or
interest on, any Bonds remaining unclaimed for five (5) years after the
principal of all of the Bonds has become due and payable (whether at maturity
or upon call for redemption or by acceleration as provided in this
Indenture), if such moneys were so held at such date, or five (5) years after
the date of deposit of such moneys if deposited after said date when all of
the Bonds became due and payable, shall be repaid to the Borrower, upon its
written request, free from the trusts created by this Indenture and all
liability of the Trustee with respect to such moneys shall thereupon cease;
provided, however, that before the repayment of such moneys to the Borrower
as aforesaid, the Trustee may (at the cost and request of the Borrower) first
mail to the Holders of Bonds which have not been paid, at the addresses last
shown on the registration books maintained by the Trustee, a notice, in such
form as may be deemed appropriate by the Trustee with respect to the Bonds so
payable and not presented and with respect to the provisions relating to the
repayment to the Borrower of the moneys held for the payment thereof.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Liability of Authority Limited to Revenues.
Notwithstanding anything to the contrary contained in this Indenture or in
the Bonds, the Authority shall not be required to advance any moneys derived
from any source other than the Revenues and other assets pledged under this
Indenture for any of the purposes in this Indenture mentioned, whether for
the payment of the principal and Purchase Price of or interest on the Bonds
or for any other purpose of this Indenture. Notwithstanding any provisions of
this Indenture to the contrary, no recourse under or upon any obligation,
covenant or agreement contained herein or in any Bond shall be had against
the Authority, it being expressly agreed and understood that the obligations
of the Authority hereunder, and under the Bonds and elsewhere, are solely
corporate obligations of the Authority and shall be enforceable only out of
the Authority's interest in this Indenture and the Loan Agreement (except for
the Authority's rights to payment of certain costs, fees and expenses as set
forth in this Indenture, the Loan Agreement and elsewhere) and there shall be
no other recourse against the Authority or any property now or hereafter
owned by it and after entry of judgment against the Authority by virtue of
the power herein contained, the Authority shall mark the judgment index to
the effect that the judgment is limited as aforesaid.
SECTION 12.02. Limitation of Liability of Directors, Etc. of
Authority. No covenant, agreement, provision or obligation contained herein
shall be deemed to be a covenant, agreement or obligation of any present or
future director, commissioner, officer, employee, member or agent of the
Authority in his individual capacity, and neither the members of the
Authority nor any officer thereof shall be liable personally on this
Indenture or any of the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or this Indenture. No
director, commissioner, officer, employee, member or agent of the Authority
shall incur any personal liability with respect to any other action taken by
him pursuant to this Indenture or the Act. Notwithstanding anything herein to
the contrary, no provision, covenant or agreement contained in this Indenture
or in the Bonds or any obligations herein or therein imposed upon the
Authority or the breach thereof, shall constitute or give rise to or impose
upon the Authority a pecuniary liability or a charge upon its general credit.
In making the agreements, provisions and covenants set forth in this
Indenture, the Authority has not obligated itself except with respect to its
rights and interest in the Loan Agreement, as hereinabove provided. The
issuance of the Bonds under this Indenture shall not be considered a
misfeasance in office. The liability of the Authority, including its
officers, members and employees under any and all of the documentation
executed in connection with the issuance of the Bonds shall not constitute
its general obligation and recourse against the Authority on the
documentation executed in connection with the issuance of the Bonds shall be
had only against the property specifically pledged as security therefor and
any rents, issues and profits thereof. It is expressly understood that the
Authority shall not otherwise be obligated and that none of its members,
officers or employees shall be in any way obligated for any costs, expenses,
fees or other obligations or liabilities incurred or imposed in connection
with the issuance of the Bonds, whether incurred prior to or after closing,
and that recourse against the Authority and its members, officers of
employees, shall be limited as set forth herein.
SECTION 12.03. Covenant Not to Sue. The forms of Bonds provide that
the owners of the Bonds agree not to sue the Authority or any of its board
members, officers, agents or employees, past, present or future except as
provided herein and in the Loan Agreement as a condition of, and in
consideration for, the issuance of the Bonds; accordingly, the Trustee shall
not be permitted to sue the Authority on behalf of the Owners of the Bonds.
SECTION 12.04. Successor is Deemed Included in All References to
Predecessor. Whenever in this Indenture either the Authority or the Trustee
is named or referred to, such reference shall be deemed to include the
successors or assigns thereof, and all the covenants and agreements in this
Indenture contained by or on behalf of the Authority or the Trustee shall
bind and inure to the benefit of the respective successors and assigns
thereof whether so expressed or not.
SECTION 12.05. Limitation of Rights to Parties, Bank, Borrower and
Bondholders. Nothing in this Indenture or in the Bonds, express or implied,
is intended or shall be construed to give to any Person other than the
Authority, the Trustee, the Bank, the Borrower and the Holders of the Bonds,
any legal or equitable right, remedy or claim under or in respect of this
Indenture or any covenant, condition or provision therein or herein
contained; and all such covenants, conditions and provisions are and shall be
held to be for the sole and exclusive benefit of the Authority, the Trustee,
the Bank, the Borrower and the Holders of the Bonds.
SECTION 12.06. Waiver of Notice. Whenever in this Indenture the
giving of notice by mail or otherwise is required, the giving of such notice
may be waived in writing by the Person entitled to receive such notice and in
any case the giving or receipt of such notice shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
SECTION 12.07. Severability of Invalid Provisions. If any one or
more of the provisions contained in this Indenture or in the Bonds shall for
any reason be held to be invalid, illegal or unenforceable in any respect,
then such provision or provisions shall be deemed several from the remaining
provisions contained in this Indenture and such invalidity, illegality or
unenforceablility shall not affect any other provision of this Indenture, and
this Indenture shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein. The Authority hereby
declares that it would have entered into this Indenture and each and every
other Section, paragraph, sentence, clause or phrase hereof and authorized
the issuance of the Bonds pursuant thereto irrespective of the fact that any
one or more Sections, paragraphs, sentences, clauses or phrases of this
Indenture may be held illegal, invalid or unenforceable.
SECTION 12.08. Notices. Prior to the Conversion Date, all notices to
Bondholders shall be given by certified or registered mail, commercial
overnight delivery service, telex, telegram, telecopier or other
telecommunication device unless otherwise provided herein and confirmed in
writing as soon as practicable. All such notices shall also be sent to the
Holder and any person designated in writing by any Holder to receive copies
of such notices. Any notice to or demand upon the Trustee may be served or
presented, and such demand may be made, at the corporate trust office of the
Trustee, or at such other address as may have been filed in writing by the
Trustee. Any notice to or demand upon the Authority, the Borrower, the
Remarketing Agent, the Placement Agent, the Tender Agent or the Bank shall be
deemed to have been sufficiently given or served for all purposes by being
delivered or sent by telex or by being deposited, postage prepaid, in a post
office letter box, addressed as the case may be,
To the Trustee:
First Union National Bank
123 S. Broad Street
11th Floor , PA-1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
To the Authority:
Philadelphia Authority for Industrial Development
2600 Centre Square West
1500 Market Street
Philadelphia, PA 19102
Attn: Chairman
(or such other address as may have been filed in writing by the Authority
with the Trustee),
To the Borrower:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President - Finance
(or such other address as may have been filed in writing by the Borrower with
the Trustee),
To the Remarketing Agent:
First Union Capital Markets Corp.
301 College Street
8th Floor
Charlotte, NC 28288
Attn: William Bingham, Vice President
(or such other address as may have been filed in writing by the Remarketing
Agent with the Trustee),
To the Placement Agent:
First Union Capital Markets Corp.
600 Penn Street, 2nd Floor South
Reading, PA 19602
Attn: Director: Tax Advantage Products
To the Tender Agent:
First Union National Bank
123 S. Broad Street
11th Floor , PA-1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
(or such other address as may have been filed in writing by the Tender Agent
with the Trustee),
To the Bank:
First Union National Bank
123 South Broad Street
15th Floor, PA 1222
Philadelphia, PA 19109
Attn: Jane Sobieski, Vice President
(or such other address as may have been filed in writing by the Bank with the
Trustee),
SECTION 12.09. Evidence of Rights of Bondholders. Any request,
consent or other instrument required or permitted by this Indenture to be
signed and executed by Bondholders may be in any number of concurrent
instruments of substantially similar tenor and shall be signed or executed by
such Bondholders in person or by an agent or agents duly appointed in
writing. Proof of the execution of any such request, consent or other
instrument or of a writing appointing any such agent, or of the holding by
any person of Bonds transferable by delivery, shall be sufficient for any
purpose of this Indenture and shall be conclusive in favor of the Trustee and
of the Authority if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such
request, consent or other instrument or writing may be proved by the
certificate of any notary public or other officer of any jurisdiction,
authorized by the laws thereof to take acknowledgments of deeds, certifying
that the Person signing such request, consent or other instrument
acknowledged to him the execution thereof, or by an affidavit of a witness of
such execution duly sworn to before such notary public or other officer.
The ownership of Bonds shall be proved by the bond registration
books held by the Trustee.
Any request, consent or other instrument or writing of the Holder of
any Bond shall bind every future Holder of the same Bond and the Holder of
every Bond issued in exchange therefor or in lieu thereof, in respect of
anything done or suffered to be done by the Trustee or the Authority in
accordance therewith or in reliance thereon.
SECTION 12.10. Disqualified Bonds. In determining whether the
Holders of the requisite aggregate principal amount of Bonds have concurred
in any demand, request, direction, consent or waiver under this Indenture,
Bonds which are owned or held by or for the account of the Authority or the
Borrower, or by any other obligor on the Bonds, or by any Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the Authority, the Borrower, or any other obligor on the Bonds,
shall be disregarded and deemed not to be Outstanding for the purposes of
this Section. Except for Bonds registered in the name of the Authority or the
Borrower, the Trustee shall not be deemed to have knowledge of the ownership
or the holders of such Bonds. If the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote such Bonds and that
the pledgee is not a Person directly or indirectly controlling or controlled
by, or under direct or indirect common control with, the Authority, the
Borrower or any other obligor on the Bonds, such Bonds shall be deemed
Outstanding. In case of a dispute as to such right, any decision by the
Trustee taken upon the advice of Counsel shall be full protection to the
Trustee.
SECTION 12.11. Money Held for Particular Bonds. The money held by
the Trustee for the payment of the interest, principal or premium due on any
date with respect to particular Bonds (or portions of Bonds in the case of
registered Bonds redeemed in part only) shall, on and after such date and
pending such payment, be set aside on its books and held uninvested in trust
by it for the Holders of the Bonds entitled thereto, subject, however, to the
provisions of Section 11.04 hereof.
SECTION 12.12. Funds. Any fund required by this Indenture to be
established and maintained by the Trustee may be established and maintained
in the accounting records of the Trustee, either as a fund or an account, and
may, for the purposes of such records, any audits thereof and any reports or
statements with respect thereto, be treated either as a fund or as an
account; but all such records with respect to all such funds shall at all
time be maintained in accordance with current corporate trust industry
standards, to the extent practicable, and with due regard for the
requirements of Section 7.05 hereof and for the protection of the security of
the Bonds and the rights of every Holder thereof.
SECTION 12.13. Payments Due on Days other than Business Days. If a
payment day is not a Business Day at the place of payment, then payment may
be made at that place on the next Business Day and no interest shall accrue
for the intervening period.
SECTION 12.14 Provisions Applicable After Conversion Date. (a) From
and after the Conversion Date, all references to "Available Moneys" herein
shall be changed to read as "money" or "moneys" depending on the applicable
context.
(b) From and after the Conversion Date, all provisions
herein requiring notice to or the consent of the Bank shall be deemed to be
deleted and of no force and effect.
SECTION 12.15. Execution in Several Counterparts. This Indenture may
be executed in any number of counterparts and each of such counterparts shall
for all purposes be deemed to be an original; and all such counterparts, or
as many of them as the Authority and the Trustee shall preserve undestroyed,
shall together constitute but one and the same instrument.
SECTION 12.16. Notices to Rating Agency. To the extent the Trustee
has knowledge thereof, written notice shall be provided by the Trustee to
each Rating Agency, if any, of (i) the appointment of any successor Trustee,
Tender Agent, Paying Agent or Remarketing Agent, (ii) any supplemental
indenture or any amendment to the Loan Agreement or the Letter of Credit,
(iii) the expiration, termination or extension of the Letter of Credit, (iv)
the payment of all Outstanding Bonds, and (v) the conversion of the Bonds to
a Fixed Rate.
SECTION 12.17. Governing Law. This Indenture shall be governed by
and construed in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to any conflict of laws provision thereof.
IN WITNESS WHEREOF, the PHILADELPHIA AUTHORITY FOR INDUSTRIAL
DEVELOPMENT has caused this Indenture to be signed in its name by its
Chairman and its seal to be hereunto affixed and attested by its Secretary or
Assistant Secretary, and FIRST UNION NATIONAL BANK, in token of its
acceptance of the trusts created hereunder, has caused this Indenture to be
signed in its corporate name by its authorized officer and its corporate seal
to be hereunto affixed and attested by its authorized officer, all as of the
day and year first above written.
ATTEST: PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
____________________________ By:__________________________________
(Assistant) Secretary Chairman
(SEAL)
ATTEST: FIRST UNION NATIONAL BANK
____________________________ By:__________________________________
Authorized Officer Title:
(SEAL)
EXHIBIT A
FLOATING RATE FORM OF BOND
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the
Philadelphia Authority for Industrial Development (the "Authority") or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
(the "Registered Owner") hereof, Cede & Co., has an interest herein.
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
TAX-EXEMPT VARIABLE RATE DEMAND/FIXED
RATE REVENUE BOND
(LANNETT COMPANY, INC. PROJECT)
SERIES OF 1999
No. VR-1 $3,700,000
Interest Rate Maturity Date Dated Date CUSIP
- ------------- ------------- ---------- -----
Variable May 1, 2014 April 30, 1999
THIS BOND IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIME
AND IN THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE
DEEMED TO HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
KNOW ALL PERSONS BY THESE PRESENTS that the PHILADELPHIA AUTHORITY
FOR INDUSTRIAL DEVELOPMENT (the "Authority"), for value received, promises to
pay to CEDE & Co. or registered assigns on May 1, 2014, upon surrender
hereof, the principal sum of Three Million Seven Hundred Thousand Dollars
($3,700,000), and in like manner to pay interest on said sum at the rate
described below on the first Business Day of each calendar month and on the
Conversion Date (hereinafter defined), commencing June 1, 1999 (each an
"Interest Payment Date"), from the Interest Payment Date next preceding the
date of authentication hereof to which interest has been paid or duly
provided for, unless the date of authentication hereof is an Interest Payment
Date to which interest has been paid or duly provided for, in which case from
the date of authentication hereof, or unless no interest has been paid or
duly provided for on the Bonds (as hereinafter defined), in which case from
April 30, 1999 (the "Date of Issuance"), until payment of the principal
hereof has been made or duly provided for. Notwithstanding the foregoing, if
this Bond is authenticated after any date which is the Business Day (as
hereinafter defined) next preceding any Interest Payment Date (a "Record
Date") and before the following Interest Payment Date, this Bond shall bear
interest from such Interest Payment Date; provided, however, that if the
Authority shall default in the payment of interest due on such Interest
Payment Date, then this Bond shall bear interest from the next preceding
Interest Payment Date to which interest has been paid or duly provided for,
or, if no interest has been paid or duly provided for on the Bonds, from the
Date of Issuance. The principal of this Bond is payable in lawful money of
the United States of America at the principal corporate trust office of First
Union National Bank, as trustee (together with its successors in trust, the
"Trustee") at 1525 West W.T. Harris Boulevard, Charlotte, North Carolina
28288-1153, Attn: Corporate Trust Department, or at the duly designated
office of any successor Trustee under the Trust Indenture dated April 30,
1999, between the Authority and the Trustee (which Trust Indenture, as from
time to time amended and supplemented, is hereinafter referred to as the
"Indenture"). Payment of interest on this Bond shall be made on each Interest
Payment Date to the registered Owner hereof as of the applicable Record Date
and shall be paid by check mailed by the Trustee to such registered owner at
his address as it appears on the registration books of the Authority or at
such other address as is furnished to the Trustee in writing by such
registered Owner, or in such other manner as may be permitted by the
Indenture. The Purchase Price (hereinafter defined) of this Bond shall be
payable by First Union National Bank (together with any successor Tender
Agent, the "Tender Agent") to the registered owner hereof, upon presentation
hereof, at the Delivery Office of the Tender Agent. As used herein, the term
"Business Day" means any day other than a Saturday or Sunday, a legal holiday
on which banking institutions in the State of New York, the Commonwealth of
Pennsylvania, the City of New York or the City of Philadelphia are authorized
or required by law to close, or a day on which the New York Stock Exchange is
closed.
This Bond shall bear interest as follows:
(A) From the Date of Issuance of this Bond to the
Conversion Date, this Bond shall bear interest at the "Floating Rate." The
"Floating Rate" shall be a variable rate of interest equal to the minimum
rate of interest necessary, in the sole judgment of the Remarketing Agent, to
sell the Bonds on any Business Day at a price equal to the principal amount
thereof, exclusive of accrued interest, if any, thereon. The Floating Rate
shall be determined weekly by First Union Capital Markets Corp., Charlotte,
North Carolina (the "Remarketing Agent") on each Wednesday (or if such
Wednesday is not a Business Day, on the next succeeding Business Day) and
shall be effective on the Thursday immediately following the Weekly Period
(as hereinafter defined), all as more fully set forth in the Indenture. The
determination of the Floating Rate shall be conclusive and binding upon the
Authority, the Trustee, the Bank (as hereinafter defined), the Borrower, the
Remarketing Agent, the Tender Agent and the Owners of this Bond.
Anything herein to the contrary notwithstanding, the Floating Rate
shall in no event exceed fifteen percent (15%) per annum.
(B) The Bonds shall bear interest at the "Fixed Rate" from
and after the Conversion Date. In such event, the Fixed Rate shall be
applicable until the maturity of the Bonds. The "Fixed Rate" shall be a fixed
annual interest rate on the Bonds established by the Remarketing Agent as the
rate of interest for which the Remarketing Agent has received commitments on
or prior to the fifth (5th) day preceding the Conversion Date, at a price of
par without discount.
Prior to the Conversion Date, interest on the Bonds shall be
computed on the basis of a 365 or 366 day year, as applicable, and the actual
number of days elapsed. On and after the Conversion Date, interest on the
Bonds shall be computed on the basis of a 360 day year of twelve 30 day
months.
As used herein, the term "Conversion Date" means the Optional
Conversion Date; the term "Letter of Credit Termination Date" means the later
of (i) that date upon which the Letter of Credit (hereinafter defined) shall
expire or terminate pursuant to its terms, or (ii) that date to which the
expiration or termination of the Letter of Credit may be extended, from time
to time, either by extension or renewal of the existing Letter of Credit or
the issuance of a Substitute Letter of Credit (as defined in the Indenture);
the term "Optional Conversion Date" means that date, which shall be a
Business Day, from and after which the interest rate on the Bonds is
converted from the Floating Rate to the Fixed Rate as a result of the
exercise by the Borrower of the Conversion Option; the term "Conversion
Option" means the option granted to the Borrower in the Indenture pursuant to
which the interest rate on the Bonds is converted from the Floating Rate to
the Fixed Rate as of the Optional Conversion Date; the term "Purchase Price"
means an amount equal to 100% of the principal amount of any Bond tendered or
deemed tendered for purchase pursuant to the Indenture or with respect to
which the Demand Purchase Option has been exercised, plus accrued and unpaid
interest thereon to the date of purchase.
The interest rate on the Bonds may be converted from the Floating
Rate to the Fixed Rate upon satisfaction of certain conditions and notice
given by the Trustee at the direction of the Borrower to the Owners of the
Bonds at least twenty (20) days but not more than thirty (30) days prior to
the Conversion Date in accordance with the requirements of the Indenture, and
the Bonds shall be subject to mandatory tender by the Owners thereof on the
Conversion Date. On and after the Conversion Date, the Demand Purchase Option
will not be available to the Owners of the Bonds. On or prior to the
Conversion Date, owners of the Bonds shall be required to deliver their Bonds
to the Tender Agent for purchase at the Purchase Price. Accrued interest on
the Bonds will be payable on the Conversion Date to the Owners of Bonds as of
the Conversion Date. Any Bonds not delivered to the Tender Agent on or prior
to the Conversion Date ("Undelivered Bonds"), for which there has been
irrevocably deposited in trust with the Trustee or the Tender Agent an amount
of money sufficient to pay the Purchase Price of the Undelivered Bonds, shall
be deemed to have been purchased at the Purchase Price and are deemed to be
no longer outstanding with respect to such prior Owners. IN THE EVENT OF A
FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS ON OR PRIOR TO THE
CONVERSION DATE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING
ANY INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE CONVERSION DATE) OTHER THAN
THE PURCHASE PRICE FOR SUCH UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS
SHALL NO LONGER BE ENTITLED TO THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE
PURPOSE OF PAYMENT OF THE PURCHASE PRICE THEREFOR.
Notwithstanding the foregoing provisions, to the extent that at the
close of the fifth (5th) Business Day prior to the proposed Optional
Conversion Date, the Remarketing Agent has not presented to the Borrower firm
commitments for the purchase of all of the Bonds, the Borrower, at its
option, may rescind an optional conversion of the Bonds. Any such election to
rescind must be made by the close of the fourth (4th) Business Day prior to
the proposed Conversion Date and the Borrower shall give written notice to
the Trustee, the Tender Agent and the Bank of its decision to rescind the
optional conversion by such time. The Borrower shall cause the Trustee to
immediately notify the Owners of such rescission and thereafter the Bonds
shall bear interest at the Floating Rate in effect for the then current
Weekly Period and thereafter the Bonds shall bear interest at the Floating
Rate until any subsequent Conversion Date effected in accordance with the
Indenture. As used herein, "Weekly Period" means, while this Bond bears
interest at the Floating Rate, the weekly period that begins on and includes
Thursday of each calendar week and ends at the close of business on Wednesday
of the next succeeding week.
At any time prior to the Record Date preceding the first Interest
Payment Date following the Conversion Date, the Trustee or the Tender Agent,
as the case may be, shall deliver a replacement Bond evidencing interest
payable at the Fixed Rate.
Prior to the Conversion Date, this Bond shall be purchased, at the
option of the Owner hereof ("Demand Purchase Option") at the Purchase Price,
upon:
(a) delivery by such Owner to the Trustee and the Tender
Agent at their principal corporate trust office and Delivery Office
(hereinafter defined) respectively; and to the Remarketing Agent at its
principal office, of a notice (a "Demand Purchase Notice") (said notice to be
irrevocable and effective upon receipt) which states (i) the aggregate
principal amount and the bond numbers of Bonds to be purchased; and (ii) the
date on which such Bonds are to be purchased, which date shall be a Business
Day not prior to the Business Day next succeeding the date of delivery of
such notice and which date shall be prior to the Conversion Date; and
(b) delivery to the Tender Agent at its Delivery office
(hereinafter defined) at or prior to 10:00 a.m., New York City time, on the
date designated for purchase in the applicable Demand Purchase Notice of such
Bonds to be purchased with an appropriate endorsement for transfer or
accompanied by a bond power endorsed in blank.
Any Bond as to which a Demand Purchase Notice has been delivered
pursuant to (a) above, must be delivered to the Tender Agent as provided in
(c) above, and any such Bonds not so delivered ("Undelivered Bonds"), for
which there has been irrevocably deposited in trust with the Trustee or the
Tender Agent an amount of money sufficient to pay the Purchase Price thereof,
shall be deemed to have been purchased at the Purchase Price and are deemed
to be no longer outstanding with respect to such tendering Owner. IN THE
EVENT OF A FAILURE BY AN OWNER OF BONDS TO DELIVER ITS BONDS AS SPECIFIED
ABOVE, SAID OWNER SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING ANY
INTEREST TO ACCRUE ON OR SUBSEQUENT TO THE DATE DESIGNATED FOR PURCHASE IN
THE APPLICABLE DEMAND PURCHASE NOTICE) OTHER THAN THE PURCHASE PRICE FOR SUCH
UNDELIVERED BONDS, AND ANY UNDELIVERED BONDS SHALL NO LONGER BE ENTITLED TO
THE BENEFITS OF THE INDENTURE, EXCEPT FOR THE PAYMENT OF THE PURCHASE PRICE
THEREFOR.
Notwithstanding the foregoing provisions, in the event any Bond as
to which the Owner thereof has exercised the Demand Purchase Option is
remarketed to such Owner pursuant to the Remarketing Agreement, such owner
need not deliver such Bond to the Tender Agent as provided in (c) above,
although such Bond shall be deemed to have been delivered to the Tender
Agent, redelivered to such owner, and remarketed for purposes of the
Indenture.
Any delivery of a notice required to be made to the Trustee at its
principal corporate trust office pursuant to (a) above shall be delivered to
the Trustee at 1525 West W.T. Harris Boulevard, Charlotte, North Carolina
28288-1153, Attn: Corporate Trust Department, or to the office designated for
such purpose by any successor Trustee; any delivery of a notice required to
be made to the Remarketing Agent at its principal office pursuant to (a)
above shall be delivered to the Remarketing Agent at 301 College Street, 8th
Floor, Charlotte, North Carolina 28288, Attention: Money Market Trading and
Sales, or to the office designated for such purpose by any successor
Remarketing Agent; and any delivery of Bonds required to be made to the
Tender Agent pursuant to (b) above shall be delivered to the Tender Agent at
1525 West W.T. Harris Boulevard, Charlotte, North Carolina 28288-1153, Attn:
Corporate Trust Department, or the office designated for such purpose by any
successor Tender Agent (the "Delivery Office").
This Bond and the Bonds of the Series of which it is a part is
comprised of a duly authorized issue of bonds designated as "Tax-Exempt
Variable Rate Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc.
Project), Series of 1999" (the "Bonds") issued by the Authority in the
aggregate principal amount of $3,700,000 under and by virtue of the
Pennsylvania Economic Development Financing Law, as amended and supplemented
(the "Act"), and by virtue of a resolution duly adopted by the Authority (the
"Bond Resolution"), and equally and ratably secured under the Indenture for
the purpose of raising funds to finance a project (the "Project") consisting
of (i) the construction of an approximately 40,000 square foot manufacturing
and manufacturing-related facility as an addition to a 33,000 square foot
existing facility located at 9000 State Road, Philadelphia, Pennsylvania (the
"9000 State Road Facility") or, alternatively, the acquisition and renovation
of an existing manufacturing and manufacturing-related facility located at
9030 State Road, Philadelphia, Pennsylvania (the "9030 State Road Facility");
(ii) the acquisition of equipment for installation and use in either the 9000
State Road Facility or the 9030 State Road Facility; and (iii) the payment of
a portion of the costs of issuance of the Bonds. Pursuant to a Loan
Agreement, dated April 30, 1999 (the "Loan Agreement"), by and between the
Authority and Lannett Company, Inc. (the "Borrower"), installment payments
sufficient for the prompt payment when due of the principal and Purchase
Price of, premium, if any, and interest on the Bonds are to be paid to the
Trustee for the account of the Authority and deposited in the Bond Fund
established by the Indenture and have been duly pledged for that purpose, all
to the extent and in the manner provided in the Indenture.
The Bonds are all issued under and are equally and ratably secured
by and entitled to the protection of the Indenture, pursuant to which all
payments due from the Borrower to the Authority under the Loan Agreement
(other than certain indemnification payments and the payment of certain
expenses of the Authority) are assigned to the Trustee to secure the payment
of the principal and Purchase Price of, and premium, if any, and interest on
the Bonds and certain costs, fees and expenses of the Trustee. The Borrower
has caused to be delivered to the Trustee an irrevocable direct pay letter of
credit (together with any Substitute Letter of Credit, the "Letter of
Credit") issued by First Union National Bank (in such capacity, the "Bank")
and dated the Date of Issuance of the Bonds, which will expire, unless
earlier terminated or extended, on October 31, 2002. Subject to certain
conditions, the Letter of Credit may be replaced by a Substitute Letter of
Credit of another commercial bank, savings and loan association or savings
bank. Under the Letter of Credit, the Trustee will be entitled to draw up to
an amount sufficient to pay (a) the principal of the Bonds or the portion of
the Purchase Price corresponding to the principal of the Bonds and (b) up to
forty-six (46) days' accrued interest (calculated at the maximum rate of
fifteen percent (15%) per annum based on 365 or 366 day year, as applicable,
and the actual number of days elapsed) on the Bonds or the portion of the
Purchase Price of the Bonds corresponding to accrued interest thereon.
Reference is hereby made to the Indenture, the Loan Agreement and
the Letter of Credit for a description of the property pledged and assigned,
the provisions, among others, with respect to the nature and extent of the
security, the rights, duties and obligations of the Authority, the Trustee
and the Owners of the Bonds and the terms upon which the Bonds are issued and
secured; and the Owner of this Bond by acceptance hereof, hereby consents to
the terms and provisions of all of the foregoing as a material portion of the
consideration for the issuance of this Bond.
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE
SOLELY AND EXCLUSIVELY FROM THE PAYMENTS REQUIRED TO BE MADE BY THE BORROWER
UNDER THE LOAN AGREEMENT AND FROM DRAWS ON THE LETTER OF CREDIT. NO RECOURSE
SHALL BE HAD FOR THE PAYMENT OF PRINCIPAL, PURCHASE PRICE OR REDEMPTION PRICE
OF, OR INTEREST ON, THIS BOND, OR ANY CLAIM BASED HEREON OR ON THE INDENTURE
OR THE LOAN AGREEMENT, AGAINST THE AUTHORITY OR ANY SUCCESSOR BODY OR AGAINST
ANY OFFICER, MEMBER, EMPLOYEE OR AGENT PAST, PRESENT OR FUTURE OF THE
AUTHORITY OR ANY SUCCESSOR BODY, UNDER ANY CONSTITUTIONAL PROVISION, STATUTE
OR RULE OF LAW, OR BY THE ENFORCEMENT OF ANY ASSESSMENT OR BY ANY LEGAL OR
EQUITABLE PROCEEDING OR OTHERWISE, AND ALL SUCH LIABILITY OF THE AUTHORITY OR
ANY SUCCESSOR BODY OR ANY SUCH OFFICERS, MEMBERS, EMPLOYEES OR AGENTS IS
RELEASED AS A CONDITION OF, AND IN CONSIDERATION FOR, THE ISSUANCE OF THIS
BOND. AS A CONDITION OF, AND IN CONSIDERATION FOR THE ISSUANCE OF THIS BOND,
THE REGISTERED OWNER HEREOF COVENANTS THAT HE WILL NOT SUE THE AUTHORITY OR
ITS MEMBERS, OFFICERS, EMPLOYEES OR AGENTS, PAST, PRESENT OR FUTURE, EXCEPT
AS EXPRESSLY PERMITTED IN THE INDENTURE AND THE LOAN AGREEMENT. THE BONDS AND
THE INTEREST THEREON SHALL NOT BE IN ANY WAY A DEBT OR LIABILITY OF THE
COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF AND SHALL
NOT CREATE OR CONSTITUTE ANY INDEBTEDNESS, LIABILITY OR OBLIGATION OF THE
COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF, WHETHER
LEGAL, MORAL OR OTHERWISE, AND THE AUTHORITY SHALL NOT INCUR ANY INDEBTEDNESS
ON BEHALF OF OR IN ANY WAY TO OBLIGATE THE COMMONWEALTH OF PENNSYLVANIA OR
ANY POLITICAL SUBDIVISION THEREOF. NEITHER THE MEMBERS OF THE AUTHORITY NOR
ANY PERSON EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS BY
REASON OF THE ISSUANCE THEREOF. THE AUTHORITY IS A CONDUIT AUTHORITY AND HAS
NO TAXING POWER.
This Bond is transferable by the registered owner hereof in person
or by his attorney duly authorized in writing, at the office of the Trustee
in Philadelphia, Pennsylvania, or at the Delivery Office of the Tender Agent
or that of any successor Tender Agent, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and
upon surrender and cancellation of this Bond. Upon such transfer a new
registered Bond or Bonds of authorized denomination or denominations for the
same aggregate principal amount will be issued to the transferee in exchange
therefor. The Authority, the Tender Agent and the Trustee may deem and treat
the registered Owner hereof as the absolute owner hereof (whether or not this
Bond shall be overdue) for all purposes, and neither the Authority, the
Tender Agent nor the Trustee shall be bound by any notice or knowledge to the
contrary.
Prior to the Conversion Date, (i) the Bonds are issuable as fully
registered bonds without coupons in the denominations of $100,000 or any
integral multiple of $5,000 in excess thereof; and (ii) the Bonds may not be
issued, exchanged or transferred except in authorized denominations of
$100,000 or any integral multiple of $5,000 in excess thereof. From and after
the Conversion Date, the Bonds shall be issuable as fully registered bonds
without coupons in the denominations of $5,000 or any integral multiple
thereof.
Extraordinary Redemption
The Bonds are callable for redemption in the event (1) the Project
or any portion thereof is damaged or destroyed or taken in a condemnation
proceeding as provided in Section 6.04 of the Loan Agreement, or (2) the
Borrower shall exercise its option to cause the Bonds to be redeemed as
provided in Section 9.02 of the Loan Agreement. If called for redemption at
any time pursuant to (1) or (2) above, the Bonds shall be subject to
redemption by the Authority on any Interest Payment Date, in whole or in
part, at a redemption price of one hundred percent (100%) of the principal
amount thereof plus accrued interest to the redemption date.
Mandatory Redemption
The Bonds are subject to mandatory redemption, five (5) Business
Days prior to the Letter of Credit Termination Date, in whole, at a
redemption price equal to one hundred percent (100%) of the principal amount
thereof being redeemed plus accrued interest to the redemption date if, on
the thirtieth (30th) Business Day prior to the Letter of Credit Termination
Date, the Trustee shall not have received a Substitute Letter of Credit which
will be effective on or before the Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in
part, on any Interest Payment Date, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date, if any proceeds of the sale of the
Bonds remain on deposit in the Project Fund established under the Indenture
upon completion of the Project, under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds
or portions thereof to be redeemed shall be selected by the Trustee at random
or in such other manner as the Trustee in its discretion shall deem fair and
appropriate.
The Bonds are also subject to mandatory redemption, in whole, at any
time, within one hundred eighty (180) days after the occurrence of a
Determination of Taxability (as hereinafter defined), at a redemption price
equal to one hundred percent (100%) of the aggregate principal amount of
Bonds Outstanding plus accrued interest to the redemption date.
"Event of Taxability" with respect to any Bond means a change of law
or regulations, or the interpretation thereof, or the occurrence of any other
event or the existence of any other circumstance (including without
limitation the fact that any representations or warranties of the Borrower or
the Authority made in connection with the issuance of any Bond is or was
untrue or that a covenant of the Borrower has been breached) that has the
effect of causing interest payable on any Bond to be includable in gross
income for federal income tax purposes under Section 103 of the Internal
Revenue Code of 1986, as amended, and the applicable regulations thereunder
(the "Code") other than by reason that such interest (i) is includable in the
gross income of an Owner or former Owner of any Bond while such owner or
former Owner is or was a "substantial user" or a "related person" to a
"substantial user" of the Project (as such terms are used in Section
147(a)(1) of the Code) or (ii) is deemed an item of tax preference including,
without limitation, an item subject to any alternative minimum tax.
"Determination of Taxability" with respect to any Bond shall be
deemed to have been made upon the first to occur of the following events:
(i) the date on which the Borrower determines that an Event
of Taxability has occurred by filing with the Trustee a statement to that
effect supported by one or more tax schedules, returns or documents which
disclose that such an Event of Taxability has occurred;
(ii) the date on which the Borrower or the Trustee is
advised by private ruling, technical advice or any other written
communication from any authorized official of the Internal Revenue Service
that, based upon any filings of the Borrower or any other person or entity,
or upon any review or audit of the Borrower or any other person or entity, or
upon any other grounds whatsoever, an Event of Taxability has occurred;
(iii) the date on which the Trustee or the Borrower is
advised that a court of competent jurisdiction has issued an order,
declaration, ruling or judgment to the effect that an Event of Taxability has
occurred;
(iv) the date the Trustee shall have received written
notice from any Owner of the Bonds that such Owner has received a written
assertion or claim by any authorized official of the Internal Revenue Service
that an Event of Taxability has occurred; or
(v) the date the Trustee is notified that the Internal
Revenue Service has issued any private ruling, technical advice or any other
written communication, with or to the effect that an Event of Taxability has
occurred; provided, however, that (a) no Determination of Taxability
described in each of clauses (i) or (v) above shall be deemed to have
occurred unless the Trustee shall have received a written opinion of
nationally recognized bond counsel satisfactory to the Trustee, in form and
substance satisfactory to the Bank and the Borrower and not unsatisfactory to
the Trustee, to the effect that an Event of Taxability has occurred, and (b)
no Determination of Taxability described in each of clauses (i), (ii), (iii),
(iv) or (v) above shall be deemed to have occurred until 180 days shall have
elapsed from the dates described in clauses (i), (ii), (iii), (iv) or (v)
above without such Determination of Taxability having been rescinded or
cancelled.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest
Payment Date occurring in the month of May in each of the years set forth
below commencing on the Interest Payment Date occurring in May, 2000 (each, a
"Mandatory Sinking Account Payment Date"), at a redemption price equal to
100% of the principal amount thereof plus accrued interest as follows:
Mandatory Sinking
Year Account Payments
---- ----------------
2003 $535,000
2004 $810,000
2005 $655,000
2006 $690,000
2007 $105,000
2008 $110,000
2009 $115,000
2010 $125,000
2011 $130,000
2012 $135,000
2013 $140,000
2014* $150,000
*Maturity
Optional Redemption
On or prior to the Conversion Date, upon satisfaction of the notice
provisions of the Indenture, the Bonds are subject to redemption by the
Authority, at the option of the Borrower, at any time, in whole or in part,
at the redemption price of 100% of the principal amount thereof being
redeemed plus accrued interest to the redemption date. Notwithstanding the
foregoing, no such optional redemption shall occur unless on the redemption
date there shall be available in the Bond Fund established under the
Indenture sufficient Available Moneys (as defined in the Indenture) to pay
all amounts due with respect to such a redemption.
In the event any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed and the redemption price (including
the premium, if any), shall be given by the Trustee in accordance with the
Letter of Representations so long as the Bonds are registered in the name of
The Depository Trust Company ("DTC") or its nominee, and if the DTC
book-entry-only system shall be discontinued, notice of the call for
redemption shall be given by mailing a copy of the redemption notice by
first-class mail at least (i) ten (10) days prior to the date fixed for
redemption in the event of a mandatory redemption fifteen (15) days prior to
the Letter of Credit Termination Date; and (ii) thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption in all other
instances to the Owner of each Bond to be redeemed in whole or in part at the
address shown on the registration books. Any notice mailed as provided above
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. No further interest shall accrue on the principal
of any bond called for redemption after the redemption date if Available
Moneys (as defined in the Indenture) sufficient for such redemption have been
deposited with the Trustee. Notwithstanding the foregoing, the notice
requirements contained in the first sentence of this paragraph may be deemed
satisfied with respect to a transferee of a Bond which has been purchased
pursuant to the Demand Purchase Option under certain circumstances provided
in Section 4.06 of the Indenture, after such Bond has previously been called
for redemption, notwithstanding the failure to satisfy the notice
requirements of the first sentence of this paragraph with respect to such
transferee.
Mandatory Tender
The Bonds are subject to mandatory tender in whole on the effective
date of any Substitute Letter of Credit provided by a Substitute Bank (as
such term is defined in the Indenture), at a Purchase Price equal to 100% of
the principal amount thereof, plus accrued interest to the purchase date. In
the event of a mandatory tender, notice of such tender shall be given by the
Trustee by delivering or mailing by first-class mail a copy of such notice at
least twenty (20) days but not more than thirty (30) days prior to the date
of such tender to the Owner of each Bond at the address shown on the
registration books.
The Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the Commonwealth of Pennsylvania, particularly the
Act, and by appropriate action duly taken by the Authority authorizing the
execution and delivery of the Loan Agreement and the Indenture. The Bonds
have been issued under the provisions of the Act.
Notwithstanding anything to the contrary contained herein or in the
Indenture, the Loan Agreement or in any other instrument or document executed
by or on behalf of the Authority in connection herewith, no stipulation,
covenant, agreement or obligation contained herein or therein shall be deemed
or construed to be a stipulation, covenant, agreement or obligation of any
present or future member, commissioner, director, trustee, officer, employee
or agent of the Authority, or of any successor to the Authority, in any such
person's individual capacity, and no such person, in his individual capacity,
shall be liable personally for any breach or nonobservance of or for any
failure to perform, fulfill or comply with any such stipulations, covenants,
agreements or the principal of or premium, if any, or interest on any of the
Bonds or for any claim based thereon or on any such stipulation, covenant,
agreement or obligation, against any such person, in his individual capacity,
either directly or through the Authority or any successor to the Authority,
under any rule of law or equity, statute or constitution or by the
enforcement of any assessment or penalty or otherwise, and all such liability
of any such person, in his individual capacity, is hereby expressly waived
and released.
The Owner of this Bond shall 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 default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions, in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued
under the Indenture and then outstanding may become or may be declared due
and payable before the stated maturity thereof, together with interest
accrued thereon.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modifications of the rights and obligations of
the Authority and the rights of the owners of the Bonds at any time by the
Authority with the consent of the Bank and the holders of all Bonds at the
time outstanding. Any such consent or any waiver by the Bank and the holders
of all Bonds at the time outstanding shall be conclusive and binding upon the
Owner and upon all future Owners of this Bond and of any Bond issued in
replacement hereof whether or not notation of such consent or waiver is made
upon this Bond. The Indenture also contains provisions which, subject to
certain conditions, permit or require the Trustee to waive certain past
defaults under the Indenture and their consequences.
It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to
and in connection with the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in due
time, form and manner as required by law; and that the issuance of this Bond
and the issue of which it forms a part, together with all other obligations
of the Authority, does not exceed or violate any constitutional or statutory
limitation.
This Bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been signed by the Trustee or
the Tender Agent, as authenticating agent.
IN WITNESS WHEREOF, the Philadelphia Authority for Industrial
Development has caused this Bond to be signed in its name and on its behalf
by the manual or facsimile signature of its Chairman and its corporate seal
to be affixed, imprinted or reproduced hereon and attested by the manual or
facsimile signature of its Secretary or Assistant Secretary, all as of the
Date of Issuance.
ATTEST: PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
____________________________ By:__________________________________
(Assistant) Secretary Chairman
(SEAL)
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the
within-mentioned Trust Indenture.
FIRST UNION NATIONAL BANK,
as Trustee and Tender Agent
By:_________________________
Authorized Signature
Date of Authentication: April ___, 1999
(Form of Transfer)
FOR VALUE RECEIVED, ________________ the undersigned, hereby sells,
assigns and transfers unto _____________________ (Tax Identification or
Social Security No.______________) the within Bond and all rights thereunder,
and hereby irrevocably constitutes and appoints _______________ attorney to
transfer the within Bond on the books kept for registration thereof, with
full power of substitution in the premises.
Dated: ____________________ _____________________________
NOTICE: Signature must be guaranteed by an approved eligible guarantor
institution, an institution which is a participant in a Securities Transfer
Association recognized signature guarantee program.
NOTICE: The Signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without
alteration or enlargement or any change whatever.
FORM OF BOND COUNSEL OPINION
Re: Philadelphia Authority for Industrial Development
$3,700,000 Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999 (the "Bonds")
TO THE REGISTERED OWNERS OF THE ABOVE BONDS:
We have acted as Bond Counsel in connection with the issuance by the
Philadelphia Authority for Industrial Development (the "Authority") of the
above-captioned Bonds under the Pennsylvania Economic Development Financing
Law, as supplemented and amended (the "Act"). The proceeds of the Bonds will
be used by the Authority to provide funds to Lannett Company, Inc., (the
"Borrower") to finance a project (the "Project") consisting of (i) the
construction of an approximately 40,000 square foot manufacturing and
manufacturing-related facility as an addition to a 33,000 square foot
existing facility located at 9000 State Road, Philadelphia, Pennsylvania (the
"9000 State Road Facility") or, alternatively, the acquisition and renovation
of an existing manufacturing and manufacturing-related facility located at
9030 State Road, Philadelphia, Pennsylvania (the "9030 State Road Facility");
(ii) the acquisition of equipment for installation and use in either the 9000
State Road Facility or the 9030 State Road Facility; and (iii) the payment of
a portion of the costs of issuance of the Bonds. All capitalized terms used
in this opinion and not defined herein shall have the meanings assigned to
them in the Indenture unless the context clearly requires otherwise.
The Authority and the Borrower have entered into a Loan Agreement,
dated April 30, 1999 (the "Loan Agreement"), pursuant to which the Authority
has agreed to loan the proceeds of the Bonds to the Borrower and the Borrower
has agreed, among other things, to make certain payments in such amounts and
at such times as to permit the Authority to pay, among other things, the
principal of, premium, if any, and interest on the Bonds when due.
Pursuant to the provisions of a Trust Indenture, dated April 30,
1999 (the "Indenture"), between the Authority and First Union National Bank,
as trustee (the "Trustee"), the Authority has, among other things, pledged,
assigned and granted to the Trustee substantially all of its right, title and
interest in and to the Loan Agreement (except for certain indemnification
rights and rights to be reimbursed for certain costs and expenses that it may
incur as provided in the Loan Agreement) and has granted a security interest
in the loan payments receivable by the Authority under the Loan Agreement.
The Bonds issued this date mature on May 1, 2014 and bear interest
and are subject to purchase and redemption prior to maturity upon the terms
and conditions stated therein and in the Indenture. The Bonds shall be in
denominations of $100,000 or integral multiples of $5,000 in excess thereof.
In connection with the issuance of the Bonds, First Union National
Bank (the "Bank"), at the request of the Borrower, has issued a certain
irrevocable, direct pay Letter of Credit dated the date of issuance of the
Bonds (the "Letter of Credit"), in favor of the Trustee. Pursuant to the
terms and conditions set forth in the Letter of Credit and the Indenture, on
each debt service payment date the Trustee shall draw upon the Letter of
Credit the amount necessary to pay the principal of and interest payable on
the Bonds on such debt service payment date.
In connection with providing our opinion, we have examined the
following:
1 . The Act;
2. Section 103 and Sections 141 through 150 of the Internal
Revenue Code of 1986, as amended (the "Code");
3. Copies of the proceedings of the Authority in connection
with the issuance of the Bonds, including, particularly, the Authority's
authorizing resolution (the "Resolution");
4. A copy of the resolution of the Borrower authorizing,
among other things, the execution and delivery of the Loan Agreement;
5. A copy of the executed Letter of Credit;
6. A specimen copy of one of the Bonds (we assume due
execution and authentication of each Bond);
7. The Non-Arbitrage Certificate executed and delivered by
the Authority;
8. The Tax Compliance Agreement executed and delivered by
the Borrower and the Trustee;
9. The Form 8038 executed by the Authority; and
10. Executed copies of the Indenture, the Loan Agreement,
the Reimbursement Agreement, the Letter of Credit, the Remarketing Agreement,
the Pledge and Security Agreement, the Borrower General Certificate, the
Authority General Certificate and the other documents, agreements,
certificates and opinions delivered at the closing held this day (the
"Closing").
Based upon our examination of the foregoing and upon our attendance
at the Closing, and subject to the qualifications and limitations hereinafter
set forth, it is our opinion that, as of the date hereof:
A. The Authority is a body corporate and politic and a
public instrumentality of the Commonwealth of Pennsylvania, duly organized
and validly existing under the Act, with full power and authority to
undertake the financing of the Project, to execute and deliver the Loan
Agreement and the Indenture and to issue the Bonds.
B. The Indenture and the Loan Agreement have been duly
authorized, executed and delivered by the Authority and, assuming due
authorization and execution by the other parties thereto, each constitutes
the legal, valid and binding obligation of the Authority enforceable in
accordance with its respective terms.
C. The issuance and sale of the Bonds have been duly
authorized by the Authority and, assuming due execution and authentication as
stated above, the Bonds are entitled to the benefit and security of the
Indenture and constitute the legal, valid and binding special limited
obligations of the Authority enforceable in accordance with their terms.
D. Under the laws of the Commonwealth of Pennsylvania as
currently enacted and construed, the Bonds are exempt from personal property
taxes in Pennsylvania and the interest on the Bonds is exempt from
Pennsylvania personal income tax and Pennsylvania corporate net income tax.
E. Under existing law as currently enacted and construed,
interest on the Bonds is excluded from gross income for federal income tax
purposes under Section 103(a) of the Code, except for any period during which
the Bonds are held by a "substantial user" of the Project Facilities or by a
"related person" within the meaning of Section 147(a) of the Code.
F. Interest on the Bonds is an item of tax preference under
Section 57 of the Code, and thus is subject to both individual and corporate
alternative minimum tax for federal income tax purposes.
In providing the foregoing opinions, we advise you as follows:
(a) Our opinion set forth in paragraph E above is subject
to the condition that the Authority and the Borrower comply with all
requirements of the Code that must be satisfied in order that the interest on
the Bonds be (or continue to be) excluded from gross income for federal
income tax purposes. Failure to comply with such requirements could cause the
interest on the Bonds to be included in gross income for federal income tax
purposes retroactive to the date of the issuance of the Bonds.
(b) In providing our opinion set forth in paragraph E
above, we have assumed continuing compliance by the Authority and the
Borrower with the applicable requirements of the Code and the regulations
promulgated thereunder that must be met in order for the interest on the
Bonds to be excludable from the gross income of a Bondholder for federal
income tax purposes and we are relying, without independent investigation,
upon the representations, warranties and continuing covenants of the Borrower
and the Authority contained in the various documents, instruments, agreements
and certificates delivered at closing (particularly as such covenants relate
to the use of the proceeds of the Bonds and the Borrower's and the
Authority's undertakings to comply with the requirements of the Code). In
addition, we have assumed the accuracy of the factual information and the
truthfulness of the expectations set forth in the Non-Arbitrage Certificate
and the Tax Compliance Agreement, referred to above.
(c) The enforceability of the provisions of the Bonds, the
Indenture and the Loan Agreement (and any other applicable document) may be
limited by applicable bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
(d) Equitable remedies with respect to the Bonds, the
Indenture and the Loan Agreement (and any other applicable document) lie in
the discretion of the courts and, accordingly, may not be available.
(e) Except as specifically set forth above, we express no
opinion regarding other federal income tax consequences arising with respect
to the Bonds and the effects, if any, of certain other provisions of the Code
that could result in collateral federal income tax consequences to certain
investors with respect to tax-exempt interest.
(f) We have not been engaged to verify, nor have we
independently verified, nor do we express any opinion to the registered
owners of the Bonds with respect to, the accuracy, completeness or
truthfulness of any statements, certifications, information or financial
statements set forth in the Placement Memorandum dated April 30, 1999 (the
"Placement Memorandum"), or with respect to any other materials used in
connection with the placement of the Bonds.
(g) We express no opinion with respect to whether the
Authority, the Borrower or any other person, in connection with the placement
of the Bonds or the preparation of the Placement Memorandum, has made any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make any statement made, not misleading. Further, we
have not verified, and express no opinion as to the accuracy of, any "CUSIP"
identification number that may be printed on any Bond. We have also assumed
the genuineness of the signatures appearing on all the certificates,
documents and instruments executed and delivered at closing.
(h) We call to your attention the fact that the Bonds are
special limited obligations of the Authority, payable only from draws by the
Trustee on the Letter of Credit pursuant to the terms thereof and the
payments made by the Borrower under the Loan Agreement and that the Bonds do
not pledge the general credit or taxing powers of the Commonwealth of
Pennsylvania or any other political subdivision thereof.
Very truly yours,
OBERMAYER REBMANN MAXWELL & HIPPEL LLP
EXHIBIT B
FIXED RATE FORM OF BOND
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC") to the
Philadelphia Authority for Industrial Development (the "Authority") or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
(the "Registered Owner") hereof, Cede & Co., has an interest herein.
PHILADELPHIA AUTHORITY FOR INDUSTRIAL DEVELOPMENT
TAX-EXEMPT REVENUE BOND
(LANNETT COMPANY, INC. PROJECT)
SERIES OF 1999
No. FR-1 $
Interest Rate Maturity Date Dated Date CUSIP
- ------------- ------------- ---------- -----
May 1, 2014
KNOW ALL PERSONS BY THESE PRESENTS that the PHILADELPHIA AUTHORITY
FOR INDUSTRIAL DEVELOPMENT (the "Authority"), for value received, promises to
pay to CEDE & Co. registered assigns, upon surrender hereof, the principal
sum of _________________________________ Dollars ($___________), and in like
manner to pay (calculated on the basis of a 360-day year or twelve 30 day
months) on said sum at the rate of ________% per annum on May 1 and November
1 of each year, commencing ______________ (each an "Interest Payment Date"),
from the Interest Payment Date next preceding the date of authentication
hereof to which interest has been paid or duly provided for, unless the date
of authentication hereof is an Interest Payment Date to which interest has
been paid or duly provided for, in which case from the date of authentication
hereof, or unless no interest has been paid or duly provided for on the Bonds
(as hereinafter defined), in which case from the Conversion Date (as defined
in the Indenture, as hereinafter defined), until payment of the principal
hereof has been made or duly provided for.
Notwithstanding the foregoing, if this Bond is authenticated after
any date which is the fifteenth calendar day next preceding any Interest
Payment Date (a "Record Date") and before the following Interest Payment
Date, this Bond shall bear interest from such Interest Payment Date;
provided, however, that if the Authority shall default in the payment of
interest due on such Interest Payment Date, then this Bond shall bear
interest from the next preceding Interest Payment Date to which interest has
been paid or duly provided for, or, if no interest has been paid or duly
provided for on the Bonds, from the Conversion Date. The principal of this
Bond is payable in lawful money of the United States of America at the
principal corporate trust office of First Union National Bank, as trustee
(together with its successors in trust, the "Trustee") at 123 S. Broad
Street, 11th Floor, PA-1249, Philadelphia, Pennsylvania 19109, Attention:
Corporate Trust Department, or at the duly designated office of any successor
Trustee under the Trust Indenture, dated April 30, 1999, between the
Authority and the Trustee (which indenture, as from time to time amended and
supplemented, is hereinafter referred to as the "Indenture"). Payment of
interest on this Bond shall be made on each Interest Payment Date to the
registered Owner hereof as of the applicable Record Date and shall be paid by
check mailed by the Trustee to such registered Owner at his address as it
appears on the registration books of the Authority or at such other address
as is furnished to the Trustee in writing by such registered Owner, or in
such other manner as may be permitted by the Indenture. The Purchase Price
(hereinafter defined) of this Bond shall be payable by First Union National
Bank (together with any successor tender agent, the "Tender Agent") to the
registered Owner hereof, upon presentation hereof, at the delivery office of
the Tender Agent. As used herein, the term "Business Day" means any day other
than a Saturday or Sunday, a legal holiday on which banking institutions in
the State of New York, the Commonwealth of Pennsylvania, the City of New York
or the City of Philadelphia are authorized or required by law to close or a
day on which the New York Stock Exchange is closed.
This Bond and the Bonds of the Series of which it is a part is
comprised of a duly authorized issue of bonds (the "Bonds") of the Authority
designated as "Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project), Series of 1999" (the "Bonds") issued in the
original aggregate principal amount of $3,700,000 under and by virtue of the
Pennsylvania Economic Development Financing Law, as amended and supplemented
(the "Act"), and by virtue of a resolution duly adopted by the Authority (the
"Bond Resolution"), and equally and ratably secured under the Indenture, for
the purpose of financing a project (the "Project") consisting of (i) the
construction of an approximately 40,000 square foot manufacturing and
manufacturing-related facility as an addition to a 33,000 square foot
existing facility located at 9000 State Road, Philadelphia, Pennsylvania (the
"9000 State Road Facility") or, alternatively, the acquisition and renovation
of an existing manufacturing and manufacturing-related facility located at
9030 State Road, Philadelphia, Pennsylvania (the "9030 State Road Facility");
(ii) the acquisition of equipment for installation and use in either the 9000
State Road Facility or the 9030 State Road Facility; and (iii) the payment of
a portion of the costs of issuance of the Bonds. Pursuant to a Loan Agreement
dated as of April 30, 1999 (the "Loan Agreement") by and between the
Authority and Lannett Company, Inc. (the "Borrower"), installment payments
sufficient for the prompt payment when due of the principal and Purchase
Price of, premium, if any, and interest on the Bonds are to be paid to the
Trustee for the account of the Authority and deposited in the Bond Fund
established by the Indenture and have been duly pledged for that purpose, all
to the extent and in the manner provided in the Indenture.
Notwithstanding any provision herein to the contrary, so long as
this Bond is subject to a system of book-entry transfers, any requirement for
the delivery of Bonds to the Tender Agent in connection with an optional or
mandatory tender shall be deemed satisfied upon the transfer, on the
registration books of DTC, of the beneficial ownership interests in the Bonds
tendered for purchase to the account of the Tender Agent, or any participant
in DTC acting on behalf of or at the discretion of such Tender Agent.
The Bonds are all issued under and are equally and ratably secured
by and entitled to the protection of the Indenture, pursuant to which all
payments due from the Borrower to the Authority under the Loan Agreement
(other than certain indemnification payments and the payment of certain
expenses of the Authority) are assigned to the Trustee to secure the payment
of the principal and Purchase Price of and premium, if any, and interest on
the Bonds and certain costs, fees and expenses of the Trustee. The Borrower
has caused to be delivered to the Trustee an irrevocable direct pay letter of
credit (together with any Substitute Letter of Credit, the "Letter of
Credit") issued by First Union National Bank (in such capacity, the "Bank")
and dated the Date of Issuance of the Bonds, which will expire, unless
earlier terminated or extended, on October 31, 2002. Subject to certain
conditions, the Letter of Credit may be replaced by a Substitute Letter of
Credit of another commercial bank, savings and loan association or savings
bank. Under the Letter of Credit, the Trustee will be entitled to draw up to
an amount sufficient to pay (a) the principal of the Bonds and (b) 205 days'
accrued interest on the Bonds (calculated at the interest rate on the Bonds).
Reference is hereby made to the Indenture, the Loan Agreement and
the Letter of Credit for a description of the property pledged and assigned,
the provisions, among others, with respect to the nature and extent of the
security, the rights, duties and obligations of the Authority, the Trustee
and the Owners of the Bonds and the terms upon which the Bonds are issued and
secured; and the Owner of this Bond, by acceptance hereof, hereby consents to
the terms and provisions of all of the foregoing as a material portion of the
consideration for the issuance of this Bond.
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE
SOLELY AND EXCLUSIVELY FROM THE PAYMENTS REQUIRED TO BE MADE BY THE PROJECT
USER UNDER THE LOAN AGREEMENT AND FROM DRAWS ON THE LETTER OF CREDIT. NO
RECOURSE SHALL BE HAD FOR THE PAYMENT OF PRINCIPAL, PURCHASE PRICE OR
REDEMPTION PRICE OF, OR INTEREST ON, THIS BOND, OR ANY CLAIM BASED HEREON OR
ON THE INDENTURE OR THE LOAN AGREEMENT, AGAINST THE AUTHORITY OR ANY
SUCCESSOR BODY OR AGAINST ANY OFFICER, MEMBER, EMPLOYEE OR AGENT PAST,
PRESENT OR FUTURE OF THE AUTHORITY OR ANY SUCCESSOR BODY, UNDER ANY
CONSTITUTIONAL PROVISION, STATUTE OR RULE OF LAW, OR BY THE ENFORCEMENT OF
ANY ASSESSMENT OR BY ANY LEGAL OR EQUITABLE PROCEEDING OR OTHERWISE, AND ALL
SUCH LIABILITY OF THE AUTHORITY OR ANY SUCCESSOR BODY OR ANY SUCH OFFICERS,
MEMBERS, EMPLOYEES OR AGENTS IS RELEASED AS A CONDITION OF, AND IN
CONSIDERATION FOR, THE ISSUANCE OF THIS BOND. AS A CONDITION OF, AND IN
CONSIDERATION FOR THE ISSUANCE OF THIS BOND, THE REGISTERED OWNER HEREOF
COVENANTS THAT HE WILL NOT SUE THE AUTHORITY OR ITS MEMBERS, OFFICERS,
EMPLOYEES OR AGENTS, PAST, PRESENT OR FUTURE, EXCEPT AS EXPRESSLY PERMITTED
IN THE INDENTURE AND THE LOAN AGREEMENT. THE BONDS AND THE INTEREST THEREON
SHALL NOT BE IN ANY WAY A DEBT OR LIABILITY OF THE COMMONWEALTH OF
PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF, AND SHALL NOT CREATE OR
CONSTITUTE ANY INDEBTEDNESS, LIABILITY OR OBLIGATION OF THE COMMONWEALTH OF
PENNSYLVANIA OR ANY POLITICAL SUBDIVISION THEREOF, WHETHER LEGAL, MORAL OR
OTHERWISE, AND THE AUTHORITY SHALL NOT INCUR ANY INDEBTEDNESS ON BEHALF OF OR
IN ANY WAY TO OBLIGATE THE COMMONWEALTH OF PENNSYLVANIA OR ANY POLITICAL
SUBDIVISION THEREOF. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY PERSON
EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE
ISSUANCE THEREOF. THE AUTHORITY IS A CONDUIT AUTHORITY AND HAS NO TAXING
POWER.
This Bond is transferable by the registered owner hereof in person
or by his attorney duly authorized in writing, at the principal corporate
trust office of the Trustee or at the Delivery Office of the Tender Agent or
that of any successor Tender Agent, but only in the manner, subject to the
limitations and upon payment of the charges provided in the Indenture, and
upon surrender and cancellation of this Bond. Upon such transfer a new
registered Bond or Bonds of authorized denomination or denominations for the
same aggregate principal amount will be issued to the transferee in exchange
therefor. The Authority, the Tender Agent and the Trustee may deem and treat
the registered Owner hereof as the absolute Owner hereof (whether nor not
this Bond shall be overdue) for all purposes, and neither the Authority, the
Tender Agent nor the Trustee shall be bound by any notice or knowledge to the
contrary.
The Bonds shall be issuable as fully registered Bonds without
coupons in the denomination of $5,000 or any integral multiple thereof.
Extraordinary Redemption
The Bonds are callable for redemption in the event (1) the Project
or any portion thereof is damaged or destroyed or taken in a condemnation
proceeding as provided in Section 6.04 of the Loan Agreement, or (2) the
Borrower shall exercise its option to cause the Bonds to be redeemed as
provided in Section 9.02 of the Loan Agreement. If called for redemption at
any time pursuant to (1) or (2) above, the Bonds shall be subject to
redemption by the Authority on any Interest Payment Date, in whole or in
part, at a redemption price of one hundred percent (100%) of the principal
amount thereof plus accrued interest to the redemption date.
Mandatory Redemption
The Bonds are subject to mandatory redemption, five (5) Business
Days prior to the Letter of Credit Termination Date, in whole, at a
redemption price equal to one hundred percent (100%) of the principal amount
thereof being redeemed plus accrued interest to the redemption date if, on
the thirtieth (30th) Business Day prior to the Letter of Credit Termination
Date, the Trustee shall not have received a Substitute Letter of Credit which
will be effective on or before the Letter of Credit Termination Date.
The Bonds are also subject to mandatory redemption, in whole or in
part, on any Interest Payment Date, at a redemption price equal to one
hundred percent (100%) of the principal amount thereof being redeemed plus
accrued interest to the redemption date, if any proceeds of the sale of the
Bonds remain on deposit in the Project Fund established under the Indenture
upon completion of the Project, under the conditions specified therein.
If less than all the Bonds are to be redeemed, the particular Bonds
or portions thereof to be redeemed shall be selected by the Trustee at random
or in such other manner as the Trustee in its discretion shall deem fair and
appropriate.
The Bonds are also subject to mandatory redemption, in whole, at any
time, within one hundred eighty (180) days after the occurrence of a
Determination of Taxability (as hereinafter defined), at a redemption price
equal to one hundred percent (100%) of the aggregate principal amount of
Bonds Outstanding plus accrued interest to the redemption date.
"Event of Taxability" with respect to any Bond means a change of law
or regulations, or the interpretation thereof, or the occurrence of any other
event of the existence of any other circumstance (including without
limitation the fact that any representations or warranties of the Borrower or
the Authority made in connection with the issuance of any Bond is or was
untrue or that a covenant of the Borrower has been breached) that has the
effect of causing interest payable on any Bond to be includable in gross
income for federal income tax purposes under Section 103 of the Internal
Revenue Code of 1986, as amended, and the applicable regulations thereunder
(the "Code") other than by reason that such interest (i) is includable in the
gross income of an Owner or former Owner of any Bond while such Owner or
former owner is or was a "substantial user" of the Project or a "related
person" to a "substantial user" of the Project (as such terms are used in
Section 147(a)(1) of the Code), or (ii) is deemed an item of tax preference
including, without limitation, an item subject to any alternative minimum
tax.
"Determination of Taxability" with respect to any Bond shall be
deemed to have been made upon the first to occur of the following events:
(i) the date on which the Borrower determines that an Event
of Taxability has occurred by filing with the Trustee a statement to the
effect supported by one or more tax schedules, returns or documents which
disclose that such an Event of Taxability has occurred;
(ii) the date on which the Borrower or the Trustee is
advised by private ruling, technical advice or any other written
communication from any authorized official of the Internal Revenue Service
that, based upon any filings of the Borrower or any other person or entity,
or upon any review or audit of the Borrower or any other person or entity, or
upon any other grounds whatsoever, an Event of Taxability has occurred;
(iii) the date on which the Trustee or the Borrower is
advised that a court of competent jurisdiction has issued an order,
declaration, ruling or judgment to the effect that an Event of Taxability has
occurred;
(iv) the date the Trustee shall have received written
notice from any Owner of the Bonds that such Owner has received a written
assertion or claim by any authorized official of the Internal Revenue Service
that an Event of Taxability has occurred; or
(v) the date the Trustee is notified that the Internal
Revenue Service has issued any private ruling, technical advice or any other
written communication, with or to the effect that an Event of Taxability has
occurred; provided, however, that (a) no Determination of Taxability
described in each of clauses (i) or (v) above shall be deemed to have
occurred unless the Trustee shall have received a written opinion of
nationally recognized bond counsel satisfactory to the Trustee, in form and
substance satisfactory to the Bank and the Borrower and not unsatisfactory to
the Trustee, to the effect that an Event of Taxability has occurred, and (b)
no Determination of Taxability described in each of clauses (i) , (ii) ,
(iii) , (iv) or (v) above shall be deemed to have occurred until 180 days
shall have elapsed from the dates described in clauses (i), (ii), (iii), (iv)
or (v) above without such Determination of Taxability having been rescinded
or cancelled.
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory redemption on the Interest
Payment Date occurring in the month of May in each of the years set forth
below commencing on the Interest Payment Date occurring in May____ (each, a
"Mandatory Sinking Account Payment Date"), at a redemption price equal to
100% of the principal amount thereof plus accrued interest as follows:
Mandatory Sinking
Year Account Payments
---- ----------------
*Maturity
Optional Redemption
[TO BE PROVIDED]
In the event any of the Bonds or portions thereof are called for
redemption as aforesaid, notice of the call for redemption, identifying the
Bonds or portions thereof to be redeemed and the redemption price (including
the premium, if any), shall be given by the Trustee in accordance with the
Letter of Representations so long as the Bonds are registered in the name of
The Depository Trust Company ("DTC") or its nominee, and if the DTC
book-entry-only system shall be discontinued, notice of the call of
redemption shall be given by mailing a copy of the redemption notice by
first-class mail at least (i) ten (10) days prior to the date fixed for
redemption in the event of a mandatory redemption fifteen (15) days prior to
the Letter of Credit Termination Date; and (ii) thirty (30) days but not more
than sixty (60) days prior to the date fixed for redemption in all other
instances to the Owner of each Bond to be redeemed in whole or in part at the
address shown on the registration books. Any notice mailed as provided above
shall be conclusively presumed to have been duly given, whether or not the
Owner receives the notice. No further interest shall accrue on the principal
of any bond called for redemption after the redemption date if Available
Moneys (as defined in the Indenture) sufficient for such redemption have been
deposited with the Trustee. Notwithstanding the foregoing, the notice
requirements contained in the first sentence of this paragraph may be deemed
satisfied with respect to a transferee of a Bond which has been purchased
pursuant to the Demand Purchase Option under certain circumstances provided
in Section 4.06 of the Indenture, after such Bond has previously been called
for redemption, notwithstanding the failure to satisfy the notice
requirements of the first sentence of this paragraph with respect to such
transferee.
The Bonds are issued pursuant to and in full compliance with the
Constitution and laws of the Commonwealth of Pennsylvania, particularly the
Act, and by appropriate action duly taken by the Authority authorizing the
execution and delivery of the Loan Agreement and the Indenture. The Bonds
have been issued under the provisions of the Act.
Notwithstanding anything to the contrary contained herein or in the
Indenture, the Loan Agreement or in any other instrument or document executed
by or on behalf of the Authority in connection herewith, no stipulation,
covenant, agreement or obligation contained herein or therein shall be deemed
or construed to be a stipulation, covenant, agreement or obligation of any
present or future member commissioner, director, trustee, officer, employee
or agent of the Authority, or of any successor to the Authority, in any such
person's individual capacity, and no such person, in his individual capacity,
shall be liable personally for any breach or nonobservance of or for any
failure to perform, fulfill or comply with any such stipulations, covenants,
agreements or the principal of or premium, if any, or interest on any of the
Bonds or for any claim based thereon or on any such stipulation, covenant,
agreement or obligation, against any such person, in his individual capacity,
either directly or through the Authority or any successor to the Authority,
under any rule of law or equity, statute or constitution or by the
(enforcement of any assessment or penalty or otherwise, and all such
liability of any such person, in his individual capacity, is hereby expressly
waived and released.
The Owner of this Bond shall 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 default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, unless certain circumstances described in the Indenture shall have
occurred. In certain events, on the conditions in the manner and with the
effect set forth in the Indenture, the principal of all the Bonds issued
under the Indenture and then outstanding may become or may be declared due
and payable before the stated maturity thereof, together with interest
accrued thereon.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modifications of the rights and obligations of
the Authority and the rights of the owners of the Bonds at any time by the
Authority with the consent of the Bank and the holders of all Bonds at the
time outstanding. Any such consent or any waiver by the Bank and the holders
of all Bonds at the time outstanding shall be conclusive and binding upon the
Owner and upon all future Owners of this Bond and of any Bond issued in
replacement hereof whether or not notation of such consent or waiver is made
upon this Bond. The Indenture also contains provisions which, subject to
certain conditions, permit or require the Trustee to waive certain past
defaults under the Indenture and their consequences.
It is hereby certified, recited and declared that all acts,
conditions and things required to exist, happen and be performed precedent to
and in connection with the execution and delivery of the Indenture and the
issuance of this Bond do exist, have happened and have been performed in due
time, form and manner as required by law; and that the issuance of this Bond
and the issue of which it forms a part, together with all other obligations
of the Authority, does not exceed or violate any constitutional or statutory
limitation.
This Bond shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the
certificate of authentication hereon shall have been signed by the Trustee or
the Tender Agent, as authenticating agent.
IN WITNESS WHEREOF, the Philadelphia Authority for Industrial
Development has caused this Bond to be signed in its name and on its behalf
by the manual or facsimile signature of its Chairman and its corporate seal
to be affixed, imprinted or reproduced hereon and attested by the manual or
facsimile signature of its Secretary or Assistant Secretary all as of the
Date of Issuance.
ATTEST: PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
____________________________ By:__________________________________
(Assistant) Secretary Chairman
(SEAL)
(Form of Certificate of Authentication)
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds of the issue described in the
within-mentioned Trust Indenture.
FIRST UNION NATIONAL BANK,
as Trustee and Tender Agent
By:_________________________
Authorized Signature
Date of Authentication: ____________________
(Form of Transfer)
FOR VALUE RECEIVED, ________________ the undersigned, hereby sells,
assigns and transfers unto _____________________ (Tax Identification or
Social Security No.______________) the within Bond and all rights thereunder,
and hereby irrevocably constitutes and appoints _______________ attorney to
transfer the within Bond on the books kept for registration thereof, with
full power of substitution in the premises.
Dated: ___________________________ ___________________________
NOTICE: Signature must be guaranteed by an approved eligible guarantor
institution, an institution which is a participant in a Securities Transfer
Association recognized signature guarantee program.
NOTICE: The Signature to this assignment must correspond with the name as it
appears upon the face of the within Bond in every particular, without
alteration or enlargement or any change whatever.
[FORM OF BOND COUNSEL OPINION]
ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA :
: SS
COUNTY OF PHILADELPHIA :
On this, the ___ day of April, 1999 before me, the undersigned
notary public, personally appeared James McManus, who acknowledged himself to
be the Chairman of the Philadelphia Authority for Industrial Development, and
that he as such officer, being authorized to do so, executed the foregoing
instrument for the purposes therein contained by signing the name of said
Authority by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------
Notary
My Commission Expires:
ACKNOWLEDGMENT
COMMONWEALTH OF PENNSYLVANIA :
: SS
COUNTY OF PHILADELPHIA :
On this, the ___ day of April, 1999 before me, the undersigned
notary public, personally appeared _________________ who acknowledged
himself/herself to be a __________________ of FIRST UNION NATIONAL BANK and
that he/she as such officer, being authorized to do so, executed the
foregoing instrument for the purposes therein contained by signing the name
of said Bank by himself/herself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-------------------------
Notary
My Commission Expires:
PLEDGE AND SECURITY AGREEMENT
(Unremarketed Bonds)
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement") is made the
30th day of April, 1999, by Lannett Company, Inc., a Delaware corporation
(the "Pledgor") in favor of FIRST UNION NATIONAL BANK, a national banking
association (the "Bank").
WHEREAS, the Philadelphia Authority for Industrial Development
(the "Authority") has agreed with the Pledgor is issue its $3,700,000
aggregate principal amount Tax-Exempt Variable Rate Demand/Fixed Rate Revenue
Bonds (Lannett Company, Inc. Project), Series of 1999 (the "Bonds"), under a
Trust Indenture, dated April 30, 1999 (the "Indenture"), by and between the
Authority and First Union National Bank, as trustee (the "Trustee"); and
WHEREAS, Pledgor and the Bank have entered into a Reimbursement
Agreement, dated April 30, 1999 (the "Reimbursement Agreement"), pursuant to
which the Bank has agreed, subject to the conditions precedent provided in
the Reimbursement Agreement, to issue an irrevocable direct pay letter of
credit by Bank in favor of the Trustee (the "Letter of Credit").
NOW, THEREFORE, the parties, intending to be legally bound,
agree as follows:
1. Defined Terms. As used in this Agreement, the terms defined
in the preambles to this Agreement shall have such meanings and the following
terms have the following meanings (all such meanings to be equally applicable
to both the singular and plural forms of the terms defined, all capitalized
terms not defined herein shall have the meanings ascribed to such terms in
the Reimbursement Agreement):
"Collateral" means all property at any time pledged to
the Bank under this Agreement (whether described in this Agreement or not)
and all income therefrom and proceeds thereof.
"Event of Default" has the meaning given to such term in
the Reimbursement Agreement.
"Pledged Bonds" has the meaning given to such term in
Section 3 hereof.
"Pledged Bonds Custodian" means First Union National
Bank (or such other successor thereto or substitute therefor) in its capacity
as collateral agent for the Bank.
"Remarketing Agent" has the meaning given to such term
in the Indenture.
"Tender Agent" has the meaning given to such term in the
Indenture.
"Unremarketed Bonds" has the meaning given to such term
in the Indenture.
2. Interpretation. (a) Unless the context otherwise indicates,
words expressed in the singular shall include the plural and vice versa and
the use of the neuter, masculine or feminine gender is for convenience only
and shall be deemed to mean and include the neuter, masculine or feminine
gender, as appropriate.
(b) Headings of articles and sections herein are solely
for convenience of reference, do not constitute a part hereof and shall not
affect the meaning, construction or effect hereof.
(c) All references herein to "Articles," "Sections,"
"Paragraphs" and other subdivisions are to the corresponding Articles,
Sections, Paragraphs or subdivisions of this Agreement; the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Paragraph or
subdivision hereof.
3. Pledge. The Pledgor hereby pledges, assigns, hypothecates
and transfers to the Bank all of the Pledgor's right, title and interest to
the Unremarketed Bonds delivered from time to time to the Tender Agent by the
owners thereof and grants to the Bank a first lien on, and security interest
in, all of its right, title and interest in and to the Unremarketed Bonds,
the interest thereon, and all proceeds thereof, as collateral security for
the prompt and complete payment by the Pledgor (by acceleration, at stated
maturity, or otherwise) of all amounts payable from time to time by the
Pledgor to the Bank in respect of the Indebtedness. Unless all amounts drawn
under the Letter of Credit with respect to the payment of the Purchase Price
of the Bonds pursuant to mandatory and optional tenders of the Bonds are
reimbursed to the Bank on the same day as such Drawings, the Pledgor shall,
no later than 5:00 p.m. (Philadelphia time) on the same day, (a) deliver or
use its best efforts to cause to be delivered to the Pledged Bonds Custodian,
Unremarketed Bonds in a principal amount equal to the unreimbursed portion of
such drawing (such Unremarketed Bonds so delivered to and held by the Pledged
Bonds Custodian from time to time to be referred to as the "Pledged Bonds")
and (b) give or use its best efforts to cause to be given to the Bank notice
of the number and principal amount of each such Pledged Bond.
4. Registration of and Interest on Pledged Bonds. If the Bonds
are in certificated form, Pledged Bonds shall be registered in the name of
the Pledged Bonds Custodian and shall be duly endorsed for transfer by the
Pledged Bonds Custodian in blank or by appropriate instruments of transfer
duly executed in blank. The Bank may, but shall not be obligated to, request
that Pledged Bonds be registered in its name at any time or from time to
time. Any interest on Pledged Bonds shall be paid to or upon the order of the
Bank and shall be applied as a credit against the Indebtedness with respect
to the related Principal and Interest Drawings under the Letter of Credit in
accordance with the terms of the Reimbursement Agreement. The Pledged Bonds
Custodian shall follow the written direction of the Bank ensuring the release
or transfer of the Pledged Bonds.
5. Release of Pledged Bonds. Upon payment to the Bank of the
proceeds of remarketed Pledged Bonds in an amount sufficient to cover the
principal of and accrued interest, if any, on the Unremarketed Bonds, the
Bank shall (i) reinstate the Letter of Credit to an amount equal to the
principal amount of such Bonds together with an amount equal to forty-six
(46) days interest thereon calculated at an interest rate (based on a 365 or
366 day year, as applicable, for the actual number of days elapsed) of
fifteen percent (15%) to pay interest on the Bonds; (ii) notify the Trustee
of the amount of such reinstatement; and (iii) release or instruct the
Pledged Bonds Custodian to release Pledged Bonds in a principal amount equal
to the principal amount of such payment to the Bank from the pledge and
security interest created by this Agreement. Such Pledged Bonds shall be
delivered to or upon the order of the Tender Agent only after payment to the
Bank as aforesaid.
6. Redemption of Pledged Bonds. In the event any Pledged Bond
is called for redemption under the Indenture, Pledgor shall use its best
efforts to cause the Trustee to take all such actions as shall be required
under the Indenture to effect the redemption and shall pay or cause to be
paid the redemption price to or to the order of the Bank as a credit against
the Indebtedness.
7. Rights of the Bank. The Bank shall not be liable, except in
the case of its willful misconduct or gross negligence, for failure to
collect or realize upon the Indebtedness or the Collateral or any part
thereof, or for any delay in so doing, nor shall the Bank be under any
obligation to take any action whatsoever with regard thereto. If an Event of
Default has occurred and its continuing, the Bank, with or without notice,
shall have the right to exercise all rights, privileges or options pertaining
to any Pledged Bonds, as if it were the absolute owner thereof, upon such
terms and conditions as it may, in its sole discretion determine, all without
liability except to account to the Pledgor for property actually received by
it. The Bank shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so
or delay in so doing.
8. Remedies. In the event that any portion of the Indebtedness
has been declared due and payable (upon scheduled maturity, acceleration or
otherwise), the Bank, without demand for performance or other demand,
advertisement or notice of any kind (except the notice specified below of
time and place of public or private sale) to the Pledgor or any other person
(all and each of which demands, advertisements and/or notices are expressly
waived by the Pledgor), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give an option or options to purchase, contract to sell, or otherwise
dispose of and deliver the Collateral, or any part thereof, in one or more
parcels or portions at public or private sale or sales, at any exchange,
broker's board or at any of the Bank's offices or elsewhere upon such terms
and conditions as it may, in its sole discretion, deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk, with the right to the Bank, upon any
such sale or sales, public or private, to purchase the whole or any part of
the Collateral so sold, free to any right or equity of redemption in the
Pledgor, which right or equity is hereby expressly waived or released by
Pledgor. The net proceeds or any such collection, recovery, receipts,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care,
safekeeping, or otherwise of any and all of the Collateral or in any way
relating to the rights of the Bank under this Agreement, including, but not
limited to, reasonable attorneys' fees and legal expenses, shall be applied
first to the satisfaction of the Indebtedness in such order as the Bank may
elect, the Pledgor remaining liable for any deficiency remaining unpaid after
such application, and only after so paying over such net proceeds and after
the payment by the Bank of any other amount required by any provision of law,
including, without limitation, Section 9-504 (1)(c) of the Uniform Commercial
Code, need the Bank account for the surplus, if any, to the Pledgor. The
Pledgor agrees that the Bank need not give more than five (5) days' notice of
the time and place of any public sale or of the time after which a private
sale or other intended disposition is to take place and that such notice is
reasonable notification of such matters. In addition to the rights and
remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to any of the Indebtedness, the
Bank shall have the authority to exercise all the rights and remedies of a
secured party under the Uniform Commercial Code. Notwithstanding anything
contained herein to the contrary, the Bank may not sell, assign, give an
option or options to purchase, contract to sell or otherwise dispose of and
deliver the Collateral unless it shall reinstate the Letter of Credit in full
as to principal and interest with respect to such Bonds, except this shall
not apply in the case of a conversion of the Bonds to a Fixed Rate in
accordance with the terms of the Indenture.
9. Representations, Warranties and Covenants of the Pledgor.
The Pledgor represents and warrants that: (a) on the date of delivery to the
Bank or the Pledged Bonds Custodian of any Pledged Bonds, none of the
Remarketing Agent, the Tender Agent, the Trustee nor any other person, firm
or corporation (other than the Pledgor or the Bank or the Pledged Bonds
Custodian) will have any right, title or interest in and to the Pledged
Bonds; (b) it has, and on the date of delivery to the Bank or the Pledged
Bonds Custodian of any Pledged Bonds will have, full power, authority and
legal right to pledge all of its right, title and interest in and to the
Pledged Bonds pursuant to this Agreement; (c) the Pledged Bonds and the
proceeds thereof, are not subject to any pledge, lien, mortgage,
hypothecation, security interest, charge, option or encumbrance or to any
agreement purporting to grant to any third party a security interest in the
property or assets of the Pledgor which would include the Pledged Bonds. The
Pledgor covenants and agrees that it will defend the Bank's and the Pledged
Bonds Custodian's right, title and security interest in and to the Pledged
Bonds and the proceeds thereof against the claims and demands of all persons
at the Pledgor's sole cost and expense.
10. No Disposition, etc. Except as contemplated in this
Agreement, without the prior written consent of the Bank, the Pledgor agrees
that it will not sell, assign, transfer, exchange or otherwise dispose of, or
grant any option with respect to, the Collateral, nor will it create, incur
or permit to exist any pledge, lien, mortgage, hypothecation, security
interest, charge, option or any other encumbrance with respect to any of the
Collateral, or any interest therein, or any proceeds thereof, except for the
lien and security interest provided for by this Agreement.
11. Sale of Collateral. (a) The Pledgor recognizes that the
Bank may be unable to effect a public sale of any or all of the Pledged Bonds
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities Act"), and applicable state securities laws, but may
be compelled to resort to one or more private sales thereof to a restricted
group or purchasers who may be obliged to agree, among other things, to
acquire such securities for their own account for investment and not with a
view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner. The Bank
shall be under no obligation to delay a sale of any of the Pledged Bonds for
the period of time necessary to permit the Pledgor to register such
securities for public sale under the Securities Act, or under applicable
state securities law, even if the Pledgor would agree to do so.
(b) The Pledgor further agrees to promptly do or cause
to be done all such other reasonable acts and things as may be necessary to
make any sale or sales of any portion or all of the Pledged Bonds valid and
binding and in compliance with any and all applicable laws, regulations,
orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Pledgor's cost and
expense.
12. Further Assurances. The Pledgor agrees that at any time and
from time to time upon the written request of the Bank or the Pledged Bonds
Custodian, the Pledgor will execute and deliver such further documents and do
such further acts and things as the Bank or the Pledged Bonds Custodian may
reasonably request in order to effect the purposes of this Agreement.
13. 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 provision of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
14. No Waiver; Cumulative Remedies. No act, delay or omission
of the Bank or the Pledged Bonds Custodian shall be deemed to be a waiver of
any rights or remedies granted under this Agreement and no waiver shall be
valid unless in writing, signed by the Bank, and then only to the extent set
forth in such waiver. A waiver of any right or remedy under this Agreement on
any one occasion shall not be construed as a bar to any right or remedy which
the Bank would otherwise have on any future occasion. No failure to exercise
and no delay in exercising on the part of the Bank or the Pledged Bonds
Custodian any right, power or privilege under this Agreement shall operate as
a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other right, power or
privilege. The rights and remedies provided in this Agreement are cumulative
and may be exercised singly or concurrently, and are not exclusive of any
rights or remedies provided by law or equity.
15. Waivers, Amendments. None of the terms or provisions of
this Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Pledgor and the Bank and if such
amendment affects the rights or duties of the Pledged Bonds Custodian, with
the written consent of the Pledged Bonds Custodian. This Agreement and all
obligations of the Pledgor under this Agreement shall be binding upon the
successors and assigns of the Pledgor, and shall, together with the rights
and remedies of the Bank or the Pledged Bonds Custodian under this Agreement,
inure to the benefit of the Bank and its successors and assigns.
16. Fees and Expenses of the Pledged Bonds Custodian. The
Pledgor agrees that it will pay or reimburse the Bank for (i) all fees
charged and expenses incurred by the Pledged Bonds Custodian for and in
connection with its acting as such for the purposes of this Agreement and
(ii) all costs and other expenses incurred by the Bank or the Pledged Bonds
Custodian in connection with the transfer, registration or exchange of the
Pledged Bonds.
17. Governing Law. This Agreement shall be governed by and be
construed and interpreted in accordance with the laws of the Commonwealth of
Pennsylvania.
18. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be a original and all of which shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Pledgor and the Bank have caused this
Agreement to be duly executed and delivered by their duly authorized officers
as of the day and year first above written.
ATTEST: LANNETT COMPANY, INC.
_____________________ By:____________________________
(Assistant) Secretary Name:
Title:
FIRST UNION NATIONAL BANK
By:____________________________
Vice President
April 30, 1999
First Union National Bank
123 S. Broad Street
15th Floor
Philadelphia, PA 19109
Ladies and Gentlemen:
We refer to the Pledge and Security Agreement dated April 30,
1999 (the "Agreement"), between Lannett Company, Inc. (the "Pledgor") and
you. All terms used in this letter and not otherwise defined shall have the
meanings given to such terms in the Agreement.
We accept our appointment as Pledged Bonds Custodian under the
Agreement and undertake to hold any Pledged Bonds which the Pledgor shall
deliver or cause to be delivered to us in such capacity as your collateral
agent until otherwise directed in writing by you and to otherwise perform the
duties of the Pledged Bonds Custodian under the Agreement.
The Pledgor by its signature to this letter agrees, jointly and
severally, to indemnify and hold us and our directors, officers, agents and
employees (collectively, the "Indemnitees") harmless from and against any and
all claims, liabilities, losses, damages, fines, penalties and expenses,
including out-of-pocket, incidental expenses, legal fees and expenses and the
allocated costs and expenses of in-house counsel and legal staff ("Losses")
that may be imposed on, incurred by or asserted against the Indemnitees or
any of them for following any instruction or other direction upon which we
are authorized to rely pursuant to the terms of the Agreement. In addition to
and not in limitation of the immediately preceding sentence, the Pledgor also
agrees jointly and severally to indemnify and hold the Indemnitees and each
of them harmless from and against any and all Losses that may be imposed on,
incurred by or asserted against, the Indemnitees or any of them in connection
with or arising out of our performance under the Agreement, provided we have
not acted with gross negligence or engaged in willful misconduct. Anything in
the Agreement to the contrary notwithstanding, in no event shall we be liable
for special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if we have been advised of
such loss or damage and regardless of the form of action.
The provisions of this paragraph shall survive the termination of
the Agreement and our resignation or removal for any reason.
Very truly yours,
FIRST UNION NATIONAL BANK
By: __________________________
Vice President
ACKNOWLEDGED AND AGREED:
LANNETT COMPANY, INC.
By: __________________________
Chairman
REMARKETING AGREEMENT
$3,700,000
Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999
This REMARKETING AGREEMENT ("Agreement") is made and entered into
April 30, 1999, by and between FIRST UNION CAPITAL MARKETS CORP.
("Remarketing Agent") and LANNETT COMPANY, INC., a Delaware corporation (the
"Borrower") and shall be effective if, as and when the $3,700,000
Philadelphia Authority for Industrial Development Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc. Project), Series of
1999 (the "Bonds") are issued by the Philadelphia Authority for Industrial
Development (the "Authority"). This Agreement shall be upon the following
terms and conditions, to wit:
In the event there is any conflict between provisions of this
Agreement and the Indenture (hereinafter defined), the provisions of the
Indenture shall be controlling.
1. Consideration. The consideration for this Agreement is comprised
of the mutual covenants and agreements herein contained, together with other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged. Further, the parties hereto have entered into this
Agreement each intending to be legally bound hereby.
2. Bonds. The Bonds are being issued pursuant to a Trust Indenture,
of even date herewith (the "Indenture"), between the Authority and First
Union National Bank, as trustee (the "Trustee"), which Indenture calls for
and requires the services of a Remarketing Agent with regard to certain
determinations and actions to effect remarketings of the Bonds as more
specifically set forth in the Indenture to which further reference is hereby
made. Unless the context otherwise clearly requires, all initially
capitalized terms and phrases used herein and not otherwise defined herein
shall have the meanings given to such terms and phrases in the Indenture.
3. Establishment of the Floating Rate and the Fixed Rate. (a) The
Remarketing Agent agrees to establish the Floating Rate in accordance with
the provisions of the Indenture and the Bonds from and including the period
during which the Bonds are initially issued through the earlier of (i) the
Conversion Date or (ii) the date on which the Bonds mature, are fully
redeemed, are accelerated or otherwise cease to be outstanding, as the case
may be. The Remarketing Agent shall determine the Floating Rate in accordance
with the applicable provisions of this Agreement and the Indenture.
(b) The Remarketing Agent shall determine the Fixed Rate in
accordance with the applicable provisions of this Agreement and the
Indenture.
(c) In the event that the Remarketing Agent fails to
establish the Floating Rate in accordance with the provisions of this
Agreement and the Indenture, the Floating Rate to be borne by the Bonds for
the next succeeding Weekly Period shall be determined as provided in the
Indenture.
4. Payment of Bonds. Payments of amounts due on the Bonds from time
to time as provided in the Indenture shall be made as provided in the
Indenture by the Trustee or the Tender Agent on behalf of the Authority from
amounts on deposit in the Bond Fund, from remarketing proceeds, and certain
other security including but not limited to an irrevocable, direct pay letter
of credit (the "Letter of Credit") issued by First Union National Bank (the
"Bank"). In no event shall the Remarketing Agent be in any manner or to any
extent liable for the payment of any amounts due on the Bonds, either as to
principal, interest, premium (if any), purchase price or otherwise, except as
herein expressly provided.
5. Tenders. On each date on which tenders of Bonds are required
under Sections 5.01, 5.03 or 5.04 of the Indenture ("Tender Dates"), Owners
of the Bonds will be required to tender such Bonds to First Union National
Bank, as tender agent, or any successor tender agent appointed under the
Indenture (the "Tender Agent") for purchase in accordance with the Indenture.
The Purchase Price for any such tendered Bonds will be derived from moneys in
the manner set forth in Section 5.05 of the Indenture.
6. Appointment and Acceptance. The Borrower desires that the
Remarketing Agent undertake to remarket any Bond in respect of which a notice
pursuant to Sections 5.01, 5.03 or 5.04 of the Indenture has been delivered,
such remarketings to be made pursuant to the provisions of the Indenture and
this Agreement. The Borrower hereby appoints, subject to the terms and
conditions herein contained, First Union Capital Markets Corp.
as Remarketing Agent for the Bonds.
The Remarketing Agent, subject to the terms and conditions
herein contained, accepts such appointment and the duties and obligations
imposed by the Indenture and this Agreement.
7. Standard of Care. In performing its duties and obligations
hereunder, the Remarketing Agent shall use the same degree of care and skill
as a prudent person would exercise under the same circumstances in the
conduct of his own affairs. The Remarketing Agent shall not be liable in
connection with the performance of its duties hereunder except for its own
willful misconduct, gross negligence or bad faith.
8. Dealing in Bonds. The Remarketing Agent may deal in the Bonds to
the same extent and with the same effect as provided in the Indenture with
respect to the Trustee.
9. Remarketing Agent as Bondholder. The Remarketing Agent, for its
own account, may in good faith buy, sell, own, hold and deal in any of the
Bonds, and may join in any action which any Bondholder may be entitled to
take with like effect as if it were not the Remarketing Agent. The
Remarketing Agent, in its individual capacity, either as principal or agent,
may also engage in or be interested in any financial or other transaction
with the Authority, and may act as depositary, trustee or agent for any
committee or body of holders of Bonds secured by the Indenture or other
obligations of the Authority as freely as if it were not the Remarketing
Agent. The Remarketing Agent shall have the right to tender Bonds for
purchase pursuant to the provisions of the Indenture and shall have all other
rights of a Bondholder at any time that it is the Owner of any Bonds.
10. Cooperation as to Registration. The Borrower will cooperate in
taking all steps reasonably requested by the Remarketing Agent which the
Remarketing Agent or its counsel may consider necessary or desirable: (a) to
register the sale of the Bonds by the Remarketing Agent under any federal or
state securities law or to qualify the Indenture under the Trust Indenture
Act of 1939, as amended; or (b) to enable the Remarketing Agent to establish
a "due diligence" defense to any action commenced against the Remarketing
Agent in respect of any disclosure documents.
11. Timely Determinations. So long as this Agreement remains in
effect, the Remarketing Agent agrees that it will (i) be available to advise
the Borrower and the Authority on a timely basis with respect to the
applicable Floating Rate and (ii) perform its duties under the Indenture and
this Agreement. In addition, the Remarketing Agent will furnish the Trustee,
the Tender Agent, the Authority and the Borrower and other parties required
to have such information under the Indenture, such information as they may
from time to time reasonably request with respect to the purchasers of the
Bonds and the prices at which the Bonds are sold.
12. Waiver of Lien. The Remarketing Agent hereby waives any rights
to, or lien on, any funds or obligations held by or owing to it pursuant
hereto or to the Indenture. The Remarketing Agent shall be reimbursed its
costs and expenses and compensated for acting as Remarketing Agent hereunder
and pursuant to the Indenture from payments to be made by the Borrower
pursuant to the applicable provisions of this Agreement and the Indenture.
13. Performance. (a) The Remarketing Agent shall, in accordance with
the applicable terms of the Indenture and this Agreement, use its best
efforts to sell all Bonds on the applicable Purchase Date at the applicable
Purchase Price for which it receives a timely tender notice at its principal
corporate office from any Bondholder. The Remarketing Agent, in accordance
with the applicable terms of the Indenture and this Agreement, shall also use
its best efforts for a period not in excess of thirty (30) days beginning on
each Tender Date to sell all Pledged Bonds.
(b) The Remarketing Agent shall not offer for sale or sell
any Bonds upon the occurrence and continuation of any Event of Default as
defined in the Indenture.
(c) By not later than 10:00 a.m., New York City time, on
the Purchase Date, the Remarketing Agent shall give telephonic notice,
promptly confirmed in writing, to the Trustee and the Tender Agent,
specifying:
(i) the total principal amount of the Bonds, if
any, remarketed by it; and
(ii) the names of the persons to whom such Bonds
were sold and are to be registered, each such person's address and social
security number or taxpayer identification number, the denominations in which
replacement Bonds are to be prepared, and any other appropriate registration
and transfer instructions.
(d) Not later than 10:00 a.m., New York City time, on each
Purchase Date, the Remarketing Agent shall transfer the proceeds of the
remarketing of the Bonds to the Tender Agent for deposit in the Remarketing
Account established with respect to such Bonds and, if there are not
sufficient remarketing proceeds on deposit in the Remarketing Account, the
Remarketing Agent shall give telephonic notice (promptly confirmed by
telecopy) to the Tender Agent, the Trustee, the Borrower and the Bank (if the
Letter of Credit securing the Bonds is then in effect) of (i) the aggregate
amount of Bonds tendered or deemed tendered for purchase; and (ii) the amount
of proceeds on deposit in the Remarketing Account established with respect to
such Bonds.
(e) The Remarketing Agent shall determine the rate or rates
to be borne by the Bonds pursuant to, at the times specified in, and in the
manner provided in Articles II and V of the Indenture.
14. Representations and Warranties. Each of the parties hereto
represents and warrants to the other that this Agreement has been duly
authorized, executed and delivered by such party and (assuming due
authorization, execution and delivery by the other party hereto), constitutes
a legal, valid and binding obligation of such party. The Remarketing Agent
hereby further represents and warrants that it is a member of the National
Association of Securities Dealers, Inc., has a capitalization of at least
$15,000,000 and is authorized by law to perform all the duties imposed upon
it by this Agreement and by the Indenture. The principal corporate office of
the Remarketing Agent for purpose of the Indenture is as set forth below in
Section 17.
15. Remarketing Fees. In consideration of the services to be
provided by the Remarketing Agent hereunder, the Borrower agrees to pay to
the Remarketing Agent all costs, fees and expenses in connection with each
remarketing in accordance with Schedule A which is attached hereto and
incorporated herein by reference.
16. Termination. This Agreement and the obligations of the
Remarketing Agent hereunder shall, in the absence of earlier termination
pursuant to the provisions hereof, terminate on the earlier of (a) the date
all of the Bonds to be remarketed after the Conversion Date have been
remarketed and (b) the final maturity of the Bonds. Notwithstanding the
foregoing, the Remarketing Agent may at any time resign and be discharged of
the duties and obligations created by this Agreement and the Indenture by
giving at least thirty (30) days' notice to the Authority, the Bank, the
Borrower, the Trustee and the Tender Agent. The Remarketing Agent may be
removed by the Borrower at any time for any reason or no reason upon thirty
(30) days' written notice. No such resignation or removal shall be effective
unless and until a successor Remarketing Agent is appointed by the Borrower
and accepts such appointment. Upon receipt of notice from the Remarketing
Agent or upon delivery of notice to the Remarketing Agent, the Borrower
agrees to use its best efforts to appoint a successor Remarketing Agent.
In the event of the resignation or removal of the
Remarketing Agent, the Remarketing Agent shall pay over, assign and deliver
any moneys and Bonds held by it in such capacity to its successor or, if
there be no successor, to the Authority or its assigns. Termination of this
Agreement pursuant to any of the provisions of this Section shall not
terminate liability for any fees due hereunder and not yet paid.
17. Notices. Except as otherwise required in Section 13 hereof, any
notice required or permitted to be given under this Agreement may be given in
person or by mail or telecopier and shall be deemed received, if mailed,
three (3) business days after being deposited in the United States mail,
postage prepaid, or, if by telecopier, when received at the appropriate
office for transmission, in all cases addressed to the Authority, the Bank,
the Borrower, the Trustee, the Tender Agent and the Remarketing Agent, as
follows:
The Authority:
Philadelphia Authority for Industrial Development
2600 Centre Square West
1500 Market Street
Philadelphia, PA 19102
Attn: Chairman
The Bank:
First Union National Bank
123 South Broad Street
PA 1222
Philadelphia, PA 19109
Attn: Jane Sobieski, Vice President
The Borrower:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President - Finance
with a copy to:
Fox, Rothschild ,O'Brien & Frankel, LLP
2000 Market Street
Philadelphia, PA 19103
Attn: J. Randolph Lawlace, Esquire
The Trustee:
First Union National Bank
123 S. Broad Street
11th Floor - PA-1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
The Tender Agent:
First Union National Bank
123 S. Broad Street
11th Floor - PA-1249
Philadelphia, PA 19109
Attn: Corporate Trust Department
The Remarketing Agent:
First Union Capital Markets Corp.
301 College Street
8th Floor
Charlotte, NC 28288-0600
Attn: William Bingham, Vice President
Each party hereto may change the address for service of notice upon
it by a notice in writing and in the manner provided herein to the other
parties hereto.
18. Telephonic Requests or Directions. The Remarketing Agent may
rely upon, and is hereby authorized to honor, any telephonic request or
directions which the Remarketing Agent believes, in its sole discretion, to
emanate from an authorized representative of the Authority, the Borrower, the
Trustee or the Tender Agent acting pursuant hereto, regardless of the source
of such request or direction. Any telephonic request or direction to the
Remarketing Agent shall promptly be confirmed in writing; provided, however,
that failure to receive any such written confirmation shall not affect the
authority of the Remarketing Agent to rely and act upon such request or
direction.
19. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns
and the officers and directors and controlling persons thereof, and no other
person(s) will have any rights or obligations hereunder.
20. Severability. If any provision of this Agreement for any reason
shall be held or deemed to be or shall, in fact, be invalid, inoperative or
unenforceable as applied in any particular case in any jurisdiction or all
jurisdictions, such circumstances shall not have the effect of rendering the
provision in question invalid, inoperative or unenforceable in any other case
or circumstance, or of rendering any other provision or provisions of this
Agreement invalid, inoperative or unenforceable to any extent whatever. In
case any one or more of the provisions in this Agreement shall be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.
21. Amendment. This Agreement may be amended by the parties hereto
without the consent of or notice to any Owners of the Bonds.
22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
23. Captions. Captions to the sections hereof are inserted for
convenience of reference only and shall not be relied upon for any
interpretive purpose whatsoever.
24. Disclosure. The Borrower hereby covenants and agrees to
immediately advise the Remarketing Agent of any event or circumstance that
would materially and adversely affect the financial condition of the Borrower
or its ability to perform its obligations under the Loan Agreement or the
Reimbursement Agreement, and to cooperate with the Remarketing Agent and/or
its counsel in the preparation of such disclosure material deemed necessary
by the Remarketing Agent in connection therewith. The Borrower also hereby
covenants to cooperate with the Remarketing Agent and/or its counsel and to
provide updated disclosure materials to the Remarketing Agent to be delivered
to Owners of Bonds in connection with any remarketing of the Bonds in order
to comply with state and federal laws, regulations and rules, including
without limitation, Securities and Exchange Commission Exchange Act Rule
15c2-12. The Borrower further agrees to pay all costs and fees associated
with the preparation of such disclosure materials.
25. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Remarketing
Agreement to be executed as of the date first above written.
ATTEST: LANNETT COMPANY, INC.
______________________ By:___________________________
Authorized Officer William Farber, Chairman
:
FIRST UNION CAPITAL MARKETS CORP.
By:___________________________
Director and Vice President
SCHEDULE A
Fees for Remarketing Bonds
Prior to any remarketing in connection with a Conversion Date, the
remarketing fee payable by the Borrower to the Remarketing Agent shall be an
amount equal to 0.125% per annum of the outstanding principal amount of
Bonds, payable annually in advance; provided, however, the Borrower and the
Remarketing Agent agree that such fee shall be adjusted upwards, from time to
time, in the event that the applicable prevailing fees for such services in
the marketplace increase.
Remarketing fees in connection with a remarketing for a conversion
to Fixed Rate shall be subject to good faith negotiations prior to such
remarketing.
In addition, the Remarketing Agent shall be reimbursed for all its
costs and expenses in preparing any disclosure material required for any
remarketings, including but not limited to, legal costs.
BOND PLACEMENT AGREEMENT
$3,700,000
Philadelphia Authority for Industrial Development
Tax-Exempt Variable Rate Demand/Fixed Rate Revenue Bonds
(Lannett Company, Inc. Project)
Series of 1999
BOND PLACEMENT AGREEMENT ("Placement Agreement"), dated April
30, 1999, by and between the PHILADELPHIA AUTHORITY FOR INDUSTRIAL
DEVELOPMENT (the "Authority"), a body corporate and politic constituting a
public instrumentality of the Commonwealth of Pennsylvania, LANNETT COMPANY,
INC., a Delaware corporation (the "Borrower") and FIRST UNION CAPITAL MARKETS
CORP. (the "Placement Agent").
1. Background
A. The Authority is issuing its Tax-Exempt Variable Rate
Demand/Fixed Rate Revenue Bonds (Lannett Company, Inc. Project), Series of
1999, in the aggregate principal amount of $3,700,000 (the "Bonds") pursuant
to a Trust Indenture of even date herewith (the "Indenture") between the
Authority and First Union National Bank, as Trustee (the "Trustee"). The
proceeds of the Bonds are being applied to finance a project (the "Project")
consisting of (i) the construction of an approximately 40,000 square foot
manufacturing and manufacturing-related facility as an addition to a 33,000
square foot existing facility located at 9000 State Road, Philadelphia,
Pennsylvania (the "9000 State Road Facility") or, alternatively, the
acquisition and renovation of an existing manufacturing and
manufacturing-related facility located at 9030 State Road, Philadelphia,
Pennsylvania (the "9030 State Road Facility"); (ii) the acquisition of
equipment for installation and use in either the 9000 State Road Facility or
the 9030 State Road Facility; and (iii) the payment of a portion of the costs
of issuance of the Bonds.
B. The Authority and the Borrower have entered into a Loan
Agreement of even date herewith (the "Loan Agreement"), pursuant to which the
Authority has agreed to loan the proceeds of the Bonds to the Borrower and
the Borrower has agreed, among other things, to make loan payments to the
Trustee in amounts and at the times sufficient to pay, when due, the
principal of, premium, if any, and interest on the Bonds.
C. Concurrently with, and as a condition to the issuance of
the Bonds, the Borrower will cause to be delivered to the Trustee an
irrevocable, direct-pay Letter of Credit, dated the date of issuance of the
Bonds (the "Letter of Credit") issued by First Union National Bank. Under the
terms of the Letter of Credit, the Trustee will be entitled to draw up to an
amount equal to the principal of the Bonds plus at least forty-six (46) days'
accrued and unpaid interest thereon (at a maximum rate of 15% per annum for
the Bonds, based on a 365 or 366 day year, as applicable, and the actual
number of days elapsed). The Letter of Credit will be issued pursuant to a
Reimbursement Agreement, of even date herewith (the "Reimbursement
Agreement") between the Bank and the Borrower. The Letter of Credit will
expire pursuant to its terms on October 31, 2002, unless earlier terminated
pursuant to its terms (the "Letter of Credit Termination Date"). The Bonds
mature on May 1, 2014 and are subject to optional, extraordinary, mandatory
and mandatory sinking fund redemption and optional and mandatory tender prior
to maturity, all as set forth in the Placement Memorandum (as hereinafter
defined).
D. It is intended that the Bonds will constitute "qualified
small issue bonds" within the meaning of Section 144(a) of the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder
(the "Code"), so that the interest on the Bonds will be excludable from gross
income for purposes of federal income taxation under Section 103(a) of the
Code.
E. The Bonds will be issued pursuant to a Resolution
adopted by the Authority (the "Resolution") and the Indenture. The proceeds
of the sale of the Bonds are to be applied (i) to pay financing costs not in
excess of two percent (2%) of the face amount of the Bonds and (ii) to
provide moneys for certain qualifying costs of the Project, all as set forth
in the Indenture, the Loan Agreement, the Placement Memorandum (as
hereinafter defined) and certain certifications and agreements of the
Borrower and the Authority delivered in connection with the issuance of the
Bonds. Financing costs are deemed to include, but not be limited to, the
costs of preparing and reproducing the Loan Agreement, the Reimbursement
Agreement, the Placement Memorandum, the Remarketing Agreement and this
Placement Agreement, the Placement Agent's fee in accordance with Section 2
hereof, reasonable administrative fees of the Authority and the Trustee and
any fees and disbursements of Bond Counsel, Counsel for the Borrower, Counsel
for the Bank and Counsel for the Placement Agent. If for any reason the Bonds
are not "placed" or to the extent that financing costs exceed two percent
(2%) of the face amount of the Bonds, then (i) all of the financing costs, in
the case that the Bonds are not placed; or (ii) that portion of the financing
costs in excess of two percent (2%) of the face amount of the Bonds, in the
case that the Bonds are placed, are to be paid directly by the Borrower to
the appropriate parties.
F. The Bonds will be remarketed in accordance with the
applicable provisions of the Indenture and a Remarketing Agreement of even
date herewith (the "Remarketing Agreement"), by and between First Union
Capital Markets Corp., in its capacity as remarketing agent, and the
Borrower.
G. The professional advisors referred to in this Placement
Agreement are:
Bond Counsel,
Bank Counsel and Obermayer Rebmann Maxwell & Hippel LLP
Placement Agent Counsel: One Penn Center, 19th Floor
1617 John F. Kennedy Boulevard
Philadelphia, PA 19103
Borrower Counsel: J. Randolph Lawlace, Esquire
Fox, Rothschild, O'Brien & Frankel, LLP
2000 Market Street
Philadelphia, PA 19103
Authority Counsel: Philip M. Brandt, Esquire
2600 Centre Square West
1500 Market Street
Philadelphia, PA 19102
2. Placement and Closing. Subject to the terms and conditions and in
reliance on the representations, warranties, agreements and indemnities set
forth herein, (i) the Placement Agent hereby agrees to privately place the
Bonds, as agent for the Authority; and (ii) the Authority hereby agrees to
deliver to such investors, all (but not less than all) of the Bonds as
provided in the Indenture. The aggregate price for the Bonds shall be 100% of
the principal amount thereof plus accrued interest to the date of Closing (as
hereinafter defined), payable in immediately available funds to the order of
the Trustee for the account of the Authority. As consideration for its
private placement of the Bonds, the Borrower shall pay the Placement Agent a
fee equal to 1.25% of the principal amount of the Bonds in immediately
available funds on the date of closing. Closing will be held at the offices
of Obermayer Rebmann Maxwell & Hippel LLP at 9:00 a.m. prevailing local time,
on April 30, 1999 (the "Closing"), or at such other place and time as may be
agreed to by the parties hereto. The Bonds will be delivered to The
Depository Trust Company in New York, New York, in fully registered form in
such denominations and registered in such names as shall be requested by the
Placement Agent.
3. Authority's Representations. The Authority represents to and
agrees with the Placement Agent that as of the date hereof and the date of
Closing:
(a) The statements and information in the Placement
Memorandum under the captions "The Authority," "Disclosure Required By
Florida Blue Sky Laws" and "Litigation" (only insofar as such information
pertains to the Authority) are true and correct in all material respects, and
the Placement Memorandum does not contain any untrue statement of a material
fact relating to the Authority or omit to state a material fact relating to
the Authority that is necessary to make the statements and information
therein, in the light of the circumstances under which they were made, not
misleading, it being understood that the Authority is not making any
representation as to the truth, accuracy or completeness of the Placement
Memorandum, other than those portions that relate to or describe the
Authority.
(b) The Authority is a body corporate and politic and a
public instrumentality of the Commonwealth of Pennsylvania with the power and
authority set forth in the Pennsylvania Economic Development Authority Law
(the "Act"), including the power and authority to authorize the issuance of
the Bonds under the Act.
(c) The Authority has the requisite authority to enter into
this Placement Agreement. This Placement Agreement has been duly authorized,
executed and delivered by the Authority and, assuming the due authorization,
execution and delivery by the other parties hereto, will constitute a valid
and binding obligation of the Authority, enforceable in accordance with its
terms (subject to any applicable bankruptcy, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights or remedies
generally).
(d) The Authority has the requisite authority to execute
the Bonds and when delivered to and paid for by the Placement Agent at the
Closing in accordance with the provisions of this Placement Agreement, the
Resolution and the Indenture, the Bonds will have been duly authorized,
executed and issued and will constitute valid and binding special limited
obligations of the Authority enforceable in accordance with their respective
terms and entitled to the benefits and security of the Indenture (subject to
any applicable bankruptcy, insolvency, moratorium or other similar laws or
equitable principles affecting creditors' rights or remedies generally).
(e) The Authority has the requisite authority to enter into
the Indenture and the Loan Agreement and to execute the Placement Memorandum
and the Authority has duly authorized and approved their execution and
delivery. The Indenture and the Loan Agreement, when each of them has been
executed by the Authority, will, assuming due authorization, execution and
delivery by the other parties thereto, constitute a valid and binding
obligation of the Authority, enforceable in accordance with its respective
terms (subject to applicable bankruptcy, insolvency, moratorium or other
similar laws or equitable principles affecting creditors' rights or remedies
generally).
(f) The adoption of the Resolution and the execution of the
Placement Memorandum, the Indenture, the Loan Agreement, the Bonds and this
Placement Agreement and compliance by the Authority with the provisions
thereof and hereof, under the circumstances contemplated thereby and hereby,
to the knowledge of the Authority, do not and will not in any material
respect conflict with or constitute on the part of the Authority a breach of
or default under any indenture, deed of trust, mortgage, agreement or other
instrument to which the Authority is a party, or conflict with, violate or
result in a breach of any existing law, public administrative rule or
regulation, judgment, court order or consent decree to which the Authority is
subject.
(g) The Resolution and the forms of the Indenture, the Loan
Agreement, the Bonds and this Placement Agreement were adopted or approved at
a duly convened meeting of the Authority, with respect to which all legally
required notices were duly given to all members of the Authority, and at
which meetings quorums were present and acting at the time of adoption
thereof.
(h) Neither the Commonwealth of Pennsylvania nor the County
of Philadelphia is obligated to pay, and neither the faith and credit nor
taxing power of the Commonwealth of Pennsylvania nor the County of
Philadelphia is pledged to the payment of, the principal or redemption price,
if any, of or interest on the Bonds. The Bonds are special, limited
obligations of the Authority, payable solely out of the revenues or other
receipts, funds or moneys of the Authority pledged under the Indenture and
from any amounts otherwise available under the Indenture for the payment of
the Bonds. The Bonds do not now and shall never constitute a charge against
the general credit of the Authority. The Authority has no taxing power.
(i) Except with respect to defaults under certain
obligations of the Authority in which it has acted only as a conduit issuer
for the benefit of borrowers, the Authority, to the best of its knowledge,
has never defaulted and is not now in default with respect to, any bonds,
notes or other obligations which it has issued.
(j) It is specifically understood and agreed that the
Authority makes no representation as to the financial position or business
condition of the Borrower and does not represent or warrant as to the
correctness, completeness or accuracy of any of the statements, information
(financial or otherwise), representations or certifications furnished or to
be made and furnished by the Borrower in connection with the execution and
delivery of the Loan Agreement or the consummation of the transactions
contemplated thereunder or in connection with the sale of the Bonds.
4. Borrower's Representations. The Borrower makes the following
representations as of the date hereof, all of which will continue to be in
effect subsequent to the private placement of the Bonds:
(a) The Borrower is a corporation duly organized and
validly subsisting under the laws of the State of Delaware.
(b) The Borrower has full legal power to execute and
deliver the Loan Agreement, the Reimbursement Agreement, the Remarketing
Agreement, this Placement Agreement, the Loan Documents (as such term is
defined in the Reimbursement Agreement) and any and all other documents,
certificates and agreements executed by the Borrower in connection with the
issuance of the Bonds and the Letter of Credit (collectively, the "Borrower
Documents") and to perform its obligations thereunder and hereunder.
(c) The Borrower has duly authorized the execution and
delivery of the Borrower Documents and the undertaking of its obligations
thereunder and hereunder, and the taking of all actions as may be required on
the part of the Borrower to carry out the same; and the making and
performance of each such agreement will not conflict with, nor constitute a
breach of or a default under, any provision of the Articles of Incorporation,
By-laws or other constituent documents of the Borrower or any indenture,
agreement or other instrument to which the Borrower is a party or by which
the Borrower or any of its properties may be bound, or any constitutional or
statutory provision or order, rule, regulation, decree or ordinance of any
court, government or governmental body to which the Borrower or any of its
properties are subject.
(d) As of the Closing, the Borrower Documents will be duly
executed and delivered by the Borrower, will be in full force and effect, and
assuming due authorization, execution and delivery by the other parties
thereto, each of the Borrower Documents will constitute the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their
respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles in effect from time to time affecting
the enforcement of creditors' rights generally.
(e) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best knowledge of the
Borrower, threatened against the Borrower, nor to the best knowledge of the
Borrower is there any basis therefor, wherein an unfavorable ruling or
finding would adversely affect the validity or enforceability of the Borrower
Documents or would materially and adversely affect any of the transactions
contemplated by this Placement Agreement.
(f) The information set forth in the Placement Memorandum
(as hereinafter defined), with the exception of the information under the
headings "The Authority," "Litigation," as such information relates to the
Authority or the Bank, "Introductory Statement," as such information relates
to the Authority and the information in Appendices A and B, is true and
correct in all material respects and does not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(g) The Borrower has obtained all consents, approvals,
authorizations and orders of governmental or regulatory authorities that are
required to be obtained by it as a condition precedent to the execution by
the Borrower of the Borrower Documents. The Borrower has obtained all
consents that are required to be obtained by it for the performance of its
obligations under the Borrower Documents.
5. Placement Agent's Representations, Warranties and Covenants. The
Placement Agent makes the following representations, warranties and
covenants, all of which will continue to be in effect subsequent to the
purchase and placement of the Bonds:
(a) The Placement Agent has full legal power to execute and
deliver this Placement Agreement, the Remarketing Agreement and any and all
other agreements, documents and certificates executed by the Placement Agent
in connection with the issuance of the Bonds (collectively, the "Placement
Agent Documents") and to perform its obligations thereunder and hereunder.
(b) The Placement Agent has received all necessary
information with respect to the Borrower, the Bank and the Project in order
to place the Bonds and any and all information relating to the Borrower or
the Bank and their affairs, which the Placement Agent has requested has been
provided to the Placement Agent.
(c) The Placement Agent Documents have been duly executed
and delivered by the Placement Agent and assuming the due authorization,
execution and delivery by the other parties thereto, each of the Placement
Agent Documents is the binding and enforceable agreement of the Placement
Agent enforceable in accordance with its terms, except that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws or equitable principles affecting creditors'
rights or remedies generally.
(d) The Placement Agent hereby expressly waives the right
to receive any information relating to the Project or the business and
affairs, financial or otherwise, of the Borrower from the Authority and
relieves the Authority and its agents, representatives and attorneys, of all
liability for failure to provide such information or for the inclusion in
such information or in any of the documents, representations or
certifications to be provided by the Borrower under this Agreement, the
Placement Memorandum or under any of the Borrower Documents of any untrue
statement or for the failure therein to include any fact.
(e) The documents relating to the issuance of the Bonds,
including without limitation, the Indenture and the Letter of Credit, have
been reviewed by the Placement Agent and such documents contain terms
acceptable to, and agreed to by, the Placement Agent.
(f) The Placement Agent has complied with and will continue
to comply with all applicable regulations of the Municipal Securities
Rulemaking Board.
(g) The Bonds are being offered in authorized denominations
of $100,000 or more and are being sold to no more than thirty-five (35)
persons each of whom the Placement Agent reasonably believes (i) has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of the prospective investment and (ii) is
not purchasing for more than one account or with a view to distributing the
Bonds. The Placement Agent acknowledges that each investor has been given or
will have been given an opportunity to examine such material relating to the
Bonds, the Borrower, the Project and the Bank as is satisfactory to each of
them.
(h) There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before or by any court, public body or
other governmental authority, pending or, to the best knowledge and
information of the Placement Agent, threatened against or affecting the
Placement Agent, wherein an unfavorable decision, ruling or finding could
materially adversely affect the business or financial condition of the
Placement Agent or could adversely affect the transactions contemplated by
this Agreement, or which in any manner raises any questions concerning the
legality, validity or enforceability of this Agreement nor to the best
knowledge and belief of the Placement Agent is there any basis therefor.
(i) The execution, delivery and performance by the
Placement Agent of this Agreement does not and will not violate its
certificate of incorporation or by-laws or any order, injunction, ruling or
decree by which the Placement Agent is bound, and does not and will not
constitute a breach of or a default under any agreement, indenture, mortgage,
lease, note or other obligation, instrument or arrangement to which the
Placement Agent is a party or by which the Placement Agent or any of its
property is bound, or contravene or constitute a violation of any law, rule
or regulation to which the Placement Agent or any of its property is subject,
and no approval or other action by, or filing or registration with any
governmental authority or agency is required in connection therewith which
has not been previously obtained or accomplished.
6. Placement Memorandum. Prior to the Closing, the Borrower and the
Authority each approved and authorized the distribution of the Placement
Memorandum (including all exhibits and appendices thereto, the "Placement
Memorandum"), and each authorized the use of the Placement Memorandum in
connection with the private placement of the Bonds.
7. Authority Covenants. The Authority covenants as follows:
(a) To refrain from taking any action within its control
which will adversely affect the exclusion from gross income for federal
income tax purposes of the interest on the Bonds; and
(b) To promptly notify the Placement Agent if, prior to the
Closing, any event occurs which is known to the Authority and which, in the
judgment of the Authority, makes any statements concerning the Authority in
the Placement Memorandum untrue in any material respect or which requires the
making of any changes in the Placement Memorandum in order to make any
statement concerning the Authority therein not misleading.
8. Borrower Covenants. The Borrower covenants as follows:
(a) To refrain from taking any action, or permitting any
action within its control to be taken, which will adversely affect the
exclusion from gross income for federal income tax purposes of the interest
on the Bonds;
(b) To indemnify, hold harmless and defend the Authority,
its members, officers, agents and employees, past, present and future, and
the Placement Agent, its officers, agents and employees, past, present and
future and each person, if any, who controls the Placement Agent within the
meaning of Section 15 of the Securities Act of 1933, as amended
(individually, an "Indemnified Party" and collectively, the "Indemnified
Parties"), to the full extent permitted by law against any and all losses,
claims, damages or liabilities (including reasonable legal and other expenses
of defending any actions) that they or any of them may incur or have asserted
against them caused by (i) any untrue statement or alleged untrue statement
of a material fact in the Placement Memorandum, except (as to the Authority
only) for the information under the heading "The Authority," "Litigation" (to
the extent of the information therein relating to the Authority) and except
for the information contained in Appendices A and B or any amendments or
supplements to the Placement Memorandum; or (ii) the omission or alleged
omission to state therein a material fact required to be stated in the
Placement Memorandum or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading or (iii) any
breach (or alleged breach) by the Borrower of any of its representations or
warranties set forth in this Placement Agreement or directly or indirectly
resulting from, arising out of, or related to the Project;
(c) To indemnify, hold harmless and defend the Authority,
its elected public officials, officers and employees, past, present and
future, to the full extent permitted by law against all loss, costs, damages,
suits, judgments, actions and liabilities of whatever nature, including
without limitation, any liability under state or federal securities laws,
directly or indirectly resulting from, arising out of, or related to the
issuance or remarketing of the Bonds.
9. Actions Brought Against Indemnified Parties. In case any action
shall be brought against any Indemnified Party with respect to which
indemnity may be sought against the Borrower under the provisions of this
Placement Agreement, such Indemnified Party shall promptly notify the
Borrower in writing, and the Borrower shall assume the defense thereof,
including the employment of counsel and the payment of all expenses. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the sole cost and expense of such Indemnified Party
unless (i) the employment of such counsel has been specifically authorized in
writing by the company; or (ii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Party and the
Borrower and such Indemnified Party shall have been advised by its counsel
that it is probable that a conflict of interest between the Borrower and such
Indemnified Party may arise and for this reason it is not desirable for the
same counsel to represent both the Borrower and the Indemnified Party (in
which case the Borrower shall not have the right to assume the defense of
such action on behalf of such Indemnified Party); it being understood,
however, that in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, the Borrower shall not be
liable for the reasonable fees and expenses or more than one separate firm of
attorneys for all such Indemnified Parties, which firm shall be designated in
writing by the Indemnified Parties). The Borrower shall not be liable for any
settlement of any such action effected without its written consent, but if
settled with the written consent of the Borrower or if there is a final
judgment for the plaintiff in any such action, the Borrower agrees to
indemnify and hold harmless any Indemnified Party from and against any loss,
cost, expense or liability by reason of such settlement or judgment,
including but not limited to attorneys' fees. This indemnity includes but is
not limited to reimbursement for expenses reasonably incurred by the
Indemnified Party in investigating the claim and in defending it if the
Borrower declines to assume the defense, provided that the matter is one for
which indemnification is required of the Borrower under this Agreement. The
indemnity agreements of the Borrower contained in Section 8 hereof shall
survive the delivery and payment of the Bonds.
10. Blue Sky Requirements. The Placement Agent shall, in its sole
discretion, determine the jurisdictions in which the Bonds shall be offered
and sold. The Placement Agent shall use its best efforts to qualify the Bonds
for offer, sale and delivery under the securities or "Blue Sky" laws of each
such jurisdiction to the extent required. The Authority and the Borrower
shall cooperate with the Placement Agent in its efforts to qualify the Bonds
for such offer, sale and delivery under the securities or "Blue Sky" laws of
such jurisdictions as the Placement Agent may request; provided, however,
that neither the Authority nor the Borrower shall be required to qualify as a
foreign corporation or to file written consent to suit or consent to service
of process in any jurisdiction. The Authority and the Borrower consent to the
use of the Placement Memorandum by the Placement Agent in obtaining such
qualifications. The Authority shall not be obligated to pay any expenses or
costs (including, but not limited to, legal fees) incurred in connection with
such qualification.
11. Conditions of Closing. The obligations of the Placement Agent to
privately place the Bonds on the date of Closing shall be subject, except as
specifically waived in writing by the Placement Agent in its sole discretion,
to (i) the accuracy of the representations and warranties on the part of the
Authority and the Borrower contained herein as of the date hereof and as of
the date of Closing; (ii) the accuracy in all material respects of the
statements of the officers and the elected public officials, as the case may
be, of the Authority and the Borrower made in any certificates or other
documents furnished pursuant to the provisions hereof, and (iii) the
performance by the Authority and the Borrower of their respective obligations
to be performed hereunder or otherwise at or prior to the Closing and to the
following additional conditions:
(a) At the Closing, the Resolution shall have been duly
adopted by the Authority and shall be in full force and effect and constitute
the legal, valid and binding action of the Authority, and the Borrower
Documents, when executed and delivered by the parties thereto, will
constitute legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their respective terms, and such documents
shall not have been amended, modified or supplemented except as may have been
agreed to in writing by the Placement Agent;
(b) At the Closing, there shall not have been any material
adverse change in the business, properties or financial condition of the
Bank, as described in the Placement Memorandum or of the Borrower, which in
the judgment of the Placement Agent, makes it inadvisable to proceed with the
offer and sale of the Bonds;
(c) The Letter of Credit shall have been delivered by the
Bank;
(d) At the Closing, the Placement Memorandum shall not have
been amended, modified or supplemented, except as may have been agreed to in
writing by the Placement Agent;
(e) Neither the Authority nor the Borrower shall have
defaulted in the performance of any of their covenants hereunder, under the
Indenture or under the Borrower Documents;
(f) The Placement Agent shall have received:
(i) An opinion of Bond Counsel, dated the date of
Closing, in customary form to the effect that the Bonds are legal, valid and
binding obligations of the Authority and that interest on the Bonds is not
includable in gross income for federal income tax purposes under Section
103(a) of the Code, and in addition, containing therein or in a supplemental
opinion of Bond Counsel, addressed to the Authority, the Placement Agent and
its counsel, also dated the date of Closing, the matters set forth in Exhibit
A hereto and any other matters which may be reasonably requested by the
Placement Agent, with such changes therein as are acceptable to the Placement
Agent and its counsel;
(ii) An opinion of Counsel for the Borrower, dated
the date of Closing and addressed to the Authority, the Placement Agent, the
Bank, and the Trustee, covering the matters set forth in Exhibit B hereto and
any other matters which may be reasonably requested by the Placement Agent,
with such changes therein as are acceptable to the Authority, the Placement
Agent, the Bank and the Trustee;
(iii) An opinion of Counsel for the Bank, dated
the date of Closing and addressed to the Authority, the Placement Agent, the
Bank and the Trustee, covering the matters set forth in Exhibit C hereto,
with such changes therein as are acceptable to the Authority, the Placement
Agent, the Bank, the Trustee and Bond Counsel;
(iv) An opinion of Authority Counsel, dated the
date of Closing and addressed to the Placement Agent, the Bank, the Trustee
and Bond Counsel, covering the matters set forth in Appendix D hereto, with
such changes therein as are acceptable to the Placement Agent, the Bank, the
Trustee and Bond Counsel.
(v) A certificate, dated the date of Closing and
signed by an authorized representative of the Borrower to the effect (A) that
the Borrower has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied under this Placement
Agreement, the Loan Agreement and the Reimbursement Agreement or otherwise at
or prior to the Closing; and (B) such other matters as Bond Counsel and the
Placement Agent may reasonably request;
(vi) An executed Form 8038 of the Authority;
(vii) the Authority General Certificate, duly
executed by an authorized officer of the Authority;
(viii) Such additional documents, instruments,
agreements, certificates and opinions as Bond Counsel, the Placement Agent
and its counsel and the Authority may reasonably request to evidence the
accuracy of the representations and warranties and compliance with the
covenants set forth herein, including the covenants as to the exclusion of
the interest on the Bonds from gross income for federal income tax purposes
and the exemption of the offering of the Bonds from registration under the
Securities Act of 1933, as amended; and
(g) Between the date hereof and the date of Closing, the
market price or marketability of the Bonds shall not have been materially
adversely affected, in the reasonable judgment of the Placement Agent
(evidenced by a written notice to the Authority and the Borrower terminating
the obligation of the Placement Agent to privately place the Bonds), by
reason of any of the following:
(i) Legislation enacted by or introduced in the
Congress of the United States or reported out of or pending in committee or
recommended for passage by the President of the United States, or a decision
rendered by a court established under Article III of the Constitution of the
United States or by the Tax Court of the United States, or an order, ruling,
regulation or official statement (final, temporary or proposed) issued or
made or any other release or announcement (A) by or on behalf of the Treasury
Department of the United States or the Internal Revenue Service or any other
federal or state authority, with the purpose or effect, directly or
indirectly, of imposing federal income taxation upon such interest as would
be received by the holders of the Bonds, or (B) by or on behalf of the
Securities and Exchange Commission, or any other governmental agency having
jurisdiction of the subject matter, to the effect that obligations of the
general character of the Bonds are not exempt from qualification under, or
other requirements of, the Trust Indenture Act of 1939, as amended, or that
the issuance, offering or sale of obligations of the general character of the
Bonds, including any or all underlying arrangements as contemplated hereby or
by the Placement memorandum, is or would be in violation of the federal
securities laws as amended and then in effect and the regulations promulgated
thereunder; or
(ii) The declaration of war or engagement in major
hostilities by the United States or the occurrence of any other local,
national or international emergency or calamity relating to the effective
operation of the government of or the financial community in the United
States, or a default with respect to the debt obligations of, or the
institution of proceedings under the federal bankruptcy laws by or against,
any state of the United States or agency thereof, the City of New York, New
York, or any city in the United States having a population of over 1,000,000,
the effect of which on the financial markets of the United States will be
such as, in the Placement Agent's judgment, makes it impracticable for the
Placement Agent to place the Bonds; or
(iii) The declaration of a general banking
moratorium by federal, New York or Pennsylvania authorities, or the general
suspension of trading on any national securities exchange; or
(iv) Any amendment to the United States
Constitution or the Pennsylvania Constitution or action by any federal or
state court, legislative body, regulatory body or other authority materially
adversely affecting the validity or enforceability of the Resolution, the
Bonds, the Loan Agreement, the Indenture, the Reimbursement Agreement, the
Letter of Credit or this Placement Agreement, or the ability of the
Authority, the Borrower or the Bank to meet its respective covenants under
such agreements; or
(v) Any event occurring, or information becoming
known which, in the reasonable judgment of the Placement Agent, the Authority
or the Borrower makes untrue in any material respect any statement or
information contained in the Placement Memorandum, or has the effect that the
Placement Memorandum contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
If the Placement Agent terminates its obligation to place the Bonds
for any reason permitted by this Placement agreement, this Placement
Agreement will terminate without liability on the part of the Authority, the
Borrower or the Placement Agent, except for the provisions of Sections 8 as
to indemnification of the Authority and the Placement Agent.
11. Representation of the Placement Agent. The Placement Agent
acknowledges that each investor has been given or will have been given an
opportunity to examine such material relating to the Bonds, the Borrower, the
Project and the Bank as is satisfactory to each of them.
12. Notices and Other Actions. All notices, demands and formal
actions hereunder will be in writing, mailed, telegraphed or delivered to:
The Authority:
Philadelphia Authority for Industrial Development
2600 Centre Square West
1500 Market Street
Philadelphia, PA 19102
Attn: Chairman
The Borrower:
Lannett Company, Inc.
9000 State Road
Philadelphia, PA 19136
Attn: Vice President - Finance
with a copy to:
Fox, Rothschild, O'Brien & Frankel, LLP
2000 Market Street
Philadelphia, PA 19103
Attn: J. Randolph Lawlace, Esquire
The Placement Agent:
First Union Capital Markets Corp.
Second Floor South
600 Penn Street
Reading, PA 19602
Attn: Director: Tax-Advantage Products
13. Acknowledgment of Multiple Representation. Each of the parties
hereto acknowledges and confirms that it was advised on or before March 1,
1999 that Obermayer Rebmann Maxwell & Hippel LLP would act as Bond Counsel,
Bank Counsel and Counsel to the Placement Agent in connection with the
transaction described in this Bond Placement Agreement. Each of the parties
hereto further acknowledges and confirms that, upon being so advised, it
agreed to such multiple representation.
14. Execution in Counterparts. This Placement Agreement may be
executed in any number of counterparts, all of which shall constitute but one
and the same document, and any parties hereto may execute this Placement
Agreement by signing any such counterparts.
15. Successors. This Placement Agreement will inure to the benefit
of and be binding upon the parties hereto and their successors, and no other
person shall acquire or have any right hereunder or by virtue hereof.
16. Applicable Law. This Placement Agreement shall be governed by
and construed in accordance with the domestic internal laws (but not the law
of conflict of laws) of the Commonwealth of Pennsylvania.
17. Limitation of Liability. The liability of the Authority under
this Placement Agreement shall be limited to the same extent as set forth in
the Bonds.
IN WITNESS WHEREOF, the Authority, the Borrower and the Placement
Agent, intending to be legally bound, have caused their duly authorized
representatives to execute and deliver this Bond Placement Agreement as of
the date first written above.
ATTEST: PHILADELPHIA AUTHORITY FOR
INDUSTRIAL DEVELOPMENT
_____________________________ By:_________________________________
Secretary Chairman
ATTEST: LANNETT COMPANY, INC.
_____________________________ By:_________________________________
Authorized Officer William Farber, Chairman
WITNESS: FIRST UNION CAPITAL MARKETS CORP.
_____________________________ By:_________________________________
Director and Vice President
EXHIBIT A
Points to be covered in
Supplemental Opinion of Bond Counsel
1. The Bonds are exempt from registration under the
Securities Act of 1933 and the Indenture is exempt from qualification under
the Trust Indenture Act of 1939, as amended.
2. The description and summaries under the captions entitled
"The Bonds" (except for the information extracted from information provided
by DTC), "The Indenture," "The Loan Agreement" and "Tax Matters" contained in
the Placement Memorandum fairly summarize the applicable provisions of the
documents or portions of applicable law, as the case may be, which are
purported to be summarized therein.
EXHIBIT B
Points to be covered in Opinion of counsel for the Borrower
1. The Borrower is a corporation duly organized and validly
subsisting under the laws of the Commonwealth of Pennsylvania.
2. The Borrower has the necessary authority to execute and
deliver the Borrower Documents, and the undertakings of its obligations
thereunder, and the taking of all actions as may be required on the part of
the Borrower to carry out the same, and the making and performance of each
such agreement will not conflict with, constitute a breach of or a default
under, any provision of the Articles of Incorporation, By-laws or other
constituent documents of the Borrower or, to counsel's knowledge, any
indenture, agreement or other instrument to which the Borrower is a party or
by which the company or any of its properties may be bound, or any
constitutional or statutory provision or order, rule, regulation, decree or
ordinance of any court, government or governmental body to which the Borrower
or any of its properties are subject.
3. The Borrower Documents have been duly authorized,
executed, acknowledged and delivered by the Borrower, are in full force and
effect and constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable
principles, or by bankruptcy, insolvency, reorganization, moratorium and
other similar laws or equitable principles in effect from time to time
affecting the enforcement of creditors' rights generally.
4. To the best of such counsel's knowledge, no authorization,
consent, approval or review of any court or governmental body or regulatory
authority is required for the authorization, execution and delivery by the
Borrower of, and performance by the Borrower of its obligations under, the
Borrower Documents or for any action taken by the Borrower in connection with
the transactions contemplated thereby, which has not been obtained or
effected.
5. There is no action, suit, litigation, proceeding, inquiry
or investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of such counsel's
knowledge, threatened against the Borrower, nor to the best of such counsel's
knowledge is there any basis therefor, wherein an unfavorable ruling or
finding would adversely affect (i) the business, properties or financial
condition of the Borrower; (ii) the validity or enforceability of the
Borrower Documents; or (iii) any of the transactions contemplated by the
undertaking of the Project and the aforementioned documents.
6. The Borrower has duly authorized the taking of any and all
action necessary to carry out and give effect to the transactions
contemplated to be performed on its part by the Borrower Documents, the
Preliminary Placement Memorandum and the Placement Memorandum and has duly
authorized the taking of any and all action necessary to carry out and give
effect to the transactions contemplated to be performed on its part by the
Borrower Documents.
7. The Borrower has all necessary permits, licenses,
certifications and qualifications to conduct its business as it is presently
being conducted, subject to such exceptions which, in the aggregate, would
not have a material adverse effect on the business or operations of the
Borrower and the Borrower is not in any material way in breach of or in
default under any applicable law or administrative regulation of the
Commonwealth of Pennsylvania or of the United States or any applicable
judgment or decree.
8. The Borrower has obtained all approvals required under
applicable federal and state laws (other than securities laws) to finance the
Project.
EXHIBIT C
Points to be covered in the Opinion of Counsel for the Bank
1. The Bank is a national banking association, validly existing and
in good standing under the laws of the United States of America and has full
power and authority to issue and deliver the Letter of Credit and to execute
and deliver the Reimbursement Agreement and the Remarketing Agreement and to
perform its obligations thereunder.
2. The Reimbursement Agreement, the Letter of Credit and the
Remarketing Agreement have been duly authorized and constitute valid and
binding obligations of the Bank, enforceable against the Bank in accordance
with their respective terms, except as the enforceability thereof may be
limited by equitable principles, or by bankruptcy, insolvency,
reorganization, moratorium, liquidation and similar laws in effect from time
to time affecting the enforcement of creditors, rights generally, as such
laws would apply in the event of the bankruptcy, insolvency, reorganization
or liquidation of, or other similar occurrence with respect to, the Bank or
in the event of any moratorium or similar occurrence affecting the Bank. In
connection with its opinion in this paragraph, counsel expresses no opinion
as to whether a court, in the exercise of its equitable powers, may
temporarily enjoin or restrain payment of the drawing under the Letter of
Credit. However, counsel is of the opinion that a court would not permanently
enjoin or restrain such payment in the event of a bankruptcy, reorganization,
insolvency or liquidation or similar proceeding affecting the Authority or
the Borrower.
3. The issuance of the Letter of Credit and the performance by the
Bank of its obligations thereunder (a) require no consents or approvals of,
or filing with, any governmental or other regulatory agencies and (b) do not
violate any existing law, rule, regulation or ordinance.
4. The Letter of Credit constitutes a security issued or guaranteed
by a bank within the meaning of Section 3(a)(2) of the Securities Act of
1933, as amended (the "Securities Act") and, as such, is not required to be
registered pursuant to the Securities Act.
5. Although such counsel has not been engaged by the Bank to review
generally, or to express its opinion with respect to, disclosure materials
used in connection with the offer and sale of the Bonds and expresses no
opinion with respect thereto other than as set forth in this Paragraph 5,
such counsel has reviewed the information relating to the Letter of Credit
and the Reimbursement Agreement in the Placement Memorandum (the "Placement
Memorandum") set forth under the heading "The Letter of Credit and the
Reimbursement Agreement." Such information sets forth accurate summaries of
the portions of the Letter of Credit and Reimbursement Agreement purported to
be summarized therein.
EXHIBIT D
Points to be covered in the Opinion of Authority Counsel
1. The Authority is a body corporate and politic constituting a
public instrumentality of the Commonwealth of Pennsylvania, with full legal
right, power and authority to issue the Bonds and to lend the proceeds
thereof to the Company in order to undertake the Project, to adopt the
Resolutions, to execute and deliver the Loan Agreement, the Indenture, the
Placement Memorandum and the Bond Placement Agreement, to perform its
obligations thereunder and to issue and deliver the Bonds to the investors
designated by the Placement Agent as provided in the Bond Placement Agreement
and the Authority has complied with all applicable provisions of Pennsylvania
law in all matters relating to such transactions.
2. The Authority has duly authorized the execution, delivery and due
performance of the Loan Agreement, the Indenture and the Bond Placement
Agreement, the issuance and delivery of the Bonds, the execution and delivery
of the Placement Memorandum, and the taking of all actions as may be required
on the part of the Authority to carry out, give effect to and consummate the
transactions contemplated by the same; and the making and performance of each
such agreement will not conflict with, constitute a breach of, or default
under, the rules of procedure of the Authority or any indenture, agreement or
other instrument to which the Authority is a party or by which it is bound,
or any constitutional or statutory provision of Pennsylvania law, or, to the
best of such counsel's knowledge, any order, rule, regulation, decree or
ordinance of any court, government or governmental body to which the
Authority or any of its properties are subject.
3. The Resolutions have been duly adopted by the Authority and are
in full force and effect and constitute legal, valid and binding actions of
the Authority and the Loan Agreement, the Indenture and the Bond Placement
Agreement constitute legal, valid and binding obligations of the Authority.
4. The Bonds have been duly executed and delivered by the Authority
and constitute legal, valid and binding obligations of the Authority.
5. The Authority has obtained the approval by the Mayor of the City
of Philadelphia of the minutes of the public hearing required by Section
147(f) of the Internal Revenue Code of 1986, as amended, and the approval of
the issuance of the Bonds by the Pennsylvania Department of Community and
Economic Development has been obtained.
6. There is no action, suit, proceeding, inquiry or investigations,
at law or in equity before or by any court, regulatory agency, public board
or body pending or to the best of such counsel's knowledge, threatened
against the Authority, wherein an unfavorable ruling or finding would
adversely affect the validity or enforceability of the Loan Agreement, the
Indenture, the Bonds or the Bond Placement Agreement, or any other instrument
contemplated for use in consummating the transactions contemplated thereby,
or would materially and adversely affect any of the transactions contemplated
by the Bond Placement Agreement.
7. The portions of the Placement Memorandum under the headings "The
Authority" and "Disclosure Required by Florida Blue Sky Regulations" and the
first paragraph under the heading "Litigation" are true and correct in all
material respects and said portions of the Placement Memorandum do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
Exhibit 10(ag)
Reinbursement Agreements
supporting bond issues
Exhibit 10 (ag)
Reinbursement Agreements
Supporting Bond Issues
REIMBURSEMENT AGREEMENT
among
LANNETT COMPANY, INC.
WILLIAM FARBER
AND
FIRST UNION NATIONAL BANK
(taxable bond issue)
- ------------------------------------------------------------------------------
Dated as of April 30, 1999
- ------------------------------------------------------------------------------
EXHIBITS
EXHIBIT 2.01 Form of Letter of Credit
EXHIBIT 2.05 Schedule of Annual Principal
Payments Under Loan Agreement
EXHIBIT 4.04 Request for Disbursement
EXHIBIT 5.01 Affiliates and Tradenames
EXHIBIT 5.05 Litigation
EXHIBIT 5.07 Contingent Liabilities
EXHIBIT 5.09 Existing Liens and Encumbrances
EXHIBIT 6.01 Insurance Requirements
REIMBURSEMENT AGREEMENT
AGREEMENT made as of the 30th day of April, 1999, by and among
LANNETT COMPANY, INC., a Delaware corporation, with its principal place of
business at 9000 State Road, Philadelphia, PA (the "Borrower"), William
Farber ("Guarantor") and FIRST UNION NATIONAL BANK a national banking
association with offices at 123 S. Broad Street, Philadelphia, PA (the
"Bank").
BACKGROUND
A. The Borrower has decided to finance a certain debt by the
issuance of $2,300,000 aggregate principal amount of its Variable Rate
Demand/Fixed Rate Taxable Bonds (Lannett Company, Inc. Project) Series of
1999 (the "Bonds") pursuant to a Trust Indenture dated as of April 30, 1999
(the "Indenture") between the Borrower and First Union National Bank, as
trustee (the "Trustee").
B. The project being financed with the bonds involves (i) the
refinancing of certain debt, (ii) the repayment of deferred interest due to
shareholder, William Farber, (iii) payment of the costs and expenses of the
financing and of a portion of the costs and expenses of the Tax-Exempt
Bonds(collectively the "Project").
C. Borrower has requested the Bank to issue to and for the benefit
of the Trustee, and for the account of the Borrower, an Irrevocable Direct
Pay Letter of Credit in the initial stated amount of $2,349,276.72 to secure
the payment of the principal of $2,300,000 and up to forty-six (46) days of
interest accrued on the Bonds (the "Letter of Credit").
D. The Bank is willing to issue the Letter of Credit to and for the
benefit of the Trustee, and for the account of the Borrower, on the terms and
subject to the conditions set forth below.
NOW THEREFORE, in consideration of the foregoing and of the
covenants and mutual agreements set forth below, and intending to be legally
bound, the parties agree:
ARTICLE I
DEFINITIONS AND OTHER TERMS
SECTION 1.01 Certain Defined Terms. In addition to other terms
defined elsewhere in this Agreement, the following terms as used in this
Agreement shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
Accounts has the meaning given to that term in the Uniform
Commercial Code, and includes Contract Rights.
Agreement means this Reimbursement Agreement, as the same may be
amended, modified or supplemented from time to time.
Annual Fee has the meaning given to that term in Section 2.03.
Annual Payment Date has the meaning given in Section 2.02.
Bank means FIRST UNION NATIONAL BANK
Bond Documents means the Indenture and the Bonds, and all
agreements, documents, and instruments (other than the Reimbursement
Documents) now or hereafter executed or delivered in connection with the
Indenture or the Loan Agreement or the issuance of the Bonds.
Bonds has the meaning given to that term in the Background of this
Agreement.
Borrower means Lannett Company, Inc.
Borrower's Account means Borrower's operating account.
Business Day means a day other than (i) a Saturday or Sunday, (ii) a
day on which commercial banks in the Commonwealth of Pennsylvania, or State
of New York, are authorized or required to close, or (iii) a day in which the
New York Stock Exchange is closed.
Capital Lease Obligations shall mean, collectively, the obligations
to pay rent or other amounts under any lease of or other arrangement
conveying the right to use real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person pursuant to and in
accordance with GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
Chattel Paper has the meaning given to that term in the Uniform
Commercial Code.
Closing Date means the date of the issuance of the Bonds under and
pursuant to the Indenture.
Collateral means all of the property and assets of the Borrower, the
Guarantor[s], as the case may be, described in Sections 3.01 or 3.03 or in
the Collateral Documents.
Collateral Documents means the Security Agreement described in
Section 3.01, and the Assignments and the Pledge Agreement described in
Section 3.03, and all other agreements, documents, lien instruments, and
certificates heretofore or hereafter delivered by the Borrower and Guarantor
to the Bank granting to the Bank a security interest, lien or other
encumbrance upon any property or assets of the Borrower (as security for the
Indebtedness).
Commitment Fee has the meaning given to that term in Section 2.03.
Construction has the meaning given to that term in the Background
Section of the Agreement.
Construction Documents has the meaning given to that term in
Subsection 4.02(s).
Construction Permits has the meaning given to that term in
Subsection 4.02(r).
Conversion Date has the meaning given to that term in the Indenture.
Contract Right means any right to payment under a contract not yet
earned by performance and not evidenced by an Instrument or Chattel Paper.
Credit Obligation means any obligation for the payment of borrowed
monies (other than monies borrowed from the Bank) or the deferred purchase
price of property or services.
Current Assets has the meaning set forth in Section 6.10.
Current Liabilities has the meaning set forth in Section 6.10.
Current Ratio has the meaning set forth in Section 6.10.
Debt Service Coverage Ratio has the meaning set forth in Section
6.10.
Default Rate has the meaning given to that term in Subsection
2.04(b).
Documents has the meaning given to that term in the Uniform
Commercial Code.
Drawing has the meaning given to that term in the Letter of Credit,
which shall be a drawing in respect of the payment of principal and/or
interest on the Bonds.
Effective Net Worth Ratio has the meaning given to that term in
Section 6.10.
Environmental Laws collectively means and includes all present and
future laws and any amendments (whether common law, statute, rule, order,
regulation or otherwise), permits, and other requirements or guidelines of
governmental authorities relating to the environment and environmental
conditions or to any Hazardous Substance or Hazardous Substance Activity
(including, without limitation, CERCLA, the Federal Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ss.6901, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. ss.6901, et seq., the Federal Water Pollution
Control Act, 33 U.S.C. ss.1251, et seq., the Clean Air Act, 33 U.S.C.
ss.7401, et seq., the Clean Air Act, 42 U.S.C. ss.7401, et seq., the Toxic
Substances Control Act, 15 U.S.C. ss.2601-2629, the Safe Drinking Water Act,
42 U.S.C. ss.300f-300j, the Emergency Planning and Community Right-To-Know
Act, 42 U.S.C. ss.1101, et seq., and any so-called "Super Fund" or "Super
Lien" law, environmental laws administered by the Environmental Protection
Agency, the Pennsylvania Solid Waste Management Act, 35 P.S.
ss.ss.6018.101-108, the Pennsylvania Hazardous Sites Cleanup Act, 35 Pa.
C.S.A. ss.ss.6020.101, et seq., any similar state and local laws and
regulations, all amendments thereto and all regulations, orders, decisions,
and decrees now or hereafter promulgated thereunder).
Equipment has the meaning given to that term in the Uniform
Commercial Code, and includes fixtures.
ERISA means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time, and the regulations and published
interpretations thereof.
ERISA Affiliate means any trade or business, whether or not
incorporated, which together with the Borrower or Guarantor, as the case may
be, would be treated as a single employer under Section 4001 of ERISA.
Event of Default has the meaning given to that term in Section 7.01.
Expiry Date has the meaning given to that term in Section 2.01.
First Mortgage has the meaning given to that term in Section 3.02 of
this Agreement.
General Intangibles has the meaning given to that term in the
Uniform Commercial Code.
Guarantor means William Farber.
Guaranty Agreement has the meaning given to that term in Section
3.04.
Hazardous Substances means "hazardous substances" (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sec. 9601 et seq., and the New Jersey Industrial Site Recovery Act
N.J.S.A.13: 1K-5 et seq., "hazardous wastes" (as defined in the Resource
Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.), "toxic
substances" (as defined in the Toxic Substances Control Act, 15 U.S.C. Sec.
2601 et seq.), and all other pollutants and contaminants regulated or
controlled by, or required to be removed or remediated under any
Environmental Law.
Improvements has the meaning given to that term in Section 6.17(i)
of this Agreement.
Indebtedness means (i) all indebtedness and other liabilities and
obligations now or hereafter owing by the Borrower to the Bank under this
Agreement or the other Reimbursement Documents to which the Borrower is
party, (ii) all Swap Obligations of Borrower to the Bank or any of its
affiliates now existing or hereinafter incurred, and (iii) all other
indebtedness and other liabilities and obligations of the Borrower to the
Bank (including any past, present or future advances, readvances,
substitutions, extensions, renewals, interest, late charges, penalties, and
fees of any and all types), whether primary or secondary, absolute or
contingent, direct or indirect, joint, several, or independent, voluntary or
involuntary, similar or dissimilar, related or unrelated (including
overdrafts), now or hereafter existing, due or to become due, or held or to
be held by the Bank for its own account or as agent for others, whether
created directly or acquired by negotiation, assignment or otherwise.
Indenture has the meaning given to that term in the Background of
this Agreement and includes any amendments, modifications, or supplements to
the Indenture.
Instruments has the meaning given to that term in the Uniform
Commercial Code.
Interest Payment Date has the meaning given to that term in the
Indenture.
Internal Revenue Code means the Internal Revenue Code of 1986, as
the same may be amended from time to time, and the regulations and published
interpretations thereof.
Inventory has the meaning given to that term in the Uniform
Commercial Code.
Letter of Credit has the meaning given to that term in the
Background of this Agreement.
Line of Credit Facility means a certain facility given by the Bank
to Borrower pursuant to the terms of a certain Loan Agreement dated March 11,
1999 between Bank and Borrower, as amended.
Mortgage has the meaning given to that term in Section 3.02 of this
Agreement.
Mortgaged Property means the Property.
Multi-employer Plan means a Plan described in Section 4001(a)(3) of
ERISA that covers employees of the Borrower or Guarantor, as the case may be,
or of an ERISA Affiliate.
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Plan means any plan established, maintained, or to which
contributions have been made, by the Borrower or Guarantor, as the case may
be, or by an ERISA Affiliate.
Plans and Specifications has the meaning given to that term in the
Background section of this Agreement.
Pledged Bonds has the meaning given to that term in the Indenture.
Potential Default shall mean any event or condition which with
notice or the passage of time, or both, would constitute an Event of Default.
Prime Rate means the floating annual rate of interest that is
designated from time to time by the Bank as its Prime Rate and used by the
Bank as a reference base with respect to different interest rates charged to
borrowers; it being understood that such rate may not be the lowest rate of
interest at which the Bank makes loans to borrowers.
Principal Installment Payment Day has the meaning given to that term
in Section 2.02(a)(i).
Prohibited Transaction means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code.
Project has the meaning given to that term in the Background Section
of this Agreement.
Project Fund has the meaning given in Section 6.05.
Property has the meaning given to the term in the background section
of the Tax Exempt Reimbursement Agreement.
Protected Area has the meaning given to that term in Section 5.14.
Regular Rate has the meaning given to that term in Section 2.04(a).
Reimbursement Documents means this Agreement, the Mortgage, and the
Collateral Documents, and any other agreements, documents, or instruments now
or hereafter executed or delivered by or on behalf of the Borrower to the
Bank in connection with the issuance of the Letter of Credit.
Reportable Event means any of the events set forth in Section 4043
of ERISA.
Senior Debt has the meaning given to that term in Section 6.10.
Shareholder Debt means the debt to William Farber as shown in the
financial statements dated December 31, 1998.
Sinking Fund Account has the meaning given to that term in Section
2.05.
Stated Amount has the meaning given to that term in the Letter of
Credit.
Subordinated Indebtedness means all indebtedness of a Borrower, the
payment of which is subordinated to the Indebtedness on terms approved in
writing in advance by the Bank.
Subsidiary means, with respect to a parent corporation, each
corporation of which more than fifty (50%) of its outstanding capital stock
with ordinary voting power is at the time owned by the parent corporation or
by one or more other Subsidiaries of the parent corporation or by a
combination of the parent corporation and other Subsidiaries.
Substitute Letter of Credit shall have the meaning set forth with
the Indenture.
Swap Agreement means an ISDA Master Agreement which may be entered
into between the Borrower and the Bank or any affiliate of the Bank,
including the Schedule and Confirmations (and such terms are defined in the
ISDA Master Agreement), and any future amendments, restatements,
modifications or supplements thereof or thereto.
Swap Obligations means all obligations and liabilities of the
Borrower to the Bank or any affiliate thereof under the Swap Agreement and
any related documents or any other swap transaction.
Total Liabilities has the meaning set forth in Section 6.10.
Tax-Exempt Bonds means Tax-Exempt Variable Rate Demand Fixed Rate
Revenue Bonds issued by the Philadelphia Authority for Industrial
Development, $3,700,000.00 Bond Issue (Lannett Company, Inc. Project) Series
1999.
Tax-Exempt Reimbursement Agreement means that certain Reimbursement
Agreement between the parties of even date herewith, pursuant to which the
Bank has issued a letter of credit with respect to certain tax exempt bonds
issued by the Philadelphia Authority for Industrial Development.
Trustee has the meaning given to that term in the Background of this
Agreement and includes any successor trustee under the Indenture to which the
Letter of Credit is transferred in accordance with its terms.
Uniform Commercial Code means the Uniform Commercial Code of
Pennsylvania, as the same may be amended from time to time.
SECTION 1.02. Accounting and Other Terms.
(a) All accounting terms not specifically defined in this
Agreement shall be construed, and all calculations with respect to accounting
or financial matters shall be computed, in accordance with generally accepted
accounting principles, applied in a manner consistent with the application of
the principles in the preparation of the financial statements mentioned in
Section 5.04.
(b) All terms used and not otherwise defined in this
Agreement that are defined in the Uniform Commercial Code shall have the
meanings given to them in the Uniform Commercial Code.
ARTICLE II
LETTER OF CREDIT
SECTION 2.01. The Letter of Credit. Subject to the terms and
conditions of this Agreement, the Bank agrees to have issued and delivered
the Letter of Credit, in the initial Stated Amount of $2,349,276.72 and
substantially in the form attached as Exhibit 2.01, to and for the benefit of
the Trustee and for the account of the Borrower, upon the Closing Date. The
Letter of Credit shall expire on the close of business on October 31, 2002
(the "Expiry Date"), or, if such day is not a Business Day, on the next
succeeding Business Day. Borrower may request a one (1) year extension of the
Expiry Date by submitting a written request to the Bank at least sixty (60)
days prior to the first year anniversary date from the date of the issuance
of the Letter of Credit. If the Bank agrees to the extension of the Expiry
Date, the new Expiry Date may also be extended in accordance with the
procedure set forth in the previous sentence. Anything in this section to the
contrary notwithstanding, the Bank shall have no obligation to grant any
renewal or extension of the Letter of Credit.
SECTION 2.02. Reimbursement and Other Payments.
(a) The Borrower shall pay to the Bank, immediately after
the honoring by the Bank of a Drawing under the Letter of Credit and without
any further notice, demand or declaration hereunder, (1) a sum (and interest
on such sum as provided in clause (3) below) equal to the amount so drawn
under the Letter of Credit; (2) any and all reasonable charges and expenses
that the Bank may pay or incur relating to the Letter of Credit; and (3)
interest on any and all amounts unpaid by the Borrower when due hereunder
from the date such amounts become due until payment in full, payable on
demand, calculated in accordance with the provisions of Section 2.03 below.
Notwithstanding the foregoing, but subject in all events to the Borrower's
reimbursement obligations, Borrower agrees to pay to the Bank in advance, the
following amounts at the following times, to be held by the Bank as security
for all of Borrower's reimbursement and other obligations hereunder:
(i) Principal. An amount equal to the principal
due on the Bonds on May 1 of each year in accordance with Exhibit 2.02
("Annual Payment Date") shall be deposited by the Borrower in advance in the
Sinking Fund Account in twelve (12) equal installments, the first such
installment payable on June 1 and additional installments payable on the
first day of each month thereafter (the "Principal Installment Payment
Date").
(ii) Redemption. An amount equal to any principal,
premium, if any, and interest due on the Bonds as a result of an optional or
mandatory redemption pursuant to the Indenture shall be deposited by Borrower
in advance at least thirty (30) days prior to the date established for
redemption in the Sinking Fund Account.
(iii) Interest. Prior to the Conversion Date, an
amount equal to the interest due on the Bonds on each Interest Payment Date
shall be deposited by the Borrower at the Bank in advance on the first day of
the month preceding such Interest Payment Date; provided that with respect to
interest due on the Bonds on the first Interest Payment Date following the
Closing Date, if less than one (1) full calendar month will elapse between
the Closing Date and the first Interest Payment Date thereafter, then an
amount equal to the interest due on such Interest Payment Date shall be paid
on the Closing Date. Subsequent to the Conversion Date, an amount equal to
one-sixth (1/6) of the amount of interest due on the Bonds on the Interest
Payment Date under the Indenture shall be deposited by the Borrower in the
Sinking Fund Account on the first day of each month.
(iv) Tender Purchase Price. The Borrower shall pay
to the Bank any Drawing in respect of the tender purchase price due on any
Bonds immediately upon receipt of notice from the Bank of such Drawing.
(v) Reimbursement After Drawing. The Bank shall
have the right to be reimbursed immediately after a Drawing by debiting the
accounts where the Borrower's funds are deposited pursuant to subparts
(i)-(iii) hereof.
(b) If any enactment, promulgation or adoption of or change
in any law, regulation, or rule or, in the interpretation or administration
or governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall (i) impose, modify or
deem applicable any reserve, special deposit or similar requirement
(including a request or requirement which affects the manner in which the
Bank allocates capital resources to its commitments, including its
obligations under this Agreement and the Letter of Credit), (ii) subject the
Bank to any tax or change the basis of taxation of the Bank (other than a
change in a rate of tax based on overall net income of the Bank), or (iii)
impose on the Bank any other condition regarding this Agreement or the Letter
of Credit, and if the result of any event referred to in clause (i), (ii) or
(iii) shall be to increase the direct or indirect cost to the Bank amounts
receivable by the Bank under this Agreement (which increase in cost or
reduction in amounts receivable shall be determined by the Bank's reasonable
allocation of such cost increase or reduction in amounts receivable resulting
from such event), then within ten (10) Business Days after demand by the
Bank, the Borrower shall pay to the Bank, from time to time as specified by
the Bank, additional amounts that in the aggregate shall be sufficient cost
or reduction in amounts receivable. A certificate setting forth in reasonable
detail such increased cost incurred or reduction in amounts receivable by the
Bank as a result of any event mentioned in clause (i), (ii) or (iii) shall be
submitted by the Bank to the Borrower, and such certificate shall be
conclusive, as to the amount(s) thereof, absent manifest error.
SECTION 2.03. Fees.
(a) The Borrower shall pay a commitment fee at Closing in
the amount of 0.25 percent (0.25%) per annum of the Stated Amount of the
Letter of Credit.
(b) The Borrower shall pay an opening commission charge at
Closing in the amount of seventy-five dollars ($75.00).
(c) The Borrower shall pay to the Bank an annual fee
(computed on the basis of the actual number of days in the calendar year
divided by 360) at the rate of one percent (1%) per annum of the Stated
Amount of the Letter of Credit (the "Annual Fee"). The Annual Fee shall be
calculated on each (based on the Stated Amount on such day) and shall be
payable in advance on each November 1; the Annual Fee, for the period
beginning on the date of issuance of the Letter of Credit and ending on
October 31, 2000, shall be payable on the date of issuance of the Letter of
Credit. The amount of the Annual Fee shall not be reduced, and no portion of
the Annual Fee shall be refunded regardless of the date on which the Bonds
are repaid; provided, however, if prior to the expiration of any annual
period for which the Annual Fee has been paid, the Letter of Credit is
surrendered to the Bank for cancellation upon redemption of the Bonds as a
whole, and so long as no Event of Default has occurred and is continuing,
then a portion of the Annual Fee shall be refunded based on the number of
days in such annual period that the Letter of Credit is no longer outstanding
and available for drawing by the Trustee.
(d) The Borrower shall pay to the Bank, on demand, all
reasonable transaction charges that the Bank may make for a drawing under the
Letter of Credit and all reasonable costs expenses that the Bank may incur or
pay relating to the Letter of Credit, including, without limitation a fifty
dollar ($50.00) fee per Drawing (subject to increase). The Borrower also
shall pay to the Bank, upon each transfer of the Letter of Credit in
accordance with the terms of the Letter of Credit, a transfer fee of two
thousand five hundred dollars ($2,500.00) together with all reasonable costs
and expenses incurred by the Bank in connection with such transfer. The
Borrower also shall pay to the Bank, upon any amendment of the Letter of
Credit in accordance with the terms of the Letter of Credit, an amendment fee
of fifty dollars ($50.00) together with all reasonable costs and expenses.
Should the Letter of Credit be terminated prior to its expiration date as a
result of the delivery of a Substitute Letter of Credit by another bank or
financial institution other than the Bank, the Borrower shall pay to the
Bank, upon demand, a termination fee of five thousand dollars ($5,000.00).
SECTION 2.04. Interest.
(a) All amounts due to the Bank under this Agreement
(including all amounts due under Sections 2.02 and 2.03) shall be accompanied
by interest thereon, from the date such amounts become due until paid in full
at an annual rate equal to the Bank's Prime Rate plus one percent (1%) (the
"Regular Rate") (before and after judgment). Interest shall be computed on
the basis of the actual number of days in the calendar year divided by 360
and the rate of interest shall change automatically and simultaneously as of
the date of each change in the Bank's Prime Rate.
(b) Upon the occurrence of any Event of Default, interest
shall accrue on amounts due under this Agreement at an annual rate (before
and after judgment) equal to the Bank's Prime Rate plus three percent (3%)
per annum (the "Default Rate").
SECTION 2.05. Sinking Fund Account.
(a) The Borrower shall establish and maintain an interest-bearing
deposit account with the Bank into which the Borrower shall deposit with the
Bank all the sums required to be deposited pursuant to Section 2.02 (a)(i)
through (iii) (the "Sinking Fund Account").
(b) The Sinking Fund Account established pursuant to this Section
2.05 shall be under the sole control of the Bank, and the Borrower shall have
no right to withdraw any funds in such deposit account or to use any funds in
such deposit account except in payment of the liabilities and obligations
owing by the Borrower to the Bank under this Agreement or the other
Reimbursement Documents (including the obligation of the Borrower to
reimburse the Bank for amounts drawn under the Letter of Credit). As
additional security for the payment, performance, and discharge of all
liabilities and obligations of the Borrower under this Agreement or the other
Reimbursement Documents, Borrower assigns to the Bank, and grants to the Bank
a first priority security interest in and lien upon and right of set-off
against, the deposit account established pursuant to this Section 2.05 and,
at any time and from time to time at the request of the Bank, the Borrower
shall execute and deliver any assignments, documents, and instruments
reasonably requested by the Bank to further evidence or perfect such
assignment and such security interest, lien and right of set-off.
SECTION 2.06. Obligations Absolute. The obligations of the Borrower
under this Article II shall be absolute and unconditional and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including the following circumstances: (i) any lack
of validity or enforceability of the Letter of Credit, the Bond Documents, or
any agreement, document or instrument relating thereto; (ii) any amendment or
waiver of or any consent to or departure from the Letter of Credit, the Bond
Documents or any agreement, document, or instrument relating thereto; (iii)
the existence of any claim, set-off, defense or other right which the
Borrower may have at any time against the Trustee (or any persons or entities
for whom the Trustee may be acting), the Bank, or any other person or entity,
whether in connection with any unrelated transactions described in this
Agreement, or any unrelated transactions; or (iv) any of the circumstances
contemplated in clauses (1) through (7), of paragraph (a) of Section 2.08.
The Borrower understands and agrees that no payment by the Borrower or any
third party under any other agreement (whether voluntary or otherwise) shall
constitute a defense to their obligations under this Agreement, except to the
extent that the Bank has been indefeasibly paid in full.
SECTION 2.07. Indemnification. To the extent permitted by applicable
law, the Borrower agrees to indemnify and hold harmless the Bank and its
directors, officers, employees and agents from and against any and all
claims, damages, losses, liabilities, costs or expenses (including reasonable
attorneys' fees) which the Bank may incur or which may be claimed against the
Bank by any person or entity whatsoever by reason of or in connection with
(a) the issuance and sale of the Bonds (including any actual or alleged
misstatements or omissions in any placement memorandum relating to the
offering of the Bonds), (b) the issuance or a transfer of, or payment or
failure to pay under, the Letter of Credit (c) any breach by the Borrower of
any representation, warranty, covenant, term or condition in, or the
occurrence of any default under the Reimbursement Documents or the Bond
Documents, including all reasonable claims or liabilities arising as a result
of any such breach or default, and (d) involvement of the Bank in any legal
suit, investigation, proceeding, inquiry or action as a consequence, direct
or indirect, of the issuance by the Bank of the Letter of Credit or its
entering into this Agreement, or any other event or transaction contemplated
by any of the foregoing; provided however, the Borrower shall not be required
to indemnify the Bank for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused solely by (i) the
willful misconduct or gross negligence of the Bank, (ii) the wrongful and
willful failure by the Bank to pay under the Letter of Credit after the
presentation to it by the Trustee of a draft and certificate strictly
complying with the terms and conditions of the Letter of Credit, unless the
Bank in good faith believes that it is prohibited by law or other legal
authority from making such payment or (iii) any untrue statement contained in
information furnished in writing by the Bank to the Borrower for use in any
placement memorandum.
SECTION 2.08. Liability of Bank.
(a) As between the Borrower and the Bank, Borrower assumes
all risks of the acts or omissions of the Trustee with respect to the
Trustee's use of the Letter of Credit. Neither the Bank nor any of its
officers, directors, employees, or agents shall be liable or responsible for:
(1) the use which may be made of the Letter of Credit or for any act or
omissions of the Trustee in connection with the Letter of Credit; (2) the
form, validity, sufficiency, accuracy or genuineness of any documents
(including any documents presented under the Letter of Credit), or of any
statement in or endorsement on such documents, even if any such documents,
statements or endorsements should in fact prove to be in any or all respects
invalid, insufficient, fraudulent, forged, inaccurate, or untrue; (3) the
payment by the Bank against presentation of documents which do not comply
with the terms of the Letter of Credit, or any other failure by the Trustee
to comply fully with conditions required in order to effect a drawing under
the Letter of Credit; (4) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the Letter of
Credit or the rights or benefit under or proceeds of the Letter of Credit, in
whole or in part, which may prove to be invalid or ineffective for any
reason; (5) errors, omissions, interruptions, losses or delays in
transmission or delivery of any messages by mail, cable, telegraph, telex,
telephone or otherwise; (6) any loss or delay in the transmission or
otherwise of any document or draft required in order to make a drawing under
the Letter of Credit; or (7) any other circumstances whatsoever in making or
failing to make payment under the Letter of Credit; except only that the
Borrower shall have a claim against the Bank, and the Bank shall be liable to
the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused solely by (i) the willful misconduct or gross negligence
of the Bank or (ii) the wrongful and willful failure by the Bank to pay under
the Letter of Credit after the presentation to it by the Trustee of a draft
and certificate strictly complying with the terms and conditions of the
Letter of Credit, unless the Bank in good faith believes that it is
prohibited by law or other legal authority from making such payment. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without responsibility
for further investigation, regardless of any notice or information to the
contrary; provided, however, that if the Bank should receive written
notification from both the Trustee and the Borrower that documents conforming
to the terms of the Letter of Credit presented to the Bank are not to be
honored, the Bank agrees that it will not honor such documents.
(b) Except for the obligations of the Bank under the Letter
of Credit, the Bank shall have no liability to the Borrower or any other
person or entity as a result of any reduction of the credit rating or any
deterioration in the financial condition of the Bank. No such reduction or
deterioration shall reduce or in any way diminish the obligations of the
Borrower to the Bank under this Agreement, including the obligation of the
Borrower to pay the Annual Fee to the Bank or to reimburse the Bank for any
drawing under the Letter of Credit.
ARTICLE III
COLLATERAL
SECTION 3.01. Security Interests. As security for the payment,
performance and discharge of the Indebtedness, the Borrower grants to the
Bank (and ratifies and confirms the grant of): (i) a first priority security
interest in and lien upon all Accounts, Contract Rights, General Intangibles,
Chattel Paper, Inventory, Instruments, Documents, Equipment, and other assets
in which the Borrower now has or hereafter may acquire any interest, wherever
located, and in all proceeds and products thereof, as more fully described
in, and under the terms and conditions of the Security Agreement all dated as
of even date herewith, from Borrower to the Bank, and (ii) a security
interest in and lien upon, and right of set-off against, all funds or other
assets of the Borrower now or at any time hereafter on deposit with or in the
possession of the Bank or owing by the Bank to the Borrower and in all assets
of the Borrower in which the Bank now has or at any time hereafter may obtain
a lien, mortgage, or security interest for any reason.
SECTION 3.02. Mortgage. As security for the payment, performance,
and discharge of all liabilities and obligations of the Borrower under this
Agreement or the other Reimbursement Documents, or otherwise arising in
connection with the Letter of Credit, Borrower shall execute and deliver to
the Bank, contemporaneously with the execution and delivery of this
Agreement, in form and substance satisfactory to the Bank, a mortgage and
security agreement (the "First Mortgage") on the Property and all buildings,
structures, renovations, alterations, additions, and improvements, and all
machinery, equipment, fixtures, and other personal property (including
appliances, furniture, furnishings and equipment) installed in or on, or used
in connection with, such property. The lien of the Mortgage shall be a first
priority lien on the Mortgaged Property except (i) possible prior liens for
taxes not yet due and payable and (ii) easements and restrictions presently
of record and approved by the Bank.
SECTION 3.03. Assignments and Pledge Agreement. As security for the
payment, performance and discharge of all liabilities and obligations of the
Borrower under this Agreement or the other Reimbursement Documents, or
otherwise arising in connection with the Letter of Credit: (i) the Borrower
shall assign to the Bank all of its right, title, and interest in and to all
present and future leases, rental agreements and other tenancies of the
Mortgaged Property, as more fully described in and under the terms and
conditions of the Assignment of Leases and Rents dated the date of this
Agreement from the Borrower to the Bank; (ii) the Borrower shall assign to
the Bank all of its title, right and interest in and to the Construction
Documents, as more fully described in and under the terms of the Assignment
of Construction Documents dated as of the date of this Agreement from
Borrower to the Bank, (iii) the Borrower shall assign to the Bank, and grant
to the Bank a first priority security interest in, all of its right, title,
and interest in and to the Pledged Bonds, as more fully described in and
under the terms and conditions of the Pledge and Security Agreement dated the
date of this Agreement between the Borrower and the Bank; and (iv) the
Borrower shall assign to the Bank, and grant to the Bank a first priority
security interest in and lien upon, all of its right, title, and interest in
and to the Sinking Fund Account and all assets in said Account as more fully
described in and under the terms and conditions of the Assignment and
Security Agreement dated the date of this Agreement from the Borrower to the
Bank.
SECTION 3.04. Guaranty Agreement. As security for the payment,
performance and discharge of liabilities and obligations of the Borrower
hereunder and under the Tax Exempt Reimbursement Agreement up to the amount
of $1,000,000, the Guarantor shall execute a guaranty and surety agreement
(the "Guaranty Agreement"), guaranteeing the performance of said obligations,
provided, however, that, upon receipt of the financial reporting information
of Borrower for fiscal year ending June 30, 2001, the Guaranty Agreement
shall terminate if (a) Borrower is in compliance of all the terms of this
Agreement, including, without limitation, the financial covenants set forth
in Section 6.10 hereof, and (b) neither Borrower nor Guarantor is in default
of any other terms of this Agreement or the Reimbursement Documents.
SECTION 3.05. Further Assurances.
(a) The Borrower shall execute and deliver to the Bank from
time to time such financing statements and such additional instruments or
documents as the Bank may deem necessary in its discretion to perfect,
protect, maintain or enforce its security interests in or other rights or
claims to the Collateral or the Mortgaged Property, and shall pay the costs
of filing or recording the same in such offices as the Bank may designate.
(b) The Borrower shall deliver to the Bank, in form and
substance satisfactory to the Bank, instruments from all owners and all
mortgagees of all premises at which the Collateral (or any books and records
pertaining to the Collateral) may be located, by which such owners and
mortgagees waive any right to distrain or disclaim any interest in the
Collateral.
SECTION 3.06. Records and Reports. The Borrower shall keep accurate
and complete records of the Collateral and shall furnish the Bank with any
information about the Collateral as Bank may from time to time reasonably
request.
SECTION 3.07. Insurance; Discharge of Taxes. The Borrower authorizes
the Bank, from time to time, without notice to the Borrower, to: (i) obtain
insurance covering any of the Collateral and the Mortgaged Property, if the
Borrower fails to do so; (ii) discharge taxes, liens, security interests or
other encumbrances at any time levied or placed on any of the Collateral and
the Mortgaged Property, if the Borrower fails to do so; and (iii) pay for the
maintenance and preservation of any of the Collateral and the Mortgaged
Property, if the Borrower fails to do so. The Borrower shall reimburse the
Bank, on demand, for any payment made or any expense incurred by it pursuant
to this authorization. The Borrower may assign to the Bank all rights to
receive the proceeds of insurance covering the Collateral and the Mortgaged
Property and authorize the Bank to direct any insurer to pay all such
proceeds directly to the Bank, and to endorse in the names of the Borrower on
any draft for such proceeds.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Events. As conditions precedent to the issuance of the
Letter of Credit, the following events shall have occurred:
(a) The Indenture and the other Bond Documents shall have
been duly executed and delivered and shall be in form and substance
satisfactory to the Bank.
(b) All conditions precedent to the issuance of the Bonds
shall have occurred and the Company shall have duly executed and delivered
the Bonds to the Trustee.
(d) The Borrower shall have paid to the Bank the commitment
fee due under subsection 2.03(a) and the Annual Fee due under subsection
2.03(b).
SECTION 4.02. Documents. As conditions precedent to the issuance of
the Letter of Credit, Borrower shall have delivered or caused to be delivered
to the Bank, in form and substance satisfactory to the Bank:
(a) The Reimbursement Agreement.
(b) The Mortgage.
(c) The Collateral Documents.
(d) Certified copies of a resolution adopted by the Board
of Directors of Borrower authorizing the execution, delivery and performance
of the Reimbursement Documents and the Bond Documents to which Borrower
and/or Guarantor are a party.
(e) Certified copies of the articles of incorporation and
bylaws (and all amendments thereto) of Borrower, along with a certificate of
authority issued by the Commonwealth of Pennsylvania, and certificates of
good standing of Borrower (issued not more than thirty (30) days prior to the
Closing Date) evidencing its good standing as a corporation under the laws of
the states of Delaware and Pennsylvania.
(f) All letter of credit applications and related documents
required to be executed by the Bank.
(g) Omitted.
(h) An opinion of counsel for the Borrower as to the
matters set forth in Sections 5.01 through 5.03, 5.05, 5.10 and 5.16, and
such other matters requested by the Bank.
(i) A certificate of an executive officer of Borrower as to
the matters set forth in Sections 5.01 through 5.19, and such other matters
requested by the Bank.
(j) Certificates of insurance meeting the requirements set
forth in Section 6.01 and the Collateral Documents.
(k) A subordination agreement with respect to the
Shareholder Debt;
(l) A commitment for title insurance from a title insurance
company satisfactory to the Bank, insuring that the lien of the Mortgage on
the Property is a first priority lien (free and clear of mechanics' liens,
municipal liens, and other encumbrances and objections, except as may be
approved by the Bank) and containing such endorsements and affirmative
coverages as the Bank may reasonably require.
(m) A survey of the Mortgaged Property, showing the
location of all improvements, driveways, fences, encroachments, and
easements, recorded and unrecorded, of every nature (including, without
limitation, all easements and encroachments raised or exceptions on the title
report) and all other matters that would be disclosed by an inspection of the
Mortgaged Property and the public records.
(n) An appraisal of the Property (based on completion of
the Construction) conducted by a certified and licensed appraiser approved by
the Bank and conforming to the requirements of the Financial Institution
Reform, Recovery, and Enforcement Act of 1989, indicating a fair market value
of the Mortgaged Property satisfactory to the Bank.
(o) A Phase I environmental survey for the Property
prepared by a consultant approved by the Bank (the "Phase I Survey") showing
that (i) the Property is not now being used, and has not been used in the
past except as disclosed in the Phase I Survey, for any activities involving,
directly or indirectly, the use, generation, treatment, storage, or disposal
of any hazardous or toxic chemical, material, substance, or waste of any kind
or nature (other than in the ordinary course of business and in compliance
with all applicable environmental Laws) and (ii) the Property does not
represent an environmental risk to the Bank.
(p) Satisfactory evidence (including certificates from
appropriate governmental authorities) that the Mortgaged Property and the
proposed Construction complies with all applicable zoning and other laws and
regulations and that there are not outstanding notices of uncorrected
violations of zoning, building, safety, fire, and other laws, ordinances,
codes, and regulations.
(q) Satisfactory evidence that all permits and approvals
required to proceed with the Construction required by the local municipality,
(the "Construction Permits") have been issued, except for the building
permit.
(r) Satisfactory evidence that all approvals or consents
required by any covenants or restrictions of record in order to proceed with
the Construction have been obtained.
(s) A copy of the construction contract, architectural
contract, engineering contract and all other agreements relating to the
Project all with the prior approval and in form satisfactory to the Bank, and
all Construction Permits (collectively, the "Construction Documents"), except
for the building permit.
(t) Approval of the Plans and Specifications by the Bank.
(u) Waivers of liens from the general contractor(s) and, if
requested by Bank, from subcontractors properly executed and recorded in
Philadelphia County.
(v) A performance and payment bond from the general
contractor or contractors engaged to perform the Construction for the amount
of its contract, if required by the Bank.
(w) The funds required pursuant to Section 2.05 hereof for
deposit in the Sinking Fund Account.
(x) Counterparts of the Indenture and all other Bond
Documents and all opinions, certificates, approvals, and other items executed
and delivered in connection with the issuance of the Bonds.
(y) Such additional documents or instruments and such
additional approvals and opinions as the Bank may have reasonably requested
under the terms of the Reimbursement Documents, the Bond Documents, or
otherwise.
SECTION 4.03. Conditions Precedent - Letter of Credit. As additional
conditions precedent to the issuance of the Letter of Credit, the following
statements shall be true and correct:
(a) The representations and warranties made by the Borrower
in this Agreement and the other Reimbursement Documents are true and correct
on and as of the date of issuance with the same effect as though made on and
as of that date.
(b) No Event of Default or Potential Default has occurred
and is continuing or will result from the issuance of the Letter of Credit.
SECTION 4.04. Conditions Precedent - Disbursements. As conditions
precedent to the approval by the Bank under the Indenture of the initial
disbursement and each subsequent disbursement of the proceeds of the Bonds to
Borrower from the Project Fund:
(a) All conditions precedent to the issuance of the Letter
of Credit in Sections 4.01, 4.02 and 4.03 shall have been satisfied in a
manner acceptable to the Bank.
(b) The representations and warranties made by the Borrower
in this Agreement and the other Reimbursement Documents shall be true and
correct on and as of the date of disbursement with the same effect as though
made on and as of that date.
(c) No Event of Default or Potential Default shall have
occurred and be continuing or shall result from the funding of the
disbursement.
(d) No material adverse change as determined by the Bank in
its sole discretion shall have occurred in the condition of the Borrower,
financial or otherwise, since the date of this Agreement.
(e) Borrower shall have delivered to Bank an endorsement to
the title insurance policy for the Property insuring Bank's lien to the
completed part of the Construction.
(f) Borrower shall have delivered to Bank a requisition and
request for the disbursement in the form attached hereto as Exhibit 4.04,
together with a Request for Payment by the contractor(s) engaged in the
Construction on AIA Form 703, and with such supporting invoices and documents
as the Bank may reasonably require, all in form and substance satisfactory to
the bank, shall have been furnished by the general contractor(s) of Borrower,
indicating that the request for disbursement is based on the work completed
to date, less retainage, and such requisition shall have been reviewed and
approved by the Bank.
(g) Satisfactory evidence that the building permit has been
issued provided that satisfaction of this condition is not required for the
initial disbursement.
(h) The Bank shall have inspected the Construction and
approved the disbursement.
(i) The Borrower shall have delivered to the Bank such
additional instruments or documents and such additional approvals and
opinions as the Bank may have reasonably requested under the terms of the
Reimbursement Documents, the Bond Documents, or otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to
issue the Letter of Credit, the Borrower and Guarantor represent and warrant
to the Bank as follows:
SECTION 5.01. Existence.
Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all
requisite power and authority, corporate or otherwise, to conduct its
business and to own and operate its properties, and is duly qualified as a
foreign corporation to do business in, and is in good standing in, the
Commonwealth of Pennsylvania and in all other jurisdictions in which failure
to qualify could have a material adverse effect on its financial condition or
business. Borrower does not have any subsidiaries or affiliated companies, or
in the past five years has used any trade or other fictitious names, except
as described in the schedule attached as Exhibit 5.01.
SECTION 5.02. Authorization.
Borrower and Guarantor have all requisite power and authority to
execute, deliver and perform the applicable Reimbursement Documents and the
Bond Documents to which each is a party. The execution, delivery and
performance by Borrower of the applicable Reimbursement Documents and the
Bond Documents to which it is a party have been duly authorized by all
necessary corporate action and do not and will not violate any provision of
law or of the articles of incorporation or bylaws of Borrower or result in a
breach or constitute a default under any agreement, indenture or instrument
to which Borrower or Guarantor is a party, or by which their properties may
be bound or affected.
SECTION 5.03. Validity. The Reimbursement Documents and the Bond
Documents to which the Borrower or Guarantor is a party are legal, valid and
binding obligations of the Borrower or Guarantor, as the case may be,
enforceable in accordance with their respective terms, subject to the
application by a court of general principles of equity and to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally.
SECTION 5.04. Financial Statements. The financial statements of the
Borrower and Guarantor as of December 31, 1998, previously furnished to the
Bank, have been prepared in accordance with generally accepted accounting
principles, consistently applied, are substantially complete and correct, and
present fairly the financial condition of the Borrower and Guarantor as of
that date and the results of its operations for the period then ended. Since
December 31, 1998, there has been no material adverse change in the condition
of the Borrower, financial or otherwise, from that set forth in such
financial statements.
SECTION 5.05. Litigation. Except as disclosed in the schedule
attached as Exhibit 5.05, there are no actions or proceedings pending or, to
the knowledge of Borrower and Guarantor threatened against or affecting
either Borrower or Guarantor, or any of their properties before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which are substantial in amount or
which, if determined adversely, would have a material adverse effect on the
financial condition or business of Borrower or the Guarantor or their ability
to perform their obligations under the Reimbursement Documents or the Bond
Documents.
SECTION 5.06. Agreements and Orders. Neither Borrower nor Guarantor
is in default in the performance of any agreement of which it may be party or
by which its properties may be bound or with respect to any order, writ,
injunction, or decree of any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
SECTION 5.07. Contingent Liabilities. Neither Borrower nor Guarantor
has any material or substantial contingent obligations or liabilities, for
taxes or otherwise, that are not disclosed in the financial statements
mentioned in Section 5.04 or set forth on the schedule attached as Exhibit
5.07.
SECTION 5.08. Taxes. Borrower and Guarantor have filed all tax
returns and reports required to be filed as of the date of this Agreement and
have paid all taxes, assessments and charges imposed upon them or their
operations or properties, or which they are required to withhold and pay over
(including payroll withholding taxes).
SECTION 5.09. Ownership and Encumbrances. Borrower has good title,
or valid leasehold interests in, all of its properties and assets, real and
personal. None of the properties and assets of Borrower are subject to any
lien, encumbrance, security interest or other claim of any nature, except
liens and encumbrances in favor of the Bank and existing liens and
encumbrances disclosed in all financial statements mentioned in Section 5.04
or set forth on the schedule attached as Exhibit 5.09.
SECTION 5.10. Consents. No authorization, consent, approval,
license, exemption by or filing or registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary to the valid
execution, delivery or performance by Borrower or Guarantor of the
Reimbursement Documents or the Bond Documents to which it is a party
(excepting only such authorizations, consents, approvals, licenses, filings,
and registrations that have been obtained or accomplished on or prior to the
date of this Agreement).
SECTION 5.11. ERISA.
(a) To the extent applicable, Borrower is in compliance in
all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; no circumstances exist which
constitute grounds under Section 4042 of ERISA Affiliate entitling the PBGC
to institute proceedings to terminate, or appoint a trustee to administrate,
a Plan, nor has the PBGC instituted any such proceedings; neither the
Borrower nor any ERISA Affiliate has completely or partially withdrawn under
Section 4201 or 4204 of ERISA from a Multiemployer Plan; except as previously
disclosed in writing by the Borrower to the Bank, Borrower and each ERISA
Affiliate has met its minimum funding requirements under ERISA with respect
to all of its Plans and the present value of all vested benefits under each
Plan does not exceed the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA and the regulations thereunder
for calculating the potential liability of the Borrower or any ERISA
Affiliate to the PBGC or the Plan under Title IV of ERISA; and neither any
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
(b) The Borrower does not maintain any employee benefit
plan covered by Title IV of ERISA.
SECTION 5.12. Operations of Business. Borrower possesses (i) all
licenses, permits, and other governmental authorizations and (ii) all
trademarks, trade names, copyrights, patents, or rights in any of the
foregoing, adequate for the conduct of its business as now conducted and
presently proposed to be conducted, and, to the best of the knowledge,
information, and belief of the Borrower, without conflict with the material
rights or claimed rights of others.
SECTION 5.13. Disclosure. No representation or warranty made by
Borrower in this Agreement or the other Reimbursement Documents is false or
misleading in any material respect or omits to state any material fact
necessary in order to make the statements by Borrower in this Agreement or
the other Reimbursement Documents. Borrower has disclosed to the Bank in
writing every fact that materially and adversely affects its business or
financial condition or its ability to perform its obligations under the
Reimbursement Documents or the Bond Documents.
SECTION 5.14. Environmental Laws.
(a) Except as permitted under Section 6.20, no property
owned or leased by Borrower or any subsidiary of Borrower, is in violation of
any Environmental Laws, no Hazardous Substances are present on said property
and neither Borrower nor any subsidiary of Borrower, has been identified in
any litigation, administrative proceedings or investigation as a responsible
party for any liability under and Environmental Laws.
(b) Borrower has received all permits and filed all
notifications necessary to carry on its business under and in compliance with
all applicable Environmental Laws. Neither Borrower nor Guarantor has any
knowledge of, or has given any written or oral notice to the Environmental
Protection Agency or any state or local agency regarding, any actual or
imminently threatened removal, spill, release or discharge of Hazardous
Substances on properties owned or leased by the Borrower or either Guarantor
or in connection with the conduct of its business and operations. Neither
Borrower nor Guarantor has any knowledge of, or has received any notice that
it is potentially responsible for, costs of clean-up of any actual or
imminently threatened spill, release or discharge of Hazardous Substances.
(c) Upon request by the Bank, Borrower shall provide
evidence in form and substance acceptable to the Bank that the Property
complies with all applicable Environmental Laws.
(d) No part of the Property contains, is located in or
abuts floodplain, navigable water or any other body of water, tideland,
marshland, wetland or other area (collectively, "Protected Area") which is
subject to special state, federal or municipal regulation, control or
protection, except as previously disclosed to Bank; and Borrower shall comply
with all laws, ordinances and regulations pertaining to Protected Areas, to
the extent applicable to the Property.
SECTION 5.15. Margin Stock. Borrower is not engaged in, nor does it
have as one of its substantial activities, the business of extending or
obtaining credit for the purpose of purchasing or carrying "margin stock" (as
that term is defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no proceeds of the Bonds will be used for such purpose or
for the purpose of purchasing or carrying any shares of margin stock.
SECTION 5.16. Perfection of Liens. Upon the filing or recording of
financing statements and other documents or lien instruments in all places in
the Commonwealth of Pennsylvania and elsewhere as are necessary to perfect to
security interests, liens, and other encumbrances created or granted by this
Agreement or the Collateral Documents, no further action (including the
filing or recording of any documents or instrument) is or will be necessary
in order to establish, perfect or maintain the security interests, liens, and
other encumbrances created or granted by this Agreement or the Collateral
Documents.
SECTION 5.17. Securities Laws. To the extent applicable, all shares
of capital stock, all partnership interests, and all other securities of the
Borrower have been offered and sold in accordance with the registration
requirements of all applicable federal and state securities laws, or in
compliance with any exemptions afforded thereunder.
SECTION 5.18. Other Agreements. Neither Borrower nor Guarantor is a
party to any indenture, loan, or credit agreement, or of any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which could have a material adverse effect on their business, properties,
assets, or condition, financial or otherwise, or their ability to perform
their obligations under the Reimbursement Documents or the Bond Documents to
which they are a party, except for the Line of Credit Facility.
SECTION 5.19. Labor Disputes and Casualties. Borrower is not
affected by any fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of public enemy, or
other casualty (whether or not covered by insurance) which could materially
and adversely affect its business, properties, assets, or condition,
financial or otherwise, or its ability to perform its obligations under the
Reimbursement Documents or the Bond Documents to which it is a party.
SECTION 5.20. Year 2000 Compliance. The advent of the year 2000
shall not adversely affect the Borrower's operations or their information
technology or related systems. Without limiting the generality of the
foregoing, (i) the information technology systems utilized by Borrower are
designed to be used prior to, during, and after the calendar year 2000 A.D.,
(ii) the information technology systems utilized by Borrower will not
abnormally end or provide invalid or incorrect results as a result of date
data, and (iii) the information technology systems utilized by Borrower are
designed or programmed to ensure year 2000 A.D. compatibility, including date
data, century recognition, leap year, calculations which accommodate same
century and multi-century formulae in date values, and date data interface
values that reflect the century.
ARTICLE VI
COVENANTS
As long as any portion of the Indebtedness is or remains outstanding
and unpaid, or the Bank has any obligations under this Agreement or the
Letter of Credit, the Borrower and Guarantor covenant and agree that, unless
the Bank otherwise consents in writing:
SECTION 6.01. Insurance. Borrower shall maintain insurance with
respect to its business and assets in such amounts, including but not limited
to the Collateral and the Property, and in the amounts set forth in Exhibit
6.01. Such insurance shall be with such companies as may be satisfactory to
the Bank in its reasonable discretion, it being understood that insurance
comparable to insurance customarily maintained by companies operating similar
businesses as the Borrower shall be satisfactory. All policies of insurance
covering the Collateral and the Property shall insure the Bank as its
interest may appear and shall bear a lender's loss payable and thirty (30)
day notice of cancellation or material change endorsements in favor of the
Bank.
SECTION 6.02. Reports. The Borrower and Guarantor shall furnish to
the Bank:
(a) as soon as possible, and in any event within five (5)
Business Days after Borrower becomes aware of the occurrence of any Event of
Default or Potential Default, a written statement by an executive officer of
the Borrower or by Guarantor, as the case may be, setting forth details of
the Event of Default or Potential Default and the action which is proposed to
be taken with respect thereto;
(b) as soon as possible, and in any event within five (5)
Business Days after receiving knowledge thereof, written notice of any
action, suit and proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting Borrower or a Guarantor which involves $100,000 or more or would
materially adversely affect the business, properties or condition, financial
or otherwise, of the Borrower or a Guarantor, if adversely determined.
(c) as soon as possible and in any event prior to entering
into any proposed change order or amendment relating to any of the
Construction Documents, and it shall not execute such change order or
amendment without the prior written approval of the Bank.
SECTION 6.03. Bond Documents.
(a) The Borrower shall: (i) observe and perform all
agreements, conditions, undertakings, and covenants in the Bond Documents to
be observed or performed by the Borrower; and (ii) obtain the consent of the
Bank whenever the Borrower is required to obtain the consent of the Trustee
under the Bond Documents.
(b) The Borrower shall not: (i) permit, consent to, or
enter into any amendment or modification of or supplement to the Bond
Documents; or (ii) assign or transfer, voluntarily or involuntarily, by
operation of law or otherwise, any of its right, title, or interest in and to
the Bond Documents (other than to the Trustee or the Bank pursuant to the
Reimbursement Documents or the Bond Documents).
SECTION 6.04. Use of Bond Proceeds.
(a) The Borrower shall use the proceeds of the Bonds solely
to finance the Project, as follows: (i) $1,429,395.97 for refinancing; (ii)
$750,000 for the repayment of deferred interest due to shareholder; and (iii)
$120,604.03 to pay the costs and expenses of the Bonds and a portion of costs
and expenses of the Tax Exempt Bonds.
(b) To the extent and/or the proceeds are not used at
Closing they shall be deposited in the Project Fund established in accordance
with the terms of the Indenture. Upon Bank's request, the Borrower shall
direct the Trustee to invest the proceeds of the Project Fund in an account
of the Bank.
SECTION 6.05 Financial Condition. Borrower and Guarantor shall
maintain, in the Bank's judgment, a satisfactory financial condition, and
shall notify the Bank promptly in writing of any adverse changes in its
financial condition, operations or the Collateral as shown in its financial
statement dated December 31, 1999 and submitted to the Bank.
SECTION 6.06. Maintenance of Records. Borrower and Guarantor shall
maintain accounting records in accordance with generally accepted accounting
principles consistently applied with ledger and account cards and/or computer
tapes and computer discs, computer printouts and computer records pertaining
to the Collateral and the Mortgaged Property which contain information as may
from time to time be requested by Bank. Borrower and Guarantor shall maintain
complete, accurate and current records concerning all of the Collateral and
the Mortgaged Property. Borrower and Guarantor shall not modify or change its
method of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any third
party accounting firm and/or service bureau for the preparation and/or
storage of Borrower's or Guarantor's accounting records without the prior
written consent of Bank and without such accounting firm and/or service
bureau agreeing unconditionally to provide information regarding the
Collateral and Borrower's or Guarantor's financial condition to Bank.
SECTION 6.07. Inspections. Borrower shall permit Bank and any of its
employees, officers or agents, during Borrower's usual business hours, or the
usual business hours of third persons having control thereof, to have access
to and examine (i) the Collateral, (ii) the Mortgaged Property, and (iii) all
of Borrower's books and records, and to make copies therefrom.
SECTION 6.08. Financial Statements. Borrower and Guarantor shall
deliver to Bank the following:
(a) within 120 days after the end of the fiscal year of
Borrower, audited annual financial statements on a consolidated and
consolidating basis prepared by independent certified public accountants of
Borrower approved by Bank, on the basis of generally accepted accounting
principles;
(b) within 45 days after the end of each calendar
quarter period, Borrower's 10Q reports
filed with the Securities and Exchange Commission;
(c) within 120 days after the end of each calendar year,
personal financial statements
and tax returns of Guarantor;
(d) within 90 days after the end of each fiscal year, an
annual budget and projections
for the new fiscal year;
(e) such certificates of non-default as Bank may request
from time to time; and
(f) such other information concerning its business,
property and financial affairs of
Borrower and Guarantor as Bank may request from time to time.
SECTION 6.09. Bank's Costs. Borrower shall immediately reimburse
Bank for all sums expended by Bank in connection with the execution,
delivery, amendment, administration, termination, defense and presentation of
rights under, and enforcement of this Agreement.
SECTION 6.10. Financial Covenants. Prior to the termination of
Borrower's obligations hereunder, the Borrower shall comply with the
following financial covenants at all times, to be reviewed by the Bank
periodically as set forth below:
(a) Senior Debt to Effective Net Worth Ratio. Borrower shall
maintain a ratio of Senior Debt divided by Effective Net
Worth of not more than 2.00 to 1.00 at each fiscal year,
tested annually. "Senior Debt" shall mean the sum of total
liabilities, including capitalized leases and all reserves
for deferred taxes and other deferred sums appearing on the
liabilities side of the balance sheet, in accordance with
generally accepted accounting principles applied on a
consistent basis, excluding debt subordinated to the Bank.
"Effective Net Worth" shall mean total assets (less
intangibles) minus Total Liabilities. "Total Liabilities"
shall mean all liabilities of Borrower, excluding debt
fully subordinated to the Bank on terms and conditions
acceptable to Bank, and including capitalized leases and
all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet, in
accordance with generally accepted account principles
applied on a consistent basis.
(b) Effective Net Worth. Borrower shall, at fiscal year ending
6/30/99, maintain an Effective Net Worth of not less than
four million dollars ($4,000,000.00), at fiscal year ending
6/30/00 maintain an Effective Net Worth of not less than
five million seven hundred fifty thousand dollars
($5,750,000.00), and at fiscal year ending 6/30/01 maintain
an Effective Net Worth of not less than seven million, five
hundred thousand dollars ($7,500,000.00), tested annually.
Thereafter, to the extent that the Letter of Credit is
extended, the Borrower shall maintain Effective Net Worth
as required by the Bank.
(c) Debt Service Coverage Ratio. Borrower shall maintain a Debt
Service Coverage Ratio of not less than 1.50 to 1.00,
tested quarterly on a rolling four-quarter basis. "Debt
Service Coverage Ratio" shall mean the sum of earnings
before interest, taxes, depreciation, and amortization
divided by the sum of interest expense and current
maturities of long term debt and capital leases.
(d) Current Ratio. Borrower shall maintain a Current Ratio of
not less than 1.50 to 1.0, tested quarterly. "Current
Ratio" shall mean the ratio of Current Assets to Current
Liabilities. "Current Assets" and "Current Liabilities"
shall mean all assets (less intangibles) and liabilities
which are so classified in accordance with generally
accepted accounting principles.
All determinations under this Section 6.10 shall be made in
accordance with generally accepted accounting principles consistently
applied.
SECTION 6.11. Warranties. Each warranty and representation contained
in this Agreement shall be automatically deemed repeated with each request
for an advance hereunder and shall be conclusively presumed to have been
relied on by Bank regardless of any investigation made or information
possessed by Bank. The warranties, representations and agreements set forth
herein shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall give, or cause to be
given, to Bank, either now or hereafter.
SECTION 6.12. Maintenance of Collateral. Borrower shall keep and
maintain the Collateral and Mortgaged Property in good condition and repair
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall keep and maintain all items of
equipment as personal property notwithstanding the manner of their annexation
to the Mortgaged Property and their adaptability to the uses and purpose for
which the Mortgaged Property is used.
SECTION 6.13. Accuracy of Information. All financial statements and
information relating to Borrower and Guarantor which may hereafter be
delivered by Borrower or Guarantor to Bank shall be true and correct and have
been prepared in accordance with generally accepted accounting principles
consistently applied.
SECTION 6.14. Bank Expenditures. If the Borrower fails at any time
to obtain insurance covering any of the Collateral or the Mortgaged Property,
maintain or preserve the Collateral or the Mortgage Property, discharge taxes
or Liens at any time placed upon the Collateral or the Mortgaged Property, or
pay or perform any of its obligations hereunder, Bank shall have the right,
in its sole discretion and without liability to Borrower or any other person
or entity, to do any or all of the foregoing. Any such expenditures by Bank
shall be added to the balance due hereunder, bear interest at the Default
Rate and shall be secured by the Collateral and the Mortgaged Property.
SECTION 6.15. Payment of Taxes, Assessments, etc. Borrower shall
make due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment
or deposit thereof. Borrower will make timely payment or deposit of all
F.I.C.A. payments and withholding taxes required of it by all applicable laws
and will upon request furnish Bank with proof satisfactory to Bank that
Borrower has made such payments or deposits.
SECTION 6.16. Maintenance of Existence. Compliance with Laws.
Borrower and any Subsidiary shall each do or cause to be done all things
necessary to preserve and keep in full force and effect its respective
existence, rights, and franchises. Borrower and Guarantor shall not be in
violation of any laws, ordinances, governmental rules and regulations to
which it is subject, and will not fail to obtain or maintain any licenses,
permits, franchises or other governmental authorization necessary to the
ownership and use of its property and the Collateral and the Mortgaged
Property or to the conduct of its business, which violation or failure to
obtain might materially adversely affect any business, operations,
Collateral, Mortgaged Property, or condition (financial or otherwise) of
Borrower.
SECTION 6.17. Omitted.
SECTION 6.18 Compliance with Covenants. Borrower shall not be in
violation of any covenants or restrictions affecting the Property.
SECTION 6.19. Negative Covenants. Borrower covenants and agrees that
it will not, without Bank's prior written consent:
(a) Grant or permit or permit any Subsidiary to create,
assume, or suffer to exist, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind upon the Property or any of its other
assets, whether now owned or hereafter acquired, except:
(i) Capital Lease Obligations and purchase money
liens on and security interests in equipment hereafter acquired securing Debt
not in excess of $100,000 at any time, provided that such liens and security
interests attach only to the equipment so acquired and do not encumber any
other property of the Borrower or any Subsidiary;
(ii) liens for taxes not yet payable or being
contested in good faith by appropriate proceedings for which adequate
reserves have been provided on the books of the Borrower or a Subsidiary;
(iii) mechanics', materialmen's, warehousemen's,
carriers' or other like liens arising in the ordinary course of business of
the Borrower or any Subsidiary, if any, arising with respect to obligations
which are not overdue for a period longer than thirty (30) days or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided on the books of the Borrower or a
Subsidiary;
(iv) pledges or deposits in connection with
workers' compensation, unemployment insurance, or other forms of governmental
insurance or benefits or deposits or pledges to secure the performance of
bids, tenders, contracts, leases, public or statutory obligations, surety or
appeal bonds or other deposits or pledges for purposes of a like general
nature or given in the ordinary course of a business by the Borrower or any
Subsidiary;
(v) the Subordinated Indebtedness; and
(vi) other encumbrances consisting of zoning
restrictions, easements, rights-of-way, restrictions on the use of real
property or minor irregularities in the title thereto, which do not arise in
connection with the borrowing of, or any obligation for the payment of, money
and which in the aggregate, do not materially detract from the value of the
Premises or the business, properties or assets of the Borrower or any
Subsidiary.
(b) Sell, lease, relocate or otherwise transfer or dispose
of any Collateral or Mortgaged Property except only the sale or lease of
inventory in the ordinary course of Borrower's business or the replacement of
equipment with other equipment of a value at least equal to that of the
replaced equipment and purchased by Borrower free of any lien or encumbrance;
(c) Liquidate or merge or consolidate with or into any
other business organization;
(d) Acquire the stock or assets of any other business
organization;
(e) Enter into any transaction not in the usual course of
Borrower's business or otherwise permitted hereunder;
(f) Guarantee or otherwise become in any way liable with
respect to the obligations of any other person or entity;
(g) Make any change in Borrower's financial structure or in
any of its business objectives, purposes or operations which would adversely
affect the ability of Borrower to repay its obligations hereunder;
(h) Incur any debts outside the ordinary course of
Borrower's business.
(i) Make any advance or loan to any other person or entity
except in the ordinary course of business;
(j) Prepay its indebtedness to any other person or entity;
(k) Permit the transfer of controlling interest by William
Farber in the Borrower or any change in the chairman of the board of
directors or the chief operating officer of Borrower without prior written
consent of the Bank;
(m) Accept prepayment of rent under any lease for the
Mortgaged Property or permit any tenant to offset or credit sums due and
payable by Borrower to such tenant against rents, as the case may be, for
more than thirty (30) days in advance;
(n) Make any distributions of dividends to its shareholders
or of profits to its partners (except to the extent required in order to pay
personal income taxes of partners or of shareholders of a subchapter S
corporation);
(o) Enter into any new lease or amend any existing lease
for the Mortgaged Property;
(p) Permit any judgment against Borrower in excess of
$100,000 to remain unsatisfied for a period in excess of fifteen (15) days.
6.20. Environmental Matters.
(a) Borrower covenant and agree that (i) Borrower shall
not, and shall not permit any other person to, locate, store, generate,
manufacture, process, distribute, use, treat, transport, handle, dispose of,
emit, discharge or release any Hazardous Substance in the operation of its
business or on the Mortgaged Property, except that Borrower may use, store
and dispose of Hazardous Substances in the ordinary course of Borrower's
business in reasonable quantities and in compliance with Environmental Laws);
(ii) Borrower shall immediately notify Bank of any violation of or potential
liability under the Environmental Laws; (iii) Borrower shall immediately
comply with any order, action or demand of any governmental agency or legal
or administrative agency having jurisdiction thereof to clean and remove any
Hazardous Substance from the Mortgaged Property or from the operation of its
business an to pay for such clean up, removal and associated costs, fines and
penalties; and (iv) Borrower shall otherwise comply with all Environmental
Laws and laws relating to the storage, handling and disposing of petroleum
products.
(b) At any time Bank shall have the right, but not the
obligation, to conduct or cause to be conducted by any other person
designated by Bank, an environmental audit or similar assessment concerning
the Borrower's compliance with Environmental Laws and to ascertain the
existence of Hazardous Substances on the Mortgaged Property. Borrower shall
pay all costs and expenses associated with such audit or assessment. Bank and
its designees are authorized to enter upon the Premises to perform such audit
or assessment and to conduct all tests necessary including above and below
ground tests. If such audit, assessment or other inquiry reveals the
existence of any Hazardous Substances or noncompliance with Environmental
Laws, Bank, at Borrower's expense, shall have the right, but not the
obligation, to cause Borrower's properties to be treated by persons
designated by Bank, as is necessary in Bank's opinion, to cause the
Borrower's operations on the Mortgaged Property to comply with Environmental
Laws and to be free of Hazardous Substances. Any cost or expense arising from
any audit, assessment or other inquiry and from any treatment not paid by
Borrower may be paid by Bank. Borrower will pay to Bank immediately, and
without demand, all sums of money advanced by Bank pursuant to this paragraph
together with interest on any such advance at the Default Rate and all such
sums and interest thereon shall be secured hereby.
(c) Borrower shall defend, indemnify, and hold harmless
Bank and its directors, officers, agents and employees, from any and all
liabilities (including strict liability), actions, demands, penalties,
losses, costs, or expenses (including without limitation attorneys' fees and
expenses, and remedial costs), suits, costs of any settlement or judgment,
and claims of any and every kind whatsoever which may now or in the future be
paid, incurred, or suffered by or asserted against Bank by any person or
entity or governmental agency for, with respect to, or as a direct or
indirect result of, the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, or release from the Borrower's
operations or the Mortgaged Property of any Hazardous Substances or arise our
of or result from the environmental condition of the Mortgaged Property or
the violation of any Environmental Laws regardless of whether or not caused
by or within the control of Borrower or Bank. The representations, covenants,
warranties, and indemnification's contained in this Section and in Section
5.14 shall survive the termination of this Agreement.
SECTION 6.21 Litigation. The Borrower and any Subsidiary and
Guarantor shall give the Bank prompt written notice of any existing or
pending litigation against the Borrower or any Subsidiary or of any event of
or default hereunder or under the Mortgage or under any other obligation of
the Borrower, whether or not referred to herein or existing at the date
hereof, and of any other matter known to the Borrower which might materially
and adversely affect the Borrower's ability to pay and perform its
obligations hereunder.
SECTION 6.22 ERISA. The Borrower and any Subsidiaries of Borrower
which have or adopt employee benefit plans shall comply in all material
respects with the applicable provisions of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") and shall not permit or suffer any
Reportable Event (as that term is defined in ERISA) to continue with respect
to any such plan.
SECTION 6.25 Borrower's Account. Borrower shall maintain at all
times Borrower's Account at the Bank and shall advise Bank immediately if
Borrower's Account number is changed.
SECTION 6.26 Other Information. The Borrower and Guarantor and any
Subsidiary of Borrower shall furnish the Bank with such other information
concerning their respective business and financial affairs as the Bank shall
reasonably request from time to time and shall each permit the Bank at all
reasonable times and upon reasonable notice to examine and make extracts from
each of their books and records.
SECTION 6.27 Additional Equity Contribution. The Borrower shall
provide, from sources other than the Bonds, the funds necessary to pay the
total cost of the Construction in excess of the amounts available to the
Borrower from the Bond proceeds. If, at any time, the Bank shall determine
that the undisbursed balance of the Bond proceeds will be insufficient to pay
the total cost of constructing the Improvements (including all related soft
costs), the Borrower shall promptly provide the Bank with evidence
satisfactory to the Bank that the Borrower has sufficient funds available to
pay the increased costs as they are incurred, and the Bank reserves the right
to require the Borrower to deposit with the Bank, within fifteen (15)
Business Days after any request by Bank, sufficient funds to complete the
Construction prior to consenting to any further disbursements of the Bond
proceeds.
ARTICLE VII
DEFAULT
SECTION 7.01 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default" under this
Agreement:
(a) Failure by the Borrower to pay any principal, interest,
or other amounts due under this Agreement or the other Reimbursement
Documents (including but not limited to payments due under Section 2.05
hereof), when and in the manner due; or
(b) Failure by the Borrower to observe or perform any
agreements, conditions, undertakings or covenants in this Agreement or the
other Reimbursement Documents to be observed or performed by the Borrower or
Guarantor, other than the obligations set forth in 7.01(a) hereof, and such
failure (if it can be cured to the satisfaction of the Bank) is not cured
within twenty (20) days after the earlier of (i) notice of such failure has
been given to the Borrower by the Bank or (ii) notice of such failure should
have been given to the Bank by the Borrower under Section 6.03; provided that
if the failure to perform is of such a nature that it can be cured, as
determined by the Bank, but not within the 20 day period, such longer period
as it is required to cure the default, but, in any case, not to exceed sixty
(60) days from the initial date of notice of default to Borrower, so long as
Borrower initiates corrective action within such twenty (20) day period and
diligently pursues such action to a conclusion satisfactory to Bank); or
(c) Any representation or warranty made in this Agreement
or the other Reimbursement Documents or furnished by the Borrower in
connection with making this Agreement or the other Reimbursement Documents or
in compliance with their provisions, proves to have been false or erroneous
in any material respect when made; or
(d) Either the Borrower becomes insolvent or unable to pay
its debts as they mature, or files a voluntary petition or suffers any
involuntary petition to be filed against it under any provision of any state
or federal bankruptcy or insolvency statute, or makes an assignment for the
benefit of its creditors, or applies for or consents to the appointment of a
receiver or custodian for its assets, and with respect to the filing of an
involuntary petition, such petition is not dismissed within thirty (30) days
after the filing thereof; or
(e) Any attachment or garnishment is initiated or filed
against either the Borrower or the Guarantor; or
(f) Borrower (i) fails to pay any Credit Obligation owing
by the Borrower, or any interest or premium thereon, when due (whether such
Credit Obligation has become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise) and such failure
continues after any applicable grace period specified in any agreement or
instrument relating to the Credit Obligation, or (ii) fails to perform any
term, covenant or agreement on its part to be performed under any agreement
or instrument relating to any Credit Obligation when required to be performed
and such failure continues after any applicable grace period specified in
such agreement or instrument, if the effect of such failure to perform is to
accelerate, or to permit the acceleration of, with the giving of notice, if
required, the maturity of such Credit Obligation; or
(g) Any of the following events occurs or exists with
respect to Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan; (iii)
the filing under Section 4041 of ERISA of a notice of intent to terminate any
Plan or the termination of any Plan; (iv) any event or circumstance that
might constitute grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4202 of
ERISA from a Multiemployer Plan or the reorganization, insolvency, or
termination of any multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in the
opinion of the Bank subject the Borrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any
combination thereof) which in the aggregate would have a material adverse
effect on the financial connection, properties, or operations of the
Borrower; or
(h) A material adverse change occurs in the business or
financial condition of the Borrower which is unacceptable to the Bank (in a
reasonable and good faith exercise of its discretion) from the condition most
recently disclosed to the Bank in any manner, or the Bank in a reasonable and
good faith exercise of its discretion deems itself or the Collateral or the
Mortgaged Property insecure for any reason whatsoever; or
(i) The Collateral Documents or the Mortgage at any time
and for any reason cease (i) to create valid and perfected security
interests, liens and encumbrances in and to the Collateral or the Mortgaged
Property in accordance with the lien priority specified in this Agreement
(other than loss of perfection as a result of acts or omissions of the Bank
or (ii) to be in full force and effect or are declared null and void, or the
validity or enforceability thereof is contested by either Borrower; or
(j) Any one or more of the Reimbursement Documents at any
time and for any reason cease to be in full force and effect or are declared
null and void, or the validity or enforceability thereof is contested by
either Borrower, or either Borrower denies that it has any further liability
or obligation thereunder; or
(k) A default or event of default otherwise occurs under
the other Reimbursement Documents (subject, to the extent applicable thereto,
to the notice and cure provisions in paragraphs (a), (b), (d) and (e), above,
of this Section 7.01); or
(l) An "Event of Default" occurs under the Indenture (as
those terms are defined in the Indenture) or a default or event of default
otherwise occurs under any other Bond Documents (subject to any applicable
notice and cure provisions contained in the Bond Documents); or
(m) Borrower (i) fails to pay any obligation owing by the
Borrower on the Line of Credit Facility or the Tax Exempt Reimbursement
Agreement or any other Indebtedness, or any interest or premium thereon, when
due (whether such obligation has become due by scheduled maturity, by
required prepayment, by acceleration, by demand or otherwise) and such
failure continues after any applicable grace period specified in any
agreement or instrument relating to the Line of Credit Facility or the Tax
Exempt Reimbursement Agreement or any other Indebtedness, or (ii) fails to
perform any term, covenant or agreement on its part to be performed under any
agreement or instrument relating to any Line of Credit Facility or the Tax
Exempt Reimbursement Agreement or any other Indebtedness when required to be
performed and such failure continues after any applicable grace period
specified in such agreement or instrument, if the effect of such failure to
perform is to accelerate, or to permit the acceleration of the Line of Credit
Facility or the Tax Exempt Reimbursement Agreement or any other Indebtedness;
or
(n) A default of the Borrower under the Swap Agreement or
any Swap Obligations.
During any cure or grace period set forth in this Section
7.01, the Bank shall refrain from the exercise of any remedies provided it
upon default in Section 7.02; provided, however, that the Bank may, during
such period: (i) exercise its right to set off against assets or accounts of
the Borrower or the Guarantor in its possession or control; and (ii) take all
actions with respect to the Collateral or the Mortgaged Property necessary
for the protection of the Collateral or the Mortgaged Property and its
interest therein against third parties, including, if required, the exercise
of the remedies under the provisions of Section 7.02.
SECTION 7.02. Remedies Upon Default.
(a) Upon the occurrence of any Event of Default, the Bank,
in addition to the rights specifically granted in this Agreement, may at its
election exercise the rights and remedies under the other Reimbursement
Documents, in accordance with their respective provisions, and the rights and
remedies now or hereafter existing in equity, at law, by virtue of statute or
otherwise.
(b) Upon the occurrence of any Event of Default:
(i) In the case of an Event of Default other than an
Event of Default referred to in paragraph (d) of Section 7.01, the Bank may,
by written notice to the Borrower, and to the Trustee within five (5)
Business Days after a drawing under the Letter of Credit, refuse to reinstate
the Letter of Credit and/or declare the then outstanding principal of and
accrued and unpaid interest on the Bonds to be immediately due and payable,
whereupon such amounts shall be immediately due and payable; in which event,
the Bank shall notify the Trustee of such acceleration and shall pay to the
Trustee pursuant to the Letter of Credit an amount equal to the outstanding
principal of and the accrued and unpaid interest on the Bonds on such date of
acceleration, whereupon the Letter of Credit shall be terminated
automatically, all without presentment, demand, protest, or other formalities
to the Borrower all of which are expressly waived by the Borrower or
(ii) In the case of an Event of Default referred to in
clause (d) of Section 7.01, the then outstanding principal of and accrued and
unpaid interest on the Bonds shall become automatically due and payable in
which event the Bank shall notify the Trustee of such acceleration and shall
pay to the Trustee pursuant to the Letter of Credit an amount equal to the
unpaid principal of and accrued and unpaid interest on the Bonds on such date
of acceleration, whereupon the Letter of Credit shall be terminated
automatically, all without presentment, demand, protest or other formalities
to the Borrower all of which are expressly waived by the Borrower.
(c) Upon the occurrence of any Event of Default, and upon
notice by the Bank, Borrower shall immediately deposit cash or its equivalent
with the Bank an amount equal to the aggregate contingent liability of the
Bank under the Letter of Credit, and the Bank shall hold all monies so
delivered to it in a cash collateral account under its sole control as
collateral; security for the liabilities and obligations of the Borrower
under the Reimbursement Documents, and shall apply those monies as necessary
to reimburse the Bank after the Bank has honored any drawing under the Letter
of Credit.
(d) Upon the occurrence of any Event of Default, the Bank
may declare the Stated Amount of the Letter of Credit to be immediately due
and payable, whereupon the Stated Amount of the Letter of Credit and all
accrued interest thereon shall become immediately due and payable, without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived by the Borrower.
(e) Upon the occurrence of any Event of Default, the Bank
may notify the Trustee of such occurrence and cause the Trustee to declare
the principal amount of the Bonds then outstanding, together with all accrued
and unpaid interest thereon, to be immediately due and payable, whereupon the
same shall become immediately due and payable pursuant to Section 8.02 of the
Indenture, and the Bank may exercise, or cause to be exercised, any and all
rights and remedies as the Trustee and the Bank may have under the
Reimbursement Documents or the Bond Documents or at law, in equity, by virtue
of statue, or otherwise.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 No Waiver; Cumulative Remedies. No course of dealing
and no failure or delay of the Bank in exercising any right, power or remedy
under this Agreement shall operate as a waiver thereof or shall affect any
other or future exercise thereof or the exercise of any other right, power or
remedy nor shall any single or partial exercise of any such right, power or
remedy or any abandonment or discontinuance of such exercise preclude any
other or further exercise thereof or of any other right, power or remedy
under this Agreement. The rights, powers and remedies of the Bank in this
Agreement are cumulative and not exclusive of any rights, powers, or remedies
which the Bank may otherwise have.
SECTION 8.02 Marshalling. The Bank shall not be required to marshall
any present or future security for, or guaranties or sureties of, the
Indebtedness or to resort to any security or any guaranty or surety in any
particular order, and the Borrower waives, to the fullest extent that it
lawfully may, (i) any right it may have to require the Bank to pursue any
particular remedy before proceeding against the Borrower and (ii) any right
to the benefit of, or to direct the application of the proceeds of the
Collateral or the Mortgaged Property until the Indebtedness has been paid in
full.
SECTION 8.03. Amendments and Waivers. The provisions of this
Agreement may be modified or amended only by a written agreement entered into
by the Borrower and the Bank, and may be waived only by a written waiver
signed by the Bank. No waiver, modification or amendment shall extend to or
affect any obligation not expressly waived, modified or amended, or impair
any right of the Bank related to such obligation.
SECTION 8.04. Notices.
(a) All notices, requests, demands and other communications
that this Agreement requires or permits shall be in writing, and shall be
sent or given by overnight courier providing delivery receipt, or by
certified mail, return receipt requested, or by telecopy, (except that
notices required to be given under Section 7.01 hereof may not be given by
telecopier) addressed as follows:
To Borrower: Lannett Company, Inc.
9000 State Street
Philadelphia, PA 19136
Attn: Jeffrey M. Moshal, Vice President Finance
To Guarantor: William Farber
c/o Lannett Company, Inc.
9000 State Street
Philadelphia, PA 19136
With a copy to: J. Randolph Lawlace, Esquire
Fox, Rothschild, O'Brien & Frankel
2000 Market Street, 10th Floor
Philadelphia, PA 19103-3291
To Bank:
FIRST UNION NATIONAL BANK
123 South Broad Street
Philadelphia, PA 19109
Attention: Jane Sobieski, Vice President or Kevin Dow,
Vice President
With copy to:
Obermayer Rebmann Maxwell & Hippel LLP
One Penn Center, 19th Floor
1617 John F. Kennedy Blvd.
Philadelphia, PA 19103
Attention: Anastasius Efstratiades, Esquire
(b) All notices, requests, demands and other communications
provided in accordance with the provisions of this Agreement shall be
effective: (i) if given by hand delivery, when delivered; (ii) if sent by
overnight courier or telecopier, when received; and (iii) if sent by
certified mail, return receipt requested, the third day after sending.
SECTION 8.05. Costs and Expenses. The Borrower agrees to pay on
demand (a) all reasonable costs and expenses of the Bank in connection with
the preparation, execution, delivery and administration of this Agreement and
the other Reimbursement Documents, and all other instruments and documents to
be delivered under or in connection with this Agreement, and any waivers or
supplements or amendments thereto, including the reasonable fees and expenses
of counsel, fees and expenses of appraisers, accountants, and other
professionals, costs of property and lien searches, and costs of field
audits; and (b) all reasonable costs and expenses of the Bank in connection
with the enforcement of this Agreement and the other Reimbursement Documents,
and all other instruments and documents to be delivered under or in
connection with this Agreement, including the reasonable fees and expenses of
counsel and the reasonable fees and expenses of appraisers, accountants, and
other professionals. Such costs and expenses shall include all reasonable
costs and expenses (including the reasonable fees and expenses of counsel for
the Bank) incurred in connection with: (A) the protection, exercise or
enforcement of the Bank's rights with respect to the Collateral or the
Mortgaged Property; and (B) the assertion, protection, exercise or
enforcement of the Bank's rights in any proceeding under the United States
Bankruptcy Code, including without limitation the preparation, filing and
prosecution of (i) proofs of claim, (ii) motions for relief from the
automatic stay, (iii) motions for adequate protection and (iv) complaints,
answers and other pleadings in adversary proceedings by or against the Bank
or relating in any way to any of the Collateral. Such costs and expenses also
shall include the reasonable fees and expenses of counsel for the Bank in
advising the Bank as to its rights and responsibilities under this Agreement
or the other Reimbursement Documents or under the Letter of Credit and in
representing the Bank in any legal proceeding in which the Trustee seeks to
enforce payment by the Bank under the Letter of Credit or the Borrower seeks
to restrain the Bank from making payment under the Letter of Credit.
SECTION 8.06. Miscellaneous Payment Provisions.
(a) All payments to be made by the Borrower under this
Agreement or the other Reimbursement Documents shall be made to the Bank in
immediately available funds without set-off, counterclaim, deduction or
withholding, at the offices of the Bank or at such other place as may be
directed by the Bank.
(b) Whenever any payment to be made by the Borrower under
this Agreement or the other Reimbursement Documents is stated to be due on a
day that is not a Business Day, such payment shall be made on the next day
that is a Business Day, and such extension of time shall be involved in the
computation of interest and fees due from the Borrower (under Sections 2.03
and 2.04 of this Agreement).
(c) If at any time any payment made by the Borrower under
this Agreement or the other Reimbursement Documents is rescinded or must
otherwise be returned by the Bank for any reason, including, but not limited
to, the insolvency, bankruptcy, or reorganization of the Borrower, the
security interest and liens granted to the Bank and the rights of the Bank
shall be reinstated as though payment had not been made.
(d) If any payment to be made by the Borrower under this
Agreement or the other Reimbursement Documents is not paid on or before the
fifteenth (15) calendar day after the due date thereof, then in addition to
and not in limitation of any other rights or remedies available to the Bank,
the Bank may impose a late charge of equal to the greater of $15.00 or five
percent (5.00%) of the amount due on the due date (the "Late Charge"),
provided that the Late Charge will not be applied to a payment of the entire
outstanding principal and accrued interest due pursuant to a acceleration
under Section 7.02 hereof.
(e) Borrower authorizes the Bank to charge their deposit
accounts at the Bank for the payment, when due, of amounts due under this
Agreement or the other Reimbursement Documents.
SECTION 8.07. Participation. The Bank may grant participations to
one or more banks in the Letter of Credit and the Reimbursement Documents
and, to the extent of any such participation, unless otherwise stated
therein, the assignee and participant shall have the same rights and benefits
under this Agreement and the other Reimbursement Documents as it would have
if it were the Bank under this Agreement and the other Reimbursement
Documents.
SECTION 8.08. Governing Law. This Agreement shall be governed in all
respects by the laws in effect in the Commonwealth of Pennsylvania (without
regard to the principles of conflicts of law) and for all purposes shall be
construed in accordance with such laws.
SECTION 8.09. Headings and Table of Contents. The headings and
tables of contents in this Agreement are for convenience of reference only,
and shall not affect the construction or interpretation of this Agreement or
constitute a part of this Agreement.
SECTION 8.10. Rules of Construction. Unless otherwise expressly
provided in this Agreement or unless the context otherwise requires: (i) the
singular means the plural, and the plural means the singular; (ii) the use of
any gender includes all genders; (iii) all references to Sections and
Exhibits are references to Sections and Exhibits of this Agreement; and (iv)
all references to any time of the day are references to Eastern Standard Time
or Eastern Daylight Savings Time, as in effect in Philadelphia, Pennsylvania.
The use of the words "includes" or "including" shall be construed as words of
illustration only, and not as words of limitation.
SECTION 8.11. Continuing Representations. All agreements,
representations, warranties and covenants made by the Borrower in this
Agreement or the other Reimbursement Documents or in any certificate or other
document delivered to the Bank in connection with this Agreement, shall be
continuing as long as any liabilities and obligations of the Borrower under
this Agreement or the other Reimbursement Documents shall remain outstanding
and unpaid; provided, however, that the covenants set forth in Sections 2.06,
through 2.08, 8.05, and 8.14 through 8.17 shall survive the payment of such
liabilities and obligation.
SECTION 8.12. Binding Effect. This Agreement shall be binding upon
and operate for the benefit of the Borrower and the Bank, and their
respective successors and assigns; provided, however, that the Borrower may
not assign, transfer, or delegate any of its rights or obligations without
the prior written consent of the Bank.
SECTION 8.13. Records. The amounts due and owing under this
Agreement and the other Reimbursement Documents and the unpaid interest and
fees accrued thereon or in connection therewith shall at all times be
ascertained from the records of the Bank, which shall be conclusive evidence
of such amounts, absent manifest error.
SECTION 8.14. Indemnity. The Borrower shall indemnify the Bank
against any loss or expense (including, without limitation, attorneys' fees)
which the Bank may sustain or incur as a consequence of any default by the
Borrower in the performance or observance of any term, condition, covenant,
or undertaking contained in this Agreement or the other Reimbursement
Documents to be observed or performed by the Borrower (including, without
limitation, the failure to pay when due, by acceleration or otherwise, any
principal, interest, fee, or other amount due under this Agreement or the
other Reimbursement Documents).
SECTION 8.15. WAIVER OF JURY TRIAL. BORROWER AND GUARANTOR WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR ANY PROCEEDING
IN ANY WAY ARISING OUT OF OR RELATED TO ANY OF THE FOREGOING, AND BORROWER
AND GUARANTOR EACH AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 8.16. CONSENT TO JURISDICTION AND VENUE. BORROWER AND
GUARANTOR SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COMMONWEALTH OF PENNSYLVANIA FOR THE DETERMINATION OF ANY
CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR THE OTHER
LOAN DOCUMENTS, AND BORROWER AND GUARANTOR EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT, OR OTHER PROCESS IN AN ACTION IN ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COMMONWEALTH OF PENNSYLVANIA AND AGREES THAT ALL
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED
SECTION 8.17. CONFESSION OF JUDGMENT. UPON THE OCCURRENCE OF ANY
EVENT OR DEFAULT, BORROWER IRREVOCABLY AUTHORIZES THE PROTHONOTARY OR ANY
ATTORNEY OF ANY COURT OF RECORD IN PENNSYLVANIA OR ELSEWHERE TO APPEAR FOR
AND CONFESS JUDGMENT AGAINST THE BORROWER FOR ANY AND ALL AMOUNTS UNPAID
UNDER THIS AGREEMENT, INCLUDING INTEREST THEREFROM TO DATE OF PAYMENT (SUCH
AMOUNT AND THE OCCURRENCE OF SUCH EVENT OF DEFAULT TO BE EVIDENCED BY A
COMPLAINT OR AN AFFIDAVIT SIGNED BY AN OFFICER OF THE BANK) TOGETHER WITH
FEES OF COUNSEL, DISBURSEMENTS AND COSTS OF SUIT, RELEASING ALL ERRORS AND
WAIVING RIGHTS OF APPEAL. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT,
SHALL HAVE BEEN FILED IN SUCH PROCEEDING, IT SHALL NOT BE NECESSARY TO FILE
THE ORIGINAL AS A WARRANT OF ATTORNEY. BORROWER WAIVES THE RIGHT TO ANY STAY
OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN
EFFECT. NO SINGLE EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT
SHALL BE DEEMED TO EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL
BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS POWER SHALL
CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE
BANK SHALL ELECT UNTIL ALL AMOUNTS DUE UNDER THIS AGREEMENT SHALL HAVE BEEN
PAID IN FULL.
SECTION 8.18. Liability of Bank. The Borrower agrees that the Bank
shall not have any liability (in tort or otherwise) for any lost profits or
other consequential damage sustained by the Borrower as a result of any
action taken or omitted by the Bank or any of its officers, agents, or
employees in connection with the administration or enforcement of this
Agreement or the other Reimbursement Documents.
SECTION 8.19. Interpretation. This Agreement and the other
Reimbursement Documents shall be construed as one agreement and shall be
interpreted so as to expand, rather than contract, the rights of the Bank;
provided, however, that in the event of inconsistency, the provisions of this
Agreement shall supersede and control the provisions of the other
Reimbursement Documents.
SECTION 8.20. Integration. This Agreement and the other
Reimbursement Documents, together with the Credit Agreement, constitute the
entire agreement and understanding between the Borrower and the Bank related
to the issuance of the Letter of Credit. Borrower acknowledges that, in
entering into this Agreement, not relying on any statement, representation,
warranty, covenant, or agreement of any kind made by the Bank or any employee
or agent of the Bank, other than the agreements of the Bank set forth in this
Agreement.
SECTION 8.21. Conflicts. In case of conflict between any provision
of this Agreement and any provision in any of the Reimbursement Documents,
the provisions of this Agreement shall prevail.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
LANNETT COMPANY, INC
Attest:
_________________________ BY:________________________________
Name:
Title:
(Corporate Seal)
Witness:
- ------------------------- --------------------------------
William Farber
Attest: FIRST UNION NATIONAL BANK
__________________________ BY:________________________________
(Seal) Name:
Title:
EXHIBIT 2.01
FORM OF LETTER OF CREDIT
See tab #7 in this binder
EXHIBIT 2.02
SCHEDULE OF ANNUAL PAYMENTS UNDER THE INDENTURE
EXHIBIT 4.04
REQUEST FOR CONSENT TO DISBURSEMENT NO.
The undersigned, being the ______________ of Lannett Company, Inc.
("Borrower") hereby requests FIRST UNION NATIONAL BANK or its successors
pursuant to the terms of a certain Reimbursement Agreement (the "Agreement")
as of dated _________________, by and between FIRST UNION NATIONAL BANK
("Bank") and the Borrower, to disbursement from the funds held by the Bank
the sum of $______________ to Borrower, in connection with which request the
Borrower hereby certifies to Bank as follows (all terms used herein and
defined in the Agreement shall have the meanings assigned to them in the
Agreement):
(1) that Borrower has fully complied with all of the
provisions of the Agreement and satisfied the following conditions:
(a) All conditions precedent to the issuance of the
Letter of Credit and to disbursements in Sections 4.01, 4.02, 4.03 and 4.04
of the Agreement have been satisfied.
(b) The representations and warranties made by the
Borrower in the Agreement and the other Reimbursement Documents are true and
correct on and as of the date of this request for disbursement.
(c) No Event of Default or Potential Default has
occurred and be continuing or shall result from the funding of the
disbursement.
(d) No material adverse change has occurred in the
condition of the Borrower, financial or otherwise, since the date of the
Agreement.
(e) Without limiting the generality of the foregoing,
the Borrower certifies:
(i) The Contractors listed have delivered certain
requests for payment on AIA Form 703 which are attached hereto for review and
approval by the Bank:
Name of Contractor Amount of Request Amount of Retainage
------------------ ----------------- -------------------
Total:
(f) Other project expenses included in this request
(supported by attached documentation) are as follows:
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrower has duly executed this request for disbursement on this _____ day of
_____________, 199_.
LANNETT COMPANY, INC.
By: ____________________________
Name:
Title:
EXHIBIT 5.01
AFFILIATES AND TRADENAMES
REGISTERED TRADEMARKS
None
EXHIBIT 5.05
LITIGATION
None
EXHIBIT 5.07
CONTINGENT LIABILITIES
None.
EXHIBIT 5.09
EXISTING LIENS AND ENCUMBRANCES
Attach Schedule B-II of marked up Title Commitment
EXHIBIT 6.01
INSURANCE REQUIREMENTS
Borrower shall at all times provide, maintain and keep in force the
following policies of insurance:
(a) Insurance against loss or damage to the Property
by fire and any of the risks covered by insurance of the type now known as
"fire and extended coverage", in an amount not less than the full replacement
cost of the Improvements (exclusive of the cost of excavations, foundations,
and footings below the lowest basement floor), whichever is greater; and with
not more than $1,000.00 deductible from the loss payable for any casualty.
The policies of insurance carried in accordance with this subparagraph (a)
shall contain the "Replacement Cost Endorsement".
(b) Comprehensive public liability insurance
(including coverage for elevators and escalators, if any, on the Property
and, if any construction of new improvements occurs after execution of this
Agreement, completed operations coverage) on an "occurrence basis" against
claims for bodily injury, death or property damage occurring on, in or about
the Property and the adjoining streets, sidewalks and passageways, such
insurance to afford immediate minimum protection to a limit of not less than
that required by Bank with respect to personal injury or death to any one or
more persons or damage to property.
(c) During the course of any construction or repair
of Improvements on the Property, builder's completed value risk insurance
against "all risks of physical loss", including collapse and transit
coverage, during construction of such Improvements, with deductibles not to
exceed $1,000.00, in non-reporting form, covering the total value of work
performed and equipment, supplies and materials furnished.
(d) Boiler and machinery insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against loss of
occupancy or use arising from any such breakdown, in such amounts as are
reasonably satisfactory to Bank.
(e) Insurance against loss or damage to the personal
property by fire and other risks covered by insurance of the type now known
as "fire and extended coverage".
(f) Business interruption insurance in amounts
acceptable to the Bank.
(g) Such other insurances, and in such amounts, as
may from time to time be required by Bank against the same or other hazards.
REIMBURSEMENT AGREEMENT
among
LANNETT COMPANY, INC.,
WILLIAM FARBER
AND
FIRST UNION NATIONAL BANK
(tax exempt bond issue)
- -----------------------------------------------------------------------------
Dated as of April 30, 1999
- -----------------------------------------------------------------------------
EXHIBITS
EXHIBIT 2.01 Form of Letter of Credit
EXHIBIT 2.02 Schedule of Annual Principal
Payments Under Loan Agreement
EXHIBIT 4.04 Request for Disbursement
EXHIBIT 5.01 Affiliates and Tradenames
EXHIBIT 5.05 Litigation
EXHIBIT 5.07 Contingent Liabilities
EXHIBIT 5.09 Existing Liens and Encumbrances
EXHIBIT 6.01 Insurance Requirements
REIMBURSEMENT AGREEMENT
AGREEMENT made as of the 30th day of April, 1999, by and between
LANNETT COMPANY, INC., a Delaware corporation, with its principal place of
business at 9000 State Road, Philadelphia, PA (the "Borrower"), William
Farber ("Guarantor") and FIRST UNION NATIONAL BANK a national banking
association with offices at 123 S. Broad Street, Philadelphia, PA (the
"Bank").
BACKGROUND
A. The Borrower has requested the Philadelphia Authority for
Industrial Development (the "Authority") to finance a certain project by the
issuance of $3,700,000 aggregate principal amount of Variable Rate
Demand/Fixed Rate Industrial Development Bonds (Lannett Company, Inc.
Project) Series of 1999 (the "Bonds") pursuant to a Trust Indenture dated as
of April 30, 1999 (the "Indenture") between the Authority and First Union
National Bank (the "Trustee").
B. The project being financed with the bonds involves (i) the
construction of a 33,000 square foot expansion of a facility pursuant to
certain plans and specifications to be approved by the Bank at certain
property known as 9000 State Road, Philadelphia, PA, (the "9000 State Road
Facility") or the acquisition and renovation (pursuant to plans and
specifications to be approved by the Bank) of a facility located at 9030
State Road, Philadelphia, PA,(the "9030 State Road Facility") (ii) the
acquisition of manufacturing equipment, , and (iii) payment of a portion of
the costs and expenses of such financing (collectively the "Project"). The
properties located at 9000 State Road Facility, Philadelphia, PA and at 9030
State Road Facility, Philadelphia, PA are collectively referred to as the
"Property."
C. Borrower has requested the Bank to issue to and for the benefit
of the Trustee, and for the account of the Borrower, an Irrevocable Direct
Pay Letter of Credit in the initial stated amount of $3,769,945.20 to secure
the payment of the principal of $3,700,000.00 and up to 46 days of interest
accrued on the Bonds (the "Letter of Credit").
D. The Bank is willing to issue the Letter of Credit to and for the
benefit of the Trustee, and for the account of the Borrower, on the terms and
subject to the conditions set forth below.
NOW THEREFORE, in consideration of the foregoing and of the
covenants and mutual agreements set forth below, and intending to be legally
bound, the parties agree:
ARTICLE I
DEFINITIONS AND OTHER TERMS
SECTION 1.01 Certain Defined Terms. In addition to other terms
defined elsewhere in this Agreement, the following terms as used in this
Agreement shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
Accounts has the meaning given to that term in the Uniform
Commercial Code, and includes Contract Rights.
Agreement means this Reimbursement Agreement, as the same may be
amended, modified or supplemented from time to time.
Annual Fee has the meaning given to that term in Section 2.03.
Annual Payment Date has the meaning given in Section 2.02.
Authority has the meaning given to that term in the Background of
this Agreement and includes any successor to the Authority.
Bank means FIRST UNION NATIONAL BANK
Bond Documents means the Indenture, the Loan Agreement, and the
Bonds, and all agreements, documents, and instruments (other than the
Reimbursement Documents) now or hereafter executed or delivered in connection
with the Indenture or the Loan Agreement or the issuance of the Bonds.
Bonds has the meaning given to that term in the Background of this
Agreement.
Borrower means LANNETT COMPANY, INC.
Borrower's Account means Borrower's operating account.
Business Day means a day other than (i) a Saturday or Sunday, (ii) a
day on which commercial banks in the Commonwealth of Pennsylvania, or State
of New York, are authorized or required to close or (iii) a day in which the
New York Stock Exchange is closed.
Capital Lease Obligations shall mean, collectively, the obligations
to pay rent or other amounts under any lease of or other arrangement
conveying the right to use real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person pursuant to and in
accordance with GAAP, and the amount of such obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
Chattel Paper has the meaning given to that term in the Uniform
Commercial Code.
Closing Date means the date of the issuance of the Bonds under and
pursuant to the Indenture.
Collateral means all of the property and assets of the Borrower, the
Guarantor or the Authority, as the case may be, described in Sections 3.01 or
3.03 or in the Collateral Documents.
Collateral Documents means the Security Agreement described in
Section 3.01, and the Assignments and the Pledge Agreement described in
Section 3.03, and all other agreements, documents, lien instruments, and
certificates heretofore or hereafter delivered by the Borrower and Guarantor
or the Authority to the Bank granting to the Bank a security interest, lien
or other encumbrance upon any property or assets of the Borrower or the
Authority (as security for the Indebtedness).
Commitment Fee has the meaning given to that term in Section 2.03.
Construction means, as applicable, the construction at the 9000
State Road Facility referred to in the Background section of this Agreement
or the renovation of the 9030 State Road Facility referred to in the
Background section of this Agreement.
Construction Contract means the contract between Borrower and the
general contractor for the Construction, approved by the Bank.
Construction Consultant has the meaning set forth in Section
6.17(e).
Construction Documents has the meaning given to that term in
Subsection 4.02(s).
Construction Permits has the meaning given to that term in
Subsection 4.02(r).
Conversion Date has the meaning given to that term in the Indenture.
Contract Right means any right to payment under a contract not yet
earned by performance and not evidenced by an Instrument or Chattel Paper.
Credit Obligation means any obligation for the payment of borrowed
monies (other than monies borrowed from the Bank) or the deferred purchase
price of property or services.
Current Assets has the meaning set forth in section 6.10.
Current Liabilities has the meaning set forth in section 6.10.
Current Ratio has the meaning set forth in section 6.10.
Debt Service Coverage Ratio has the meaning set forth in section
6.10.
Default Rate has the meaning given to that term in Subsection
2.04(b).
Documents has the meaning given to that term in the Uniform
Commercial Code.
Drawing has the meaning given to that term in the Letter of Credit,
which shall be a drawing in respect of the payment of principal and/or
interest on the Bonds.
Effective Net Worth Ratio has the meaning given to that term in
Section 6.10.
Environmental Laws collectively means and includes all present and
future laws and any amendments (whether common law, statute, rule, order,
regulation or otherwise), permits, and other requirements or guidelines of
governmental authorities relating to the environment and environmental
conditions or to any Hazardous Substance or Hazardous Substance Activity
(including, without limitation, CERCLA, the Federal Resource Conservation and
Recovery Act of 1976, 42 U.S.C. ss.6901, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. ss.6901, et seq., the Federal Water Pollution
Control Act, 33 U.S.C. ss.1251, et seq., the Clean Air Act, 33 U.S.C.
ss.7401, et seq., the Clean Air Act, 42 U.S.C. ss.7401, et seq., the Toxic
Substances Control Act, 15 U.S.C. ss.2601-2629, the Safe Drinking Water Act,
42 U.S.C. ss.300f-300j, the Emergency Planning and Community Right-To-Know
Act, 42 U.S.C. ss.1101, et seq., and any so-called "Super Fund" or "Super
Lien" law, environmental laws administered by the Environmental Protection
Agency, the Pennsylvania Solid Waste Management Act, 35 P.S.
ss.ss.6018.101-108, the Pennsylvania Hazardous Sites Cleanup Act, 35 Pa.
C.S.A. ss.ss.6020.101, et seq., any similar state and local laws and
regulations, all amendments thereto and all regulations, orders, decisions,
and decrees now or hereafter promulgated thereunder).
Equipment has the meaning given to that term in the Uniform
Commercial Code, and includes fixtures.
ERISA means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time, and the regulations and published
interpretations thereof.
ERISA Affiliate means any trade or business, whether or not
incorporated, which together with the Borrower or Guarantor, as the case may
be, would be treated as a single employer under Section 4001 of ERISA.
Event of Default has the meaning given to that term in Section 7.01.
Expiry Date has the meaning given to that term in Section 2.01.
First Mortgage has the meaning given to that term in Section 3.02 of
this Agreement.
General Intangibles has the meaning given to that term in the
Uniform Commercial Code.
Guarantor means William Farber.
Guaranty Agreement has the meaning given to that term in Section
3.04.
Hazardous Substances means "hazardous substances" (as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sec. 9601 et seq., and the New Jersey Industrial Site Recovery Act
N.J.S.A.13: 1K-5 et seq., "hazardous wastes" (as defined in the Resource
Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.), "toxic
substances" (as defined in the Toxic Substances Control Act, 15 U.S.C. Sec.
2601 et seq.), and all other pollutants and contaminants regulated or
controlled by, or required to be removed or remediated under any
Environmental Law.
Improvements has the meaning given to that term in Section 6.17(i)
of this Agreement.
Indebtedness means (i) all indebtedness and other liabilities and
obligations now or hereafter owing by the Borrower to the Bank under this
Agreement or the other Reimbursement Documents to which the Borrower is
party, (ii) all Swap Obligations of Borrower to the Bank or any of its
affiliates now existing or hereinafter incurred, and (iii) all other
indebtedness and other liabilities and obligations of the Borrower to the
Bank (including any past, present or future advances, readvances,
substitutions, extensions, renewals, interest, late charges, penalties, and
fees of any and all types), whether primary or secondary, absolute or
contingent, direct or indirect, joint, several, or independent, voluntary or
involuntary, similar or dissimilar, related or unrelated (including
overdrafts), now or hereafter existing, due or to become due, or held or to
be held by the Bank for its own account or as agent for others, whether
created directly or acquired by negotiation, assignment or otherwise.
Indenture has the meaning given to that term in the Background of
this Agreement and includes any amendments, modifications, or supplements to
the Indenture.
Instruments has the meaning given to that term in the Uniform
Commercial Code.
Interest Payment Date has the meaning given to that term in the
Indenture.
Internal Revenue Code means the Internal Revenue Code of 1986, as
the same may be amended from time to time, and the regulations and published
interpretations thereof.
Inventory has the meaning given to that term in the Uniform
Commercial Code.
Letter of Credit has the meaning given to that term in the
Background of this Agreement.
Line of Credit Facility means a certain facility given by the Bank
to Borrower pursuant to the terms of a certain Loan Agreement dated March 11,
1999 between Bank and Borrower, as amended.
Loan Agreement means the Loan Agreement dated as of April 30, 1999
between the Authority and the Borrower, relating to the Bonds, as the same is
amended, modified or supplemented from time to time.
Mortgage has the meaning given to that term in Section 3.02 of this
Agreement.
Mortgaged Property means the Property, provided that if Borrower
elects to build an expansion of the 9000 State Road Facility, rather than
purchasing the 9030 State Road Facility, this term shall include only the
9000 State Road Facility.
Multi-employer Plan means a Plan described in Section 4001(a)(3) of
ERISA that covers employees of the Borrower or Guarantor, as the case may be,
or of an ERISA Affiliate.
9000 State Road Facility has the meaning set forth in the Background
section of the Agreement.
9030 State Road Facility has the meaning set forth in the Background
section of this Agreement.
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Plan means any plan established, maintained, or to which
contributions have been made, by the Borrower or Guarantor, as the case may
be, or by an ERISA Affiliate.
Plans and Specifications the plans and specifications approved by
the Bank with respect to the Construction.
Pledged Bonds has the meaning given to that term in the Indenture.
Potential Default shall mean any event or condition which with
notice or the passage of time, or both, would constitute an Event of Default.
Prime Rate means the floating annual rate of interest that is
designated from time to time by the Bank as its Prime Rate and used by the
Bank as a reference base with respect to different interest rates charged to
borrowers; it being understood that such rate may not be the lowest rate of
interest at which the Bank makes loans to borrowers.
Principal Installment Payment Day has the meaning given to that term
in Section 2.02(a)(i).
Prohibited Transaction means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code.
Project has the meaning given to that term in the Background Section
of this Agreement.
Project Fund has the meaning given in Section 6.05.
Property has the meaning given to the term in the background section
of this Agreement.
Protected Area has the meaning given to that term in section 5.14.
Real Estate Purchase has the meaning set forth in Section 6.28.
Regular Rate has the meaning given to that term in Section 2.04(a).
Reimbursement Documents means this Agreement, the Mortgage, and the
Collateral Documents, and any other agreements, documents, or instruments now
or hereafter executed or delivered by or on behalf of the Borrower or the
Authority to the Bank in connection with the issuance of the Letter of
Credit.
Reportable Event means any of the events set forth in Section 4043
of ERISA.
Senior Debt has the meaning given to that term in Section 6.10.
Sinking Fund Account has the meaning given to that term in Section
2.05.
Stated Amount has the meaning given to that term in the Letter of
Credit.
Subordinated Indebtedness means the indebtedness of Borrower to
Guarantor, the payment of which is subordinated to the Indebtedness on terms
approved in writing in advance by the Bank.
Subsidiary means, with respect to a parent corporation, each
corporation of which more than fifty percent (50%) of its outstanding capital
stock with ordinary voting power is at the time owned by the parent
corporation or by one or more other Subsidiaries of the parent corporation or
by a combination of the parent corporation and other Subsidiaries.
Substitute Letter of Credit shall have the meaning set forth in the
Indenture.
Swap Agreement means an ISDA Master Agreement which may be entered
into between the Borrower and the Bank or any affiliate of the Bank,
including the Schedule and Confirmations (and such terms are defined in the
ISDA Master Agreement), and any future amendments, restatements,
modifications or supplements thereof or thereto.
Swap Obligations means all obligations and liabilities of the
Borrower to the Bank or any affiliate thereof under the Swap Agreement and
any related documents or any other swap transaction.
Taxable Reimbursement Agreement means that certain Reimbursement
Agreement between the parties of even date herewith, pursuant to which the
Bank has issued a letter of credit with respect to Borrower's bonds in the
principal amount of $2,300,000. .
Total Liabilities has the meaning set forth in section 6.10.
Trustee has the meaning given to that term in the Background of this
Agreement and includes any successor trustee under the Indenture to which the
Letter of Credit is transferred in accordance with its terms.
Uniform Commercial Code means the Uniform Commercial Code of
Pennsylvania, as the same may be amended from time to time.
Unused Bond Proceeds has the meaning set forth in Section 6.04(c).
SECTION 1.02. Accounting and Other Terms.
(a) All accounting terms not specifically defined in this
Agreement shall be construed, and all calculations with respect to accounting
or financial matters shall be computed, in accordance with generally accepted
accounting principles, applied in a manner consistent with the application of
the principles in the preparation of the financial statements mentioned in
Section 5.04.
(b) All terms used and not otherwise defined in this
Agreement that are defined in the Uniform Commercial Code shall have the
meanings given to them in the Uniform Commercial Code.
ARTICLE II
LETTER OF CREDIT
SECTION 2.01. The Letter of Credit. Subject to the terms and
conditions of this Agreement, the Bank agrees to have issued and delivered
the Letter of Credit, in the initial Stated Amount of $3,769,945.20 and
substantially in the form attached as Exhibit 2.01, to and for the benefit of
the Trustee and for the account of the Borrower, upon the Closing Date. The
Letter of Credit shall expire on the close of business on October 31, 2002
(the "Expiry Date"), or, if such day is not a Business Day, on the next
succeeding Business Day. Borrower may request a one (1) year extension of the
Expiry Date by submitting a written request to the Bank at least sixty (60)
days prior to the first year anniversary date from the date of the issuance
of the Letter of Credit. If the Bank agrees to the extension of the Expiry
Date, the new Expiry Date may also be extended in accordance with the
procedure set forth in the previous sentence. Anything in this section to the
contrary notwithstanding, the Bank shall have no obligation to grant any
renewal or extension of the Letter of Credit.
SECTION 2.02. Reimbursement and Other Payments.
(a) The Borrower shall pay to the Bank, immediately after
the honoring by the Bank of a Drawing under the Letter of Credit and without
any further notice, demand or declaration hereunder, (1) a sum (and interest
on such sum as provided in clause (3) below) equal to the amount so drawn
under the Letter of Credit; (2) any and all reasonable charges and expenses
that the Bank may pay or incur relating to the Letter of Credit; and (3)
interest on any and all amounts unpaid by the Borrower when due hereunder
from the date such amounts become due until payment in full, payable on
demand, calculated in accordance with the provisions of Section 2.03 below.
Notwithstanding the foregoing, but subject in all events to the Borrower's
reimbursement obligations, Borrower agrees to pay to the Bank in advance, the
following amounts at the following times, to be held by the Bank as security
for all of Borrower's reimbursement and other obligations hereunder:
(i) Principal. An amount equal to the principal
due on the Bonds on May 1 of each year in accordance with Exhibit 2.02
("Annual Payment Date") shall be deposited by the Borrower in advance in the
Sinking Fund Account in twelve (12) equal installments, the first such
installment payable on June 1 and additional installments payable on the
first day of each month thereafter (the "Principal Installment Payment
Date").
(ii) Redemption. An amount equal to any principal,
premium, if any, and interest due on the Bonds as a result of an optional or
mandatory redemption pursuant to the Indenture shall be deposited by Borrower
in advance at least thirty (30) days prior to the date established for
redemption in the Sinking Fund Account.
(iii) Interest. Prior to the Conversion Date, an
amount equal to the interest due on the Bonds on each Interest Payment Date
shall be deposited by the Borrower at the Bank in advance on the first day of
the month preceding such Interest Payment Date; provided that with respect to
interest due on the Bonds on the first Interest Payment Date following the
Closing Date, if less than one (1) full calendar month will elapse between
the Closing Date and the first Interest Payment Date thereafter, then an
amount equal to the interest due on such Interest Payment Date shall be paid
on the Closing Date. Subsequent to the Conversion Date, an amount equal to
one sixth (1/6) of the amount of interest due on the Bonds on the Interest
Payment Date under the Indenture shall be deposited by the Borrower in the
Sinking Fund Account on the first day of each month.
(iv) Tender Purchase Price. The Borrower shall pay
to the Bank any Drawing in respect of the tender purchase price due on any
Bonds immediately upon receipt of notice from the Bank of such Drawing.
(v) Reimbursement After Drawing. The Bank shall
have the right to be reimbursed immediately after a Drawing by debiting the
accounts where the Borrower's funds are deposited pursuant to subparts
(i)-(iii) hereof.
(b) If any enactment, promulgation or adoption of or change
in any law, regulation, or rule or, in the interpretation or administration
or governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall (i) impose, modify or
deem applicable any reserve, special deposit or similar requirement
(including a request or requirement which affects the manner in which the
Bank allocates capital resources to its commitments, including its
obligations under this Agreement and the Letter of Credit), (ii) subject the
Bank to any tax or change the basis of taxation of the Bank (other than a
change in a rate of tax based on overall net income of the Bank), or (iii)
impose on the Bank any other condition regarding this Agreement or the Letter
of Credit, and if the result of any event referred to in clause (i), (ii) or
(iii) shall be to increase the direct or indirect cost to the Bank amounts
receivable by the Bank under this Agreement (which increase in cost or
reduction in amounts receivable shall be determined by the Bank's reasonable
allocation of such cost increase or reduction in amounts receivable resulting
from such event), then within ten (10) Business Days after demand by the
Bank, the Borrower shall pay to the Bank, from time to time as specified by
the Bank, additional amounts that in the aggregate shall be sufficient cost
or reduction in amounts receivable. A certificate setting forth in reasonable
detail such increased cost incurred or reduction in amounts receivable by the
Bank as a result of any event mentioned in clause (i), (ii) or (iii) shall be
submitted by the Bank to the Borrower, and such certificate shall be
conclusive, as to the amount(s) thereof, absent manifest error.
SECTION 2.03. Fees.
(a) The Borrower shall pay a commitment fee at Closing in
the amount of 0.25 percent (0.25%) per annum of the Stated Amount of the
Letter of Credit.
(b) The Borrower shall pay an opening commission charge at
Closing in the amount of seventy-five dollars ($75.00).
(c) The Borrower shall pay to the Bank an annual fee
(computed on the basis of the actual number of days in the calendar year
divided by 360) at the rate of one percent (1%) per annum of the Stated
Amount of the Letter of Credit (the "Annual Fee"). The Annual Fee shall be
calculated on each (based on the Stated Amount on such day) and shall be
payable in advance on each November 1; the Annual Fee, for the period
beginning on the date of issuance of the Letter of Credit and ending on
October 31, 2000, shall be payable on the date of issuance of the Letter of
Credit. The amount of the Annual Fee shall not be reduced, and no portion of
the Annual Fee shall be refunded regardless of the date on which the Bonds
are repaid; provided, however, if prior to the expiration of any annual
period for which the Annual Fee has been paid, the Letter of Credit is
surrendered to the Bank for cancellation upon redemption of the Bonds as a
whole, and so long as no Event of Default has occurred and is continuing,
then a portion of the Annual Fee shall be refunded based on the number of
days in such annual period that the Letter of Credit is no longer outstanding
and available for drawing by the Trustee.
(d) The Borrower shall pay to the Bank, on demand, all
reasonable transaction charges that the Bank may make for a drawing under the
Letter of Credit and all reasonable costs expenses that the Bank may incur or
pay relating to the Letter of Credit, including, without limitation a fifty
dollar ($50.00) fee per Drawing (subject to increase). The Borrower also
shall pay to the Bank, upon each transfer of the Letter of Credit in
accordance with the terms of the Letter of Credit, a transfer fee of two
thousand five hundred dollars ($2,500.00) together with all reasonable costs
and expenses incurred by the Bank in connection with such transfer. The
Borrower also shall pay to the Bank, upon any amendment of the Letter of
Credit in accordance with the terms of the Letter of Credit, an amendment fee
of fifty dollars ($50.00) together with all reasonable costs and expenses.
Should the Letter of Credit be terminated prior to its expiration date as a
result of the delivery of a Substitute Letter of Credit by another bank or
financial institution other than the Bank, the Borrower shall pay to the
Bank, upon demand, a termination fee of five thousand dollars ($5,000.00).
SECTION 2.04. Interest.
(a) All amounts due to the Bank under this Agreement
(including all amounts due under Sections 2.02 and 2.03) shall be accompanied
by interest thereon, from the date such amounts become due until paid in full
at an annual rate equal to the Bank's Prime Rate plus one percent (1%) (the
"Regular Rate") (before and after judgment). Interest shall be computed on
the basis of the actual number of days in the calendar year divided by 360
and the rate of interest shall change automatically and simultaneously as of
the date of each change in the Bank's Prime Rate.
(b) Upon the occurrence of any Event of Default, interest
shall accrue on amounts due under this Agreement at an annual rate (before
and after judgment) equal to the Bank's Prime Rate plus three percent (3%)
per annum (the "Default Rate").
SECTION 2.05. Sinking Fund Account.
(a) The Borrower shall establish and maintain an interest-bearing
deposit account with the Bank into which the Borrower shall deposit with the
Bank all the sums required to be deposited pursuant to Section 2.02 (a)(i)
through (iii) (the "Sinking Fund Account").
(b) The Sinking Fund Account established pursuant to this Section
2.05 shall be under the sole control of the Bank, and the Borrower shall have
no right to withdraw any funds in such deposit account or to use any funds in
such deposit account except in payment of the liabilities and obligations
owing by the Borrower to the Bank under this Agreement or the other
Reimbursement Documents (including the obligation of the Borrower to
reimburse the Bank for amounts drawn under the Letter of Credit). As
additional security for the payment, performance, and discharge of all
liabilities and obligations of the Borrower under this Agreement or the other
Reimbursement Documents, Borrower assigns to the Bank, and grants to the Bank
a first priority security interest in and lien upon and right of set-off
against, the deposit account established pursuant to this Section 2.05 and,
at any time and from time to time at the request of the Bank, the Borrower
shall execute and deliver any assignments, documents, and instruments
reasonably requested by the Bank to further evidence or perfect such
assignment and such security interest, lien and right of set-off.
SECTION 2.06. Obligations Absolute. The obligations of the Borrower
under this Article II shall be absolute and unconditional and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including the following circumstances: (i) any lack
of validity or enforceability of the Letter of Credit, the Bond Documents, or
any agreement, document or instrument relating thereto; (ii) any amendment or
waiver of or any consent to or departure from the Letter of Credit, the Bond
Documents or any agreement, document, or instrument relating thereto; (iii)
the existence of any claim, set-off, defense or other right which the
Borrower may have at any time against the Trustee (or any persons or entities
for whom the Trustee may be acting), the Bank, or any other person or entity,
whether in connection with any unrelated transactions described in this
Agreement, or any unrelated transactions; or (iv) any of the circumstances
contemplated in clauses (1) through (7), of paragraph (a) of Section 2.08.
The Borrower understands and agrees that no payment by the Borrower or any
third party under any other agreement (whether voluntary or otherwise) shall
constitute a defense to their obligations under this Agreement, except to the
extent that the Bank has been indefeasibly paid in full.
SECTION 2.07. Indemnification. To the extent permitted by applicable
law, the Borrower agrees to indemnify and hold harmless the Bank and its
directors, officers, employees and agents from and against any and all
claims, damages, losses, liabilities, costs or expenses (including reasonable
attorneys' fees) which the Bank may incur or which may be claimed against the
Bank by any person or entity whatsoever by reason of or in connection with
(a) the issuance and sale of the Bonds (including any actual or alleged
misstatements or omissions in any placement memorandum relating to the
offering of the Bonds), (b) the issuance or a transfer of, or payment or
failure to pay under, the Letter of Credit (c) any breach by the Borrower of
any representation, warranty, covenant, term or condition in, or the
occurrence of any default under the Reimbursement Documents or the Bond
Documents, including all reasonable claims or liabilities arising as a result
of any such breach or default, and (d) involvement of the Bank in any legal
suit, investigation, proceeding, inquiry or action as a consequence, direct
or indirect, of the issuance by the Bank of the Letter of Credit or its
entering into this Agreement, or any other event or transaction contemplated
by any of the foregoing; provided, however, the Borrower shall not be
required to indemnify the Bank for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused solely by (i)
the willful misconduct or gross negligence of the Bank, (ii) the wrongful and
willful failure by the Bank to pay under the Letter of Credit after the
presentation to it by the Trustee of a draft and certificate strictly
complying with the terms and conditions of the Letter of Credit, unless the
Bank in good faith believes that it is prohibited by law or other legal
authority from making such payment or (iii) any untrue statement contained in
information furnished in writing by the Bank to the Borrower for use in any
placement memorandum.
SECTION 2.08. Liability of Bank.
(a) As between the Borrower and the Bank, Borrower assumes
all risks of the acts or omissions of the Trustee with respect to the
Trustee's use of the Letter of Credit. Neither the Bank nor any of its
officers, directors, employees, or agents shall be liable or responsible for:
(1) the use which may be made of the Letter of Credit or for any act or
omissions of the Trustee in connection with the Letter of Credit; (2) the
form, validity, sufficiency, accuracy or genuineness of any documents
(including any documents presented under the Letter of Credit), or of any
statement in or endorsement on such documents, even if any such documents,
statements or endorsements should in fact prove to be in any or all respects
invalid, insufficient, fraudulent, forged, inaccurate, or untrue; (3) the
payment by the Bank against presentation of documents which do not comply
with the terms of the Letter of Credit, or any other failure by the Trustee
to comply fully with conditions required in order to effect a drawing under
the Letter of Credit; (4) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the Letter of
Credit or the rights or benefit under or proceeds of the Letter of Credit, in
whole or in part, which may prove to be invalid or ineffective for any
reason; (5) errors, omissions, interruptions, losses or delays in
transmission or delivery of any messages by mail, cable, telegraph, telex,
telephone or otherwise; (6) any loss or delay in the transmission or
otherwise of any document or draft required in order to make a drawing under
the Letter of Credit; or (7) any other circumstances whatsoever in making or
failing to make payment under the Letter of Credit; except only that the
Borrower shall have a claim against the Bank, and the Bank shall be liable to
the Borrower, to the extent, but only to the extent, of any direct, as
opposed to consequential, damages suffered by the Borrower which the Borrower
proves were caused solely by (i) the willful misconduct or gross negligence
of the Bank or (ii) the wrongful and willful failure by the Bank to pay under
the Letter of Credit after the presentation to it by the Trustee of a draft
and certificate strictly complying with the terms and conditions of the
Letter of Credit, unless the Bank in good faith believes that it is
prohibited by law or other legal authority from making such payment. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without responsibility
for further investigation, regardless of any notice or information to the
contrary; provided, however that if the Bank should receive written
notification from both the Trustee and the Borrower that documents conforming
to the terms of the Letter of Credit presented to the Bank are not to be
honored, the Bank agrees that it will not honor such documents.
(b) Except for the obligations of the Bank under the Letter
of Credit, the Bank shall have no liability to the Borrower or any other
person or entity as a result of any reduction of the credit rating or any
deterioration in the financial condition of the Bank. No such reduction or
deterioration shall reduce or in any way diminish the obligations of the
Borrower to the Bank under this Agreement, including the obligation of the
Borrower to pay the Annual Fee to the Bank or to reimburse the Bank for any
drawing under the Letter of Credit.
ARTICLE III
COLLATERAL
SECTION 3.01. Security Interests. As security for the payment,
performance and discharge of the Indebtedness, the Borrower grants to the
Bank (and ratifies and confirms the grant of): (i) a first priority security
interest in and lien upon all Accounts, Contract Rights, General Intangibles,
Chattel Paper, Inventory, Instruments, Documents, Equipment, and other assets
in which the Borrower now has or hereafter may acquire any interest, wherever
located, and in all proceeds and products thereof, as more fully described
in, and under the terms and conditions of the Security Agreement all dated as
of even date herewith, from Borrower to the Bank, and (ii) a security
interest in and lien upon, and right of set-off against, all funds or other
assets of the Borrower now or at any time hereafter on deposit with or in the
possession of the Bank or owing by the Bank to the Borrower and in all assets
of the Borrower in which the Bank now has or at any time hereafter may obtain
a lien, mortgage, or security interest for any reason.
SECTION 3.02. Mortgage. As security for the payment, performance,
and discharge of all liabilities and obligations of the Borrower under this
Agreement or the other Reimbursement Documents, or otherwise arising in
connection with the Letter of Credit, Company shall execute and deliver to
the Bank, contemporaneously with the execution and delivery of this
Agreement, in form and substance satisfactory to the Bank, a mortgage and
security agreement (the "First Mortgage") on the 9000 State Road Facility and
all buildings, structures, renovations, alterations, additions, and
improvements, and all machinery, equipment, fixtures, and other personal
property (including appliances, furniture, furnishings and equipment)
installed in or on, or used in connection with, such property. The lien of
the Mortgage shall be a first priority lien on the Mortgaged Property except
(i) possible prior liens for taxes not yet due and payable and (ii) easements
and restrictions presently of record and approved by the Bank. If Borrower
elects to purchase the 9030 State Road Facility, it shall execute and deliver
to the Bank a first mortgage on the 9030 State Road Facility, and all
references herein to the Mortgage or First Mortgage shall refer collectively
to the mortgages on the 9000 State Road Facility and the 9030 State Road
Facility.
SECTION 3.03. Assignments and Pledge Agreement. As security for the
payment, performance and discharge of all liabilities and obligations of the
Borrower under this Agreement or the other Reimbursement Documents, or
otherwise arising in connection with the Letter of Credit: (i) the Authority
shall assign to the Bank all of its right, title, and interest in and to the
Loan Agreement, as more fully described in and under the terms and conditions
of the Assignment of Loan Agreement dated the date of this Agreement from the
Authority to the Bank; (ii) the Borrower shall assign to the Bank all of its
right, title, and interest in and to all present and future leases, rental
agreements and other tenancies of the Mortgaged Property, as more fully
described in and under the terms and conditions of the Assignment of Leases
and Rents dated the date of this Agreement from the Borrower to the Bank;
(iii) the Borrower shall assign to the Bank all of its title, right and
interest in and to the Construction Documents, as more fully described in and
under the terms of the Assignment of Construction Documents dated as of the
date of this Agreement from Borrower to the Bank, (iv) the Borrower shall
assign to the Bank, and grant to the Bank a first priority security interest
in, all of its right, title, and interest in and to the Pledged Bonds, as
more fully described in and under the terms and conditions of the Pledge and
Security Agreement dated the date of this Agreement between the Borrower and
the Bank; and (v) the Borrower shall assign to the Bank, and grant to the
Bank a first priority security interest in and lien upon, all of its right,
title, and interest in and to the Sinking Fund Account and all assets in said
Account as more fully described in and under the terms and conditions of the
Assignment and Security Agreement dated the date of this Agreement from the
Borrower to the Bank.
SECTION 3.04. Guaranty Agreement. As security for the payment,
performance and discharge of liabilities and obligations of the Borrower
hereunder and under the Taxable Reimbursement Agreement up to the amount of
$1,000,000, the Guarantor shall execute a guaranty and surety agreement (the
"Guaranty Agreement"), guaranteeing the performance of said obligations,
provided, however, that, upon receipt of the financial reporting information
of Borrower for fiscal year ending June 30, 2001, the Guaranty Agreement
shall terminate if (a) Borrower is in compliance of all the terms of this
Agreement, including, without limitation, the financial covenants set forth
in section 6.10 hereof, and (b) neither Borrower nor Guarantor is in default
of any other terms of this Agreement or the Reimbursement Documents.
SECTION 3.05. Further Assurances.
(a) The Borrower shall execute and deliver to the Bank from
time to time such financing statements and such additional instruments or
documents as the Bank may deem necessary in its discretion to perfect,
protect, maintain or enforce its security interests in or other rights or
claims to the Collateral or the Mortgaged Property, and shall pay the costs
of filing or recording the same in such offices as the Bank may designate.
(b) The Borrower shall deliver to the Bank, in form and
substance satisfactory to the Bank, instruments from all owners and all
mortgagees of all premises at which the Collateral (or any books and records
pertaining to the Collateral) may be located, by which such owners and
mortgagees waive any right to distrain or disclaim any interest in the
Collateral.
SECTION 3.06. Records and Reports. The Borrower shall keep accurate
and complete records of the Collateral and shall furnish the Bank with any
information about the Collateral as Bank may from time to time reasonably
request.
SECTION 3.07. Insurance; Discharge of Taxes. The Borrower authorizes
the Bank, from time to time, without notice to the Borrower to: (i) obtain
insurance covering any of the Collateral and the Mortgaged Property, if the
Borrower fail to do so; (ii) discharge taxes, liens, security interests or
other encumbrances at any time levied or placed on any of the Collateral and
the Mortgaged Property, if the Borrower fails to do so; and (iii) pay for the
maintenance and preservation of any of the Collateral and the Mortgaged
Property, if the Borrower fails to do so. The Borrower shall reimburse the
Bank, on demand, for any payment made or any expense incurred by it pursuant
to this authorization. The Borrower may assign to the Bank all rights to
receive the proceeds of insurance covering the Collateral and the Mortgaged
Property and authorize the Bank to direct any insurer to pay all such
proceeds directly to the Bank, and to endorse the name of the Borrower on any
draft for such proceeds.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Events. As conditions precedent to the issuance of the
Letter of Credit, the following events shall have occurred:
(a) The Authority shall have duly adopted resolutions
authorizing the execution, delivery, and performance of the Indenture and the
other Bond Documents to which the Authority is a party.
(b) The Indenture and the other Bond Documents shall have
been duly executed and delivered and shall be in form and substance
satisfactory to the Bank.
(c) All conditions precedent to the issuance of the Bonds
shall have occurred and the Authority shall have duly executed and delivered
the Bonds to the Trustee.
(d) The Borrower shall have paid to the Bank the commitment
fee due under subsection 2.03(a) and the Annual Fee due under subsection
2.03(c).
SECTION 4.02. Documents. As conditions precedent to the issuance of
the Letter of Credit, Borrower shall have delivered or caused to be delivered
to the Bank, in form and substance satisfactory to the Bank:
(a) The Reimbursement Agreement.
(b) The Mortgage.
(c) The Collateral Documents.
(d) Certified copies of a resolution adopted by the Board
of Directors of Borrower authorizing the execution, delivery and performance
of the Reimbursement Documents and the Bond Documents to which Borrower is a
party.
(e) Certified copies of the articles of incorporation and
bylaws (and all amendments thereto) of Borrower along with a certificate of
authority issued by the Commonwealth of Pennsylvania, and certificates of
good standing of Borrower (issued not more than thirty (30) days prior to the
Closing Date) evidencing its good standing as a corporation under the laws of
the states of Delaware and Pennsylvania.
(f) All letter of credit applications and related documents
required to be executed by the Bank.
(g) Omitted.
(h) An opinion of counsel for the Borrower as to the
matters set forth in Sections 5.01 through 5.03, 5.05, 5.10 and 5.16, and
such other matters requested by the Bank.
(i) A certificate of an executive officer of Borrower as to
the matters set forth in Sections 5.01 through 5.19, and such other matters
requested by the Bank.
(j) Certificates of insurance meeting the requirements set
forth in Section 6.01 and the Collateral Documents.
(k) A Subordination Agreement with respect to the
Subordinated Indebtedness.
(l) A commitment for title insurance from a title insurance
company satisfactory to the Bank, insuring that the lien of the Mortgage on
the Property is a first priority lien (free and clear of mechanics' liens,
municipal liens, and other encumbrances and objections, except as may be
approved by the Bank) and containing such endorsements and affirmative
coverages as the Bank may reasonably required.
(m) A survey of the Mortgaged Property, showing the
location of all improvements, driveways, fences, encroachments, and
easements, recorded and unrecorded, of every nature (including, without
limitation, all easements and encroachments raised or exceptions on the title
report) and all other matters that would be disclosed by an inspection of the
Mortgaged Property and the public records.
(n) An appraisal of the 9000 State Road Facility (based on
completion of the Construction) conducted by a certified and licensed
appraiser approved by the Bank and conforming to the requirements of the
Financial Institution Reform, Recovery, and Enforcement Act of 1989,
indicating a fair market value of the Mortgaged Property satisfactory to the
Bank.
(o) A Phase I environmental survey for the Property
prepared by a consultant approved by the Bank (the "Phase I Survey") showing
that (i) the 9000 State Road Facility is not now being used, and has not been
used in the past except as disclosed in the Phase I Survey, for any
activities involving, directly or indirectly, the use, generation, treatment,
storage, or disposal of any hazardous or toxic chemical, material, substance,
or waste of any kind or nature (other than in the ordinary course of business
and in compliance with all applicable environmental Laws) and (ii) the 9000
State Road Facility does not represent an environmental risk to the Bank.
(p) Satisfactory evidence (including certificates from
appropriate governmental authorities) that the Mortgaged Property complies
with all applicable zoning and other laws and regulations and that there are
not outstanding notices of uncorrected violations of zoning, building,
safety, fire, and other laws, ordinances, codes, and regulations.
(q) The funds required pursuant to Section 2.05 hereof for
deposit in the Sinking Fund Account.
(r) Counterparts of the Indenture and all other Bond
Documents and all opinions, certificates, approvals, and other items executed
and delivered in connection with the issuance of the Bonds.
(s) Such additional documents or instruments and such
additional approvals and opinions as the Bank may have reasonably requested
under the terms of the Reimbursement Documents, the Bond Documents, or
otherwise.
SECTION 4.03. Conditions Precedent - Letter of Credit. As additional
conditions precedent to the issuance of the Letter of Credit, the following
statements shall be true and correct:
(a) The representations and warranties made by the Borrower
in this Agreement and the other Reimbursement Documents are true and correct
on and as of the date of issuance with the same effect as though made on and
as of that date.
(b) No Event of Default or Potential Default has occurred
and is continuing or will result from the issuance of the Letter of Credit.
SECTION 4.04. Conditions Precedent - Disbursements. As conditions
precedent to the approval by the Bank under the Indenture of the initial
disbursement and each subsequent disbursement of the proceeds of the Bonds to
Borrower from the Project Fund:
(a) All conditions precedent to the issuance of the Letter
of Credit in Sections 4.01, 4.02 and 4.03 shall have been satisfied in a
manner acceptable to the Bank.
(b) The representations and warranties made by the Borrower
in this Agreement and the other Reimbursement Documents shall be true and
correct on and as of the date of disbursement with the same effect as though
made on and as of that date.
(c) No Event of Default or Potential Default shall have
occurred and be continuing or shall result from the funding of the
disbursement.
(d) No material adverse change as determined by the Bank in
its sole discretion shall have occurred in the condition of the Borrower,
financial or otherwise, since the date of this Agreement.
(e) Borrower shall have delivered to Bank an endorsement to
the title insurance policy for the Property insuring Bank's lien to the
completed part of the Construction.
(f) Borrower shall have delivered to Bank requisition and
request for the disbursement in the form attached hereto as Exhibit 4.04,
together with a Request for Payment by the contractor(s) engaged in the
Construction on AIA Form 7021 703, and with such supporting invoices and
documents as the Bank may reasonably require, all in form and substance
satisfactory to the bank, shall have been furnished by the general
contractor(s) of Borrower, indicating that the request for disbursement is
based on the work completed to date, less retainage, and such requisition
shall have been reviewed and approved by the Bank.
(g) Borrower shall have delivered to the Bank satisfactory
evidence that:
(i) With respect to disbursements for the purchase
of equipment, the amount of the request does not exceed 80%
of the purchase price of such equipment;
(ii) With respect to disbursements for the
purchase of or improvements to real estate, the amount of
the request does not exceed 80% of the appraised value of
the Property after completion of the Construction, or
acquisition of the 9030 State Road Facility, as the case
may be
(h) Borrower shall have delivered satisfactory evidence
that the building permit has been issued provided that satisfaction of this
condition is not required for the initial disbursement.
(i) The Bank shall have inspected the Construction and
approved the disbursement;
(j) The Borrower shall have delivered to the Bank such
additional instruments or documents and such additional approvals and
opinions as the Bank may have reasonably requested under the terms of the
Reimbursement Documents, the Bond Documents, or otherwise.
SECTION 4.05. Conditions Precedent - Final Disbursement. As
conditions precedent to the approval by the Bank under the Indenture of the
final disbursement of the proceeds of the Bonds to Borrower from the Project
fund:
(a) Bank shall have received evidence satisfactory to it
that the Project has been completed in accordance with the Plans and
Specification.
(b) Bank shall have received unconditional lien release on
final payment from each contractor, subcontractor and supplier of materials
and services with respect to whom any previous disbursement has been made or
who has performed any work or services relating to the Project or the
Property.
(c) Bank shall have received written approval of its making
the Final Disbursement from the surety on any bond required by Bank.
(d) A certificate of occupancy (or final building
inspection report) with respect to the Project shall have been issued to
Borrower, if required, by any governmental authority.
(e) Bank shall have received an "as-built" survey of the
Property.
(f) The Borrower shall have delivered to the Bank such
additional instruments or documents and such additional approvals and
opinions as the Bank may have reasonably requested under the terms of the
Reimbursement Documents, the Bond Documents, or otherwise.
SECTION 4.06 Conditions Precedent - Disbursement of Unused Bond
Proceeds. As conditions precedent to the approval by the Bank under the
Indenture of the disbursement of the Unused Bond Proceeds or any part thereof
to Borrower from the Project Fund in order to close on the purchase of the
9030 State Road Facility, items (a) through (l) below shall have occurred and
(ii) in order to proceed with the Construction of an expansion at the 9000
State Road Facility items (g) through (i) and (k) through (l) (i) shall have
occurred:
(a) Borrower shall have delivered at least twenty (20) days
prior to closing on the Real Estate Purchase a commitment for title insurance
from a title insurance company satisfactory to the Bank, insuring that the
lien of the Fee Mortgage on the applicable property is a first priority lien
(free and clear of mechanics' liens, municipal liens, and other encumbrances
and objections, except as may be approved by the Bank) and containing such
endorsements and affirmative coverages as the Bank may reasonably require.
The commitment must be followed by the issuance of a title insurance policy
on ALTA 1970 Form B or other form satisfactory to the Bank insuring the
Bank's interest in an amount at least equal to the Stated Amount of the
Letter of Credit.
(b) A survey of the applicable Property, showing the
location of all improvements, driveways, fences, encroachments, and
easements, recorded and unrecorded, of every nature (including, without
limitation, all easements and encroachments raised or exceptions on the title
report) and all other matters that would be disclosed by an inspection of the
Property and the public records, dated not more than one (1) month prior to
disbursement and furnished to the Bank at least ten (10) days prior to the
closing for the Real Estate Purchase.
(c) Bank shall have received, at Borrower's cost, an
appraisal of the applicable Property (based on completion of the
Construction) conducted by a certified and licensed appraiser approved by the
Bank and conforming to the requirements of the Financial Institution Reform,
Recovery, and Enforcement Act of 1989, indicating a fair market value of the
property satisfactory to the Bank in its sole discretion, and dated not
earlier than six (6) months prior to the closing on the Real Estate Purchase.
(d) Bank shall have received, at Borrower's costs, a Phase
I environmental survey for the Property prepared by a consultant approved by
the Bank (the "Phase I Survey") and dated not earlier than six (6) months
prior to the closing on the Real Estate Purchase showing that (i) the
Property is not now being used, and has not been used in the past except as
disclosed in the Phase I Survey, for any activities involving, directly or
indirectly, the use, generation, treatment, storage, or disposal of any
hazardous or toxic chemical, material, substance, or waste of any kind or
nature (other than in the ordinary course of business and in compliance with
all applicable environmental laws), and (ii) the Property does not represent
an environmental risk to the Bank.
(e) Borrower shall have delivered to Bank an opinion from
Borrower's counsel stating that the Property to be purchased is zoned for its
intended use by Borrower.
(f) Borrower shall have delivered to Bank copies of all
leases to the applicable Property in form and substance acceptable to the
Bank.
(g) Borrower shall have delivered to Bank certificates of
insurance meeting the requirements set forth in Section 6.01 and the
Collateral Documents.
(h) The conditions set forth in Section 4.04 shall have
been satisfied.
(i) Borrower shall have delivered to Bank requisition and
request for the disbursement in the form attached hereto as Exhibit 4.04, and
with such supporting invoices and documents as the Bank may reasonably
require, all in form and substance satisfactory to the Bank, shall have been
furnished by the general contractor(s) of Borrower, indicating that the
request for disbursement is based on the work completed to date, less
retainage, and such requisition shall have been reviewed and approved by the
Bank.
(j) Borrower shall have delivered to Bank a first fee
mortgage and an assignment of rents and leases in the same form as those
delivered for the 9000 State Road Facility.
(k) Borrower shall have delivered to Bank the following
documents relating to the Construction and the Bank shall have approved the
same:
(i) the Plans and Specifications;
(ii) the architect's contract, the Construction
Contract, the engineering contract and all other agreements relating to the
Project and all Construction Permits (collectively the "Construction
Documents");
(iii) the construction budget;
(iv) Satisfactory evidence (including certificates
from appropriate governmental authorities) that the Mortgaged Property and
the Construction comply with all applicable zoning and other laws and
regulations and that there are not outstanding notices of uncorrected
violations of zoning, building, safety, fire, and other laws, ordinances,
codes, and regulations;
(v) Satisfactory evidence that all approvals or
consents required by any covenants or restrictions of record in order to
proceed with the Construction have been obtained;
(vi) Waivers of liens from the general
contractor(s) and, if requested by Bank, from subcontractors properly
executed and recorded in Philadelphia County;
(vii) A performance and payment bond from the
general contractor or contractors engaged to perform the Construction for the
amount of its contract, if required by the Bank; and
(viii) the Assignment of the Construction
Contract, the Assignment of the Architect's Contract, and the Assignment of
Plans, Permits and Rights.
(l) Borrower shall have delivered to Bank such additional
documents or instruments and such additional approvals and opinions as the
Bank may have reasonably requested under the terms of the Reimbursement
Documents, the Bond Documents, or otherwise.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to
issue the Letter of Credit, the Borrower and Guarantor represent and warrant
to the Bank as follows:
SECTION 5.01. Existence.
Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all
requisite power and authority, corporate or otherwise, to conduct its
business and to own and operate its properties, and is duly qualified as a
foreign corporation to do business in, and is in good standing in, the
Commonwealth of Pennsylvania and all other jurisdictions in which failure to
qualify could have a material adverse effect on its financial condition or
business. Borrower does not have any subsidiaries or affiliated companies, or
in the past five years has used any trade or other fictitious names, except
as described in the schedule attached as Exhibit 5.01.
SECTION 5.02. Authorization.
Borrower and Guarantor have all requisite power and authority to
execute, deliver and perform the applicable Reimbursement Documents and the
Bond Documents to which eachis a party. The execution, delivery and
performance by Borrower of the applicable Reimbursement Documents and the
Bond Documents to which it is a party have been duly authorized by all
necessary corporate action and do not and will not violate any provision of
law or of the articles of incorporation or bylaws of Borrower or result in a
breach or constitute a default under any agreement, indenture or instrument
to which Borrower or Guarantor is a party, or by which their properties may
be bound or affected.
SECTION 5.03. Validity. The Reimbursement Documents and the Bond
Documents to which either the Borrower or Guarantor is a party are legal,
valid and binding obligations of the Borrower or Guarantor, as the case may
be, enforceable in accordance with their respective terms, subject to the
application by a court of general principles of equity and to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally.
SECTION 5.04. Financial Statements. The financial statements of the
Borrower as of December 31, 1998, previously furnished to the Bank, have been
prepared in accordance with generally accepted accounting principles,
consistently applied, are substantially complete and correct, and present
fairly the financial condition of the Borrower as of that date and the
results of its operations for the period then ended. Since December 31, 1998,
there has been no material adverse change in the condition of the Borrower,
financial or otherwise, from that set forth in such financial statements.
SECTION 5.05. Litigation. Except as disclosed in the schedule
attached as Exhibit 5.05, there are no actions or proceedings pending or, to
the knowledge of Borrower and Guarantor, threatened against or affecting
either Borrower or Guarantor, or any of its properties before any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which are substantial in amount or
which, if determined adversely, would have a material adverse effect on the
financial condition or business of Borrower or the Guarantor or its ability
to perform its obligations under the Reimbursement Documents or the Bond
Documents.
SECTION 5.06. Agreements and Orders. Neither Borrower nor Guarantor
is in default in the performance of any agreement of which it may be party or
by which its properties may be bound or with respect to any order, writ,
injunction, or decree of any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
SECTION 5.07. Contingent Liabilities. Neither Borrower nor Guarantor
has any material or substantial contingent obligations or liabilities, for
taxes or otherwise, that are not disclosed in the financial statements
mentioned in Section 5.04 or set forth on the schedule attached as Exhibit
5.07.
SECTION 5.08. Taxes. Borrower and Guarantor have filed all tax
returns and reports required to be filed as of the date of this Agreement and
have paid all taxes, assessments and charges imposed upon them or their
operations or properties, or which they are required to withhold and pay over
(including payroll withholding taxes).
SECTION 5.09. Ownership and Encumbrances. Borrower has good title,
or valid leasehold interests in, all of its properties and assets, real and
personal. None of the properties and assets of any Borrower are subject to
any lien, encumbrance, security interest or other claim of any nature, except
liens and encumbrances in favor of the Bank and existing liens and
encumbrances disclosed in all financial statements mentioned in Section 5.04
or set forth on the schedule attached as Exhibit 5.09.
SECTION 5.10. Consents. No authorization, consent, approval,
license, exemption by or filing or registration with any court or
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary to the valid
execution, delivery or performance by Borrower or Guarantor of the
Reimbursement Documents or the Bond Documents to which it is a party
(excepting only such authorizations, consents, approvals, licenses, filings,
and registrations that have been obtained or accomplished on or prior to the
date of this Agreement).
SECTION 5.11. ERISA.
(a) To the extent applicable, Borrower is in compliance in
all material respects with all applicable provisions of ERISA. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan; no notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated; no circumstances exist which
constitute grounds under Section 4042 of ERISA Affiliate entitling the PBGC
to institute proceedings to terminate, or appoint a trustee to administrate,
a Plan, nor has the PBGC instituted any such proceedings; neither the
Borrower nor any ERISA Affiliate has completely or partially withdrawn under
Section 4201 or 4204 of ERISA from a Multiemployer Plan; except as previously
disclosed in writing by the Borrower to the Bank, Borrower and each ERISA
Affiliate has met its minimum funding requirements under ERISA with respect
to all of its Plans and the present value of all vested benefits under each
Plan does not exceed the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA and the regulations thereunder
for calculating the potential liability of the Borrower or any ERISA
Affiliate to the PBGC or the Plan under Title IV of ERISA; and neither any
Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under
ERISA.
(b) The Borrower does not maintain any employee benefit
plan covered by Title IV of ERISA.
SECTION 5.12. Operations of Business. Borrower possesses (i) all
licenses, permits, and other governmental authorizations and (ii) all
trademarks, trade names, copyrights, patents, or rights in any of the
foregoing, adequate for the conduct of its business as now conducted and
presently proposed to be conducted, and, to the best of the knowledge,
information, and belief of the Borrower, without conflict with the material
rights or claimed rights of others.
SECTION 5.13. Disclosure. No representation or warranty made by
Borrower in this Agreement or the other Reimbursement Documents is false or
misleading in any material respect or omits to state any material fact
necessary in order to make the statements by Borrower in this Agreement or
the other Reimbursement Documents. Borrower has disclosed to the Bank in
writing every fact that materially and adversely affects its business or
financial condition or its ability to perform its obligations under the
Reimbursement Documents or the Bond Documents.
SECTION 5.14. Environmental Laws.
(a) Except as permitted under Section 6.20, no property
owned or leased by Borrower or any subsidiary of Borrower, is in violation of
any Environmental Laws, no Hazardous Substances are present on said property
and neither Borrower nor any subsidiary of Borrower, has been identified in
any litigation, administrative proceedings or investigation as a responsible
party for any liability under and Environmental Laws.
(b) Borrower has received all permits and filed all
notifications necessary to carry on its business under and in compliance with
all applicable Environmental Laws. Neither Borrower nor Guarantor has any
knowledge of, or has given any written or oral notice to the Environmental
Protection Agency or any state or local agency regarding, any actual or
imminently threatened removal, spill, release or discharge of Hazardous
Substances on properties owned or leased by the Borrower or either Guarantor
or in connection with the conduct of its business and operations. Neither
Borrower nor Guarantor has any knowledge of, or has received any notice that
it is potentially responsible for, costs of clean-up of any actual or
imminently threatened spill, release or discharge of Hazardous Substances.
(c) Upon request by the Bank, Borrower shall provide
evidence in form and substance acceptable to the Bank that the Property
complies with all applicable Environmental Laws.
(d) No part of the Property contains, is located in or
abuts floodplain, navigable water or any other body of water, tideland,
marshland, wetland or other area (collectively, "Protected Area") which is
subject to special state, federal or municipal regulation, control or
protection, except as previously disclosed to Bank; and Borrower shall comply
with all laws, ordinances and regulations pertaining to Protected Areas, to
the extent applicable to the Property.
SECTION 5.15. Margin Stock. Borrower is not engaged in, nor does it
have as one of its substantial activities, the business of extending or
obtaining credit for the purpose of purchasing or carrying "margin stock" (as
that term is defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no proceeds of the Bonds will be used for such purpose or
for the purpose of purchasing or carrying any shares of margin stock.
SECTION 5.16. Perfection of Liens. Upon the filing or recording of
financing statements and other documents or lien instruments in all places in
the Commonwealth of Pennsylvania and elsewhere as are necessary to perfect to
security interests, liens, and other encumbrances created or granted by this
Agreement or the Collateral Documents, no further action (including the
filing or recording of any documents or instrument) is or will be necessary
in order to establish, perfect or maintain the security interests, liens, and
other encumbrances created or granted by this Agreement or the Collateral
Documents.
SECTION 5.17. Securities Laws. To the extent applicable, all shares
of capital stock, all partnership interests, and all other securities of the
Borrower have been offered and sold in accordance with the registration
requirements of all applicable federal and state securities laws, or in
compliance with any exemptions afforded thereunder.
SECTION 5.18. Other Agreements. Neither Borrower nor Guarantor is a
party to any indenture, loan, or credit agreement, or of any lease or other
agreement or instrument, or subject to any charter or corporate restriction,
which could have a material adverse effect on their business, properties,
assets, or condition, financial or otherwise, or its ability to perform their
obligations under the Reimbursement Documents or the Bond Documents to which
they are a party, except for the Line of Credit Facility.
SECTION 5.19. Labor Disputes and Casualties. Borrower is not
affected by any fire, explosion, accident, strike, lockout, or other labor
dispute, drought, storm, hail, earthquake, embargo, act of public enemy, or
other casualty (whether or not covered by insurance) which could materially
and adversely affect its business, properties, assets, or condition,
financial or otherwise, or its ability to perform its obligations under the
Reimbursement Documents or the Bond Documents to which it is a party.
SECTION 5.20. Year 2000 Compliance. The advent of the year 2000
shall not adversely affect the Borrower's operations or its information
technology or related systems. Without limiting the generality of the
foregoing, (i) the information technology systems utilized by Borrower are
designed to be used prior to, during, and after the calendar year 2000 A.D.,
(ii) the information technology systems utilized by Borrower will not
abnormally end or provide invalid or incorrect results as a result of date
data, and (iii) the information technology systems utilized by Borrower are
designed or programmed to ensure year 2000 A.D. compatibility, including date
data, century recognition, leap year, calculations which accommodate same
century and multi-century formulae in date values, and date data interface
values that reflect the century.
ARTICLE VI
COVENANTS
As long as any portion of the Indebtedness is or remains outstanding
and unpaid, or the Bank has any obligations under this Agreement or the
Letter of Credit, the Borrower and Guarantor covenant and agree that, unless
the Bank otherwise consents in writing:
SECTION 6.01. Insurance. Borrower shall maintain insurance with
respect to its business and assets in such amounts, including but not limited
to the Collateral and the Property, and in the amounts set forth in Exhibit
6.01. Such insurance shall be with such companies as may be satisfactory to
the Bank in its reasonable discretion, it being understood that insurance
comparable to insurance customarily maintained by companies operating similar
businesses as the Borrower shall be satisfactory. All policies of insurance
covering the Collateral and the Property shall insure the Bank as its
interest may appear and shall bear a lender's loss payable and thirty (30)
day notice of cancellation or material change endorsements in favor of the
Bank.
SECTION 6.02. Reports. The Borrower and Guarantor shall furnish to
the Bank:
(a) as soon as possible, and in any event within five (5)
Business Days after Borrower becomes aware of the occurrence of any Event of
Default or Potential Default, a written statement by an executive officer of
the Borrower or by Guarantor, as the case may be, setting forth details of
the Event of Default or Potential Default and the action which is proposed to
be taken with respect thereto.
(b) as soon as possible, and in any event within five (5)
Business Days after receiving knowledge thereof, written notice of any
action, suit and proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting Borrower or a Guarantor which involves $100,000 or more or would
materially adversely affect the business, properties or condition, financial
or otherwise, of the Borrower or a Guarantor, if adversely determined.
(c) as soon as possible and in any event prior to entering
into any proposed change order or amendment relating to any of the
Construction Documents, and it shall not execute such change order or
amendment without the prior written approval of the Bank.
SECTION 6.03. Bond Documents.
(a) The Borrower shall: (i) observe and perform all
agreements, conditions, undertakings, and covenants in the Bond Documents to
be observed or performed by the Borrower; and (ii) obtain the consent of the
Bank whenever the Borrower is required to obtain the consent of the Authority
or the Trustee under the Bond Documents.
(b) The Borrower shall not: (i) permit, consent to, or
enter into any amendment or modification of or supplement to the Bond
Documents; or (ii) assign or transfer, voluntarily or involuntarily, by
operation of law or otherwise, any of its right, title, or interest in and to
the Bond Documents (other than to the Trustee or the Bank pursuant to the
Reimbursement Documents or the Bond Documents).
SECTION 6.04. Use of Bond Proceeds.
(a) The Borrower shall use the proceeds of the Bonds solely
to finance the Project, as follows: (i) $1,517,216.46 to finance the
Construction or acquire and renovate the 9030 State Road Facility; (ii)
$2,033,400.05 for purchase of equipment; and (iii) $149,383.49 to pay a
portion of costs and expenses of the Bonds.
(b) To the extent the proceeds are not used at Closing they
shall be deposited in the Project Fund established in accordance with the
terms of the Indenture. Upon Bank's request, the Borrower shall direct the
Trustee to invest the proceeds of the Project Fund in an account of the Bank.
(c) Certain of the Bond Proceeds (the "Unused Bond
Proceeds") shall be used for the Real Estate Purchase or for the construction
of the facility at Borrower's election, such election to occur upon notice to
the Bank within twelve (12) months from the Closing. At Closing, the Unused
Bond Proceeds shall be deposited in a Project Fund Account by the Trustee,
and shall be disbursed pursuant to the terms of this Agreement.
SECTION 6.05 Financial Condition. Borrower and Guarantor shall
maintain, in the Bank's judgment, a satisfactory financial condition, and
shall notify the Bank promptly in writing of any adverse changes in its
financial condition, operations or the Collateral as shown in its financial
statement dated December 31, 1998 and submitted to the Bank.
SECTION 6.06. Maintenance of Records. Borrower and Guarantor shall
maintain accounting records in accordance with generally accepted accounting
principles consistently applied with ledger and account cards and/or computer
tapes and computer discs, computer printouts and computer records pertaining
to the Collateral and the Mortgaged Property which contain information as may
from time to time be requested by Bank. Borrower and Guarantor shall maintain
complete, accurate and current records concerning all of the Collateral and
the Mortgaged Property. Borrower and Guarantor shall not modify or change its
method of accounting or enter into, modify or terminate any agreement
presently existing, or at any time hereafter entered into with any third
party accounting firm and/or service bureau for the preparation and/or
storage of Borrower's or Guarantor's accounting records without the prior
written consent of Bank and without such accounting firm and/or service
bureau agreeing unconditionally to provide information regarding the
Collateral and Borrower's or Guarantor's financial condition to Bank.
SECTION 6.07. Inspections. Borrower shall permit Bank and any of its
employees, officers or agents, during Borrower's usual business hours, or the
usual business hours of third persons having control thereof, to have access
to and examine (i) the Collateral, (ii) the Mortgaged Property and (iii) all
of Borrower's books and records, and to make copies therefrom.
SECTION 6.08. Financial Statements. Borrower and Guarantor shall
deliver to Bank the following:
(a) within 120 days after the end of the fiscal year of
Borrower, audited annual financial statements on a consolidated and
consolidating basis prepared by independent certified public accountants of
Borrower approved by Bank, on the basis of generally accepted accounting
principles;
(b) within 45 days after the end of each calendar
quarter period, Borrower's 10Q reports filed with the Securities and Exchange
Commission;
(c) within 120 days after the end of each calendar year,
personal financial statements and tax returns of Guarantor;
(d) within 90 days after the end of each fiscal year, an
annual budget and projections for the new fiscal year;
(e) such certificates of non-default as Bank may request
from time to time; and
(f) such other information concerning thebusiness,
property and financial affairs of Borrower and Guarantor as Bank may request
from time to time.
SECTION 6.09. Bank's Costs. Borrower shall immediately reimburse
Bank for all sums expended by Bank in connection with the execution,
delivery, amendment, administration, termination, defense and presentation of
rights under, and enforcement of, this Agreement.
SECTION 6.10. Financial Covenants. Prior to the termination of
Borrower's obligations hereunder, the Borrower and Guarantor shall comply
with the following financial covenants at all times, to be reviewed by the
Bank periodically as set forth below:
(a) Senior Debt to Effective Net Worth Ratio. Borrower shall
maintain a ratio of Senior Debt divided by Effective Net
Worth of not more than 2.00 to 1.00 at each fiscal year,
tested annually. "Senior debt" shall mean the sum of total
liabilities, including capitalized leases and all reserves
for deferred taxes and other deferred sums appearing on the
liabilities side of the balance sheet, in accordance with
generally accepted accounting principles applied on a
consistent basis, excluding debt subordinated to the Bank.
"Effective Net Worth" shall mean total assets (less
intangibles) minus Total Liabilities. "Total Liabilities"
shall mean all liabilities of Borrower, excluding debt
fully subordinated to the Bank on terms and conditions
acceptable to Bank, and including capitalized leases and
all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet, in
accordance with generally accepted account principles
applied on a consistent basis.
(b) Effective Net Worth. Borrower shall, at fiscal year ending
6/30/99, maintain an Effective Net Worth of not less than
four million dollars ($4,000,000.00), at fiscal year ending
6/30/00 maintain an Effective Net Worth of not less than
five million seven hundred and fifty thousand dollars
($5,750,000.00), and at fiscal year ending 6/30/01 maintain
an Effective Net Worth of not less than seven million, five
hundred thousand dollars ($7,500,000.00), tested annually.
Thereafter, to the extent that the Letter of Credit is
extended, the Borrower shall maintain Effective Net Worth
as required by the Bank.
(c) Debt Service Coverage Ratio. Borrower shall maintain a Debt
Service Coverage Ratio of not less than 1.50 to 1.00,
tested quarterly on a rolling four-quarter basis. "Debt
Service Coverage Ratio" shall mean the sum of earnings
before interest, taxes, depreciation, and amortization
divided by the sum of interest expense and current
maturities of long term debt and capital leases.
(d) Current Ratio. Borrower shall maintain a Current Ratio of
not less than 1.50 to 1.0, tested quarterly. "Current
Ratio" shall mean the ratio of Current Assets to Current
Liabilities. "Current Assets" and "Current Liabilities"
shall mean all assets (less intangibles) and liabilities
which are so classified in accordance with generally
accepted accounting principles.
All determinations under this Section 6.10 shall be made in
accordance with generally accepted accounting principles consistently
applied.
SECTION 6.11. Warranties. Each warranty and representation contained
in this Agreement shall be automatically deemed repeated with each request
for an advance hereunder and shall be conclusively presumed to have been
relied on by Bank regardless of any investigation made or information
possessed by Bank. The warranties, representations and agreements set forth
herein shall be cumulative and in addition to any and all other warranties,
representations and agreements which Borrower shall give, or cause to be
given, to Bank, either now or hereafter.
SECTION 6.12. Maintenance of Collateral. Borrower shall keep and
maintain the Collateral and Mortgaged Property in good condition and repair
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall keep and maintain all items of
equipment as personal property notwithstanding the manner of their annexation
to the Mortgaged Property and their adaptability to the uses and purpose for
which the Mortgaged Property is used.
SECTION 6.13. Accuracy of Information. All financial statements and
information relating to Borrower and Guarantor which may hereafter be
delivered by Borrower or Guarantor to Bank shall be true and correct and have
been prepared in accordance with generally accepted accounting principles
consistently applied.
SECTION 6.14. Bank Expenditures. If the Borrower fails at any time
to obtain insurance covering any of the Collateral or the Mortgaged Property,
maintain or preserve the Collateral or the Mortgage Property, discharge taxes
or Liens at any time placed upon the Collateral or the Mortgaged Property, or
pay or perform any of its obligations hereunder, Bank shall have the right,
in its sole discretion and without liability to Borrower or any other person
or entity, to do any or all of the foregoing. Any such expenditures by Bank
shall be added to the balance due hereunder, bear interest at the Default
Rate and shall be secured by the Collateral and the Mortgaged Property.
SECTION 6.15. Payment of Taxes, Assessments, etc. Borrower shall
make due and timely payment or deposit of all federal, state and local taxes,
assessments or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment
or deposit thereof. Borrower will make timely payment or deposit of all
F.I.C.A. payments and withholding taxes required of it by all applicable laws
and will upon request furnish Bank with proof satisfactory to Bank that
Borrower has made such payments or deposits.
SECTION 6.16. Maintenance of Existence. Compliance with Laws.
Borrower and any Subsidiary shall each do or cause to be done all things
necessary to preserve and keep in full force and effect its respective
existence, rights, and franchises. Borrower and Guarantor shall not be in
violation of any laws, ordinances, governmental rules and regulations to
which it is subject, and will not fail to obtain or maintain any licenses,
permits, franchises or other governmental authorization necessary to the
ownership and use of its property and the Collateral and the Mortgaged
Property or to the conduct of its business, which violation or failure to
obtain might materially adversely affect any business, operations,
Collateral, Mortgaged Property, or condition (financial or otherwise) of
Borrower.
SECTION 6.17. Construction. (a) Borrower shall not commence the
Construction without first obtaining all permits and approvals required by
any governmental agency having jurisdiction thereof. Borrower shall pursue
completion of the Construction in accordance with the Construction Documents
and the Plans and Specifications. Borrower shall not make any changes to the
Plans and Specifications, without the Bank's prior written approval.
(b) All change orders relating to the Construction
Contract, shall not be implemented without the Bank's prior written approval.
(c) Prior to the commencement of Construction, Borrower
shall provide Bank a budget with respect to the Construction and the purchase
and installation of the Equipment, which shall include a detailed breakdown
of the construction draws to be paid with Disbursements hereunder, which
budget will be subject to review and approval by Bank.
(d) All work relating to the Construction shall be
performed in a good and workmanlike manner , utilizing new materials, which
are free of defects.
(e) The Bond Proceeds shall be funded at Closing to the
Trustee. Disbursements shall be made by the Trustee upon submission of
requests for disbursement pursuant to Section 4.04(f). The requests for
disbursement shall be reviewed and approved, prior to any disbursement being
made, by the Bank and by the Bank's construction consultant engaged by the
Bank (the "Construction Consultant"). The fees of the Construction Consultant
shall be paid by Borrower.
(f) Upon completion of the Construction, Borrower shall
deliver to the Bank certified copies of certificates of occupancy issued by
the local, county and state governmental agencies having jurisdiction over
the Project.
(g) Borrower shall submit to Bank a complete and accurate
list of the names and addresses of the general contractor, and all
subcontractors.
(h) If at any time Bank, in its sole discretion, determines
that the Bond proceeds, or the undisbursed balance thereof, are insufficient
to complete the Construction or to pay in full any other charge or expense
which may have been incurred or may be assumed by Bank in connection with the
Agreement, Borrower agrees to pay the amount of any such deficiency promptly
upon demand.
(i) The Construction shall be completed on or before
February 28, 2002 (the "Completion Date"). The Completion Date will occur
upon compliance with the following: (i) Borrower presents Bank with an
unconditional certificate of occupancy for the buildings and other
improvements to be constructed or renovated as part of the Construction; (ii)
Borrower presents the Bank with any and all other permits, certificates and
approvals required by any local, state or federal agency required for the
occupancy of the building and other improvements to be constructed or
renovated as part of the Construction and evidencing completion of the
Construction in accordance with the Plans; (iii) a letter from Borrower's
architect, in form satisfactory to Bank, that the Construction has been
completed in accordance with the approvals and Plans; (iv) a final survey
showing there are no encroachments; (v) proof that all contractors and other
costs of construction have been paid as hereinafter required; (vi) title
insurance as hereinafter required; and (vii) there shall have been no
defaults by Borrower under the loan documents and Borrower shall have so
certified.
(j) Notwithstanding anything else herein contained, Bank
shall have the right, without the specific consent of Borrower, to apply any
funds which it agrees to advance hereunder to bring about the completion of
the Construction, and to payment of any settlement costs, taxes, special
assessments, or any other charges which could be or become a lien on the
Property, or any part thereof, or any interest on the Loan, or any premium on
any insurance policy affecting the Property, but as long as Borrower is not
in default under the Loan, Bank agrees to give Borrower notice of each such
application of funds.
(k) If at any time Bank, in the good faith exercise of
business judgment, determines that the funds hereby agreed to be advanced, or
the undisturbed balance thereof, are insufficient to complete the
Construction to the Property or for any other charge or expense which may
have been incurred or may be assumed by Bank in connection with the Loan,
Borrower agrees to pay the amount of any such deficiency promptly upon
demand.
SECTION 6.18 Compliance with Covenants. Borrower shall not be in
violation of any covenants or restrictions affecting the Property.
SECTION 6.19. Negative Covenants. Borrower covenant and agree that
they will not, without Bank's prior written consent:
(a) Grant or permit, or permit any Subsidiary, to create,
assume, or suffer to exist any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind upon the Property or any of their other
assets, whether now owned or hereafter acquired, except:
(i) Capital Lease Obligations and purchase money
liens on and security interests in equipment hereafter acquired securing Debt
not in excess of $100,000 at any time, provided that such liens and security
interests attach only to the equipment so acquired and do not encumber any
other property of the Borrower or any Subsidiary;
(ii) liens for taxes not yet payable or being
contested in good faith by appropriate proceedings for which adequate
reserves have been provided on the books of the Borrower or a Subsidiary;
(iii) mechanics', materialmen's, warehousemen's,
carriers' or other like liens arising in the ordinary course of business of
the Borrower or any Subsidiary, if any, arising with respect to obligations
which are not overdue for a period longer than thirty (30) days or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been provided on the books of the Borrower or a
Subsidiary;
(iv) pledges or deposits in connection with
workers' compensation, unemployment insurance, or other forms of governmental
insurance or benefits or deposits or pledges to secure the performance of
bids, tenders, contracts, leases, public or statutory obligations, surety or
appeal bonds or other deposits or pledges for purposes of a like general
nature or given in the ordinary course of a business by the Borrower or any
Subsidiary;
(v) the Subordinated Indebtedness; and
(vi) other encumbrances consisting of zoning
restrictions, easements, rights-of-way, restrictions on the use of real
property or minor irregularities in the title thereto, which do not arise in
connection with the borrowing of, or any obligation for the payment of, money
and which in the aggregate, do not materially detract from the value of the
Property or the business, properties or assets of the Borrower or any
Subsidiary.
(b) Sell, lease, relocate or otherwise transfer or dispose
of any Collateral or Mortgaged Property except only the sale or lease of
inventory in the ordinary course of Borrower's business or the replacement of
equipment with other equipment of a value at least equal to that of the
replaced equipment and purchased by Borrower free of any lien or encumbrance;
(c) Liquidate or merge or consolidate with or into any
other business organization;
(d) Acquire the stock or assets of any other business
organization;
(e) Enter into any transaction not in the usual course of
Borrower's business or otherwise permitted hereunder;
(f) Guarantee or otherwise become in any way liable with
respect to the obligations of any other person or entity;
(g) Make any change in Borrower's financial structure or in
any of its business objectives, purposes or operations which would adversely
affect the ability of Borrower to repay its obligations hereunder;
(h) Incur any debts outside the ordinary course of
Borrower's business;
(i) Make any advance or loan to any other person or entity
except in the ordinary course of business;
(j) Prepay its indebtedness to any other person or entity;
(k) Permit the transfer of controlling interest by William
Farber in the Borrower or any change in the chairman of the board of
directors or the chief operating officer of Borrower without prior written
consent of the Bank
(m) Accept prepayment of rent under any lease for the
Mortgaged Property or permit any tenant to offset or credit sums due and
payable by Borrower to such tenant against rents, as the case may be, for
more than thirty (30) days in advance;
(n) Make any distributions of dividends to its shareholders
or of profits to its partners (except to the extent required in order to pay
personal income taxes of partners or of shareholders of a subchapter S
corporation);
(o) Enter into any new lease or amend any existing lease
for the Mortgaged Property; or
(p) Permit any judgment against Borrower in excess of
$100,000 to remain unsatisfied for a period in excess of fifteen (15) days.
6.20. Environmental Matters.
(a) Borrower covenant and agree that (i) Borrower shall
not, and shall not permit any other person to, locate, store, generate,
manufacture, process, distribute, use, treat, transport, handle, dispose of,
emit, discharge or release any Hazardous Substance in the operation of its
business or on the Mortgaged Property, except that Borrower may use, store
and dispose of Hazardous Substances in the ordinary course of Borrower's
business in reasonable quantities and in compliance with Environmental Laws);
(ii) Borrower shall immediately notify Bank of any violation of or potential
liability under the Environmental Laws; (iii) Borrower shall immediately
comply with any order, action or demand of any governmental agency or legal
or administrative agency having jurisdiction thereof to clean and remove any
Hazardous Substance from the Mortgaged Property or from the operation of its
business an to pay for such clean up, removal and associated costs, fines and
penalties; and (iv) Borrower shall otherwise comply with all Environmental
Laws and laws relating to the storage, handling and disposing of petroleum
products.
(b) At any time Bank shall have the right, but not the
obligation, to conduct or cause to be conducted by any other person
designated by Bank, an environmental audit or similar assessment concerning
the Borrower's compliance with Environmental Laws and to ascertain the
existence of Hazardous Substances on the Mortgaged Property. Borrower shall
pay all costs and expenses associated with such audit or assessment. Bank and
its designees are authorized to enter upon the Premises to perform such audit
or assessment and to conduct all tests necessary including above and below
ground tests. If such audit, assessment or other inquiry reveals the
existence of any Hazardous Substances or noncompliance with Environmental
Laws, Bank, at Borrower's expense, shall have the right, but not the
obligation, to cause Borrower's properties to be treated by persons
designated by Bank, as is necessary in Bank's opinion, to cause the
Borrower's operations on the Mortgaged Property to comply with Environmental
Laws and to be free of Hazardous Substances. Any cost or expense arising from
any audit, assessment or other inquiry and from any treatment not paid by
Borrower may be paid by Bank. Borrower will pay to Bank immediately, and
without demand, all sums of money advanced by Bank pursuant to this paragraph
together with interest on any such advance at the Default Rate and all such
sums and interest thereon shall be secured hereby.
(c) Borrower shall defend, indemnify, and hold harmless
Bank and its directors, officers, agents and employees, from any and all
liabilities (including strict liability), actions, demands, penalties,
losses, costs, or expenses (including without limitation attorneys' fees and
expenses, and remedial costs), suits, costs of any settlement or judgment,
and claims of any and every kind whatsoever which may now or in the future be
paid, incurred, or suffered by or asserted against Bank by any person or
entity or governmental agency for, with respect to, or as a direct or
indirect result of, the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, or release from the Borrower's
operations or the Mortgaged Property of any Hazardous Substances or arise our
of or result from the environmental condition of the Mortgaged Property or
the violation of any Environmental Laws regardless of whether or not caused
by or within the control of Borrower or Bank. The representations, covenants,
warranties, and indemnification's contained in this Section and in Section
5.14 shall survive the termination of this Agreement.
SECTION 6.21 Litigation. The Borrower and any Subsidiary and
Guarantor shall give the Bank prompt written notice of any existing or
pending litigation against the Borrower or any Subsidiary or of any event of
or default hereunder or under the Mortgage or under any other obligation of
the Borrower, whether or not referred to herein or existing at the date
hereof, and of any other matter known to the Borrower which might materially
and adversely affect the Borrower's ability to pay and perform its
obligations hereunder.
SECTION 6.22 ERISA. The Borrower and any Subsidiaries of Borrower
which have or adopt employee benefit plans shall comply in all material
respects with the applicable provisions of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA") and shall not permit or suffer any
Reportable Event (as that term is defined in ERISA) to continue with respect
to any such plan.
SECTION 6.25 Borrower's Account. Borrower shall maintain at all
times Borrower's Account at the Bank and shall advise Bank immediately if
Borrower's Account number is changed.
SECTION 6.26 Other Information. The Borrower and Guarantor and any
Subsidiary of Borrower shall furnish the Bank with such other information
concerning their respective business and financial affairs as the Bank shall
reasonably request from time to time and shall each permit the Bank at all
reasonable times and upon reasonable notice to examine and make extracts from
each of their books and records.
SECTION 6.27 Additional Equity Contribution. The Borrower shall
provide, from sources other than the Bonds, the funds necessary to pay the
total cost of the Construction in excess of the amounts available to the
Borrower from the Bond proceeds. If, at any time, the Bank shall determine
that the undisbursed balance of the Bond proceeds will be insufficient to pay
the total cost of constructing the Improvements (including all related soft
costs), the Borrower shall promptly provide the Bank with evidence
satisfactory to the Bank that the Borrower has sufficient funds available to
pay the increased costs as they are incurred, and the Bank reserves the right
to require the Borrower to deposit with the Bank, within fifteen (15)
Business Days after any request by Bank, sufficient funds to complete the
Construction prior to consenting to any further disbursements of the Bond
proceeds.
SECTION 6.28 Real Estate Purchase. Subject to the Bank's right to
approve the transaction in its sole discretion, Borrower may purchase with
the Unused Bond Proceeds the 9030 State Road Facility (the "Real Estate
Purchase"). Borrower shall notify the Bank within twelve (12) months from the
date of Closing as to whether it shall proceed with the Real Estate Purchase
or proceed with the Construction of the expansion of the 9000 State Road
Facility. If Borrower proceeds with the Real Estate Purchase, then, subject
to the Bank's right to approve the transaction, closing on the Real Estate
Purchase shall occur within two (2) years from Closing.
ARTICLE VII
DEFAULT
SECTION 7.01 Events of Default. The occurrence of any one or more of
the following events shall constitute an "Event of Default" under this
Agreement:
(a) Failure by the Borrower to pay any principal, interest,
or other amounts due under this Agreement or the other Reimbursement
Documents (including but not limited to payments due under Section 2.05
hereof), when and in the manner due; or
(b) Failure by the Borrower to observe or perform any
agreements, conditions, undertakings or covenants in this Agreement or the
other Reimbursement Documents to be observed or performed by the Borrower or
Guarantor, other than the obligations set forth in 7.01(a) hereof, and if
such failure (if it can be cured to the satisfaction of the Bank) is not
cured within twenty (20) days after the earlier of (i) notice of such failure
has been given to the Borrower by the Bank, or (ii) notice of such failure
should have been given to the Bank by the Borrower under Section 6.03;
provided that if the failure to perform is of such a nature that it can be
cured, as determined by the Bank, but not within the 20-day period, such
longer period as it is required to cure the default, but, in any case, not to
exceed sixty (60) days from the initial date of notice of default to
Borrower, so long as Borrower initiates corrective action within such twenty
(20) day period and diligently pursues such action to a conclusion
satisfactory to Bank); or
(c) Any representation or warranty made in this Agreement
or the other Reimbursement Documents or furnished by the Borrower in
connection with making this Agreement or the other Reimbursement Documents or
in compliance with their provisions, proves to have been false or erroneous
in any material respect when made; or
(d) Either the Borrower becomes insolvent or unable to pay
its debts as they mature, or files a voluntary petition or suffers any
involuntary petition to be filed against it under any provision of any state
or federal bankruptcy or insolvency statute, or makes an assignment for the
benefit of its creditors, or applies for or consents to the appointment of a
receiver or custodian for its assets, and with respect to the filing of an
involuntary petition, such petition is not dismissed within thirty (30) days
after the filing thereof; or
(e) Any attachment or garnishment is initiated or filed
against the Borrower or Guarantor; or
(f) Borrower (i) fails to pay any Credit Obligation owing
by the Borrower, or any interest or premium thereon, when due (whether such
Credit Obligation has become due by scheduled maturity, by required
prepayment, by acceleration, by demand or otherwise) and such failure
continues after any applicable grace period specified in any agreement or
instrument relating to the Credit Obligation, or (ii) fails to perform any
term, covenant or agreement on its part to be performed under any agreement
or instrument relating to any Credit Obligation when required to be performed
and such failure continues after any applicable grace period specified in
such agreement or instrument, if the effect of such failure to perform is to
accelerate, or to permit the acceleration of, with the giving of notice, if
required, the maturity of such Credit Obligation; or
(g) Any of the following events occurs or exists with
respect to Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event with respect to any Plan; (iii)
the filing under Section 4041 of ERISA of a notice of intent to terminate any
Plan or the termination of any Plan; (iv) any event or circumstance that
might constitute grounds entitling the PBGC to institute proceedings under
Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or 4202 of
ERISA from a Multiemployer Plan or the reorganization, insolvency, or
termination of any multiemployer Plan; and in each case above, such event or
condition, together with all other events or conditions, if any, could in the
opinion of the Bank subject the Borrower to any tax, penalty, or other
liability to a Plan, a Multiemployer Plan, the PBGC or otherwise (or any
combination thereof) which in the aggregate would have a material adverse
effect on the financial connection, properties, or operations of the
Borrower; or
(h) A material adverse change occurs in the business or
financial condition of the Borrower which is unacceptable to the Bank (in a
reasonable and good faith exercise of its discretion) from the condition most
recently disclosed to the Bank in any manner, or the Bank in a reasonable and
good faith exercise of its discretion deems itself or the Collateral or the
Mortgaged Property insecure for any reason whatsoever; or
(i) The Collateral Documents or the Mortgage at any time
and for any reason cease (i) to create valid and perfected security
interests, liens and encumbrances in and to the Collateral or the Mortgaged
Property in accordance with the lien priority specified in this Agreement
(other than loss of perfection as a result of acts or omissions of the Bank
or (ii) to be in full force and effect or are declared null and void, or the
validity or enforceability thereof is contested by either Borrower or the
Authority; or
(j) Any one or more of the Reimbursement Documents at any
time and for any reason cease to be in full force and effect or are declared
null and void, or the validity or enforceability thereof is contested by
either Borrower or the Authority, or either Borrower or the Authority denies
that it has any further liability or obligation thereunder; or
(k) A default or event of default otherwise occurs under
the other Reimbursement Documents (subject, to the extent applicable thereto,
to the notice and cure provisions in paragraphs (a), (b), (d) and (e), above,
of this Section 7.01); or
(l) An "Event of Default" or a "Determination of
Taxability" occurs under the Indenture (as those terms are defined in the
Indenture) or a default or event of default otherwise occurs under any other
Bond Documents (subject to any applicable notice and cure provisions
contained in the Bond Documents); or
(m) Borrower (i) fails to pay any obligation owing by the
Borrower on the Line of Credit Facility or the Taxable Transaction
Reimbursement Agreement or any other Indebtedness, or any interest or premium
thereon, when due (whether such obligation has become due by scheduled
maturity, by required prepayment, by acceleration, by demand or otherwise)
and such failure continues after any applicable grace period specified in any
agreement or instrument relating to the Line of Credit Facility or the
Taxable Transaction Reimbursement Agreement or any other Indebtedness, or
(ii) fails to perform any term, covenant or agreement on its part to be
performed under any agreement or instrument relating to any Line of Credit
Facility or the Taxable Transaction Reimbursement Agreement or any other
Indebtedness when required to be performed and such failure continues after
any applicable grace period specified in such agreement or instrument, if the
effect of such failure to perform is to accelerate, or to permit the
acceleration of the Line of Credit Facility or the Taxable Transaction
Reimbursement Agreement or any other Indebtedness; or
(n) A default of the Borrower under the Swap Agreement or
any Swap Obligations.
During any cure or grace period set forth in this Section
7.01, the Bank shall refrain from the exercise of any remedies provided it
upon default in Section 7.02; provided, however, that the Bank may, during
such period: (i) exercise its right to set off against assets or accounts of
the Borrower or the Guarantor in its possession or control; and (ii) take all
actions with respect to the Collateral or the Mortgaged Property necessary
for the protection of the Collateral or the Mortgaged Property and its
interest therein against third parties, including, if required, the exercise
of the remedies under the provisions of Section 7.02.
SECTION 7.02. Remedies Upon Default.
(a) Upon the occurrence of any Event of Default, the Bank,
in addition to the rights specifically granted in this Agreement, may at its
election exercise the rights and remedies under the other Reimbursement
Documents, in accordance with their respective provisions, and the rights and
remedies now or hereafter existing in equity, at law, by virtue of statute or
otherwise.
(b) Upon the occurrence of any Event of Default:
(i) In the case of an Event of Default other than an
Event of Default referred to in paragraph (d) of Section 7.01, the Bank may,
by written notice to the Borrower, and to the Trustee within five (5)
Business Days after a drawing under the Letter of Credit, refuse to reinstate
the Letter of Credit and/or declare the then outstanding principal of and
accrued and unpaid interest on the Bonds to be immediately due and payable,
whereupon such amounts shall be immediately due and payable; in which event,
the Bank shall notify the Trustee of such acceleration and shall pay to the
Trustee pursuant to the Letter of Credit an amount equal to the outstanding
principal of and the accrued and unpaid interest on the Bonds on such date of
acceleration, whereupon the Letter of Credit shall be terminated
automatically, all without presentment, demand, protest, or other formalities
to the Borrower all of which are expressly waived by the Borrower, or
(ii) In the case of an Event of Default referred to in
clause (d) of Section 7.01, the then outstanding principal of and accrued and
unpaid interest on the Bonds shall become automatically due and payable in
which event the Bank shall notify the Trustee of such acceleration and shall
pay to the Trustee pursuant to the Letter of Credit an amount equal to the
unpaid principal of and accrued and unpaid interest on the Bonds on such date
of acceleration, whereupon the Letter of Credit shall be terminated
automatically, all without presentment, demand, protest or other formalities
to the Borrower all of which are expressly waived by the Borrower.
(c) Upon the occurrence of any Event of Default, and upon
notice by the Bank, Borrower shall immediately deposit cash or its equivalent
with the Bank an amount equal to the aggregate contingent liability of the
Bank under the Letter of Credit, and the Bank shall hold all monies so
delivered to it in a cash collateral account under its sole control as
collateral; security for the liabilities and obligations of the Borrower
under the Reimbursement Documents, and shall apply those monies as necessary
to reimburse the Bank after the Bank has honored any drawing under the Letter
of Credit.
(d) Upon the occurrence of any Event of Default, the Bank
may declare the Stated Amount of the Letter of Credit to be immediately due
and payable, whereupon the Stated Amount of the Letter of Credit and all
accrued interest thereon shall become immediately due and payable, without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived by the Borrower.
(e) Upon the occurrence of any Event of Default, the Bank
may notify the Trustee of such occurrence and cause the Trustee to declare
the principal amount of the Bonds then outstanding, together with all accrued
and unpaid interest thereon, to be immediately due and payable, whereupon the
same shall become immediately due and payable pursuant to Section 8.02 of the
Indenture, and the Bank may exercise, or cause to be exercised, any and all
rights and remedies as the Trustee and the Bank may have under the
Reimbursement Documents or the Bond Documents or at law, in equity, by virtue
of statue, or otherwise.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 No Waiver; Cumulative Remedies. No course of dealing
and no failure or delay of the Bank in exercising any right, power or remedy
under this Agreement shall operate as a waiver thereof or shall affect any
other or future exercise thereof or the exercise of any other right, power or
remedy nor shall any single or partial exercise of any such right, power or
remedy or any abandonment or discontinuance of such exercise preclude any
other or further exercise thereof or of any other right, power or remedy
under this Agreement. The rights, powers and remedies of the Bank in this
Agreement are cumulative and not exclusive of any rights, powers, or remedies
which the Bank may otherwise have.
SECTION 8.02 Marshalling. The Bank shall not be required to marshall
any present or future security for, or guaranties or sureties of, the
Indebtedness or to resort to any security or any guaranty or surety in any
particular order, and the Borrower waives, to the fullest extent that it
lawfully may, (i) any right it may have to require the Bank to pursue any
particular remedy before proceeding against the Borrower and (ii) any right
to the benefit of, or to direct the application of the proceeds of, the
Collateral or the Mortgaged Property until the Indebtedness has been paid in
full.
SECTION 8.03. Amendments and Waivers. The provisions of this
Agreement may be modified or amended only by a written agreement entered into
by the Borrower and the Bank, and may be waived only by a written waiver
signed by the Bank. No waiver, modification or amendment shall extend to or
affect any obligation not expressly waived, modified or amended, or impair
any right of the Bank related to such obligation.
SECTION 8.04. Notices.
(a) All notices, requests, demands and other communications
that this Agreement requires or permits shall be in writing, and shall be
sent or given by overnight courier providing delivery receipt, or by
certified mail, return receipt requested, or by telecopy, (except that
notices required to be given under Section 7.01 hereof may not be given by
telecopier) addressed as follows:
To Borrower: Lannett Company, Inc.
9000 State Street
Philadelphia, PA 19136
Attn: Jeffrey M. Moshal, Vice President Finance
To Guarantor: William Farber
c/o Lannett Company, Inc.
9000 State Street
Philadelphia, PA 19136
With a copy to: J. Randolph Lawlace, Esquire
Fox, Rothschild, O'Brien & Frankel
2000 Market Street, 10th Floor
Philadelphia, PA 19103-3291
To Bank:
FIRST UNION NATIONAL BANK
123 South Broad Street
Philadelphia, PA 19109
Attention: Jane Sobieski, Vice President or Kevin Dow,
Vice President
With copy to:
Obermayer Rebmann Maxwell & Hippel LLP
One Penn Center, 19th Floor
1617 John F. Kennedy Blvd.
Philadelphia, PA 19103
Attention: Anastasius Efstratiades, Esquire
(b) All notices, requests, demands and other communications
provided in accordance with the provisions of this Agreement shall be
effective: (i) if given by hand delivery, when delivered; (ii) if sent by
overnight courier or telecopier, when received; and (iii) if sent by
certified mail, return receipt requested, the third day after sending.
SECTION 8.05. Costs and Expenses. The Borrower agrees to pay on
demand (a) all reasonable costs and expenses of the Bank in connection with
the preparation, execution, delivery and administration of this Agreement and
the other Reimbursement Documents, and all other instruments and documents to
be delivered under or in connection with this Agreement, and any waivers or
supplements or amendments thereto, including the reasonable fees and expenses
of counsel, fees and expenses of appraisers, accountants, and other
professionals, costs of property and lien searches, and costs of field
audits; and (b) all reasonable costs and expenses of the Bank in connection
with the enforcement of this Agreement and the other Reimbursement Documents,
and all other instruments and documents to be delivered under or in
connection with this Agreement, including the reasonable fees and expenses of
counsel and the reasonable fees and expenses of appraisers, accountants, and
other professionals. Such costs and expenses shall include all reasonable
costs and expenses (including the reasonable fees and expenses of counsel for
the Bank) incurred in connection with: (A) the protection, exercise or
enforcement of the Bank's rights with respect to the Collateral or the
Mortgaged Property; and (B) the assertion, protection, exercise or
enforcement of the Bank's rights in any proceeding under the United States
Bankruptcy Code, including without limitation the preparation, filing and
prosecution of (i) proofs of claim, (ii) motions for relief from the
automatic stay, (iii) motions for adequate protection and (iv) complaints,
answers and other pleadings in adversary proceedings by or against the Bank
or relating in any way to any of the Collateral. Such costs and expenses also
shall include the reasonable fees and expenses of counsel for the Bank in
advising the Bank as to its rights and responsibilities under this Agreement
or the other Reimbursement Documents or under the Letter of Credit and in
representing the Bank in any legal proceeding in which the Trustee seeks to
enforce payment by the Bank under the Letter of Credit or the Borrower seeks
to restrain the Bank from making payment under the Letter of Credit.
SECTION 8.06. Miscellaneous Payment Provisions.
(a) All payments to be made by the Borrower under this
Agreement or the other Reimbursement Documents shall be made to the Bank in
immediately available funds without set-off, counterclaim, deduction or
withholding, at the offices of the Bank or at such other place as may be
directed by the Bank.
(b) Whenever any payment to be made by the Borrower under
this Agreement or the other Reimbursement Documents is stated to be due on a
day that is not a Business Day, such payment shall be made on the next day
that is a Business Day, and such extension of time shall be involved in the
computation of interest and fees due from the Borrower (under Sections 2.03
and 2.04 of this Agreement).
(c) If at any time any payment made by the Borrower under
this Agreement or the other Reimbursement Documents is rescinded or must
otherwise be returned by the Bank for any reason, including, but not limited
to, the insolvency, bankruptcy, or reorganization of the Borrower, the
security interest and liens granted to the Bank and the rights of the Bank
shall be reinstated as though payment had not been made.
(d) If any payment to be made by the Borrower under this
Agreement or the other Reimbursement Documents is not paid on or before the
fifteenth (15) calendar day after the due date thereof, then in addition to
and not in limitation of any other rights or remedies available to the Bank,
the Bank may impose a late charge of equal to the greater of $15.00 or five
percent (5.00%) of the amount due on the due date (the "Late Charge"),
provided that the Late Charge will not be applied to a payment of the entire
outstanding principal and accrued interest due pursuant to a acceleration
under Section 7.02 hereof.
(e) Borrower authorizes the Bank to charge its deposit
accounts at the Bank for the payment, when due, of amounts due under this
Agreement or the other Reimbursement Documents.
SECTION 8.07. Participation. The Bank may grant participations to
one or more banks in the Letter of Credit and the Reimbursement Documents
and, to the extent of any such participation, unless otherwise stated
therein, the assignee and participant shall have the same rights and benefits
under this Agreement and the other Reimbursement Documents as it would have
if it were the Bank under this Agreement and the other Reimbursement
Documents.
SECTION 8.08. Governing Law. This Agreement shall be governed in all
respects by the laws in effect in the Commonwealth of Pennsylvania (without
regard to the principles of conflicts of law) and for all purposes shall be
construed in accordance with such laws.
SECTION 8.09. Headings and Table of Contents. The headings and
tables of contents in this Agreement are for convenience of reference only,
and shall not affect the construction or interpretation of this Agreement or
constitute a part of this Agreement.
SECTION 8.10. Rules of Construction. Unless otherwise expressly
provided in this Agreement or unless the context otherwise requires: (i) the
singular means the plural, and the plural means the singular; (ii) the use of
any gender includes all genders; (iii) all references to Sections and
Exhibits are references to Sections and Exhibits of this Agreement; and (iv)
all references to any time of the day are references to Eastern Standard Time
or Eastern Daylight Savings Time, as in effect in Philadelphia, Pennsylvania.
The use of the words "includes" or "including" shall be construed as words of
illustration only, and not as words of limitation.
SECTION 8.11. Continuing Representations. All agreements,
representations, warranties and covenants made by the Borrower in this
Agreement or the other Reimbursement Documents or in any certificate or other
document delivered to the Bank in connection with this Agreement, shall be
continuing as long as any liabilities and obligations of the Borrower under
this Agreement or the other Reimbursement Documents shall remain outstanding
and unpaid; provided, however, that the covenants set forth in Sections 2.06,
through 2.08, 8.05, and 8.14 through 8.17 shall survive the payment of such
liabilities and obligation.
SECTION 8.12. Binding Effect. This Agreement shall be binding upon
and operate for the benefit of the Borrower and the Bank, and their
respective successors and assigns; provided, however, that the Borrower may
not assign, transfer, or delegate any of its rights or obligations without
the prior written consent of the Bank.
SECTION 8.13. Records. The amounts due and owing under this
Agreement and the other Reimbursement Documents and the unpaid interest and
fees accrued thereon or in connection therewith shall at all times be
ascertained from the records of the Bank, which shall be conclusive evidence
of such amounts, absent manifest error.
SECTION 8.14. Indemnity. The Borrower shall indemnify the Bank
against any loss or expense (including, without limitation, attorneys' fees)
which the Bank may sustain or incur as a consequence of any default by the
Borrower in the performance or observance of any term, condition, covenant,
or undertaking contained in this Agreement or the other Reimbursement
Documents to be observed or performed by the Borrower (including, without
limitation, the failure to pay when due, by acceleration or otherwise, any
principal, interest, fee, or other amount due under this Agreement or the
other Reimbursement Documents).
SECTION 8.15. WAIVER OF JURY TRIAL. BORROWER AND GUARANTOR WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, OR THE OTHER LOAN DOCUMENTS, OR ANY PROCEEDING
IN ANY WAY ARISING OUT OF OR RELATED TO ANY OF THE FOREGOING, AND BORROWER
AND GUARANTOR EACH AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 8.16. CONSENT TO JURISDICTION AND VENUE. BORROWER AND
GUARANTOR SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COMMONWEALTH OF PENNSYLVANIA FOR THE DETERMINATION OF ANY
CONTROVERSY ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR THE OTHER
LOAN DOCUMENTS, AND BORROWER AND GUARANTOR EACH WAIVE PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT, OR OTHER PROCESS IN AN ACTION IN ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COMMONWEALTH OF PENNSYLVANIA AND AGREES THAT ALL
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED
SECTION 8.17. CONFESSION OF JUDGMENT. UPON THE OCCURRENCE OF ANY
EVENT OR DEFAULT, BORROWER IRREVOCABLY AUTHORIZES THE PROTHONOTARY OR ANY
ATTORNEY OF ANY COURT OF RECORD IN PENNSYLVANIA OR ELSEWHERE TO APPEAR FOR
AND CONFESS JUDGMENT AGAINST THE BORROWER FOR ANY AND ALL AMOUNTS UNPAID
UNDER THIS AGREEMENT, INCLUDING INTEREST THEREFROM TO DATE OF PAYMENT (SUCH
AMOUNT AND THE OCCURRENCE OF SUCH EVENT OF DEFAULT TO BE EVIDENCED BY A
COMPLAINT OR AN AFFIDAVIT SIGNED BY AN OFFICER OF THE BANK) TOGETHER WITH
FEES OF COUNSEL, DISBURSEMENTS AND COSTS OF SUIT, RELEASING ALL ERRORS AND
WAIVING RIGHTS OF APPEAL. IF A COPY OF THIS NOTE, VERIFIED BY AFFIDAVIT,
SHALL HAVE BEEN FILED IN SUCH PROCEEDING, IT SHALL NOT BE NECESSARY TO FILE
THE ORIGINAL AS A WARRANT OF ATTORNEY. BORROWER WAIVES THE RIGHT TO ANY STAY
OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN
EFFECT. NO SINGLE EXERCISE OF THIS WARRANT AND POWER TO CONFESS JUDGMENT
SHALL BE DEEMED TO EXHAUST THIS POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL
BE HELD BY ANY COURT TO BE INVALID, VOIDABLE OR VOID, BUT THIS POWER SHALL
CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE
BANK SHALL ELECT UNTIL ALL AMOUNTS DUE UNDER THIS AGREEMENT SHALL HAVE BEEN
PAID IN FULL.
SECTION 8.18. Liability of Bank. The Borrower agrees that the Bank
shall not have any liability (in tort or otherwise) for any lost profits or
other consequential damage sustained by the Borrower as a result of any
action taken or omitted by the Bank or any of its officers, agents, or
employees in connection with the administration or enforcement of this
Agreement or the other Reimbursement Documents.
SECTION 8.19. Interpretation. This Agreement and the other
Reimbursement Documents shall be construed as one agreement and shall be
interpreted so as to expand, rather than contract, the rights of the Bank;
provided, however, that in the event of inconsistency, the provisions of this
Agreement shall supersede and control the provisions of the other
Reimbursement Documents.
SECTION 8.20. Integration. This Agreement and the other
Reimbursement Documents, together with the Credit Agreement, constitute the
entire agreement and understanding between the Borrower and the Bank related
to the issuance of the Letter of Credit. Borrower acknowledges that, in
entering into this Agreement, not relying on any statement, representation,
warranty, covenant, or agreement of any kind made by the Bank or any employee
or agent of the Bank, other than the agreements of the Bank set forth in this
Agreement.
SECTION 8.21. Conflicts. In case of conflict between any provision
of this Agreement and any provision in any of the Reimbursement Documents,
the provisions of this Agreement shall prevail.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
LANNETT COMPANY, INC
Attest:
_________________________ BY:________________________________
Name:
Title:
(Corporate Seal)
Witness:
- ------------------------- --------------------------------
William Farber
Attest: FIRST UNION NATIONAL BANK
__________________________ BY:________________________________
(Seal) Name:
Title:
EXHIBIT 2.01
FORM OF LETTER OF CREDIT
See tab #7
EXHIBIT 2.02
SCHEDULE OF ANNUAL PAYMENTS UNDER THE LOAN AGREEMENT
EXHIBIT 4.04
REQUEST FOR CONSENT TO DISBURSEMENT NO.
The undersigned, being the ______________ of Lannett Company, Inc.
("Borrower") hereby requests FIRST UNION NATIONAL BANK or its successors,
pursuant to the terms of a certain Reimbursement Agreement (the "Agreement")
dated as of _________________, by and between FIRST UNION NATIONAL BANK
("Bank") and the Borrower, disbursement from the funds held by the Bank the
sum of $______________ to Borrower, in connection with which request the
Borrower hereby certifies to Bank as follows (all terms used herein and
defined in the Agreement shall have the meanings assigned to them in the
Agreement):
(1) that Borrower has fully complied with all of the
provisions of the Agreement and satisfied the following conditions:
(a) All conditions precedent to the issuance of the
Letter of Credit and to disbursements in Sections 4.01, 4.02, 4.03 and 4.04
of the Agreement have been satisfied.
(b) The representations and warranties made by the
Borrower in the Agreement and the other Reimbursement Documents are true and
correct on and as of the date of this request for disbursement.
(c) No Event of Default or Potential Default has
occurred and be continuing or shall result from the funding of the
disbursement.
(d) No material adverse change has occurred in the
condition of the Borrower, financial or otherwise, since the date of the
Agreement.
(e) Without limiting the generality of the foregoing,
the Borrower certifies:
(i) The Contractors listed have delivered certain
requests for payment on AIA Form 703 which are attached hereto for review and
approval by the Bank:
Name of Contractor Amount of Request Amount of Retainage
------------------ ----------------- -------------------
Total:
(f) Other project expenses included in this request
(supported by attached documentation) are as follows:
[The following representation is only applicable if Borrower is requesting
disbursement of the Unused Bond Proceeds]
(g) All conditions preceded to disbursements set forth
in Section 4.05 of the Agreement have been satisfied.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
Borrower has duly executed this request for disbursement on this _____ day of
_____________, _______.
Lannett Company, Inc.
By: __________________________________
Name:
Title:
EXHIBIT 5.01
AFFILIATES AND TRADENAMES
REGISTERED TRADEMARKS
None
EXHIBIT 5.05
LITIGATION
None
EXHIBIT 5.07
CONTINGENT LIABILITIES
None.
EXHIBIT 5.09
EXISTING LIENS AND ENCUMBRANCES
See Schedule B-II of marked up Title Commitment
EXHIBIT 6.01
INSURANCE REQUIREMENTS
Borrower shall at all times provide, maintain and keep in force the
following policies of insurance:
(a) Insurance against loss or damage to the Property
by fire and any of the risks covered by insurance of the type now known as
"fire and extended coverage", in an amount not less than the full replacement
cost of the Improvements (exclusive of the cost of excavations, foundations,
and footings below the lowest basement floor), whichever is greater; and with
not more than $1,000.00 deductible from the loss payable for any casualty.
The policies of insurance carried in accordance with this subparagraph (a)
shall contain the "Replacement Cost Endorsement".
(b) Comprehensive public liability insurance
(including coverage for elevators and escalators, if any, on the Property
and, if any construction of new improvements occurs after execution of this
Agreement, completed operations coverage) on an "occurrence basis" against
claims for bodily injury, death or property damage occurring on, in or about
the Property and the adjoining streets, sidewalks and passageways, such
insurance to afford immediate minimum protection to a limit of not less than
that required by Bank with respect to personal injury or death to any one or
more persons or damage to property.
(c) During the course of any construction or repair
of Improvements on the Property, builder's completed value risk insurance
against "all risks of physical loss", including collapse and transit
coverage, during construction of such Improvements, with deductibles not to
exceed $1,000.00, in non-reporting form, covering the total value of work
performed and equipment, supplies and materials furnished.
(d) Boiler and machinery insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against loss of
occupancy or use arising from any such breakdown, in such amounts as are
reasonably satisfactory to Bank.
(e) Insurance against loss or damage to the personal
property by fire and other risks covered by insurance of the type now known
as "fire and extended coverage".
(f) Business interruption insurance in amounts
acceptable to the Bank.
(g) Such other insurances, and in such amounts, as
may from time to time be required by Bank against the same or other hazards.
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT made this 30th day of April,
1999, between LANNETT COMPANY, INC., a Delaware corporation, with an address
at 9000 State Road, Philadelphia, Pa. 19136 (the " Mortgagor ") and FIRST
UNION NATIONAL BANK, a national banking association with offices at 123 South
Broad street, Philadelphia, Pa.
19109 (the "Mortgagee").
W I T N E S S E T H T H A T :
Mortgagor holds fee title to the land situate at known as 9000 State
Road, Philadelphia, Pennsylvania, as more fully described on Exhibit "A"
attached hereto and made a part hereof (the "Land"). The Premises is being
hypothecated to the Mortgagee as collateral for (1) a certain letter of
credit in the amount of $3,769,945.20 issued by Mortgagee in favor of
Mortgagor, pursuant to the terms of a certain reimbursement agreement between
Mortgagor and Mortgagee dated as of April 30, 1999 and (2) a certain letter
of credit in the amount of $2,349,276.72 issued by Mortgagee in favor of
Mortgagor, pursuant to the terms of a certain reimbursement agreement between
Mortgagor and Mortgagee dated as of April 30, 1999 (collectively the two
reimbursement agreements are referred to as the "Reimbursement Agreement" or
the "Agreement") (collectively the "Obligations").
This Mortgage will secure $6,119,221.92 of the Obligations as
increased pursuant to the terms of the Agreement or this Mortgage.
NOW, THEREFORE, in consideration of the indebtedness and other good
and valuable consideration, receipt of which is hereby acknowledged,
Mortgagor has granted, conveyed, bargained, sold, aliened, enfeoffed,
released, confirmed and mortgaged, and by these presents does hereby grant,
convey, bargain, sell, alien, enfeoff, release, confirm and mortgage unto
Mortgagee the following:
All of Mortgagor's right, title and interest in and to the Land;
TOGETHER WITH, all rents, issues, profits, royalties, income,
reversions and remainders and other benefits derived from the Land, the
Improvements and the Personal Property (collectively the "Rents"), subject to
the right, power and authority hereinafter given to Mortgagor to collect and
apply such rents; and
TOGETHER WITH, all leasehold estate, right, title and interest of
Mortgagor in and to all leases or subleases or agreements to lease covering
the Land, the Improvements and the Personal Property or any portion thereof
now or hereafter existing or entered into, and all right, title and interest
of Mortgagor thereunder, including, without limitation, all cash or security
deposits, advance rentals, and deposits or payments of similar nature; and
TOGETHER WITH, all interest, estate or other claims, both in law and
in equity, which Mortgagor now has or may hereafter acquire in the Land, the
Improvements and the Personal Property; and
TOGETHER WITH, any and all tenements, hereditaments and
appurtenances belonging to the Land or any part thereof hereby mortgaged or
intended so to be, or in any way appertaining thereto, and all streets,
alleys, passages, ways, water courses, water rights, and shares of stock
evidencing such water rights, and all leasehold estates, easements and
covenants now existing or hereafter created for the benefit of Mortgagor or
any subsequent owner or tenant of the Land over ground adjoining the Land and
all right to enforce the maintenance thereof, and all other rights, liberties
and privileges of whatsoever kind or character, and all the estate, right,
title, interest, property, possession, claim and demand whatsoever, at law or
in equity, of Mortgagor in and to the Land or any part thereof; and
TOGETHER WITH, all right, title and interest of Mortgagor, now owned
or hereafter acquired, in and to any land lying within the right-of-way of
any street, open or proposed, adjoining the Land, and any and all sidewalks,
alleys and strips and gores of land adjacent to or used in connection with
the Land; and
TOGETHER WITH, any and all buildings and improvements now or
hereafter erected on or at the Land, including but not limited to, the
fixtures, attachments, appliances, equipment, machinery, and other articles
attached to such buildings and improvements (the "Improvements"); and
TOGETHER WITH, all right, title and interest of Mortgagor in and to
all tangible personal property of any nature whatsoever owned by Mortgagor
and now or at any time hereafter installed in, attached to or located on or
at the Land or the Improvements or used or intended to be used in connection
therewith, or in the operation of the Improvements or any plant or business
situate at the Land, whether or not such personal property is or shall be
affixed thereto (the "Personal Property"); and
TOGETHER WITH, all building materials, fixtures, building machinery
and building equipment delivered on site to the Land or the Improvements
during the course of or in connection with, the construction of, or
remodeling of any buildings and improvements from time to time during the
term hereof; and
TOGETHER WITH, all the estate, interest, right, title, other claim
or demand, including claims or demands with respect to the proceeds of
insurance with respect thereto, which Mortgagor now has or may hereafter
acquire in the Land, Improvements and Personal Property, and any and all
awards made for the taking by eminent domain or condemnation, or by any
proceeding or purchase in lieu thereof, of the whole or any part of the
Premises, including, without limitation, any awards resulting from a change
of grade of streets and awards for severance damages.
TOGETHER WITH, all contract rights and general intangibles relating
to or associated with the Premises, which Mortgagor may now or hereafter own,
hold, or claim including, without limitation, all options and rights to
purchase, and rights of first refusal to purchase (and the like), any and all
real property, improvements, leasehold estates, and other such interests
adjacent to or touching upon the Land or otherwise included within the
Premises.
TOGETHER WITH, all additional rights and property interests of
Mortgagor pertaining to the Premises as set forth hereinafter.
TOGETHER WITH, proceeds of any or all of the foregoing.
All of the above-mentioned Land, Improvements, Personal Property and
the balance of the entire estate, property and interest located, lying and
being in or at the Premises and hereby conveyed to Mortgagee is hereafter
collectively referred to as the "Premises".
FOR THE PURPOSE OF SECURING:
(a) Payment of the indebtedness, with interest thereon,
under the Agreement and any and all modifications, extensions and renewals
thereof.
(b) Performance of all Obligations of Mortgagor.
(c) Payment of all sums advanced by Mortgagee to protect the
Premises, with interest thereon.
(d) Payment of all other sums, with interest thereon, which
may hereafter be loaned to Mortgagor, its successors or assigns, by
Mortgagee, or other obligation of Mortgagor to Mortgagee when set forth in
agreements or evidenced by a promissory note or notes reciting that they are
secured by this Mortgage and Security Agreement (the "Mortgage").
(e) Performance of Mortgagor's obligations and agreements
contained in a certain Assignment of Lease from Mortgagor to Mortgagee (the
"Assignment") which secures the Obligations, and each agreement of Mortgagor
incorporated by reference therein or herein, or contained therein or herein.
This Mortgage, the Reimbursement Agreement, the Guaranty and the
Assignment and any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby are sometimes
hereinafter collectively referred to as the "Loan Documents".
TO HAVE AND TO HOLD, the Premises hereby conveyed or mentioned and
intended so to be, unto Mortgagee its successors and assigns to its own use
forever.
PROVIDED ALWAYS, and this instrument is upon the express condition
that, if Mortgagor pays to Mortgagee the principal sum mentioned in the Loan
Documents, the interest thereon and all other sums payable by Mortgagor to
Mortgagee as are secured hereby, in accordance with the provisions of the
Loan Documents, at the times and in the manner specified, without deduction,
fraud or delay, and Mortgagor performs and complies with all the agreements,
conditions, covenants, provisions and stipulations contained herein and in
the other Loan Documents, then this Mortgage and the estate hereby granted
shall cease and become void.
TO PROTECT THE SECURITY OF THIS MORTGAGE, MORTGAGOR HEREBY COVENANTS
AND AGREES AS FOLLOWS:
Mortgagor hereby represents, covenants, warrants and agrees to the following:
1. Payment of Secured Obligations. Mortgagor shall pay when due the
principal of, and the interest on, the indebtedness created under the
Agreement, and the principal of, and interest on, any future advances secured
by this Mortgage; and that Mortgagor shall pay when due the charges, fees and
all other sums as provided in the Loan Documents.
2. Maintenance, Repair, Alterations. Mortgagor covenants and agrees
to keep the Premises in good order and condition and in a rentable and
tenantable state of repair; to make or cause to be made, as and when
necessary, all repairs, renewals and replacements, structural and
non-structural, exterior and interior, ordinary and extraordinary, foreseen
and unforeseen; not to remove, demolish or alter (except such alterations as
may be required by laws, ordinances or regulations) any of the Improvements;
to complete promptly and in good workmanlike manner any building or other
Improvements which may be constructed on the Premises and promptly restore in
like manner any Improvements which may be damaged or destroyed thereon, and
to pay when due all claims for labor performed and materials furnished
therefor; to comply with all laws, ordinances, regulations, covenants,
conditions and restrictions now or hereafter affecting the Premises or any
part thereof or requiring any alterations or Improvements; not to commit or
permit any waste or deterioration of the Premises; to keep and maintain
abutting grounds, sidewalks, roads, parking and landscape areas in good and
neat order and repair; to comply with the provisions of any lease of all or
any part of the Premises; not to commit, suffer or permit any act to be done
in or upon the Premises in violation of any law, ordinance or regulation; not
to permit the Premises to become vacant, deserted or unguarded.
3. Insurance.
(a) Mortgagor shall keep the buildings and improvements on
the Land continuously insured against loss by fire, with extended coverage,
in such total amount as Mortgagee may from time to time require (but such
amount shall in no event exceed the full fair insurable value of said
buildings and improvements), business interruption insurance, and against
other hazards as Mortgagee may reasonably require including, but not limited
to polices for any amounts carried in excess of the aforesaid minimum and
policies not specifically required by Mortgagee, shall be with an insurance
company or companies, and in form, satisfactory to Mortgagee, and shall be
deposited, premiums paid, with Mortgagee. The loss, if any, shall be payable
to Mortgagee according to the terms of a standard mortgagee clause, not
subject to contribution, or of such other form as shall be satisfactory to
Mortgagee. Mortgagee shall have the right to apply the proceeds of any such
insurance, at its election, either to reduce the indebtedness secured hereby
or to restore the Premises. All renewal policies shall be delivered, premiums
paid, to Mortgagee at least ten days before the expiration of the old
policies. If Mortgagee becomes the owner of the Premises or any part thereof
by foreclosure or otherwise, such policies shall become the absolute property
of Mortgagee.
(b) In the event of foreclosure of this Mortgage or other
transfer of title or assignment of the Premises in extinguishment, in whole
or in part, of the debt secured hereby, all right, title and interest of
Mortgagor in the policies shall inure to the benefit of and pass to the
successor in interest to Mortgagor or the purchaser or grantee of the
Premises.
4. Indemnification; Subrogation; Waiver of Offset.
(a) If Mortgagee is made a party defendant to any litigation
concerning this Mortgage or the Premises or any part thereof or any interest
therein, or the construction, operation or occupancy thereof by Mortgagor,
then Mortgagor shall indemnify, defend and hold Mortgagee harmless from all
liability by reason of such litigation, including reasonable attorneys' fees
and expenses incurred by Mortgagee in any such litigation, whether or not any
such litigation is prosecuted to judgment. If Mortgagee commences an action
against Mortgagor to enforce any of the terms hereof or because of the breach
by Mortgagor of any of the terms hereof, or for the recovery of any sum
secured hereby, Mortgagor shall pay to Mortgagee reasonable attorneys' fees
and expenses, and the right to such attorneys' fees and expenses shall be
deemed to have accrued on the commencement of such action, and shall be
enforceable whether or not such action is prosecuted to judgment. If
Mortgagor breaches any term of this Mortgage, Mortgagee may employ an
attorney or attorneys to protect its rights hereunder, and in the event of
such employment following any breach by Mortgagor, Mortgagor shall reimburse
Mortgagee for any reasonable attorneys' fees and expenses incurred by
Mortgagor by reason of breach.
(b) Mortgagor waives any and all right to claim or recover
against Mortgagee, its officers, employees, agents and representatives, for
loss of or damage to Mortgagor, the Premises, Mortgagor's property or the
property of others under Mortgagor's property or the property of others under
Mortgagor's control from any cause insured against or required to be insured
against by the provisions of this Mortgage.
(c) Except as otherwise specifically provided herein, all
sums payable by Mortgagor hereunder shall be paid without notice, demand,
counterclaim, setoff, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and liabilities of
Mortgagor hereunder shall in no way be released, discharged or otherwise
affected (except as expressly provided herein) by reason of: (i) any damage
to or destruction of or any condemnation or similar taking of the Premises of
any part thereof; (ii) any restriction or prevention of or interference with
any use of the Premises or any part thereof; (iii) any title defect or
encumbrance or any eviction from the Premises or the Improvements or any part
thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other
like proceeding relating to Mortgagee, or any action taken with respect to
this Mortgage by any trustee or receiver of Mortgagee, or by any court, in
any such proceeding; (v) any claim which Mortgagor has or might have against
Mortgagee; (vi) any default or failure on the part of the Mortgagee to
perform or comply with any of the terms hereof or of any other agreement with
Mortgagor; or (vii) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing; whether or not Mortgagor shall have notice or
knowledge of any of the foregoing. Except as expressly provided herein,
Mortgagor waives all rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction of
any sum secured hereby and payable by Mortgagor.
5. Taxes and Impositions.
(a) Mortgagor agrees to pay, at least ten (10) days prior to
delinquency, all taxes and assessments, general and special, and all other
taxes and assessments of any kind or nature whatsoever, including without
limitation non-governmental levies or assessments such as maintenance
charges, levies or charges resulting from covenants, conditions and
restrictions affecting the Premises, which are assessed or imposed upon the
Premises, or become due and payable, and which create, may create or appear
to create a lien upon the Premises, or any part thereof, or upon any Personal
Property, equipment or other facilities used in the construction, operation
or maintenance thereof (all of which taxes, assessments and other
governmental charges of like nature are hereinafter referred to as
"Impositions"); provided, however, that if, by law, any such Impositions are
payable, or any Impositions, at the option of the taxpayer, are payable in
installments, Mortgagor may pay such Impositions together with any accrued
interest on the unpaid balance of such Imposition, in installments as they
become due and before any fine, penalty, interest or cost may be added
thereto for the nonpayment of any such installment and interest.
(b) If any law or ordinance now or hereafter assesses or
imposes: (i) a tax or assessment on the Premises in lieu of or in addition to
the Impositions payable by Mortgagor pursuant to Section 5(a) hereof, or (ii)
a license fee, tax or assessment on Mortgagee measured by or based in whole
or in part upon the amount of the outstanding obligations secured hereby,
then all such taxes, assessments or fees shall be deemed to be included
within the term "Impositions" as defined in Section 5(a) hereof, and
Mortgagor shall pay and discharge the same as herein provided with respect to
the payment of Impositions or, at the option of Mortgagee, all obligations
secured hereby together with all accrued interest thereon, shall immediately
become due and payable. Anything to the contrary herein notwithstanding,
Mortgagor shall have no obligation to pay any franchise, estate, inheritance,
income, excess profits or similar tax levied on Mortgagee or on the
obligations secured hereby.
(c) Subject to the provisions of subparagraphs (d) of this
Section 5, Mortgagor covenants to furnish Mortgagee within ten (10) days
after the date upon which any such Impositions are due and payable by
Mortgagor, official receipts of the appropriate taxing authority, or other
proof satisfactory to Mortgagee evidencing the payment thereof.
(d) Mortgagor shall have the right before any delinquency
occurs to contest or object to the amount or validity of any such Impositions
in good faith and by appropriate legal proceedings, but this shall not be
deemed or construed in any way as relieving, modifying or extending
Mortgagor's obligation to pay any such Impositions at the time such contest,
objection and legal proceedings have been terminated or discontinued
adversely to Mortgagor, and further provided that, during the pendency of
such contest, objection and legal proceedings: (i) Mortgagor remains the
record title holder of the Premises; (ii) Mortgagor is not in default under
the Agreement, this Mortgage or any other Loan Document; (iii) Mortgagor has
given prior written consent to Mortgagee of Mortgagor's intent to so contest
or object to such Impositions; and (iv) at Mortgagee's sole opinion,
Mortgagor shall either (a) demonstrate from time to time, to Mortgagee's
satisfaction, that the legal proceedings undertaken by Mortgagor shall
conclusively operate to accomplish a stay of any proceedings which may be
instituted to enforce payment of such Impositions and prevent the sale of the
Premises or any part thereof to satisfy such Impositions; or (b) Mortgagor
shall furnish a good and sufficient bond or surety for the payment of such
Impositions and any interest and penalties accruing thereon satisfactory to
Mortgagee.
(e) If taxes are hereafter assessed against the Personal
Property at the Premises, Mortgagor covenants and agrees not to suffer,
permit or initiate the joint assessment of taxes upon the real property and
the Personal Property at the Premises, or any other procedure whereby the
lien of the real property taxes and the lien of the personal property taxes
shall be assessed, levied or charged to the Premises as a single lien.
(f) In the event of the passage after the date of this
Mortgage of any law of the Commonwealth of Pennsylvania deducting from the
value of real property for the purposes of taxation of mortgages or debts
secured by mortgage for state or local purposes or the manner of the
collection of any such taxes, and imposing a tax, either directly or
indirectly on this Mortgage or the Obligations, the holder of this Mortgage
and of the debt which it secures shall have the right to declare the
principal sum and the interest due without any prepayment charge on a date to
be specified by not less than ninety (90) days' written notice to be given to
Mortgagor by Mortgagee, provided, however, that such election shall be
ineffective if Mortgagor is permitted by law to pay the whole of such tax in
addition to all other payments required hereunder and if Mortgagor prior to
such specified date, does pay such tax and agrees to pay any such tax when
thereafter levied or assessed against the Premises, and such agreement shall
constitute a modification of this Mortgage.
(g) If at any time the United States Government or any
department or bureau thereof shall require internal revenue stamps on the
Obligations or the Agreement secured hereby, upon demand Mortgagor shall pay
for same; and on default of such payment within 156 days after demand for
same, the holder of the Obligations may pay for such stamps and add the
amount so paid to the principal indebtedness under the terms of the Agreement
and secured by this Mortgage, and said additional principal shall bear
interest at the Default Rate (as defined in the Agreement. If any law or
ordinance adopted hereafter imposes a tax on Mortgagee with respect to the
Premises, the value of Mortgagor's equity therein, the amount of the
indebtedness secured hereby, the Agreement, or this Mortgage, Mortgagee shall
have the right at its election from time to time to give Mortgagor 60 days
written notice to pay such indebtedness secured hereby, whereupon such
indebtedness shall become due, payable and collectible at the expiration of
such period of 60 days, unless prior thereto, lawfully and without violation
of usury laws, mortgagor has paid any such tax in full as the same became due
and payable, in which event such notice s hall be deemed to have been
rescinded with respect to any right of Mortgagee hereunder arising by reason
of the tax so paid. Any prepayment of the indebtedness secured hereby
pursuant to any such notice shall be subject to the prepayment provisions
contained in the Agreement.
6. Escrow Funds. Without limiting the effect of Sections 3 and 5
hereof, upon request of Mortgagee, Mortgagor shall pay to Mortgagee monthly
at the time when such monthly installment of principal and interest is
payable, an amount equal to 1/12 of the annual premiums for such fire and
extended coverage insurance and such annual real estate taxes, water rents,
sewer rents, special assessments, and any other tax assessment, claim, lien
or encumbrance which may at any time be or become and lien upon the Premises
prior to the lien of this Mortgage, and on demand from time to time shall pay
to Mortgagee additional sums necessary to pay such premiums and other
payments, all as estimated by Mortgagee, the amounts so paid to be security
for such premiums and other payments and to be used in payment thereof. No
amount so paid shall be deemed to be trust funds but may be commingled with
general funds of Mortgagee, and no interest s hall be payable thereon. If,
pursuant to any provision of this Mortgage, the whole amount of said
principal debt remaining becomes due and payable, Mortgagee shall have the
right at its election to apply any amounts so held against the entire
indebtedness secured hereby.
7. Utilities. Mortgagor shall pay when due all utility charges which
are incurred by Mortgagor for the benefit of the Premises or which may become
a charge or lien against the Premises for gas, electricity, water or sewer
services furnished to the Premises, and all other assessments or charges of a
similar nature, whether public or private, affecting the Premises or any
portion thereof, whether or not such taxes, assessments or charges are liens
thereon.
8. Actions Affecting Premises. Mortgagor shall appear in and contest
any action or proceeding purporting to affect the security hereof or the
rights or powers of Mortgagee and to pay all costs and expenses, including
reasonable attorneys' fees, in any such action or proceeding in which
Mortgagee may appear.
9. Mortgagee's Right to Publicize Source of Financing. Mortgagee
shall have the right to announce and publicize the source of financing for
the Improvements on the Premises, and to select the media, means and
frequency of the publicity.
10. Survival of Warranties. All representations, warranties and
covenants of Mortgagor contained herein shall survive the closing and the
issuance of the Letter of Credit and shall remain continuing obligations,
warranties and representations of Mortgagor during any time when any portion
of the obligations secured by this Mortgage remain outstanding.
11. Eminent Domain. If any part of the Premises is condemned, except
as hereinafter provided in this covenant, all proceeds shall be applied first
to pay the indebtedness secured hereby. No settlement for the damages
sustained thereby shall be made by Mortgagor without Mortgagee's prior
written approval thereof. If the amount of an initial award of damages for
the condemnation is insufficient to pay the amount of the indebtedness
secured hereby in full with interest and costs, Mortgagee shall have the
right at its sole option, to file an appeal or such other legal proceedings
as legal counsel may advise to be appropriate under the circumstances in the
name of Mortgagor or Mortgagee (for which action Mortgagee or such counsel as
it chooses is hereby irrevocably appointed attorney in facto for Mortgagor),
and to prosecute same to final conclusion or otherwise dispose thereof, in
which event the expenses of the appeal or other appropriate legal
proceedings, including but not limited to counsel fees, shall be first paid
out of the proceeds, and no credit shall be given on account of the
indebtedness secured hereby other than a credit for the amount, if any,
whereby the final proceeds exceed all such expenses. Nothing in this covenant
or elsewhere in this Mortgage shall limit rights otherwise available at law
to Mortgagee, including but not limited to rights to intervene as a part to
any condemnation proceeding.
12. Additional Security. In the event Mortgagee at any time holds
additional security for any of the obligations secured hereby, it may enforce
the sale thereof or otherwise realize upon such additional security, at its
option, either before or concurrently herewith or after a sale is made
hereunder.
13. Successors and Assigns. This Mortgage applies to, inures to the
benefit of and binds all parties hereto and their successors and assigns.
14. Inspections. Mortgagee, or its agents, representatives or
workmen, are authorized to enter at any reasonable time upon or in part of
the Premises for the purpose of inspecting the Premises and for the purpose
of performing any of the acts it is authorized to perform under the terms of
any of the Loan Documents.
15. Liens. Mortgagor shall pay and promptly discharge, at
Mortgagor's cost and expense, all liens, encumbrances and charges upon the
Premises, or any part hereof or interest therein; provided that Mortgagor
shall have the right to contest in good faith the validity of any such lien,
encumbrance or charge; provided, however, that if any such lien, encumbrance
or charge has or may have priority over the lien of this Mortgage, then
Mortgagor shall first deposit with Mortgagee a bond or other security
satisfactory to Mortgagee in such amounts as Mortgagee shall reasonably
require; and further provided that Mortgagor shall thereafter diligently
proceed to cause such lien, encumbrance or charge to be removed and
discharged. If Mortgagor shall fail to pay and promptly discharge any such
lien, encumbrance or charge, then, in addition to any other right or remedy
of Mortgagee, Mortgagee may, but shall not be obligated to, discharge the
same, either by paying the amount claimed to be due, or by procuring the
discharge of such lien by depositing in court a bond or the amount claimed or
otherwise giving security for such claim; or in such manner as is or may be
prescribed by law; and all expenditures and expenses incurred by Mortgagee in
so doing shall be recoverable by Mortgagee from Mortgagor upon the terms set
forth in Section 4.04 and shall be deemed advances secured by the lien of
this Mortgage.
16. No Other Financing or Liens. Without the prior written consent
of Mortgagee, Mortgagor shall not permit to exist any lien on the Premises,
and shall not incur any indebtedness for money borrowed to purchase, improve
or operate the Premises or any part thereof, other than the indebtedness
secured hereby and liens heretofore approved by Mortgagee.
17. Mortgagee's Powers. Without affecting the liability of any other
person liable for the payment of any obligation herein mentioned, and without
affecting the lien or charge of this Mortgage upon any portion of the
Premises not then or theretofore released as security for the full amount of
all unpaid obligations, Mortgagee may, from time to time and without notice:
(i) release any person so liable; (ii) extend the maturity or alter any of
the terms of any such obligation; (iii) grant other indulgences; (iv) release
or reconvey, or cause to be released or reconveyed, at any time at
Mortgagee's option, any parcel, portion or all of the Premises; (v) take or
release any other or additional security for any obligation herein mentioned,
or (vi) make compositions or other arrangements with debtors in relation
thereto.
18. Warranty of Title. Mortgagor warrant that it possesses an
unencumbered fee simple title to the Premises.
19. No Transfer. Without the prior written consent of Mortgagee,
Mortgagor will abstain from and will not cause or permit, to the extent it
may do so, any transfer of title to or control of the Premises or any part
thereof or any change in identity or control of the Mortgagor, voluntarily or
by operation of law. This Mortgage may not be assumed by any other party. A
change in identity or control shall mean: (i) with respect to a corporation,
a transfer or transfers (other than by testate or intestate succession) of
outstanding voting stock of such corporation, or the issuance of additional
voting stock by such corporation, to a person other than a stockholder shall
be deemed to be a pro rata transfer of such corporation's interest to such
other person or persons; and (ii) with respect to a partnership or any
sub-partnership holding an interest therein, (x) a transfer or transfers of
an outstanding percentage interest of the partners in such partnership or
sub-partnership, whether limited or general interest, to any person or
persons (other than by testate or intestate succession) shall be deemed to be
a pro rata transfer of the partnership's or sub-partnership's interest to
such other person or persons, and (y) a transfer or transfers (other than by
testate or intestate succession) of outstanding voting stock of any corporate
partner in such partnership or sub-partnership, or the issuance of additional
voting stock by said corporation, to any person or persons shall be deemed to
be a pro rata transfer of such corporation's interest in the partnership or
sub-partnership to such other person or persons. For the purposes of the
foregoing, if any shares in Mortgagor (if Mortgagor is a corporation) or
interests in Mortgagor (if Mortgagor is a limited partnership, partnership,
joint venture, trust or other entity) are owned by a person which is itself
an entity other than a natural person, the shares or interests of such person
in Mortgagor shall be deemed to have been conveyed, transferred, assigned,
sold or otherwise disposed of, if the conveyance, transfer, assignment, sale
or other disposition of any shares or interests in such person would
constitute a change in identity or control under this Article if such person
were Mortgagor hereunder. Mortgagor hereby agrees to give prompt and current
notice to Mortgagee of all transfers or other dispositions of ownership
interests in itself or in any subtier partnership or corporation in a partner
or subtier partner in Mortgagor, whether or not falling within said
exceptions. Notwithstanding anything in this Mortgage to the contrary, any
transferee of an interest in Mortgagor must be of good business character and
reputation.
20. Leases. Mortgagor hereby represents that there are leases for
the Premises as shown in the schedule attached to a certain Assignment of
Rents, Leases and Profits of even date herewith. Mortgagor covenants and
agrees that all future leases at the Premises shall be subject to prior
review and approval by Mortgagee and shall be subordinate or prior to the
lien of this Mortgage, at the option of Mortgagee.
21. Environmental Covenants.
(a) As used in this Mortgage, the following terms shall have
the following meanings:
(i) The term "Environmental Laws" means any and all
applicable federal, state and local environmental laws, rules and regulations
whether now or existing or hereafter enacted together with all amendments,
modifications and supplements thereof.
(ii) The term "Hazardous Substance" means any
contaminants, hazardous substances or
wastes, pollutants, toxic substances or wastes, regulated substances or other
similar substances or wastes which may be the subject of liability pursuant
to any Environmental Law.
(b) Mortgagor represents and warrants to Mortgagee that (i)
the Premises and Mortgagor are in full compliance with the Environmental
Laws; (ii) Mortgagor has no knowledge of or notice concerning any potential
liability under, or any investigation or proceeding threatened or pending
under the Environmental Laws arising from the ownership or operation, past or
present, of the Premises; (iii) there are no under ground or above ground
storage tanks on the Premises that have been used for the storage of
petroleum products or any Hazardous Substance nor to the best of Mortgagor's
knowledge, have any such tanks been located on the Premises at any time; and
(iv) there is no evidence of any release , discharge or pollution from any
petroleum products or any Hazardous Substance on the Premises.
(c) Mortgagor covenants and agrees (i) Mortgagor shall not,
and shall not permit any other person to, locate, store, generate,
manufacture, process distribute, use, treat, transport, handle, dispose of,
emit, discharge or release any Hazardous Substance only from or with respect
to the Premises (Mortgagor may use, store and dispose of cleaning materials
and office supplies in the ordinary course of Mortgagor's business in
reasonable quantities and in compliance with Environmental Laws); (ii)
Mortgagor shall immediately notify Mortgagee of any violation of or potential
liability under the Environmental Laws; (iii) Mortgagor shall immediately
comply with any order, action or demand of any governmental agency or legal
or administrative agency having jurisdiction over the Premises to clean and
remove any Hazardous Substance from the Premises and to pay for such clean
up, removal and associated costs, fines and penalties; and (iv) Mortgagor
shall otherwise comply with all Environmental Laws and laws relating to the
storage, handling and disposing of petroleum products.
(d) At any time Mortgagee shall have the right, but not the
obligation, to conduct or cause to be conducted by any other person
designated by Mortgagee; an environmental audit or similar assessment
concerning the Premises and its compliance with Environmental Laws and to
ascertain the existence of Hazardous Substances on the Premises. Mortgagor
shall pay all costs and expenses associated with such audit or assessment.
Mortgagee and its designees are authorized to enter upon the Premises to
perform such audit or assessment and to conduct all tests necessary including
above and below the ground tests. If such audit, assessment or other inquiry
reveals the existence of any Hazardous Substances or noncompliance with
Environmental Laws, Mortgagee, at Mortgagor's expense, shall have the right,
but not the obligation, to cause the Premises to be treated by persons
designated by Mortgagee, as is necessary in Mortgagee's opinion, to cause the
Premises to comply with the Environmental Laws and to be free of Hazardous
Substances. Any cost or expense arising from any audit, assessment or other
inquiry and from any treatment not paid by Mortgagor may be paid by
Mortgagee. Mortgagor will pay to Mortgagee immediately, and without demand,
all sums of money advanced by Mortgagee pursuant to this paragraph together
with interest on any such advance at the Default Rate and all such sums and
interest thereon shall be secured hereby.
(e) Mortgagor shall defend, indemnify, and hold harmless
Mortgagee and its directors, officers, agents and employees, from any and all
liabilities (including strict liability), actions, demands, penalties,
losses, costs, or expenses (including without limitation attorneys' fees and
expenses and remedial costs), suits, costs of any settlement or judgment, and
claims of any and every kind whatsoever which may now or in the future
(whether before or after the satisfaction of this Mortgage) be paid,
incurred, or suffered by or asserted against Mortgagee by any person or
entity or governmental agency for, with respect to, or as a direct or
indirect result of , the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, or release from the Premises of any
Hazardous Substances or arise out of or result from the environmental.
Condition of the Premises or the violation of any Environmental Laws
regardless of whether or not caused by or within the control of Mortgagor or
Mortgagee. The representations, covenants, warranties, and indemnifications
contained in this paragraph shall survive the satisfaction and prepayment in
full of this Mortgage.
(f) Mortgagor represents and warrants to Mortgagee that no
part of the Premises contains, is located in or abuts floodplain, navigable
water or any other body of water, tideland, marshland, wetland or other area
(collectively, "Protected Area") which is subject to special state, federal
or municipal regulation, control or protection; (ii) Mortgagor shall comply
with all laws, ordinances and regulations pertaining to Protected Areas, to
the extent applicable to the Premises.
22. Financial Records.
(a) At any time and from time to time within thirty (30)
days after notice and demand by Mortgagee, Mortgagor will furnish to
Mortgagee current balance sheets and statements of income and surplus,
certified to be accurate by a partner or corporate officer, as applicable, of
Mortgagor, and Mortgagor consents to the delivery by Mortgagee (with
instructions to keep the same confidential) to any purchaser or prospective
purchaser of all or part of this Mortgage of (i) such information as
Mortgagee receives pursuant to the provisions of this Mortgage and (ii) such
other information as Mortgagee may have with respect to (a) the indebtedness
secured by the Mortgage and the documents relating thereto, (b) the Premises
and (c) Mortgagor, any Guarantor, any tenant of the Premises, or any portion
thereof and any guarantor of any such tenant.
(b) With respect to the Premises and Mortgagor's operation
and leasing thereof, Mortgagor will keep proper books of record and account
in accordance with generally accepted accounting principles applied on a
consistent basis; Mortgagee shall have the right to examine said books of
account and to discuss the affairs, finances and accounts of Mortgagor
concerning said Premises with, and to be informed as to the same by, the
officers or partners of Mortgagor, all at such reasonable times and intervals
as Mortgagee may desire; and Mortgagor will furnish to Mortgagee, within
ninety (90) days after the end of each fiscal year of Mortgagor, (i) a
statement in such reasonable detail as Mortgagee may request, certified by an
executive officer or a general partner of Mortgagor, or by a partner of such
general partner, regarding the Leases, and (ii) a statement in such
reasonable detail as Mortgagee may request, certified by a certified public
accountant, of the income and expenses of the Premises for such fiscal year,
and on demand Mortgagor will furnish to Mortgagee executed counterparts of
any such Leases and convenient facilities for the audit and verification of
any such statement.
23. ERISA. Mortgagor covenants and warrants:
(a) that it will not use the assets of an employee benefit plan
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as now or hereafter amended, in the exercise of any of its obligations
or rights specified herein or in the Agreement or in any other instrument
which may be held by Mortgagee as additional security for the Obligations or
in the performance of any transaction contemplated hereunder or under the
Agreement or under any other instrument which may be held by Mortgagee as
additional security for the Obligations; and
(b) that the Premises do not, and without the written consent
of Mortgagee will not, constitute an asset of such an employee benefit plan;
and
(c) that it will not sell, convey or transfer the Premises to a
person or entity which could not satisfy the undertakings set forth in
subclauses (a) and (b) above, regardless of whether any of the
above-described conditions arises by operation of law or otherwise.
If Mortgagor fails to comply with the provisions of sub-clauses
(a), (b) and (c) above, Mortgagee shall be entitled at its election upon five
(5) days' notice to Mortgagor (i) to call due the outstanding principal
balance of this Mortgage plus accrued interest and/or (ii) to seek any other
remedies it may have at law or in equity.
Notwithstanding any other provision of this Mortgage, in the
event that Mortgagor shall at any time sell, convey or transfer or attempt to
sell, convey or transfer the Premises in violation of the provisions of this
Article, then Mortgagee shall, in addition to all rights and remedies it may
have at law or in equity or under this Mortgage, be entitled to a decree or
order restraining and enjoining such sale, conveyance or transfer and
Mortgagor shall not plead in defense thereof that there would be an adequate
remedy at law (it being hereby expressly acknowledged and agreed that damages
at law would be an inadequate remedy for breach or threatened breach of the
provisions of subclause (c) above).
The term "Mortgagor" as used in this Section shall include such
Mortgagor, its successors or assigns, and any person or entity to whom the
Premises are sold, conveyed or transferred whether by operation of law or
otherwise.
24. Usury. In no event shall the rate of interest under the
Agreement exceed the maximum rate of interest permitted to be charged by the
applicable law (including the choice of law rules), and any interest paid in
excess of the permitted rate shall be refunded to Mortgagor. Such refund
shall be made by application of the excessive amount of interest paid against
any sums outstanding under the Agreement and shall be applied in such order
as Mortgagee may reasonably determine. If the excessive amount of interest
paid exceeds the sums outstanding under the Agreement, the portion exceeding
said sums outstanding under the Agreement shall be refunded to Mortgagor in
cash by Mortgagee. Any such crediting or refund shall not cure or waive any
default by Mortgagor under this Mortgage or under the Agreement or other Loan
Documents. Mortgagor agrees, however, that in determining whether or not any
interest payable under the Agreement or this Mortgage exceeds the highest
rate permitted by law, any nonprincipal payment (except payments specifically
stated in the Agreement to be "interest"), including, without limitation,
prepayment fees and late charges, shall be deemed to the extent permitted by
law to be an expense, fee, premium or penalty rather than interest.
25. Assignment of Rents.
(a) Assignment. Mortgagor hereby assigns and transfers to
Mortgagee all the rents, issues and profits of the Premises, and hereby gives
to and confers upon Mortgagee the right, power and authority to collect such
rents, issues and profits. Mortgagor irrevocably appoints Mortgagee its true
and lawful attorney-in-fact, at the option of Mortgagee at any time and from
time to time, to demand, receive and enforce payment, to give receipts,
releases and satisfaction, and to sue, in the name of Mortgagor and
Mortgagee, for all such rents, issues and profits and apply them to the
indebtedness secured hereby; provided; however, that Mortgagor shall have the
right to collect such rents, issues and profits (but not more than two months
in advance) prior to or at any time there is not an event of default under
any of the Loan Documents. The assignment of rents, issues and profits of the
Premises in this Article II is intended to be an absolute assignment of a
security interest. The rents, issues and profits are hereby assigned
absolutely by Mortgagor to Mortgagee contingent only upon the occurrence of
an event of default under any of the Loan Documents.
(b) Collection Upon Default. Upon any event of default under
any of the Loan Documents, Mortgagee may, at any time without notice except
as otherwise expressly provided herein, either in person, by agent or by a
receiver appointed by a court, and without regard to the adequacy of any
security for the indebtedness hereby secured, enter upon and take possession
of the Premises, or any part thereof, in its own name sue for or otherwise
collect such rents, issues and profits, including those past due and unpaid,
and apply the same, less costs and expenses of operation and collection,
including attorneys' fees, upon any indebtedness secured hereby, and in such
order as Mortgagee may determine. The collection of such rents, issues and
profits, or the entering upon and taking possession of the Premises, or the
application thereof as aforesaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done in response to such
default or pursuant to such notice of default.
(c) Conditional Assignment of Leases, Rents and Profits.
Mortgagor, by separate instrument of even date herewith entitled Assignment
of Lease, has assigned and transferred to Mortgagee as additional security
for the payment of the indebtedness secured hereby, all present and future
leases upon all or any part of the Premises and all agreements benefiting the
Premises and further agrees to execute and deliver, at the request of the
Mortgagee, all such further assurances and specific assignments of leases and
agreements with respect to the Premises as Mortgagee shall from time to time
require. Mortgagor expressly covenants and agrees that if Mortgagor shall
fail to perform and fulfill any term, covenant, condition or provision in
such leases or agreements, or any of them, on its part to be performed or
fulfilled, at the times and in the manner in such leases or agreements
provided, or if Mortgagor shall suffer or permit to occur any breach or
default under the provisions of any such Assignment and such default shall
continue for fifteen (15) days, then and in any such event, such breach or
default shall constitute an event of default hereunder as such term is
defined in Section 27 hereof.
26. Creation of Security Interest. Mortgagor hereby grants to
Mortgagee a security interest in the Personal Property owned by Mortgagor
located on or at the Premises, including without limitations any and all
property of similar type or kind hereafter located on or at the Premises for
the purpose of securing all obligations of Mortgagor contained in any of the
Loan Documents.
27. Representations and Covenants with Respect to Personal Property.
Mortgagor hereby warrants, represents and covenants as follows:
(a) Except for the security interest granted hereby, and by
the First Mortgage, Mortgagor is, and as to portions of the Personal Property
to be acquired after the date hereof will be, the sole owner of the Personal
Property, free from any adverse lien, security interest, encumbrance or
adverse claims thereon of any kind whatsoever. Mortgagor will notify
Mortgagee, of, and will defend the Personal Property against, all claims and
demands of all persons at any time claiming the Personal Property or any
interest therein.
(b) Mortgagor will not assign, pledge, encumber, lease,
sell, convey or in any manner transfer the Personal Property without the
prior written consent of Mortgagee.
(c) The Personal Property is not, and shall not be, used or
brought for personal, family or household purposes.
(d) The Personal Property will be kept on or at the Premises
and Mortgagor will not remove any portion or item of Personal Property
without the prior written consent of Mortgagee, except such portions or items
of Personal Property which are consumed or worn out in ordinary usage, all of
which shall be promptly replaced by Mortgagor.
(e) At the request of Mortgagee, Mortgagor will join
Mortgagee in executing one or more financing statements and renewals,
continuation statements and amendments thereof pursuant to the Uniform
Commercial Code of the State in which the Property is located in form
satisfactory to Mortgagee, and will pay the cost of filing the same in all
public offices wherever filing is deemed by Mortgagee to be necessary or
desirable. Without limiting the foregoing, Mortgagor hereby irrevocably
appoints Mortgagee attorney-in-fact for Mortgagor to execute, deliver and
file such instruments for and on behalf of Mortgagor.
(f) All covenants and obligations of Mortgagor contained
herein relating to the Premises shall be deemed to apply to the Personal
Property whether or not expressly referred to herein.
(g) This Mortgage constitutes a security agreement under the
Uniform Commercial Code of the state in which the Premises is located.
(h) Notwithstanding any release of any or all of that
property included in the Premises which is deemed "real property", or any
proceedings to foreclose this Mortgage or its satisfaction of record, the
terms hereof shall survive as a security agreement with respect to the
security interest created hereby and referred to above until the repayment or
satisfaction in full of the Obligations.
28. Default. The occurrence of any of the following shall constitute
an Event of Default hereunder:
(a) Failure of Mortgagor to make any payment or principal
or interest when due in accordance with the terms of the Agreement.
(b) Failure of Mortgagor to pay when due any other sums
required to be paid under the terms of the Agreement, this Mortgage or any
Collateral Agreement or any other agreement of any nature whatsoever with the
Mortgagee.
(c) The occurrence of any default under the Agreement, any
Collateral Agreement, or any other agreement of any nature whatsoever between
Mortgagor and Mortgagee or the failure of Mortgagor to observe, perform or
comply with any other term, covenant or condition contained in the Agreement,
this Mortgage, any Collateral Agreement or any other agreement of any nature
whatsoever with the Mortgagee.
(d) Any representation, warranty, financial statement or
other information made or furnished by Mortgagor to Mortgagee in compliance
with or in connection with the loan secured hereby, shall prove to have been
false or erroneous in any material respect when made or furnished.
(e) If Mortgagor shall become insolvent or make an
assignment for the benefit of creditors or if any petition shall be filed by
or against Mortgagor under any bankruptcy or insolvency law.
(f) Commencement of any action or proceeding to foreclose
any lien upon the Premises or any part thereof other than the lien of this
Mortgage.
(g) Mortgagor shall convey or in any other manner cause or
permit to change of ownership of, or title to, all or any portion of the
Premises, or of any interest therein or in any partnership or corporation
having an interest in the Premises. The transfer by any partner or
shareholder of any of its interest in Mortgagor shall constitute a transfer
of an interest in the Premises.
(h) The entry of any judgment against Mortgagor which
remains unsatisfied for 15 days or the issuance of any tax lien against any
property of material value in which Mortgagor has an interest.
(i) The dissolution, merger change in control (as control
is defined in Rule 12b-2 under the Securities Exchange Act of 1934),
consolidation or reorganization of Mortgagor if Mortgagor is a corporation or
partnership or the sale or transfer of any substantial portion of Mortgagor's
assets, or if any agreement for such dissolution, merger or consolidation,
sale or transfer is entered into without the written consent of Mortgagee.
(j) The death of Mortgagor if Mortgagor is a natural
person.
29. Remedies Upon Default. Upon the occurrence of any one or more of
said Events of Default, the entire unpaid balance of the principal, the
accrued interest, and all other sums secured by this Mortgage shall, at the
option of Mortgagee, become immediately due and payable without notice or
demand, and in any such Event of Default Mortgagee may forthwith:
(a) Foreclosure. Institute an action or mortgage
foreclosure, or take such other action, as the law may allow, at law or in
equity, for the enforcement thereof and realization on the mortgage security
or any other security which is herein or elsewhere provided for, and proceed
thereon to final judgment and execution thereon for the entire unpaid balance
of said principal sum, with interest at the rate stipulated in the Agreement
to the date of default and thereafter at the Default Rate, together with all
other sums secured by this Mortgage, all costs of suit, interest at the
Default Rate on any final judgment obtained by Mortgagee from and after the
date of any Sheriff's Sale of the Premises (which may be sold in one parcel
or in such parcels, manner or order as Mortgagee shall elect) until actual
payment is made of the full amount due Mortgagee, and any attorney's
commission for collection which shall be fifteen percent (15%)of the total of
the foregoing sums, but not less than $5,000, without further stay, any law,
usage or custom to the contrary notwithstanding; or
(b) Entry. Receivership. Enter into possession of the
Premises, with or without legal action, if necessary; lease the same; collect
all rents and profits therefrom and, after deducting all costs of collection
and administration expenses, apply the net rents and profits to the payment
of taxes, water and sewer rents, charges and claims, insurance premiums and
all other carrying charges (including but not limited to agents' compensation
and fees and costs of counsel and receivers) and to the maintenance, repair
or restoration of the Premises, or on account and in reduction of the
principal or interest, or principal and interest, hereby secured, in such
order and amounts as Mortgagee in Mortgagee's sole discretion may elect with
or without the appointment of as receiver; and, at its discretion, have a
receiver appointed to enter into possession of the Premises, collect the
rents and profits therefrom, and apply the same as the court may direct.
Mortgagee and/or rent receiver shall be liable to account only for rents and
profits actually received by Mortgagee. For such purposes, Mortgagor hereby
authorizes any attorney of any court of record to appear for Mortgagor to
sign an agreement for entering an amicable action of ejectment for possession
of the Premises, and to confess judgment therein against Mortgagor in favor
of Mortgagee, whereupon a writ may forthwith issue for the immediate
possession of the Premises, without any prior writ or proceeding whatsoever;
and for so doing this Mortgage or a copy hereof verified by affidavit shall
be a sufficient warrant; or
(c) Confession of Judgment for Possession. For the purpose
of securing possession of the Premises to Mortgagee in the event of any
default, Mortgagor does hereby authorize and empower any attorney or
prothonotary (or successor officer) of any court in the Commonwealth of
Pennsylvania, as attorney for Mortgagor, as well as for all persons claiming
under, by, or through Mortgagor, to sign an agreement for the entering in any
competent court of an amicable action in ejectment for the possession of the
Premises, together with the hereditaments and appurtenances, and all
Equipment now or hereafter installed upon the same, against Mortgagor and all
persons claiming under, by, or through Mortgagor, and therein to confess
judgment for the recovery of such possession by Mortgagee, for which this
Mortgage, or a copy hereof verified by affidavit, shall be sufficient
warrant; whereupon, if Mortgagee so desires, a writ of possession may be
issued forthwith on said judgment, without any prior writ or proceeding
whatsoever, Mortgagor hereby releasing Mortgagee from all procedural errors
and defects whatsoever in said proceedings; and if, for any reason, after
such action has been commenced, the same shall be discontinued, marked
satisfied of record or be determined, or possession of the Premises shall
remain in or be restored to Mortgagor, Mortgagee shall have the right, for
the same default or in the event of any subsequent default or defaults, to
bring one or more further amicable actions in the same manner, and to confess
judgment for the recovery of possession of the Premises, and execute the
same, as hereinabove provided. Mortgagee may bring an amicable action in
ejectment and confess judgment therein before and after the institution of
proceedings to foreclose this Mortgage or to enforce the Reimbursement
Agreement, or after entry of judgment therein, or after a Sheriff's sale or
judicial sale or other foreclosure sale of the Premises in which Mortgagee is
the successful bidder, it being the understanding of the parties that the
authorization to pursue such proceedings for obtaining possession and
confession of judgment therein is an essential part of the remedies for the
enforcement of the Mortgage, and shall survive any execution sale to
Mortgagee.
(d) Other Remedies. Take such other action at law or in
equity for the enforcement hereof and recovery of the sums secured hereby.
The remedies of Mortgagee as provided herein and in the Agreement and in the
Collateral Agreement, shall be cumulative and concurrent and may be pursued
singly, successively, or together against Mortgagor or the Premises, all at
the sole discretion of Mortgagee. The waiver of any default or failure to
enforce any right or to pursue any remedy at any time, shall not be a waiver
of any subsequent default or preclude such enforcement or pursuit at a
subsequent time.
30. Recovery of Expenses by Mortgagee. All expenditures and
expenses of the nature mentioned in Section 29 and such expenses and fees as
may be incurred in the protection of the Premises and maintenance of the lien
of this Mortgage, including the fees of any attorney employed by Mortgagee in
any litigation or proceeding affecting this Mortgage, the Agreement or other
Loan Documents, or the Premises, including probate and bankruptcy
proceedings, or in preparation for the commencement or defense of any
proceedings or threatened suit or proceeding, shall be immediately due and
payable by Mortgagor, with interest thereon at the Default Rate, and shall be
secured by this Mortgage. Mortgagee shall have the right, from time to time,
to bring an appropriate action to recover any sums required to be paid by
Mortgagor under the terms of this Mortgage, as they become due, without
regard to whether or not the principal indebtedness or any other sums payable
under the terms of the Agreement and secured by this Mortgage shall be due,
and without prejudice to the right of Mortgagee thereafter to bring an action
of Mortgage Foreclosure, or any other action, for any default by Mortgagor
existing at the time the earlier action was commenced. Attorneys' fees
incurred by Mortgagee in connection with enforcement of this Mortgage, shall
be at the rate set forth in the Agreement.
31. Application of Income Received by Mortgagee. Mortgagee, in
the exercise of the rights and powers hereinabove conferred upon it by
Section 25 and Section 29 hereof shall have full power to use and apply the
avails, rents, issues and profits of the Premises to the payment of or on
account of the following, in such order as Mortgagee may determine:
(a) to the payment of the operating expenses of the
Premises, including cost of management and leasing thereof (which shall
include reasonable compensation to Mortgagee and its agent or agents, if
management be delegated to an agent or agents, and shall also include lease
commissions and other compensation and expenses of seeking and procuring
tenants and entering into leases), established claims for damages, if any,
and premiums on insurance hereinabove authorized;
(b) to the payment of taxes and special assessments now
due or which may hereafter become
due on the Premises;
(c) to the payment of all costs or repairs, decorating,
renewals, replacements, alterations, additions, betterments, and improvements
of the Premises, including the cost from time to time of installing or
replacing the Personal Property therein, and of placing the Premises in such
condition as will, in the judgment of Mortgagee, make it readily rentable;
(d) to the payment of any indebtedness secured hereby or
any deficiency which may result from any foreclosure sale upon the Premises,
or any part thereof.
32. Appointment of Receiver. Upon, or at any time after the
filing of an action to foreclose this Mortgage, the court in which such
action is filed may appoint a receiver of the Premises. Such appointment may
be made either before or after sale, without notice, without regard to the
solvency or insolvency of Mortgagor at the time of application for such
receiver and without regard to the then value of the Premises and Mortgagee
hereunder or any agent of Mortgagee may be appointed as such receiver. Such
receiver shall have power: (a) to collect the rents, issues and profits of
the Premises during the pendency of such foreclosure suit as well as during
any other times when Mortgagor except for the intervention of such receiver,
would be entitled to collect such rents, issues and profits; (b) to extend or
modify any then existing leases and agreements and to make new leases and
agreements, which extensions, modifications and new leases and agreements may
provide for terms to expire, beyond the date of the issuance of a deed or
deeds to a purchaser or purchasers at a foreclosure sale, it being understood
and agreed that any such leases and agreements, and the options or other such
provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Premises are subject to the lien hereof and
upon the purchaser or purchasers at any foreclosure decree or deficiency
judgment, or issuance of any bill of sale or deed to any purchaser; and (c)
all other powers which may be necessary or are usual in such cases for the
protection, possession, control, management and operation of the Premises
during the whole of such period. The court from time to time may authorize
the receiver to apply the net income in his hands in payment in whole or in
part of: (a) the indebtedness secured hereby, or by any judgment or decree
foreclosing this Mortgage, or any tax, special assessment or other lien which
may be or become superior to the lien hereof or of such judgment or decree,
provided such application is made prior to foreclosure sale; and (b) the
deficiency judgment, in case of a foreclosure sale and deficiency judgment.
33. Remedies Cumulative. Mortgagor hereby agrees that:
(a) Mortgagee shall be entitled to enforce payment and
performance of any indebtedness or obligations secured hereby and to exercise
all rights, remedies and powers under the Mortgage or any other Loan
Documents notwithstanding that some or all of such indebtedness and
obligations secured hereby may now or hereafter be otherwise secured, whether
by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither
the acceptance of this Mortgage nor its enforcement whether by court action
or other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or
hereafter held by Mortgagee, it being agreed that Mortgagee shall be entitled
to enforce this Mortgage and any other security now or hereafter held by
Mortgagee in such order and manner as it may in its absolute discretion
determine.
(b) No remedy herein conferred upon or reserved to
Mortgagee is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or
in equity or by statute. Every power or remedy given by any of the Loan
Documents to Mortgagee or to which it may be otherwise entitled, may be
exercised separately, successively, concurrently or independently, from time
to time and as often as it may be deemed expedient by Mortgagee and Mortgagee
may pursue inconsistent remedies.
(c) The failure to exercise any such right or remedy
shall in no event be construed as a waiver or release thereof. Any failure by
Mortgagee to insist upon strict performance by Mortgagor of any of the terms
and provisions of this Mortgage or of the other Loan Documents shall not be
deemed to be a waiver of any of the terms or provisions of this Mortgage or
other Loan Documents, and Mortgagee shall have the right thereafter to insist
upon strict performance by Mortgagor of any and all of them.
(d) Neither Mortgagor nor any other person now or
hereafter obligated for payment of all or any part of the sums now or
hereafter secured by this Mortgage shall be relieved of such obligation by
reason of the failure of Mortgagee to comply with any request of Mortgagor or
of any other person so obligated to take action to foreclose on this Mortgage
or otherwise enforce any provisions of the Mortgage or the other Loan
Documents, or by reason of the release, regardless of consideration, of all
or any part of the security held for the indebtedness secured by this
Mortgage, or by reason of any agreement or stipulation between any subsequent
owner of the Premises and Mortgagee extending the time of payment of
modifying the terms of this Mortgage or other Loan Documents without first
having obtained the consent of Mortgagor or such other person; and in the
latter event Mortgagor and all such other persons shall continue to be liable
to make payments according to the terms of any such extension of modification
agreement, unless expressly released and discharged in writing by Mortgagee.
(e) Mortgagee may release, regardless of consideration,
any part of the security held for the indebtedness secured by this Mortgage
without, as to the remainder of the security, in any way impairing or
affecting the lien of this Mortgage or its priority over any subordinate
lien.
34. Giving of Notice. Any notice which either party hereto may
desire or be required to give to the other party pursuant to this Mortgage or
any of the Loan Documents shall be in writing and the mailing thereof shall
be by registered mail, return receipt requested, postage prepaid, addressed
to Mortgagor at the address set forth in the heading of this Mortgage or to
Mortgagee at the address set forth in the heading of this Mortgage (or at
such other place as either party hereto may by notice in writing designate as
a place for service of notice); only such notices as are given in accordance
with the foregoing shall constitute service of notice hereunder, and shall be
deemed effective upon mailing.
35. Counsel Fees. If Mortgagee becomes a party to any suit or
proceeding affecting the Premises or title thereto, the lien created by this
Mortgage or Mortgagee's interest therein, or if Mortgagee has engaged counsel
to prepare or review any of the Loan Documents or other items required by
Mortgagee as conditions precedent to the granting of the loan to Mortgagor
evidenced thereby, or to the disbursement of any funds secured hereby, whose
fees and costs Mortgagor has agreed to pay as a condition of Mortgagee's
commitment to grant such loan, or if Mortgagee engages counsel to collect any
of the indebtedness or to enforce performance or stipulations of this
Mortgage, the Loan Agreement, the Agreement or any Loan Documents,
Mortgagee's costs, expenses and counsel fees and costs, whether or not suit
is instituted, shall be paid to Mortgagee by Mortgagor on demand, with
interest at the Default Rate and until paid they shall be deemed to be part
of the indebtedness under the Agreement and secured by this Mortgage.
36. Governing Law. This Mortgage shall be governed by the laws
of the state in which the Property is located. In the event that any
provision or clause of any of the Loan Documents conflicts with applicable
laws, such conflicts shall not affect other provisions of such Loan Documents
which can be given effect without the conflicting provision, and to this end
the provisions of the Loan Documents are declared to be severable. This
instrument cannot be waived, amended, changed, released, discharged or
satisfied orally, but only by an instrument in writing signed by the party
against whom enforcement of any waiver, amendment, change release, discharge
or satisfaction is sought.
37. Mortgagor's Waiver of Rights. Mortgagor waives the benefit
of all laws now existing or that hereafter may be enacted providing for : (i)
any appraisement before sale of any portion of the Premises, and (ii) the
benefit of all laws that may be hereafter enacted in any way extending the
time for the enforcement of the collection of the Obligations or the debt
evidenced thereby or creating or extending a period of redemption from any
sale made in collecting such debt. To the full extent Mortgagor may do so,
Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, extension or redemption, and
Mortgagor, for Mortgagor, Mortgagor's successors and assigns, and for any and
all persons ever claiming any interest in the Premises, to the extent
permitted by law, hereby waives and releases all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of the secured indebtedness and marshalling in the
event of foreclosure of the liens hereby created. Mortgagor hereby waives and
releases all errors, defects and imperfections in any proceeding instituted
by Mortgagee under the Agreement or this Mortgage or the other Loan
Documents, or any of them, and, unless specifically required herein, all
notices of Mortgagor's default or of Mortgagee's election to exercise, or
Mortgagee's actual exercise of any option under the Agreement or this
Mortgage or the other Loan Documents. If any law referred to in this Section
and now in force, of which Mortgagor, Mortgagor's successors and assigns or
other person may take advantage despite this Section, shall hereafter be
repealed or cease to be in force, such law shall not thereafter be deemed to
preclude the application of this Section. Mortgagor expressly waives and
relinquishes any and all rights and remedies which Mortgagor may have or be
able to assert by reason of the laws of the state in which the Property is
located pertaining to the rights and remedies of sureties.
38. Statement by Mortgagor. Either party within ten (10) days
after being given notice, will furnish to the other party or to any proposed
successor in interest to such party, a written certification stating the
unpaid principal balance of and interest owing under the Agreement and any
other amounts secured by this Mortgage and stating whether any offset or
defense exists against such principal, interest and other amounts.
39. Captions. The captions or heading at the beginning of each
Section hereof are for the convenience of the parties and are not a part of
this Mortgage.
40. Invalidity of Certain Provisions. If the lien of this
Mortgage is invalid or unenforceable as to any part of the debt, or if the
lien is invalid or unenforceable as to any part of the Premises, the
unsecured or partially secured portion of the debt shall be completely paid
prior to the payment of the remaining and secured or partially secured
portion of the debt, and all payments made on the debt, whether voluntary or
under foreclosure or other enforcement action or procedure, shall be
considered to have been first paid on and applied to the full payment of that
portion of the debt which is not secured or fully secured by the lien of this
Mortgage.
41. Subrogation. To the extent that proceeds received by
Mortgagor as a result of this transaction are used to pay any outstanding
lien, charge or prior encumbrance against the Premises, such proceeds have
been or will be advanced by Mortgagee at Mortgagor's request and Mortgagee
shall be subrogated to any and all rights and liens held by any owner or
holder of such outstanding liens, charges and prior encumbrances,
irrespective of whether such liens, charges or encumbrances are released.
42. Certain Definitions. Whenever used in this Mortgage, unless
the context clearly indicates a contrary intent:
(a) The word "Mortgagor" shall mean the person who
executes this Mortgage and any subsequent owner of the Premises and his
respective heirs, executors, administrators, successors and assigns (and
provided that nothing in this definition shall be deemed to permit any sale
or transfer of the Premises);
(b) The word "Mortgagee" shall mean the person who has
issued the Letter of Credit secured hereunder whether or not specifically
named herein as "Mortgagee", or any subsequent assignee of such issuer;
(c) The word "person" shall mean individual,
corporation, partnership or unincorporated association;
(d) The use of any gender shall include all genders;
(e) The singular number shall include the plural and the
plural the singular as the context may require.
(f) If Mortgagor be or consist of more than one person,
all agreements, conditions, covenants, provisions, stipulations, warrants of
attorney, authorizations, waivers, releases, options, undertakings, rights
and benefits made or given by Mortgagor shall be joint and several, and shall
bind and affect all persons who are defined as "Mortgagor" as fully as though
all of them were specifically named herein wherever the word "Mortgagor" is
used.
43. Interest Rate Not Reduced on Judgment. In the event
Mortgagee obtains any judgment against Mortgagor on this Mortgage or on the
Agreement, whether such judgment is obtained by confession or otherwise
interest shall accrue on the judgment in the same manner and at the same rate
as provided in the Agreement, notwithstanding any law, custom or legal
presumption to the contrary, subject only to the usury saving clauses of the
Agreement and this Mortgage, until Mortgagee has received payment in full of
all amounts due it pursuant to this Mortgage and the Agreement secured
hereby.
44. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR RELATED TO
THIS MORTGAGE OR THE RELATIONSHIP ESTABLISHED HEREUNDER, EACH UNDERSIGNED
PARTY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED IN ANY COUNTY IN THE COMMONWEALTH OF
PENNSYLVANIA WHERE MORTGAGEE MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY
OBJECTION TO SUCH JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE
OF ANY SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED PARTY AGREES THAT
SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON IT BY
MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID, TO EACH
UNDERSIGNED PARTY.
45. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES,
AND MORTGAGEE BY ITS ACCEPTANCE HEREOF THEREBY WAIVES TRIAL BY JURY IN ANY
LEGAL PROCEEDING INVOLVING DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACTOR OR OTHERWISE) IN ANY WAY ARISING OUT OF OR
RELATED TO THIS MORTGAGE OR THE RELATIONSHIP ESTABLISHED HEREUNDER, THIS
PROVISION IS A MATERIAL INDUCEMENT FOR MORTGAGEE TO ENTER INTO, ACCEPT OR
RELY UPON THIS MORTGAGE.
IN WITNESS WHEREOF, Mortgagor has caused this Mortgage to be
executed the day and year first above written and acknowledges receipt of a
true copy of this Mortgage and Security Agreement.
LANNETT COMPANY, INC.
By: ______________________________
Attest:___________________________
COMMONWEALTH OF PENNSYLVANIA:
SS.
COUNTY OF PHILADELPHIA :
On this, the 30th day of April, 1999, before me the subscriber,
a Notary Public in and for the Commonwealth of Pennsylvania, personally
appeared _________________ who acknowledged himself to be the
______________________________ of LANNETT COMPANY, INC., a Delaware
corporation, and that he as such officer executed the foregoing instrument
for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and notarial
seal.
________________
NOTARY PUBLIC
MY COMMISSION EXPIRES:
SECURITY AGREEMENT
(Accounts, Inventory and Equipment)
THIS AGREEMENT is made this 30th day of April, 1999, between FIRST UNION
NATIONAL BANK, a national banking association (the "Bank"), and Lannett
Company, Inc. (the "Debtor") with an office at 9000 State Road, Philadelphia,
Pennsylvania 19136.
Debtor is obligated to the Bank, pursuant to the terms of certain
reimbursement agreements between Assignor and Assignee of even date herewith
(collectively the "Reimbursement Agreement") in the amounts of $3,769,945.20
and $2,349,276.72 respectively (collectively the "Obligation"). As security
for Debtor's obligations under the Reimbursement Agreement Debtor has agreed
to enter into this Security Agreement.
1. DEFINITIONS. As used herein and in any separate agreement between
the Bank and the Debtor in connection with this Agreement:
(a) "Account" means any right to payment for goods sold or
leased or for services rendered which is not evidenced by
an Instrument or Chattel Paper, whether or not it has been
earned by performance including all rights to payment under
a charter or other contract involving the use or hire of a
vessel and all rights incident to such charter or contract.
(b) "Qualified Account" means any Account meeting all the
following specifications: (i) it is lawfully owned by the
Debtor and subject to no lien, security interest or prior
assignment, and the Debtor has the right of assignment
thereof and the power to grant a security interest therein;
(ii) it is a valid and enforceable Account, representing
the undisputed indebtedness of an Account Debtor to the
Debtor; (iii) it is not subject to any defense, set-off,
counter-claim, credit, allowance or adjustment; (iv) no
substantial part of any goods, the sale of which has given
rise to the Account, has been returned, rejected, lost or
damaged, (v) if it arises from the sale of goods by the
Debtor, such sale was an absolute sale and not on
consignment or on approval or on a sale or return basis nor
subject to any other repurchase or return agreement, and
such goods have been shipped to the Account Debtor; (vi) if
it arises from the performance of services, such services
have actually been performed; (vii) it arose in the
ordinary course of the Debtor's business; (viii) no notice
of the Bankruptcy, receivership, reorganization,
insolvency, or financial embarrassment of the Account
Debtor has been received; (ix) the Account Debtor is not a
subsidiary or affiliate of the Debtor, does not control the
Debtor, and is not under the control of or under common
control with the Debtor; and (x) the Account meets such
other specifications and requirements which may from time
to time be established by the Bank.
(c) "Account Debtor" means the Person who is obligated on an
Account or General Intangible.
(d) "Chattel Paper" means a writing or writings which evidence
both a monetary obligation and a security interest in or a
lease of specific goods.
(e) "Collateral" means (i) all of the Debtor's Inventory now
owned or hereafter acquired. (ii) all of the Debtor's
Documents of Title now owned or hereafter acquired; (iii)
all of the Debtor's Accounts now existing or hereafter
arising; (iv) all of the Debtor's Farm Products now
existing or hereafter arising; (v) all of the Debtor's
General Intangibles, Chattel Paper and Instruments now
existing or hereafter acquired or arising; (vi) all
guarantees of the Debtor's existing and future Accounts and
General Intangibles and all other security held by the
Debtor for the payment or satisfaction thereof, (vii) the
goods or the services, the sale or lease or performance of
which gave rise to any Account or General Intangible of the
Debtor, including any returned goods; (viii) all of the
Debtor's Equipment now owned or hereafter acquired; (ix)
any balance or share belonging to the Debtor of any
deposit, agency or other account with any bank and any
other amounts which may be owing from time to time by any
bank to the Debtor; (x) all property of any nature
whatsoever of the Debtor now or hereafter in the possession
of or assigned or hypothecated to the Bank for any purpose:
and (xi) all Proceeds of all of the foregoing, including
all Proceeds of other Proceeds.
(f) "Debtor" means the Person who executes this Agreement as
such. The Debtor may be either a borrower from the Bank or
a guarantor of the indebtedness of another to the Bank, and
in either case is the Person obligated to pay the
Liabilities secured hereby.
(g) "Document of Title" means a bill of lading, dock warrant,
dock receipt, warehouse receipt or order for the delivery
of goods, and also any other document which in the regular
course of business or financing is treated as adequately
evidencing that the Person in possession of it is entitled
to receive, hold and dispose of the document and the goods
it covers.
(h) "Farm Products" means crops or livestock or supplies used
or produced in farming operations or products of crops or
livestock in their unmanufactured states (such as ginned
cotton, woolclip, maple syrup, milk and eggs), if they are
in the possession of a Debtor engaged in raising,
fattening, grazing or other farming operations.
(i) "Equipment" means tangible personal property held by the
Debtor for use primarily in business and includes
equipment, machinery, furniture, fixtures, dies, tools, and
all accessories and parts now or hereafter affixed thereto.
(j) "General Intangibles" means all personal property of every
kind and description of Debtor other than goods, Accounts,
Chattel Paper, Documents of Title, Instruments and money,
and includes without limitation choses in action, books,
records, customer lists, tax, insurance and other kinds of
refunds, patents, trademarks, copyrights, trade names,
plans, licenses and other rights in personal property.
(k) "Instrument" means a negotiable instrument or a security or
any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and
is of a type which is, in ordinary course of business,
transferred by delivery with any necessary endorsement or
assignment.
(1) "Inventory" means tangible personal property held by the
Debtor for sale or lease or to be furnished under contracts
of service, tangible personal property which the Debtor has
so leased or furnished, and raw materials, work in process
and materials used, produced or consumed in Debtor's
business, and shall include tangible personal property
returned to the Debtor by the purchaser following a sale
thereof by the Debtor and tangible personal property
represented by Documents of Title. All equipment,
accessories and parts at any time attached or added to
items of Inventory or used in connection therewith shall be
deemed to be part of the Inventory.
(m) "Liabilities" means all existing and hereafter incurred or
arising indebtedness, obligations and liabilities of the
Debtor to the Bank, whether absolute or contingent, direct
or indirect and out of whatever transactions arising, and
includes without limitation, all matured and unmatured
indebtedness, obligations and liabilities of the Debtor
under or in connection with existing and future loans and
advances evidenced by promissory notes or otherwise,
letters of credit, acceptances, all other extensions of
credit, repurchase agreements, security agreements,
mortgages, overdrafts, foreign exchange contracts and all
other contracts for payment or performance, indemnities,
and all indebtedness, obligations and liabilities under any
guaranty or surety agreement, or as co-maker or co-obligor
with any person for any of the foregoing, including without
limitation all interest, expenses, costs (including
collection costs) and fees (including reasonable attorney's
fees and prepayment fees) incurred, arising or accruing
(whether prior or subsequent to the filing of any
bankruptcy petition by or against any Debtor) under or in
connection with any of the foregoing, and further including
all such indebtedness, obligations and liabilities of the
Debtor (i) to others which the Bank may have obtained by
assignment, participation, subrogation, merger or
otherwise, and (ii) to subsidiaries of the Bank.
(n) "Person" means an individual, a corporation, a government
or governmental subdivision or agency or instrumentality, a
business trust, an estate, a trust, a partnership, a
cooperative, an association, two or more Persons having a
joint or common interest, or any other legal or commercial
entity.
(o) "Proceeds" means whatever is received when Collateral is
sold, exchanged, collected or otherwise disposed of,
including without limitation insurance proceeds.
(p) "Reimbursement Agreement" has the meaning set forth in the
Background section of this Agreement.
2. SECURITY INTEREST IN COLLATERAL. As Security for the payment of the
Liabilities the Debtor hereby assigns to the Bank and grants to the
Bank a lien upon and security interest in the Collateral. Without
the written consent of the Bank. the Debtor will not create, incur,
assume or suffer to exist any other liens or security interests in
the Collateral.
3. COLLECTION OF ACCOUNTS. The Bank hereby authorizes the Debtor to
collect all Accounts from the Account Debtors. The Proceeds of
Accounts so collected by the Debtor shall be received and held by
the Debtor in trust for the Bank. Unless otherwise agreed by the
Bank, the Debtor shall deliver to the Bank within one day of the
receipt thereof by the Debtor all Proceeds in the form of cash,
checks, drafts, notes and other remittances received in payment of
or on account of any of the Debtor's Accounts. Such Proceeds shall
be deposited in a special non-interest bearing bank account (the
"Cash Collateral Account") maintained with the Bank over which the
Bank alone shall have power of withdrawal. All Proceeds other than
cash shall be deposited in precisely the form in which received,
except for the addition thereto of the endorsement of the Debtor
when necessary to permit collection of the items, which endorsement
the Debtor agrees to make. The Debtor will not commingle any such
Proceeds with any of the Debtor's other funds or property but will
hold them separate and apart from any other funds or property and
upon an express trust for the Bank until deposit thereof is made in
the Cash Collateral Account. Periodically, at the Bank's discretion,
the Bank will apply all or any part of the collected Proceeds of
Accounts on deposit in the Cash Collateral Account to the payment in
full or in part of such of the Liabilities and in such order as the
Bank may elect. The authority hereby given to the Debtor to collect
the Proceeds of Accounts in trust for the Bank may be terminated by
the Bank at any time. The Bank shall have the right at any time,
acting if it so chooses in the Debtor's name, to collect the
Debtor's Accounts itself, to sell, assign, compromise, discharge or
extend the time for payment of any Account, to institute legal
action for the collection of any Account, and to do all acts and
things necessary or incidental thereto. The Debtor hereby ratifies
all that the Bank shall do by virtue hereof. The Bank may at any
time, without notice to the Debtor, notify any Account Debtor that
the Account payable by such Account Debtor has been assigned to the
Bank and is to be paid directly to the Bank. At the Bank's request
the Debtor shall so notify Account Debtors and shall indicate on all
billings to Account Debtors that payments thereon are to be made to
the Bank. Without the written consent of the Bank, the Debtor shall
not compromise, discharge, extend the time for payment of or
otherwise grant any indulgence or allowance with respect to any
Account.
4. PROCESSING AND SALES OF INVENTORY. So long as the Debtor is not in
default hereunder, the Debtor shall have the right, in the regular
course of its business, to process and sell its Inventory.
5. OTHER AGREEMENTS OF DEBTOR.
(a) The Debtor shall keep complete and accurate books and
records and make all necessary entries therein to reflect
the quantities, costs, values and location of its Inventory
and Equipment, and the transactions and facts giving rise
to its Accounts and General Intangibles and all payments,
credits and adjustments applicable thereto. The Debtor
shall keep the Bank fully and accurately informed as to the
location of all such books and records pertaining to the
Collateral and shall permit the Bank's agents to have
access to all such books and records and any other records
pertaining to the Debtor's business which the Bank may
request and, if deemed necessary by the Bank, to remove
them from the Debtor's place of business or any other place
where the same may be found for the purpose of examining,
auditing and copying the same. Any of the Debtor's books
and records so removed by the Bank's agents shall be
returned to the Debtor by the Bank as soon as the Bank
shall have completed its inspection, audit or copying
thereof. The Bank shall have the right to communicate with
Account Debtors and Debtor's accountant to the extent
reasonably necessary to verify account balances and any
information provided by the Debtor. The Bank's right to
take possession of the Debtor's books and records
pertaining to the Collateral shall be enforceable at law by
action of replevin or by any other appropriate remedy at
law or in equity, and the Debtor consents to the entry of
judicial orders or injunctions enforcing such right without
any notice to the Debtor or any opportunity to be heard.
(b) In the event that any lien, assessment or tax liability
against the Debtor shall arise, whether or not entitled to
priority over the security interest of the Bank created
hereby, the Debtor shall give prompt notice thereof in
writing to the Bank. The Bank shall have the right (but
shall be under no obligation) to pay any tax or other
liability of the Debtor deemed by the Bank to affect its
interest. The Debtor shall repay to the Bank any sums which
the Bank shall have so paid, together with interest thereon
at the rate payable by the Debtor, at the time of payment
by the Bank, with respect to the Liabilities (or the
highest such rate, if there be more than one;, but in no
event less than six percent (6%) per annum and the Debtor's
liability to the Bank for such repayment with interest
shall be included in the Liabilities. In addition, the Bank
shall be subrogated to the extent of the payment made by it
to all rights of the recipient of such payment against the
assets of the Debtor. The Debtor shall furnish to the Bank
at such times as the Bank may require proof satisfactory to
the Bank of the making of payments or deposits required by
applicable law with respect to amounts withheld by the
Debtor from wages and salaries of employees and amounts
contributed by the Debtor on account of federal and other
income or wage taxes and amounts due under the Federal
Insurance Contributions Act. The Debtor represents,
warrants and agrees that, in respect to all employee
pension or other benefit plans maintained by the Debtor or
any of its subsidiaries, the Debtor is in full compliance,
and will continue to comply fully, with the Employee
Retirement Income Security Act of 1974, as amended and all
rules and regulations adopted thereunder or pursuant
thereto. The Debtor continuously represents and warrants to
the Bank that all Collateral consisting of goods has been
and will continue to be produced in compliance with the
requirements of the Fair Labor Standards Act, including
Sections 206 and 207 thereof, and will immediately notify
Bank if Debtor has any reason to believe otherwise.
(c) If any of the Debtor's Accounts or General Intangibles
arises out of a contract with the United States or any
department, agency or instrumentality thereof, the Debtor
will immediately notify the Bank thereof in writing and
execute any instruments and take any steps required by the
Bank in order that the security interest of the Bank
hereunder in the Debtor's General Intangibles under such
contract and in all Accounts arising thereunder and in the
Proceeds thereof shall be perfected under the provisions of
the Federal Assignment of Claims Act.
(d) If any of the Debtor's Accounts is or becomes evidenced by
a promissory note, a trade acceptance or any other
instrument for the payment of money, the Debtor will
promptly deliver such instrument to the Bank appropriately
endorsed to the Bank's order. Regardless of the form of
such endorsement, the Debtor hereby waives presentment,
demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto.
(e) The Debtor will keep its Inventory and Equipment insured
against such casualties and in such amounts as the Bank
shall require. All insurance policies shall be written for
the benefit of the Debtor as the insured, and shall name
the Bank as loss payee, and such policies shall be
delivered to and held by the Bank. All such policies of
insurance shall provide for at least ten days' advance
notice in writing to the Bank of any cancellation thereof,
and shall insure Bank notwithstanding the act or neglect to
act of Debtor. If the Debtor fails to pay the premiums on
any such insurance, the Bank shall have the right (but
shall be under no obligation) to pay such premiums for the
Debtor's account. The Debtor shall repay to the Bank any
sums which the Bank shall have so paid, together with
interest thereon at the rate payable by the Debtor, at the
time of payment by the Bank, with respect to the
Liabilities (or the highest such rate, if there be more
than one), but in no event less than six percent (6%) per
annum and the Debtor's liability to the Bank for such
repayment with interest shall be included in the
Liabilities. The Debtor hereby assigns to the Bank any
return or unearned premium which may be due upon
cancellation of any such policies for any reason whatsoever
and directs the insurers to pay to the Bank any amounts so
due. The Debtor's rights to receive payment of such return
or unearned premiums and the proceeds of any such insurance
are included in the Accounts and General Intangibles which
are hereby subjected to a security interest.
(f) The Debtor will maintain the Equipment in good condition
and repair, and will pay the cost of repairs to or
maintenance of the same and will not permit anything to be
done that may impair the value of the Equipment.
(g) The Bank shall have the right to take possession of any
Inventory and the Debtor hereby assigns to the Bank its
right of stoppage in transit with respect to any Inventory.
All costs of transportation, packing, storage and insurance
of any Inventory which the Bank may take into its
possession shall be promptly repaid to the Bank by the
Debtor, together with interest thereon at the rate payable
by the Debtor, at the time of payment by the Bank, with
respect to the Liabilities (or the highest such rate, if
there be more than one), but in no event less than six
percent (6%) per annum and the Debtor's liability to the
Bank for such repayment with interest shall be included in
the Liabilities. If any of the Debtor's Inventory is or
becomes represented by a Document of Title, the Bank may
require that such Document of Title be in such form as to
permit the Bank or anyone to whom the Bank may negotiate
the same to obtain delivery of the Inventory represented
thereby, and that it be delivered into the possession of
the Bank.
(h) At such intervals as the Bank may require, the Debtor shall
submit to the Bank a schedule reflecting in form and detail
satisfactory to the Bank the quantities, cost and value of
its Inventory and Equipment, and the amounts of all its
outstanding Accounts and the amount of the Accounts which
are Qualified Accounts and the value of all its General
Intangibles. The Bank may also require the Debtor to submit
to the Bank copies of the invoices pertaining to all or any
of its Accounts and evidence of shipment of the Inventory
the sale or leasing of which have given rise to such
Accounts.
(i) The Debtor shall promptly notify the Bank of any event
causing deterioration, loss or depreciation in value of any
substantial portion of the Debtor's Inventory or Equipment
and the amount of such loss or depreciation. The Debtor
shall permit the Bank's agents to have access to its
Inventory and Equipment from time to time, as requested by
the Bank, for purposes of examination, inspection, and
appraisal thereof and verification of the Debtor's records
pertaining thereto. Upon demand by the Bank, in the case of
Inventory and upon default by the Debtor in the case of
Equipment, the Debtor shall assemble the Inventory and
Equipment and make them available to the Bank at such place
as may be designated by the Bank which is reasonably
convenient to both parties. At the request of the Bank, the
Debtor shall lease warehousing space in the Debtor's own
premises to the Bank for the purpose of taking any
Inventory into the custody of the Bank without removal
thereof from such premises and will erect such structures
and post such signs as the Bank may require in order to
place such Inventory under the exclusive control of the
Bank.
(j) The Debtor will promptly notify the Bank (i) of any
material adverse change in the Debtor's financial condition
or in the financial condition of any Account Debtor or in
the collectibility of any of its Accounts, (ii) of all
claims, rejections, returns and adjustments which may
result in a reduction of the liability of any Account
Debtor on an Account, and (iii) of any Qualified Account
which shall cease for any reason to meet the specifications
fixed hereby for Qualified Accounts.
(k) The Debtor warrants that the Debtor's chief executive
office and all of its offices where it keeps its records
concerning the Collateral, all locations at which it keeps
its Inventory and Equipment and all locations at which it
maintains a place of business are listed in Section 18
hereof. Debtor further warrants that Debtor has no plans
for the removal of the Collateral to any location not set
forth in Section 18. The Debtor shall promptly notify the
Bank in writing of any change in the Debtor's name, chief
executive office or the location of the Debtor's records,
of any change in the location of the Collateral, of any
change in the location of any place of business and of the
establishment of any new place of business. If any of the
Collateral or any of the Debtor's records concerning the
Collateral are at any time to be located on premises leased
by the Debtor or on premises owned by the Debtor, subject
to a mortgage or other lien, the Debtor shall obtain and
deliver to the Bank, prior to the delivery of any
Collateral or records concerning the Collateral to said
premises, an agreement in form satisfactory to the Bank,
waiving the landlord's or mortgagee's or lienholder's
rights to enforce any claim against the Debtor for moneys
due under the lease, mortgage or other lien by levy of
distraint or other similar proceedings against the
Collateral or the Debtor's records concerning the
Collateral and assuring the Bank's ability to have access
to the Collateral and the Debtor's records concerning the
Collateral in order to exercise its rights hereunder to
take possession thereof.
(1) The Debtor shall pay to the Bank on demand, with interest
at the rate payable by the Debtor, at the time of payment
by . the Bank, with respect to the Liabilities (or the
highest such rate, if there be more than one), but in no
event less than six percent (6%) per annum, any and all
expenses (including reasonable attorney's fees and legal
expenses, filing fees, searches, and termination costs),
which may have been incurred by the Bank (i) to enforce
payment of any Account or to enforce any General
Intangibles or to enforce any of the Liabilities, whether
as against an Account Debtor, the Debtor or any guarantor
or surety of any Account Debtor or of the Debtor; or (ii)
in the enforcement, prosecution or defense of any action
growing out of or connected with the subject matter of this
Agreement, the Liabilities, the Collateral or any of the
Bank's rights therein or thereto; or (iii) in connection
with the custody, preservation, use, operation, preparation
for sale or sale of any Collateral; or (iv) in connection
with preparation and completion of this Agreement and any
and all related agreements and consummation of the
financing arrangements described herein and any
modification or extension hereof, or (v) with respect to
the enforcement, protection or preservation from time to
time of the Bank's rights under this Agreement or with
respect to the Collateral. The Debtor's liability to the
Bank for such repayment with interest shall be included in
the Liabilities and is secured by the Collateral.
(m) The Debtor shall provide the Bank with all financial
statements or other financial documents as the Bank may
from time to time require. The Debtor further covenants and
agrees to execute from time to time any and all agreements
and documents (including financing statements) which the
Bank may request in order to perfect its lien on the
Collateral and otherwise carry out the provisions of this
Agreement. The Debtor further authorizes the Bank to file a
carbon, photographic or other reproduction of this
Agreement or a financing statement previously filed under
this Agreement as a financing statement in any
jurisdiction. If certificates of title are issued or
outstanding with respect to any of the Collateral, the
Debtor will cause the security interest of the Bank to be
properly noted thereon and will promptly deliver such
certificates to the Bank.
(n) Without the prior written consent of the Bank, the Debtor
shall not sell or otherwise dispose of its Equipment and,
except in the ordinary course of business, the Debtor shall
not sell or dispose of its Inventory.
6. ENVIRONMENTAL MATTERS.
(a) As used in this Agreement, the following terms shall have
the following meanings: (i) "Environmental Laws" means any
and all applicable federal, state and local environmental
laws, rules and regulations whether now existing or
hereafter enacted together with all amendments,
modifications and supplements thereof, and (ii) "Hazardous
Materials" means any contaminants, hazardous substances,
regulated substances, or hazardous wastes which may be the
subject of liability pursuant to any Environmental Law.
(b) The Debtor represents and warrants that no property owned
or leased by the Debtor or any subsidiary of the Debtor is
in violation of any Environmental Laws, no Hazardous
Materials are present on said property and neither the
Debtor nor any subsidiary of the Debtor has been identified
in any litigation, administrative proceedings or
investigation as a responsible party for any liability
under any Environmental Laws.
(c) The Debtor shall not use, generate, treat, store, dispose
of or otherwise introduce, or permit any subsidiary to use,
generate, treat, store, dispose of or otherwise introduce,
any Hazardous Materials into or on any property owned or
leased by the Debtor, and will not, and will not permit any
subsidiary to, cause, suffer, allow or permit anyone else
to do so, except in an environmentally safe manner through
methods which have been approved by and meet all of the
standards of the federal Environmental Protection Agency
and any other federal, state or local agency with authority
to enforce Environmental Laws. The Debtor hereby agrees to
indemnify, reimburse, defend and hold harmless the Bank and
its directors, officers, agents and employees ("Indemnified
Parties") for, from and against all demands, liabilities,
damages, costs, claims, suits, actions, legal or
administrative proceedings, interest, losses, expenses and
reasonable attorney's fees (including any such fees and
expenses incurred in enforcing this indemnity) asserted
against, imposed on or incurred by any of the Indemnified
Parties, directly or indirectly pursuant to or in
connection with the application of any Environmental Law,
to acts or omissions occurring at any time on or in
connection with any property owned or leased by the Debtor
or any subsidiary of the Debtor or any business conducted
thereon.
7. DEFAULT. The Debtor shall be in default hereunder upon the
occurrence of any of the following events:
(a) The nonpayment when due of any amount payable on any of the
Liabilities by the Debtor or by any other person liable,
either absolutely or contingently, for payment, including
endorsers, guarantors and sureties (each such person is
referred to as a "Obligor");
(b) If the Debtor or any Obligor has failed to observe or
perform any existing or future agreement of any nature
whatsoever with the Bank (other than those described in
clause (a) above);
(c) If any representation, warranty, certificate, financial
statement or other information made or given by the Debtor
or any Obligor to the Bank is materially incorrect or
misleading;
(d) If the Debtor or any Obligor shall become insolvent or make
an assignment for the benefit of creditors or if any
petition shall be filed by or against the Debtor or any
Obligor under any bankruptcy or insolvency law;
(e) The entry of any judgment against the Debtor or any Obligor
which remains unsatisfied for 15 days or the issuance of
any attachment, tax lien, levy or garnishment against any
property of material value in which the Debtor or any
Obligor has an interest;
(f) If any attachment, levy, garnishment or similar legal
process is served upon the Bank as a result of any claim
against the Debtor or any Obligor or against any property
of the Debtor or any Obligor;
(g) The dissolution, merger, consolidation or change in control
(as control is defined in Rule 12b-2 under the Securities
Exchange Act of 1934) of any Debtor which is a corporation
or partnership, or the sale or transfer of any substantial
portion of any Debtor's assets, or if any agreement for
such dissolution, merger, or consolidation, change in
control, sale or transfer is entered into without the
written consent of Bank;
(h) The death of any Debtor or Obligor who is a natural person;
(i) If the Bank determines reasonably and in good faith that an
event has occurred or a condition exists which has had, or
is likely to have, a material adverse effect on financial
condition or creditworthiness of the Debtor or any Obligor;
(j) If the Debtor or any Obligor shall fail to remit promptly
when due to the appropriate government agency or authorized
depository, any amount collected or withheld from any
employee of the Debtor for payroll taxes, Social Security
payments or similar payroll deductions;
(k) If any Obligor shall attempt to terminate or disclaim such
Obligor's liability for the Liabilities;
(1) If the Bank shall reasonably and in good faith determine
and notify the Debtor that any collateral is insufficient
as to quality or quantity;
(m) If the Debtor shall fail to pay when due any material
indebtedness for borrowed money other than to the Bank; or
(n) If the Debtor shall be notified of the failure of the
Debtor or any Obligor to provide such financial and other
information promptly when reasonably requested by the Bank.
(o) If the Debtor is in default under the Reimbursement
Agreement.
8. ACCELERATION AND ENFORCEMENT RIGHTS. Whenever the Debtor shall be in
default as aforesaid, (i) the Bank may declare the entire unpaid
amount of such of the Liabilities as are not then due and payable to
become immediately due and payable without notice to or demand on
any Obligor; and (ii) the Bank may at its option exercise from time
to time any or all rights and remedies available to it under the
Uniform Commercial Code or otherwise available to it, including the
right to collect, receipt for, settle, compromise, adjust, sue for,
foreclose or otherwise realize upon any of the Collateral and to
dispose of any of the Collateral at public or private sale(s) or
other proceedings, with or without advertisement, and the Debtor
agrees that the Bank or its nominee may become the purchaser at any
such sale(s). Bank shall have the unconditional right to retain and
obtain the full benefit of all Collateral until all Liabilities of
the Debtor to the Bank are paid and satisfied in full. If any
notification of intended disposition of the Collateral is required
by law, such notice shall be deemed reasonable if mailed at least 7
days before such disposition addressed to the Debtor at its Address
shown herein. If any Note secured hereby is payable on demand,
Bank's right to require payment shall not be restricted or impaired
by the absence, non-occurrence or waiver of an Event of Default, and
it is understood that if such Note is payable on demand, the Bank
may require payment at any time.
9. APPLICATION OF COLLATERAL. The Proceeds of any Collateral received
by the Bank at any time before or after default, whether from sale
of Collateral or otherwise, may be applied to the payment in full or
in part of such of the Liabilities and in such order as the Bank may
elect. The Debtor, to the extent that it has any right, title or
interest in any of the Collateral, authorized Bank to proceed
against the Collateral in any order that Bank may determine and
waives and releases any right to require the Bank to collect any of
the Liabilities from any source other than from the Collateral under
any theory of marshalling of assets, or otherwise, and specifically
authorizes the Bank to proceed against any of the Collateral in
which the Debtor has a right, title or interest with respect to any
of the Liabilities in any manner that the Bank may determine.
10. POWER OF ATTORNEY. The Debtor does hereby appoint any officer or
agent of the Bank as the Debtor's true and lawful attorney in-fact,
with power to endorse the name of the Debtor upon any notes, checks,
drafts, money orders, or other instruments of payment or Collateral
that may come into possession of Bank; to sign and endorse the name
of the Debtor upon any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against Account
Debtors, assignments, verifications and notices in connection with
Accounts, and any instruments or documents relating thereto or to
the Debtor's rights therein; and to give written notice to such
office and officials of the United States Postal Service to effect
such change or changes of address so that all mail addressed to the
Debtor may be delivered directly to Bank (Bank will return all mail
not related to the Liabilities or the Collateral); granting unto
Debtor's said attorney full power to do any and all things necessary
to be done with respect to the above transactions as fully and
effectually as Debtor might or could do, and hereby ratifying all
that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney shall be irrevocable for the term of
this Agreement and all transactions hereunder.
11. TERM. The term of this Agreement shall commence with the date hereof
and end on the date when, after receipt of written notice of the
termination of this Agreement from either party to the other, which
notice may be given by either party at any time, there shall be no
Liabilities outstanding.
12. SUCCESSORS AND ASSIGNS. All provisions herein shall inure to, and
become binding upon, the heirs, executors, administrators,
successors, representatives, receivers, trustees and assigns of the
parties, provided, however, that this Agreement shall not be
assignable by the Debtor without the prior written approval of the
Bank.
13. CONFESSION OF JUDGMENT. The Debtor hereby irrevocably authorizes and
empowers any attorney of any court of record to appear for and
confess judgment against the Debtor for the unpaid amount of the
Liabilities as evidenced by an affidavit signed by an officer of the
Bank setting forth the amount then due, plus 15% thereof, but no
less than $5,000, as an attorney's commission, with costs of suit,
release of errors, and without right of appeal. If a copy hereof,
verified by an affidavit, shall have been filed in said proceeding,
it shall not be necessary to file the original as a warrant of
attorney. The Debtor waives the right to any stay of execution and
the benefit of all exemption laws now or hereafter in effect. No
single exercise of the foregoing warrant and power to confess
judgment shall be deemed to exhaust the power, whether or not any
such exercise shall be held by any -court to be invalid, voidable,
or void, but the power shall continue undiminished and may be
exercised from time to time as often as the Bank shall elect, until
all Liabilities have been paid in full.
14. THE DEBTOR'S AUTHORITY AND CAPACITY, ETC. The Debtor represents and
warrants that the Bank is obtaining and shall maintain at all times
a first lien on all of the Collateral. If the Debtor is a
corporation, the Debtor further represents and warrants that it is
duly organized, validly in existence and in good standing in its
state of incorporation and any other state where the nature or
extent of its business requires qualification, that the execution
and performance by the Debtor of this Agreement and any related
agreements is authorized by the Debtor's Board of Directors and does
not violate the Articles of Incorporation or by-laws of the Debtor
or any other Agreement or contract by which the Debtor is bound. The
Debtor represents and warrants that this Agreement is the legal,
valid and binding obligation of the Debtor enforceable against the
Debtor in accordance with its terms.
15. CONSENT TO JURISDICTION AND VENUE. IN ANY LEGAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER,
EACH UNDERSIGNED PARTY HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN
ANY COUNTY IN THE COMMONWEALTH OF PENNSYLVANIA WHERE THE BANK
MAINTAINS AN OFFICE AND AGREES NOT TO RAISE ANY OBJECTION TO SUCH
JURISDICTION OR TO THE LAYING OR MAINTAINING OF THE VENUE OF ANY
SUCH PROCEEDING IN SUCH COUNTY. EACH UNDERSIGNED PARTY AGREES THAT
SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE DULY EFFECTED UPON
IT BY MAILING A COPY THEREOF, BY REGISTERED MAIL, POSTAGE PREPAID,
TO EACH UNDERSIGNED PARTY.
16. WAIVER OF JURY TRIAL. EACH UNDERSIGNED PARTY HEREBY WAIVES, AND THE
BANK BY ITS ACCEPTANCE HEREOF THEREBY WAIVES, TRIAL BY JURY IN ANY
LEGAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK TO
ENTER INTO, ACCEPT OR RELY UPON THIS AGREEMENT.
17. MISCELLANEOUS. The construction and interpretation of this Agreement
and all agreements shall be governed by the laws of the Commonwealth
of Pennsylvania. No modification hereof shall be binding or
enforceable unless in writing and signed by the party against whom
enforcement is sought. If any provision of this Agreement is
determined to be unenforceable or invalid, such determination shall
not affect or impair the remaining provisions of this Agreement. No
rights are intended to be created hereunder for the benefit of any
third party beneficiary hereof. The individual signatory(ies) on
behalf of the Debtor represents that he (they) is (are) authorized
to execute this Agreement on behalf of the Debtor. This Agreement
supplements the Debtor's obligations under any promissory notes or
separate agreements with the Bank.
18. LOCATIONS OF DEBTOR. The Debtor represents and warrants that the
following addresses (together with any additional addresses which
may be shown on any attached schedule) correctly set forth all of
the locations where the Debtor maintains a place of business, its
records or the Collateral.
Chief Executive Office: 9000 State Road, Philadelphia, PA 19136
19. NAME OF DEBTOR. The Debtor represents and warrants that the name of
the Debtor shown on this Agreement is the correct, full legal name
of the Debtor and that the Debtor has not at any time changed its
name, identity or corporate structure, been the surviving
corporation in a merger, acquired any other business, or engaged in
business under an assumed name or trade name except as set forth
below.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto under seal and intending to be legally bound on the day and
year first above written.
FIRST UNION NATIONAL BANK
By ___________________________
LANNETT COMPANY, INC.
By ___________________________
Name:
Title:
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement")
made this 30th day of April, 1999 by LANNETT COMPANY, INC.("Indemnitor"), in
favor of First Union National Bank ("Lender").
A. Lender and Indemnitor have entered into (i) a reimbursement
agreement of even date herewith, pursuant to which Lender shall issue a
letter of credit in the amount of $3,769,945.20 on behalf of Indemnitor, and
(ii) a reimbursement agreement of even date herewith, pursuant to which
Lender shall issue a letter of credit in the amount of $2,349,276.72 on
behalf of Indemnitor. Collectively, the transactions referred to in (i) and
(ii) above are referred to as the "Loan", and the reimbursement agreements
are referred to herein as the "Reimbursement Agreement."
B. The Loan shall be governed by the terms of the Reimbursement
Agreement between Indemnitor and Lender, and secured by a certain mortgage
(the "Mortgage") encumbering certain property of Indemnitor, as more fully
described on Exhibit "A" attached hereto and made a part hereof (the
"Property"). The Reimbursement Agreement, and Mortgage and other documents
are each a "Loan Document" and are referred to hereinafter collectively as
the "Loan Documents".
C. As a condition to entering into the Reimbursement Agreement, the
Lender requires that the Indemnitor execute and deliver this Agreement in
favor of the Lender.
D. To induce the Lender to make the Loan, the Indemnitor desires to
execute and deliver this Agreement for the benefit of the Lender.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
"Agreed Rate" means a rate per annum equal to the interest rate per
annum determined under the Reimbursement Agreement.
"CERCLA" means the Comprehensive Environmental Response
Compensation, and Liability Act of 1980 (42 U.S.C. ss.9601, et seq.), as
heretofore or hereafter amended from time to time.
"Environmental Laws" collectively means and includes all present and
future laws and any amendments (whether common law, statute, rule, order,
regulation or otherwise), permits, and other requirements or guidelines of
governmental authorities applicable to the Property and relating to the
environment and environmental conditions or to any Hazardous Substance or
Hazardous Substance Activity (including, without limitation, CERCLA, the
Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.6901, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss.6901, et seq.,
the Federal Water Pollution Control Act, 33 U.S.C. ss.1251, et seq., the
Clean Air Act, 33 U.S.C. ss.7401, et seq., the Clean Air Act, 42 U.S.C.
ss.7401, et seq., the Toxic Substances Control Act, 15 U.S.C. ss.2601-2629,
the Safe Drinking Water Act, 42 U.S.C. ss.300f-300j, the Emergency Planning
and Community Right-To-Know Act, 42 U.S.C. ss.1101, et seq., and any
so-called "Super Fund" or "Super Lien" law, environmental laws administered
by the Environmental Protection Agency, the Pennsylvania Solid Waste
Management Act, 35 P.S. ss.ss.6018.101-108, the Pennsylvania Hazardous Sites
Cleanup Act, 35 Pa. C.S.A. ss.ss.6020.101, et seq., any similar state and
local laws and regulations, all amendments thereto and all regulations,
orders, decisions, and decrees now or hereafter promulgated thereunder).
"Environmental Losses" means Losses (as hereinafter defined)
suffered or incurred by the Lender, arising out of or as a result of: (i) the
occurrence, prior to a Foreclosure Transfer (as hereinafter defined), of any
Hazardous Substance Activity; (ii) any violation, prior to a Foreclosure
Transfer, of any applicable Environmental Laws, Federal, state or local,
relating to the Property or to the ownership, use, occupancy, or operation
thereof; (iii) any investigation, inquiry, order, hearing, action, or other
proceeding by or before any governmental agency in connection with any
Hazardous Substance Activity occurring or allegedly occurring prior to a
Foreclosure Transfer; (iv) any claim, demand or cause of action, or any
action or other proceeding, whether meritorious or not, brought or asserted
against the Lender, regardless of when such claim, demand, or cause of action
or other proceeding brought or asserted, which directly or indirectly relates
to, arises from or is based on any of the matters described in Clause (i),
(ii) or (iii) or any allegation of any such matters.
"Foreclosure Transfer" means the transfer of title to all or any
part of the Property at a foreclosure sale under the Mortgage, either
pursuant to judicial decree or the power of sale contained in the Mortgage,
or by deed in lieu of such foreclosure, or under the jurisdiction of a
Bankruptcy court.
"Hazardous Substance" means, at any time, (i) asbestos and any
asbestos containing material and any substance that is then defined or listed
in, or otherwise classified pursuant to, any Environmental Laws or any
applicable laws or regulations as a "hazardous substance", "hazardous
material", "hazardous waste", "infectious waste", "toxic substance", "toxic
pollutant" or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or
"EP toxicity", (ii) any petroleum and drilling fluids, produced waters, and
other wastes associated with the exploration, development or production of
crude oil, natural gas, or geothermal resources and (iii) petroleum products,
polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive matter,
and medical waste.
"Hazardous Substance Activity" means any actual use, packaging,
labeling, treatment, leaching, spill, cleanup, storage, holding, existence,
release, emission, discharge, generation, processing, abatement, removal,
disposition, handling or transportation of any Hazardous Substance from,
under, into or on the Property or surrounding property (but only concerning
surrounding property to the extent of seepage, release, discharge, migration,
disposal or other actions from the Property to the surrounding property or
from the surrounding property to the Property).
"Losses" means any and all losses, liabilities, damages, demands,
claims, actions, judgments, causes of action, assessments, penalties, costs
and expenses incurred by the Lender (including, without limitation, all
amounts contributed for investigation, monitoring, remediation, response
action, removal, restoration and permit acquisition and the reasonable fees
and disbursements of outside legal counsel, environmental experts, and
accountants and the reasonable charges of in-house legal counsel and
accountants). In addition, "Losses" also means all foreseeable and
unforeseeable consequential damages.
2. Indemnification. Indemnitor hereby agrees to indemnify, defend
(with attorneys acceptable to the Lender) and hold harmless the Lender and
its directors, officers, employees, partners, attorneys, agents, successors
and assigns from and against any and all Environmental Losses.
3. Use of Property. Without limiting the provisions of Section 2
hereof, the Property is not now used and shall not hereafter be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, process or in any manner deal with Hazardous Substances,
and no Hazardous Substances are installed, placed or in any manner dealt with
on the Property, except as permitted under Section 6 hereof.
4. Compliance with Environmental Laws. Indemnitor has complied, and
shall comply and cause all tenants and other occupants of the Property to
comply, with all Environmental Laws which apply or pertain to the Property to
the uses thereon or therein by any tenant or occupant. Indemnitor
acknowledges that Hazardous Substances may permanently and materially impair
the value and use of the Property and that breach of this covenant
constitutes willful misconduct and intentional waste of the Property.
5. Site Visits, Observations and Testing. Lender and its agents and
representatives shall have the right at any reasonable time to enter and
visit the Property and the improvements located on the Property
("Improvements") for the purposes of observing the Property, taking and
removing soils or groundwater samples, and conducting tests on any part of
the Property or the Improvements. Lender is under no duty, however, to visit
or observe the Property or to conduct tests, and any such acts by Lender
shall be solely for the purpose of protecting Lender's security and
preserving Lender's rights. No site visit, observation or testing by Lender
shall result in a waiver of any default of Indemnitor or impose any liability
on Lender. In no event shall any site visit, observation or testing by Lender
by a representation that Hazardous Substances are or are not present in, on
or under the Property or the Improvements, or that there has been or shall be
compliance with any Environmental Law or any other applicable governmental
law. Neither Indemnitor nor any other person or entity is entitled to rely on
any site visit, observation or testing by Lender. Lender owes no duty of care
to protect Indemnitor or any other person or entity from or against, or to
inform Indemnitor or any other person or entity of, any Hazardous Substances
or any other adverse condition affecting the Property or the Improvements.
Lender shall not be obligated to disclose to Indemnitor or any other person
or entity any report or findings made as the result of, or in connection
with, any site visit, observation or testing by Lender. In each instance,
Lender shall give Indemnitor reasonable notice before entering the Property
or the Improvements. Lender shall make reasonable efforts to avoid
interfering with Indemnitor's use of the Property or the Improvements in
exercising any rights provided in this section.
6. Exception for Ordinary and Reasonable Use of Hazardous Substances
Permitted by Law. Nothing in this Agreement shall preclude Indemnitor from
using Hazardous Substances, provided such use is permitted by applicable
Environmental Laws, and provided the Hazardous Substances are of such types
and in such quantities as is ordinary and reasonable in the operation or
maintenance of the Property or in the ordinary course of business of
Indemnitor.
7. Independent Obligations. The obligations of Indemnitor under this
Indemnity are independent of, and shall not be measured or affected by (i)
any amounts at any time owing under the Loan, or secured by the Mortgage,
(ii) the sufficiency or insufficiency of any collateral (including, without
limitation, the Property) given to the Lender to secure repayment of the
Loan, (iii) the consideration given by the Lender or any other party in order
to acquire the Property or any portion thereof, (iv) the modification,
expiration or termination of any of the documents or instruments relating to
the Loan, (v) the discharge or repayment in full of the Loan (including,
without limitation, by amounts paid or credit bid at a foreclosure sale or by
discharge in connection with a deed in lieu of foreclosure), or (vi) any
extension of time for performance under the Loan Documents.
8. Rights Cumulative. The rights of the Lender under this Indemnity
shall be in addition to any other rights and remedies of the Lender against
Indemnitor under the Loan Documents or at law or in equity (including,
without limitation, any right of reimbursement or contribution pursuant to
CERCLA), and shall not in any way be deemed a waiver of any such rights.
9. Payment of Obligations. All obligations of Indemnitor hereunder
shall be payable on demand and any amount due and payable hereunder to the
Lender by Indemnitor which is not paid within five (5) days after written
demand therefor from the Lender shall bear interest from the date of such
demand at the Agreed Rate.
10. Confession of Judgment. Upon the occurrence of any event of
default, Indemnitor irrevocably authorizes the prothonotary or any attorney
of any court of record in Pennsylvania or elsewhere to appear for and confess
judgment against the Indemnitor for any and all amounts unpaid under this
Agreement, including interest therefrom to date of payment (such amount and
the occurrence of such event of default to be evidenced by a complaint or an
affidavit signed by an officer of the Lender), together with fees of counsel,
disbursements and costs of suit, releasing all errors and waiving rights of
appeal. If a copy of this Agreement, verified by affidavit, shall have been
filed in such proceeding, it shall not be necessary to file the original as a
warrant of attorney. Indemnitor waives the right to any stay of execution and
the benefit of all exemption laws now or hereafter in effect. No single
exercise of this warrant and power to confess judgment shall be deemed to
exhaust this power, whether or not any such exercise shall be held by any
court to be invalid, voidable or void, but this power shall continue
undiminished and may be exercised from time to time as often as the Lender
shall elect until all amounts due under this Agreement shall have been paid
in full.
11. Notice of Actions. Indemnitor shall immediately notify the
Lender in writing of (i) any governmental or regulatory actions instituted or
threatened in writing under any Environmental Laws affecting the Property or
any indemnity hereunder, including, without limitation, any notice of
inquiry, inspection, abatement or noncompliance, (ii) all claims made or
threatened in writing by any third party against Indemnitor or the Property
relating to any Hazardous Substance or a violation of Environmental Laws, and
(iii) Indemnitor's discovery of any occurrence or condition on the Property
or any real property adjoining the Property which could subject Indemnitor or
the Property to a claim under any Environmental Law or to any restrictions on
ownership, occupancy, transferability or use of the Property under any
Environmental Law in connection with the matters covered by this Indemnity.
12. Notice of Claim. The Lender agrees that it shall provide
Indemnitor with written notice of any claim or demand which the Lender has
determined could give rise to a right of indemnification under this
Indemnity. Such notice shall be given promptly after the Lender becomes aware
of facts that render the indemnities herein applicable and shall specify, to
the best of the Lender's knowledge, the facts giving rise to the alleged
claim, and the amount to the extent determinable, of liability for which
indemnity is asserted. Indemnitor agrees that in any action, suit or
proceeding brought against the Lender, the Lender may be represented by
counsel also representing Indemnitor and mutually acceptable to Indemnitor
and the Lender, except that in the case of (a) conflict of interest by said
counsel in representing both Indemnitor and the Lender, (b) the existence of
adverse interests between Indemnitor and the Lender, or (c) said counsel not
being satisfactory to the Lender or not defending the Lender in a
satisfactory manner, in the Lender's sole discretion, then the Lender shall
have the right to be represented by counsel of its choice without affecting
or otherwise impairing the indemnities hereunder and, to the extent fees and
disbursements of the Lender's counsel (either representing both the Lender
and Indemnitor or the Lender alone) are incurred in protecting the Lender's
interest, Indemnitor agrees to pay such fees and disbursements within fifteen
(15) days after demand and if not paid within such 15-day period, shall bear
interest from the date of such demand at the Agreed Rate. The Lender agrees
that it will not settle or otherwise compromise any such action, suit or
proceeding without the prior written consent of Indemnitor, which consent
shall not be unreasonably withheld or delayed. Indemnitor also agrees that it
will not settle or compromise such action, suit or proceeding without the
Lender's prior written consent which will not be unreasonably withheld.
13. Attorneys' Fees. If the Lender retains counsel for advice or
other representation in any litigation, contest, dispute, suit or proceeding
(whether instituted by the Lender, Indemnitor, or any other party, including
any governmental agency charged with enforcement of any Environmental Laws)
in any way relating to this Indemnity and the indemnities described herein,
or to enforce the indemnities hereunder, then all of the attorneys' fees
arising from such services and all related expenses and court costs shall be
payable by Indemnitor within fifteen (15) days of demand, and if not paid
within such 15 day period shall bear interest from the date of demand at the
Agreed Rate.
14. Survival of Indemnitor's Obligations. (a) The obligations of
Indemnitor hereunder shall remain in full force without regard to, and shall
not be impaired by the following, any of which may be taken in such manner,
upon such terms and at such times as the Lender, in its sole discretion,
deems advisable without the consent of, or notice to, Indemnitor, nor shall
any of the following give Indemnitor any recourse or right of action against
the Lender: (1) any express or implied amendment, modification, renewal,
supplement, extension or acceleration of or to any of the Loan Documents; (2)
any exercise or non-exercise by the Lender of any right or privilege under
any of the Loan Documents; (3) any Bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation or other like proceeding
relating to Indemnitor, or any affiliate thereof, or any action taken with
respect to this Indemnity by any trustee or receiver, or by any court, in any
such proceeding, whether or not Indemnitor shall have had notice or knowledge
of any of the foregoing; (4) any release, waiver or discharge of Indemnitor
or any endorser from liability under any of the Loan Documents (other than
liability under this Indemnity) or any grant to the Lender of a security
interest, lien or encumbrance in any of Indemnitor's property; (5) any
subordination, compromise, settlement, release (by operation of law or
otherwise), discharge, collection, or liquidation of any of the Loan
Documents or any collateral described in any of the Loan Documents or
otherwise, or any substitution with respect thereto; (6) any assignment or
other transfer of any of the Loan Documents, in whole or in part; (7) any
acceptance of a partial performance of any of the obligations of Indemnitor;
(8) any consent to the transfer of any collateral described in the Loan
Documents; (9) any bid or purchase at any sale of the collateral described in
the Loan Documents; and (10) any acts of Lender with respect to any Hazardous
Substance other than those acts which constitute the gross negligence or
willful misconduct of the Lender.
(b) Indemnitor unconditionally and jointly and severally
waives: (1) any right to require the Lender to exhaust any collateral
described in the Loan Documents or to pursue any other remedy whatsoever; (2)
any defense arising by reason of any invalidity or enforceability of any of
the Loan Documents or any disability of any guarantor, if any; and (3) any
defense based upon an election of remedies by the Lender, including, without
limitation, any election to proceed by judicial or nonjudicial foreclosure of
any security, whether real property or personal property security, or by deed
in lieu thereof.
15. No Waiver Respecting Violations of Environmental Law.
Indemnitor's obligations hereunder shall in no way be impaired, reduced or
released by reason of the Lender's omission or delay to exercise any right
described in connection with any notice, demand, warning or claim regarding
violations of any Environmental Law governing the Property.
16. No Election of Remedies. Indemnitor waives any right to require
that any action be brought by the Lender against any other person, or that
any other remedy under the Loan Documents be exercised. The Lender may, at
its option, proceed against Indemnitor in the first instance to collect
monies when due or obtain performance under this Indemnity, without first
resorting to any other remedy under the Loan Documents.
17. Successors and Assigns. This Indemnity shall be binding upon
Indemnitor, its successors and assigns, and shall inure to the benefit of and
shall be enforceable by the Lender, its successors, endorsees, and assigns
(including, without limitation, any entity to which the Lender assigns or
sells all or any portion of its interest in the Loan). As used herein, the
singular shall include the plural and the masculine shall include the
feminine and neuter and vice versa, as the context so requires.
18. Notices. (a) All notices, demands, requests, consents, approvals
and other instruments ("Notices") under this Indemnity shall be in writing
and, unless otherwise expressly provided herein, shall be addressed to the
intended recipient at the following address:
If to Indemnitor:
LANNETT COMPANY, INC.
9000 State Street
Philadelphia, PA 19136
Attention: Jeffrey M. Moshal, Vice President Finance
With a copy to:
J. Randolph Lawlace, Esquire
Fox, Rothschild, O'Brien & Frankel
2000 Market Street, 10th Floor
Philadelphia, PA 19103-3291
To Lender:
FIRST UNION NATIONAL BANK
123 South Broad Street
Philadelphia, Pa. 19109
Attention: Jane Sobieski, Vice President
With copy to:
Obermayer Rebmann Maxwell & Hippel LLP
19th Floor
One Penn Center
1617 John F. Kennedy Blvd.
Philadelphia, Pa. 19103
All notices shall be either delivered to such party by express courier
service, delivery charges prepaid and receipt acknowledged in writing, or
mailed to such party by certified mail, return receipt requested, postage
prepaid. Either party hereto may at any time and from time to time by Notice
given as herein provided change the address to which future Notices to such
party are to be given.
(b) No Notice given by any party hereto shall be of any
force or effect unless such Notice is given in accordance with all of the
provisions hereof.
(c) All Notices shall be deemed to have been given and
received (i) one day after delivery to a private, overnight air courier
service; or (ii) three (3) business days after mailing if deposited, postage
prepaid, in first class United States mail.
17. Governing Law. This Indemnity shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania. Each of the
parties hereto agrees to submit to the jurisdiction and service of process of
any court having jurisdiction over the Property to the same extent and with
the same force and effect as if they were residents at the Property.
18. Severability. Every provision of this Indemnity is intended to
be severable. If any provision of this Indemnity or the application of any
provision hereof to any party or circumstance is declared to be illegal,
invalid or unenforceable for any reason whatsoever by a court of competent
jurisdiction, such invalidity shall not affect the balance of the terms and
provisions hereof or the application of the provision in question to any
other party or circumstance, all of which shall continue in full force and
effect.
19. No Waiver. No failure or delay on the part of the Lender to
exercise any power, right or privilege under this Indemnity shall impair any
such power, right or privilege, or be construed to be a waiver of any default
or an acquiescence therein, nor shall any single or partial exercise of such
power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. No provision of this Indemnity may be
changed, waived, discharged or terminated except with the written consent of
the Lender.
20. Costs of Enforcement. If Lender brings any action or proceeding
to enforce any of its rights under this Agreement, the prevailing party shall
be entitled to recover attorneys' fees, costs and expenses from the
non-prevailing party.
21. No Third Party Beneficiaries. Except for any purchasers of all
or any part of the Loan (and such parties' successors and assigns), the
parties hereto do not intend to confer any rights or benefits hereunder on
any parties other than the parties hereto, their successors and permitted
assigns, if any.
22. Intentionally Omitted.
23. Capitalized Terms. All capitalized terms used herein and not
defined herein shall have the respective meanings given to such terms in the
Mortgage.
24. Entire Agreement. This Indemnity and the Loan Documents
constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to
the subject matter contained in this Indemnity; provided that in the case of
any conflict or inconsistency between or among the terms of this Agreement
and the Loan Documents with respect to the subject matter hereof, the terms
of this Indemnity shall govern and control.
25. Captions. The captions by which the paragraphs of this Agreement
are designated are for convenience of reference only and do not define,
describe or limit the scope or the intent of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Attest: INDEMNITOR:
LANNETT COMPANY, INC.
______________________ By:__________________________
(Seal)
Attest: LENDER:
FIRST UNION NATIONAL BANK
____________________ By:__________________________
(Seal)
AMENDMENT NO. 1 TO REIMBURSEMENT AGREEMENT AND WAIVER
This Amendment is entered into as of the 24th day of September, 1999
among Lannett Company, Inc., a Delaware corporation, with its principal place
of business at 9000 State Road, Philadelphia, Pennsylvania (the "Borrower"),
William Farber ("Guarantor") and FIRST UNION NATIONAL BANK a national banking
association with offices at 123 South Street, Philadelphia, Pa 19109 (the
"Bank").
The parties have entered into a (a) a Reimbursement Agreement (the
"Agreement") dated as of April 30, 1999, which, inter alia, provided for the
issuance of a letter of credit by the Bank in the original Stated Amount of
$2,349,276.72, (b) a Reimbursement Agreement (the "Agreement") dated as of
April 30, 1999, which, inter alia, provided for the issuance of a letter of
credit by the Bank in the original Stated Amount of $3,769,945.20, and (c)
the Bank's Loan Agreement dated March 11, 1999 in the amount of $2,000,000.00
(the "Loan Agreement"). The Borrower and the Guarantor entered in certain
covenants with the Bank in each Agreement and the Loan Agreement. The Bank,
the Borrower and the Guarantor have agreed to amend certain representations
in each Agreement and the Loan Agreement and record their agreement in this
Amendment.
NOW, THEREFORE, in consideration of the within premises and for
other good and valuable consideration, the receipt and sufficiency of with is
hereby acknowledged, the parties agree as follows:
1. Section 6.10 of each Agreement and the Financial Covenants
of the Loan Agreement are hereby amended to read as follows:
SECTION 6.10 Financial Covenants. Prior to the termination of
Borrower's obligations hereunder, the Borrower and Guarantor shall comply
with the following financial covenants at all times, to be reviewed by the
Bank periodically as set forth below:
(a) Senior Debt to Effective Net Worth Ratio. Borrower shall
maintain a ratio of Senior Debt divided by Effective Net Worth
of not more than 2.25 to 1.00 through June 29, 2000, and 2.00
to 1.00 at June 30, 2000 and each fiscal year thereafter, such
ratio to be tested annually. "Senior debt" shall mean the sum
of total liabilities, including capitalized leases as all
reserves for deferred taxes and other deferred sums appearing
on the liabilities side of the balance sheet, in accordance
with generally accepted accounting principles applied on a
consistent basis, excluding debt subordinated to the Bank.
"Effective Net Worth" shall mean total assets (less
intangibles) minus Total Liabilities. "Total Liabilities"
shall mean all liabilities of Borrower, excluding debt fully
subordinated to the Bank on terms and conditions acceptable to
Bank, and including capitalized leases and all reserves for
deferred taxes and other deferred sums appearing on the
liabilities side of a balance sheet, in accordance with
generally accepted accounting principles applied on a
consistent basis.
(b) Effective Net Worth. Borrower shall, at fiscal year ending
6/30/99, maintain an Effective Net Worth of not less than four
million dollars ($4,000,000.00), at fiscal year ending 6/30/00
maintain an Effective Net Worth of not less than five million
seven hundred and fifty thousand dollars ($5,750,000.00), and
at fiscal year ending 6/30/01 maintain an Effective Net Worth
of not less than seven million, five hundred thousand dollars
($7,500,000.00), tested annually. Thereafter, to the extent
that the Letter of Credit is extended, the Borrower shall
maintain Effective Net Worth as required by the Bank.
(c) Debt Service Coverage Ratio. Borrower shall maintain a Debt
Service Coverage Ratio of not less than 1.50 to 1.00, tested
quarterly on a rolling four-quarter basis, Effective fiscal
year 2000, "Debt Service Coverage Ratio" shall mean the sum of
earnings before interest, taxes, depreciation, and
amortization divided by the sum of interest expense and
current maturities of long term debt and capital leases
excluding prncipal outstanding under the working capital line
of credit of Borrower with the Bank and any Subordinated Debt
with a maturity of twelve months or less.
(d) Current Ratio. Borrower shall maintain a Current Ratio of not
less than 1.50 to 1.0, tested quarterly. "Current Ratio" shall
mean the ratio of Current Assets to Current Liabilities.
"Current Assets" shall mean all assets (less intangibles)
which are so classified in accordance with generally accepted
accounting principles. Effective fiscal year 2000 "Current
Liabilities" shall mean all liabilities which are so
classified in accordance with generally accepted accounting
principles, excluding debt fully subordinated to the Bank on
terms and conditions acceptable to the bank and also the
principal outstanding under the working capital line of credit
of Borrower with the Bank.
All determinations under this Section 6.10 and the Financial
Covenants section in the Loan Agreements shall be made in accordance
with generally accepted accounting principals consistently applied.
3. The Bank agrees to waive any Event of Default resulting
from non-compliance with (a) the Senior Debt to Effective Net Worth Ratio and
(b) the Debt Service Coverage Ratio and (c) the Current Ratio, as of June 30,
1999.
4. The Remainder of the terms of each Agreement and the Loan
Agreement remain unchanged and are hereby restated.
5. All capitalized terms unless specifically defined herein
shall have the meaning given to them in each Agreement and the Loan
Agreement.
IN WITNESS whereof, the parties have executed this Amendment as of
the date first above written.
LANNETT COMPANY, INC.
Attest:
By: /s/ William Farber
-------------------------
William Farber, Chairman
GUARANTOR
By: /s/ William Farber
-------------------------
William Farber, Chairman
FIRST UNION NATIONAL BANK
By: /s/ Kevin Dow
-------------------------
Kevin Dow, Vice President
Exhibit 11
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Lannett Company, Inc and Subsidiary
STATEMENT RE COMPUTATION OF EARNINGS
PER SHARE
Year Ended June 30 Year Ended June 30
1999 1999 1998 1998
------------------------------------------------------------------
Net Income Shares Net Income Shares
<S> <C> <C> <C> <C>
Basic earnings per share factors $1,308,138 5,206,128 $1,025,722 5,206,128
Effect of potentially dilutive
option plans and debentures:
Interest on debentures 180,000 182.500
Conversion on debentures 9,542,636 10,144,000
Employee stock options 48,000
---------- ---------- ---------- ----------
Diluted earnings per share factors $1,488,138 14,748,764 $1,208,222 15,398,128
---------- ---------- ---------- ----------
Basic earnings per share $ 0.25 $ 0.20
Diluted earnings per share $ 0.10 $ 0.08
</TABLE>
Exhibit 23
Consent of Deloitte & Touche
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-79258 on Form S-8 of Lannett Company, Inc. and Subsidiary of our report
dated September 24, 1999 appearing in this Annual Report on Form 10-KSB of
Lannett Company, Inc. and subsidiary for the year ended June 30, 1999.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> $ 117,004
<SECURITIES> 0
<RECEIVABLES> 1,602,603
<ALLOWANCES> 165,000
<INVENTORY> 2,624,378
<CURRENT-ASSETS> 4,412,721
<PP&E> 6,880,291
<DEPRECIATION> 2,063,543
<TOTAL-ASSETS> 12,667,548
<CURRENT-LIABILITIES> 4,181,830
<BONDS> 10,844,917
<COMMON> 5,206
0
0
<OTHER-SE> 320,575
<TOTAL-LIABILITY-AND-EQUITY> 12,667,548
<SALES> 10,580,568
<TOTAL-REVENUES> 10,580,568
<CGS> 6,619,837
<TOTAL-COSTS> 8,750,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 911,579
<INCOME-PRETAX> 940,038
<INCOME-TAX> (368,100)
<INCOME-CONTINUING> 1,308,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,308,138
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.10
</TABLE>
